The world this week September 17 - September 21 2012


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The world this week September 17 - September 21 2012

  1. 1. The World This WeekSept 17 – Sept 21, 2012
  2. 2. Equity View: Indian equity markets in general and Nifty in particular moved up by more than 4% from the previous week’s closing. In last three months, Nifty has moved up my almost 10% and in CY 12 till date Nifty has moved up by 20%. This is backed by huge inflows from FIIs who have put in a total of Rs. 75,000 crores in Indian equity markets from the beginning of CY12. The Prime Minister’s announcement on fiscal side has continued to benefit the markets. In addition to the diesel price hike and FDI in retail and aviation, there are several other reforms which are expected during the course of next few weeks. One of the biggest announcements that we are expecting is of the restructuring of the State Electricity Board debt. There is almost Rs. 2,00,000 crores of worth of debt which is provided by various banks the city boards and these city boards have been in very bad conditions with respect to the financials as they have been providing power to the consumers across the country at a rate below their purchase price. It is expected that on this announcement of SEB exposure moving away from their own balance sheets to the state government’s balance sheet would be huge positive for the banks especially the public sector banks and we could see some more upside in the PSU banking names if this reform is pushed through in next few weeks. The markets have bottomed out last year and since then markets have continued to move up. We maintain our view of year end target of 21,500 for Sensex on back of mix of very strong global liquidity in terms of unlimited bond buying programmes in US and Euro and improving domestic macros as together it would provide a bullish sentiment in the Indian equity markets. Hence, we would recommend buying in the Indian equities. It is expected that RBI in its review on 30th October 2012 would cut rates and monetary easing would start in India also, which would lead to rebounding of growth to a level of around 6%. In last one year we have witnessed rupee depreciating by 20% against US Dollar which had a significant negative impact on Indian markets. But after the positive fiscal reform announcement and large FII buying in Indian equities, we have seen rupee appreciation of 4% in last 10 days and currently rupee stands at Rs. 53.5 per dollar. Rupee also has a potential to appreciate slightly from these levels if some more reform announcements are made by the government. Hence, the outlook for the both Rupee and Indian Equity Markets remains positive in short to medium term.News:DOMESTIC MACRO: The RBI policy announced a cash reserve ratio (CRR) cut of 25 bps last Monday. But the central bank would wait for the economy to stabilise before reducing the repo rate. The monsoon continued to show improvement and the deficit has been reduced to about 5 pct of the long-term average. The rains are expected to boost the rabi crop, cushioning the losses caused by kharif crops. The markets gained 2 pct last week, with the Nifty closing at a 14-month high of 5691, after a resurgent Congress stood by its policy measures despite the threat of key ally Trinamool Congress leaving the ruling coalition.
  3. 3. GLOBAL MACROEURO Markits composite euro-zone purchasing managers index fell to 45.9 in September from 46.3 in August and Markit said it suggested the euro-zone economy could shrink by roughly 0.6 percent in the third quarter ending this month. The euro zones economic problems do not call for the same sort of asset-purchasing programmes that central banks in the United States or Japan have adopted, a European Central Bank policymaker said on Thursday. The International Monetary Fund acknowledged on Monday it faced "serious challenges" in designing bailout programs for troubled euro zone countries mainly because it was restricted by the rules of the 17- member currency zone.US Markits flash U.S. manufacturing purchasing managers index remained stuck at 51.5 this month, unchanged from August. A Federal Reserve policymaker pitched a bold proposal on Thursday for keeping interest rates low until unemployment falls sharply -- an about-face that shows how concerned the Fed is about the sluggish U.S. economy.China The China HSBC flash manufacturing PMI inched up in September to 47.8 from Augusts nine-month low of 47.6, suggesting the worlds second-largest economy remains on track for a seventh quarter of slowing annual growth.
  4. 4. Satadru Mitra Varun Goel Jharna Agarwal Abbas Naheed Kinjal Mehta DisclaimerThe information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock BrokingLimited) or other Karvy Group companies. The information contained herein is based on our analysis and upon sourcesthat we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is forpersonal 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 owninvestment decisions based on their specific investment objectives and financial position and using such independentadvice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may pleasenote that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arisingfrom 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 disclosetheir individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysisand investment recommendations are restricted in purchasing/selling of shares or other securities till such a time thisrecommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restrictedto 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. Investorsare advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We alsoexpect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicabilityand incidence of tax on investmentsKarvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indianregulations.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-SEBIRegistration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”