Markets across the globe are at their peaks since the Sub-Prime crisis engulfed the world economy last September. Although it was there for some time, it made its presence felt when the so called rock stars of high street finance, the last four wall street investment banks, ran for cover in the second week of September last year. Since March this year the bull has been spotted on most of the occasions but bear has capitalized on the volatility of the markets on some occasions. Since then, Bull has pushed all the indices by more than 30%. To name a few, Nasdaq composite has moved up by 48%, Dow Jones Composite Index up by 35%, NYSE S&P 500 by 40% and Nikkei by 35%. But the star performer has been our very own Bombay Stock Exchange-Sensex which has risen by more than 80% since March this year. This has been made possible by positive quarterly corporate results, positive government reports, dwindling unemployment figure, and growth in Industrial indices, increased oil prices, increased government spending by all countries, favourable growth projections by banks, government & nongovernment agencies.

Banks like Goldman Sachs, Citibank, JP Morgan Chase which were seen chasing Federal Reserve for life support a few months back booked huge Q2 profits even after servicing debt bullets. This brought more cheer among B-Schoolers than in the market. Corporate houses have been successful in riding this wave and have accumulated huge capital. Indian corporate which raised huge capital through Global Depository Receipts and by Qualified Institutional Placement, were seen a few waves ahead.

All these news make us float in optimism and take a look behind; we see lots of instances where a day of Bear Paws upset days of Bull Run. What does this suggest? This says that there is enough pessimism and volatility in the market; too high for comfort. Any half cooked report of a small negative projection by any non entity on any sector has upset the whole market on many sessions. Macroeconomic fundamentals are projected on flowery assumptions and so are still dicey. They have been intentionally projected to boost sentiments, financial markets & the economy. As a result most of the markets are trading by more than twenty times their Price to Earnings Ratio. Most of the listed companies are trading at more than fifty times their Price to Earnings ratios. This indicates that even at such perceived low levels, the market is irrationally upside and will slip once the dust settles and the smoke clears.

The Union Budget was passed on 6th July with a negative short term effect on the markets. The long term effect of this budget, its effect on various sectors, its comparison with expectations and growth parameters have been discussed in details as the cover story of this issue.

We are very happy that in our next issue, Niveshak will celebrate its first anniversary. With your support, good wishes and contributions, Niveshak has successfully completed a full circle around the sun. Together we have witnessed the most turbulent time of the world of Finance and learnt from it. We have seen the fall of banking stars, we have seen iconic companies turning to Chapter 11 bankruptcy or mergers/acquisitions for survival, we witnessed bankruptcy declaration by sovereign states and then we saw economies navigating through the worst of recessions. To mark the success of our journey together, we shall have a special anniversary issue capturing the roller coaster ride that we have been through, the highs and lows of the world economy over the past year, the most fearsome fight between the Bear & the Bull. We invite you to contribute articles on any specific event of the last year or on “The year that was” as a whole. Yes that is the theme of out anniversary issue. Lots of exciting prizes are waiting to be yours. For more information, please see the declarations page or Niveshak website.

What an awesome “Year that was”.

Team Niveshak

(click on image or here to view)

Soon after Finance Minister Pranab Mukherjee presented the Union Budget 2009, the first negative sign came from the market and Sensex went southward.However, there is silver line for other sectors and already they are showing the Budget 2009 impact.

Cars and TVs reduce prices: In the Budget 2009 presented on Monday Pranab had announced the cuts in excise and custom duties. Already automobile companies like Mitsubishi, Ford, Toyota et al have announced the full benefit to customers.

The Budget 2009 had directed a cut of Rs 5,000 in excise duty on all passenger vehicles with engines over 2000cc that means SUVs get major benefit as 70% of sales in passenger vehicles comes from the small car segment. Mitsubishi’s Outlander, Pajero and Montero, have cut Rs 6000 while Ford’s Endeavour, Toyota’s Camry and Innova, General Motors’ Tavera and vehicles from Mahindra & Mahindra too followed suit.

Consumer companies like Samsung Electronics and LG who are major players in LCD TVs too have said they would pass on the benefit to the customer. Samsung Electronics announced a cut Rs 1,200 on 32 inch monitors, Rs 2000 on 40-inch monitors and Rs 3500 on 46-inch, according to reliable sources. However Samsung spokesman promised further cut from August. So did LG who have less than 30% market share on LCDs. And both auto makers as well as consumer companies are confident to make the best of time till September.

No hike in home loan tax exemption: Despite plea from urban development ministry, Pranab chose it to ignore coolly by not increasing the income tax ceiling on home loan interest payments. "It has been requested that the deduction on account of interest payment available under section 24 of the Income-tax Act should be increased to the extent of full payment paid in housing loan taken, for all categories of assesses, at least in respect of one house," acknowledged Minister of State for Finance S. S. Palanimanickam. The ceiling of Rs 1.5 lakh is applicable only in case of self-occupied property and in the case of rented property, the entire interest paid on home loan is already allowed as a deduction.

