The markets have started on a somber note. As discussed in the past that markets were at tiring levels of 8600, a 3% correction was expected in last one month. it would be an approximate fall of 7% after today’s correction which is in line with developed markets. The US markets fall of ~7.5% in last one month has impacted Y-O-Y returns from 17% to 3%. India on the other hand, is considered to be an outperformer as compared to other emerging markets like Brazil, Australia, Indonesia, etc however a further correction of 3% - 4% cannot be ruled out. The mid cap index is fairly resilient but people should stay away from low quality high beta mid cap stocks and if investments are existing then profit booking followed by exiting these stocks is suggested.

1. The World This Week
August 17 – August 22, 2015

2. Equity View:
The markets have started on a somber note. As discussed in the past that markets were at tiring levels of
8600, a 3% correction was expected in last one month. it would be an approximate fall of 7% after
today’s correction which is in line with developed markets. The US markets fall of ~7.5% in last one
month has impacted Y-O-Y returns from 17% to 3%. India on the other hand, is considered to be an
outperformer as compared to other emerging markets like Brazil, Australia, Indonesia, etc however a
further correction of 3% - 4% cannot be ruled out. The mid cap index is fairly resilient but people should
stay away from low quality high beta mid cap stocks and if investments are existing then profit booking
followed by exiting these stocks is suggested.
The local factors responsible for this correction are monsoon and rating agency Moody’s, lowering India’s
growth forecast to 7% from 7.5%. Global factors are also responsible like steep fall in oil prices,
challenges of emerging markets, resignation of Greek Prime Minister and also the talks of U.S interest
rate hike in September. In US, there is a contradictory situation because one concern is sustaining growth
and another is increase in interest rates. According to classical theory of economics only one thing can be
right so our view is that there would not be interest rate hikes in September and the US markets will be
the first one to recover with investors coming out from emerging markets and investing into US markets.
India will also stabilize after initial round of correction.
The Technicals suggest a Support at 7950 and worst case scenario 7750 levels. We prefer FMCG sector for
couple of reasons like whenever high beta stocks are correcting, investors find lot of comfort in FMCG
companies and they also benefit by low commodity prices depending upon their raw material usage
between 40% - 60%. These FMCG companies have strong brands and excellent pricing power which will
give rise to their profitability by 300 – 500 bps. There is a great temptation for China to devalue its
currency but now they are being criticized by global community. China wants Yuan to be a part of their
Reserve basket of currency but with these unilateral actions taken by them the favorable chances are
reduced which will be a concern for China.
News:
DOMESTIC MACRO:
 RBI Governor Raghuram Rajan says there is a pick up in the economy and expresses hope that rural
demand will get stronger if the monsoon improves; adds that the devaluation of the Chinese yuan is not
something to be "concerned" about at current levels.
 Government notifies the setting up of National Mineral Exploration Trust (NMET), which will look
into the ways to encourage exploration of mines and minerals in the country.
 RBI and the government planning to allow foreign portfolio investors to trade in bonds floated by state
governments.
 Government approves signing and ratification of the agreement between India and Seychelles for
exchange of information with respect to taxes to check black money generation.
 RBI grants in-principle licence for payments banks to 11 applicants

3. GLOBAL MACRO
EURO
 Eurozone manufacturing PMI was 52.4 in August, the same as the previous month.
 Eurozone consumer confidence index rose to -6.8 in August from July's -7.1.
 UK retail sales increased by a seasonally adjusted 0.1% in July following a drop of 0.1% in June.
United States
 US flash manufacturing purchasing managers’ index (PMI) dipped to 52.9 in August from 53.8 in July
 US existing home sales rose 2% in July to a seasonally adjusted annual rate of 5.59 mn, the fastest rate
since February 2007 compared to 5.48 mn in June.
China
 China’s Caixin/Markit preliminary manufacturing purchasing managers' index (PMI) stood at 47.1 in
August, down from 47.8 in July.
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
17/08/15 27,878 11,488 19,338 21,598 11,387 17,777 7,896 18,000 11,584 7,908 9,415 2,002 1,411 6,376
18/08/15 27,832 11,542 19,454 21,555 11,518 17,934 7,891 17,898 11,771 7,756 9,415 1,999 1,406 6,437
19/08/15 27,932 11,549 19,545 21,456 11,678 18,026 7,896 18,368 11,855 7,653 9,404 1,998 1,392 6,464
20/08/15 27,608 11,318 19,192 20,957 11,464 17,697 8,002 18,437 11,585 7,470 9,239 1,961 1,335 6,327
21/08/15 27,366 11,217 18,795 20,688 11,421 17,385 8,011 18,440 11,628 7,400 9,149 1,941 1,300 6,319
-1.84% -2.36% -2.81% -4.21% 0.30% -2.21% 1.46% 2.44% 0.38% -6.42% -2.83% -3.04% -7.82% -0.89%
Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per 10gms)
17/08/2015 65.22 102.23 72.39 52.42 3203 25804
18/08/2015 - - - - 3179 25919
19/08/2015 65.25 102.25 72.19 52.50 3183 25853
20/08/2015 65.23 102.20 72.57 52.59 3077 26351
21/08/2015 65.82 103.38 74.26 53.55 3077 26802
-0.91%
Rupee
Depreciated
-1.11%
Rupee
Depreciated
-2.52%
Rupee
Depreciated
-2.11% Rupee
Depreciated
-3.93% 3.87%

4. Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 7.54 -3
2-Year 7.74 -11
5-Year 7.87 -8
10-Year 7.75 -6

5. Phani Sekhar Ponangi Jharna Agarwal
Nupur Gupta Aakash Mehta Ridhdhi Chheda
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