The World this Week April 30 - May 04 2012


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The World this Week April 30 - May 04 2012

  1. 1. The World This WeekApr 30 – May 04, 2012
  2. 2. Equity View: thIndian Equity Markets witnessed a sharp downfall on 4 May 2012. Nifty closed at 5086.9, a correction of about 2% during theweek. Last week, many mid-tier public sector banks (PSU) declared results in line with expectations. On the positive side, wethink that NPA cycle has peaked-out and asset quality has bottomed-out which would lead to a definite improvement in theasset quality of banks going forward. The credit growth is also expected to be around 15-20%. Some of the mid-tier PSU banksare trading at 0.5X to 0.6X FY14 earnings which makes them extremely attractive from valuation perspective. We are positiveselectively on some of the mid-tier PSU banks.Financial markets around the globe were jittery on the back of French presidential election results. Mr. Francois Hollandedefeated Mr. Nicolas Sarkozy in a tightly fought election which led to a huge uncertainty about the fate of deals that werealready signed in the last eighteen months regarding the fiscal stability of Eurozone. Markets of course are very concerned asto what will happen to the earlier deals as Mr. Hollande came to power on back of his opposition to austerity measures andcarries very strong anti-euro views. However, till the time there is no clarity on how his government is going to shape up andwhat Mr. Hollande thinks about the Euro shaping up over the course of next few months there is going to be some sort ofuncertainty in the markets.In parallel elections held in Greece, we witnessed political parties with the anti-austerity beliefs get more votes than thoseparties which favored austerity measures. Hence we would continue to witness some amount of turbulence in global assetslike Equity, Commodities and Crude oil.Brent crude has fallen $7 in the last week down to $111-112 per barrel. This is a big positive for India and if Brent crudecontinues to fall and witnesses levels of $100 per barrel with rupee not deprecating further against dollar, then it wouldaddress many concerns like fiscal deficit and the current account deficit.This week the Government will start the discussion on the tax changes introduced in the budget session of the parliament inMarch this year. The discussion would start on May 7, 2012 and is expect to last over a month. There is a lot of speculationregarding the General Anti-Avoidance Rule (GAAR) which could be relaxed and its implementations could be postponed by 1-2years. There are concerns regarding the India –Mauritius treaty and apparently it is also under review. All of this is leading touncertainty regarding the taxation proposals that the Government of India would come up with.News:DOMESTIC MACRO: India is considering a review of the Double Taxation Avoidance Treaty with Mauritius to raise revenues, Minister of State for Finance S.S. Palanimanickam told lawmakers on Friday. HSBCs Business Activity Index, compiled by Markit, rose to 52.8 in April from 52.3 in March. Indias services sector growth accelerated a touch in April thanks to a rise in new business, and optimism hit its highest level since June 2011. Indias consumer price index (CPI) for industrial workers rose 8.65 percent in March from a year earlier, faster than Februarys annual rise of 7.57 percent, government data showed on Monday.GLOBAL MACROEuro: The European Central Bank held interest rates at 1 percent on Thursday and will resist calls to do more to fight the euro zone crisis, putting the onus on governments to foster growth and head off anger over austerity policies. Unemployment in the euro zone rose to a 15-year high of 10.9 percent in March, driven by lay-offs in Italy and Spain, and economists said worse was to come as the impact of the debt crisis extracts an ever greater toll.
  3. 3. Standard & Poors raised Greeces credit rating out of default territory to CCC on Wednesday, as expected after Athens slashed its debt by about a third by completing the biggest sovereign debt restructuring in financial history.US: U.S. employers decreased hiring for the second straight month in April but the unemployment rate still fell to 8.1 percent, giving mixed messages about the economys strength ahead of President Barack Obamas November re- election bid.China: The HSBC China Purchasing Managers Index, geared to smaller firms, improved to 49.3 in April from 48.3 in March, but remained below the threshold of 50 that divides expansion from contraction.
  4. 4. Satadru Mitra Varun Goel Jharna Agarwal Palak Nanjani Abbas Naheed Kanika Khorana 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 applicability andincidence 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”