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ETMarkets Evening Podcast: Market extends gains; what next?

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ETMarkets Evening Podcast: Market extends gains; what next?

By ETMarkets.com | May 28, 2018, 08.19 PM IST

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7 punches of Modinomics that made 'fragile' India a galloping horse

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7 punches of Modinomics that made 'fragile' India a galloping horse

By ET CONTRIBUTORS | May 28, 2018, 08.13 PM IST

Under Modi’s watch, the last four years have seen a series of structural reforms.

By Ajay Bodke

Prime Minister Narendra Modi-led NDA government completed four years in office on May 26. Modi inherited an economy that was derisively scorned by investors -- both global and domestic -- as one of the ‘Fragile Five’ with a Damocles sword of credit rating downgrade to ‘Junk’ status.

The last few years of the previous regime were marked by an economy characterised by yawning fiscal and current account deficits, elevated consumer inflationary pressure, a plunging rupee and above all, an unprecedented uproar over crony capitalism. This was evident through assignment of natural resources to a favored few, either on a nomination basis or through a manifest rigging of legally laid-down procedures. The handover of a precariously perched economy to Modi was akin to a poisoned chalice.

Under Modi’s watch, the last four years have seen a series of structural reforms that have provided a sturdy ballast to the world’s fifth largest (in GDP terms) and fastest growing economy.

Following are Modinomics’ seven significant steps that would turbocharge India’s economic growth:

1. GST is compelling tax compliance, reworking logistics and manufacturing architecture, demolishing trade barriers and fuelling aggregate demand.

The biggest indirect tax reform since Independence through introduction of Goods and Services Tax (GST) is revolutionising logistics, distribution and manufacturing architecture of businesses by doing away with sub-scale operational outposts in favour of more efficient, scalable and closer-to-consumer operational hubs.

It is compelling tax evading entities to become part of the taxation ecosystem and propelling a broad shift from unorganised players that thrived on tax arbitrage to organised players, thereby enhancing the nation’s tax kitty. Most importantly, it is giving a leg-up to aggregate demand by harmonising the rates across all the states by demolishing trade barriers across state borders.

2. IBC: Setting up a durable edifice to resurrect India’s financially-distressed corporate entities

Indian banking system was characterised by slothful clogging of lakhs of crores of capital lent to companies for projects that had turned unviable. Though some projects -- especially in infrastructure sectors -- hit a roadblock due to lack of environmental, forest and other regulatory approvals or adverse macro-economic headwinds, many others piled on excessive project risk through over-optimistic future assumptions.

Some brazenly gold-plated their project costs by making lenders assume all the risks and having no ‘skin in the game’. This lent credence to the abhorrent practice of ‘privatising profits and socialising losses’. It is this canker that is sought to be addressed by Modi through the Insolvency and Bankruptcy Code (IBC).

IBC regime has created a transparent, efficient and legally-sound mechanism for resurrecting financially-distressed entities characterised by bloated cost structures (operational and/or financial) into viable, productive entities. A World Bank study points out that in pre-IBC era, it used to take an average of 4.3 years for resolution of a case which now has to be completed within 270 days. An average resolution pre-IBC, yielded creditors just 26.4 paise for every rupee outstanding, which is expected to be bettered and recovered far earlier.

3. Demonetisation: Force multiplier for financialisation of Indian economy and bold assault on tax cheats, terror financiers and illicit money hoarders

Another affliction that characterised Indian way of life was excessive reliance on cash ecosystem that has fuelled a parallel economy, depriving Indian citizens of legitimate taxes and posing myriad issues from lack of transparency to heightened challenges to law enforcement and security agencies.

Modi’s bold assault on tax cheats, terror financiers and illicit money hoarders through demonetisation has given a strong push to financialisation of the economy. Lakhs of crores of cash hoardings were forced to be deposited into banking channels, making the depositors accountable to regulatory and legal authorities.

