Advice for The Wise April 2014


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Advice for The Wise April 2014

  1. 1. 1 ADVICE for the WISE Newsletter –APRIL 2014
  2. 2. Economic Update 4 Equity Outlook 8 Debt Outlook 12 Forex 14 Gold 15 Index Page No. Contents Real Estate Outlook 16 2
  3. 3. From the Desk of the CIO “Advisory services are provided through Karvy Capital having SEBI Registration No: INP000001512. Investments are subject to market risks. Please read the disclaimer on slide 18” Dear Investors, RBI kept the repo rate constant in its April monetary policy review. This was along the lines of general consensus amongst market participants and experts. For the monetary loosening enthusiasts, the falling inflation numbers undoubtedly present an opportunity to start cutting rates. However, it is unlikely that RBI is merely looking for a trigger of some sorts to get started on reducing interest rates. There are still three unknowns that could lead to the inflation spiking again. For one, the expectation of normal or sub-normal monsoon in 2014 will have a strong bearing on food and vegetable prices. Secondly the outcome of general elections will strongly influence the pace of economic growth. Thirdly, the continued tapering of monetary stimulus by the US Fed may start to reduce the flow of money to emerging markets through 2014. A development connected to the third of these factors is likely increase in US interest rates (or the expectation of it) in 2015. In the face of increasing yields in US, it could be unwise to reduce interest rates in India – till such time that the India growth story is firmly back on track in the eyes of global investors, who either do not mind the lower ‘carry’ (the difference between Indian interest rates and US interest rates) or remain enthusiastic about Indian equities. RBI, being aware of the same, is more likely to wait than rush into the monetary loosening. If indeed a reforms-minded government comes to power in the centre, growth would pick up in the short term simply on account of positive sentiment. That could reduce the intensity of demands on RBI to cut rates quickly. Interestingly enough, as current account deficit is falling consistently, global investors have taken fancy to Indian equities again. Part of this is driven by a bet on the general elections’ outcome. It is also driven by money looking for a suitable emerging market to invest into. Owing to several global developments, this list is getting shorter by the day. India hence is temporarily the beneficiary of the adverse developments in the investment climate in Brazil, Turkey, Russia and China. For now, the capital account surplus on account of these inflows has swollen enough to warrant RBI’s intervention in keeping rupee from appreciating too much. Unlike defending a falling currency, stopping the rise of an appreciating one is not that hard. That is because such anti-appreciation intervention increases forex reserves of the central bank instead of depleting them. Hence, speculators cannot bet on the running-out-of- ammunition by the central bank. These interventions at present are a good idea for two reasons. Firstly, the export industries that received a boost from the falling rupee last year could suddenly find themselves at the wrong end of the exchange rate if rupee appreciates quickly. That could stymie already anemic economic growth in India. Secondly, if a large part of these inflows does indeed reverse on the outcome of general elections (either through profit booking after expected outcome or worse, stop loss due to unexpected outcome), that could lead to a rapid fall in rupee then. It is prudent to build ammunition to defend a slide of rupee in such a scenario. Unlike the slow and steady appreciation that comes in good times, depreciation of currencies generally tends to be rapid and disruptive. Also unlike the appreciation, the depreciation attracts speculative interests which can worsen the fall. Going into the election season, we remain circumspect about the outcome and its immediate effect on capital markets as well as medium term effect on the economy. For now, across asset classes, the prudent thing to do seem to be to stay invested. 3
