Union Budget 2016-17 to dictate near term trend on the bourses
Macroeconomic data, Union Budget 2016-17, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar and crude oil price movement will dictate trend on the bourses in the near term.
The next major trigger for the stock market is Union Budget 2016-17, which will be unveiled in the Parliament by the finance minister Arun Jaitley on Monday, 29 February 2016. Finance Minister Arum Jaitley may provide a roadmap for rationalisation of the corporate tax exemptions in Budget. Jaitley in his last Budget had announced phased reduction in corporate taxes over four years to 25% from present 30%, and also simultaneous withdrawal of corporate tax exemptions. Investors want to see if the government is able to keep spending on areas such as building rural roads, houses and other infrastructure, without letting its fiscal deficit targets slip. In Union Budget 2015-16, Jaitley had stretched the fiscal deficit target to 3.9% of GDP for 2015-16 from the earlier 3.6% to address growth concerns. At that time, he had set fiscal deficit target at 3.5% of GDP for 2016-17.
According to news reports, the finance minister may bring in changes in the service tax regime and withdraw excise duty exemptions on some items in the Budget to set the stage for the rollout of the nationwide goods & services tax (GST). The list of exempted items under the GST will required to be pruned substantially so that it contains only essential items. This is key to keeping the GST rate low.
Meanwhile, the government may raise the rate of service tax to 16-17% to bridge the gap between the current service tax rate and proposed GST rates. Further, the Budget may rationalise exemptions available under service tax to align with the minimal proposed exemptions under GST, according to media reports.
For the banking sector, the key announcement to watch in the Union Budget 2016-17 is whether there is higher than proposed allocation of capital funds to public sector banks (PSU banks). As per Indradhanush framework for transforming PSU banks, the government has proposed capital infusion of Rs 70000 crore in PSU banks over four years through FY 2019, with Rs 25000 crore each for FY 2016 and FY 2017 and Rs 10000 crore each for FY 2018 and FY 2019. The government has already infused Rs 20000 crore in FY 2016 so far. A higher capital funds allocation would enable PSU banks to write off bad loans and meet with Basel III capital adequacy requirements. PSU banks continue to reel under a severe asset quality pressure, which worsened sharply in Q3 December 2015 after the Reserve Bank of India (RBI) advised banks to classify certain weak loan accounts as NPAs and make provision as a part of an Asset Quality Review (AQR) of the banking system.
For the IT sector, a key announcement to watch out for in Union Budget 2016-17 is whether the government restores the exemption from minimum alternate tax (MAT) on profit from exports for SEZ units. Due to removal of exemption from MAT for SEZ units in the 2011 Budget, the IT industry is struggling to utilize the MAT credit lying in balance sheet.
For the cement sector, analysts expect the government to continue its focus on infrastructure development in Union Budget 2016-17, which augurs well for cement demand. Like in the past, the cement industry continues to expect rationalization and simplification of the complicated excise duty structure on cement in the Budget. Currently excise duty on cement is levied in the form of 12.5% ad valorem plus specific duty Rs 125 per tonne with 30% abatement. Most of the varieties of cement are subjected to excise duty on the basis of the maximum retail price (MRP) printed on the bags. The cement industry also expects imposition of basic customs duty on cement imports into India to provide a level playing field to domestic cement manufacturers. Alternatively, the industry expects import duties on goods required for manufacture of cement to be abolished
The real estate industry expects the government to accord industry status to the sector in the Union Budget 2016-17. The industry status will help the sector access bank lending at lower interest rates. The realty sector also expects clarity to emerge on tax treatment of Real Estate Investment Trust (REITs), which may fast track the launch of REITs. It remains to be seen whether the government raises tax benefits on home loans. At present, the deduction available under section 24 of the Act is to a maximum limit of Rs 2 lakh on interest payment on loan taken for acquisition/construction of self-occupied house property. Additionally, exemption of up to Rs 1.50 lakh on principal payments for home loan under Section 80C of the Income Tax Act is available.
The Budget session of parliament began on 23 February 2016 and will continue till 13 May 2016 with recess from 17 March 2016 to 24 April 2016.
Auto companies will be in focus as these companies will start unveiling sales figures for February from Tuesday, 1 March 2016.
Public sector oil marketing companies (PSU OMCs) will be in action as the next review of fuel prices is due at the end of February. PSU OMCs undertake fuel price review at the middle of the month and at the month-end every month based on the trend in international oil market. Airline stocks also will be watched as PSU OMCs will review jet fuel prices on the last day of February. PSU OMCs review jet fuel prices on the last day of every month based on the average imported oil price for the month.
The results of private surveys providing indications of the strength of factory and services activity for the month of February will catch investors' attention in the coming week. Markit Economics will unveil Nikkei India Manufacturing PMI, which gauges the business activity of India's factories, for February on Tuesday, 1 March 2016. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index rose to 51.1 in January 2016 from 49.1 in December 2015. Markit Economics will unveil the result of a monthly survey on the performance of India's services sector for February on Thursday, 3 March 2016. The seasonally adjusted Nikkei India services purchasing managers' index hit a 19-month high at 54.3 in January 2016.
On global front, Markit Economics will unveil data on manufacturing PMIs for China, Japan, Eurozone and US among others for the month of February on Tuesday, 1 March 2016, which will indicate health of manufacturing activity in the respective regions. Markit Economics will unveil data on services PMIs for China, Japan, Eurozone and US among others for the month of February on Thursday, 3 March 2016, which will indicate the performance of services sector for the respective regions.
