Todays Stock Market Summury - Chart of the Day 17 Jan 2017

Todays Stock Market Summury - Chart of the Day 17 Jan 2017

   January 17, 2017       prabhakardalvi

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Talking about cyclical industries, commodities are the first thing that come to our mind. Commodity prices can have a huge impact on inflation data as well. As per the latest wholesale price index (WPI), WPI inflation accelerated to 3.39% in December 2016 as compared to -1.06% during the corresponding month of the previous year. For November 2016, WPI stood at 3.15%. 

The rise in WPI inflation is mainly on the back of rising global commodity prices and an unfavourable base effect. 

Can Inflation Come Back to Haunt the Economy?

   

Fuel and Power index rose sharply (on YoY Basis) on the back of the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) to reduce crude oil output. Even oil producers outside the group led by Russia agreed to reduce the output. The low base effect of last year also contributed to a sharp increase of fuel and power index. 

Manufactured products inflation, which largely contributed to the uptick in December 2016 WPI came in at a 14 month high of 3.37%. However, food inflation has turned negative for the first time since August 2015 at -0.7% in December 2016 as against 1.54% in the previous month. 

In the coming months, it looks like WPI could inch up and CPI might soften. The RBI is scheduled to hold the next meeting of the monetary policy committee on 8 February and is likely to keep a close watch on these numbers.

The International Monetary Fund (IMF) has cut its GDP growth forecast for India by a full percentage point to 6.6%. This is on the back of disruption caused by demonetisation. With this, India may lose the 'fastest growing major economy' tag to China in 2016-17. 

In its World Economic Outlook (WEO) Update, the IMF said India is likely to grow 6.6% in FY17. The IMF also expects India's growth to pick up at a slower pace in FY18, at 7.2%, against its earlier estimate of 7.6%. 

As per the IMF, the growth forecast trimmed for the current and next fiscal year primarily due to the temporary negative consumption shock induced by cash shortages and payment disruption associated with the recent currency note withdrawal and exchange initiative. 

Earlier, the World Bank has lowered its economic growth forecast for India to 7% after taking into account the impact of demonetisation and the fall in private investments. Similarly, the growth projection by the Central Statistics Office (CSO) released earlier, has lowered economic growth to 7%. This is mainly due to an industrial slowdown and this doesn't include the impact of demonetisation. 

With GST likely to be rolled out from 1 July 2017, it will be interesting to see how economic growth estimate pans out for FY18. 

Talking about GST, as per the latest development, GST is set to be rolled out from 1 July instead of 1 April after the centre and the states struck a consensus on the contentious issue of sharing of administrative powers. The deferred implementation date gives some time for the industry to prepare after the shock of demonetisation. Immediate rollout of GST would have created disruption and discontinuity in the system. 

What remains now are the rates for various goods and services which will be decided in the near future. The real benefit of GST comes from a 'level playing field'. A common floor tax across India means that the most efficient producer will win the consumer. 

If you would like to dig deeper into the practical implications of GST, I strongly recommend you download Vivek Kaul's free report, What the Mainstream Media DID about NOT TELL YOU GST.

After opening the day in the green, the Indian stock market indices slipped into the red around noon time. IT, FMCG, and capital goods, stocks are leading the sectoral gains. 

The BSE Sensex is trading lower by 37 points (down 0.14%) and the NSE Nifty is trading lower 11 points (down 0.13%). The BSE Small Cap and BSE Mid Cap indices are trading higher by 0.4% and 0.16% respectively.

( Reported by Equitymaster)

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New year gift of Tax slab modification from PM Modi - FM Jaitley, Wait-n-watch

New year gift of Tax slab modification from PM Modi - FM Jaitley, Wait-n-watch

   December 29, 2016       prabhakardalvi

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As refer title , every person assume what is Tax slab for 2017-2018 from BJP Govt. after Cash DANGAL(movie name, act by Aamir Khan). PM Modi need more tax for development and FM Jaitley want formation as per RBI condition....

let see what happen ???, what my thinking i wrote below..... 

Modi wants to increase taxes on stock market investors. At least, this was the most common interpretation doing the rounds after his recent speech. Markets tanked on Monday at the prospect. 

There's no doubt the government needs more tax money. But they better not fall into the trap of linear thinking...or what we might call 'The Cobra Effect'. 

Word has it that when the British were ruling India, they offered a bounty to anyone who brought them dead cobras. The idea was to control the growing cobra population. But the move backfired. Instead of going down, the cobra population went up. Turns out, people started breeding cobras to get the reward. And when the government saw this and cancelled the scheme, all the cobras were released in the wild. 

Linear thinking assumes that increasing tax revenue is a simple function of increasing the tax rate. The Cobra Effect, on the other hand, alerts us to the reality of non-linear consequences. What if, instead of leading to increased revenues, the higher tax rates actually lowering revenues? 

Arthur Laffer, an American economist and former member of Ronald Reagan's Economic Policy Advisory Board, had an intuitive understanding of the cobra effect in the realm of taxes. 

Once, during a war of words about the president's tax plan, he couldn't take it any longer. He ordered for a napkin and drew an elegant chart. No one has been able to present the relationship between government revenue and taxes better than Arthur Laffer did on that cocktail napkin. 

The chart was a simple 'inverted U', a hallmark of non-linear thinking. An 'inverted U' has a peak point right at the center and tends to go to zero at both its ends.

 

The idea is that there exists a certain tax rate at which the government will earn the maximum revenues. And it is the government's job to find this sweet spot. Anything lower than this optimum tax rate and tax revenues would drop. Anything higher and the revenues would still drop as people would start to evade taxes or even stop working altogether. 

Whether you implement a 0% tax rate or 100% tax rate doesn't matter: Revenues would be zero. And it intuitively makes sense, doesn't it? Why would someone want to work if the government is going to take away all the income? 

Personal income taxes in India were as high as 85% in the 70s. And still, there were people who felt Indian tax rates were too far on the left side of the 'inverted U' curve. That is, they thought tax rates could be hiked even more to reach peak tax collection. But since then, taxes have come down to 30%. And many now feel that tax rates are still too high and should be lowered to reach peak collection. 

Either way, there's no denying the relationship between taxation and revenue is non-linear. There is an optimum tax rate. There is a level at which revenues will peak. 

As far as taxes on capital gains are concerned, market participants believe they are already on the right side of the curve. Any more tinkering and it may not go down well with investors. 

What about personal income tax rates? The slabs have remained constant since 1997-98. Still, they could well be on the right side of the curve; lowering income tax rates could actually end up increasing government tax revenues. 

(source :- Equitymaster Agora Research Private Limited)

Will Jaitley oblige come February 2017? If he does and the government revenues do go up, it would be a double treat for the stock markets. Both the economy and the government finances would get a boost. 

We see a minor, if not a big, relief coming for the middle-class tax payer. If for no other reason than to ease some of the pain from demonetisation. What do you think? mail me on prabhakara.dalvi@gmail.com. 

Note : Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com

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