David Fuller and Eoin Treacy's Comment of the Day
Category - India

    ndian Stocks Rebound From Two-Month Low as Industrials Advance

    This article by Santanu Chakraborty for Bloomberg may be of interest to subscribers. Here is a section:

    “The market rebounded from an oversold territory as investors used the panic to add to their portfolios,” Jitendra Panda, chief executive officer at Peerless Securities Ltd., said by phone from Kolkata. “There’s speculation that moderating inflation will enable the Reserve Bank of India to lower rates next quarter.”

    India’s wholesale prices fell for a 12th straight month even while the pace of deflation eased. Consumer prices -- the central bank’s benchmark -- rose 5 percent last month from a year earlier after a 4.41 percent climb in September. RBI Governor Raghuram Rajan has said he can reach his 5 percent CPI target for March 2017 with the current monetary stance. He reviews rates again on Dec. 1, having cut four times this year.

    “We expect more than 200 basis points of rate cuts in 2015-2016,” Christopher Wood, chief equity strategist at CLSA Asia Pacific Markets, told reporters in Gurgaon, near New Delhi on Monday. “While earnings growth continues to be downgraded, the offsetting positive is the significant rate cuts.” The brokerage remains “overweight” on Indian equities because the country benefits more than its regional peers from lower oil and commodity prices, he said.

     

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    Autodesk's CEO of today on the machines that will be making things tomorrow

    This article by Nick Lavars for Gizmag may be of interest to subscribers. Here is a section: 

    "Back to the point of how things are made is changing, here's a small group of people who were able to use the most advanced manufacturing to do things," Bass says. "And I think that's really upsetting the apple cart, in terms of small companies and small groups of people, who are empowered in ways to do things that used to require huge amounts of capital."

    The thought that these Darwinian machines can crunch through countless possibilities, mutating designs until they produces something resembling the perfect solution, is a fascinating idea. Bass does acknowledge that the technology won't provide a one-size fits all approach, however, that there will be problems where generative design is an appropriate solution and problems that are better solved by human minds.

    And as for the fabrication of future designs, both our own and those conjured up by computers? While 3D printing technology is advancing all the time, Bass is of the view that it will only ever complement existing techniques like subtractive manufacturing, rather than completely snuff them out.

    "Does 3D printing replace all manufacturing? It's another tool in the toolbox," he says. "There will be times when 3D printing is awesome, there will be times when manufacturing is awesome. What I think the future of making things is, is this combination of having powerful design tools in order to make them, and the powerful fabrication techniques to realize those designs."

     

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    India Ministry Pushes for Rate Cut, Says Inflation Under Control

    This article by Unni Krishnan and Siddhartha Singh for Bloomberg may be of interest to subscribers. Here is a section:

    “If the RBI decides to lower rates then certainly it will help the economy and some of the possible risk areas that we identified will get relief,” he said, referring to the Reserve Bank of India. “Inflation is under control.”

    Central bank Governor Raghuram Rajan has rebuffed calls to cut interest rates as he awaits more clarity on whether consumer-price inflation will hit his 6 percent target for January. India has the fourth-highest borrowing costs among 14 Asia-Pacific countries tracked by Bloomberg.

    Consumer prices eased to an eight-month low of 3.78 percent in July. Wholesale prices in July fell the most on record, according to data released on Friday.

    Rajan left the repurchase rate unchanged at 7.25 percent on Aug. 4 after cutting it three times this year. While two of those cuts have come in unscheduled meetings, he’s held rates at three of four reviews in 2015.

    The central bank expects CPI to hit 4 percent in August and rise toward the 6 percent target by January.

     

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    Textile and garment exports to TPP market up 70 per cent

    This article from Vietnam News may be of interest to subscribers. Here is a section:

    Viet Nam's garment and textile export turnover to countries taking part in the Trans-Pacific Partnership (TPP) negotiations increased by 69.66 per cent in the first five months compared with the same period last year, according to the latest report from the Viet Nam Textile and Apparel Association (Vitas).

