An important week for India capital formation has included the first full year budget of the Modi Government, and another surprise interest rate cut taking the RBI repurchase rate to 7.5%.
Among 30 SGX-listed companies with India businesses, the largest capitalised that apportion more than 10% of revenue to India are Ascendas India Trust, Religare Health Trust, India Bulls Property Trust, Sarine Technologies and Cordlife Group.
In the year thus far, four of these five stocks have generated gains, while one has declined in price. The average gain of the five stocks has been 6.2% and they maintain an average dividend yield of 3.7%. Meanwhile the iShares MSCI India ETF is the most actively traded ETF on SGX and the SGX Nifty Index Futures has set a number of new participation records in 2015 to date.
Recent Economic Developments
It has been a week of keystone fiscal and monetary policy initiatives in India.
The first full year budget of the Modi Government was presented on Saturday. Budget highlights maintained the five major economic challenges for India were “Agricultural income under stress, increasing investment in infrastructure, decline in manufacturing, resource crunch in view of higher devolution in taxes to states and maintaining fiscal discipline”.
Accordingly, the statement noted that “the journey for fiscal deficit target of 3% will be achieved in three years rather than two years. Nevertheless KPMG India maintained this week that the Fiscal deficit of 4.5% of GDP in FY14 is lower than the budgeted target of 4.8% of GDP. On the coffer front, corporate income tax is to be lowered to 25% from the current 30% over the next four years.
On the Financial Market front, KPMG India have highlighted a number of key budget proposals, including:
Non-Banking Financial Companies (NBFCs) registered with the Reserve Bank of India (RBI), with asset size of INR5,000 million and above, would be considered for notifications as a ‘Financial Institution’ in terms of the SARFAESI Act, 2002 enabling them to fund SME and mid-corporate businesses;
Merging the Forwards Markets Commission with SEBI. Foreign Investments in Alternate Investment Funds to be allowed;
Distinction between different forms of foreign investments, especially between Foreign Portfolio Investors and Foreign Direct Investors to be done away with;
Tax free infrastructure bonds for the projects in the rail, road and irrigation sectors; and
A regulatory reform bill proposed that would bring out a certainty and clarity across various sectors of infrastructure.
Complementing the fiscal initiatives, yesterday the RBI surprised markets with an intermeeting 25bps rate cut to bring the RBI repurchase rate to 7.5%, from 7.75% previously. This was the second rate cut of the year, following the other intermeeting rate cut on 15 January.
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