US ECONOMY- ON THE TRACK THOUGH CONSUMER SPENDING STILL SOFTENS

Gross domestic product rose at an annualized rate of 3.1 percent, the Commerce Department said in its final estimate, revised up from 2.8 percent. The consumer sentiment report added to some recent economic data -- excluding employment and manufacturing -- that suggested growth in the first three months of 2011 would at best match the fourthquarter pace, or slow.

According to Sweet, data so far suggests growth in the first three months of 2011 was between 2.5 percent and 3 percent. Rising fuel prices, boosted by unrest in the Middle East and North Africa, are largely blamed for the expected pullback in growth, although economists expect it will be temporary. As yet, no big impact on the U.S. economy is expected from the devastating earthquake and tsunami in Japan. Treasury Secretary Timothy Geithner on Friday said he was not concerned the disaster in Japan would hurt the U.S. recovery.  U.S. real gross domestic product increased at a 3.1% annualized rate in the fourth quarter, revised up from the 2.8% pace reported one month ago. The government provides three estimates of economic growth per quarter, with each reflecting more complete information than the last. Investors will get a look at Hutchison Whampoa's full-year results and two reports on March manufacturing activity in China, plus industrial-output data from Japan. Market Watch's Lisa Twaronite in Tokyo looks at the week ahead.

New data showed that corporate profits had a banner year in 2010. Before taxes, corporate profits increased 36.8% in the past year, the largest jump since 1950.  The revision to GDP was in line with expectations of economists surveyed by MarketWatch.  Compared with the previous estimate, the government estimated larger business investment. Inventories were less of a drag on growth than previously estimated. Final sales of domestic product increased at a 6.7% annual pace, unchanged from the earlier report.  Economists are much more worried about the current quarter, which ends next week.  Over the past few weeks, analysts have been steadily trimming their estimates for first-quarter growth.  The trend continued Thursday, when Bank of America Merrill Lynch, Macroeconomic Advisers and Morgan Stanley each cut their first-quarter GDP view.  Macroeconomic Advisers' estimate declined to 2.3% from 2.5%, while Morgan Stanley's slipped to 2.5% from 2.7% and B. of A.'s estimates fell to 2.2% from 2.5%, following weak durable-goods orders in February.

US markets shown some range bound trading despite some good economic reports as traders showed concern over Japan's nuclear crisis and violence in the Middle East and North Africa. Oil prices eased a bit as rebels in Libya, gained ground against Moammar Gadhafi with the help of international airstrikes against Gadhafi's forces. On the domestic front, the Commerce Department said that consumer spending rose at its fastest pace in four months in February, though some of the increase was driven by higher gas prices. On the same time, the National Association of Realtors said more Americans signed contracts to buy homes in February than economists were expecting. Sales rose in every region but the Northeast, but remained below what is considered a healthy level. Sales agreements for homes unexpectedly rose 2.1 percent last month to a reading of 90.8. Signings were 19.6 percent above June's index reading, the low point since the housing bust. Rupee, after losing all its steam in the previous week, came back on its track in the last week of March supported by gains in the stock market amidst dollar weakness against ther Asian currencies. Local unit was also comforted by the external commercial borrowing-related dollar inflows. However, higher demand from oil importers for the greenback could limit the rise of domestic currency going ahead in the day.

Mansukh brings to you the most updated monthly magazine which will not only help you in understanding online share market but will also help you in doing online stock market trading conveniently and smartly. For all the latest happening of Share market trading, visit http://moneysukh.com .

Nifty 50 Sensex From The Desk Of Research

The rebound in international crude prices by around a percent in the back of the ongoing turbulence in Libya and neighboring nations too weighed on the local sentiments. However, the rally in software and technology stocks capped the downside risks for the markets while the ease in inflation numbers to single digits during the week-ended March 19 after showing an unexpected increase in the previous week also supported the investor mood.

Indian frontline indices went through a rollercoaster ride on the settlement day of March series futures and options contracts as sentiments turned highly volatile in the second half of the session. The seven successive days of winning streak got extended for yet another day, thanks to the late short covering rally after the indices drifted to the red terrain on the back of hefty position squaring in rate sensitive and healthcare counters . The rebound in international crude prices by around a percent on the back of the ongoing turbul ences in Libya and neighboring nations too weighed on the local sentiments.

