Advice for The Wise February 2014
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Advice for The Wise February 2014

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Advice for The Wise February 2014 Advice for The Wise February 2014 Presentation Transcript

  • ADVICE for the WISE Newsletter –FEBRUARY 2014 1
  • Contents Index Page No. Economic Update 4 Equity Outlook 8 Debt Outlook 12 Forex 14 Commodities 15 Real Estate 16 2
  • From the Desk of CIO Dear Investors, The inflation headwinds have continued to be a major hindrance for economic quite badly, Argentina following suit. Other emerging markets are not far recovery in India. Add to that the change in stance at RBI in terms of the behind in the rout. While Rupee is much better placed now than it was in the inflation index of focus – from WPI to CPI – & it is likely that the ‘tracked’ mid-2013 (when tapering speculations first began), it is hard to gauge the inflation remains high for quite some time to come. For several quarters now, actual effect of the tapering on foreign fund flows to India. There are the food & fuel price increases kept the CPI high even as the WPI had started arguments for & against investing into India for global investors & the easing. Fundamentally, the sensitivity of food & fuel prices to monetary prospect of general elections in India in near future makes matters rather risky conditions is much lower than that of say industrial input goods. The former for any investor not keen to take a bet on who comes to power at the centre are consumption driven while the latter are investment driven. Monetary in May. The repo rate increase of RBI was probably also keeping in mind the tightening operates through reduced investment demand by increasing the possible downward pressure on Rupee with the continued tapering in US. cost of borrowing. Its effect on consumption demand is only indirect & second-level. Hence a tight monetary policy affects investment demand quite Interestingly enough, while inflationary expectations are starting to get quickly – as is evident from the reduced order book of most infrastructure entrenched in Indian economy, there seems to be another curious companies. However, it is likely to take much longer to affect food & fuel development as regard interest rates. Increasingly, it would seem that the prices. The operating mechanism for that is expected to be the reduced high interest rate regime is also getting ‘entrenched’ in the economic system. circulation of money in the economy due to the tight monetary policy – which Companies & individuals alike are seemingly getting resigned to continued in turn is expected to reduce the amount of money available for consumption high interest rates. Such stabilization of beliefs in continued high interest rate as well. How long before this mechanism starts to take effect is anybody’s environment may on one hand aid growth by getting companies & individuals guess. to act on their investment plans – albeit with lesser profitability – rather than postpone them with the expectations of lower rates later. On the other hand, Besides inflation, RBI seems to be cognizant of another worry on the global these rates may also keep most of the savings in relatively safe financial side – thus prompting it to raise the interest rates in January, in a surprise instruments such as government debt or quasi-government debt. The risk move. The long-awaited & much-feared tapering of the monetary stimulus aversion of investors coupled with high yields may starve several potentially from the US Federal Reserve (also called quantitative easing – III) has profitable investment projects of funds – thus delaying the recovery. continued in the Fed’s latest meeting. The monthly purchase of US debt Hopefully, a change of guard at the centre after the election would propel securities by the Fed has been reduced from $85 billion earlier to $65 billion investment activity with drivers other than cost of borrowing. That could end now, in two steps. Several emerging market currencies have suffered from the interest rate - low growth spiral. what seems like the beginning of a ‘run’. Turkey in particular has suffered “Advisory services are provided through Karvy Capital having SEBI Registration No: INP000001512. Investments are subject to market risks. Please read the disclaimer on slide 18” 3
