On
a weekly basis, both the Sensex and Nifty halted their two-week losing streak
by surging 1,662.34 points or 5 per cent, and 523 points or 5 per cent,
respectively. On Friday, the Sensex rose by 579.68 points to end at a one-month
high of 35,011.65 on easing crude prices, strengthening of rupee to 72.52 and
fresh foreign fund inflows. Positive cues from global markets on easing
concerns over the US-China trade war too buoyed the sentiment. Investor
sentiment got a big push after Brent crude dropped below the $73-mark to quote
at a seven-month low of $72.65 by falling 3.48 per cent due to higher supply
from the world’s major producers. Banks and financials witnessed short covering
due to a fall in yields, while improved automobile sales in October attracted
investors.
Prime
Minister Narendra Modi on Friday announced a 12-point package for micro, small
and medium enterprises (MSMEs), aimed at giving them access to credit and
increasing their cash flows, along with a liberal business environment. This
comes two years after the Prime Minister had announced demonetisation of old
currency notes of Rs 500 and Rs 1,000 — a move that had affected small and medium
businesses the most. The package, which he termed Diwali gift and includes
relaxation in labour laws and environmental rules along with changes in company
laws, may come as a relief to small and medium enterprises, which are facing
liquidity crunch owing to issues related to non-banking finance companies
(NBFCs) and weak banks. Citing official figures, MSME Minister Giriraj Singh said
65 million firms employed 120 million workers in the sector and generated the
highest number of jobs after agriculture. In this age of globalisation, these
reform measures will go a long way in strengthening the MSME sector. I will
myself do a focused monitoring of the government’s reach-out to small
businesses across 100 districts in the next 100 days,” PM Modi said.
The
Prime Minister announced a 2 per cent interest subvention for all goods and
services tax (GST)-registered MSMEs on fresh or incremental loans up to Rs 10
million. PM Modi announced a Rs 60 billion package for creating 20 hubs and 100
tool rooms for technology upgrade. The Prime Minister also announced an increase
in interest rebate from 3 per cent to 5 per cent for exporters who receive
loans in the pre-shipment and post-shipment period. PM also announced the
countrywide launch of a web portal to sanction loans of up to Rs 10 million in
just 59 minutes. The loan portal, which was launched as a pilot project in
September, has already seen in-principle approval to 72,680 loan proposals
worth Rs 236 billion. Companies with an annual turnover of Rs 15 million or
less are considered MSMEs and this definition will be expanded to include those
with an annual turnover of up to Rs 50 million. MSMEs are allowed to file
quarterly returns under the goods and services tax instead of monthly returns.
Key announcements
·
Approval of loans up to Rs 10
million in 59 minutes through web portal
·
GST-registered MSMEs to get 2 per
cent subvention benefit on incremental and new loans
·
Pre- and post-shipment credit
increased to 5 per cent from 3 per cent for exporters
·
Mandatory 25 per cent procurement
from MSMEs by CPSEs, up from 20 per cent
·
Ordinance for simplifying levy of
penalties for minor offences under Companies Act
·
Single approval for environmental
clearance
·
All CPSEs and corporate above Rs 5
billion turnover to be on TReDS
Global markets
European
markets also witnessed a global relief rally after US President Donald Trump
fuelled hopes among investors that a deal to end a prolonged dispute over trade
could be made with his Chinese counterpart Xi Jinping later this month.
President
Donald Trump said the US remains open to reaching a comprehensive deal with Iran
that blocks its nuclear-weapons programme, just days before sanctions on the
country’s energy and shipping sectors kick back in. “Our objective is to force
the regime into a clear choice,” Trump said in a statement released by the White
House on Friday evening, referencing the resumption of sanctions on Monday.
“Either abandon its destructive behaviour or continue down the path toward
economic disaster.” He added that the
penalties were aimed at the Tehran government, “not at the long-suffering Iranian
people.” “For this reason,” Trump said, “we reiterate today that the sale of
food, medicine, medical devices, and agricultural commodities to Iran has long
been, and remains, exempt from the sanctions.”
In
a joint statement on Friday, the European Union’s high commissioner and the
finance and foreign ministers from the UK, Germany and France said they “deeply
regret the further re-
imposition
of sanctions by the United States.” They said they will work “to protect
European economic operators engaged in legitimate business with Iran,”
including preserving “effective financial channels” and continuing “Iran’s
export of oil and gas.”
Global
benchmark Brent crude has fallen about 15 per cent from more than $85 a barrel
last month on increasing speculation that at least some nations would get
waivers, as well as signs that other Opec members will pump more to offset any
supply gap.
Ajcon’s view
Going ahead, we believe rupee movement against the dollar, cues
from ongoing tussle between US and Iran, volatility in oil prices, movement of
bond yields, festive sales, Q2FY19 earnings season, outcome from (both exit
polls and actual result) of upcoming assembly elections in five states will
determine the market trend. Last week owing to fall in crude oil prices, rupee appreciation
against the dollar there was some confidence seen among street participants
which led to relief rally. Investors can start looking for good companies which
have a sustainable business model with good ethical management having clearcut
strategy for the future at cheap valuation. Investors can gradually start
building their long term portfolio in some of the top rung stocks of which many
have come down 30-40 percent in the recent fall. We expect volatility to
continue ahead of state elections. All said and done, we still believe that
equity is a great asset class and always remember panic time is the best friend
of a true investor. It is this time when one should put money in the market
from medium to long term perspective.
For Disclosure refer to Disclaimer
