Intellectual Thoughts by Sanjay Panda: stock market

Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts

India slashes corporate tax to fire up economy, Dalal street responds with a massive surge.

Diwali came early for India Inc and the bourses after the Centre slashed effective corporate tax to 25.17 per cent. Indian  Finance Minister says the new rates would be "comparable with the lowest tax rates in South Asian region and in South East Asia". The announcement sent shares soaring more than five percent in Mumbai -- the biggest jump in 10 years .

Here's what India FM announced on Friday,  20th Sept :

  • Domestic company to pay income tax at the rate of 22% subject to condition they will not avail any incentive or exemptions. 
  • Manufacturing companies set up after October 1 to get option to pay 15% tax. Effective tax rate for new manufacturing firms to be 17.01% inclusive of surcharge & tax.
  • Listed companies that have announced buyback before July 5, 2019, tax on buyback of shares will not be charged.

  • Higher surcharge will also not apply on capital gains on sale of security including derivatives held by FPIs.

  • Enhanced surcharge will not apply to capital gains arising on equity sale or equity-oriented funds liable to STT stabilise flow of funds into capital markets.

  • To provide relief to companies availing of concessions and benefits, a MAT relief by reducing it from 18% to 15%.
  • CSR 2% spending to include government, PSU incubators and public funded universities, IITs, National  Labs & autonomous  bodies engaged in  research in science, technology, engineering & medicines. 
The following graphics from Eco times of India  sums it all.

India jumped up 16 positions on a global index of the world's most competitive economies

In a big jump, India has moved up 16 positions to rank 39th on a global index of the world's most competitive economies. The report  showed that India fared well in goods market efficiency, business sophistication and innovation

India’s competitiveness improved across the board, particularly in goods market efficiency (60), business sophistication (35) and innovation (29). WEF said recent reform efforts by the government have concentrated on improving public institutions (up 16 places), opening the economy to foreign investors and international trade (up 4), and increasing transparency in the financial system (up 15).

India still needs to cover a lot of ground, the WEF said, citing labour market deficiencies, large, public enterprises that reduce economic efficiency, especially in the utilities sector and the financial market. Lack of infrastructure remains a critical bottleneck, the report said.  

Bayer and Monsanto to Create a Global Leader in Agriculture

In the largest deal of 2016 (so far), after months of negotiations  with several  baby steps  agriculture giants Bayer and Monsanto announced  that  they are planning to merge. In an  all-cash   transaction    Bayer  striking the deal a $128  a share  valuing Monsanto at $66B.  including the debt.

Consolidation has been driven by a global  glut that has pushed down crop prices and hurt farm incomes, leading to reduced investment in agricultural inputs such as fertilisers and  Agrochemicals.   Several Mega & small mergers are right now underway/partially completed   like Dow Chemical and DuPont, ChemChina &   Syngenta, FMC & Cheminova  etc.

But the proposed merger  likely face an intense and lengthy regulatory process If the deal closes, it will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.

Both the   company executives claims the  businesses are complimentary & there is very little overlap between them.  However antitrust experts have said regulators  likely  demand the sale of some soybeans, cotton and canola seed assets.

The transaction includes a $2-billion break-up fee that Bayer will pay to Monsanto should it fail to get regulatory clearance. Bayer expects the deal to close by the end of 2017.

Key Features of Indian Budget 2016- 2017


o   Will not resort to retrospective taxation in future; one time tax dispute resolution proposed for retrospective taxation

o   To rationalise corporate tax for new manufacturing companies

o   To implement general anti avoidance tax rule from April 1, 2017

o   Security transaction tax on options raised to 0.05 percent

o   Proposes to levy infrastructure cess of 1-4 percent certain  models of cars  (1 % on small petrol, LPG, CNG cars, 2.5% on diesel  cars of certain capacity and 4% on other higher engine capacity vehicles

o   Raises factory gate tax on various tobacco products by 10-15 percent.

o   Proposes to abolish 13 different levies


o   100 percent foreign direct investment to be allowed in food processing industry

o   Promises further reforms in foreign direct investment policy in insurance, pension, asset recast companies


o   Total stake sales in 2016/17 seen at 565 billion rupees

o   To encourage central public enterprises to divest own assets for raising resources for new projects

o   Strategic divestment seen at 205 billion rupees


o   Fiscal deficit seen at 3.9 percent of GDP in 2015/16

o   Fiscal deficit seen at 3.5 percent of GDP in 2016/17

o   Plan expenditure seen at 5.5 trillion rupees in 2016/17

o   Proposes to set up panel to review fiscal responsibility management act


o   Rural jobs programme allocated 385 billion rupees ($5.61 billion) in 2016/17

o   Farmer welfare budget to total 359.84 billion rupees

o   Rural road development to get 190 billion rupees

o   Target of agriculture credit at 9 trillion rupees

o   Interest subvention towards farm loans at 150 billion rupees

o   To set up dedicated irrigation fund worth 200 billion core

o   Allocates 55 billion rupees for crop insurance programme for 2016/17


o   Bankruptcy code for financial firms to be introduced in parliament in 2016/17

o   RBI act is being amended for implementing monetary policy framework

o   To list general insurances companies on stock exchanges


o   Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find resources for additional capital for banks if required


o   Allocates 2.21 trillion rupees for infrastructure development for 2016/17

o   Allocation for roads and highways development at 550 billion rupees

o   Capital expenditure on roads and rail development at 2.18 trillion rupees