As the 30-share Bombay Stock Exchange (BSE) Sensex continued its downward journey on Friday, having lost 664 points in just two trading sessions, analysts advise retail investors to stay away from the stock market.
However those in long term investment horizon can bet on large blue-chip stocks, they said.
“Retail investors should stay away from the stock market as currently there is no clarity on the euro zone crisis,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities. “Only once we get some clarity, retail investors should think of entering in the market,” he said.
The European Union leaders summit failed on Friday to secure the full backing of the 27 nations for treaty changes to help fight euro-zone debt crisis.
According to experts, investors should look at options such as gold and fixed income instruments.
“Retail investor investors should not enter the market right now, but those having long term investment horizon can invest 10-20% of the investible amount in blue chip stocks and remaining in the gold and fixed income instruments,” said Sudip Bandyopadhyay, managing director and chief executive officer, Destimoney, Securities.
“Going forward we expect some more clarity from the European Union leaders for resolving Eurozone crisis,” he added. However marketwatchers assure that the long term growth story of India is intact.
Many clouds over North Block
Hiring down, may spread to more sectors
The uncertain economic environment and policy paralysis that have dampened consumer sentiment are affecting new job offers as corporations withhold expansion plans. HR consultants say companies have not cut headcounts, but new offers are being put on hold in view of the uncertainty in the short term.
It is feared that if the slowdown in the Indian economy continues, the malaise could spread to more sectors.
The hiring sentiment has been weakening over the last several months.
The sectors where new job creation has been adversely affected include FMCG, sales, customer service operations, insurance and telecom. Staffing firm TeamLease estimates between sales and customer services new job creation over the last six months has reduced by 15% from a year ago.
Manish Sabharwal, chairman TeamLease Services said if the current trend continues automobiles and BPOs could be next in line to feel the heat on job creation.
And it is not just entry-level jobs but middle- and top-level executives are feeling heat as well. “Of late, hiring activity has weakened in senior level positions as well,” said Vikram Chhachhi, executive vice president at the global executive search firm DHR International.
Negative sentiments have only increased over the last 18 months due to stalled economic reforms, he felt. “...and thanks to the uncertainty, nobody knows what lies six months ahead,” he said.
Excise mop-up dips 6.5% in Nov
The government on Friday said excise duty collections has fallen by 6.5% in November compared to the same period last year, a strong sign of industrial deceleration crippled by costly borrowing, rising raw material cost and weakening consumer demand.
Excise duty collections during November stood at Rs 11,761 crore, down from Rs 12,574 crore collected during the same month of the previous year.
“Decline in central excise collection is a matter of concern and we are studying relevant aspects to identify the shortfall and will rectify it to achieve our target,” CBEC chairman SK Goel told reporters here on Friday.
In 2011-12, the government had budgeted to collect Rs 4,00,635 crore from indirect taxes — customs, excise and service tax — but meeting this appears increasingly difficult. Till November, government has collected Rs 2,52,544 crore as indirect taxes or 63% of the budgeted amount.
Brakes on expansion plans
With rising interest rates and inflation battering consumer sentiment in the country, Indian companies are busy redrawing targets and rethinking investments.
India’s second-largest carmaker Hyundai Motor India ltd has postponed plans to invest Rs 400 crore to set up a diesel engine factory citing sluggish demand for cars.
Market leader Maruti Suzuki India Ltd, which had announced a new factory in Gujarat, doubts whether it would go live as per schedule.
“This year we do not expect any growth as reaching last year’s level itself is a challenge,” said RC Bhargava, chairman, MSIL. “We make cars as per the demand in the market. So if it remains as sluggish, then our expansion would also need to be realigned accordingly.”
Consumer durable manufacturers are also hit. “We are keeping a close eye on the macro-economic situation. In the present scenario we will be cautious in investment plans,” the spokesperson of a Japanese durables manufacturer said.
Holes: telecom, disinvestment
A question mark loomed over the India’s ability to meet this year’s fiscal deficit targets with the government unsure about meeting its non-tax revenue targets from two primary sources — telecom spectrum sale and disinvestment in public sector undertakings (PSUs).
The government had estimated earnings of Rs 40,000 crore from disinvestment of PSU and another Rs 29,648 crore from receipts on account of spectrum usage charges and auction of broadband wireless access (BWA) spectrum.
However, the department of telecommunications is yet to finalise plans for sale of 20mhz of broadband spectrum in most of the telecom circles.
“The Government is addressing these challenges so as to realise major portions of these estimated receipts,” the finance ministry’s mid-year analysis of the Indian economy tabled in Parliament on Friday said.
Support for farmers’ loans
Farmers who have been paying their loans on time are set to be rewarded by the government. The centre has decided to pay a part of their loans by raising the interest rate subsidy from the current 2% to 3%.
The department of expenditure is understood to be looking into the matter. The government in its mid-year review indicated that a cabinet note has also been prepared for finalising the details.
The move would encourage more farmers to get into the institutional credit mode. At present about 60% of farmers still avail loans from non-institutional sources like money lenders in a bid to avoid procedural complications.
Commercial banks, with a target of Rs 4,75,000 crore of agriculture credit for 2011-12, have also stepped up their direct lending operations to small and marginal farmers on a priority basis.