Economic Survey 2018-19, Modi's US$ 5 Trillion Economy, and Top Stocks in Focus Today

Fri, 5 Jul Pre-Open

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On Thursday, share markets in India traded on a positive note throughout the day and ended marginally higher.

The BSE Sensex closed higher by 69 points to end the day at 39,908. Bharti Airtel and Tata Motors were among the top gainers.

While the broader NSE Nifty ended up by 30 points to end at 11,947.

Among BSE sectoral indices, telecom stocks gained the most by 1.5%, followed by realty stocks and FMCG stocks.

Top Stocks in Focus Today

Shares of Indiamart Intermesh will be in focus today. The stock of the company made a strong debut yesterday by listing 21% higher at Rs 1,180 against its issue price of Rs 973 apiece on the exchanges.

Post listing, the stock rallied up to 30% to Rs 1,267.

Cox & Kings share price will also be in focus today. The share price of the company witnessing selling pressure yesterday as the company defaulted on payment of interest on non-convertible debentures (NCDs) which was due on June 30. There were pending sell orders for more than 5 million shares, with no buyers available.

From the pharma space, market participants will be tracking Dr. Reddy's Laboratories share price as the company has launched Carboprost Tromethamine Injection USP, 250 mcg/mL (1mL) Single-dose Vial, a therapeutic equivalent generic version of Hemabate injection, approved by the USFDA.

Key Highlights of Economic Survey 2018-19

A day before the Union Budget of 2019, Finance Minister Nirmala Sitharaman tabled the Economic Survey 2018-19 in the Parliament today.

Here are some of the important pointers from the survey:

The Indian economy is at a 5-year low of 6.8% in 2018-19 and the fourth quarter growth has slumped to 5.8% which is a 17-quarter low.

The Chairman of the Economic Advisory (CEA) Council to the Prime Minister (EAC-PM), Bibek Debroy, welcomed the Economic Survey's emphasis on fiscal consolidation and fiscal discipline and investments, especially private investments, as the growth driver.

The CEA announced to let private investment increase. This is said to make firms more productive, bringing jobs and increasing exports, making firms able to compete in international markets. Furthermore, as per the CEA, this will increase demand and further investment.

NITI Aayog vice chairman Rajiv Kumar said the Economic Survey reflects the government's resolve to maintain fiscal stability while pushing up GDP growth rates by measures to accelerate private investment.

The Economic Survey showed that those states which were rigid in respect of their labour laws have not only suffered in all dimensions but have also been unable to create enough employment. These states have also failed to attract adequate capital investment which is necessary for job creation.

Jotting down some data, here are a few important numbers from the Economic Survey...

FY20 GDP growth is seen at 7% on stable macroeconomic factors.

General fiscal deficit is seen at 5.8% in FY19.

GDP growth averaged at a high of 7.5% in last five years.

Farmers may have produced less in FY19 on fall in food prices. And declining non-performing assets (NPAs) should help push capex cycle.

The survey is prepared by Chief Economic Adviser Krishnamurthy Subramanian. The Economic Survey projects the state of health of the Indian economy and outlines the challenges.

Prime Minister Narendra Modi said the Economic Survey 2019 outlines a vision to achieve a US$5 trillion economy by 2025.

GST, Jandhan, Aadhaar, Digitisation and Bankruptcy Act could become the pillars to lay the foundation of a US$ 5 trillion economy.

But to double India's GDP within five years, the government will have to be on an overdrive rather than resting on its laurels.

As per Tanushree Banerjee, there are several goals that the government will need to work on to achieve the US$ 5 trillion mark. You can read about them here: The Trade to Make the Most of India's US$ 5 Trillion Potential

Also, Tanushree states what would the above goal of the government mean for the stock markets. Here's what she wrote...

• It is certainly wishful thinking to believe that all these goals would be seamlessly achieved. Or that India's GDP would be perched above the US$ 5 trillion mark by the next elections.
  
  But I believe being anchored to India' GDP goals could be the biggest mistake that stock market investors could make.
  
  You would rather focus on the plan, progress and execution.
  
  To put it differently, it is neither the upcoming Budget nor the timeframe for India's US$ 5 trillion GDP goal that should worry you.
  
  Instead look for stocks that could be the biggest beneficiaries of the economic tailwinds over the next five years. Be it manufacturing, agriculture, defence or even financial sector cleanup, a few businesses will stand head and shoulders above the rest.
  
  And buying those stocks as and when the stock markets goes through temporary turbulence could be your best wealth creating bet. Not just for the next five years, but possibly for a lifetime.

This is an opportunity to act on what Tanushree calls the Rebirth of India. Something that investors seeking to create permanent wealth for a lifetime simply cannot afford to miss.

Meanwhile, in this latest video below, Rahul Shah shares an important investment lesson before making a big bet on the Union Budget 2019.

RBI to Hold Power to Regulate HFCs

India will soon give Reserve Bank of India (RBI) power to regulate housing finance companies (HFCs), which will almost certainly lead to the lenders facing stringent asset quality reviews.

Finance Minister Nirmala Sitharaman said the government was considering giving more powers to the central bank to regulate the struggling shadow banking sector, though she was not specific.

That could have major repercussions for about 80 HFCs, the largest of which include Indiabulls Housing Finance Ltd, Housing Development Finance Corporation and Dewan Housing Finance Corporation, leading to them facing unprecedented scrutiny and the potential for major financial penalties and restriction on their activities if improper practices are discovered.

In late 2015, the RBI started a similar review of bank assets amid allegations that lenders were hiding the extent of the bad debts on their books.

During multiple asset quality reviews of banks, the RBI revealed a plethora of areas where lenders were under reporting their bad loans.

It initially led to financial penalties for some lenders and eventually fed into decisions to impose tougher restrictions on their loan books while their bad debts remained high.

The housing finance companies, which are part of the broader shadow banking sector known as non-banking finance companies (NBFCs), are currently regulated by the National Housing Board, and the central bank has no direct authority over them.

The other NBFCs are very loosely regulated, with various regulators including the RBI having some role but no one being fully accountable.

The RBI's oversight of HFCs will be a step towards the Indian authorities getting a firmer grip on the risky shadow banking sector that will help to contain any systemic problems.

A series of debt defaults last year by major infrastructure financing group, Infrastructure Leasing and Financial Services (IL&FS), showed that much of the sector was highly leveraged.

Note that both the government and RBI have declined to provide direct financial support to financially troubled NBFCs so far. But having regulatory powers over the HFCs might make it easier for the RBI to open credit lines for these firms if necessary, the reports noted.

As credit rating firms have downgraded the ratings of some of the housing finance companies it has stoked credit-risk fears and hurt their ability to raise funds for more lending.

That in turn has made it difficult for consumers and small businesses to get loans and hurt car and motorbike sales, among other things.

We will keep you updated on how this development pans out. Stay tuned.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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