The World This Week - 03rd Aug to 08th Aug, 2015 As expected rates were kept unchanged in the RBI credit policy last week but the tone of the policy along with macro economic factors suggest that there could be a chance of rate cut in the next credit policy which is due on 29th September or even before that. The only concern is distribution of monsoon which is very uneven so if monsoon plays out properly then the rates may be cut. The change witnessed from previous credit policy to this one is the probability of another rate cut happening in this calendar year has increased from 50% to 75%. There would be certain consequences of a rate cut. Sectors which would benefit are stable businesses like Auto, Private Banks, and NBFC etc. Sectors like infrastructure, manufacturing, high capital intensive business which are facing problems of raising capital, inadequate profitability etc would still struggle despite a rate cut. Know

1. The World This Week
August 03 – August 08, 2015

2. Equity View:
As expected rates were kept unchanged in the RBI credit policy last week but the tone of the policy along
with macro economic factors suggest that there could be a chance of rate cut in the next credit policy
which is due on 29th
September or even before that. The only concern is distribution of monsoon which is
very uneven so if monsoon plays out properly then the rates may be cut. The change witnessed from
previous credit policy to this one is the probability of another rate cut happening in this calendar year has
increased from 50% to 75%. There would be certain consequences of a rate cut. Sectors which would
benefit are stable businesses like Auto, Private Banks, and NBFC etc. Sectors like infrastructure,
manufacturing, high capital intensive business which are facing problems of raising capital, inadequate
profitability etc would still struggle despite a rate cut.
An important fact is the peculiar nature of market rally which was seen last week. Larger indices reached
higher levels along with low quality mid cap stocks attaining newer highs or rallying enthusiastically. This
is a worry for investors as, if one was planning to buy these stocks then it should be avoided and if these
were existing holdings then they should be sold to book profits. This however is not a correction but
common phenomena which is seen when large indices like Nifty attains new levels. At such time,
investors tend to book profits in low quality high beta mid cap stocks as well as those sectors.
The results season could be looked at in two ways. On one hand, in absolute terms without considering
context results were lower than what is needed to hold this market at these levels. However on the other
hand markets were having low expectations and results turned out to be a pleasant surprise especially
sectors like IT and FMCG. The only negative thing in this result season is the steadily rising non-
performing loans even in well managed private sector banks. The market movement for the next 4 – 5
months of this calendar year would be stock specific rather than index specific. The expected levels for
Sensex could be around 32000 which could correspond to Nifty levels hovering around 9500.
News:
DOMESTIC MACRO:
 Government has recently allowed non-resident Indians (NRIs) to invest in chit funds by making necessary
amendments in the Foreign Exchange Management Act (FEMA) regulations relating to permissible capital
account transactions.
 Finance Minister Arun Jaitley says that conditions in India are favourable for further interest rate cuts due
to low global commodity prices as well as prospects of good summer crops.
 The government approves proposals for divesting 11.36% stake in NTPC and 5% stake in NHPC, a move that
it likely to fetch Rs 8247 crore to the exchequer.
 RBI says banks can shift, merge or close urban and semi-urban branches without its approval.
 India’s services purchasing managers’ index (PMI) rose to 50.8 points in July as against 47.7 in June; the
composite PMI climbed to 52.0 from 49.2 in June.

3.  Finance minister Arun Jaitley says state-run banks will raise Rs 1.1 lakh cr from market in next few years to
meet their funding requirements.
GLOBAL MACRO
EURO
 UK industrial output fell 0.4% month on month in June following 0.4% drop in May.
 The Bank of England retained its key rate unchanged at a record low in a split vote, while
policymakers unanimously decided to keep quantitative easing at 375 bn pounds.
United States
 The US economy added 215,000 jobs in July compared to a revised 231,000 jobs in the previous month;
unemployment rate stayed unchanged at 5.3% in July compared with the previous month.
 The US trade gap increased 7.1% to $43.8 bn in June compared to May’s revised trade gap of $ 40.9 bn.
 US Institute of Supply Management said its non-manufacturing PMI rose to 60.3 in July from 56.0 in June.
China
 Chinese exports plunged 8.3% in July, compared with a 2.8% rise in June, while imports fell 8.1% after a
6.1% fall in June; trade surplus came in at $43.03 bn in July, compared with $47 bn in June.
 China's consumer price index rose 1.6% in July from a year earlier, compared with a 1.4% year-on-year
rise in June; producer price index fell 5.4% in July from a year earlier, compared with a 4.8% decline in
June.
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
3/8/2015 28,187 11,331 19,247 21,712 11,238 18,142 8,157 17,104 11,014 8,575 9,852 2,080 1,392 6,202
4/8/2015 28,072 11,457 19,440 21,815 11,152 18,078 8,126 17,115 10,949 8,805 9,784 2,081 1,389 6,162
5/8/2015 28,223 11,544 19,641 21,744 11,148 18,176 8,240 17,380 11,143 8,802 9,800 2,098 1,435 6,256
6/8/2015 28,298 11,586 19,752 21,864 11,361 18,482 8,147 17,579 11,173 8,754 9,774 2,095 1,442 6,265
7/8/2015 28,236 11,558 19,765 21,702 11,413 18,392 8,141 17,521 11,169 8,673 9,967 2,064 1,437 6,246
0.18% 2.00% 2.69% -0.04% 1.56% 1.38% -0.19% 2.44% 1.41% 1.15% 1.16% -0.74% 3.27% 0.72%

4. Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per 10gms)
03/08/2015 63.9623 99.9347 70.1602 51.5600 3342 24830
04/08/2015 63.9315 99.8226 70.0497 51.5900 3167 24696
05/08/2015 63.8159 99.1508 69.3104 51.2900 3196 24590
06/08/2015 63.7603 99.6000 69.7091 51.1100 3165 24562
07/08/2015 63.8061 98.9250 69.6571 51.1300 3157 24668
0.24%
Rupee
Appreciated
1.02%
Rupee
Appreciated
0.72%
Rupee
Appreciated
0.84%
Rupee
Appreciated
-5.54% -0.65%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 7.57 -1
2-Year 7.85 5
5-Year 7.95 3
10-Year 7.81 3

5. Phani Sekhar Ponangi Jharna Agarwal
Aakash Mehta Nupur Gupta Ridhdhi Chheda
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