  4. 4. As on 25th Mar 2014 Change over last month Change over last year Equity Markets BSE Sensex 22055 6.0% 18.1% S&P Nifty 6589 6.5% 17.0% S&P 500 1865 1.0% 20.2% Nikkei 225 14423 (2.8%) 15.0% Debt Markets 10-yr G-Sec Yield 8.79% (10 bps) 84 bps Call Markets 8.89% 102 bps 117 bps Fixed Deposit* 9.00% 0 bps 25 bps Commodity Markets RICI Index 3687 0.0% (0.5%) Gold (`/10gm) 29058 (5.2%) (1.6%) Crude Oil ($/bbl) (As on 24th March) 106.59 (2.9%) (0.5%) Forex Markets Rupee/Dollar 60.49 2.39% (10.57%) Yen/Dollar 102.35 0.1% (7.8%) Economic Update - Snapshot of Key Markets 10 yr Gsec Gold • Indicates SBI one-year FD •New 10 Year benchmark paper (8.15%, 2022 Maturity) was listed in the month of June, the 1 year yield is compared to the earlier benchmark (2021 Maturity) 4 75 85 95 105 115 125 135 145 155 165 S & P BSE Sensex CNX Nifty S&P 500 Nikkei 225 24000 26000 28000 30000 32000 34000 50 52 54 56 58 60 62 64 66 68 70 `/$ 6.8000 7.3000 7.8000 8.3000 8.8000 9.3000
  5. 5. US Europe Japan Emerging economies • The U.S. government posted a smaller budget deficit than expected in February of $193.5 billion as receipts came in stronger than in the same period a year ago. • Fed trims asset purchase by another US$10bn to $55bn a month. • Initial claims for state unemployment benefits dropped 9,000 to seasonally adjusted 3,15,000,the lowest reading since November, suggesting a strengthening in labor market conditions. Economy Update - Global • Japan’s core consumer price index rose 1.3% in February from a year earlier, same as that in January & December. • Japan’s retail sales rose 3.6% Y-O-Y in February, compared with a 4.4% gain in January. • Japan's unemployment rate came in at a seasonally adjusted 3.6% in February, compared with 3.7% in January. • The Indian economy can grow an annual 5.2 percent in the quarter to end-March on higher farm output growth, the chairman of the Prime Minister's Economic Advisory Council said. • India's HSBC manufacturing PMI grows to 52.5 in February . • China’s industrial output rose 8.6% in the first two months of 2014 from a year earlier, missing market expectations for a 9.5% rise, 5 • The European Central Bank left interest rates on hold at 0.25% & unveiling no other measures to bolster a fragile Euro zone recovery. • Greece’s major banks must raise an extra 6.4 bn Euros ($8.9 bn) in capital to make themselves strong enough to deal with the fallout from future crisis. • British house prices rose at the slowest pace in six months in February, suggesting the housing market recovery still has a long way to run.
  6. 6. Economy Outlook - Domestic • Q3FY14 GDP growth slowed down to 4.7% YoY as against expectations of 4.8% YoY & as compared to 4.8% in the previous quarter leading to Apr-Dec’13 growth of 4.6%. Strong growth in Services sector contributed significantly to the growth in the economy in the third quarter. While manufacturing growth slumped by 1.9% in Q3FY14. • Apr-Dec’13 GDP at Market Price remained below GDP at Factor Cost at 4.2% as against 4.6% growth in GDP at FC. Excise duty & Service tax collections has slowed down sharply in FY14 thus we can expect going forward GDP at FC to remain above GDP at MP. • Agriculture sector in Nominal term have recorded a growth of 18.5% YoY while in real terms have grown by 3.6%. Record high production in food grains in FY14 is likely to reflect in Agriculture sector’s growth in the next quarter. • Nearly 90.0% of the GDP growth contribution was due to surge in Services sector performance. Services sector growth sharply augmented to 5 month high of 7.6% YoY as compared to 6.0% in the previous quarter & 6.9% in corresponding quarter in last year. • Jan’14 IIP witnessed a positive growth of 0.1% Y-o-Y after decelerating 0.6% in Dec ’13 and after posting three months of consecutive decline. • IIP performance is expected to further improve in Feb’14. This improvement is indicated by 4.4% Y-o-Y increase in Auto production, 10.5% growth in Electricity generation and robust pace of expansion indicated by PMI. • Headline figure for Dec’13 & Oct’13 have been upwardly revised by ~40bps to (0.2)% Y-o-Y & (1.2)%, respectively. Revision in Dec’13 IIP figures is mainly due to 1.3% upward revision in food products and 1.5% upward revision in textiles sector, while 3.2% sharp revision in Basic Metals led to upward revision in Oct’13 IIP figures. IIP 6 -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 6.1 5.3 5.5 5.3 4.5 4.8 4.4 4.8 4.7 4.0 4.5 5.0 5.5 6.0 6.5 FY12(Q3) FY12(Q4) FY13(Q1) FY13(Q2) FY13(Q3) FY13(Q4) FY14(Q1) FY14(Q2) FY14(Q3)