Employers may rejig salary: The removal of the Fringe Benefit Tax (FBT) proposed in the Budget is being regarded as a welcome move for companies and may also provide them scope to restructure employee remuneration, say Human Resources experts.

"The abolishment of the FBT is a welcome move from employers. It means that perquisites will be taxed in the hands of employees at the marginal rate of tax applicable to them," observed R. Sankar of PricewaterhouseCoopers India.

Many analysts opined that the withdrawal of FBT will benefit employees rather than the employees. The companies will reintroduce superannuation plans as the third retirement benefit for their employees, said one.

"There are possibilities that companies may look at increasing salaries to an optimal level," another expert was quoted as saying in a news agency.

HR experts said that the removal of 10 per cent surcharge is also a good move and would be seen as beneficial for the salaried class, particularly against the prevailing backdrop of salary freezes and reductions.

Another expert said that the cut in FBT is also a loss for the exchequer: Employers use this opportunity to add this as an incentive for the employees and thus means less salary!.

Not just LCDs got a excise duty cut, Pranab also showered benefits to gems and jewellery and gave bonanza to the upper middle class by doing away 10 per cent surcharge and doubling the threshold on wealth tax of 1 per cent to Rs 30 lakh. Also do not forget pharmaceutical companies.

Items like biscuits, cakes, pressure cookers, vacuum and gas-filled bulbs of retail selling price of not more than Rs 20 per bulb, certain varieties of paper, paperboard and related articles were put under the exempted items list.

Some say Union General Budget as an expenditure budget as Pranab enhanced allocations for National Rural Employment Guarantee Act, National Rural Health Mission and other social sector schemes like Rajiv Awas Yojana and Pradhan Mantri Adarsh Gram Yojana for villages which have a Scheduled Caste majority.

The budget also focused on housing for urban poor, relief for farmers who paid loans on time, hike in allocation for Bharat Nirman and a new scheme for 1,000 villages with Scheduled Caste majority.

Disinvestment: Pranab was expected to mention something for disinvestment in the loss making public sector units who are are bleeding the exchequer. At least 100 such PSUs combined losses over Rs 10000 crores. PSUs like National Aviation Co of India Ltd, that operates Air India is expected to register a loss Rs.5,000 crore in 2008-09, others include NTPC (National Thermal Power Corporation), BHEL (Bharat Heavy Electricals Ltd).

Pharma firms smile: "Reduction in customs and central excise duties for selected drugs will benefit patients," promised a top offical pharma company. Even though the excise duty of 4% has been retained, custom duty has been lowered on some vital life saving drugs. With reduction in custom duty on certain selected life saving drugs, the prices of 9 particular drugs used for the treatment of fatal ailments like cancer, HIV, Hepatitis B and Arthritis are to be cut soon. The prices of two vital heart devices are also expected to come down.

Interest rates to rise: Amidst all these happenings, one sector - bankers - foresee rising interest rates in six months. They say that the days of softer interest rates were over. Since the government would be forced to pack in a dramatic increase in borrowing in the next three months, pressing the Reserve Bank of India (RBI) to buy more bonds from the market, crowding out borrowing by the private sector. On July 11, Finance Minister Pranab Mukherjee will address the Central Board of Directors of the Reserve Bank and is expected to discuss the government’s borrowing programme and other issues. Bankers are also waiting anxiously for the first quarter monetary policy review scheduled for July 28, where the central bank is expected to announce its strategy to ensure that government borrowings would not affect corporate fund raising plans and interest rates.

(Source: MSN News)

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Railways Minister Mamata Banerjee on Friday unveiled a massive plan to revamp railway stations in the country, saying that 50 stations in large cities would get world class facilities, while 50 more would have multi-functional complexes.

Presenting her ministry's budget for the current fiscal in the Lok Sabha, Banerjee said: "The world class facilities in the 50 stations will be developed through innovative financing and under public private partnership mode."

Some of these stations are: CST Mumbai, Pune, Nagpur, Howrah, Sealdah, Bhubaneswar, New Delhi, Lucknow, Varanasi, Amritsar, Kanpur, Guwahati, Jaipur and Chennai Central.

The multi-functional complexes will be developed in "fifty such railway stations in places of pilgrimage, industry and tourist interest," Banerjee said. They will have shopping centres, food stalls, restaurants, book shops, telephone and fax booths, medicine and variety stores and budget hotels as well as underground parking.

State-run IRCON and Rail Land Development Authority will develop these complexes.

Some of the stations where the complexes will come up are Alipurduar, Allahabad, Banspani, Bikaner, Bilaspur, Cuttack, Darjeeling, Dehradun, Ernakulum, Gandhidham and Gwalior.

The minister also proposed to develop 375 "Adarsh stations", which would have better basic facilities such as drinking water, adequate toilets, catering services and waiting rooms.

"These stations will also have dormitories especially for lady passengers and other basic facilities," Banerjee said.

Out of the 375, the railways have already identified 309 stations for the Adarsh station project.

Banerjee added that the railways would extend a helping hand to physically challenged and senior citizens.