This one measure acted as a force multiplier for growth of mutual fund and insurance industries because a significant part of money parked in bank deposits moved through these intermediaries (MFs and insurers) into the equity market. This signal move has led to the deepening and broadening of domestic institutional investors’ heft vis-à-vis foreign portfolio investors and created sustainable equity culture among a broad section of domestic retail investors.

4. Auctioning of natural resources: From putrid discretionary allotments to cronies to a transparent, competitive and price optimising allotments

One of the first measures by Modi to address the opaque and arbitrary assignment of the nation’s precious natural resources to cronies was through introduction of transparent and competitive auctioning process. Natural resources like coal, other minerals, spectrum, land etc are no longer allotted on the whims of discretion. Besides, encouraging competitive spirits and enhancing transparency, it also leads to optimum price discovery benefiting the government and ultimately Indian citizens.

5. Removing infra bottlenecks through massive capital investments in roads, railways and power transmission

Large supply bottlenecks were hobbling India’s infrastructure sectors like roads, railways, power transmission and the like. Investments in transportation sectors lead to a significant multiplier impact on economic activity over the medium to long term. It provides economic impetus to job creation and growth through faster turnaround time, better connectivity and boosting health and education in the hinterland and far-flung areas.

In each of the last 4 years, the government has earmarked investments of nearly Rs 1 lakh crore each in road and railway sectors.

6. Scourge of elevated inflation addressed through Monetary Policy Framework Agreement

Scourge of elevated inflation was another pre-Modi era’s hallmark. The present government signed the Monetary Policy Framework Agreement with the Reserve Bank of India (RBI) on maximum tolerable consumer inflation rate that RBI should target to achieve price stability. The government has thus made the RBI responsible through the Monetary Policy Committee (MPC) for containing consumer inflation at 4 per cent -- with a standard deviation of 2 per cent -- in the medium term.

By this measure, Modi has addressed the issue of high inflation that hurts the poor the most and also encouraged long-term capital investments by businesses by ensuring inflationary expectations are well anchored.

7. Widening the web of financial inclusion, plugging leakages and enhancing transparency through JAM

Modi has laid massive emphasis on the trinity of JAM (Jan Dhan Yojana, Aadhaar and Mobile) to enhance financial inclusion, ensure full-proof authentication of the beneficiaries and plug the leakages of money to ‘ghost’ beneficiaries.

More than 310 million bank accounts have been opened through the Jan Dhan Yojana, three-fifths of them in rural areas with a total balance of Rs 73,690 crore. These account holders get a debit card and access to social security schemes like insurance and pension.

(Ajay Bodke is CEO and Chief Portfolio Manager (PMS), Prabhudas Lilladher.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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PM Modi can only win by using Religion.

- Anthony Barbosa

After Hours: Vakrangee, Manpasand crash stories among 7 top stories from D-Street

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After Hours: Vakrangee, Manpasand crash stories among 7 top stories from D-Street

By Swati Verma, ETMarkets.com | May 28, 2018, 06.07 PM IST

Bharat Financial witnessed the biggest jump in OI at 37.94%, followed by Muthoot Finance 32.86%.

NEW DELHI: A drop in crude oil prices and firm rupee on Monday gave the much-needed boost to the bulls, who continued their winning momentum for the third session in a row. The S&P BSE Sensex added 240.61 points to end at 35,165, while NSE's Nifty50 index gained 83.50 points to close at 10,688.

Here's a look at Monday’s key newsmakers:

Manpasand crashes 20%
Shares of Manpasand Beverages hit lower circuit on Monday after Deloitte Haskins and Sells resigned as auditor ahead of the company’s quarterly results scheduled to be released on Wednesday. This apart, Kotak Institutional Equities suspended rating for Manpasand Beverages from ‘buy’. The stock shut shop at Rs 344.80 apiece on BSE. READ MORE

Up, up and away!
Shares of Justdial climbed as much as 23.17 per cent in the intraday trade. Last week, the company reported 53.68 per cent annual growth in net profit at Rs 38.96 crore for the quarter to March. It had posted a net profit of Rs 25.35 crore in the same quarter last year. The stock settled at Rs 609.05 apiece on BSE, up 20.03 per cent.