  7. 7. Economic Outlook - Domestic  As on Feb 2014 Bank credits grew by 14.4% on a Y-o-Y basis which is about 1.9% lower than the growth witnessed in Feb 2013. Aggregate deposits on a Y-o-Y basis grew at 15.9%, vis-a- vis 12.8% in Feb 2013.  RBI kept the key rates unchanged when it met on 1st April,2014 to review it’s first bi-monthly monetary policy for this fiscal. Due to this action of the RBI, the CRR remains unchanged at 4% , repo is kept unchanged at 8% and MSF at 9%. The Governor however, reduced borrowing under the Liquidity Adjustment Facility(LAF) to 0.25% of NDTL from the current 0.50% and increased liquidity under 7 day & 14 day repo from 0.50% to 0.75% of NDTL. RBI soothed jittery investors by stating that further tightening in monetary policy may not be required if inflation continues along the intended glide path.  WPI for Feb’14 slowed down sharply to 4.68% Y-o-Y from 5.05% in Jan’14 and 6.40% in Dec’13. Food inflation contributed significantly to the headline number as it fell to 5.60% y-o-y from a peak of 13.81% in Nov ‘13.  Dec’13 WPI has been revised upwards by 22bps to 6.40% primarily due to revision in Core inflation. Core inflation edged up to 3.15% Y-o-Y in Feb’14 as compared to 3.04% in Jan’14. Fuel Inflation declined to 8.75% Y-o-Y from 10.03% in Jan’14 mainly due to drop in Coking Coal, Kerosene and Petrol prices.  Headline CPI dropped to a 25 month low of 8.10% in February ‘14 as against 8.79% in January ‘14 primarily on account of decline in vegetable prices which fell from a high of 21.91% in January to 14.04% in February ‘14. Core CPI also fell marginally by 9 bps to 7.91% for the month from 8.0% in January ‘14. Growth in credit & deposits of SCBs * End of period figures 7 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% Bank Credit Aggregate Deposits 4.00% 6.00% 8.00% 10.00% 12.00% WPI CPI
  8. 8. Equity Outlook Indian equity markets continue to rally going into the election season. We have seen FII inflows topping three billion dollars in the last four weeks. This has also lead to a sharp appreciation in the rupee with levels of 60 being breached for the first time in eight months. GDP growth continues to stagnate at 4.5-5.0% for last four quarters pulled down by poor performance of manufacturing and industrial sectors. However, we don’t expect any further moderation and believe that the worst is behind us. India's economy could gather pace in the new fiscal year, putting behind a dismal year. The pace of recovery will be a function of reform – orientation of the new government and the political will to push ahead with difficult reform measures. India Inc is looking forward to the next government for a big reform push. While corrective measures on the fiscal deficit and current account deficit side undertaken by the Government in the recent months have started yielding results, it is important that the momentum on reforms is not lost. There are a number of measures which a strong reform oriented government can take in 2014 to accelerate the economy - Goods and Services Tax, direct cash transfer of subsidies and boost to manufacturing sector. A cyclical upturn in investment, stronger external demand and monetary easing will also boost growth. The crude oil prices are expected to stay flattish in 2014. However, if there is big upwards revision in crude oil prices, it would further strain India’s twin deficits - fiscal and current account. Reserve Bank of India (RBI) might also find it difficult to carry out the necessary monetary measures in the form of rate cuts if inflationary pressures don’t abate. 8
  9. 9. Equity Outlook 9 We expect CPI inflation would come down this year and could average around 7.5% due to moderation of food and vegetable prices. The key risk factor for Indian markets in 2014 remains the political stability and the government’s ability to push through fiscal consolidation. The right government can take measure to further reduce fiscal which will give RBI the necessary cushion to carry out rate cuts starting July. The key to growth revival is the fillip to the capex cycle for which low interest rates are an imperative. We should see 25-50bps cut in interest rates in 2014 provided fiscal deficit is curtailed. We believe that going forward markets will reconcile to the fact that trend GDP growth rate has come down, and could