    Exports to this market also accounted for 66.8 per cent of the sector's total export turnover. Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Viet Nam are members of the TPP.

    Exports to the US ranked top with US$4.05 billion, accounting for nearly 50 per cent of the export value to the countries joining the TPP agreement, a 53 per cent increase on the year.

    Viet Nam's textile and garment export turnover to the US is expected to reach $11 billion by the end of the year, Dang Phuong Dung, Vitas deputy chairwoman told Hai Quan (Customs) newspaper.
    Textile and garment export turnover to the US has increased dramatically in the past 20 years from zero to $9.8 billion in 2014.

    The turnover could be doubled once the TPP is signed, she said, adding that it would benefit local enterprises. Garment products' import taxes would be reduced by 7 to 8 per cent, replacing the current 15 to 16 per cent.

     

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    Government okays composite foreign investment cap for FDI, FII

    This article from Moneycontrol.com, CNBC India’s website may be of interest to subscribers. Here is a section: 

    “One of the most important decisions in relation to the investment is the introduction of composite caps for simplification of foreign direct investments,” Jaitley told reporters after the Cabinet meeting. 

    The report by Justice AP Shah committee, looking into levying of minimum alternate tax (MAT) on foreign portfolio investors, should be out next week informed Jaitley. He said the Cabinet has also an expenditure of over Rs 8,500 crore on multi-state power transmission system. Welcoming the decision, Dinesh Kanabar told CNBC-TV18 the distinction between different types of foreign investments will no longer remain. 

    "I would like to believe that across all sectors, wherever there is no sectoral cap today, we are now breaking the barrier between FDI and FII. You could have done that in any case by passing a board resolution which some of the companies did. But, in effect, what we are now saying is that in sectors where 100 percent FDI is permitted, we could actually have a 100 percent FII holding which is absolutely a very welcome step," he said. 

    Echoing the sentiment, Pranav Sayta, Tax Partner, EY said Jaitley has implemented what he had promised in his Budget presentation this year. "I think it will certainly provide much greater flexibility, simplify things, make it far clearer, bring in certainty into ease of doing business."

     

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    Indian Stocks Tumble With Bonds as Rate-Cut Seen as Inadequate

    This article by Rajhkumar K Shaaw and Kartik Goyal for Bloomberg may be of interest to subscribers. Here is a section: 

    Reserve Bank of India Governor Raghuram Rajan cut the key rate by 25 basis points and said he will wait to assess monsoon rains before easing further, disappointing investors looking for more reductions to spur weak economic growth. The rainfall will be less than predicted in April, the government said less than two hours after the RBI’s decision. Below-normal showers may fan prices of everything from rice to vegetables in Asia’s third-largest economy, where food costs account for almost 50 percent of the consumer price index.

    “This is a time when the economy needs a boost and these little drops of 25 basis points won’t help,” Ajay Srivastava, managing director of Dimensions Consulting Pvt., said in an interview with Bloomberg TV India. “A perfect environment will never exist.”

    While retail inflation eased to a four-month low of 4.87 percent in April, staying below the RBI’s stated limit of 6 percent by January 2016, the prospect of inadequate rain and rising crude prices are risks, Rajan said. Consumer prices may drop until August and then start rising to about 6 percent by January, he said.

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    India Rupee Falls Toward 20-Month Low Amid Debt, Equity Outflows

    This article by Nupur Acharya for Bloomberg may be of interest to subscribers. Here is a section:

    The rupee retreated 0.5 percent, snapping two days of gains, to 64.17 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. It touched 64.2650 earlier. The currency had fallen to 64.28 on May 7, the weakest level since September 2013. The S&P BSE Sensex index, India's benchmark equity gauge, slumped 2.3 percent.

    "The recent rise in U.S. yields has put some pressure on Indian bonds," said Paresh Nayar, head of currency and money markets at FirstRand Ltd. in Mumbai. "That, along with weakness in local equities, is pulling down the rupee."

