Our Top Reports For Today
- [00:00] Stories Of The Day
- [01:00] Stockmarkets Kick off The New Year On Strong Note
- [05:19] Moody’s cuts America’s ratings, dysfunctional Government says media.
- [06:44] Personal tax collections in India are up almost 30%.
- [08:26] MNCs are setting up shop in India but as many are closing down too.
- [19:46] Cybersecurity attacks are rising across the world.
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
The markets and key commodities like oil are holding steady to strong going into next week which will see some holidays.
The stock markets started Samvat 2080 or the new year on a strong note.
The BSE Sensex jumped 354 points to 65,259 while the Nifty 50 index rose 100 points to 19,525.
Diwali, which was yesterday, marks the start of a new year (Samvat) and Indian stock exchanges hold a special or Muhurat trading session which marks the beginning of Samvat 2080 and the end of Samvat 2079.
The tradition is more than half a century ago incidentally and pays homage to Lakshmi, the goddess of wealth.
Speaking of wealth, happiness and prosperity go together on Diwali and I wish all of you a happy and prosperous Diwali.
After all, we are a business show and business is about wealth creation.
Now let's pick up what others are saying about wealth creation.
Riddham Desai, Morgan Stanley managing director, told BQ Prime that the ongoing financial year will be good for Indian equity markets, driven by positive earnings outlook.
Both the third quarter and upcoming two quarters' earnings outlook looks positive, Desai, managing director at the financial services firm, told Niraj Shah of BQ Prime.
Due to a shift in policy environment, corporate profit's contribution to the GDP can increase past its previous highs, and may rise to 8% in the next three to four years of the total GDP, Desai said.
"Now, for GDP that's posting at least 10% nominal growth. Now, that means corporate profits in India could be compounding at 20%," the MD said. Earnings compounding at 20% is likely to make India look lucrative globally, despite buying shares 20 times earnings is "really not rich".
Desai, like some other investors, let me think Chris Wood of Jeffries, among even more, feel that if the outcome of next year's elections are in contrast to the market’s expectation, then there could be a significant downturn in the markets.
Translated, if the current Government does not return to power with a majority, then we are in trouble. I always wonder, if only in jest, if markets would rise similarly, or a significant upturn, if the current Government were to return.
There is so much in these statements that is said and unsaid that it is tough to embark on this train of thought…I guess.
Meanwhile, whatever may happen next year, Foreign Portfolio Investors (FPIs) continue to sell away as they dumped Indian equity worth over Rs 5,800 crore this month.
This came after such investors withdrew Rs 24,548 crore in October and Rs 14,767 crore in September, data with the depositories showed, reported Moneycontrol.
Before the outflow, FPIs were incessantly buying Indian equities in the last six months from March to August and brought in Rs 1.74 lakh crore during the period.
So, if I were to just read the data and ignore all the forward statements, the selling has already begun.
Of course it might be to do with year end pressures and factors like interest rates in the United States pulling money from, to be fair, many other parts of the world. That is most plausible. But what if there is another reason ?
On the other hand, India’s debt market attracted Rs 6,053 crore in the period under review after receiving Rs 6,381 crore in October, data showed.
The Indian G-Sec is being included in the JP Morgan Government Bond Index Emerging Markets which in turn has begun attracting funds in Indian bond markets.
With this, the total investment by FPIs in equity has reached Rs 90,161 crore and Rs 41,554 crore in the debt market so far this year.
Speaking of investments, investors are pumping money into American stocks. So much so that a lightning-fast rebound has driven the S&P 500 up in nine of the past 10 sessions and 7.2% over the past two weeks, the best such stretch of the year.
Now, as it always happens, many investors are betting the rally has legs, says the WSJ.
Some have piled into funds tracking U.S. stocks, while others have abandoned trades that would profit in times of market turmoil.
Moreover, many have slashed bearish wagers against the S&P 500 and tech-heavy Nasdaq-100 index, fearful of getting caught flat-footed if the big gains continue.
Moral of the story, I guess, is don't even think about trying to out predict the market.
On the other hand, maybe quite predictably the exact opposite of sorts is happening in the debt market, I am still talking about the US.
Moody's Cuts Us Ratings
Rating agency Moody's has cut its outlook on U.S. credit ratings from stable to negative, citing rising interest costs and the large fiscal deficit as beginning to undermine America's credibility.
Political polarisation, the ratings agency said, "raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability."
The Washington Post’s headline read Moody’s lowers US credit outlook citing political dysfunction.
Can you imagine that !
In August, Fitch Ratings downgraded the U.S. government's credit rating, citing the flirtation with a historically unprecedented default earlier this year, as well as the growing debt burden, reported the Wall Street Journal.
India Industrial Output
Now let's come home. India's industrial output grew by 5.8 percent in September - the slowest in three months - according to data released by the Ministry of Statistics and Programme Implementation on November 10.
At 5.8 percent, the latest industrial growth figure as per the Index of Industrial Production (IIP) is well below the consensus estimate of 7.4 percent.
In terms of the use-based classification of goods, production growth in September was lower for all six categories compared to what they posted in August, like primary goods, capital goods, intermediate goods, infrastructure and consumer durables. Consumer durables drop has been particularly sharp.
This is production, just to remind you.
