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The World This Week  Dec 16 -  Dec 21
 

The World This Week Dec 16 - Dec 21

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The World This Week Dec 16 - Dec 21

The World This Week Dec 16 - Dec 21

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    The World This Week  Dec 16 -  Dec 21 The World This Week Dec 16 - Dec 21 Document Transcript

    • The World This Week Dec 16 – Dec 21, 2013
    • Equity View: RBI Policy announcement came on the 18th where against all expectations, RBI decided to hold on the interest rates for long. The decision was taken essentially because the Governor believes that the food and vegetable price inflation is seasonal and should go down in the next few months. The Governor also made the point that if the food and vegetable price inflation did not cool down materially over the course of 6 months, he might look for a rate hike. Our own sense is that considering that two rate hikes have already been done in the last couple of months, another hike will only happen if there is a sustainable rise in core (CPI) Consumer Price Inflation. As we have mentioned earlier that RBI has now moved its inflation metric from (WPI) Wholesale Price Index to (CPI) Consumer Price Index and more specifically Core (CPI) Consumer Price Index. The Core CPI for last month was around 8% which is the same level what it was in the previous month hence we believe that it is the key metric to watch out for. The headline CPI number is expected to stay at elevated levels in the next few months. We believe that 10% - 11% is kind of a new normal and we don’t expect CPI number to fall below 10% in the near future. The Core CPI might see some kind of cool off going forward and we expect a number between 7% and 8%. We are not currently expecting a rate hike till January policy. In terms of global events we had a big U.S Federal reserve announcement of taper light as in a small tapering of $10bn a month and this was largely expected because of the very strong macro economic growth that the US economy has been seeing. We don’t believe that there is going to be any material decrease in U.S quantitative easing till the time U.S fiscal issues has been addressed in the early part of March. U.S GDP growth last quarter has been revised to 4.1% which is far higher than what was estimated earlier and US economy seems to be doing extremely well and if we look at it in that light, now U.S and India seem to be growing at a similar rate, our growth rate last quarter was 4.7% - 4.8%. Considering the fact that U.S economy growth has bounced back very strongly and also because of the unemployment numbers have been coming off, U.S Federal Reserve decided to start the tapering process. Also this was the last policy announcement by Mr. Ben Bernanke who retired as a Fed Chief in the 1st week of January and he probably wanted to start the tapering process before he retires. On the whole, we believe that a strong U.S economy is positive for global growth. U.S continues to be a engine or a driver of global growth and specially as far as India is concerned, the revival and growth that we’ve been seeing in the last few months is specially driven by exports considering the fact that Indian rupee has depreciated significantly in the last 1 year. A significant revival in U.S economy will be beneficial to sectors like IT and textiles and we continue to believe that this export led recovery in Indian growth will continue in the next few months. Basically there is no reason for panic or worries about US tapering and we believe that US fiscal issues will need to be addressed before we see any material change in the US monetary policy. As far as emerging market equities are concerned, we continue to see a positive traction even despite U.S tapering being announced on Thursday. Global equity markets and currency markets have reacted in a positive way. We believe that the world is a lot more prepared to accept tapering today than what it was when the tapering was first hinted at in the months of July and August.
    • In terms of India specific event which are going to impact the equity market, we are going to see the beginning of Quarter 3 earnings season beginning on 9th January 2014 with the Infosys result. We expect Indian IT companies to deliver a very set of strong numbers in the coming quarter. We believe that IT sector is really going to be leading the earnings growth with around 15% - 20% Y-o-Y earnings growth. We expect US revenue growth to be extremely strong around 5% - 6% on a Q-o-Q basis. That should give a very healthy indicator in terms of revival of US economy and also in terms of fresh order inflows. We continue to maintain a positive bias for banking space, both public and private sector banks will deliver much more healthier results this quarter as compared to what they have been doing in last two quarters. News: DOMESTIC MACRO:  India’s forex reserves rose by $4.4 bn to $295.7 bn the highest level since April as a steady stream of foreign institutional inflows into the equity markets added to the buffer built by the Reserve Bank of India (RBI) via the special swap facilities offered to banks between September 5 and November 30.  India is likely to import a record 4 million tonnes of refined palm oil in 2013/14 as Indonesian suppliers are offering discount over the crude variety due to favourable export duty structure  The Reserve Bank of India (RBI) has kept key policy rate and cash reserve ratio unchanged in the December 2013 Mid-Quarter Monetary Policy Review. GLOBAL MACRO EURO  Austria's 2013 budget envisioned a nominal 2.3 percent deficit, but officials have said final results will be better thanks to higher-than-expected tax revenue and one-off income from a mobile frequency auction.  Irish government bonds are close to marking their second year as the euro zone's top-performing debt, rewarding investors who trusted Dublin to successfully exit its bailout deal. Irish bonds have returned 11.7 percent year-to-date according to data compiled based on Markit's iBoxx. United States  The Commerce Department said housing starts jumped 22.7 percent, the biggest increase since January 1990, to a seasonally adjusted annual rate of 1.09 million units. That was the highest level since February 2008.  The U.S. central bank announced that it would reduce its monthly $85 billion bond buying program by $10 billion starting in January.
    •  December's service sector PMI rose to 56.0 from 55.9 as new orders increased, prompting businesses to take on more staff. The employment index, after hitting an eight-month low of 52.4 last month, jumped to 55.7 in December, the fastest rate of growth since Markit's data collection began in late 2009. China  China's cash market squeeze showed little sign of easing, reinforcing the view the central bank has shifted to tighter monetary policy. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 16/12/2013 20,660 6,321 11,950 12,963 5,689 9,896 6,370 9,487 8,690 9,641 8,426 1,633 1,342 4,851 17/12/2013 20,612 6,319 11,944 12,797 5,749 9,926 6,418 9,630 8,710 9,643 8,381 1,621 1,333 4,877 18/12/2013 20,860 6,404 12,150 12,976 5,826 10,186 6,444 9,742 8,753 9,706 8,561 1,655 1,380 4,899 19/12/2013 20,709 6,392 12,112 12,661 5,770 6,437 9,848 8,905 9,728 8,456 1,638 1,369 4,961 20/12/2013 21,080 6,502 12,357 12,891 5,686 10,047 6,490 9,905 9,052 9,779 8,780 1,664 1,406 5,035 9,991 2.03% 2.87% 3.41% -0.56% -0.05% 1.53% 1.89% 4.41% 4.16% 1.44% 4.20% 1.87% 4.82% 3.79% Commodities and Currency: Date USD GBP EURO YEN 16/12/2013 17/12/2013 18/12/2013 19/12/2013 20/12/2013 62.10 61.96 61.92 62.38 62.24 -0.22% Rupee Depreciated 101.27 101.14 100.83 102.15 101.81 -0.53% Rupee Depreciated 85.43 85.33 85.27 85.29 84.88 0.65% Rupee Appreciated 60.40 60.17 60.16 59.98 59.59 1.36% Rupee Appreciated Debt: Tenor 1-Year 2-Year 5-Year 10-Year Gilt Yield in % (Friday) Change in bps (Week) 8.90 8.47 8.88 8.80 -13 -3 -11 -11 Crude (Rs. per BBL) Gold (Rs. Per 10gms) 6761 6795 6719 6788 6880 29818 29863 29798 29436 29526 -1.76% 0.98%
    • Satadru Mitra Varun Goel Nupur Gupta Jharna Agarwal Kinjal Doshi 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 abovementioned 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”