1. The World This Week
July 28 – August 2, 2014
2. Equity View:
There is some global turbulence on back of US Federal Reserve meeting. As we have been talking about,
the macro economic situation in the United States continue to improve, the last quarter GDP growth was
around 4% in US which was much higher than the expectations. This comes on the back of -2% figure that
we saw in Q1. So over all for H1 they are more or less in line with expectations. However with a very
strong economic recovery in US there were fears that interest rate hikes would happen sooner than
expected. Our own sense is that till the middle of 2015 we would not see any rate hikes in US. The QE of
course continues to be trimmed down. The US Federal Reserve continues to buy bonds from the open
market. The quantum of those bond buying is around 25bn $ v/s 35n $ last month. So we would believe
that in the next few months, QE would be completely wound down and post which we will see a period
where there is no action on interest rates. Markets are aware of the fact that if US recovery continues to
be extremely strong, the interest rate hikes might happen sooner than expected. As we all know the
interest rates in US are between 0-25 bps and they have been maintaining at this level for almost five
years now. The US job data which came out last week came out slightly lower than expectations. So
around 2,00,000 jobs were added in US v/s expectations of around 2,25,000. After this data point, some
of the fears about premature increase in interest rates should get abated.
We saw some very strong macro economic data coming on Friday as far as the Indian economy is
concerned. The 8 core industries data which came in last week came at 17 month high. As we have been
talking about that the IIP data and PMI services and manufacturing, both continue to inch up. We are
expecting that a very strong economic recovery will start playing out in the next few months. We have
also seen some very healthy numbers as far as auto sales are concerned. Both two wheeler and four
wheeler numbers came out on 1st
August and we saw very strong numbers especially from Maruti with a
21% y-o-y increase in vehicle sales. The two wheeler companies also came up with strong numbers. So
our sense is that because of various discounts that are there in the market and also because of slight
upturn in consumer sentiment, things are beginning to look up. We believe that macro economic
recovery is on the anvil and in the next 3-4 months, we are going to see further signs of recovery in
economic growth. Our own sense is that FY 15 economic growth should be between 5.5-6% and probably
in FY 16 the growth will inch closer to 6.5-7%.
In terms of the earning season we have seen most of the companies coming out with earnings more or
less in line with expectations. We would believe that this quarter’s earnings on an average were between
14-15% and revenue growth was slightly muted around 10-12%. But this was again what was on expected
 India's fiscal deficit in the first quarter of the FY 2014-15 touched Rs 2.98 lakh cr or 56.1% of the full-year
 India’s retail inflation for industrial workers fell to 6.19% in June compared to 7.2% in May on account of
softening of prices of foods items.
 India’s HSBC Manufacturing PMI rose to a 17-month high of 53 in July, up from 51.5 in June.
 India's foreign exchange reserves rose to $320.56 bn as of July.
 Euro zone inflation dipped to 0.4% in July, from 0.5% in June.
 Euro zone unemployment rate fell to a 22-month low of 11.5% in June, as compared to 11.6% in May
 US employment cost index rose 0.7% in second quarter after 0.3% growth in the preceding quarter.
 US Chicago PMI fell by 10 points to a seasonally adjusted 52.6 in July, a 12-month low, from a reading of
62.6 in June.
 IMF says China should set an economic growth target of 6.5-7% for 2015, below its goal for 2014,
and refrain from stimulus measures unless the economy threatens to slow sharply from that level.
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
28/07/14 25,991 9,139 15,488 17,421 8,516 15,502 7,185 12,156 9,826 13,001 10,705 2,149 1,873 5,489
30/07/14 26,087 9,172 15,588 17,695 8,642 14,776 7,209 12,320 9,802 13,058 10,750 2,163 1,888 5,512
31/07/14 25,895 9,188 15,491 17,486 8,557 14,652 7,170 12,341 9,742 13,064 10,750 2,134 1,893 5,488
01/08/14 25,481 9,114 15,330 17,329 8,277 14,373 7,101 12,146 9,595 12,816 10,518 2,094 1,874 5,429
-1.96% -0.27% -1.02% -0.53% -2.81% -7.28% -1.16% -0.08% -2.35% -1.43% -1.75% -2.59% 0.02% -1.10%
4. Commodities and Currency:
Date USD GBP EURO YEN
(Rs. per BBL)
(Rs. Per 10gms)
28/07/2014 60.10 102.04 80.74 59.00 6519 27890
30/07/2014 60.15 101.92 80.64 58.90 6474 27781
31/07/2014 60.25 101.92 80.70 58.61 6406 27906
01/08/2014 60.85 102.69 81.46 59.11 6387 27886
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 8.66 3
2-Year 8.50 18
5-Year 8.50 7
10-Year 8.76 9
5. Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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