CBDT Tax Collections
The good news is that tax collections are stronger as more citizens pay tax or are being squeezed out of them, mostly because they are not paying as much as they should or trying to duck it.
India’s Personal Income Tax (PIT) is up 28 per cent this year, as compared to last year. This was higher than corporate tax which was around 7%.
India's gross direct tax collections till November 9, at Rs 12.37 trillion, were up 17.5 per cent higher than the same period last year, according to the Central Board of Direct Taxes (CBDT).
The net collections, which exclude refunds, were 21.8 per cent higher at Rs 10.6 trillion during the period.
Currently, the tax collection stands at 58.15 per cent of the total Budget Estimates for the year 2023-24 (FY24).
"After adjustment of refunds, the net growth in CIT collections is 12.48 per cent and that in PIT collections is 31.77 per cent (PIT only)/ 31.26 per cent (including STT)," the board said, as reported by Business Standard.
Earlier, Business Standard reported that with the present momentum in direct tax and goods and services tax (GST) collections expected to be sustained in the coming months, India's total tax receipts in FY24 could exceed the Budget Estimate by a "considerable margin".
"This is on account of several policy measures and action plans that the revenue department has readied and initiated in the past few months. These would fully reflect in the next financial year," a source had told Business Standard.
Taking both direct and indirect taxes, the gross collection is expected to grow 10.45 per cent to Rs 33.61 trillion in FY24.
Investing In India
An interesting analysis that appeared in Forbes India magazine a few months ago highlighted how more companies were leaving India than coming in over the last few years. The table, which looked at the years 2018 to 2023 which the last year having figures only until March.
For example in 2018, 102 companies set up shop but 111 exited. Except for 2019, where more companies incorporated, four years so more exits.
I will come to possible reasons shortly but remember, we are talking of a specific category of companies, multinationals and by extension foreign direct investment.
It also struck me that a lot of companies have actually existed quote publicly even as others have invested in India and possibly it does not strike us so much because we are not adding it up.
Here’s one example. Disney is getting ready to pack up and leave from its India business, either in whole or a good part of it with Reliance the most likely suitor.
Though Bob Iger, Disney chief who came back from retirement appears to have had some second thoughts going by his statements last week which could also have to do with the fact that Disney has turned in much stronger numbers for the latest quarter than was expected.
So why do companies leave ? There are many reasons said and unsaid. The easy ones to defend are obviously the ones involving global realignment. Like it happened with General Motors and Ford. I also quote these examples because these were physical investments on ground, unlike let's say Disney.
There are others who find it difficult to do business in India or have underestimated either the patience it takes or the nature of the consumer.
I caught up with Ajay Nanavati, who ran 3M, the PostIts and ScotchBrite brand which we all know for several years in India and spent over 26 years in the company. I began by asking Nanavati, who was also chairman of Syndicate Bank until 3 years ago, why companies leave India ?
CyberAttacks Are Rising
Australia’s biggest ports have been paralysed by a cyberattack since Friday.
India's annual imports from Australia amount to about $17 billion, more than 96% of that is coal.
The interruptions are expected to continue for several more days, a mass closure that threatens to disrupt supply chains across the country and globally, Bloomberg reported.
Ports company DP World Plc who also manages several ports in India, including outside Mumbai said Sunday that it has made “significant progress” in re-establishing freight operations after a hack forced it to restrict access to four of the nation’s largest ports.
DP World manages almost 40% of goods flowing in and out of Australia
About 30,000 containers of goods are stuck from moving in and out of the DP World terminals, the Australian Financial Review said.
Ships can still load or unload containers but trucks cannot get into terminals to pick up or drop off their consignments because the systems are offline, it said.
DP World, one of the world’s largest port operators, is the latest victim in a string of devastating, high-profile cyber attacks globally this year, Bloomberg said.
Last week, Industrial & Commercial Bank of China Ltd. — the world’s biggest lender by assets — was struck by a ransomware attack that blocked some Treasury market trades from clearing and forced brokers to reroute transactions.
This isn’t the first time hackers have targeted major ports. In July, Japan’s biggest maritime port was hit by the notorious hacking gang.
A month earlier, several Dutch ports including Amsterdam and Groningen faced distributed-denial-of-service attacks, known as DDoS.
In 2021, South Africa’s port and rail company was struck by a ransomware attack that forced it to declare force majeure at container terminals and switch to the manual processing of cargo.
Dubai Air Show
And before I go, all aviation industry watchers are heading to Dubai for the Dubai air show and the rest like me are trying to follow it from a distance.
Reports including in Bloomberg suggest that Emirates, already the world’s largest international airline, is set to kick off the first day of the event being today with a major aircraft order to renew its widebody fleet, with maybe a 100 aircraft.
Turkish Airlines may jump in with a giant order for about 350 aircraft, according to people familiar with the negotiations, said Bloomberg.
The Dubai show could come close to or better a record from a decade ago which saw some $100 billion in commitments on a single day.
The larger point of course being that aviation is buzzing with action and airlines, including India’s Air India and Indigo are rushing to add capacity.
Broadly, as airlines add more capacity, this also means hopefully lower fares. Nothing immediate is on the horizon though reports already suggest that fares are likely to ease off by the first few months of 2024.
So hang in there!
On that note, wish you a very happy Diwali.