  • Economic Update - Snapshot of Key Markets As on 24th Jan 2014 Change over last month Change over last year BSE Sensex 21134 0.5% 6.1% S&P Nifty 6267 0.0% S&P 500 1790 -2.3% 19.8% 9.3000 15392 -3.9% 44.9% CNX Nifty Nikkei 225 4.1% Nikkei 225 Equity Markets S & P BSE Sensex S&P 500 165 155 145 135 125 115 105 95 85 75 8.3000 10 yr Gsec 8.8000 7.8000 7.3000 6.8000 10-yr G-Sec Yield Debt Markets 8.70% (14 bps) 81 bps Call Markets 6.58% (217 bps) (145 bps) 34000 32000 Fixed Deposit* 9.00% 0 bps 50 bps Gold 30000 28000 26000 RICI Index Commodity Markets 3509 (1.4%) (7.5%) Gold (`/10gm) 29703 0.9% (2.8%) Crude Oil ($/bbl) 109.14 (2.2%) (4.2%) Rupee/Dollar 62.18 (0.5%) (13.39%) Yen/Dollar 102.88 1.5% (13.1%) (As on 24th January) Forex Markets 24000 70 68 66 64 62 60 58 56 54 52 50 `/$ 4 • Indicates SBI one-year FD •New 10 Year benchmark paper(8.15%, 2022 Maturity) was listed in the month of June , the 1 year yield is compared to the earlier benchmark(2021 Maturity)
  • Economy Update - Global • U.S. Manufacturing PMI fell to 53.7 in January from 55.0 in December. US • The U.S. unemployment rate fell 0.3% to 6.7%, its lowest level since October 2008, despite the smallest monthly job gains in three years. • Fed trims asset purchases by another US$10bn to $65bn a month. • Italy's cabinet approved the privatization of up to 40% of the post office as the government tries to bring down its huge public debt. Europe • Consumer prices in Germany, rose 0.5% on the month in December, but the annual inflation dropped to 1.2% from 1.6% in November. • Britain needs to cut 25 billion pounds ($41 billion) in spending after next year's election to reduce borrowing as per finance minister. • Japan January manufacturing PMI rose to a seasonally adjusted 56.6 in January from 55.2 in December, a 8-year high number. Japan • Japan Dec jobless rate falls to 3.7%, lowest since 2007. • Japan's core consumer inflation, excluding fresh food, rose at the fastest pace in more than five years in December by 1.3% • IMF revises India's growth forecast in 2014-15 (Apr-Mar) to 5.4% from 5.0% in October. Emerging economies • Exports of gold jewellery from India in December dropped 30.4% from a year ago to $443.19 million • China's urban unemployment rate ticked up slightly to 4.05% at the end of December 2013 from 4.04% three months earlier. 5
  • Economy Outlook - Domestic 3.0% IIP 2.0% 1.0% 0.0% -1.0% -2.0% • Q2FY14 GDP growth improved to 4.8% YoY as compared to 4.4% in the previous quarter leading to growth of 4.6% in first half of this fiscal. Strong agriculture sector growth and meager improvement in industrial sector aided in pushing the growth in the economy in the second quarter. While growth in services sector continued to slow down. • GDP at Market Price which had trended below GDP at Factor Cost for five consecutive quarters rose above FC at 5.7% as subsidies dropped in second quarter as compared to previous year. -3.0% -4.0% Nov Dec Jan Feb Mar Apr May Jun 12 12 13 13 13 13 13 13 Jul Aug Sep Oct Nov 13 13 13 13 13 • Nov’13 IIP surprises with a continued deceleration in the growth, as the performance declines by 2.1% YoY, compared to 1.6% de‐growth and 2.0% growth in Oct’13 & Sep’13. Sharper than expected deceleration in Consumer Durables sector dragged the IIP performance. 12MMA IIP further dropped to 0.4%, which is near to four year low levels. • Headline figure for Oct’13 is revised upwards by 24bps to (1.6)% YoY primarily driven by upward revision in Food products and Chemical related products. Food products sector was also revised • Agriculture growth rose to 4.6 per cent during July-September from 2.7 per cent in April-June; the growth for the first half of 2013-14 for the farm sector, according to the data released, is 3.6 per cent. The agriculture growth achieved in the first half of 201314 is just about the long term average. • Contribution of Services sector to overall GDP growth in Q2FY14 slowed down further to 76.5% of the GDP. Growth slowed down sharply to 5.9% YoY from peak growth of 10.9% in Mar’11. 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 6.9 GDP growth 6.1 5.3 5.5 5.3 4.5 4.8 4.4 4.8 upwards by 1.2% in Aug’13 IIP numbers. 6
