The World this Week - December 30th to January 4th, 2014
The World This Week
Dec 30, 2013 – Jan 03, 2014
There was a 1.6% correction in the Nifty last week esp. on the back of profit booking. In terms of major
domestic events, the earnings season is beginning in India. Infosys is expected to release its results on the
10th of this month. We are expecting IT as a whole to come up with decent numbers. We expect 3-5%
QOQ USD revenue growth for most of the Tier-I IT companies. We also expect some margin expansion on
the back of rupee depreciation that we had continued to see in the last quarter also. Considering the fact
that the macro economic recovery in the US is significant, the demand environment continues to be
robust. There are several new orders coming in therefore, we believe this trend of strong revenue dollar
growth both in US & Europe should continue for some more time. Therefore we maintain a positive
outlook in the IT space.
Indusind Bank results are also coming by the end of this week. We expect a Net Interest Income growth
of around 20-25% with a stable asset quality. We continue to like the Private sector banks esp. the Tier-I
companies. We believe that these are the companies which are being well run and have managed their
asset portfolios quite well as compared with some of the public sector peers. We believe that they will
deliver an earnings growth in excess of 15% in the coming financial year and continue to maintain a
positive stance. We expect the PSU Banks results to be muted with a stable asset quality and a single digit
earnings growth. However their valuations are extremely attractive and we continue to like PSU Banks
from valuations perspective. They are extremely cheap and have the potential to double from the current
valuations in the next two-three years.
A new development in Delhi is the announcement of electricity tariff cuts which would probably be
followed with Haryana and Maharashtra. This reiterates our negative stance on the Power utility and
generation space. If this populism spreads to other states, it would be a big negative for the power
generation, transportation and transmission companies and we would continue to be away from this
space in the foreseeable future.
Foreign direct investment (FDI) inflows into India declined by 36.6 percent in October to $1.23 billion
compared with $1.94 billion a year ago.
The output of India's key core infrastructure industries expanded by 1.7% in November.
CII Business Confidence Index for October-December surged to a six-quarter high at 54.9 from 45.7 in JulySeptember.
State Bank of India , the country's largest lender, raised 20 billion rupees ($323.34 million) through the sale
of Tier 2 10-year bonds at 9.69 percent
Corporate borrowing in the euro zone overall declined at the fastest pace on record, November's 3.9
percent drop comparing with a 3.8 percent decline on the year in the previous month.
Bank lending to Italian firms fell at an annual pace of 5.9 percent in November, the sharpest decline in the
measure's 10-year history. That was also true for the euro zone's smallest economy, Malta, which recorded
a 10.4 percent drop.
The number of people unemployed in Spain fell by 2.24 percent in December, the biggest drop ever for
that month, and the second biggest fall since the data series began.
U.S. unemployment has dropped from a post-recession high of 10 percent in 2009 to 7.0 percent in
November, while inflation remains close to 1 percent.
Construction spending in increased 1 percent to an annual rate of $934.4 billion, the highest level since
March 2009.It was the eighth straight month that construction spending increased.
U.S. Manufacturing PMI rose to 55.0 last month, beating November's 54.7 reading and an initial December
estimate of 54.4.
The HSBC/Markit Economics services Purchasing Managers' Index (PMI) dropped to 50.9 in December, its
lowest since August 2011, from 52.5 in November.
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