The World This Week - January 6th to January 11th, 2014

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The World This Week - January 6th to January 11th, 2014

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The World This Week - January 6th to January 11th, 2014

  1. 1. The World This Week Jan 06 – Jan 11, 2014 4
  2. 2. Equity View: In India, the results came out on Friday last week which were in line with the expectations. The good thing was a clear margin expansion which took most of the analysts by surprise. This was led essentially by efficiency related gains and cost rationalization measures at Infosys. We have upgraded the stock and have a target price of Rs 4000. As we have been maintaining, IT remains to be one of the top sectoral picks for this calendar year and we stand by that. The sector should undergo a PE re-rating during the course of this year. We believe that rupee depreciation along with a significant volume growth from the US and Europe, have been the key drivers for good results in the IT sector. Almost 80% of the revenue of top 3 IT stocks comes from the US and Europe combined with almost 60% coming from the North Americas and 20% from Europe. Both these geographies are showing very strong growth. We also expect Asia including India to deliver good revenue growth in the coming times. In the FMCG sector, a continuous PE expansion had been seen in the last two years, based on secular growth. And, companies are almost negligibly leveraged with high Return on Equity. IT space also continues to be in this domain and it would not be surprising if companies like TCS and Infosys get traded almost 20x FY15 earnings. There is still some upside left in most of the Tier-I companies and we continue to recommend this space. Indusind Bank came out with a decent set of numbers with a robust NII and top line growth. The only concern was an increase in provisioning of NPA norms esp. on the Net NPA. Most of the private sector banks are expected to see some stress as far as the Balance sheet quality is concerned however that is largely discounted in the price. We believe that Private sector Banks as whole would deliver around 15% growth which is decent in this challenging environment. So we continue to maintain positive stance in the private sector banking space. The WPI and CPI figures are expected in the coming week. WPI is expected to be largely range bound at around 7-7.5% for the remaining three months of this fiscal. While the CPI numbers could cool off on the back of a fall in vegetable and food prices which was extremely high last month. Thus we expect the CPI to come down from the 11% levels of last month to 10% levels this month. The core CPI has been around 8% and we believe that to be in the same range for some more time to come. Thus, the inflation as whole would remain elevated for the next few months though lower than the last month’s numbers. On the back of this, we expect the RBI policy on the 28th of Jan ‘14 to be largely stable as we do not expect it to hike rates at this point due to very muted and fragile growth environment. At the same time, we do not expect a rate cut as well, as the inflation continues to be extremely sticky.
  3. 3. News: DOMESTIC MACRO:  The trade deficit in India widened to $10.14 billion last month from $9.22 billion in November on waning exports growth.  The oil ministry is considering a partial rollback of bulk diesel prices as sales have dropped significantly.  Prime Minister pegs the country’s economic growth at 5% for the financial year ending March 2014  India’s foreign exchange reserves rose by $204.9 mn to $295.71 bn. GLOBAL MACRO EURO  Data showed annual euro zone inflation dipped to 0.8 percent in December from 0.9 in November.  Britain needs to cut 25 billion pounds ($41 billion) in spending after next year's election to reduce borrowing as per finance minister George Osborne. United States  The U.S. unemployment rate fell 0.3 percentage point to 6.7 percent, its lowest level since October 2008, despite the smallest monthly job gains in three years.  Institute for Supply Management (ISM)'s index fell to 53 last month from 53.9 in November, dropping to its lowest reading since June 2013 and under expectations for a read of 54.5. China  The December trade surplus fell 24.3 percent from a year earlier to $25.6 billion, missing the forecast of $31.2 billion and lower than 2013 trade surplus of 12.4 percent. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 06/01/2013 20,787 6,683 12,054 12,631 5,802 9,821 6,511 10,064 9,184 9,720 8,523 1,631 1,432 5,101 07/01/2013 20,693 6,658 12,065 12,608 5,814 9,869 6,507 10,076 9,066 9,557 8,406 1,610 1,408 5,048 08/01/2014 20,729 6,697 12,150 12,626 5,780 9,736 6,518 10,181 9,074 9,598 8,435 1,609 1,402 5,052 09/01/2014 20,713 6,644 12,081 12,532 5,751 9,538 6,481 10,228 9,116 9,700 8,499 1,612 1,369 5,063 10/01/2014 20,758 6,581 11,956 12,339 5,677 9,415 6,574 10,247 9,314 9,552 8,549 1,590 1,348 5,152 -0.14% -1.52% -0.81% -2.32% -2.14% -4.13% 0.96% 1.82% 1.41% -1.73% 0.31% -2.54% -5.83% 1.00%
  4. 4. Commodities and Currency: Date USD GBP EURO YEN 7/10/2013 8/10/2013 9/10/2013 10/10/2013 11/10/2013 62.33 62.38 62.24 62.18 61.94 0.63% Rupee Appreciated 101.99 102.25 102.17 102.31 102.06 -0.07% Rupee Depreciated 84.62 84.97 84.82 84.50 84.31 0.37% Rupee Appreciated 59.73 59.71 59.34 59.29 59.01 1.22% Rupee Appreciated Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.65 -11 2-Year 8.50 -2 5-Year 8.85 -8 10-Year 8.76 -8 Crude (Rs. per BBL) Gold (Rs. Per 10gms) 6671 6652 6696 6669 6615 29693 29484 29337 29279 29387 0.84% 1.03%
  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”

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