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The world this week feb 06 - february 10 2012


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The world this week feb 06 - february 10 2012

  1. 1. The World This WeekFeb 06 – Feb 10, 2012
  2. 2. Equity View:Last week, Nifty moved up by around 1%. The Index of Industrial Production (IIP) recorded a sluggish growth of 1.8% forthe month of December, much below the market expectations. The WPI data for the month of February is expected tocome this week; our expectation is that WPI could be around 7%. A low inflation number along with continuousslowdown in IIP numbers should encourage the RBI to consider a Repo rate cut in the month of March itself. We areexpecting a 25 bps cut in repo when the RBI meets in the month of March.Results season is almost over in India and so far the results have been in line with the expectations. The sales growth hasbeen robust with a number in excess of 15%. There was considerable pressure on profit numbers because of very highinterest cost and forex losses due to exposure to export markets.We expect Q4 earnings to stay more or less in similar levels. We are expecting a profit growth of about 10% for Q4.Overall for the FY12 we expected a total profit growth of around 10% for Sensex companies and so far companies are inline to achieve the profit growth numbers. We expect FY13 growth numbers to be around 15%. Based on FY 13 numbersthe market is trading close to 12.5-13 times FY 13 earnings, which is still lower than the 5 year average, hence we believethat the rally has more steam left. And as the easy liquidity regime continues in the Europe we would find more foreignmoney coming in to India.There is a big Parliament meet scheduled in Greece to pass the austerity measures worth €130 Billion. This bail outpackage is expected for Greece from European Union nations and IMF. Greece has to make a €14.5 Billion debt threpayment by March 20 2012. Hence, Greece needs to find a bail out package for which all EU nations need to agree on thbefore the deadline. Also, ECB would comes up with a LTRO package on 29 February, in which European Union Banksspecially in troubled countries like P.I.G.S are expected to borrow massively and are expected to re-invest this intoborrowings made in LTRO 1 by buying sovereign debt. Hence, we would expect this easy liquidity regime in Europe tocontinue for some more time. It has been the policy of the ECB chairmen Mr. Mario Draghi to keep the liquidity conditionextremely easy, which would provide cushion to bond yields in the peripheral euro zone area.News:DOMESTIC MACRO: The Index of Industrial Production (IIP) recorded a sluggish 1.8% growth in December 2011, considerably weaker than the 8.2% growth in December 2010, with a weaker performance across all the use-based categories except consumer non-durables. The government forecast 6.9% annual growth for the fiscal year that ends in March, the slowest pace since the 2008 financial crisis, and a tad below the 7% to 7.5% growth predicted by several government officials. The Indian government on Friday approved 10.34 billion rupees worth of foreign direct investment proposals, the finance ministry said in a statement.GLOBAL MACROEuro: Greece will likely not achieve sustainable debt levels with a 70% reduction in the value of bonds held by its private creditors, Standard & Poors warned on Wednesday, putting pressure on the official sector also to take losses. The Greek cabinet approved a draft bill spelling out reforms required by the EU and the IMF on Friday, taking Athens closer to getting a new 130 billion-euro bailout after the prime minister warned the alternative was "catastrophe".
  3. 3. Rating agency Standard & Poors downgraded 34 Italian banks on Friday, including heavyweights UniCredit and Intesa Sanpaolo, citing a reduced ability to roll over their wholesale debt and expected weak profitability. The move follows S&Ps downgrade of Italys sovereign rating last month to BBB+, part of a mass downgrade of nine euro zone countries.US: President Barack Obama will seek billions of dollars for jobs and infrastructure in his 2013 budget, an appeal to voters that draws election-year battle lines over taxes and spending as Republicans slammed him for "debt, doubt and decline." Federal Reserve Chairman Ben Bernanke on Friday issued a call to action to restore U.S. housing markets, saying depressed house prices and sales are a serious drag on the economic recovery.China: Chinas economic expansion struck a 2-1/2 year low of 8.9% in the last three months of 2011, extending a steady slowdown that had prompted the government in the autumn to switch policy settings to support growth. It has gently eased monetary and fiscal conditions since. Imports sank 15.3% in January 2012 versus January 2011 -- the lowest since August 2009 -- while exports fell 0.5% over the same period, the worst showing since November 2009. Chinas imports in January fell the most since the depths of the global financial crisis, raising concerns that demand may be weaker than previously thought even allowing for Lunar New Year factory shutdowns
  4. 4. Swapnil Pawar Varun Goel Jharna AgarwalPalak Nanjani Abbas Naheed Kanika Khorana DisclaimerThe information and views presented here are prepared by Karvy Private Wealth or other Karvy Groupcompanies. The information contained herein is based on our analysis and upon sources that we considerreliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personalinformation 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 maketheir own investment decisions based on their specific investment objectives and financial position and usingsuch independent advice, as they believe necessary. While acting upon any information or analysis mentionedhere, investors may please note that neither Karvy nor any person connected with any associated companies ofKarvy 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 theabove-mentioned companies from time to time. Every employee of Karvy and its associated companies arerequired to disclose their individual stock holdings and details of trades, if any, that they undertake. The teamrendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares orother securities till such a time this recommendation has either been displayed or has been forwarded to clientsof 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 applicableto them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this couldchange the applicability and incidence of tax on investmentsKarvy Private Wealth (A division of Karvy Stock Broking Limited): Operates from within India and is subject toIndian regulations. Mumbai office Address: 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 registrationNo’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”