However , the rally in software and technology stocks capped the downside risks for the markets while the ease in inflation numbers to single digits during the week-ended March 19 after showing an unexpected increase in the previous week also supported the investor mood. The NSE's 50share broadly followed index Nifty, settled a tad below the crucial 5,850 support level, after surging around a percent while Bombay stock Exchange's Sensitive Index, or Sensex garnered over one hundred fifty points and closed just below the psychological 19,450 level. In the broader markets especially the mid cap stocks after a tremendous rally in last session showed some sign of fatigue but managed to hold in green. The BSE's Midcap and Smallcap indices went home with trivial gains of 0.29% and 0.21% pectively, underperforming their larger peers by quite a margin. On the sectoral front, The IT pocket grabbed the top gainer's position after garnering 1.92% on hopes that upbeat results and outlooks last week from global technology majors Oracle Corp and Accenture bode well for resurgence in tech spending. 

The paper stocks continued to remain in jubilant mood while AP Paper Mills once again got locked in upper circuit other paper stocks too traded higher. On the other hand, the Banking sector languished at the bottom of the table after slipping 0.70% as majors like SBI and Indusind Bank plummeted 3.19% and 4.87% respectively..Among most active underlyings SBI witnessed a contraction of 13.08% in the March month futures contract, followed by Reliance which saw a contraction of 7.05% of OI in the near month contract. Tata steel witnessed an addition of 0.50% in the near-month futures and Tata Motors witnessed an addition of 14.21% in the near month futures contract . Meanwhile, the government is set to release a revised FDI policy circular later in the day hoping to attract greater amount of foreign funds in the next financial year beginning April 1. Among other modifications, the third edition of the Consolidated FDI Policy Circular (CFPC) may contain guidelines on domestic companies issuing shares to foreign entities for considerations other than cash, a move aimed at checking possible misuse of FDI policy to engage in money laundering.

At current juncture we expect the same scenario in the upcoming sessions though possibility of profit booking around 5875-5885 couldn't be rule out. Any closing above this level may generate another 250-300 pts rally and we might see 6070-6080 in the next series. On the flip side any negative outcome from global side particularly from Middle East Asia may dampens the current euphoria. Technically too spot index rallied from last 8 consecutive sessions. Therefore ossibility of minor retracement near to 5550-5570 could be on higher side however any correction should be used to create fresh long positions.

Mansukh brings to you the most updated monthly magazine which will not only help you in understanding online share market but will also help you in doing online stock market trading conveniently and smartly. For all the latest happening of  Share market trading, visit www.moneysukh.com.

Equity Research Weekly Market Outlook Report By Mansukh 26-March-2011

SNAPSHOT

Despite starting the week with a lackadaisical performance and ending below the crucial support levels of 5,400 and 18,000, the benchmarks convalesced on Tuesday and carried forward the strong rally for rest of the of the week as they vivaciously conquered a lot of psychological levels on their way up. The consolidation in crude prices around $105 levels despite escalating turbulences in the Middle East nations was also seen as an opportunity by the local investors who resorted to broad based buying as tabling of the banking sector amendment bill and the Constitution Amendment Bill in parliament buttressed the chances of a rebound for the domestic indices. Moreover, bourses rallied over two percentage points on the last trading day of the week to finish the action-packed week on an exciting note. The spurt on the last trading day in benchmarks was not only due to sanguine leads from the global market but also on encouraging local cues like the overall growth  in the farm sector being pegged at 5.4% along with finance minister's avowal of 9% growth in the next fiscal in the upper house of Parliament stoking investor sentiments. 

