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Of Fiscal Consolidation, GST Updates, and Other Top Cues to Watch Out Today
Thu, 12 Oct Pre-Open | Monish Vora, TM Team

On Wednesday, Share markets in India turned negative in the noon session and ended their day on a negative note.

At the closing bell yesterday, the BSE Sensex closed lower by 90 points. While, the NSE Nifty finished lower by 32 points. Meanwhile, the S&P BSE Midcap Index finished down by 0.9% while the S&P BSE Small Cap Index ended down by 1.2%.

Among BSE sectoral indices, oil & gas sector gained the most by 0.8%, followed by information technology sector 0.7%, while realty sector & metal sector finished down by 2% & 1.3% respectively.

Top Stocks in Focus Today

Bharti Airtel share price will be in focus today. The stock of the company zoomed over 5.5% yesterday on reports that the company has tied up with Karbonn Mobiles to offer 4G smartphone effectively at the price of a feature phone which is aimed at enabling every Indian to buy a 4G smartphone and get on to the digital superhighway.

Dena Bank share price will also be in focus today. This comes as the bank is set to become the first bank under the Reserve Bank of India's (RBI) prompt corrective action to tap the equity market after it announced a qualified institutional placement (QIP) to raise up to Rs 4.3 billion from institutional investors.

Market participants will also track Lupin share price today as the company has announced the acquisition of US based Symbiotix Therapeutics. The pharma major said that it acquired the US based company in a deal worth US$ 150 million (Rs 9.8 billion) in a bid to grow its women's health business. Lupin said the acquisition was made for a cash consideration or US$ 150 million, including a US$ 50 million upfront and other time-based payments. In addition, there are sales based contingent payments.

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No Deviation in Fiscal Consolidation Exercise

As per a leading financial daily, the Prime Minister's Economic Advisory Council (EAC) yesterday said that India must not move away from the path of fiscal consolidation.

Admitting a slowdown in the Indian economy, the EAC Chief Bibek Debroy stated that the fiscal deficit target should not be breached.

The above view, however, contradicts that of NITI Aayog Vice Chairman Rajiv Kumar, who said that the economy will do well with extra fiscal stimulus and there will be no harm if the centre busts the fiscal deficit target.

One must note that in the last one decade, India is making serious efforts to reduce the fiscal deficit level. Ever since, the new government came in it has been in favor of fiscal consolidation and meet the long term fiscal deficit target of 3% by FY17-18. This will be the lowest target compared to the last couple of years.

That said, challenges remain. The notebandi exercise has resulted in a slowdown. Further, government has announced flurry of projects but execution is still pending. This means the government needs to relax its spending to spurt the growth again.

This means, once again, the government needs to fight dual challenge. First, maintaining its stance on fiscal consolidation and sticking it fiscal deficit target of 3% of GDP for FY17-18. Second, it must relax the deficit target for reviving the economy from the shock of demonetisation.

It would be interesting to see how the government tackles these challenges ahead.

From the IPO Space...

In the news from the IPO space, General Insurance Corporation of India (GIC's) 113 billion IPO, which kicked off yesterday, was subscribed by around 73% till the afternoon session yesterday.

General Insurance Corporation of India (GIC Re), a leading Government PSU, was incorporated in 1972 and is the largest re-insurance company in India. It provides reinsurance for various general insurance products.

GIC Re is the largest reinsurance company in India in terms of gross premiums accepted in Fiscal 2017, and accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during Fiscal 2017.

That said, is the company leaving enough money on the table for investors? We recently released our IPO note for the above IPO. You can access the same in our IPO section.

GST on Bunker Fuel Reduced

The Goods and Services Tax (GST) Council reduced the tax on marine fuel oil, known as bunker fuel, to 5% for all vessels. The council had recommended assessing GST rates for the bunker fuel sales in the recently held meeting.

Until now, the GST taxed bunker fuel sales at 18%.

The above reduction in tax rate would help the country's fuel sellers compete with other lower-tax ports in Asia and increase their volumes and profitability.

Also, apart from the above, the Council set the GST at 12% for the offshore oil and gas field services. Further, tax rate for natural gas transported through a pipeline is set at 5% without so-called input tax credits, or 12% if the tax credits are included.

Crude Oil Gains on Signs of Tighter Supply

Crude oil is witnessing buying interest this week. The commodity witnessed most of the gains after Saudi Arabia said it would cut oil exports in November. Also, a big chunk of US offshore production remained offline which further added to the gains.

As per the news, the Saudis have sought to expedite Organisation of the Petroleum Exporting Countries' (OPEC's) effort to drain a global glut of crude oil by capping exports in addition to making voluntary production cuts. OPEC and other crude exporters led by Russia are keeping 1.8 million barrels a day off the market.

The above news led to optimism of lower supply levels and aided crude oil prices.

One shall note that the OPEC and non-OPEC producers including Russia have agreed to reduce crude oil output by about 1.8 million barrels per day (bpd) until March in order to reduce global oil inventories and support prices.

The group is now in talks to extend the above expiry in March.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency, and commodity markets.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Mar 22, 2018 (Close)