2. Equity View:
Both domestic and global markets were positive in the last week. The Finance Minister in the Vote on
Account announced major relief for sectors such as Auto and capital goods. Excise duty was cut in the
range of 2-4% depending on the size of automobile. Similar cuts in the Capital goods sector and consumer
non-durable space were also announced. Considering the fact that in short term the automobile growth
has been running negative and consumer durable and non-durable growth has been extremely muted,
this move would give a fillip to this space atleast until 30th June when the next budget is expected to
The fiscal deficit number also came in line with expectations. There is of course some accounting jugglery
in that number. If we include Rs 45,000 Cr which has been rolled over in terms of fuel subsidies the
number would be close to 4.9% but even this would not have changed the magnitude significantly from
the number expected. We believe that the target of 4.1% for next year is extremely ambitious. It assumes
a 19-20% revenue growth from tax collections which looks extremely difficult at this point of time. There
have been massive cuts on the capital expenditure which is a big negative for the short term growth
The government spends its money in two components; Capital expenditure and subsidies. In the last ten
years, the Capex was supposed to be 24% of the total government budget while it has come down to
almost 11%. Subsidies on the other hand used to be 9% vis-a-vis the current figure of 23%. Therefore, the
change in ratios is drastic and negative for short to medium term growth prospects of the country.
Whenever a new government comes, these numbers have to be reconsidered so that a higher thrust is
given to the capital expenditure to help revive economy in the short to medium term.
Q3 earnings season is about to end being the second quarter of positive and better than expected results
by Indian corporate. The earnings growth on ex-energy basis was 20% y-o-y which is much higher than
expected earlier. This shows a very strong traction in the earnings. Corporate India is surprised with a
very significant increase in EBITDA margins. Due to expansion in margins, the PAT growth has come at
20% which is a seven quarter high and we believe that the corporate recovery theme has begun to play
out thus there is an expectation of much better earnings in the next few quarters. This reaffirms our
positive outlook for the equity market as whole for the coming full year. We have the year-end target for
Sensex at 24,800.
IMF projects India’s FY'14 GDP growth at 4.6%.
India central bank allots 390.07 billion rupees at 14-day term repo auction; gets bids worth 694.50 billion
rupees and sets weighted average rate of 8.16 percent.
Moody's Investors Service says that the fuel subsidy provision in the Government of India's (Baa3 stable)
interim budget, announced on Monday, will not be sufficient to fully reimburse the under-recoveries of oil
marketing companies (OMCs) including Indian Oil Corporation (Baa3 stable) and Bharat Petroleum
Corporation (Baa3 stable).
Software services exports jump 37% to Rs 3.41 lakh cr in FY13.
Greece achieved a current account surplus of 1.24 billion euros ($1.71 billion) in January-December in
2013, for the first time since official data began in 1948, helped by strong tourism revenue, the Bank
of Greece said.
Inflation in the 18-member euro zone unexpectedly slowed to 0.7 percent year-on-year in January,
matching a four-year low set last October and confounding expectations for a rise to 0.9 percent.
France Markit’s composite purchasing managers' fell in February to 47.6 from 48.9 in January, dropping
further away from the 50-point threshold dividing an expansion in activity from a contraction.
Severe cold weather and a shortage of houses on the market pushed U.S. home sales to an 18-month low
in January leading to 5.1% drop.
Core CPI rose 1.6 percent on the year, slowing from a 1.7 percent increase in December and the smallest
rise since June.
The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to a seven-month low of 48.3 in February
from January's final reading of 49.5.
5. Satadru Mitra
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