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The world this week 28th July - 2nd August


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The world this week 28th July - 2nd August

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The world this week 28th July - 2nd August

  1. 1. The World This Week July 28 – August 2, 2014
  2. 2. Equity View: There is some global turbulence on back of US Federal Reserve meeting. As we have been talking about, the macro economic situation in the United States continue to improve, the last quarter GDP growth was around 4% in US which was much higher than the expectations. This comes on the back of -2% figure that we saw in Q1. So over all for H1 they are more or less in line with expectations. However with a very strong economic recovery in US there were fears that interest rate hikes would happen sooner than expected. Our own sense is that till the middle of 2015 we would not see any rate hikes in US. The QE of course continues to be trimmed down. The US Federal Reserve continues to buy bonds from the open market. The quantum of those bond buying is around 25bn $ v/s 35n $ last month. So we would believe that in the next few months, QE would be completely wound down and post which we will see a period where there is no action on interest rates. Markets are aware of the fact that if US recovery continues to be extremely strong, the interest rate hikes might happen sooner than expected. As we all know the interest rates in US are between 0-25 bps and they have been maintaining at this level for almost five years now. The US job data which came out last week came out slightly lower than expectations. So around 2,00,000 jobs were added in US v/s expectations of around 2,25,000. After this data point, some of the fears about premature increase in interest rates should get abated. We saw some very strong macro economic data coming on Friday as far as the Indian economy is concerned. The 8 core industries data which came in last week came at 17 month high. As we have been talking about that the IIP data and PMI services and manufacturing, both continue to inch up. We are expecting that a very strong economic recovery will start playing out in the next few months. We have also seen some very healthy numbers as far as auto sales are concerned. Both two wheeler and four wheeler numbers came out on 1st August and we saw very strong numbers especially from Maruti with a 21% y-o-y increase in vehicle sales. The two wheeler companies also came up with strong numbers. So our sense is that because of various discounts that are there in the market and also because of slight upturn in consumer sentiment, things are beginning to look up. We believe that macro economic recovery is on the anvil and in the next 3-4 months, we are going to see further signs of recovery in economic growth. Our own sense is that FY 15 economic growth should be between 5.5-6% and probably in FY 16 the growth will inch closer to 6.5-7%. In terms of the earning season we have seen most of the companies coming out with earnings more or less in line with expectations. We would believe that this quarter’s earnings on an average were between 14-15% and revenue growth was slightly muted around 10-12%. But this was again what was on expected lines.
  3. 3. News: DOMESTIC MACRO:  India's fiscal deficit in the first quarter of the FY 2014-15 touched Rs 2.98 lakh cr or 56.1% of the full-year target.  India’s retail inflation for industrial workers fell to 6.19% in June compared to 7.2% in May on account of softening of prices of foods items.  India’s HSBC Manufacturing PMI rose to a 17-month high of 53 in July, up from 51.5 in June.  India's foreign exchange reserves rose to $320.56 bn as of July. GLOBAL MACRO EURO  Euro zone inflation dipped to 0.4% in July, from 0.5% in June.  Euro zone unemployment rate fell to a 22-month low of 11.5% in June, as compared to 11.6% in May United States  US employment cost index rose 0.7% in second quarter after 0.3% growth in the preceding quarter.  US Chicago PMI fell by 10 points to a seasonally adjusted 52.6 in July, a 12-month low, from a reading of 62.6 in June. China  IMF says China should set an economic growth target of 6.5-7% for 2015, below its goal for 2014, and refrain from stimulus measures unless the economy threatens to slow sharply from that level. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 28/07/14 25,991 9,139 15,488 17,421 8,516 15,502 7,185 12,156 9,826 13,001 10,705 2,149 1,873 5,489 30/07/14 26,087 9,172 15,588 17,695 8,642 14,776 7,209 12,320 9,802 13,058 10,750 2,163 1,888 5,512 31/07/14 25,895 9,188 15,491 17,486 8,557 14,652 7,170 12,341 9,742 13,064 10,750 2,134 1,893 5,488 01/08/14 25,481 9,114 15,330 17,329 8,277 14,373 7,101 12,146 9,595 12,816 10,518 2,094 1,874 5,429 -1.96% -0.27% -1.02% -0.53% -2.81% -7.28% -1.16% -0.08% -2.35% -1.43% -1.75% -2.59% 0.02% -1.10%
  4. 4. Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 28/07/2014 60.10 102.04 80.74 59.00 6519 27890 29/07/2014 6465 30/07/2014 60.15 101.92 80.64 58.90 6474 27781 31/07/2014 60.25 101.92 80.70 58.61 6406 27906 01/08/2014 60.85 102.69 81.46 59.11 6387 27886 -1.23% Rupee Appreciated -0.63% Rupee Appreciated -0.89% Rupee Appreciated -0.19% Rupee Appreciated -2.02% -0.01% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.66 3 2-Year 8.50 18 5-Year 8.50 7 10-Year 8.76 9
  5. 5. Varun Goel Jharna Agarwal Nupur Gupta Ridhdhi Chheda 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”