"The Indian railways will extend a helping hand to the persons with physical disabilities and old age people. Standard ramps, earmarked parking lots, specially designed coaches in each mail and express train, lifts and escalators would be provided in a phased manner," she said.

(Source: Economic Times)

Budget Summary
* Mamata ends Rail Budget speech with Urdu couplet
* No hike in freight rates
* No increase in passenger fares across classes
* Tatkal scheme to be reduced from 5 days to 2 days
* 12 new 'Durant' AC sleeper trains between major metros
* Non-stop AC 'Durant' trains to be introduced
* 1000 MW power plant with NTPC on Bengal-Jharkhand border
* Kolkata Metro to get more extensions
* Ladies Special to be extended to Kolkata, Chennai, Delhi
* Metro concession in Kolkata to minority students
* Press correspondents to get 50% concession
* Cold storage facilities for farmers to store produce
* New scheme called 'Izzat' for low-income monthly travel
* Total working expenditure estimated at Rs 81,685cr
* Unrealistic high targets of Interim Budget not sustainable
* Freight loading fell short of target
* New coach factory to be set up in Kanchrapara in Bengal
* Mega logistics hubs in Eastern and Western corridor
* Launch of premium parcel service between 3 stations
* New policy to allow private freight terminal
* Railways to lease out land for commercial purposes
* Special recruitment drive to fill up physically challenged posts
* Metro Rail Hospital in Tollygunj to be upgraded
* Hospitals to be developed for railway staff
* Colleges on railway land through public-private partnership
* Girl child scholarship for Group B Railway employees
* To increase number of women commandos in key routes
* Ramps, special bogeys for physically challenged passengers
* To introduce double-decker AC coaches for inter-city travel
* Passengers can buy tickets from Post Offices
* SMS update on waitlisted tickets
* Automatic ticket vending machines in 200 stations
* Ticketing services in 200 new towns and cities
* Infotainment services in Rajdhani, Shatabdi
* 49 stations of religious importance to be upgraded
* To introduce ambulance facilities in long-distance trains
* Depute one doctor in long-distance trains
* Specially designed coaches for handicapped passengers
* Book stores, PCOs to be set up across stations
* Multi-functional complexes for railway users at stations
* Toilet facilities for women at stations
* Public-private partnership to develop stations
* 309 out of 370 stations identified for development
* CST Mumbai, Pune, Nagpur, Howrah, Sealdah to be developed
* Develop 50 stations as world-class
* To lay stress on platform and train security, catering
* Mamata quotes Tagore's "where the mind is without fear..."
* Expert committee on socially unviable projects to be set up
* Mamata invokes Indira Gandhi in her Budget speech
* All-inclusive development needs to happen
* Rail projects governed by social viability: Mamata
* Rail projects shouldn't be gauged by economic viability
* We are proud of the Indian Railways: Mamata
* Mamata Banerjee begins speech in Parliament
* Mamata Banerjee tables her third Rail Budget
* 'My Budget by the people, for the people'

(Source: IBN Live)

Download Entire Budget Speech

The economic survey prepared by the finance ministry, released ahead of Monday's budget announcement for the fiscal year ending in March 2010, said inflation is no longer a worry and called for an urgent return to the targeted fiscal deficit of 3 percent.

KEY POINTS:
- Economy could grow around 7 percent in 2009/10 if U.S. economy bottoms by Sept.
- Economy could return to 8.5-9 percent growth in medium term if reforms are pursued.
- Fiscal deficit target must be set at 3 percent of GDP at the earliest.
- Interest rates remain high despite easing of monetary policy.
- Calibrated monetary policy approach needed for early return to high growth path.

MARKET REACTION:
- The partially convertible rupee was at 47.7850/7950 per dollar, little changed from 47.79/80 before the survey. It had closed at 47.88/90 on Wednesday.
- The yield on the most traded 2021 federal bond was steady at 7.19 percent, unchanged from before the survey. It had ended at 7.23 percent on Wednesday.
- The 30-share BSE index was up 0.48 percent, from 0.23 percent higher before the report.

BACKGROUND:
- The economy grew 6.7 percent in 2008/09, slower than 9 percent or more in the previous three years.
- Fiscal deficit surged to 6.2 percent of GDP in 2008/09 on higher spending and duty cuts to prime a slowing economy.
- India raised retail fuel prices by as much as 10 percent on Wednesday, the first increase this year, on higher global crude prices.
- Manufacturing activity in India slowed slightly in June but still expanded for a third straight month, on strong local demand. But exports fell for eight consecutive months in May.
- A policy adviser to the prime minister has said the WPI number could show an annual rise of 6 percent by March end, while the economy may expand 7 percent in 2009/10.
- India's monsoon rains this year are expected to be less than normal and weakest in last four years, prompting analysts to predict lower farm output and price rise in the months ahead.
- India's factory output unexpectedly rose in April, and analysts said it confirmed early signs of economic recovery and an end to the central bank's rate cutting cycle.
- In April, the central bank cut its key short-term lending and borrowing rates by 25 basis points to shore up faltering growth in the face of the global economic slowdown. It has cut the rate by 425 basis points since October.

(Source: Reuters)