  • Economic Outlook - Domestic Growth in credit & deposits of SCBs 20.0% Bank Credit Aggregate Deposits 18.0% 16.0% 14.0% 12.0% 10.0% 8.0%  Dec’13 WPI dropped to a 5 month low at 6.16% YoY, vis-à-vis reading of 7.52% in Nov’13 and 7.24% in Oct’13. The sharp drop in Inflation in Dec’13 is driven by 29.66% MoM decline in Vegetable prices. However, Vegetable prices have more than doubled so far in this fiscal.  Nov’13. WPI for the month of Oct’13 has been revised upwards by 22bps to 7.24% YoY due to 33bps upward revision in Manufacturing Inflation and 4.9% revision in LPG prices.  The average WPI for Apr-Dec’13 remains elevated at 6.15% YoY as compared to 7.60% in the year-ago period  As on Dec 2013 Bank credits grew by 14.5% on a Y-o-Y basis which is about 0.7% lower than the growth witnessed in Dec 2012. Aggregate deposits on a Y-o-Y basis grew at 15.8%, viz-a viz a growth of 16.1% in Dec 2012.  On 28th Jan, RBI increased the repo & MSF rate by 25bps. There was no change to liquidity measures. Despite the recent cool-off in headline inflation numbers, the stickiness in core CPI has been worrisome. RBI seems to have endorsed Dr. Urijit Patel Committee recommendations for a ‘glide path’ to disinflation. RBI will be targeting to reduce headline CPI to 8% by January 2015. RBI stated that “further policy steps will be data dependent, if the disinflationary process evolves, further policy tightening in the near term would not be anticipated at current juncture” * End of period figures  Headline CPI eased to 9.87% YoY in Dec’ 13, as compared to 11.16% in Nov’13. The emphasis on CPI as an inflation metric has become the cornerstone of India’s new monetary policy under Governor Rajan. With a target for CPI to be 4% with a range of +/-2% in a time span of 2 years. 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 5.00% 4.50% 4.00% Wholesale Price Index 7
  • Equity Outlook Indian equity markets remained subdued last month. RBI hiked interest rates again, the third rates hike in last four months. Global markets remained volatile due to further reduction in US Federal Reserve. The quantum of quantitative easing (QE3) has been reduced to 65 billion dollars per month. There has been two consequent tapering actions in the last two months due to strong macroeconomic recovery in United States. The revival of US growth is good news for global economy and sooner or later, markets will start focusing on the positive side of reduction in monetary stimulus. RBI Governor increased the repo rate by 25bps in the last policy review. Despite the recent cool-off in headline inflation numbers, the stickiness in core CPI has been worrisome. RBI seems to have clearly endorsed Dr. Urijit Patel Committee recommendations for a ‘glide path’ to disinflation. RBI will be targeting to reduce headline CPI to 8% by January 2015. We expect RBI to maintain a hawkish stance to achieve these objectives as a significant drop in inflation appears unlikely in the short term. GDP growth in the last two quarters has remained below 5%. The slowdown is expected to have continued in third quarter also. Manufacturing sector remains extremely weak and there are no signs of revival in industrial activity. RBI believes that expected pick-up in agriculture should provide some support to growth. 8
  • Equity Outlook The emphasis on core CPI as an inflation metric has become the cornerstone of India’s new monetary policy under Governor Rajan. It is interesting to see RBI link rupee devaluation to CPI inflation. The current account deficit for FY14 is now expected at 2.5% as compared to 4.8% in FY13. This puts India into a relatively comfortable position compared to other emerging market peers given the uncertain external environment. The political activity in the country is going to get more and more interesting as we approach the General elections scheduled in May. The recent opinion polls indicate support building up for NDA lead by Narendra Modi, which is being taken positively by equity markets. The quarterly earnings have been largely in-line with expectations. While IT, Healthcare & telecom sectors have delivered strong earnings growth, some banks have shown further deterioration in asset quality. Currently, Public sector banks are trading at quite cheap valuations and we expect significant outperformance from that space in the next two to three years. We expect export oriented sectors like IT & healthcare to continue to benefit from the significant rupee depreciation seen last year. Telecom is another sector which might deliver strong earnings due to return of pricing power & reduction in competitive intensity. We maintain our year-end Sensex target of 24,800 and are aggressive buyers of Indian equity. 9
