The World This Week June 16 - June 21


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The World This Week June 16 - June 21

  1. 1. The World This Week June 16 – June 21, 2014
  2. 2. Equity View: The crude prices shot up last week due to tensions building up in Iraq with Brent crude trading almost at $114.50/Bbl. Iraq contributes around 3-4% of global oil production thus its impact on the world crude oil dynamics is limited. This is also as Saudi Arabia and other gulf countries are already having incremental supplies available with them. Currently the supply is being carried out as the oil producing southern part of Iraq is still under direct control of the official government. However due to the nature of unpredictability of the issue getting resolved soon, there could be some volatility in crude oil prices in the near term. Though the prices have risen only by 4% if compared with the last year’s average, this could be absorbed by India. Thus apart from inflation management which could become difficult, it could not alter the overall macroeconomic situation in India. The WPI inflation was released at 6%, up from 5.2% in the last month and the highest since Dec 2013. This was due to an increase in core inflation largely as the pricing power remains with the manufacturing sector which is surprising considering the fact that the demand has been subdued. This could also be one of the few indicators of demand coming back and reviving economy. We have already witnessed increased sales in cement, 2-wheelers and 3-wheelers segment. We believe that there would no rate cut atleast in the next few months until there is a stable decline in WPI and CPI inflation. The RBI’s core unit of measurement remains CPI which has been almost constant for the last few months. However due to some probability of unfavorable monsoon there could be an increase in food inflation thus CPI. We expect CPI to range between 8 and 9% until September when the base effect could play out. Both Iraq tensions and inflation issues are not powerful enough to alter our positive view on equities with Sensex target of 29000. In the short term the markets will be driven by Q1 earning expected to start by the second week of July. IT companies should be the first one to release their results. News: DOMESTIC MACRO:  Government clears seven big-ticket investment projects worth Rs 21000 cr.  India’s wholesale price index (WPI)-based inflation rose to a five-month high of 6.01% in May against 5.20% in the previous month, driven by costlier protein-based items, fuel & some manufactured products.  Government hikes import tariff value on gold and silver to $411 per 10 grams and $632 per kg as global prices have increased due to escalating violence in Iraq.  World Bank to provide financing of $500 mn for projects in north-east India including healthcare, e- governance, infrastructure, and water management.  World Bank projects a 5.5% growth for India in 2014-15, 6.3% in 2015-16 and 6.6% in 2016-17.
  3. 3. GLOBAL MACRO EURO  UK’s retail sales dropped 0.5% in May compared to a downwardly revised gain of 1% in April  Annual inflation in the Euro zone fell to 0.5% in May from 0.7% in April. United States  US Federal Reserve reduced its monthly bond buying program from $45 billion to $35 billion starting in July.  US current account deficit widens to $111.16 bn in Q1 2014 from 87.32 bn in Q4 2013 and 105.49 bn in the same quarter a year ago.  IMF cuts US growth outlook for 2014 to 2% from the 2.8% it predicted in April, due to a weak first quarter. China  China's average home prices fell 0.2% in May for the first time in two years and price weakness spread to more major cities, adding to signs of cooling in the property market which are posing a growing risk to the broader economy. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 16/06/14 25,190 8,967 15,032 17,221 8,200 15,674 6,889 10,839 9,032 13,093 11,365 2,227 2,029 5,091 17/06/14 25,521 9,101 15,127 17,613 8,259 15,976 6,877 10,849 9,071 13,300 11,690 2,269 2,046 5,129 18/06/14 25,246 9,035 14,974 17,424 8,128 15,829 6,827 10,856 8,976 13,177 11,523 2,235 2,003 5,091 19/06/14 25,202 8,997 15,016 17,265 8,204 15,734 6,843 10,921 9,145 13,067 11,165 2,217 1,996 5,160 20/06/14 25,106 8,962 14,878 17,197 8,489 15,603 6,842 10,817 9,149 12,982 11,114 2,199 2,007 5,163 -0.34% -0.05% -1.02% -0.14% 3.53% -0.45% -0.68% -0.20% 1.28% -0.84% -2.21% -1.24% -1.09% 1.43%
  4. 4. Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10 gms) 16/06/2014 60.0059 101.998 81.2541 58.96 6459 26802 17/06/2014 60.368 102.4807 81.8665 59.21 6436 26788 18/06/2014 60.124 102.0004 81.431 58.81 6444 26731 19/06/2014 60.0031 102.0473 81.7106 58.94 6432 26673 20/06/2014 60.2785 102.7688 82.12 59.17 6451 26679 -0.45% Rupee Depreciated -0.75% Rupee Depreciated -1.05% Rupee Depreciated -0.35% Rupee Depreciated -0.12% -0.46% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.37 2 2-Year 8.29 -6 5-Year 8.58 10 10-Year 8.72 12
  5. 5. Varun Goel Jharna Agarwal Nupur Gupta Ridhdhi Chheda 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”