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The world this week July 14 - July 19


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The world this week July 14 - July 19

  1. 1. The World This Week July 14 – July 19, 2014
  2. 2. Equity View: Last week Reliance industries published their results which were better than expected with almost a 10% increase in profits Y-o-Y. The surprise was an extremely firm gas output from its shale gas assets in the United States. In fact, the production is more than that of KG D6 basin. We believe that this kind of output might continue going forward which will provide an extra cushion and revenue for Reliance as compared to market expectations. The capex cycle for the company continues with almost 7 billion dollars invested in fresh oil and gas assets, these will produce results going forward. The retail business continues to grow in size and is also a breakeven at the EBITDA level now so we believe this will also provide an extra cushion for growth in the company in future. For the year as a whole, we expect 10%- 15% earnings and revenue growth and the stock might outperform in short to medium term. Hence we continue to be positive on Reliance industries. In terms of other corporate results most of the IT companies have published decent numbers. TCS came up with a good set of numbers with 3% Q-o-Q increase in dollar revenue. The company also delivered a healthy profit growth of almost 40% Y-o-Y. We continue to maintain a positive stance on TCS. One of several key macro economic data points published last week was CPI which was at 7.3% v/s 8.3% last month primarily due to fall in prices of fruits and vegetables. The WPI inflation also showed a downward trend at 5.43 v/s 6% last month thus both the data points on inflation continue to be positive for the economy. We do not expect any change in RBI’s stand thus do not expect any rate cut till the time there is more clarity on monsoons as there is always a threat that food prices might go up if the monsoon fails significantly. However most of areas in the country have seen either average or above average rainfall in last one week and the overall deficiency has come down except some areas of Gujarat and Maharashtra. We believe monsoon would be good for the remaining part of the month and a large part of deficiency seen in June could be compensated for. But it is still too early to predict overall monsoon but there is also news about the El-Nino effect weakening which could be a significant positive for India. News: DOMESTIC MACRO:  India’s trade deficit rose to a 11 month high of $11.76 bn in June from $11.23 bn in May and $11.28 bn in the same month last year, driven by a surge in gold imports; exports rose 10.22% on year to $26.48 bn in June and imports climbed 8.33% annually to $38.24 bn in the same month.  According to data from the Department of Industrial Policy and Promotion, the foreign direct investment (FDI) flows into India more than doubled to $3.60 bn in May, the highest in the last eight months.  Asian Development Bank (ADB) upgrades India's economic growth forecast to 6.3% in 2015-16 on hopes of speedy reform process, but retains growth forecast of 5.5% this year.  The headline Inflation (both CPI & WPI ) depicted declining trends for the month of June. While headline WPI inflation for the month of June eased by 61 bps to 5.43% y/y (May 2014: 6.01% y/y), the headline CPI inflation eased remarkably by 97 bps to 7.31% y/y (May 2014: 8.28% y/y).
  3. 3. GLOBAL MACRO EURO  Euro zone’s industrial production fell 1.1% month-on-month in May, the biggest drop since September 2012, and reversed the 0.7% rise in April.  Euro zone’s trade balance stood at a surplus of 15.4 bn euros in May, in line with the surplus in April.  UK’s unemployment rate fell to 6.5% in the three months through May, the lowest since the fourth quarter of 2008, from 6.6% in the three months through April. United States  US industrial production rose 0.2% in June, compared to May's revised increase of 0.5%;capacity utilization came in at 79.1% in June, in line with May.  US retail sales rose 0.2% in June after an upwardly revised 0.5% advance in May.  US Treasury Department reports a budget surplus of $71bn in June, following a $130bndeficit in May. China  China’s economy expanded 7.5% annually in Q2 2014 compared to 7.4% in the previous quarter.  China attracted FDI of $14.42bn in June, up 0.2% from a year earlier. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 14/07/14 25,007 8,874 15,304 16,596 8,163 15,140 6,888 11,667 9,260 12,573 10,601 2,146 1,891 5,199 15/07/14 25,229 9,045 15,519 17,054 8,393 15,478 6,867 11,693 9,244 12,737 10,768 2,178 1,932 5,204 16/07/14 25,550 9,166 15,742 17,480 8,406 15,711 6,900 11,782 9,261 13,017 10,900 2,206 2,015 5,227 17/07/14 25,561 9,292 15,716 17,478 8,584 15,893 6,923 11,849 9,268 13,337 10,854 2,258 1,999 5,238 18/07/14 25,642 9,253 15,713 17,612 8,508 15,961 6,911 11,832 9,401 13,266 10,770 2,228 1,981 5,286 2.54% 4.27% 2.67% 6.12% 4.23% 5.42% 0.33% 1.42% 1.52% 5.51% 1.60% 3.82% 4.77% 1.66%
  4. 4. Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 14/07/2014 60.01 102.72 81.60 59.18 6419 28235 15/07/2014 60.22 102.79 81.95 59.27 6419 27985 16/07/2014 60.19 103.14 81.66 59.19 6384 27808 17/07/2014 60.14 103.00 81.33 59.25 6451 27846 18/07/2014 60.33 103.18 81.58 59.54 6489 28085 -0.54% Rupee Depreciated -0.45% Rupee Depreciated 0.02% Rupee Appreciated -0.60% Rupee Depreciated 1.09% -0.53% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.68 13 2-Year 8.51 5 5-Year 8.62 -3 10-Year 8.77 0
  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”