Boisterous Indian stock markets witnessed an awe-inspiring week of trade as it seemed like the bullishness of the recent past has come to the fore. The frontline indices accumulated over a gargantuan five percentage points for the week taking the benchmarks to around two month high levels as optimistic global cues coupled with encouraging local developments fortified investors' mood. The Bombay Stock Exchange (BSE) Sensex surged 936.83 points or 5.24% to 18,815.64 during the week ended March 25, 2011.The BSE Mid-cap index gained 3.25% to 6,721.56 and the Small-cap index advanced 2.61% to 8,001.63. All the sectoral indices on the BSE were in the positive terrain; Realty was up 184.64 points or 8.99% to 2,237.87, Bankex up by 741.78 points or 6.09% to 12926.07, IT up 344.65 points or 5.74% to 6,344.62, TECk up by 198.55 points or 5.62% to 3729.29 and Capital Goods (CG) up by 646.72 points or 5.23% to 12,373.27 were the major gainer. The S&P CNX Nifty zoomed 280.55 points or 5.22% to 5,654.25. On the National Stock Exchange (NSE), Bank Nifty surged 6.27% to 11,387.30, CNX IT soared 5.77% to 6,930.65, CNX Nifty Junior advanced 3.08% to 10,943.10 and CNX mid- cap gained 3.05% to 7,824.15. 

WEEK AHEAD
Amidst rising crude oil prices would continue to be threat for the equity markets in the coming week which is characterized by the volatility of  the expiry of F&O series for the month of March, Investor's in the coming week will be eagerly eyeing the core sector growth data, as measured
by the index of six key infrastructure industries, having a combined weight of 26.7% in the Index of Industrial Production (IIP) and also the HSBC India Manufacturing PMI data for the month of March. Further, investor's will keep a close watch on telecom stocks as recommendations on the proposed new policies for telecom infrastructure and manufacturing will be coming in the next week. On the global front, investor's will be eyeing lots of major economic data from the US, starting with Existing Home Sales data on March 21,2011, New Home Sales data, Durable Goods Orders and Jobless Claims data and finally the Corporate Profits data.  Therefore any closing above 5670-5690 for at least two consecutive days may reap indices towards 5800-5850 where we might see some sort of consolidation. On the flip side 5355 still a major support for the March series. HAPPY TRADING…..

Economy Updates Budget 2011-12

AUTO
•    Increase in excise duties by 150-200 basis points
•    Increase in duties/cess on diesel vehicles

BANKS & FINANCIALS
•    Increase in deduction from income for the amount set aside for covering bad and doubtful debts to 50 pct from 7.5 pct
•    Banks to be allowed to issue tax- rebated infra bonds
•    Raise FDI limit in insurance sector to 49 pct from 26 pct
•    Increase in limit of refinancing from  India Infrastructure Finance Company  (IIFCL) to commercial bank loans for PPP projects in critical sectors
•    Tax break on long tenor deposits

INFORMATION TECHNOLOGY
•    Extension of Software Technology Parks of India
•    Act (STPI) by at least one year

OIL & GAS
•    Reduction in customs duty on crude oil, petrol and diesel
•    Reduction in excise duties on petrol/diesel
•    Clarity on 7-year tax holiday for natural gas under Sec 80 IB
•    Flexibility on claiming the 7-year tax holiday
•    Declared goods status to natural gas
•    Abolish 5 percent customs duty on LNG
•    Exemption from service tax for exploration and production

CONSUMER GOODS/FMCG
•    Increase in cigarette excise duty
•    Increase in ad-valorem excise duty to 10 pct from 8 pct
•    Increase in minimum alternate tax (MAT) rate
•    Increase in central value added tax (CENVAT) rate and service tax to 12 pct from 10 pct

POWER
•    Extension of benefits under Section 80IA
•    More funds allocation on Accelerated Power Development and Reform Programme (APDRP) and incentives to states to reform power distribution system
•    Increase in coal cess
•    Clarity on bidding criteria and royalty amount for allocation of coal blocks.

