So let’s say you were looking to manufacture something. Maybe it’s a faster cellphone battery charger. You want to set up this plant in India, to make chargers at Rs. 100. But if you did, there’s some kind of excise duty (which is a tax you pay when you manufacture something)you would pay on this product. Let’s say that’s 10%. So your cost goes up to Rs. 110. Your competition is in Malaysia, and in India, a dealer can choose to import this charger or buy from you. The import cost of the charger is Rs. 100 as well. Now there’s something called Countervailing Duty – CVD – which says that if what you import has some kind of excise duty, then it should have a similar “customs” duty as well. Excise is for local manufacture, Customs is for imports. What if the government had said that there is no CVD for battery chargers?… (Read On…)

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The Rail Budget is here . Let’s cut through the bull and give you what’s important. Fares Haven’t Changed Yes, it’s time to rejoice. You’re still going to be stuffed like sardines into massive metal boxes when you’re an “unreserved” customer of the Railways, but you won’t pay a rupee more than last year. However, you are likely to get your tickets in 5 minutes. We aren’t exactly sure why it should take five minutes either, but apparently this is a big improvement. Freight Costs are Up To transport goods, freight costs have been increased. The rates are between 4% and 10% (mostly 10%) and they expect traffic to grow as well. Coal transportation rates, for instance, are up 6.3%. Those people who just bid for all those coal blocks suddenly have to pay more, and we hope they factored that in. Big Investment in Upgrades So you complained about a train never coming on time?… (Read On…)

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We welcome the Budget 2015 series with a post on Subsidies. The government pays for many things for us: Food: The government buys food and lets it rot in large warehouses (which it also pays to build) Oil: You pay less at the petrol pump because the government pays the oil companies for the losses they make for billing you lesser. Fertilizer: The government pays the fertilizer companies so as to keep prices low for farmers. These are of course the main subsidies, but there are probably umpteen more. For instance when Air India need a Rs. 40,000 cr. rescue, it’s not called a subsidy, even though in effect, it is one. When farmers refuse to pay loans and the government pays it for them, it’s called a “waiver”, not a subsidy. When a big corporate demands a tax write off before investment, that’s not a subsidy, that’s just business. When IT companies don’t pay taxes for 10 years, that’s not a subsidy because darn it we say so.… (Read On…)

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The rest of this content is only available to premium members. Register for a premium membership today ! Apart from this content you will get our proprietary research and weekly newsletter too! Already a subscriber? Log in now !… (Read On…)

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India’s forex reserves hit a new high at $333 billion for the week ended 13 Feb 2015. This is the highest ever in terms of forex reserves that India’s held. Including known forex forward derivative exposure, we are at about $340 bn in the kitty.   What’s Different About This? Forwards have been Unwound. While this sounds like the RBI is purchasing dollars like crazy, this might have been the “unwinding of forward contracts”. RBI buys both in the cash market (and owns dollars outright, which reflects in the forex reserves) and in the forward market (where a buy will receive dollars at a future date, so it will be an “outstanding” buy). When that future date comes, the RBI can choose to buy the dollars and add to forex reserves, or roll it over to other forward contracts. The former – to end a contract and buy the dollars – results in increased forex reserves and lower outstanding forwards.… (Read On…)

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The rest of this content is only available to premium members. Register for a premium membership today ! Apart from this content you will get our proprietary research and weekly newsletter too! Already a subscriber? Log in now !… (Read On…)

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We write about the potential Budget-enforced regulation changes regarding Arbitrage Funds, and the possible effects on the markets. This post is for Capital Mind Premium subscribers only.

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I was on CNBC TV18 two days ago, talking about Suzlon and Bharat Forge and so on: Some of the things I’ll add more on: For more about what we think on Suzlon, that is, a more contrary view, check these two posts out: Suzlon faces 70% dilution on FCCB conversion Suzlon rids itself of REPower but it’s still overburdened . We’ve written about how Nifty company profits are down 7% in the December quarter , even as markets make new highs. Subscribe to Capital Mind: To subscribe to new posts by email, once a day, delivered to your Inbox:   Also, do check out Capital Mind Premium , where we provide high quality analysis on macro, fixed income and stocks. Also see our portfolio which has given stellar returns in our year, trade by trade as we progress. Take a 30-day trial: First name Last name Email * … (Read On…)

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We take an in-depth look into the chart of Hero Motocorp’s stock. This post is for Capital Mind Premium subscribers only.

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The Food Corporation of India continues to own stocks way above the required buffer limits. The redemption for us is that stocks aren’t really going up, they are slowly falling. Here’s the stock chart as of Feb 1:   As you can see, we have, in the FCI,  530 lakh tonnes of Rice+Wheat, when the buffer requirement is only 250 lakh tonnes . (2x overstocked) This buffer norm has recently been downgraded to 210 lakh tonnes (for Jan, Feb, March) so the overstocking is even more. Here’s the new stock norms: (Multiply by 10 to get lakh tonnes). We currently have 530 lakh tonnes in stock. This is greater than the HIGHEST amount of stock we should have even including the new buffer norms for the Food Security Act. This is just crazy. In Rice we own too much rice+unmilled paddy. This is altogether too much, and still, the FCI wanted to import rice from abroad !… (Read On…)

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