settle at 5-5.5%. This is the new normal for Indian growth. Further reforms on fiscal consolidation, financial liberalization and infrastructure growth will be needed to sustain an improvement in trend growth. Revival of large stalled projects cleared by the Cabinet Committee on Investments will give a boost to capital formation activity. We expect FY14 Q4 results to surprise on the positive with earnings growth of more than 15%. A real GDP growth of 5.5%- 6% along with Inflation of around 7% should lead to a nominal GDP growth of 13% in FY15 leading to earnings growth of around 13-16%.We believe sectors like Banking, selective infrastructure names, IT and Pharma would deliver strong earnings growth in the new fiscal. We see 2014 brining a new bull cycle into existence. Commodity price correction, a strong macroeconomic recovery in US & a stable Euro area continue to be significant positives for equity market this year. With domestic macro-economic data also on the mend, we are aggressive buyers of Indian equity.
  10. 10. Sector Stance Remarks Healthcare Overweight We believe in the large sized opportunity presented by Pharma sector in India. India’s strength in generics is difficult to replicate due to quality and quantity of available skilled manpower. With the developed world keen to cut healthcare costs, and a vast pipeline of drugs going off-patent, Indian pharma players are at the cusp of rapid growth. IT/ITES Overweight Demand seems to be coming back in US. North American volume growth has also remained resilient. With significant rupee depreciation in the last few months, margins will get a boost. BFSI Overweight Private sector banks and NBFC’s are expected to deliver healthy earnings growth. We expect public sector to significantly outperform due to cheap valuations and stabilization in asset quality. Energy Overweight With the ongoing price deregulation of diesel, we believe the total subsidy burden on Oil PSU’s will come down during the course of the year. Rupee appreciation will also help. Power Utilities Neutral We like the regulated return characteristic of this space. This space provides steady growth in earnings and decent return on capital. Sector View 10
  11. 11. Sector Stance Remarks Automobiles Neutral We are positive on SUV’s and agricultural vehicles segment due to lesser competition and higher pricing power. FMCG Neutral We like the secular consumption theme. We prefer “discretionary consumption” beneficiaries such as Cigarettes, IT hardware, durables and branded garments, as the growth in this segment will be disproportionately higher vis-à-vis the increase in disposable incomes. E&C Neutral The significant slowdown in order inflow activity combined with lack of demand has hurt the sector. The capex activity might pick up in the second half of the current year. Telecom Underweight While regulatory hurdles seem to be reducing, recent aggressive bidding for spectrum has revived fears of unhealthy competition. Emergent competition from the social media space also present a formidable challenge. Metals Underweight Steel companies will benefit because of rupee depreciation. However, commodity demand stays low globally due to low capex activity. Cement Underweight Cement industry is facing over capacity issues and lack luster demand. With regulator taking a strong view against pricing discipline, the profits of the sector are expected to stay muted. Sector View 11
  12. 12. Debt Outlook • The yields on 10 Yr G sec closed at 8.79% which is 10 bps lower than the last months close of 8.89%, tracking gains in the rupee. • RBI infused liquidity worth Rs 5,000 cr through the repurchase auction of government securities during the month. • 7 -day term repo rate auction for a notified amount of Rs 10,000 cr conducted during last week of March 2014, resulted in a cut off yield of 8.78% with total amount of bids received at Rs. 48,714 cr. • The spread on the 10 year AAA rated corporate bond decreased to 72 bps on 25th Mar, 2014 from 76 bps (as on 25th Feb, 2014). 10-yr G-sec yieldYield curve (%) (%) 12 7.80 8.00 8.20 8.40 8.60 8.80 9.00 9.20 9.40 0.0 0.9 1.7 2.6 3.4 4.2 5.1 5.9 6.8 7.6 8.5 9.3 10.1 11.0 11.8 12.7 13.5 14.4 15.2 16.1 16.9 17.7 18.6 19.4 6.8000 7.3000 7.8000 8.3000 8.8000 9.3000