PHARMA & HEALTHCARE
•    Increase weighted deduction on outsourced R&D to 200 pct from 150 pct
•    Extension of weighted deduction on R&D by 5 years
•    Exemption of physician samples from central excise duty
•    Exemption of customs duty for additional medical devices and life-saving drugs
•    Reduction in duty on APIs in line with formulations to 4 pct from 10 pct
•    Extension of tax incentives for hospitals with 100 plus beds to 10 years
•    infrastructure status for healthcare sector

MEDIA & ENTERTAINMENT
•    Concessions in customs duty on set-top boxes
•    Concessions in customs duty on imported plates/ink
•    Cut in DTH license fee by 4 pct to 6 pct
•    Waiver of service tax on transportation of newspapers by rail and road
•    Relaxation in FDI norms

HOTELS
•    Infrastructure status for hotels under Section 80IA

CAPITAL GOODS
•    New import duty on power equipment

CEMENT
•    Increase in excise rates to 12 pct from 10 pct
•    Elimination of import duty on thermal coal, pet coke, gypsum

REAL ESTATE
•    Extension of deadline for notifying special economic zone (SEZ) space to avail tax rebates
•    Increase in tax exemption limit for home buyers
•    Continuation of 1 pct interest subvention scheme for home buyers
•    Setting up of a real estate regulator
•    Clarity on external commercial borrowings (ECB) for sector

Expectations from the Union Budget 2011-12

Government likely to increase food subsidies
The Union Budget for the year 2011-12 is going to presented by finance minister on Monday 28 Feb 2011 and the government is likely to increase subsidies on food, a populist move that hurts public finances but promises political dividends for a ruling coalition trying to cool disquiet over high inflation. Though the govt is moving away from its partly socialised economy, removing subsidies has always been a tough call as they protect millions of poor voters who determine who governs. Its policies have led to big stockpiles of rice and wheat, but the government has often wrestled with the question of how to distribute -- free handouts defer long-term solutions and erratic monsoons and global supplies raise risk in cutting stocks.

Auto parts manufacturers eye tech boost
India's auto parts makers want the government's help to upgrade technology and spur investments to boost capacity, but analysts do not see the budget for 2011-12 to be tabled in parliament on Feb 28 taking many steps in this direction. On the contrary, the expectation is that of a modest increase in excise duty on vehicles that may push up prices. In 2010-11 thus far, component makers have witnessed an increase in sales, but going ahead rising input costs are seen weighing on margins.

Banks hope for nod to sell infra bonds in budget
Indian banks are hoping they get the government's nod to issue tax-free infrastructure bonds and some a tax concession for 2011-12. Public sector banks are also looking for the finer details of the government's capital infusion plans, which will boost capital adequacy and raise the government's stake to 58 percent in many. Currently only Industrial Finance Corp, Life Insurance Corp, Infrastructure Development Finance and some other non-banking infrastructure finance firms are allowed to issue tax-free bonds.

IT firms hope for STPI extension
Indian information technology firms are looking for increased spending on education, e-governance and defence sectors, and an extension by at least one year of tax benefits under the Software Technology Parks of India (STPI) scheme, but many think it is unlikely. STPI was a society set up by the Ministry of Information Technology in 1991 to boost software exports. Among other benefits, the STPI scheme provides a 10-year income tax exemption for units situated in software technology parks.

Government may tweak fuel taxes
India, struggling to balance between cutting its costly fuel subsidies and curbing inflation, may tweak fuel taxes in the Feb. 28 budget to cushion the blow of rising global crude prices on state-run oil retailers. Tackling the current informal structure of fuel subsidies would help investors put a better valuation on proposed share sales for Indian Oil Corp (IOC) and Oil and Natural Gas Corp, aimed at bringing in more revenues for New Delhi. Any decision on cutting subsidies would be a highly charged politically in a country where half a billion people live on little more than the cost of a litre of diesel a day.

FMCG firms want inflation tackled
India's fast moving consumer goods industry is hoping the upcoming budget will bring in concrete measures to tame spiraling inflation and viable tax structure to ensure continued growth. The 130-billion-rupee industry, which is the fourth largest sector in the Indian economy, has been reeling under the pressure of surging input costs and subsequent impact on profit margins. Prices of agri-commodities are on the rise. Prices have risen by 30-35 percent in the past two year and there is also simultaneous rise in freight rates and packaging costs which is squeezing the operating margins of the FMCG companies.

Power firms want extension of tax sops
Indian power sector expects the government to continue its thrust on infrastructure and pins its hopes on incentives for the renewable energy sector and extension of sunset clause under Income Tax Act in the budget for 2011-12 to be tabled in parliament on Feb 28. Under section 80-I(A) of the Income Tax Act mega power generation projects, with over 1,000 megawatts (MW) in case of thermal and over 500 MW in hydro, are exempted from income tax for 10 years, if they are commissioned before March 2011.

