The markets corrected around 5% last week amongst two data points which were released around the
same time. The IIP growth for the month of April surprised streets at 3.4% as this was much higher than
expected. Since October last year, the trend in IIP has largely been negative however this time, the big
drivers have been electricity generation and mining while the consumer data continued to be negative.
We believe that with manufacturing and industries showing minor recovery, there would be some
positives for IIP in future. The CPI was released at 8.28% which was lower than last week’s 8.56% while
the core inflation stayed flat at 7.7%. We expect inflation to stay between 7.5-8.5% at least till October
due to concerns about monsoon and its impact on food and vegetable prices.
The two positive macro-economic indicators would give a sentimental boost to investors. In terms of
equity markets, the next big trigger would be the earnings of this quarter which would initiate by the 1st
week of July. We would expect IT companies to deliver a decent growth of around 3-5% in their dollar
revenue growth and some bounce back in capital goods and infrastructure. This would be based on the
improved macroeconomic scenario and a small relief on the interest rates.
The budget is expected on 10th
of July and we expect government to work on a few key things such as,
excise duty exemptions on 4 wheelers and 2 wheelers, GST, etc. The government would require a huge IT
support to execute GST which is not in place yet and could take at least 1 to 2 quarters. Thus, this might
not be part of the budget but is expected to come sometime this year. There could also be reforms
especially on the direct taxes for enhancement of the limits of tax deductions or in terms of deduction
that can be claimed for interest rates on housing loans. Some major announcement could be made for
opening up of Defence for private players. As of now, FDI allowed is only 26% which could be risen all the
way to 100%. The government seems keen to have domestic production of Defence because it is very
important for the currency. India being the largest importer of arms in the world, any big change in the
production of Defence equipments could significantly help current account deficit. Some other areas like
insurance and pension might also witness FDI limit going up to 49%.
More importantly the thrust this year is going to be on execution for projects especially on the
infrastructure side which are stuck because of various reasons. These process changes can impact the
GDP growth by around 1.5-2% in the immediate future.
May retail inflation cools to 8.3 percent
April industrial output rebounds 3.4 percent
Exports speed up in May, trade talks planned with U.S.
Exports in May jumped 12.4 percent from a year earlier to $28 billion, while imports were down 11.41
percent to $39 billion, helped by a 72 percent drop in overseas gold purchases.
India needs to rationalize gold import duty - trade secretary
Euro zone industrial production increased by 1.4% on an annualized basis in April after growing by an
upwardly revised 0.2% in March.
US retail sales rose 0.3% in May after an upwardly revised 0.5% rise in April.
Initial jobless claims for US state unemployment benefits rose by 4,000 to 317,000 in the week ended
US import prices increased 0.1% in May after falling 0.5% in April; export prices ticked up 0.1% in
May after falling 1% the prior month.
US business inventories increased 0.6% in April (the largest since October) after rising 0.4% in March.
China May data shows growth steadying, but more stimulus may be needed
Japan’s core machine orders spiked 17.6% in April on a yearly basis after surging 16.1% in the previous
Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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
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”