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You are here : IndiaNotes >> Market Action >> Fundamental

Economic Calendar Nov 16 - Nov 30

Namrata Shah | 19 Nov, 2015  | Follow Author | Add to my Favourites 
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Nov 16, 2015


Wholesale Price Index

 


The Wholesale Price Index (WPI) measures inflation. It measures the change in the price of goods sold by wholesalers. Wholesale price index is divided into 3 groups: Primary Articles (20.1% of total weight), Fuel and Power (14.9%) and Manufactured Products (65%). Primary articles includes food, non food & minerals.


 

Source: Investing.com



WPI Food -
This index measures the changes in price of all food related goods at wholesale price.

 

Source: Investing.com

 

WPI Fuel - This index measures the changes in price of all fuel related goods before the retail level.

Source: Investing.com


WPI Manufacturing Inflation - This index measures the changes in price of all manufacturing related goods at wholesale prices

 

Source: Investing.com

 

WPI number are very important statistics in economic growth. RBI's decision to increase or decrease interest rate is based on WPI data.


If WPI inflation is low and likely to fall or remain low, then this would trigger interest rate cut by RBI. Whereas, increasing WPI with upward trend may increases the concern of central bank, which would tighten monetary policy by increasing interest rate.


With cooling of inflation, RBI would decrease interest rate. This would incentives corporate to undertake capex activities and pay lower interest cost. Lower inflation would decrease the price of goods & services, thereby encourage citizens to spend. With lower price of product and improved consumer demand, the company's profitability would improve. 


On other hand, to manage rising inflation, RBI increases interest rate. This, in turn, increase in interest costs of the companies that are dependent on debt for its operations. High interest cost negatively affects the Company's profitability.


On demand side, high inflation would increase prices of product or services and reduce purchasing power in hands of consumer which leads to decrease in demand. This would again negatively impact company's profitability. Overall, lower profitability has adverse impact on sensex.


Sectors that are directly affected by inflation and corresponding interest rate are realty, banking, auto and infrastructure.


Export, Import & Trade Balance

 


Exports  - Amount of merchandise exported in US dollar terms on an f.o.b. (free on board) basis.


Imports - Value of goods & services bought into India from other countries.


Trade Balance is the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported. A higher than expected exports or positive trade balance would appreciate INR against foreign currency, while a lower than expected would lead to depreciation of INR.

 

Source: Investing.com

 

Nov 20, 2015


Foreign Exchange Reserve



Foreign exchange reserves provides information about total foreign exchange reserve held by RBI


There are 4 components of foreign exchange reserve -


- Foreign currency asset - are denominated in US$. It is sum of various currency - pound, Euro, US Dollar or sterling reserve maintained in RBI. It also include the effect of appreciation or depreciation of the non-US currencies.


- Gold - Reserve Bank holds 557.8 tonnes of gold, which is revalued at the end of the month at 90% of the daily average price quoted by London Bullion market Association


- Special drawing rights (SDR) - is an international reserve asset created by IMF and allocated to its members in proportion of the members’ quota at IMF.


- Reserve position with IMF - India's reserve holding with IMF.


A foreign exchange reserve is very useful during financial crises. If India has high foreign exchange reserve then it would be in better position to maintain rupee volatility. In scenario, when rupee to US dollar exchange rate moves outside RBI's comfort level then RBI would intervene by either buying or selling US dollar. 


If rupee depreciates significantly, it not only impacts importer adversely but also negatively impacts foreign investors. With rupee depreciation, return to foreign funds in dollar terms diminishes. Appreciating rupee would impact exporters.


Source: Investing.com

 

Nov 25, 2015


M3 Money Supply


M3 money supply is sum of following Component


- Currency with public - Currency with public comprises of notes in circulation, rupee and small coins (i.e. currency in circulation) less cash with banks.


- Demand Deposit with Banks - include all liabilities (excluding inter-bank) that are payable on demand.


- Time Deposits with Banks -
are those liabilities (excluding inter-bank) which are payable otherwise than on demand.


- Other Deposits' with Banks -
include deposits from foreign central banks, multilateral institutions, financial institutions and other sundry deposits.


A higher than expected reserve balance is positive for the INR, while a lower than expected balance is negative for the INR.


Nov 27, 2015


Bank Loan & Deposit Growth

 


Bank Loan Growth measures the change in the total value of outstanding bank loans issued to consumers and businesses. Borrowing and spending are closely correlated with consumer confidence.

High bank loan and deposit growth indicates improvement in economic activity which would translates to high GDP growth 


If there is low credit growth and low GDP, increases the probability of high provisioning and thereby put pressure on profitability of banks. Also, if low credit growth persists then banks may need to write off loan defaulters as NPAs. This will acts as additional dent of banks earnings. Lower banks earnings would adversely impact sensex as banks has more than 25% weightage in sensex.


Source:Investing.com


Nov 30, 2015


Federal Fiscal Deficit


Managing Fiscal deficit is key task for government to boost economic growth


Fiscal deficit can be improved by increasing its revenue base and curtailing expenses. Revenue base can be increased by increasing tax receipts, through divestment of stake in government run companies and by lowering subsidy on food and fuel.  


With spurt in economic activity, corporate earnings would improve which in turn would increase tax receipts. High corporate earnings would pave way for bull run on stock exchanges, thereby facilitating divestments of government operated companies.


Further, with improvement in economic activity unemployment would fall and per capita income would increase. High per capita income would expand the base of population falling under taxable income category, thereby increase tax receipts.


With lower fiscal deficit, sovereign rating would notch up and attract more foreign investment.


Source:Investing.com

 

Infrastructure Output

 


The infrastructure sector accounts for 26.68% of India's industrial output.

 

GDP   

 


Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy's health.


GDP is computed via the expenditure method. As per this method, GDP is calculated as the sum total of private consumption (C), government expenditure (G), gross investment (I) made in the country, change in stocks and net exports i.e. total exports – total imports of the country (X – M).


GDP = C + G + I + (X – M)


What leads to higher GDP


- High corporate revenue growth and improved corporate earnings


- high employment rate & thereby high disposable income which would lead to high consumer spending


With High GDP


- FII fund inflows would increase


- High stock prices


Thereby, higher than expected GDP is positive for economic growth, corporate earning thereby for INR



Source: Investing.com, Trading economics, Economic Times and other leading newspaper, A Handbook on RBI’s Weekly Statistical Supplement





About Namrata Shah

Namrata Shah is a Chartered Accountant and an independent finance blogger. She loves analyzing companies financials, business models, corporate governance and other aspects of the companies. She has rich experience in research, valuation and audit, assurance & advisory function in reputed organisations. She blogs at http://finance-nams.blogspot.in/ .

 

For more information please write in to [email protected]

Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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