Equity View:Last week Indian equity markets closed flat on back of poor macro-economic data which came out during theweek. IIP for the month of June contracted by 1.8%, lower than the consensus expectations. This has led to lot ofconcern related to significant slow down of industrial activities. IIP for FY 13 Q1 has been approximately 1% andhas continued to be extremely depressed for a long time. This could result into low GDP growth for FY 13. Thecapital goods number which is a part of IIP continues to show lot of concerns about capital goods creation. TheCAPEX cycle remains almost at a standstill for almost a year now and serious intervention is needed by thegovernment to boost up the CAPEX cycle.Many brokerage houses and economist have slashed the GDP growth forecast for FY 13 to approx. 5.5%. Wecontinue to believe that as and when the rate cuts happen there will be some kind of revival in the industrialactivity which would help the GDP to reach 5.5%-6%. It is very likely that RBI would start focusing on growth overinflation in the second half of the year and rate cuts to the tune of probably 50-75 basis points could happen,which would help GDP to bounce back. RBI has already done 50 basis points of repo rate cut in April 2012. Ittypically takes 6 months for rate cuts to show effects in the economy and hence we believe that from September -October we will see some impact in a broader economy.The quarterly results of most of the companies were in line with expectations with an overall increase of 9-10% inprofits, excluding government backed PSUs and Oil & Gas marketing companies which have a very high subsidyburden on account of high crude all prices. Private sector banks also declared a good set of numbers. We continueto maintain positive stance on names like Axis Bank, ICICI Bank and HDFC Bank. We continue to maintain a positivebias for FMCG and Pharma space. FMCG and Pharma companies have delivered a 20% growth in profits. For theremaining part of the year we might see some marginal expansions in these stocks as the commodity prices cooloff.US markets continue to rally very strongly on the back of very positive macro economic numbers. The S&P has nowcrossed 1400 and the US corporate earnings have been broadly in line with the expectations. Markets areexpecting some kind of stimulus announcements from either the FED or the ECB. We continue to believe that ifthere is no big stimulus announcement the markets could cool off from the recent rally that we have seen.News:DOMESTIC MACRO: Indias industrial production contracted 1.8% in June, driven down by a slump in manufacturing. The output for May was revised to 2.5% from 2.4%. Rating agency CRISIL slashed Indias growth forecast to 5.5% for the fiscal year ending March, one of the lowest estimates on the street, just two months after pruning its projection to 6.5% from 7%.GLOBAL MACROEURO Ratings agency Standard & Poors on Tuesday revised Greeces outlook to negative, saying the debt- ridden euro zone country could require more help from its international creditors. The European Central Bank kept a lid on its bond purchase programme last week as it presented plans to launch a new and more transparent scheme that will be tied to intervention by the European rescue funds and political action.
US Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 361,000, the Labor Department said. Exports in June increased 0.9% to a record $185.0 billion, with consumer goods such as pharmaceuticals posting strong gains. Motor vehicle exports increased 5.7%. Overall imports of goods and services declined 1.5% to $227.9 billion.China Chinas industrial output growth slowed to 9.2% year-on-year in July, weakest since May 2009, down from 9.5% in June. The consumer price index rose 1.8% last month compared with a 2.2% rise in June. Chinas annual consumer inflation fell to a 30-month low in July, suggesting the central bank has scope to ease monetary policy further after rate cuts in June and July to keep Chinas economy on track to meet an official 2012 growth target of 7.5%.
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