The World This Week - August 5 - August 8, 2013


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The World This Week - August 5 - August 8, 2013

  1. 1. The World This Week August 5 – August 8, 2013
  2. 2. Equity View: Last week, we saw a 2% fall in Nifty on the last day on the back of fresh concerns emanating about the stability of the Rupee. We expect fresh measures by the Finance Ministry to curb another fall in Rupee. We expect an announcement this week about fresh NRI deposits raising plan. There could also be some bond issuances by state run companies to the extent of $5 bn – $10 bn. We also expect some curbs as far as import of consumer goods are concerned. India has been importing a significant amount of IT hardware which essentially includes laptops, tablets and other such products. Therefore for all the products which could be manufactured locally in India, there is no need for those products to be imported and to that extent there could be increase in import duty in most of these products. The Rupee has fallen almost 12% since the beginning of this fiscal year and it has caused significant pressure on both the fiscal account and the current account. RBI has reacted to this with increase in interest rates and we believe that it might take some time for the Rupee to achieve some measure of stability. Over the weekend, RBI decided auction of around Rs 22,000 Crs of 1 year securities and this would be carried out every month for the next four months. In total this would take out around Rs 88,000 Crs of liquidity from the Indian debt market in the next four months which would lead to some further hardening of interest rates in the short term. Other macro economic data which is expected this week is the IIP, we expect the negative trend in the IIP to continue with a -1.3 number expected for the month of June. We believe that the manufacturing sector continues to face a lot of challenges and as such, the growth is expected to stay muted for the next few months. As far as the results season are concerned, we have seen most of the larger companies from Nifty coming out with the results which are largely in line with the expectations. Most of the Pharma, IT and FMCG companies have delivered results in line or better than expectations. We’ve also seen some disappointments from public sector banks in terms of the results, however private sector banks have continued to deliver a good set of numbers. This week we have the SBI numbers coming in. We expect pressure to sustain on the asset quality, we also expect NIMs to come down in the next couple of quarters and we remain negative on the public sector banking space. In terms of the top sectoral picks we continue to maintain that considering the weakening rupee, we have a bias towards exporters like Pharma and IT and also telecom space needs to have rediscovered it’s pricing power with most of the companies raising voice tariffs and data tariffs in the last few months. We are now fairly bullish on the telecom space which we believe is a secular growth story for the next year from now.
  3. 3. News: DOMESTIC MACRO:  The Reserve Bank of India (RBI) did not get any bids at its special repo auction for banks to lend to mutual funds. The special repo auction was held at 10.25 percent.  The rupee hit a record low of 61.80 on Tuesday, marking a 10 percent fall so far this year - the worst performer in emerging Asia in currencies. Over two years, it is down 26 percent.  The Reserve Bank of India said on Thursday its board approved the transfer of 330.10 billion rupees dividend or surplus profit to the government for the accounting year ended June 30, 2013. In the previous year, it paid a dividend of 160.10 billion rupees. GLOBAL MACRO EURO  In Britain, the Market/CIPS services PMI leapt to 60.2 in July from 56.9, its highest level since December 2006.  Gross domestic product in Italy marked its eighth straight quarter of contraction, dropping 0.2 percent on the quarter and 2.0 percent an annual basis. USA  The U.S. central bank is buying $85 billion in long-term securities each month in order to keep interest rates low and boost hiring and investment.  A government report on Friday showed that the jobless rate last month fell to 7.4 percent in US. China  Exports rose 5.1 percent in July from a year ago, a turnaround from their first fall in 17 months in June and Imports fared even better with a 10.9 percent jump from a year earlier leading to a smaller-than-expected trade surplus of $17.8 billion. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 05/08/2013 19,182 5,444 10,297 11,532 6,463 7,725 6,721 8,957 7,583 6,684 8,359 1,404 1,217 4,324 06/08/2013 18,733 5,302 10,225 11,082 6,104 7,527 6,585 8,863 7,548 6,467 8,138 1,359 1,162 4,281 07/08/2013 18,665 5,337 10,076 11,139 6,167 7,491 6,495 8,828 7,427 6,681 8,362 1,397 1,221 4,231 08/08/2013 18,789 5,409 10,215 11,204 6,198 7,523 6,530 8,809 7,468 6,856 8,345 1,417 1,250 4,270 -2.05% -0.63% -0.79% -2.84% -4.10% -2.62% -2.85% -1.65% -1.52% 2.57% -0.18% 0.94% 2.73% -1.25%
  4. 4. Commodities and Currency: Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 9.29 -1.5 2-Year 9.02 -1.7 5-Year 8.74 -5.6 10-Year 8.13 -15.4 Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 05-08-2013 60.82 92.97 80.73 61.77 6502 28324 06-08-2013 61.54 94.37 81.58 62.49 6481 28205 07-08-2013 61.39 94.17 81.70 63.22 6480 27862 08-08-2013 61.12 94.77 81.54 63.44 6408 28077 09-08-2013 - - - - 6319 - 10-08-2013 6476 28444 -0.48% Rupee Depreciated -1.90% Rupee Depreciated -0.99% Rupee Depreciated -2.63% Rupee Depreciated -0.40% 0.42%
  5. 5. Satadru Mitra Varun Goel Jharna Agarwal Abbas Naheed Kinjal Mehta Disclaimer The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. 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. 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 nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned here. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above- mentioned companies 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. The 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 investments Karvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indian regulations. Karvy Stock Broking Ltd. is a SEBI registered stock broker, depository participant having its offices at: 702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 . (Registered office Address: Karvy Stock Broking Limited, “KARVY HOUSE”, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034) SEBI registration No’s:”NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O): INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL – SEBI Registration No: IN-DP-NSDL-247-2005, CSDL-SEBI Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”