2. Equity View:
CY 13 has been exceptionally good for the Indian equity markets. Both Nifty and Sensex have delivered a
return in excess of 25% return during the calendar year. We continue to maintain a positive stance on the
market and maintain a target of 21500 on Sensex by March 2013.
FII inflows have crossed around $ 23 billion for CY 13 till date and this is the 2nd best year for Indian equity
markets in terms of FII inflows. We continue to expect that the inflows would continue on if some
resolution on the US fiscal Cliff issue happens by the end of December 2012.
The global market sentiment continues to be positive; we have seen global stock market indices doing
quiet well this year. As a result we’ve seen positives coming in from both emerging markets as well as
developed markets. We expect these positives to continue in the first half 2013 also.
The RBI released its monetary policy last week. The key policy rates were left unchanged. There was no
repo rate cut in this policy and also the CRR was left unchanged. The policy stance that RBI has declared is
that they will cut rates in Q4 FY 12; we might see cut in repo rate by 50 bps in the next review which is
scheduled on 30th January 2012. The Indian equity markets have begun to discount this event and we
believe that once that rate cut happens it will add to further positivity in Indian equity markets. A repo
rate cut would be extremely positive for interest rate sensitive sectors like Banks and automobiles.
Corporate result season for the 3rd quarter of FY 12 would start in the second week of January. We expect
that IT space would deliver a soft set of numbers again, though Q-o-Q the volume growth could be muted
in the range of 1 to 2%. Major IT companies i.e. Infosys, TCS and Wipro have already expressed their
concerns about meeting their Q3 volume growth targets and we believe this could lead to some slippage.
We continue to maintain a cautious stance on the IT space as we believe that most of the rupee
depreciation has played out and hence only bottom up cases would merit investment in the IT industry at
this point of time.
We expect the banking space especially the private sector banking names to be the top performer as far
as the results are concerned with almost a 20% earnings growth on a year on year basis. There might also
be see some recovery in terms of NPA’s and the restructuring cycle. In the last 3 – 4 quarters all the banks
have shown a significant increase in their NPA’s and restructured assets. We believe that the trend would
stabilize and maybe even start reversing from this quarter onwards. We continue to maintain a cautious
stance on PSU banks specially the large cap ones because we believe that they might still see two more
quarters before the asset quality and trend starts moving upwards again.
News:
DOMESTIC MACRO:
The RBI kept interest rates on hold on Tuesday, ignoring government pressure to reduce borrowing costs,
but said it was shifting its focus towards boosting a flagging economy, raising the odds of a rate cut as
early as January.
3. The winter session of parliament ended on December 20. This was the most productive session in the last
two years with the passing of important bills such as foreign investment in multi-brand retail, companies
bill and banking regulations bill.
Foreign direct investment (FDI) inflows into India jumped 67 percent in October to $1.94 billion, a
government statement said on Friday
GLOBAL MACRO
EURO
Rating agency Standard & Poor's on Tuesday raised Greece's sovereign credit rating to B-minus with a
stable outlook from selective default, citing Europe's efforts to keep the country part of the euro.
Fitch improved its credit-rating outlook for Hungary on Thursday even though the country's loan talks
with international lenders have collapsed after repeated differences over economic policy.
US
Gross domestic product expanded at a 3.1 percent annual rate in the third quarter, the Commerce
Department said. It was the fastest pace since late 2011 and more than double the second quarter's 1.3
percent rate.
Ratings firm Fitch said on Wednesday it is more likely to strip the United States of its triple-A status if a
political deal is not reached to halt $600 billion of spending cuts and tax hikes set for early next year.
The Labor Department said initial claims for jobless benefits increased 17,000 to a seasonally adjusted
361,000 last week, in the low end of the range they held before Superstorm Sandy struck in late October.
China
The World Bank said China was expected to expand by 8.4 percent next year, fuelled by fiscal stimulus
and the faster implementation of large investment projects. The latest forecast is higher than the 8.1
percent figure cited in an October report.
China faces no big risk of an inflation rebound in 2013, nor any major pressure to ease monetary policy
aggressively next year, the head of research at the central bank said on Monday.
4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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