Indian Indices Turn Volatile; Metal & Power Stocks Drag

Fri, 5 Jul 12:30 pm

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Share markets in India are presently trading on a volatile note as Finance minister Nirmala Sitharaman presented the Budget 2019.

Sectoral indices are trading mixed with stocks in the telecom sector and finance sector witnessing buying interest while oil & gas stocks, metal stocks and IT stocks are witnessing selling pressure.

The BSE Sensex is trading down by 66 points while the NSE Nifty is trading down by 27 points. The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading up by 0.2%.

The rupee is trading at Rs 68.57 against the US$.

In the news from macroeconomic space, Finance Minister Nirmala Sitharaman while presenting her maiden budget said that our country is well within its capacity to become a US$5 trillion-dollar economy in the next five years.

Here are some key takeaways from the Budget 2019:

From US$1.85 trillion in 2014, the economy has reached US$ 2.7 trillion. Economy will grow to become a US$ 3 trillion economy in the current year itself.

The project of Bharatmala will enhance road connectivity and Sagarmala will help port and waterways connectivity. These along with other such initiatives such as Udaan scheme will improve India's infrastructure and enable connectivity and bridge the rural and urban divide.

Pension benefits will be offered to 30 million shop owners with annual turnover of less than Rs 15 million under new scheme called Pradhan Mantri Karamyogi Mandhan Scheme.

Multiple measures will be taken to deepen the corporate bond market, and there is also a proposal to increase minimum public shareholding in companies to 35% from 25%.

The government plans to allow FPIs to subscribe to listed debt papers of REITs and there is also a proposal to merge NRI portfolio route with FPI routes.

India's FDI flows in 2018-19 remained strong compared to global at US$ 54.2 billion, 6% higher than last year.

Nearly 19.5 million houses are proposed to be provided to eligible beneficiaries under the Pradhan Mantri Awas Yojana. Under Pradhan Mantri Gram Sadak Yojana, nearly 1,25,000 kms of roads will be upgraded at estimated cost of Rs 802 billion.

She also highlighted, ensuring farmers access to safe and adequate water is another important initiative the government will work towards.

The government proposed to allocate Rs 700 billion for PSU Bank recapitalisation.

Yesterday's Economic Survey 2019 outlined a vision to achieve a US$ 5 trillion economy by 2025. GST, Jandhan, Aadhaar, Digitization 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.

Reforms in agriculture and building infrastructure across the agriculture value chain would be necessary to address the biggest pain points of the economy.

The direct tax mop-up in fiscal 2018, at 6% of GDP, touched a decadal high. But increasing India's tax payer base consistently would be necessary to rid the economy of fiscal paralysis.

Improving Taxpayer Base Necessary for a US$ 5 Trillion Economy

That's not all.

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 the latest video below, Richa Agarwal talks about rebound opportunities in the smallcap space and how you can profit from it...

You can read more on the opportunities in smallcap space here: One Stock Crorepati, Best Stock to Buy, Profit from Electric Vehicle Disruption, Smallcap Stocks Under Modi 2.0.

Moving on to the news from the banking sector, Yes Bank share price is in focus today as the lender acquired a 9.47% stake in Eveready Industries India, part of the B M Khaitan group, by invoking pledged shares.

On Thursday, the private lender in an intimation to the exchanges said the shares were acquired on invocation of pledge subsequent to default/breach of terms of credit facilities sanctioned by Yes Bank to McLeod Russel, which is a B M Khaitan group company.

The bank said it had acquired 6,880,149 shares having a nominal value of Rs 5 per share constituting 9.47% of the post-issue paid-up share capital.

However, sources indicated the lender would be paid off once the deal for a stake sale in Eveready went through. Promoter holding in Eveready was at 44.1%, according to exchange filings.

Reports state that the group has been in troubled waters for the past one year as its major firms have been trying to bring down debt.

According to McLeod's auditor, liabilities of the company exceeded assets by Rs 14.4 billion as of March 2019 and in the last financial year it was unable to discharge obligations for repayment of loans and settlement of other financial and non-financial liabilities, including statutory liabilities.

The auditor also raised concerns on the company's ability to continue as a going concern. Further, rating agency ICRA, has recently downgraded McLeod to 'default' or 'D' category from B-/A4, factoring in recent delays in meeting debt obligations in a timely manner.

Also, Price Waterhouse & Co Chartered Accountants LLP quit as auditor in Eveready, saying it has been unable to obtain sufficient audit evidence of inter-company deposits and its recovery.

How this pans out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

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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