Down and out!
Mumbai-based technology company Vakrangee hit lower circuit limit for the 25th session in a row. The stock has lost over 70 per cent since it last closed in the green on April 20. The stock ended at Rs 38 apiece, down 4.88 per cent. READ MORE

In good spirits

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Shares of pharma major Sun Pharma ended 7.11 per cent higher at Rs 499.70 apiece on BSE after Global brokerage CLSA revised target price upwards to Rs 600 from Rs 445 earlier. “EPS to nearly double as monetisation of specialty pipeline begins. We upgraded Sun Pharma from ‘Sell’ to ‘Buy’ as we believe its earnings bottomed,” CLSA said. READ MORE

Building gains
Infrastructure major Larsen & Toubro reported a 4.69 per cent jump in net profit at Rs 3,167 crore for March quarter, beating Rs 3,098 crore estimated by analysts in an ET Now poll. The engineering and construction firm had reported Rs 3,025 crore profit in the year-ago quarter. The stock closed 2.52 per cent higher at Rs 1,377.60. READ MORE

Spurt in open interest
Bharat Financial Inclusion witnessed the biggest jump in open interest at 37.94 per cent, followed by Muthoot Finance (32.86 per cent) and Piramal Enterprises (31.68 per cent).

Stocks in oversold/overbought zone
Technical indicator RSI (Relative Strength Index) showed 5 stocks have entered the overbought zone, namely Kiri Industries, Colgate Palmolive (India), Ind-Swift Laboratories, Sharda Motor Industries and Ratnamani Metals. IVRCL, Rolta India, Shriram EPC and Mangalam Drugs are among the stocks that slipped into oversold zone.

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Tech view: Nifty50 forms bullish candle, aims for 10,775 by expiry

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Tech view: Nifty50 forms bullish candle, aims for 10,775 by expiry

By Amit Mudgill, ETMarkets.com | May 28, 2018, 05.45 PM IST

Nifty’s short-term trend is still positive and there is no indication of any exhaustion.

NEW DELHI: The Nifty50 kicked off the F&O expiry week with a bullish candle on the daily chart. The index formed higher-highs and lows for the third straight session before settling near the 10,700 mark.

Technical indicators were positive, as was market breadth, as analysts saw the index targeting the 10,750-75 levels by Thursday’s expiry of May series futures & options contracts.

Nifty’s short-term trend is still positive and there is no indication of any exhaustion. The index is now entering a key overhead resistance at the 10,750 level – a previous opening with a down gap for the index – which is going to be a crucial in the near term, said Nagaraj Shetti, Technical Research Analyst at HDFC Securities

For the day, the index rose 83.50 points, or 0.79 per cent, to close at 10,688. It hit the 10,700 level on an intraday basis, but saw some selling pressure towards close.

On Tuesday, the index will need to trade consistently above the 10,700 level to retain the same bullish undertone. “In that scenario we can expect this up move getting stretched up to 10,777 kind of level. However, major breakthrough in the indices can be witnessed on a sustainable close above 10,800,” said Mazhar Mohammad of Chartviewindia.in.

Monday’s bullish gap zone between 10,640 and 10,628 levels may act as a critical support, a close below which may weaken the ongoing bullish momentum.

Traders can trail their stop losses below 10,628 on a closing basis, Mohammad said.

As long as the index holds above 10,620, it can extend the gains towards 10,735 and at best to 10,800, said Chandan Taparia of Motilal Oswal Securities. Downside supports are seen at 10,620 and 10,550 levels, he said.

Downside bias stronger as Nifty breaks key level

Top Nifty gainers and losers of Monday's session

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