The World This Week Feb 17 to Feb 22


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The World This Week Feb 17 to Feb 22

  1. 1. The World This Week Feb 17 – Feb 22, 2014
  2. 2. Equity View: Both domestic and global markets were positive in the last week. The Finance Minister in the Vote on Account announced major relief for sectors such as Auto and capital goods. Excise duty was cut in the range of 2-4% depending on the size of automobile. Similar cuts in the Capital goods sector and consumer non-durable space were also announced. Considering the fact that in short term the automobile growth has been running negative and consumer durable and non-durable growth has been extremely muted, this move would give a fillip to this space atleast until 30th June when the next budget is expected to come. The fiscal deficit number also came in line with expectations. There is of course some accounting jugglery in that number. If we include Rs 45,000 Cr which has been rolled over in terms of fuel subsidies the number would be close to 4.9% but even this would not have changed the magnitude significantly from the number expected. We believe that the target of 4.1% for next year is extremely ambitious. It assumes a 19-20% revenue growth from tax collections which looks extremely difficult at this point of time. There have been massive cuts on the capital expenditure which is a big negative for the short term growth revival. The government spends its money in two components; Capital expenditure and subsidies. In the last ten years, the Capex was supposed to be 24% of the total government budget while it has come down to almost 11%. Subsidies on the other hand used to be 9% vis-a-vis the current figure of 23%. Therefore, the change in ratios is drastic and negative for short to medium term growth prospects of the country. Whenever a new government comes, these numbers have to be reconsidered so that a higher thrust is given to the capital expenditure to help revive economy in the short to medium term. Q3 earnings season is about to end being the second quarter of positive and better than expected results by Indian corporate. The earnings growth on ex-energy basis was 20% y-o-y which is much higher than expected earlier. This shows a very strong traction in the earnings. Corporate India is surprised with a very significant increase in EBITDA margins. Due to expansion in margins, the PAT growth has come at 20% which is a seven quarter high and we believe that the corporate recovery theme has begun to play out thus there is an expectation of much better earnings in the next few quarters. This reaffirms our positive outlook for the equity market as whole for the coming full year. We have the year-end target for Sensex at 24,800.
  3. 3. News: DOMESTIC MACRO:  IMF projects India’s FY'14 GDP growth at 4.6%.  India central bank allots 390.07 billion rupees at 14-day term repo auction; gets bids worth 694.50 billion rupees and sets weighted average rate of 8.16 percent.  Moody's Investors Service says that the fuel subsidy provision in the Government of India's (Baa3 stable) interim budget, announced on Monday, will not be sufficient to fully reimburse the under-recoveries of oil marketing companies (OMCs) including Indian Oil Corporation (Baa3 stable) and Bharat Petroleum Corporation (Baa3 stable).  Software services exports jump 37% to Rs 3.41 lakh cr in FY13. GLOBAL MACRO EURO  Greece achieved a current account surplus of 1.24 billion euros ($1.71 billion) in January-December in 2013, for the first time since official data began in 1948, helped by strong tourism revenue, the Bank of Greece said.  Inflation in the 18-member euro zone unexpectedly slowed to 0.7 percent year-on-year in January, matching a four-year low set last October and confounding expectations for a rise to 0.9 percent.  France Markit’s composite purchasing managers' fell in February to 47.6 from 48.9 in January, dropping further away from the 50-point threshold dividing an expansion in activity from a contraction. United States  Severe cold weather and a shortage of houses on the market pushed U.S. home sales to an 18-month low in January leading to 5.1% drop.  Core CPI rose 1.6 percent on the year, slowing from a 1.7 percent increase in December and the smallest rise since June. China  The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to a seven-month low of 48.3 in February from January's final reading of 49.5.
  4. 4. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 17/02/14 20,464 6,301 12,059 11,798 5,672 9,424 6,405 10,221 9,379 8,989 8,345 1,520 1,200 5,089 18/02/14 20,634 6,345 12,175 12,074 5,703 9,620 6,387 10,243 9,377 9,082 8,340 1,546 1,207 5,089 19/02/14 20,723 6,377 12,164 12,109 5,766 9,720 6,375 10,363 9,516 8,985 8,364 1,540 1,212 5,152 20/02/14 20,537 6,377 12,107 11,912 5,759 9,732 6,317 10,362 9,458 8,894 8,290 1,543 1,210 5,117 21/02/14 20,701 6,422 12,168 12,049 5,789 9,853 6,393 10,370 9,569 8,970 8,351 1,548 1,209 5,157 1.16% 1.93% 0.90% 2.13% 2.07% 4.55% -0.19% 1.45% 2.02% -0.21% 0.07% 1.85% 0.75% 1.33% Commodities and Currency: Crude (Rs. per BBL) Gold (Rs. Per 10gms) 61.17 6793 6793 6862 6863 30823 30772 30478 30476 85.27 60.66 6870 30585 -0.38% Rupee Depreciated 0.51% Rupee Appreciated -1.13% 0.77% Date USD GBP EURO YEN 17/02/2014 18/02/2014 19/02/2014 20/02/2014 61.95 62.12 104.02 103.93 84.95 85.17 60.97 60.51 62.28 103.84 85.70 21/02/2014 62.16 103.44 -0.34% Rupee Depreciated 0.56% Rupee Appreciated Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 2-Year 5-Year 10-Year 8.56 8.71 8.91 8.87 -16 -3 -4 6
  5. 5. Satadru Mitra Varun Goel Nupur Gupta Jharna Agarwal Kinjal Doshi 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 abovementioned 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”