  13. 13. Debt Strategy OutlookCategory Details Long Tenure Debt Our recommendations regarding long term debt is neither buy nor sell for now. And after the volatility settles Investors could look to add to dynamic and medium to long term income funds over the next few months. Long term debt is likely to see capital appreciation owing to the expected monetary easing. There is lesser probability of rate cuts in the near future and there could be a lot of volatility in the g-sec yields as well. An important point to note is that as commodity prices are cooling down, current account deficit may reduce to some extent. But all this is coupled with uncertainty. We suggest matching risk appetite and investment horizon to fund selection. Hence we recommend that if investing for a period of 2 years or above then long term can be looked upon or else holding/profit booking could be a good idea. Investors who may want to stay invested for the medium term (exiting when prices appreciate) and those who would want to lock in high yields for the longer term can also invest in longer tenure papers/Funds. Some AA and select A rated securities are very attractive at the current yields. A similar trend can be seen in the Fixed Deposits also. Tight liquidity in the system has also contributed to widening of the spreads making entry at current levels attractive. With RBI maintaining status quo on key interest rates in the economy we would suggest to invest in and hold on to current investments in short term debt. Due to liquidity pressures increasing in the market as RBI has a huge borrowing plan in the first half of the new fiscal, short term yields would remain higher. Short Term funds still have high YTMs (9.5%–10%) providing interesting investment opportunities. Short Tenure Debt Credit 13
  14. 14. Forex • The Indian Rupee appreciated against all the four major currencies in the last month. It strengthened by 2.39% against the US Dollar, 1.72% against the EURO and 2.30% against Japanese Yen. The major appreciation out of the four currencies was seen in GBP against which the Indian Rupee appreciated by 3.55% in last one month. • The rupee during the month end breached its crucial resistance level of 60 per dollar for the first time in eight months on the back of strong dollar inflows. Foreign funds have bought shares worth $2.9 billion so far in March, taking net inflows in 2014 to $3.3 billion. This has led to rupees’ appreciation. • Other reasons for a stronger rupee are improving macros, hopes of a stable pro-growth government at the centre & India being placed as a better investment option amongst emerging market economies. Rupee movement vis-à-vis other currencies (M-o-M) Trade balance and export-import data • The projected capital account balance for Q3 FY 13 is projected at Rs. 171984 crores along with the Q1 and Q2 being at 88013 Cr and 130409 Cr respectively. • We expect factors such as higher interest rates to attract more investments to India. Increased limits for investment by FIIs would also help in bringing in more funds though uncertainty in the global markets could prove to be a dampener. 14 Exports during February,2014 were valued at US $ 25.68 bn which was 3.67% lower than the level of US $ 26.66 bn during February, 2013. Imports during February,2014 were valued at US $ 33.81 bn representing a negative growth of 17.09% over the level of imports valued at US $ 40.79 bn in February, 2014 translating into a trade deficit of $8.13 bn. -10000 40000 90000 140000 FY 11 (Q2) FY 11 (Q3) FY 11 (Q4) FY 12 (Q1) FY 12 (Q2) FY 12 (Q3) FY 12 (Q4) FY 13 (Q1) FY14(Q2) 2.39% 3.55% 1.72% 2.30% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% USD GBP EURO YEN -25000 -20000 -15000 -10000 -5000 0 -20 -15 -10 -5 0 5 10 15 20 Export(%) Import Trade Balance (mn $)
  15. 15. Gold Gold Given the sharp sell off last year, the global commodity indices increased their 2014 weightage to the bullions given the attractive risk reward ratio. It seems that gold has moved past the tapering concerns given the macro uncertainties surrounding the world and safe haven is back. The talks of India relaxing the import norms and reducing the custom duty further kept prices elevated in anticipation of demand spike that was largely absent last year. However, due to rupee appreciation expect prices to remain stable. Gold on 25th March, 2014 closed down 5.2% on a M-O-M basis. 15 24000 25000 26000 27000 28000 29000 30000 31000 32000 33000 34000
