The World This Week  Mar 24 to Mar 29
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The World This Week Mar 24 to Mar 29 Document Transcript

  • 1. The World This Week Mar 24 – Mar 29, 2014
  • 2. Equity View: We have the RBI policy coming in tomorrow i.e 1st April ’14 from which we are expecting a status quo. As we have been talking earlier, CPI inflation continues to be the benchmark for the RBI when it comes to setting the interest rates. We have seen CPI coming down to 8% levels already which is the RBI target for the next year. Hence we are not expecting any interest rate hike in this policy. Also it is too early for RBI to start cutting interest rates considering that it is only two months since we have seen any respite in inflation. Hence we believe that RBI would want to hold on to these levels for some more time before taking a view that interest rates need to come down. Our belief is that both the CRR and the SLR ratios would be kept at the same level and RBI would not go ahead with a status quo kind of a policy. In terms of the equity markets, we saw nifty moving up by 3% last week on back of continuous FII inflows. We have seen almost 3 bn $ worth of FII investments in equity and around 2 bn $ investments in debt taking a total FII money to a 5 bn $. We have seen the effect of that on Rupee which breached the level of 60 for the first time in the last eight months. It is difficult to say to what level rupee will go in the short term but we believe that RBI will intervene meaningfully in case Rupee continues to appreciate. Our own sense is that rupee will not appreciate very significantly from these levels considering the fact that exports continue to be the driver of the Indian economy. We believe that there are big macroeconomic risks emerging from an expected failure of monsoons. We had the lamina effect which is supposedly strengthening in the pacific and hence it is expected that rainfall is going to be uncertain and unpredictable this summer. Therefore we shall be unsure about how agriculture growth will be. The only sector which continues to drive Indian macro economic growth in the next two quarters is the export growth. Hence the government and RBI are very cognizant of the fact that the rupee does not appreciate meaningfully from the levels at which it is trading at this point of time. We have already seen RBI intervening in the Forex markets in the last few trading sessions and the extent of intervention might increase in case the pace of appreciation of Rupee actually increases from the current levels. It is difficult to predict short term levels but we do expect government to intervene much more aggressively to avert the FII flows to increase significantly from the current levels. In terms of the Q4 earning season which we will see the beginning in the next 8-10 trading sessions. We expect a muted performance this time as far as the IT sector is concerned. We have the Infosys and TCS already guided for a soft quarter essentially because of weather related disruptions in the US and some kind of delaying in fresh order inflows coming in. The volume growth this quarter for both Infosys and TCS is expected to be around 3% on a Q-o-Q basis. We believe that the next two years would be extremely robust for most of the Tier I - IT companies because of two reasons: 1) There is a very strong macro economic recovery which is playing out in US, i.e. also playing out in terms of comments which we have seen from the US Federal Reserve which has expedited the pace of tapering and we believe that it also shows the kind of confidence that they have in durability of US macro economic recovery. So a strong US recovery is going to be extremely positive for Tier I - Indian IT companies.
  • 3. 2) The margin regime has more or less stabilized and we believe that this margin will stay and sustain for the at least the next 3-4 Quarters. Based on these two assumptions we believe that the earnings growth for all Tier I - IT companies should be of the order 5-20% and therefore they remain aggressive bias for us in the coming quarters. News: DOMESTIC MACRO:  Government’s indirect tax collections rose by 5% to Rs 43,794 cr in February, against Rs 41,714 cr in the same month last fiscal.  Direct tax collection as per Central Board of Direct Taxes grew 13.6% to Rs 5.82 lakh cr during the period of Apr 1-Mar 22, against the revised target of Rs 6.33 lakh cr.  Government reduces potash subsidy by Rs 3.33 per kg for 2014-15 financial year, resulting in a saving of Rs.900cr to the exchequer.  RBI extends the date for full implementation of Basel-III capital norms by banks to March 31, 2019 from the original date of March 31, 2018. GLOBAL MACRO EURO  Euro zone manufacturing PMI falls to 3-month low of 53.0 in March following a final reading of 53.2 in February  UK’s consumer price index (CPI) grew by 1.7% in the year to February, down from 1.9% in the year to January. United States  Fitch affirms US' AAA credit rating with a stable outlook.  US GDP grew at 2.6% in Q4 2013 following 4.1% growth in Q3 2013.  US new home sales fell 3.3% to a seasonally adjusted annual rate of 440,000 in February following a downwardly revised 455,000 in January. China  China’s flash Markit/HSBC Purchasing Managers' Index (PMI) fell to an eight-month low of 48.1 in March from February's final reading of 48.5.
  • 4. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 24/03/14 22,055 6,801 12,889 14,180 6,231 11,542 6,953 10,263 8,870 9,277 9,302 1,640 1,376 4,909 25/03/14 22,055 6,842 12,921 14,220 6,313 11,735 7,002 10,257 8,802 9,290 9,167 1,672 1,394 4,881 26/03/14 22,095 6,868 13,044 14,308 6,227 11,893 6,954 10,070 8,723 9,541 9,271 1,669 1,391 4,847 27/03/14 22,214 6,910 13,111 14,414 6,318 11,975 6,998 9,989 8,714 9,539 9,389 1,684 1,405 4,860 28/03/14 22,340 7,010 13,143 14,585 6,360 12,069 7,016 10,073 8,774 9,684 9,456 1,735 1,428 4,898 1.29% 3.08% 1.97% 2.86% 2.06% 4.56% 0.90% -1.85% -1.08% 4.39% 1.65% 5.77% 3.78% -0.23% Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 24/03/2014 60.70 100.11 83.81 59.26 6527 29329 25/03/2014 60.49 99.77 83.67 59.17 6484 29058 26/03/2014 60.17 99.39 83.09 58.81 6472 28897 27/03/2014 60.13 99.65 82.91 58.81 6440 28397 28/03/2014 60.10 99.85 82.58 58.83 6484 28439 1.00% Rupee Appreciated 0.26% Rupee Appreciated 1.49% Rupee Appreciated 0.73% Rupee Appreciated 0.66% 3.03% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.59 -6 2-Year 8.46 -17 5-Year 8.87 -3 10-Year 8.81 1
  • 5. Satadru Mitra 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”