need2know: Macro events that may impact your market

By Nandini Sanyal

The domestic economy continues to swing between hope and despair even though the government has been constantly trying to remove one hurdle after another to pave the way for faster growth and also nurture the green shoots of economic revival.

A final nail in the coffin of retro tax, which the Prime Minister himself put this past Sunday, was seen as the latest step in the government’s pro-active push to be business-friendly and growth-oriented.

Here we bring you an update on this and a few more such macro developments that may have an impact on the market.

Market worried about external risks
India's growth in 2016 is increasingly vulnerable to external risks. A poll by Moody's and Icra showed the market is concerned about an increase in India's (rated Baa3 positive) exposure to external risks over the past seven months. Among the market participants, 35 per cent saw external shocks as the greatest challenge facing India's economy, up from just 10 per cent in the previous Moody's and Icra surveys conducted in May 2015.

On economic growth, over 75 per cent said the headline GDP growth will stay between 6.5 per cent and 7.5 per cent over the next 12 months. Only 14 per cent of the participants expected growth to reach between 7.5 per cent and 8.5 per cent. The only ray of hope investors found was that India is much better placed in terms of growth than most similarly rated emerging market peers, such as Indonesia, Turkey, Brazil, South Africa and Russia.

Modi allays retro tax fears
Seeking to address investor concerns, Prime Minister Narendra Modi on Sunday said the controversial retrospective taxation is ‘a thing of the past’ and this chapter will never be opened again as the government was putting in place a predictable tax regime. Addressing business leaders of France and India in Chandigarh in the presence of French President Francois Hollande, Modi said his government wants to ensure that foreign investors are clear about the tax system that will prevail in India over the next 15 years.

“Retrospective tax is a matter of past. That chapter will not be opened again. We are ensuring that neither this government nor the future governments can open this chapter,” Modi told the business summit.

China business confidence dips
Business confidence among China’s entrepreneurs and bankers dipped for the fourth quarter of 2015 compared with that of the third quarter, according to a survey published by the People's Bank of China on Thursday. The entrepreneurs’ confidence index fell to 46 per cent in the fourth quarter, 4.5 percentage points lower than Q3. The export orders index was at 43.7 per cent in Q4, down 2.6 percentage points from the previous quarter.

A separate survey by the central bank showed that the bankers' confidence index slipped to 37.9 per cent in the fourth quarter, down 2.7 percentage points from the third. The survey showed 38.8 per cent of bankers believed the monetary policy would be loose in the first quarter of 2016. More bankers believed the economy had cooled in the fourth quarter compared with the third quarter.

All eyes on the US Fed
The US Federal Reserve’s rate-setting meeting that begins on Tuesday will keep markets and investors glued to it. While no major action is expected at this month’s FOMC meeting, investors and markets will look for signals on future interest rate trajectory and also its reading of the health of the economy. After raising rates by 0.25 per cent off the near-zero range where they’d been held since December 2008, the FOMC said rates would move ‘gradually’ higher in 2016 and that any move would be predicated by incoming economic data.

Oil prices on mend, will economies follow?
At Davos last week, finance minister Arun Jaitley said instead of high oil prices, low oil prices were affecting the economy. That problem may be getting solved. Crude oil futures extended gains on Monday, following a surge at the end of last week on short-covering and fuel demand triggered by freezing weather in parts of the northern hemisphere. Oil prices had soared 10 per cent on Friday, one of the biggest daily rallies ever.

Sugar faces stricter norms, drought hit
The situation is getting tougher for the sugar industry. Reason: ‘stricter’ green norms unleashed by the government on sugar mills to minimise water pollution. The revised standards will help improve operational performance. Meanwhile, Indian Sugar Mills Association has brought down its sugar output estimate, as the first back-to-back droughts hit cane plantations in Maharashtra.

Lastly, good news! Zero balance accounts dip
Deposits in Narendra Modi's flagship financial inclusion programme -- Pradhan Mantri Jan Dhan Yojana (PMJDY) -- have crossed the Rs 30,000 crore mark. As many as 20.38 crore bank accounts were opened under the PMJDY as of January 20. Another good news. There has actually been a decline in number of 'zero balance' accounts. That should auger well for banks!