2. Equity View:
The equity markets have seen almost 18% move since the beginning of this year however, some profit
booking had happened on the back of weaker global cues. There was a correction of 3.5% in Sensex last
week largely on account of profit booking.
The much awaited Budget was presented last week in which the biggest take away was a clear break
from the subsidy and the hand-out driven approach of the previous more growth-focused-government.
Also, this budget provides clear vision for long term growth and reliability in India through large
infrastructure spending, fiscal prudence and sustainable reduction in CAD. More importantly, Finance
Minister had mentioned the need to maintain low inflation trajectory which supports the high interest
rate regime currently deployed by the Central Bank governor. Based on this speech, we believe there is
very little chance of any rate cut in the second half of this fiscal. The big push was on the infrastructure
side for the treatment of long term Infra loans as CRR or SLR by banks. The allocation to roads space was
extremely high of about 38,000 crores which is almost a 50% increase over last year. The target is of
creating 8,000km of new roads by FY15 and also a 10 year tax holiday has been provided for power
generation and transmission companies. All this expenditure was budgeted for housing, roads and power
projects. More tax cuts were provided as the limit of tax-free income has been increased from 2 Lacs to
2.5 Lacs, 80C limit has been increased from 1 lac to 1.5 lacs and the housing loan exemption on interest
payment has been increased from 1.5 lacs to 2 lacs. All these 3 things will give extra income in the hands
of common man and would also help boost financial savings. One big negative presented for debt mutual
funds was the taxation on holdings below 3 years to be set at marginal tax rates. The tax structure until
now considered anything above 1 year as long term and a capital gain arising out of the same was to be
taxed at 10%. Now, anything which is held for a period of more than 3 years will be taxed at 20% thus it
could be negative for debt mutual funds and 1-2 year FMP’s. There has been a clear boost given to REITs
due to which we expect a lot of announcements and new launches in this space coming in the next few
months.
Broadly from equity market perspective the budget is positive and we continue to be positive on Indian
equities. On Friday the IIP data was released at 4.57% which is 17-month high and a pickup in investment
activity has been visible after a long time. This is also being led by the increase in manufacturing growth
rate so we believe that the economic recovery is getting strengthened and we would see a revival in the
industrial and manufacturing cycle in the remaining part of this fiscal. The CPI would be released today
and we would expect that data to be around 7.5%.
3. News:
DOMESTIC MACRO:
India’s Index of Industrial Production (IIP) for the month of May came in at 4.7% versus 3.4% in April
According to RBI data, the central bank became net purchaser of dollars for the second consecutive month
in May this fiscal by buying $1.786 bn from the spot market.
According to RBI data, overseas direct investment by Indian firms rose by over 60.7% year-on-year to $5.03
bn in June.
India's forex reserves rises by $614.6 mn to $316.39 bn in the first week of July.
GLOBAL MACRO
EURO
UK’s visible trade deficit widened to 9.2 bn pounds from 8.8 bn pounds in April.
UK’s industrial production declined by a seasonally adjusted 0.7% in May, after rising 0.3% in April
United States
US Treasury Department reports a budget surplus of $71bn in June, following a $130bn deficit in
May.
US wholesale inventories increased by a seasonally adjusted 0.5% in May, after rising 1% in April
China
China’s exports rose 7.2% year-on-year in June to $186.8bn, compared with a 7% rise in May, while imports
gained 5.5% in June to $155.2bn, compared with a 1.6% fall in May; the monthly trade surplus soared
16.4% to $31.6bn, down from $35.92 bn in May.
China's consumer price index rose 2.3% in June from a year earlier, compared with a 2.5% rise in May
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
7/7/2014 26,100 9,557 16,206 17,609 9,100 16,723 6,836 11,914 9,556 13,444 11,147 2,397 2,096 5,380
8/7/2014 25,582 9,210 15,838 17,195 8,686 15,920 6,803 11,770 9,455 12,877 10,796 2,244 1,946 5,306
9/7/2014 25,445 9,077 15,453 17,109 8,725 15,686 6,858 11,601 9,331 12,809 10,887 2,206 1,915 5,242
10/7/2014 25,373 9,132 15,313 17,002 8,453 15,715 6,881 11,602 9,248 12,929 10,892 2,231 2,010 5,196
11/7/2014 25,024 8,875 15,155 16,546 8,351 14,969 6,916 11,729 9,379 12,452 10,589 2,130 1,906 5,251
-4.12% -7.13% -6.49% -6.03% -8.24% -10.49% 1.16% -1.55% -1.85% -7.38% -5.00% -11.15% -9.05% -2.39%
4. Commodities and Currency:
Date USD GBP EURO YEN
Crude (Rs.
per BBL)
Gold (Rs. Per
10gms)
7/7/2014 59.95 102.78 81.39 58.71 6616 27786
8/7/2014 59.80 102.42 81.32 58.73 6608 27828
9/7/2014 59.73 102.36 81.38 58.79 6514 27958
10/7/2014 59.88 102.59 81.69 59.00 6467 28677
11/7/2014 60.19 103.15 81.87 59.41 6507 28470
-0.40%
Rupee
Depreciated
-0.35%
Rupee
Depreciated
-0.59%
Rupee
Depreciated
-1.18%
Rupee
Depreciated
-1.65% 2.46%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 8.55 8
2-Year 8.46 4
5-Year 8.65 -1
10-Year 8.77 11
5. Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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