Pharma firms want tax cuts, R&D sops boost
Drugmakers want tax exemption deadline for export oriented unit (EOUs) to be extended and want infrastructure or priority sector status in the budget on Feb 28. The deadline for full exemption of tax on net profit for exports oriented units, or EOUs, ends in March, though drug-making facilities in special economic zones would not be affected. The exemption beyond March 2011 will provide relief to companies like Dishman Pharmaceuticals and Chemicals, Divi's Laboratoriess, Cipla and Torrent Pharmaceuticals, which run EOUs.

Media firms seek higher FDI, lower taxes to aid growth
Media firms are expecting the government, in its budget for 2011-12 on Feb. 28, to provide them with some tax relief and are hopeful of getting a growth boost by way of an increase in foreign direct investment limit. In June 2010, Telecom Regulatory Authority of India, which also regulates broadcasters, had recommended higher foreign direct investment in the broadcasting sector, particularly in direct-to-home (DTH) and cable network operators and FM radio.

TELECOM
    Inclusion of 3G investments under section 80IA tax benefits
    Import duty on mobile handsets

CHEMICALS and FERTILISERS
    Increase in fertilizer subsidy
    Inclusion of urea in nutrient-based subsidy (NBS) scheme and price decontrol
    Increase in excise duty on chemicals to 12 pct from 10 pct

METALS
    Remove import duty on steel
    Levy duty on hot rolled or HR coil exports
    Increase import duty on HR coils to 10 pct from 5 pct
    Increase in export duty on iron ore and fines
    Reforms on iron ore and coal blocks allocation and speedier approval process for land acquisitions

CONSTRUCTION AND INFRASTRUCTURE
    MAT break for infra projects for the initial period of income tax holiday
    Single window clearance system for road and power projects
    Easing ECB norms for infrastructure projects
     Infrastructure status to integrated townships and group housing development
    Increase in allocation for Jawaharlal Nehru National Urban Renewal Mission    

Read more about Budget 2011-12

Expectations of individual taxpayers from Budget 2011

The Union Budget is an event that is anticipated with great anxiety, fear and some hope every year. This year, given that there is an overhang of the Direct Taxes Code (DTC) and the Goods and Services tax legislation (GST), the industry expectation is that the Budget should mean relatively few changes.

 

There is, however, a lack of clarity regarding the introduction of DTC from April 1, 2012, even though a significant part of the road has been travelled. We have outlined some areas where we expect changes and new proposals that may be tabled in Parliament.

INDIVIDUAL TAXES

1. Tax Rates and Income Slab
Increase in basic exemption limit — Currently, income up to 160,000 rupees is exempt from tax for individuals. For resident women and senior citizens, the limit is 190,000 rupees and 240,000 rupees respectively. Considering the pressure from rising inflation, it is likely that the government will increase the basic exemption limits, though no change in tax rates is anticipated.

2. Deductions/ Exemptions/Tax Credits
Limit for deduction under Section 80C — Currently, a deduction of up to 100,000 rupees is allowed under Section 80C for different investments expenses incurred by individuals. It is noted that the Indian central bank is pursuing a tight monetary policy. It is therefore expected that the limit will be increased with a view to spur small savings/investment.

Medical reimbursement by the employer — Non-taxable medical reimbursement by employers is limited to 15,000 rupees per annum for an individual and their dependents. It is felt that the government may give in to longstanding complaints that the exemption amount is very low considering the substantial increase in the cost of treatment over the years. Accordingly, it is expected that this limit will be suitably revised upwards.

Deduction for interest on housing loan — Presently, a deduction of up to 150,000 rupees for interest on borrowed capital for an owner-occupied house is available only if the acquisition or construction of such a property is completed within three years from the end of the financial year in which the capital was borrowed. Most housing projects have been delayed beyond their original completion dates; in general they are taking more than three years, due to lack of funds on the part of the developers/ realty companies, which is beyond the control of the individual who has taken the loan. This condition does not apply when a property is bought to let, and therefore, to remove this disparity, it is expected that the time period of three years may be increased to five years.