  • Sector View Sector Stance Remarks Overweight We believe in the large sized opportunity presented by Pharma sector in India. India’s strength in generics is difficult to replicate due to quality and quantity of available skilled manpower. With the developed world keen to cut healthcare costs, and a vast pipeline of drugs going off-patent, Indian pharma players are at the cusp of rapid growth. Telecom Overweight The regulatory hurdles and competitive pressures seem to be reducing. Incumbents have started to increase tariffs slowly and pricing power is returning. We believe that consolidation will happen sooner than expected. IT/ITES Overweight Demand seems to be coming back in US. North American volume growth has also remained resilient. With significant rupee depreciation in the last few months, margins will get a boost. BFSI Neutral The recent rate hikes will cause pressure on asset quality in the short term. We expect public sector to significantly outperform private sector due to cheap valuations and stabilization in asset quality. Power Utilities Neutral We like the regulated return characteristic of this space. This space provides steady growth in earnings and decent return on capital. Healthcare 10
  • Sector View Sector Stance Remarks Automobiles Neutral We are positive on SUV’s and agricultural vehicles segment due to lesser competition and higher pricing power. FMCG Neutral We like the secular consumption theme. We prefer “discretionary consumption” beneficiaries such as Cigarettes, IT hardware, durables and branded garments, as the growth in this segment will be disproportionately higher vis-à-vis the increase in disposable incomes. E&C Underweight The significant slowdown in order inflow activity combined with lack of demand has hurt the sector. It will take some time before capex activity revives Energy Underweight With the ongoing price deregulation of diesel, we believe the total subsidy burden on Oil PSU’s will come down during the course of the year. However, rupee depreciation will reverse most of those gains. Metals Underweight Steel companies will benefit because of rupee depreciation. However, commodity demand stays demand globally due to low capex activity Cement Underweight Cement industry is facing over capacity issues and lacklustre demand. With regulator taking a strong view against pricing discipline, the profits of the sector are expected to stay muted. 11
  • Yield curve 10-yr G-sec yield 9.3000 8.8000 8.3000 (%) 9.40 9.20 9.00 8.80 8.60 8.40 8.20 8.00 7.80 7.60 7.40 7.8000 7.3000 6.8000 0.0 0.8 1.5 2.3 3.0 3.8 4.5 5.3 6.0 6.8 7.5 8.2 9.0 9.7 10.5 11.2 12.0 12.7 13.5 14.2 15.0 15.7 16.5 17.2 18.0 18.7 19.5 (%) Debt Outlook • The yields on 10 Yr Gsec crossed 9% mark due to fear of Fed tapering and additional borrowing by Government of India which let to spread contraction between corporate bonds and sovereign bonds. • Bond yields have risen over last few days also due to the overhang from Urjit Patel Committee recommendations combined with recent renewed emerging market fears. • During the month, The RBI surprised by hiking repo rate by 25 bps today to 8%. Correspondingly, the reverse repo and MSF rates have also been hiked to 7% and 9% respectively. All other rates were kept unchanged • Year 2013 had been a wild ride for bond markets. It witnessed the highest levels of volatility in bond yields in four years. The 10-year government bond yield, which started the year at eight per cent, saw a low of about seven per cent and then a high of 9.5 per cent, before cooling towards the year-end. 12
  • Debt Strategy Category Short Tenure Debt Credit Long Tenure Debt Outlook Details With the current 25 bps repo rate hike and influence of domestic and global factors in the market, some uncertainty is coupled with the interest rate scenario in the coming quarters, hence, we would suggest to invest in and hold on to current investments in short term debt. Due to liquidity pressures increasing in the market as RBI has a huge borrowing plan, short term yields would remain higher. Short Term funds still have high YTMs (9.5%–10%) providing interesting investment opportunities. Some AA and select A rated securities are very attractive at the current yields. A similar trend can be seen in the Fixed Deposits also. Tight liquidity in the system has also contributed to widening of