2. Equity View:
The equity markets have been flattish with the Nifty moving around 0.8% in the whole week. We had big
announcements from the Government in terms of Insurance and Pension deregulation. The Government of
India has conceptually approved 49% stake for foreign investors in FDI and Insurance in India. Of course this
measure will need to be passed by the parliament. It is expected that the government is going to put it in the
winter session of parliament where they will try to convince the opposition parties, especially the BJP, to give a
go ahead for this bill. If the government is not able to reach a consensus amongst the major opposition parties,
it will be difficult for the Government to push ahead with this reform. However the BJP had supported FDI in
Insurance earlier and it is widely expected that some kind of compromise will happen between Congress and
BJP for the passage of this bill.
There was also another announcement from the government concerning a central infrastructure enabling
authority under the PMO which will help big infrastructure solution providers to get the projects passed under
a single window clearance kind of a mechanism. The contours of that National Investment board are expected
to be announced sometime next week. The Companies Bill, again a draft, has been passed which is going to
help Mergers and Acquisition activity within companies and also make the Companies Bill more up to date with
the service economy that we have in India at this point of time. BJP has already supported this bill. So it is
expected that in the winter session of parliament the bill will get passed in the parliament.
As the reforms initiated by the GOI continue, we expect to see re-pricing again in LPG and Diesel. We have
already seen a 12 rupee hike in LPG cylinders last week and it is expected that there will be another diesel hike
in the times to come. In terms of further price deregulation as far as auto fuels are concerned, it is expected
that the diesel price will be completely free to be set by the retailers by March end and by then the under
recovery on diesel should come down to a low single digit.
We have seen that the Rupee has been strengthening in the last 2 or 3 weeks. Rupee has moved up almost
from the level of 55.5 to almost 51.5 levels which is a good 6 – 7% appreciation. That along with the fact that
commodity prices have continued to cool off adds double beneficial impact to Indian importers. So all the
companies which are basically into manufacturing where raw materials are imported and sales are India
focused, these are going to be the biggest beneficiaries of the current round of appreciation in Rupee. We
believe that as Rupee continues to strengthen on the back of continuous FII Inflows, we would see further
strengthening in Rupee and we would expect the Rupee to move to around 51 – 52 kind of a level in the times
to come.
In terms of global news we have the US unemployment data coming on Friday which was at 7.8% which were
the multi year low, the lowest that US has seen under President Obama. Of course the macro economic data
coming out of US continues to strengthen and this is giving alot of hope that the US economy will bounce back
probably in this quarter and in the next quarter. Hence all the concerns about double-dip depreciation in US
should get addressed in adequate fashion. Also we believe that till the time US Presidential elections happen in
the 1st week of November, US will try to do its best to keep oil prices under control.
3. In terms of broad market perspective, this year is turning out to be an extremely good year for Indian equity
markets. Indian equity markets are almost up by 24 – 25% since the beginning of the year. We are looking at a
21500 Sensex target by March which is a good 15% away from current levels. For those investors who are
currently under invested, this is the time to increase their allocation towards equities.
News:
DOMESTIC MACRO:
The cabinet approved bills on Thursday to attract foreign investment into insurance and pensions among
a package of new measures to restore confidence in the economy, although the reforms will face a tough
fight in parliament.
The Reserve Bank of India (RBI) Governor Duvvuri Subbarao said on Thursday inflation had to be brought
down further, signalling the bank would stick to a hawkish stance, and the size of the fiscal deficit would
be a key factor in determining monetary policy.
The HSBC purchasing manager's index for the services sector, which gauges the activity of hundreds of
Indian companies, rose to 55.8 in September from August's 55.0. The HSBC manufacturing purchasing
managers' index (PMI), which gauges the business activity of India's factories but not its utilities, held
steady at 52.8 in September from 52.8 in August, which was a nine-month low.
India's annual exports fell 9.7 percent to $22.3 billion in August, while imports fell about 5.1 percent to
$38 billion, leaving a trade deficit of $15.6 billion
GLOBAL MACRO
EURO
Greece will continue talks with international lenders this week on new austerity measures for the debt-
ridden country to clinch its next loan tranche, the finance minister said on Saturday, with both sides
saying progress had been made.
European Central Bank President Mario Draghi said on Thursday everything was in place for the bank to
buy the bonds of troubled euro zone countries such as Spain and that conditions linked to it need not be
punitive.
US
The U.S. unemployment rate unexpectedly dropped to 7.8 percent in September and reached its lowest
level since President Barack Obama took office, providing a boost to his re-election bid.
China
The official purchasing managers' index (PMI) for the sector fell to 53.7 in September from 56.3 in
August, weighed by weakened construction services and transport as well as lackluster new orders
overall.
4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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