The World This Week - September 16 - September 20, 2013


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

The World This Week - September 16 - September 20, 2013

  1. 1. 11 The World This Week September 16 – September 20, 2013
  2. 2. 2 Equity View: Global markets cheered the U.S. Federal Reserve’s decision to postpone the reduction in its $85bn per month bond buying program (QE3). For the Calendar year 2014 too, the Federal Reserve has cut down both the inflation and the GDP growth forecasts. What the Fed is saying is that the recovery in U.S. is not yet as strong as they were expecting it to be and they have decided not to put any tapering on board as of now. Also we have the U.S. Budget talks happening in the 1st week of October. As we all know, U.S. has a September ending fiscal year and there has to be a discussion on Debt Ceiling Enhancement in the first two weeks of October. Looking at how the Republicans and Democrats stack up in both Houses of Legislature there, it is likely that there is going to be some amount of delay and controversy as far as the Debt Ceiling Limit is concerned. We believe that Federal Reserve has taken all those things into account while arriving at this decision of keeping a status quo for now. Fed’s announcement has proved to be a definite positive for the global Equity and Debt markets. We’ve seen Emerging Market Equities, Currencies and Debt – all bouncing back across the Globe, after a significant amount of selling that we saw in the last 3 months. It is also contingent on when the tapering actually starts - it could either happen in December or January - but it is certain that the tapering will start. We believe that the next few months will be lesser volatile as compared to what we’ve seen since the beginning of May when the first time we heard about the tapering. As far as Indian Macroeconomic events are concerned, we saw RBI announcing its Monetary Policy on Friday the 20th of September. As expected, the Marginal Standing Facility (MSF) rate was cut down by 75 bps. Clearly what the new RBI Governor Mr. Raghuram Rajan has been trying to do there is reduce the short term rates and some of these measures which were adopted earlier to defend the Rupee are beginning to get unwind as stability comes back to the Rupee. We have seen the Rupee bouncing back from 68.8 levels against the Dollar to 62 levels now - which is a good 10%-11% kind of an appreciation. We have seen some kind of stability emerging on the Rupee side. Also, bond yields are started cooling off. However, with the unexpected rise in Repo rate on Friday, we saw the the bond yields again moving up by around 20 bps. We however believe that in the short term, the RBI would not really want to increase it significantly from these levels and going forward, we would see some more cuts in the MSF rates. This in turn would help banks in borrowing at a cheaper cost as far as the short term borrowing rates are concerned. Over all from a Macroeconomic perspective, we see more stability emerging now and believe that the worst of crisis is out of the way. Although we are seeing the Rupee stabilize at an elevated level, the sense that the Rupee is stabilizing will help calm down other asset markets like Equity and Debt. From an Equity market perspective, we believe that now the worst is certainly behind us. We’ve seen high volatility in the months of August and September in which the Nifty went down to 5285 on 28th August and from there we’ve bounced back to 6000 levels. We believe that for long term investors, this market provides an extremely attractive opportunity to gain entry into the markets. Considering a worst case scenario too, we believe that we’ll end up with a GDP Growth Rate of around 4% and Fiscal Deficit of around 5.5% - 6% of the GDP. We’ve already assumed the worst case scenarios and there is not much to lose from these levels. As we’ve also highlighted earlier, the only variable which
  3. 3. 3 is keeping the markets so volatile is the Rupee and now that the Rupee has also gained a sense of stability, going forward Equity markets should continue to do well. Hence, we reiterate our positive call on Indian Equities, with a target of 22,400 for Sensex by the end of this fiscal year and believe that investors can go out and aggressively build portfolios and invest from now. News: DOMESTIC MACRO:  Food inflation accelerated to a three-year high of 18.18 percent in August, government data released on Monday showed, driving the benchmark Wholesale Price Index up by a stronger-than- expected 6.1 percent.  India increased the import duty on gold jewellery to 15 % from 10 % on Tuesday, in a move aimed more at protecting the domestic jewellery industry rather than stemming overseas purchases to narrow its current account deficit.  RBI announced the Mid Quarter Monetary Policy on Friday and various policy actions undertaken are as follows:  Repo Rate increased to 7.50%  Reverse repo increased to 6.50%  Margin Stabilization Facility (MSF) reduced to 9.5%%  CRR kept unchanged at 4%  SLR left unchanged at 23% GLOBAL MACRO EURO  Greece is in a sixth year of recession, with unemployment at a record 27.9 percent. House prices dropped almost 12 percent in the second quarter, according to the central bank. USA  Fed policy decisions influenced policymakers to cut their 2013 growth forecast to 2.0 percent to 2.3 percent from a June estimate of 2.3 percent to 2.6 percent, the biggest drop in the near-term forecast in more than a year.  U.S. bank excess reserves deposited with the Federal Reserve have mushroomed from less than $2 billion before the financial crisis to $2.17 trillion today even as the Fed has flooded the financial system with $2.8 trillion through its asset purchases over the past five years. China  House prices in China climbed 8.3% in August on an annual basis, from 7.5% in July, while prices in the country's three biggest cities - Beijing, Shanghai and Shenzen - jumped 18%.
  4. 4. 4 Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 16/09/2013 19,742 5,599 10,985 11,804 5,723 7,958 6,740 9,143 7,658 8,370 8,550 1,509 1,292 4,366 17/09/2013 19,804 5,576 11,066 11,709 5,681 7,906 6,785 9,117 7,823 8,440 8,507 1,496 1,281 4,441 18/09/2013 19,962 5,601 11,067 11,892 5,706 7,947 6,878 9,191 7,834 8,442 8,581 1,504 1,307 4,451 19/09/2013 20,647 5,725 11,383 12,698 5,799 8,324 7,099 9,315 7,819 8,762 8,849 1,543 1,377 4,484 20/09/2013 20,264 5,677 11,204 12,167 5,819 8,071 7,024 9,327 7,811 8,660 8,751 1,547 1,287 4,458 2.64% 1.40% 1.99% 3.07% 1.67% 1.42% 4.21% 2.02% 2.00% 3.46% 2.35% 2.55% -0.41% 2.11% Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 16-09-2013 62.48 99.66 83.50 63.23 7125 29442 17-09-2013 63.38 100.86 84.60 63.93 6878 29801 18-09-2013 63.14 100.48 84.37 63.65 6857 29406 19-09-2013 61.75 99.56 83.55 62.74 6984 30223 20-09-2013 62.24 99.90 84.23 62.67 6716 30190 0.39% Rupee Appreciated -0.24% Rupee Depreciated -0.87% Rupee Depreciated 0.89% Rupee Appreciated -5.74% 2.54% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.93 -46.8 2-Year 8.69 -31.4 5-Year 8.77 37 10-Year 8.57 9
  5. 5. 5 Satadru Mitra Varun Goel Jharna Agarwal Abbas Naheed Kinjal Mehta 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”