the spreads making entry at current levels attractive. Our recommendations regarding long term debt is neither buy nor sell for now. And after the volatility settles Investors could look to add to dynamic and medium to long term income funds over the next few months. Long term debt is likely to see capital appreciation owing to the expected monetary easing. There is lesser probability of rate cuts in the near future and there could be a lot of volatility in the g-sec yields as well. An important point to note is that as commodity prices are cooling down, current account deficit may reduce to some extent. But all this is coupled with uncertainty. We suggest matching risk appetite and investment horizon to fund selection. Hence we recommend that if investing for a period of 2 years or above then long term can be looked upon or else holding/profit booking could be a good idea. Investors who may want to stay invested for the medium term (exiting when prices appreciate) and those who would want to lock in high yields for the longer term can also invest in longer 13 tenure papers/Funds.
  • Forex Rupee movement vis-à-vis other currencies (M-o-M) 0.00% -0.50% -0.50% Trade balance and export-import data 20 15 10 5 0 -5 -10 -15 -20 -0.52% -1.00% Export(%) Import 0 Trade Balance (mn $) -5000 -10000 -15000 -20000 -25000 -1.28% -1.50% -2.00% -2.20% -2.50% USD GBP EURO YEN • The Indian Rupee appreciated against all the four major currencies in the last month. It saw a depreciation of 0.5% against USD, 1.28% against Japanese Yen & 2.2% against GBP. • While emerging market jittered in the last week of Jan, with sharp falls in the Argentinean peso and the Turkish lira, the Fed's announcement has clearly spread the impact wider. Strikingly, while the Indian rupee was amongst the hardest-hit currencies when the idea of a taper first emerged last May, it has been amongst the most stable this time around due to a rise in the interest rates that could accelerate foreign fund flows into Indian debt. • Rupee fell to near 62 against dollar on QE cut. To guard itself from any selling, unlike Argentina, who had spent almost $4.5bn last year to defend peso from falling, RBI has also built its foreign exchange kitty. Currently India's foreign exchange reserves are at $292 billion. Next, India is also making a conscious effort to bring down its fiscal deficit. Exports during December, 2013 were valued at US $ 26.35bn which was 3.49% higher than the level of US $ 25.46 bn during December, 2012. Imports during December,2013 were valued at US $ 36.49 Bn representing a negative growth of 15.25% over the level of imports valued at US $ 43.05 Bn in December 2012 translating into a trade deficit of $10.14 Bn. 140000 FY14(Q2) 90000 40000 -10000 FY 11 (Q2) FY 11 (Q3) FY 11 (Q4) FY 12 (Q1) FY 12 (Q2) FY 12 (Q3) FY 12 (Q4) FY 13 (Q1) • The projected capital account balance for Q3 FY 13 is projected at Rs. 171984 crores along with the Q1 and Q2 being at 88013 Cr and 130409 Cr respectively. • We expect factors such as higher interest rates to attract more investments to India. Increased limits for investment by FIIs would also help in bringing in more funds though uncertainty in the global markets could prove to be a dampener. 14
  • Commodities Precious Metals Given the sharp sell off last year, the global commodity indices increased their 2014 weightage to the bullions given the attractive risk reward ratio. It seems that gold has moved past the tapering concerns given the macro uncertainties surrounding the world and safe haven is back. The sharp fell off in emerging market currencies and slew of central bankers surprising with rate hikes supports a bullish argument for the metal. The talks of India relaxing the import norms and reducing the custom duty further kept prices elevated in anticipation of demand spike that was largely absent last year. Expect prices to remain. 34000 33000 Gold 32000 31000 30000 29000 28000 27000 26000 25000 24000 125 Oil & Gas WTI crude rose trimming the biggest monthly decline for January since 2010, as demand for distillate fuel countered a second weekly increase in U.S. crude stockpiles. The record US cold keep energy prices firmer as the distillate demand rose 20% to 4.52 million barrels a day, the highest level since February 2008, the EIA said. Cold weather will dominate the central U.S. and Canada through mid-February that would support higher prices going forward. Expect prices to remain firm. 120 115 Crude 110 105 100 95 90 15