The next major trigger for the stock market is Union Budget 2016-17, which will be unveiled in the Parliament by the finance minister Arun Jaitley on Monday, 29 February 2016. Finance Minister Arum Jaitley may provide a roadmap for rationalisation of the corporate tax exemptions in Budget. Jaitley in his last Budget had announced phased reduction in corporate taxes over four years to 25% from present 30%, and also simultaneous withdrawal of corporate tax exemptions. Investors want to see if the government is able to keep spending on areas such as building rural roads, houses and other infrastructure, without letting its fiscal deficit targets slip. In Union Budget 2015-16, Jaitley had stretched the fiscal deficit target to 3.9% of GDP for 2015-16 from the earlier 3.6% to address growth concerns. At that time, he had set fiscal deficit target at 3.5% of GDP for 2016-17.
According to news reports, the finance minister may bring in changes in the service tax regime and withdraw excise duty exemptions on some items in the Budget to set the stage for the rollout of the nationwide goods & services tax (GST). The list of exempted items under the GST will required to be pruned substantially so that it contains only essential items. This is key to keeping the GST rate low.
Meanwhile, the government may raise the rate of service tax to 16-17% to bridge the gap between the current service tax rate and proposed GST rates. Further, the Budget may rationalise exemptions available under service tax to align with the minimal proposed exemptions under GST, according to media reports.
For the banking sector, the key announcement to watch in the Union Budget 2016-17 is whether there is higher than proposed allocation of capital funds to public sector banks (PSU banks). As per Indradhanush framework for transforming PSU banks, the government has proposed capital infusion of Rs 70000 crore in PSU banks over four years through FY 2019, with Rs 25000 crore each for FY 2016 and FY 2017 and Rs 10000 crore each for FY 2018 and FY 2019. The government has already infused Rs 20000 crore in FY 2016 so far. A higher capital funds allocation would enable PSU banks to write off bad loans and meet with Basel III capital adequacy requirements. PSU banks continue to reel under a severe asset quality pressure, which worsened sharply in Q3 December 2015 after the Reserve Bank of India (RBI) advised banks to classify certain weak loan accounts as NPAs and make provision as a part of an Asset Quality Review (AQR) of the banking system.
For the IT sector, a key announcement to watch out for in Union Budget 2016-17 is whether the government restores the exemption from minimum alternate tax (MAT) on profit from exports for SEZ units. Due to removal of exemption from MAT for SEZ units in the 2011 Budget, the IT industry is struggling to utilize the MAT credit lying in balance sheet.
For the cement sector, analysts expect the government to continue its focus on infrastructure development in Union Budget 2016-17, which augurs well for cement demand. Like in the past, the cement industry continues to expect rationalization and simplification of the complicated excise duty structure on cement in the Budget. Currently excise duty on cement is levied in the form of 12.5% ad valorem plus specific duty Rs 125 per tonne with 30% abatement. Most of the varieties of cement are subjected to excise duty on the basis of the maximum retail price (MRP) printed on the bags. The cement industry also expects imposition of basic customs duty on cement imports into India to provide a level playing field to domestic cement manufacturers. Alternatively, the industry expects import duties on goods required for manufacture of cement to be abolished
The real estate industry expects the government to accord industry status to the sector in the Union Budget 2016-17. The industry status will help the sector access bank lending at lower interest rates. The realty sector also expects clarity to emerge on tax treatment of Real Estate Investment Trust (REITs), which may fast track the launch of REITs. It remains to be seen whether the government raises tax benefits on home loans. At present, the deduction available under section 24 of the Act is to a maximum limit of Rs 2 lakh on interest payment on loan taken for acquisition/construction of self-occupied house property. Additionally, exemption of up to Rs 1.50 lakh on principal payments for home loan under Section 80C of the Income Tax Act is available.
The Budget session of parliament began on 23 February 2016 and will continue till 13 May 2016 with recess from 17 March 2016 to 24 April 2016.
Auto companies will be in focus as these companies will start unveiling sales figures for February from Tuesday, 1 March 2016.
Public sector oil marketing companies (PSU OMCs) will be in action as the next review of fuel prices is due at the end of February. PSU OMCs undertake fuel price review at the middle of the month and at the month-end every month based on the trend in international oil market. Airline stocks also will be watched as PSU OMCs will review jet fuel prices on the last day of February. PSU OMCs review jet fuel prices on the last day of every month based on the average imported oil price for the month.
The results of private surveys providing indications of the strength of factory and services activity for the month of February will catch investors' attention in the coming week. Markit Economics will unveil Nikkei India Manufacturing PMI, which gauges the business activity of India's factories, for February on Tuesday, 1 March 2016. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index rose to 51.1 in January 2016 from 49.1 in December 2015. Markit Economics will unveil the result of a monthly survey on the performance of India's services sector for February on Thursday, 3 March 2016. The seasonally adjusted Nikkei India services purchasing managers' index hit a 19-month high at 54.3 in January 2016.
On global front, Markit Economics will unveil data on manufacturing PMIs for China, Japan, Eurozone and US among others for the month of February on Tuesday, 1 March 2016, which will indicate health of manufacturing activity in the respective regions. Markit Economics will unveil data on services PMIs for China, Japan, Eurozone and US among others for the month of February on Thursday, 3 March 2016, which will indicate the performance of services sector for the respective regions.
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