     

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    The India Report

    Thanks to Deepak Lalwani for this edition of his weekly report which may be of interest to subscribers. Here is a section: 

    PM Modi’s “Make in India” initiative was endorsed by a global manufacturing giant. General Electric of the US inaugurated its 67-acre plant in Chakan, near the western city of Poona (which is close to Bombay). The new $ 200m manufacturing facility will be an export hub, with plans to send half of its output to the company’s global factories. The new plant is GE’s first multi-purpose manufacturing facility in India and will produce a range of products, including aviation, rail and diesel engines. The company hopes to win increased domestic orders also.

    The National Association of Software and Services Companies (NASSCOM) expects India’s $ 150 bn IT outsourcing sector to see export revenue growth of 12-14% in the next fiscal year which starts on 1 April 2015. This compares with an estimated increase of 12% in the current fiscal year which will end on 31 March. The sector’s exports in 2015/16 are expected to touch $ 112 bn, according to NASSCOM. The sector is worth $ 150 bn in total after adding revenue generated from the domestic market. Future growth in the sector will be influenced by increasing demand from global companies for new high value services such as digital technology, mobile applications and cloud computing, according to NASSCOM. However, the export-driven outsourcing industry must focus on building a large pool of skilled workforce to avail of opportunities in the emerging high-end services segment, according to NASSCOM’s Chairman. R. Chandrasekaran. A shortage of qualified engineers to tap this segment poses a risk to the growth prospects of India’s showpiece IT sector. It accounts for about 10% of India’s GDP and employs roughly 3.5 m people who are mainly in the country. As much as 75% of outsourcing IT exports are to the US and Europe.

     

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    Indian e-Commerce

    Thanks to a subscriber for this topical report from Deutsche Bank which may be of interest. Here is a section: 

    India in a nutshell: India is a large emerging market in terms of population and formal retail is still underpenetrated. E-Commerce spend today is mostly in online travel and future growth of B2C e-tail (physical goods) is likely to be driven by large, well-funded competitors who can speed up online adoption. The key risk is how quickly profitability arrives given the size of the market, the intensity of competition, and consumer behavior. Market estimates1 put the current and future size of the Indian e-commerce market at only 3% to 7% of Chinese levels, with significant upside through consumer adoption. 

    Formal retail under-penetrated in India: Market estimates2 put the size of the Indian retail market at cUS$350bn, but formal retail at only 5% of that total.

    E-commerce nascent but growing: Market estimates3 look for the overall ecommerce market to grow from US$22bn in 2014 to US$86bn in 2018 (40% CAGR). Within just B2C e-tail, estimates are for expansion from cUS$4bn in 2014 to cUS$18bn by 2018 (45% CAGR).

    E-commerce to target the wealthier demographics: c60m households (c25% of the overall population) in India control c60% of retail spend in 2015E; these households are forecast to double in absolute numbers by 2025, with spending power to triple over the same period. Wealth concentration and limited broadband penetration (c11%) could potentially create a two-tier market: 1) wealthy cohorts, where online spend centers on consumer discretionary items (electronics, clothes, etc) and where the longer-term opportunity is in migrating their online spend to include consumer staples (diapers, consumables, food), and 2) the mass-market, where spend levels are likely to be lower but increasing mobile penetration, a lack of formal retail/alternatives, and sheer numbers could prove formidable over time.

    Low internet penetration but high growth: Less than 20% of the population had internet access in 2013 (214m) but this figure looks set to grow to c500m by 2018 (c36%), driven by mobile internet penetration leapfrogging desktop5 

    Market cap per internet user is low: In Western markets, the market cap for the e-commerce sector on a per internet user basis is nearly 15x that of India. The ratio is nearly as stretched even when compared with similar emerging markets such as APAC, where the e-commerce market cap on a per user basis is nearly 10x that of India. This indicates the huge opportunity left for ecommerce penetration and growth in India. As discussed, India has over 200m internet users but less than 10% of those users purchase online. In the next few years (and decades), more retail spend is likely to shift online, closing the gap with its global peers.

     

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