Markets jump with a populist Railway Budget

The India equity markets have extended their gains and are trading well into the positive territory on the back of several announcements in the Railway Budget and Economic Survey. As far as global markets are concerned, all the Asian markets barring Shanghai Composite which was down by 0.07%, were trading in the green after the crude oil cooled off to $97 per barrel. Also, US index futures were witnessing upward movement in trade at this point of time. On the sectoral front, banking, fast moving consumer goods, consumer durables, healthcare, public sector undertakings were trading in the green, while metal, information technology counters are dragging the markets lower. Broader markets are also trading in the green with lot of scrip specific action continuing to hog-limelight in these markets. The BSE Mid-cap and Small-cap indices gained 0.18% and 0.26%, respectively. The market breadth on the BSE was in favour of advances in the ratio of 1390:1194 while 117 scrips remained unchanged. With the railway budget in progress, stocks like Container Corporation of India, Commercial Engineers & Body Builders Co are trading in the green, while stocks like Titagarh Wagons, Kalindi Rail Nirman, Kernex Microsystems (India), Texmaco, BEML, Hind Rectifiers are reeling under pressure.

The BSE Sensex surged 92.83 points or 0.53% at 17,725.24. The index touched a high and a low of 17,801.02 and 17,589.57, respectively.

The BSE Mid-cap and Small-cap indices gained 0.18% and 0.26%, respectively.

In the BSE sectoral space Bankex up 1.87%, Fast Moving Consumer Goods (FMCG) up 1.63%, Consumer Durables (CD) up 0.73%, Healthcare (HC) up 0.66% and Public Sector Undertakings (PSU) up 0.65% were the major gainers; while Metal down 1.07%, Information Technology down 0.49% and TECk down 0.19% were the ony losers.

Meanwhile, India's animation and gaming industry, currently valued at $739 million, has grown at a compound annual growth rate (CAGR) of 32% between calendar years 2005 and 2009, said the industry body ASSOCHAM in a recent report, adding that while the industry has strong growth potential in India, government needs to take some suitable steps to achieve the desired results.

First of all, the industry needs a strong copyright laws and an effective intellectual property rights regime, said the report by ASSOCHAM and global consulting major Deloitte. Without a supportive legal setup that ensures that creators get their legitimate share, it will be difficult to get skilled manpower attracted to this industry.

There are a lot of advantages with the Indian animation and gaming industry including cheaper manpower and overhead costs compared with the developed world and a surging mobile internet market which is second only to China and is set to expand further with the launch of third generation (3G) services. The stagnation in average revenue per user of telecom and handset manufacturers has resulted in migration to the path of mobile value added services, thus opening up enormous opportunities for mobile gaming.  Further, sustained increase in the broadband penetration and the introduction of broadband wireless technologies has created new opportunities for high-end online gaming and animation content. However, despite these advantages, India's share is less than 10% in global market compared to over 50% in IT outsourcing and BPO sectors. This highlights immense potential for growth, observes the ASSOCHAM report.

In order to realize the full potential of the industry, which can also become a major employment generator, the government should give incentives like tax rebates, besides taking steps to protect copyright laws said the ASSOCHAM. 'The industry needs government support through tax rebates and grants," the industry body said adding that intellectual property regulation also need to be strengthened to encourages animation and gaming companies to produce high quality content.

The top gainers on the Sensex were Tata Motors up 3.97%, ICICI Bank up 3.43%, SBI up 2.73%, ITC up 2.44% and JP Associates up 1.84%.

On the flip side, Hindalco Inds down 3.34%, Rel Infra down 2.33%, Tata Power down 2.19%, Sterlite Inds down 2.17% and M&M down 1.96% were the major losers on the index.

India's FMCG industry has been on a fast growth track mapping a quick recovery in Indian economy, rising disposable incomes and surging middle class. However, the industry is also facing a lot of pressure from high inflation and rising cost of production. The industry therefore has a whole lot of expectations from the forthcoming Budget and is hoping that the finance ministry will provide it the next major trigger.

The foremost demand of the industry is control on inflation. Headline inflation in India has remained at highly elevated levels over the last year or so. Even worse is the situation in the primary commodities where prices have increased by 30-35% in the past two years. There has also been substantial hike in freight rates and packaging costs.

Not only the high inflation impacts the cost of production for the industry and pressurizes its margins but also squeezes the disposable income of people and hence impacts demand side for the industry as well. Citing the example of contraction seen in non-durable goods over recent months in the index of industrial production, the industry has urged the government to take some effective steps to check inflation as it can keep eroding real disposable income even in a fast growing economy and impact the demand for FMCG products. 

The industry is also strongly against any further hike in excise duty. The government had cut the excise duty by 4% following the global economic slowdown and rolled it back by 2% in the budget for current fiscal. Given the strong growth outlook and the need for pursuing fiscal consolidation, it is apprehended that the finance ministry will further hike the excise duty by 2%. The FMCG industry however feels that any further hike, particularly in wake of high inflation, will severely hit both the cost side and demand side of the industry.

Over the last few years, rural India has been becoming an important destination for FMCG products. As the farm incomes have risen over the last decade riding on consistent increase in government support prices of crops and spending on various rural schemes, FMCG products have increasingly found a destination there. However, the potential in rural markets is still far from exhausted. In fact, the industry has just started to realize the potential in rural areas. In this wake, the FMCG companies want the government to substantially increase allocation to rural spending schemes like that National Rural Employment Guarantee Scheme etc. This will boost the disposable income in rural India and further push the demand for FMCG products.

Finally, the FMCG industry has been a strong supporter of goods and services tax (GST) and, in fact, is likely to be one of the biggest beneficiary of the major reform. The application of a uniform indirect tax will help bring down the cost of FMCG products and hence prices. This will provide a major trigger for the demand side of industry. FMCG players therefore want the finance ministry to come out with a compromise formula in the forthcoming Budget that can be acceptable to all the states and would lead to an early implementation of the GST.

The S&P CNX Nifty rose 45.95 points or 0.87% to 5308.65. The index touched a high and a low of 5326.85 and 5263.85, respectively. 

The top gainers on the Nifty were Tata Motors up 4.52%, IDFC up 3.77%, ICICI Bank up 3.76%, ITC up 3.09% and Dr Reddy's up 2.73%.

On the flip side, Hindalco Inds down 3.51%, Sterlite Inds down 2.36%, Tata Power down 2.30%, M&M down 2.11% and Rel Infra down 2.11% were the major losers on the index.

Rest of the Asian markets barring Shanghai Composite which was down by 0.07%, are trading in the green. Hang Seng rose 1.45%, Jakarta Composite added 0.24%, KLSE Composite gained 0.21%, Nikkei 225 surged 0.71%, Straits Times soared 1.29%, Seoul Composite advanced 0.69% and Taiwan Weighted increased 0.68%.

Unit-8, 3rd Floor, First Mall, The Mall, Ludhiana-141001, Punjab (INDIA).

To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?TJzsLEwstCyc7OysHMyctEa0nIzszAzMnA==