  16. 16. 16 Real Estate Outlook Asset Classes Tier I Tier II Residential Due to a flurry of new launches in the first quarter of the year, most markets witnessed an increase in the unsold inventory levels even with relatively steady sales. Consequently, last quarter saw lesser new launches. With reduced new launches and steady absorption, the demand supply gap is expected to reduce over the coming months. Mid-income residential segment with Rs. 4,000 – 6,000 per sq. ft. entry pricing with good developers in Pune, Bangalore, NCR and Mumbai suburbs cane be expected to continue generating good percentage returns with relatively lower risk. Demand in Tier II cities is largely driven by the trend towards nuclear families, increasing disposable income, rising aspiration to own quality products and the growth in infrastructure facilities in these cities. Price appreciation is more concentrated to specific micro-markets in these cities. Cities like Chandigarh, Jaipur, Lucknow, Ahmedabad, Bhopal, Nagpur, Patna and Cochin are expected to perform well. Commercial/IT The over-supply in commercial asset class still continues, thereby dampening the capital values. While rentals have been seen increasing at a slow pace over the last couple of months, they still remain lower than the peal values achieved in the past. In relative terms, Bangalore market continues to outperform other markets owing primarily to the demand from the IT industry. Specific pre-leased properties with good tenant profile and larger lock- in periods continue to be good investment opportunities over a long- term horizon. Lease rentals as well as capital values continue to be stable at their current levels in the commercial asset class. Low unit sizes have played an important role in maintaining the absorption levels in these markets. Please Note: Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkatta Tier II* markets includes all state capitals other than the Tier I markets
  17. 17. Asset Classes Tier I Tier II Retail Capital values as well as lease rentals continue to be stagnant. The effects of the change in FDI policy to allow 51% foreign ownership in multi-brand retail and 100% in single-brand retail are yet to have any effect of the market for retails assets. Developers continue to defer the construction costs as absorption continues to be low unsold inventory levels high. Tier II cities see a preference of hi-street retail as compared to mall space in Tier I cities. While not much data on these rentals gets reported, these are expected to have been stagnant. The mall culture has repeatedly failed in the past n the Tier-2 cities. Whether the FDI in retail can change this phenomenon can be known with more certainty once the effect of FDI is more visible in Tier I cities. Land Agricultural / non-agricultural lands with connectivity to Tier I cities and in proximity to upcoming industrial and other infrastructure developments present good investment opportunities. Caution should however be exercised due to the complexities typically involved in land investments. Land in Tier II and III cities along upcoming / established growth corridors have seen good percentage appreciation due to low investment base in such areas. Real Estate Outlook 17 Please Note: Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkatta Tier II* markets includes all state capitals other than the Tier I markets
  18. 18. Disclaimer The information and views presented here are prepared by Karvy Capital Ltd. 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. This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. 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 Capital Ltd nor any person connected with any associated companies of Karvy Capital Ltd accepts any liability arising from the use of this information and views mentioned here. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Karvy Capital Ltd, its affiliates, directors, its proprietary trading and investment businesses (hereinafter referred to as Karvy) may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned assets 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 and Karvy Comtrade Ltd. Any 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 equity investments. Karvy Capital Ltd Operates from within India and is subject to Indian regulations. Mumbai office Address: 702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 18