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The world this week july 07 july 12


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The world this week july 07 july 12

  1. 1. The World This Week July 07 – July 12, 2014
  2. 2. Equity View: The equity markets have seen almost 18% move since the beginning of this year however, some profit booking had happened on the back of weaker global cues. There was a correction of 3.5% in Sensex last week largely on account of profit booking. The much awaited Budget was presented last week in which the biggest take away was a clear break from the subsidy and the hand-out driven approach of the previous more growth-focused-government. Also, this budget provides clear vision for long term growth and reliability in India through large infrastructure spending, fiscal prudence and sustainable reduction in CAD. More importantly, Finance Minister had mentioned the need to maintain low inflation trajectory which supports the high interest rate regime currently deployed by the Central Bank governor. Based on this speech, we believe there is very little chance of any rate cut in the second half of this fiscal. The big push was on the infrastructure side for the treatment of long term Infra loans as CRR or SLR by banks. The allocation to roads space was extremely high of about 38,000 crores which is almost a 50% increase over last year. The target is of creating 8,000km of new roads by FY15 and also a 10 year tax holiday has been provided for power generation and transmission companies. All this expenditure was budgeted for housing, roads and power projects. More tax cuts were provided as the limit of tax-free income has been increased from 2 Lacs to 2.5 Lacs, 80C limit has been increased from 1 lac to 1.5 lacs and the housing loan exemption on interest payment has been increased from 1.5 lacs to 2 lacs. All these 3 things will give extra income in the hands of common man and would also help boost financial savings. One big negative presented for debt mutual funds was the taxation on holdings below 3 years to be set at marginal tax rates. The tax structure until now considered anything above 1 year as long term and a capital gain arising out of the same was to be taxed at 10%. Now, anything which is held for a period of more than 3 years will be taxed at 20% thus it could be negative for debt mutual funds and 1-2 year FMP’s. There has been a clear boost given to REITs due to which we expect a lot of announcements and new launches in this space coming in the next few months. Broadly from equity market perspective the budget is positive and we continue to be positive on Indian equities. On Friday the IIP data was released at 4.57% which is 17-month high and a pickup in investment activity has been visible after a long time. This is also being led by the increase in manufacturing growth rate so we believe that the economic recovery is getting strengthened and we would see a revival in the industrial and manufacturing cycle in the remaining part of this fiscal. The CPI would be released today and we would expect that data to be around 7.5%.
  3. 3. News: DOMESTIC MACRO:  India’s Index of Industrial Production (IIP) for the month of May came in at 4.7% versus 3.4% in April  According to RBI data, the central bank became net purchaser of dollars for the second consecutive month in May this fiscal by buying $1.786 bn from the spot market.  According to RBI data, overseas direct investment by Indian firms rose by over 60.7% year-on-year to $5.03 bn in June.  India's forex reserves rises by $614.6 mn to $316.39 bn in the first week of July. GLOBAL MACRO EURO  UK’s visible trade deficit widened to 9.2 bn pounds from 8.8 bn pounds in April.  UK’s industrial production declined by a seasonally adjusted 0.7% in May, after rising 0.3% in April United States  US Treasury Department reports a budget surplus of $71bn in June, following a $130bn deficit in May.  US wholesale inventories increased by a seasonally adjusted 0.5% in May, after rising 1% in April China  China’s exports rose 7.2% year-on-year in June to $186.8bn, compared with a 7% rise in May, while imports gained 5.5% in June to $155.2bn, compared with a 1.6% fall in May; the monthly trade surplus soared 16.4% to $31.6bn, down from $35.92 bn in May.  China's consumer price index rose 2.3% in June from a year earlier, compared with a 2.5% rise in May Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 7/7/2014 26,100 9,557 16,206 17,609 9,100 16,723 6,836 11,914 9,556 13,444 11,147 2,397 2,096 5,380 8/7/2014 25,582 9,210 15,838 17,195 8,686 15,920 6,803 11,770 9,455 12,877 10,796 2,244 1,946 5,306 9/7/2014 25,445 9,077 15,453 17,109 8,725 15,686 6,858 11,601 9,331 12,809 10,887 2,206 1,915 5,242 10/7/2014 25,373 9,132 15,313 17,002 8,453 15,715 6,881 11,602 9,248 12,929 10,892 2,231 2,010 5,196 11/7/2014 25,024 8,875 15,155 16,546 8,351 14,969 6,916 11,729 9,379 12,452 10,589 2,130 1,906 5,251 -4.12% -7.13% -6.49% -6.03% -8.24% -10.49% 1.16% -1.55% -1.85% -7.38% -5.00% -11.15% -9.05% -2.39%
  4. 4. Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 7/7/2014 59.95 102.78 81.39 58.71 6616 27786 8/7/2014 59.80 102.42 81.32 58.73 6608 27828 9/7/2014 59.73 102.36 81.38 58.79 6514 27958 10/7/2014 59.88 102.59 81.69 59.00 6467 28677 11/7/2014 60.19 103.15 81.87 59.41 6507 28470 -0.40% Rupee Depreciated -0.35% Rupee Depreciated -0.59% Rupee Depreciated -1.18% Rupee Depreciated -1.65% 2.46% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.55 8 2-Year 8.46 4 5-Year 8.65 -1 10-Year 8.77 11
  5. 5. Varun Goel Jharna Agarwal Nupur Gupta Ridhdhi Chheda 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 above- mentioned 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”