The World This Week - 29th Aug to 2nd Sept, 2016

1. THE WORLD THIS WEEK
August 29– September 2, 2016

2. EQUITY VIEW

3. EQUITY VIEW
• The index after fluctuating delivered about 1.3% returns. There were domestic outflows of $700 million against
foreign inflows of $1.3 billion. The Indian economy continues to be largely dictated by global events. While it is nice
to remain focused on what happens on the domestic front in terms of economic data. Inflation is going above 6%,
the IIP remains fairly subdued and GDP remains marginally below expectations.
• In the near to medium term, the emerging market sentiments will continue to be impacted by global events such as
negative interest rates, fluctuating bond prices like the Japanese bond yields this weekend, etc.
• Going forward the advice remains the same i.e. get out of high beta stocks and all momentum stocks and retain
only good quality stocks. This is a good opportunity to book profits in high beta and low quality stocks.

4. NEWS

5. DOMESTIC MACRO
• Indian factory activity expanded at its fastest pace since mid-2015 in August, helped by surging new
orders, while only modest price increases should give the central bank scope to ease policy further.
Indian annual economic growth slowed in the April-June quarter to 7.1 percent, short of expectations for
7.6 percent. The Nikkei/Markit Manufacturing Purchasing Managers Index rose to 52.6 in August from
July's 51.8, marking its eighth month above the 50 level that separates growth from contraction.
• India's economic growth hit a 15-month low between April and June, putting Prime Minister Narendra
Modi's target further out of reach and making it tougher for him to create millions of new jobs for a
burgeoning workforce. While 7.1 percent GDP expansion was well below economists' predictions and the
7.9 percent growth registered in the preceding quarter, it was still faster than figures reported by China
and the Philippines.

6. GLOBAL MACRO
• British manufacturing staged one of its sharpest rebounds on record in August, a post-
Brexit surprise that could prompt the Bank of England to rethink the need to cut interest
rates again if other surveys confirm the trend.
• Big financial groups in London are losing faith in a quick fix to get access to the European
Union after Britain leaves the bloc and are instead drawing up contingency plans to avoid
becoming hostage to Brussels politics. The 19-country euro zone lost some economic
momentum in August, largely because of a slowdown in Germany.
EURO

7. GLOBAL MACRO
• Gold prices, which have been trending down over the last couple of weeks
and threatening to decline below the psychological $1,300 per ounce mark,
found respite after a strong bounce-back US job numbers released which
dimmed the prospects of a US Fed rate hike.
• US created 151,000 jobs in August vs. 180,000 jobs expected. August
traditionally has been a difficult month for jobs numbers, and 2016 proved no
exception, likely putting the Federal Reserve on hold for a rate hike anytime
soon. Nonfarm payrolls increased just 151,000 for the month, extending the
futility August has experienced over the years. This is now the 10th time in
the past 13 years the month whiffed on market expectations.
UNITED STATES

8. GLOBAL MACRO
• China and the United States committed anew to refrain from competitive
currency devaluations, and according to China it would continue an orderly
transition to a market-oriented exchange rate for the yuan. According to A
joint "fact sheet", issued a day after U.S. President Barack Obama and his
Chinese counterpart Xi Jinping held talks, two countries had committed "not
to unnecessarily limit or prevent commercial sales opportunities for foreign
suppliers of ICT (information and communications technology) products or
services".
• China will set up seven new free trade zones (FTZs), bringing the total to 11,
according to the Xinhua news agency. The new zones will be in Liaoning,
Zhejiang, Henan, Hubei, Sichuan, Shaanxi and Chongqing, . China set up
the first free trade zone in Shanghai in 2013, and followed up with zones in
Guangdong, Fujian, and Tianjin in 2014.
CHINA

9. INDICES
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
29/08/16 27,903 13,064 21,541 22,059 12,331 14,845 8,687 16,008 10,298 9,976 10,951 2,077 1,540 5,688
30/08/16 28,343 13,168 21,931 22,387 12,397 15,002 8,809 16,231 10,480 10,081 11,076 2,098 1,555 5,761
31/08/16 28,452 13,217 22,008 22,657 12,485 15,212 8,822 16,162 10,439 9,940 11,073 2,098 1,542 5,753
1/9/2016 28,423 13,167 22,086 22,678 12,435 15,115 8,841 16,122 10,424 9,971 10,983 2,079 1,511 5,696
2/9/2016 28,532 13,231 22,310 22,804 12,476 15,100 8,858 16,233 10,402 9,942 10,997 2,092 1,526 5,697
2.26% 1.28% 3.57% 3.38% 1.18% 1.72% 1.97% 1.40% 1.01% -0.33% 0.42% 0.74% -0.93% 0.17%

10. COMMODITIES AND CURRENCY
Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms)
29/08/2016 67.18 88.01 75.18 65.62 3193.00 30761.00
30/08/2016 67.09 87.69 74.94 65.61 3156.00 30703.00
31/08/2016 66.98 87.69 74.62 64.89 3110.00 30814.00
1/9/2016 66.95 88.05 74.66 64.78 2994.00 31014.00
2/9/2016 66.84 88.70 74.80 64.52 2890.00 30999.00
0.51% -0.78% 0.51% 1.68% 9.49% -0.77%

11. DEBT
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 6.82 0
2-Year 6.83 -1
5-Year 7.01 -2
10-Year 7.11 -1

12. KIASL TEAM
Jharna Agarwal
Head- Advisory
Jharna.agrawal@Karvy.com
Nupur Gupta
Lead Advisor
Nupur.gupta@Karvy.com

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