Indian Indices End Higher, FY21 GDP Growth Estimates, and Top Cues in Focus Today

Mon, 27 Jan Pre-Open

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Indian share markets ended their trading session on a positive note on Monday.

At the closing bell on Monday, the BSE Sensex stood higher by 226 points (up 0.6%) and the NSE Nifty closed higher by 67 points (up 0.6%).

The BSE Mid Cap index ended up by 0.8% and the BSE Small Cap index ended up by 0.5%.

On the sectoral front, gains were seen in the banking sector and capital goods sector.

News Related to the Union Budget

India is likely to fund roughly US$ 28 billion of its expenditure outlay in its budget for fiscal 2020-21 via off-budget borrowings as it seeks to revive a sagging economy while keeping its fiscal deficit in check.

This comes as Prime Minister Narendra Modi's government is under pressure to increase spending on rural welfare schemes and infrastructure to boost growth that has fallen for six straight quarters.

Off-budget borrowings are a means by which the government keeps its fiscal deficit in check by making quasi-government entities borrow on its behalf, to partly fund its expenditure plan for the year.

The news state that this would mark a roughly 13.8% increase in so-called off-budget borrowings from an estimated 1.75 trillion rupees (US$24.6 billion) in the ongoing fiscal year.

Finance Minister Nirmala Sitharaman, who will deliver the budget speech on 1st February, is widely expected to announce stimulus measures for small businesses and non-banking finance companies as a cut in corporate tax rates and rate cuts by the central bank have failed to revive growth.

It would be interesting to see how these numbers and estimates show up in the budget announcement. Meanwhile, we will keep you updated on all the developments from this space. Stay tuned.

The upcoming budget would play a critical role in shaping the investment trend.

In the below video, Tanushree Banerjee tells how you should react to the biggest economic event of the year - the Union Budget which is going to be announced in a few days.

Watch now to know more...

Apurva Seth, editor of Breakout Profits (requires subscription), has also written about the budget in a recent edition of Profit Hunter. You can read the same here: Will the Budget Disappoint the Markets?

India Ratings Projects India's FY21 GDP Growth at 5.5%

As per India Ratings and Research's (Ind-Ra) latest report, with the help of strong policy push coupled with revival in demand, India's growth rate is expected to be marginally higher at 5.5% in FY21 against the estimated 5% for the current fiscal.

Citing an NSO report, it said the slowdown is a combination of several factors including an abrupt and significant fall in lending by non-banking financial companies (NBFCs) close on the heels of a slowdown in bank lending and reduced income growth of households coupled with a fall in savings and higher leverage.

Although some improvement in FY21 is expected, these risks are going to persist. As a result, the Indian economy is stuck in a phase of low consumption as well as low investment demand.

As per the report, a strong policy push coupled with some heavy lifting by the government is required to revive the domestic demand cycle and catapult the economy back into a high growth phase.

The government has announced a slew of measures recently to prop-up the economy, but Ind-Ra believes they will come to aid only in the medium term. It said the shortfall in the tax plus non-tax revenue to result in the fiscal deficit slipping to 3.6% of GDP (budgeted 3.3%) in FY20, even after accounting for the surplus transferred by the RBI.

Ind-Ra said a continuance of low GDP growth even in FY21 means subdued tax revenue and limited room for stepping-up expenditure.

It believes the government will have to construct the FY21 budget in a way that expenditure is rationalised and prioritised and all avenues of revenue generation are tapped. While rationalising, the focus of expenditure has to be on creating direct employment and putting more money in the pockets of the people at the bottom of the pyramid, and it added that since their marginal propensity to consume is close to one, they are likely to spend what they receive.

This will support the consumption demand. Therefore, it said budgetary allocation to heads such as rural infrastructure, road construction, affordable housing and MNREGA must be prioritised and allocation for non-merit subsidy/expenditure less critical for growth be rationalised.

December Quarter Results

From the cement sector, UltraTech Cement posted 48.64% year-on-year (YoY) rise in standalone profit at Rs 6.4 billion for December quarter.

Revenue came in almost flat at Rs 99.8 billion against Rs 99.4 billion reported in the same quarter last year.

On a consolidated basis, the company posted 88.98% YoY rise in consolidated profit at Rs 7.1 billion. Revenue stood almost flat at Rs 103.5 billion against Rs 104.4 billion in the corresponding quarter last year.

During the quarter, the company's wholly-owned subsidiary UltraTech Cement Middle East Investments divested its entire shareholding in Emirates Cement Bangladesh and Emirates Power Company to Heidelberg Cement Bangladesh for US$ 30.2 million and included the gain on divestment of Rs 89.6 million in other income.

The company believes that signs of revival were visible in some key regions during the latter part of Q3FY20.

The company in a regulatory filing said that this, together with the government's firm commitment to revive the economy and the thrust on infrastructure spending augur well for the growth of cement demand.

It added that UltraTech is best positioned to take advantage of the revival in cement demand, despite the anomalies that may get created in demand patterns in some parts of the country due to extraneous reasons.

The company believes that demand is expected to grow in line with the GDP rate. Any pick-up in urban housing demand, liquidity improvement, fund allocation from central and state government should be watched going ahead.

From the finance sector, PNB Housing Finance reported a 22% drop in its net profit at Rs 2.4 billion for the December quarter amid lower credit growth.

The company had posted a net profit of Rs 3.1 billion in the corresponding period of last year.

The lender's net interest margin shrunk to 2.98% for the December quarter, the lowest in last five quarters.

The outstanding loan book de-grew to Rs 691.9 billion from Rs 740.2 billion in March 2019.

The company's net interest income stood at Rs 5.7 billion, up 1.4% over Rs 5.6 billion in the year-ago quarter.

Gross non-performing assets ratio stood at 1.75% of the loan assets at the end of December 2019 against 0.5% a year-ago.

Meanwhile, Punjab National Bank (PNB) has decided not to sell shares in PNB Housing and maintain a minimum shareholding of 26% as a promoter.

PNB's holding in PNB Housing is set to fall to 27.5% from the current 32.4% when the latter issues fresh shares to raise about Rs 15 billion.

The mortgage lender has shrunk its equity raising plan by one-fourth from the proposed Rs 20 billion so that PNB's holding does not fall below 26%.

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