The World This Week - January 20th to January 25

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The World This Week - January 20th to January 25

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The World This Week - January 20th to January 25

  1. 1. The World This Week Jan 20 – Jan 25, 2014
  2. 2. Equity View: Last Friday was fairly turbulent for global equity markets on the back of fresh concerns growing on the currencies of emerging markets. Argentina depreciated its currency by almost 15% largely as their efforts to stabilize its currency were not bearing fruit and finally the Central bank decided to let the currency find its own level. Some kind of turbulence was also seen in Turkey due to cases of corruption against the incumbent Prime Minister. Emerging market currencies like Brazil, South Africa, Ukraine, also weakened on the concerns of tapering related activities restarting in the US. The US Federal’s two-day meeting is starting tomorrow and there are a lot of concerns on whether there is going to be a fresh tapering activity or not. Our sense is that some of this is just a knee-jerk reaction to some of the negative news which has been floating around. We believe that a large part of the challenge related to tapering is already discounted by the markets in general and specifically in India. Indian currency has done much better in the last four months in comparison to lot of other emerging market currencies. This was essentially because of the fact that almost USD 34Bn worth of deposits were raised by RBI in the same duration so Indian Forex reserves have moved up in excess of USD 290Bn. Also, India is a lot more stable and stronger in terms of Current Account situation to face any volatility in the global currency markets. Indian Current Account Deficit (CAD) has already come down from 4.5-5% levels seven months back to almost 3% of the GDP in FY14 and we believe this is going to end up even lower on completion of the full year. Thus we believe that a lot of concerns about the rupee and CAD are largely behind us. It is only because of the global turbulence that we are going to see some volatility in the domestic markets also, but we do not believe that there is a scope of a very random downward depreciation in Rupee. A small trading band of +/- 5% is possible in any asset class but that should be about it. Last month, both CPI and WPI data cooled off thus we expect a status quo in the RBI policy tomorrow. We believe that RBI would like to see inflation data in the next few months before carrying out any tightening activity. This is also important because of the fact that growth remains extremely muted as depicted by the IIP data which came out in the last few months has been quite muted. RBI would probably consider this as one of the factors before raising rates any further. Globally, a bad set of data came out from China. The Manufacturing activity showed some kind of slowdown which was the worst data shown in the last six months. Forbes also released some report stating the liquidity crunch which some of the Chinese Banks are facing which also led to a knee-jerk reaction in the Global markets. We continue to wait for more clarity on these things but as of now we do not see any reason to panic.
  3. 3. News: DOMESTIC MACRO:  IMF revises India's growth forecast in 2014-15 (Apr-Mar) to 5.4% from 5.0% in October.  A Reserve Bank of India panel on Tuesday recommended that monetary policy be set by a committee and that consumer price index (CPI) inflation be used to set an inflation target, eventually of 4 percent.  The central bank had been widely expected to keep its policy repo rate unchanged at 7.75 percent at its next policy review on January 28, following a decline in wholesale price inflation.  RBI buys gilts worth Rs 9,477 cr at OMO auction held on 22 Jan 2014. GLOBAL MACRO EURO  Italy's cabinet approved a decree on Friday paving the way for the privatization of up to 40 percent of the post office as the government tries to bring down its huge public debt.  Ireland and Spain both drew strong demand for bonds in auctions this month, while European shares climbed to fresh 5-1/2 year peaks last week as investors grow more bullish.  Sovereign debt fell as a proportion of national output in all three of the euro zone's biggest economies, Germany, France and Italy, as well as in Portugal, one of the five countries that needed a bailout to help its government or its banks through the crisis years. United States  U.S. home resales rose in December after three straight months of declines, showing some resilience in the housing market recovery despite higher mortgage rates.  U.S. Manufacturing Purchasing Managers Index fell to 53.7 early this month from 55.0 in December. China  China's economy grew 7.7 percent in 2013 after easing in the final three months on sagging investment growth, a cooldown that some analysts say is a sign of the more sober times ahead as the government wrestles to implement major reforms.  China's urban unemployment rate ticked up slightly to 4.05 percent at the end of December 2013 from 4.04 percent three months earlier.
  4. 4. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 13/01/14 21,205 6,553 12,114 12,575 5,566 9,700 6,619 10,195 9,661 9,658 8,691 1,599 1,336 5,276 14/01/14 21,251 6,583 12,240 12,770 5,596 9,762 6,607 10,184 9,595 9,733 8,645 1,589 1,344 5,242 15/01/14 21,338 6,596 12,274 12,801 5,596 9,711 6,598 10,317 9,614 9,823 8,710 1,596 1,351 5,260 16/01/14 21,374 6,564 12,144 12,797 5,727 9,890 6,607 10,330 9,593 9,774 8,670 1,592 1,350 5,255 17/01/14 21,134 6,455 11,953 12,556 5,575 9,624 6,523 10,183 9,530 9,604 8,646 1,569 1,307 5,217 -0.34% -1.49% -1.33% -0.15% 0.15% -0.78% -1.45% -0.12% -1.36% -0.56% -0.52% -1.89% -2.14% -1.12% Commodities and Currency: Date USD GBP EURO YEN 20/01/2014 21/01/2014 22/01/2014 23/01/2014 24/01/2014 61.63 61.54 61.92 61.99 62.18 -0.87% Rupee Depreciated 101.25 101.08 101.98 102.67 103.38 83.42 83.38 83.93 83.98 85.09 59.19 58.87 59.30 59.42 60.14 -2.06% Rupee Depreciated -1.96% Rupee Depreciated -1.58% Rupee Depreciated Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.73 12 2-Year 8.57 7 5-Year 8.78 12 10-Year 8.74 11 Crude (Rs. per BBL) 6533 6533 6568 6704 6669 Gold (Rs. Per 10gms) 29627 29544 29495 29422 29703 -2.08% -0.26%
  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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