Employer’s contribution to Superannuation fund — The Finance Act, 2009 imposed a tax on employees for their company’s contribution to approved superannuation funds in excess of 100,000 rupees. It is expected that in view of the current government’s desire to encourage long-term private savings, and taking into account the fact that earlier employer superannuation fund contributions were not capped, a further relaxation in the annual monetary limit may be considered.

Refund — There is considerable dissonance among the general public at the inordinate delay in the processing of tax refunds. Individuals pay tax for the current year, while simultaneously waiting for refund claims from the tax authorities for the earlier year(s). In order to provide relief to small taxpayers, it is expected that the government will come up with a proposal to release all small value refunds before the end of the financial year in which the tax return is filed.

Allowability of foreign tax credit while determining tax deduction on salary — Currently, there is no provision for reducing the estimated Foreign Tax Credit (FTC), available to employees for taxes paid in the other country while withholding taxes in India. The government may include specific provisions in the statute allowing FTC at the same time as withholding taxes from income chargeable under the heads of salary in India. Similar provisions are already there in advance tax provisions.

Read more about  Individual Taxpayers from Budget 2011

Where will price of gold move in 2011 BY MANSUKH JANUARY 2011

There is no definitive answer to where the price of gold will be in 2011. The best an investor can do is to look at possibilities based on historical data. If an investor assumes that paper currency will continue its debasing trend, what would be a high estimate on gold prices per ounce? To answer that we need to look for the highest that gold has been in the past.

Indians were on a spending spree last year. But those who shopped for gold have reason to be satisfied with their purchase gold price has seen a 26 per cent rally this year! In rupee terms, gold prices have shot up by Rs 400/gram (Standard 24 carat gold), a 22 per cent run up. In contrast, stocks weren't a better play the benchmark Sensex is up just 15 per cent year-to-date.

January 21st, 1980 saw the price of gold reach 850 US dollars per ounce. To understand how much money this is worth today one would need to adjust the figures according to the Consumer Price Index. 850 dollars in 1980 is worth 2,250 US dollars in the year 2010. If gold were to repeat the value of a previous high it could double from the price it is trading at in December of 2010.

Other situation suggest that because the current economic output is many times greater than 30 years ago, the peak price of gold could even reach 3000 to 4000 dollars per ounce in the years to come. On the other hand the argument could be made that markets are based on mass psychology and trader emotions. Some might suggest that the average person would not believe that the price of gold could ever reach up to 3,000 dollars, thus creating a resistance to that level ever being achieved.

However some market participants believe that as the market recovers in 2011 and beyond, the price of gold will retreat dramatically as the economic woe gets pushed to the backs of people's minds and their hedging tactics are tossed aside. Longer term, the market could face headwinds that come with a sustained economic recovery as global interest rates could rise, denting the appeal of gold, a non-yield bearing asset. “The market is expected to derive strength from further economic pitfalls and the near-zero interest rates maintained by the US Federal Reserve.

There are many other reasons for gold's out performance this year. One, the change in the gold-dollar relationship. While investors have traditionally bought gold when the dollar weakened, this year was different. They bought the dollar and gold simultaneously as the euro weakened. Two, strong revival in jewellery demand after the recession induced dip last year. Three, growing investment demand for the metal from emerging and also developed nations as returns from other options dwindled. Further, gold fundamentals were supported by the lack of significant increase in mine outputs during the year and a fall in scrap gold sales. With global economies still in the grip of uncertainty, gold continues to present a case for investment. The demand for gold has been traditionally driven by jewellery consumption. But that seems to be changing with investment demand for gold now driven by a range of products such as Gold Exchange Traded Funds.

some of these deals happening quite recently, there may be potential for further value unlocking in gold stocks. But before you choose mining funds over plainer options like gold ETFs do note that they are high risk bets they are more volatile than gold and also tend to under perform physical gold during a downturn. While most of the arguments presented here may well hold good in the coming year too, possible increases in interest rates that will make bond yields attractive, are a risk. Resurfacing concerns over another wave of recessionary conditions should keep investment demand for gold firm, as investors look to hedge against financial market volatility and vulnerability.