The world this week may 14 - may 18 2012Document Transcript
The World This WeekMay 14 – May 18, 2012
Equity View:Nifty was down by around 1% on Friday from previous week’s closing. State Bank of India announced its quarterly results on th18 May 2012. The quarterly results were better than the consensus expectation. The Net Interest Income (NII) for the bankincreased by 45% to Rs.11,000 Crs. The gross NPA came down to 4.44% from 4.6%; the net NPA has also reduced. We believethat going forward we might see some stabilization in terms of asset quality. We maintain our preferences on the privatebanking space; the Tier I private sector banks like Axis bank, ICICI bank and HDFC bank continue to be our preferred picks atthis point of time.Last week, we also had Tata Steel coming out with results. The standalone and consolidated numbers were belowexpectations. The company was hit by Forex losses and losses in its European subsidiary. There was also pressure from rawmaterial as prices of both coke and iron ore have moved up during the last couple of quarters.Globally, equity markets had much bigger fall on the back of concerns in Greece. Re-elections are expected to be held inGreece during Mid-June and a new government is expected to be formed. The results should be out on the same day; postwhich there would be some clarity with respect to the future of Greece. There are lots of concerns and doubts on whetherGreece wants to stay in the Euro Zone or wants to exit. Also, there are concerns about the austerity measures which havebeen imposed on Greece. Greece has been under recession for almost 5 years now, which results into a key risk to the globalrisk assets. Most of the asset classes like equities, crude, metals etc have been corrected in both developed markets andemerging market equities in last couple of weeks and hence clarity on what happens in Greece would help in further course ofaction. thThe leaders of the G-8 countries met on 20 May 2012 and have agreed to put their fiscal houses in order and accord priorityto growth and jobs by revitalising the global economy. With respect to Greece concerns, all the countries are awaiting theoutcome of Greece elections and the best possible outcome could be that the new government is able to take shape thendecide on the future of Greece.The big social networking giant Facebook listed on Friday 18th at $38 per share. The IPO was oversubscribed by almost a 100times and the share price did saw an upside during the early stage of listing but later the price cooled off and share closedflattish. IT stocks in U.S. have been rallying for the past 6 months now and this seems to be an Internet V2.0 like the one wehad around the year 2000 when we had a big boom in IT and e-commerce shares and hence we would maintain a cautiousstance on Facebook at the current price.In terms on Global commodity prices, one very positive development for India is that the Brent crude prices have started tocool off and were around $107per barrel levels, which is almost $20 lower than the peak that we saw in the month of March.India would partially benefit from this fall in crude as Rupee has also weekend in the last couple of months. In near future, ifrupee starts to stabilize and fall in prices of Brent crude continues it would result in terms of fiscal deficit and current accountdeficit numbers and the whole negative sentiment about India might reduce to some extent, if the crude oil prices fall furtherby around 10% from current levels. A significant cool off in crude oil prices remains the biggest upside risk to the Indian equitymarkets in the short to medium term.News:DOMESTIC MACRO: Indias inflation accelerated in April to 7.23% as price pressures for food, fuel and manufactured items all picked up, adding to the RBIs bind in trying to control inflation when economic growth has slumped to a near three-year low. WPI in March was 6.89%. The rupee fell to a life-time low of 54.91 to the dollar on Friday, and is the worst performer among Asian currencies so far this year. The RBI has sold $20.69 billion in spot markets from the start of September 2011 through March 2012 and has separately sold dollars in the forwards market to defend a battered rupee. Indias consumer price inflation accelerated in April to 10.36%, making life harder for the RBI as it looks to kickstart a flagging economy, In March, consumer prices rose 9.47%.
GLOBAL MACROEuro: A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity - an approach long driven by German Chancellor Angela Merkel - with a new dose of U.S.-style stimulus seen as vital to healing ailing euro-zone economies. The Bank of Spain said bad loans rose to 8.37% of banks outstanding loans in march , the highest since August 1994 and up from 8.3% in February, which was also revised higher. Fitch Ratings Agency on Thursday downgraded Greeces credit rating to CCC from B-minus, citing the heightened risk that the country might have to leave the euro zone. Moodys Investor Service carried out a sweeping downgrade of 16 Spanish banks on Thursday, including Banco Santander, the euro zones largest bank, citing a weak economy and the governments reduced ability to support troubled lenders. Greece abandoned a nine-day hunt for a government on Tuesday and called a new election that may hand victory to leftists who might cut the nations financial lifeline, pushing it closer to bankruptcy and out of the euro zone.US: President Barack Obama on Saturday called on the U.S. Congress to back his efforts for tough new financial industry oversight, saying a $2 billion trading loss at JPMorgan(JPM.N) underscored the need for such regulation.China: Annual consumer inflation moderated to 3.4% in April from 3.6% in March, while food prices - which are of most concern for Chinas people and policymakers - rose by 7%, compared with 7.5% in March.
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