Global Markets Remain Buoyant, 100 Days To Goods And Service Tax And Key Corporate Developments During The Week
Global market ended the week on a positive note. Japan's index spiked above the 21,000 level for the first time since 1996. The benchmark index posted gains of 2.2% during the week. Robust corporate earnings coupled with broad economic improvements have led to the surge in the index.
Crude too surged by 5% during the week. From the lows of 30 dollars in 2016, the crude prices have now risen to 50 dollars. Oil prices rose as both US crude production and inventories declined. With, Organization of Petroleum Exporting Countries (OPEC) cutting production, global oil markets seem to be broadly balanced now after years of oversupply.
Benchmark index in China too posted gains of 1.2% during the week. China released its trade data for the month of September. The data suggested that the exports as well as imports expanded at a decent pace, signaling an evidence of strength in the world's second largest economy.
Key World Markets During the Week
Back home, S&P BSE Sensex too surged by 1.9% during the week. Shares of Bharti Airtel surged around 13% during the week. The surge was mainly on the back of a deal announcement to acquire Tata Teleservices.
Majority of the sectoral indices ended the week on a positive note. Stocks from telecom and information technology sector gained the most.
BSE Indices During the Week
Now let us discuss some key economic and industry developments during the week gone by
During the week, the new Good and Service tax (GST) completed a period of 100 days. One of the main reasons for implementation of the goods and service tax (GST) was to widen the taxpayers base by bringing the unorganized players in the tax net.
Let's see how well the government has fared on this front?
Till date, nine million enterprises registered under the GST network. Of which, 2.6 million are new GST assesses and 6.4 million taxpayers are from the past regime. The new additions signify an increase of 40% to the previous tax base.
The tax collections too have largely been met. Against the target set by government for Rs 910 billion, the tax revenue collected for August was Rs 906 billion.
While, the tax seems to benefit the organized players in a big way, it is the unorganized segment who have taken a big hit. First, it was demonetization and now it is the implementation of GST. This hit is well reflected in the gross domestic product numbers. GDP growth has slumped to 5.7% in the June quarter from a high of 7.9% clocked in the June quarter of 2016.
To boost the economic scenario, the government recently came out with certain relaxations under the goods and service tax (GST).
Apart from tax rates being reduced on twenty-seven items, the government relaxed the compliance burden on the small and medium sized enterprise (SME). SMEs with an annual turnover of less than 15 million can now fill quarterly returns, as compared to monthly returns before. Also, the annual turnover limit under the composition scheme which enables firms to pay tax at concessional rates have been raised from Rs 7.5 million to Rs 10 million.
Not only this, concerns of exporters too have largely been addressed by removal of interstate GST till March 2018 and an assurance to clear the refunds at a faster pace.
The transition to goods and service tax (GST) is a tough one and we believe if implemented properly, the tax will reap huge benefits to the listed organized companies in the long run.
Movers and shakers during the week
Top Gainers During the Week (BSE Group A) | ||||
---|---|---|---|---|
Company | 6-Oct-17 | 13-Oct-17 | Change | 52-wk High/Low |
63 Moons Technology | 82 | 116 | 41.2% | 124/54 |
Bharti Airtel | 382 | 432 | 12.9% | 438/284 |
IDFC Limited | 60 | 66 | 10.8% | 71/50 |
Idea Cellular | 74 | 79 | 6.9% | 124/66 |
Jindal Steel & Power | 152 | 163 | 6.7% | 166/63 |
Top Losers During the Week (BSE Group A) | ||||
Oriental Bank | 124 | 115 | -7.0% | 191/102 |
Jain Irrigation | 98 | 93 | -5.6% | 120/80 |
Jaiprakash Power | 7.7 | 7.3 | -5.2% | 9/4 |
Andhra Bank | 58 | 56 | -4.8% | 76/46 |
UNITECH | 6.7 | 6.4 | -4.7% | 10/4 |
Source: Equitymaster.com
Some of the key corporate developments in the week gone by
Bharti Airtel Ltd is acquiring Tata Teleservices virtually for free in a deal that will enable the company to expand its subscriber base and spectrum network. Tata Group has decided to opt out of this loss-making entity that has been draining its resources.
Reportedly, the transaction will be done on a debt-free cash-free basis, although Bharti Airtel will take over a small portion of Tata's unpaid liabilities for spectrum acquired in government auctions.
The two companies have entered into an understanding to merge the consumer mobile businesses of Tata Teleservices and Tata Teleservices Maharashtra into Bharti Airtel.
As part of the deal, Tata's mobile customers in 19 service areas will shift to Bharti Airtel along with airwaves that Tata had purchased.
Tata Consultancy Service reported its results for the quarter ended September 2017. The company's net profits dropped by 2.2% YoY to Rs 64.5 billion. While, the revenues grew by 4.3% YoY to Rs 305.4 billion during the quarter.
The operating margins expanded by 1.7% on a sequential basis to 25.1% during the quarter.
Further, revenues from the digital front continued to increase and it now stands at 19.7% of the company's overall revenues. Digital revenues grew by 31% on a YoY basis.
Larsen & Toubro announced that its arm L&T Hydrocarbon Engineering has bagged an order worth Rs 11.5 billion for ONGC's Daman Development Project. L&T would do the engineering, procurement and construction for the project, which is a part of ONGC's strategy to extract gas from Daman Field.
The decline in crude oil prices led to global energy majors slashing their capex, hurting order flows to companies like L&T. However, the company now believes that the industry has accepted a price range of US$45-US$60 for crude oil and is revising and reviving investment plans.
L&T has shifted its focus back to the domestic market where public-sector units continue to invest on expansion even as things remain sluggish in the Middle East. ONGC alone has a capex plan of 300 billion for 2017-18. But some orders in the domestic markets are facing delays.
As per an article in The Economic Times, Larsen & Toubro (L&T) expects state-run ONGC to finalise 3-4 projects worth around Rs 50 billion before March and would be bidding for them.
Sun Pharma announced that it has received an establishment inspection report (EIR) from USFDA for the company's Dadra formulation facility.EIR indicates closure of plant inspection by the US regulatory agency.
The manufacturing plant in Dadra is Sun Pharma's second largest facility catering to the US market, after its Halol plant in Gujarat. The drugmaker primarily manufactures oral solid generic tablets at the Dadra plant.
In April, the USFDA had issued a Form 483 with 11 observations on the Dadra facility. Most observations were related to standard operating procedures but a few could have been viewed seriously by the regulator.
However, one shall note that regulatory compliance hurdles still remain for Sun Pharmaceuticals as the Halol plant is yet to get clearance from the regulator.
The USFDA last inspected the plant in the third quarter of financial year 2016-17 and raised nine observations for failing to prevent microbiological contamination and not meeting with testing design standards.
And here's an update from our friends at Daily Profit Hunter...
The Nifty 50 Index traded another week on a strong note. On Monday, it opened the session a bit higher and continued to trade positive until mid-week, where it found some selling pressure. But, the bears couldn't hold the index down as the up-move resumed on Thursday, where the index rose nearly 120 points. On Friday, the index opened gap up and continued the bullish momentum to apex to a fresh lifetime high of 10, 192. It finally ended the weekly session 2% up.
Last time we mentioned that the index is stuck in a range of 9,700 - 10,150 since July. Today, the index broke above the range and finished at a new life high just above the 10,150 resistance level.
Now, if the index sustains itself above the 10,150 level, the bulls party might continue. But on the flip side, if the index slips below this level, it might again trade in a broad range of 9,700 - 10,150.
Nifty 50 Index at a New Lifetime High
Disclaimer: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. ...
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