The World in The Week Gone By - June20th - June 25' 2011


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Last week, the Indian equity market ended 2% positive. On Friday evening, diesel, kerosene and LPG prices were hiked by the government. Diesel price was hiked by Rs. 3/litre which would lead to 35bps rise in direct inflation. After the hike, the fuel subsidy bill is expected to go down by around 23,000 Crs.

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The World in The Week Gone By - June20th - June 25' 2011

  1. 1. The World This WeekJun 20 – Jun 25, 2011
  2. 2. ASSET CLASS VIEWEquity:Last week, the Indian equity market ended 2% positive. On Friday evening, diesel, kerosene and LPG prices were hiked bythe government. Diesel price was hiked by Rs. 3/litre which would lead to 35bps rise in direct inflation. After the hike, thefuel subsidy bill is expected to go down by around 23000 Crs. The government has also cut customs and excise duty oncrude products to the extent of 49000 Crs for this fiscal. The overall benefit for oil marketing companies could be around75000 Crs. The total under recovery for petroleum products this year goes down from around 1, 80,000 Crs to 1, 05,000 Crswhich is a big relief for the oil marketing companies and upstream oil companies.Last week Indian Meteorological department downgraded the overall forecast for monsoon for this year from 97% to 95%of long term average which is slightly lower than expected. However this is not expected to have very big impact on thefood production in the country.Nymex & Brent Crude fell down very sharply over the week. Brent is trading around $105 per barrel which is much lowerthan levels of $127-128 per barrel seen in April & May. The event of continuing correction of oil prices will be a big positivefor Indian markets.In Europe, EU officials said that they are looking at a bail out package for Greece in July. The Greece PM won the trust votethat was tabled in the Greece Parliament & this week they have to get the austerity measures approved by their ownparliament. We will be monitoring that event very closely.In China, the Chinese Prime Minister signaled that they are expecting the inflation to peak out now. Hence the interestrates may not be raised further. As a result of which the Chinese market rallied almost 4% during the last week.Real Estate:In the residential space, specifically the Tier-l cities, demand is stagnant as the rates have been on the higher side.Registration across cities is not picking up. Also due to higher cost of credit these times are tougher for investors as well asdevelopers. Thus we are not expecting the markets to go up. There is a correction possible which has been anticipated forthe last six months but the developers have good holding frame due to the non-resident investors. Markets like Mumbai,Noida, NCR region seem very bullish; they have still not corrected. The other markets like Pune, Kolkata are stagnant. Inmost of the residential properties we are witnessing new developments. In Tier-ll cities, as soon as developers seesaturation of demand, they open up new projects.For people not having homes, we recommend investing in under-construction properties at lower prices than higher pricedready flats. Typically the price of under-construction properties is 15% lower than ready properties.Commercial leasing is looking up; IT takes almost 75% space. However yields are compressed due to excess supply andlower rent.Land is rising with the Government support on infrastructure building in most developed and under-developed areas.
  3. 3. News:DOMESTIC MACRO:  Foreign direct investment (FDI) flows into India bounced back in April, on an investment surge in services, construction and auto sectors, reversing a steep drop recorded in the previous fiscal year. In April, FDI into India rose an annual 43 percent. The service sector, which saw investments rise an annual 21 percent in April, was the top recipient of FDI inflows.  Indias food price index rose 9.13 percent and the fuel price index climbed 12.84 percent last week. In the previous week, annual food and fuel inflation stood at 8.96 percent and 12.84 percent respectively.GLOBAL MACROU.S.:  The number of Americans filing new claims for unemployment benefits rose last week, suggesting little improvement in the labor market this month after employment stumbled in May.  The Federal Reserve cut its forecasts for U.S. economic growth, but offered no hint of further monetary support, saying the recovery should gradually pick up heading into 2012. The Fed estimated the economy should grow 2.7 percent to 2.9 percent this year, down from a forecast range of 3.1 to 3.3 percent made in April.China:  Private sector activity slowed in China and Europe this month just as the outlook for the United States has darkened, which suggests a global slowdown is becoming more entrenched.  Chinas growth is slowing under the weight of Beijings anti-inflation campaign and weaker global demand, but any investors betting on a hard landing would be underestimating the resilience of the worlds second-largest economy
  4. 4. Swapnil Pawar Varun Goel Jharna AgarwalPalak Nanjani Neha Arora Kanika Khorana DisclaimerThe information and views presented here are prepared by Karvy Private Wealth 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 andwe 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 theirown investment decisions based on their specific investment objectives and financial position and using suchindependent 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 Karvyaccepts 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 todisclose their individual stock holdings and details of trades, if any, that they undertake. The team renderingcorporate analysis and investment recommendations are restricted in purchasing/selling of shares or othersecurities 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 tothem. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this couldchange the applicability and incidence of tax on investmentsKarvy Private Wealth (A division of Karvy Stock Broking Limited): Operates from within India and is subject to Indianregulations. Mumbai office Address: 702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), offBandra 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, PMSRegistration No.: INP000001512”