Market Watch

Stock markets across the globe hit multi-month highs last week (September 7 - 11). In India, the benchmark indices Sensex and Nifty extended their gains to a sixth straight session last Friday and closed at 15-month highs. It was an interesting week to say the least. Monday, the markets opened with a gap lower, and there was a sharp follow-through lower on Tuesday. Once again the markets threatened to begin a larger correction, but by the end of the week they had regained the majority of their losses. The end result was a fairly balanced last month (17 Au­gust - 11 September).

The news on the monsoon front turned out to be somewhat encouraging and FIIs, for their part, re­mained bullish and kept buying stocks almost right through the week. The past one month saw the mar­ket slip below 15000 mark due to monsoon worries and global concerns about the economic recovery. The first week, both Sensex and NSE Nifty closed with a loss of 1%. The next week saw the markets gaining steadily by adding around 4.5% on both the indices. The third week began with a negative note but rise in vehicle sales led to the auto market up­surge. The weekend of the third week saw an in­crease of 1.46% in Sensex and 1.1% rise in Nifty. The indices moved in almost the same trading band as that in the preceding week.

Jet’s Mayhem

Jet Airways had last month terminated the ser­vices of two of its senior-most pilots, saying “their services were not required”. Later the two pilots, along with others, formed a trade pilot’s union body in the company, National Aviator’s Guild (NAG), and held a strike to protest their dismissal. The union has termed the sacking “an act of vendetta” and de­manded their reinstatement. The deadlock between the two sides was resolved after hours of talks in Mumbai on Saturday, 12 September.

The five-day strike by hundreds of pilots of Jet Airways ended late on Saturday night with the private airline agreeing to unconditionally take back four pilots it had sacked for forming a trade union and the pilots agreeing to resume flying at the earli­est. The rapprochement means most Jet flights will begin to operate normally from 13 September, end­ing one of the worst airline disruptions in the coun­try in recent years.

Proposed Models of Dual GST

Budget 2009-10 has indicated that there will be dual GST - a Central GST and a state GST. There are two ways of making it - one advocated by Finance Commission and one by the Empowered Committee.

One Model envisions Central GST as an incorpo­ration of Central Excise, additional excise duties, ser­vice tax and all cess and surcharges. Whereas, the state GST will combine VAT and various other service taxes as well as all state cess and surcharges.

Second Model combines Central Excise (along with additional excise duty, etc.), service tax, sales tax (VAT) and all other state taxes together and makes a common base. Thereafter a certain percent­age say is charged by the Centre and some part by the states.

Alarming New MAT Provisions

It comes as a shock for over 250 companies as the government announces the new MAT provision. Large, capital-intensive companies in infrastructure, oil and gas, telecom, pharmaceuticals, real estate etc. will have to pay over Rs. 11,500 crore as ad­ditional tax in 2010-11 if the government enacts the proposed Direct Taxes Code in its present form.

In a big blow for such firms, the draft code says companies will have to pay the higher of a 25 per cent corporation tax and a minimum alternate tax (MAT) of 2 per cent on their gross assets. Second, the basis for computing MAT has changed from book profits (15 per cent of the book profits at present) to gross assets. Third, MAT will have to be paid in even loss-making years, with no set-off against fu­ture profits. MAT is being sought as an additional burden, which would make sustainability difficult, especially in recessionary periods.

NTPC and DVC Gets Approval

To aim at the power shortage in the country the government has approved an order of Rs. 40,000crore for power equipment for the upcoming thermal power plants of NTPC and Damodar Valley Corpora­tion. The proposals were made for induction of su­percritical technology through bulk ordering for 11 units of 660 MW each by NTPC and DVC. After the government’s approval, power producer NTPC plans to float tenders for procuring the equipment for these 11 units within 45 days.

RBI Surplus Shoots by Rs. 10,000 crore

The Reserve Bank of India’s (RBI’s) transfer­able surplus to the Government of India for 2008-09 jumped 66.6 per cent to Rs. 25,009 crore from Rs. 15,011 crore in the previous year. This is primarily due to the domestic investments on account of an increase in ‘Interest on Domestic Securities and LAF operations’ and ‘Interest on Loans and Advances’. The surplus thus included Rs. 1,436 crore towards the interest differential on special securities convert­ed into marketable securities for compensating the government for the difference in interest expendi­ture, which the government had to bear consequent on conversion of such special securities.

TATA - Different Strokes

Auto major Tata Motors today reported Rs. 329 crore consolidated net loss for the first quarter of this fiscal as compared to a net profit of Rs. 719.69 crore in the same quarter last fiscal. Although the management at Tata Motors says that the results are not comparable with the previous fiscal as the results for the quarter ended June 30, 2009 include the operations of JLR businesses, acquired on June 2.

IOC Revamps

Government-owned Indian Oil Corporation (IOC) strategize to invest around Rs. 60,000 crore in capacity-building in next five years and in turn, is aspiring to have 15 per cent of its revenue from pet­rochemicals in the next three years.

There are various expansion plans in each re­spective sector. A new plant worth Rs. 14,000 crore is under construction at Panipat for propylene. Also, they intend to convert Paradip plant into a petro­chemical complex. The company is also eyeing ac­quisitions of oil producing assets in Africa and South East Asia. The company also signs a joint venture with NPCIL with the aim of entering energy sector. The IOC also plans to expand its retail sector by add­ing 200 outlets each year.

Idea Demerges from Passive Infra

Idea Cellular telecom operator got an approval from Gujarat high court for demerging its passive in­frastructure to its wholly-owned subsidiary Idea Cel­lular Towers Infrastructure. Also, the company looks forward to its financial restructuring to adjust the amount of “non-compete fee” paid to the erstwhile promoters of Spice communications pending from the acquisition deal between the 2 companies. This news affected the shares of Idea cellular as it moved up by 0.80 percent whereas, Spice com shares raised by 17.5 percent.