Saturday, March 01, 2014

Weekly Review - 03.03.2014

Dear All,

Q3 GDP at 4.7%; economy heads towards worst year in decade :-

All signs pointed towards a lower GDP print, yet the finance minister bravely hinted that the remaining two quarters of the current fiscal could post a growth of 5.2%. Well he is wrong.

Numbers released by the government says that the country grew by only 4.7% in the third quarter lower than estimates of even pessimist economists who were expecting a growth of 4.9%.

Government started the year with an assumption of nearly 6.1% growth (budget estimates) but have subsequently reduced it blaming everyone else but its own policy paralysis.

Even a few days back in his pre-budget speech finance minister could not get the numbers right. He estimated the growth in economy to be around 4.9%, which given the 4.6% growth in the first half meant that the economy would have to grow at 5.2% in the second half. With a 4.7% in the third quarter the economy will have to grow by 5.7% in order to prove the finance minister right.

Earlier in the month IIP numbers were announced which posted a contraction of negative 0.6% for December 2013. With this the entire third quarter was a wash out with all three months in the quarter posting contractions. Worst there is little sign that there might be any improvement in the fourth quarter.

However, another set of data released by the government shows that maintaining the current growth rate would be difficult. India’s fiscal deficit in the first ten months of the 2013/14 financial year crossed the target for the whole year.

Finance minister had in his speech brought down the deficit target to 4.6% of GDP from 4.8% expected earlier. However, with the target (in absolute terms) already crossing the budgeted mark, it is unlikely that the government will be increasing its spending in the coming months.

Along with the expenditure it is likely that the finance minister will reduce his growth target one last time before the fiscal ends registering the decades slowest growth rate.

The Centre's fiscal deficit in the first ten months of the financial year stood at Rs 5,32,842 crore, breaching the Revised Estimate of Rs 5,24,539 crore, showed the Controller General of Accounts (CGA) today. At Rs 5,32,842 crore, the fiscal deficit is 101.6% of the RE, against 89.4% in the corresponding period of the last financial year. Fiscal deficit was retained at 4.9% last year.

If revenue collections don't grow at a much faster pace in the last two months, fiscal deficit as percentage of GDP may overshoot Finance Minister P Chidambaram's RE of 4.6% given in the interim Budget earlier this month. The government is pegging its hopes on the fourth and last installment of advance tax collections to be paid in March.

To rein in the deficit at the projected level, the finance minister may have to compress Plan expenditure further after it was slashed by about Rs 80,000 crore in RE. This may affect growth ahead of general elections in May-April.

Economists, however, said the fiscal deficit was unlikely to exceed the projection of 4.8% of GDP that had been made at the time of the Budget for 2013-14. In Budget for 2013-14 the government had proposed to bring down the fiscal deficit to 4.8% of GDP or Rs 5.42 lakh crore.

The pick-up in the pace of tax growth in January 2014 is encouraging. However, based on the data for the first 10 months of the fiscal, excise and service tax collections appear likely to miss the revised targets for 2013-14. Net of the states' share in Central taxes, we expect the shortfall in the Central government's tax collections to be around Rs 10,000 crore," said Aditi Nayar, Senior Economist, ICRA.

As per the CGA data, the revenue deficit during April-January 2013-14 was Rs 3,78,850 crore or 102.3% of the RE. Revenue receipts during the period were Rs 7,21,905 crore or 70.1% of the RE. Total expenditure, on the other hand, was only 79.8% of the RE at Rs 5,90,434 crore.

For the next financial year, the deficit is pegged at 4.1% of GDP, one percentage point lower than targeted in a fiscal consolidation road map, even as the government cut excise duties to spur manufacturing, particularly production of consumer durable goods which fell for the 13th month in a row in December.

>>> Nifty - Weekly - As Updated Last Weekly Review <<<

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Wrote last week to buy on every dips for a good upmove.

>>> Happened<<<

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So as expected Nifty jumped 130+ Points from 6150. Hope enjoyed it.

>>>> Nifty - Daily - As updated last weekly review <<<

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Last week wrote about Price moved above 100dma and break out of Pitch fork, So the result is known to every one. So whats next ???

>>> Happened and Yet to <<<

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Yes, one more break out needed for any more upmove next week. If not, then get ready for a correction. May be very deep. How far ??? Lets see it on hourly chart.

>>> Nifty - Hourly - As Updated Last week <<<

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Wrote last week clearly that 6265 as target. Happened as said, filled the gap and touched 6265. So lets see whats next.

>>> Happened and Yet to <<<

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So now, If price able to hold above 6265 may try to fill one more gap left at 6340 on the top again, Else get ready for a good or big fall. Yes I advice CAUTION from here onwards.

>>> Bank Nifty <<<

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Hanging man on daily chart, warning signal from bear and expect a trend reversal too. Stay caution.

>>> Bank Nifty - Hourly <<<

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Raising wedge if gets broken then get ready for a fall. Else if able to stay above 10750 the gap should be filled on the upper side. Lets See.

>>> Performance <<<

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