  • Real Estate Outlook Asset Classes Residential Tier I Tier II Due to a flurry of new launches in the first quarter of the year, most markets witnessed an increase in the unsold inventory levels even with relatively steady sales. Consequently, last quarter saw lesser new Demand in Tier II cities is largely driven by the trend towards nuclear families, increasing disposable launches. income, rising aspiration to own quality products and With reduced new launches and steady absorption, the demand supply the growth in infrastructure facilities in these cities. Price appreciation is more concentrated to specific gap is expected to reduce over the coming months. micro-markets in these cities. Cities like Chandigarh, Mid-income residential segment with Rs. 4,000 – 6,000 per sq. ft. Jaipur, Lucknow, Ahmedabad, Bhopal, Nagpur, Patna entry pricing with good developers in Pune, Bangalore, NCR and and Cochin are expected to perform well. Mumbai suburbs cane be expected to continue generating good percentage returns with relatively lower risk. The over-supply in commercial asset class still continues, thereby dampening the capital values. Commercial/IT While rentals have been seen increasing at a slow pace over the last couple of months, they still remain lower than the peal values achieved in the past. In relative terms, Bangalore market continues to outperform other markets owing primarily to the demand from the IT industry. Lease rentals as well as capital values continue to be stable at their current levels in the commercial asset class. Low unit sizes have played an important role in maintaining the absorption levels in these markets. Specific pre-leased properties with good tenant profile and larger lockin periods continue to be good investment opportunities over a longterm horizon. Please Note: Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkatta Tier II* markets includes all state capitals other than the Tier I markets 16
  • Real Estate Outlook Asset Classes Tier I Tier II Retail Capital values as well as lease rentals continue to be stagnant. The effects of the change in FDI policy to allow 51% foreign ownership in multi-brand retail and 100% in single-brand retail are yet to have any effect of the market for retails assets. Developers continue to defer the construction costs as absorption continues to be low unsold inventory levels high. Land Agricultural / non-agricultural lands with connectivity to Tier I cities and in proximity to upcoming industrial and other Land in Tier II and III cities along upcoming / established growth infrastructure developments present good investment corridors have seen good percentage appreciation due to low opportunities. Caution should however be exercised due to the investment base in such areas. complexities typically involved in land investments. Tier II cities see a preference of hi-street retail as compared to mall space in Tier I cities. While not much data on these rentals gets reported, these are expected to have been stagnant. The mall culture has repeatedly failed in the past n the Tier-2 cities. Whether the FDI in retail can change this phenomenon can be known with more certainty once the effect of FDI is more visible in Tier I cities. Please Note: Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkatta Tier II* markets includes all state capitals other than the Tier I markets 17
  • Disclaimer The information and views presented here are prepared by Karvy Capital Ltd. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note that neither Karvy Capital Ltd nor any person connected with any associated companies of Karvy Capital Ltd accepts any liability arising from the use of this information and views mentioned here. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Karvy Capital Ltd, its affiliates, directors, its proprietary trading and investment businesses (hereinafter referred to as Karvy) may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned assets from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd and Karvy Comtrade Ltd. Any information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidence of tax on equity investments. Karvy Capital Ltd Operates from within India and is subject to Indian regulations. Mumbai office Address: 702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 18