The World This Week - Nov 7 - Nov11'2011


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Last week in India, the equity markets corrected by 2%. 58% declared their Q2 results last week, which was well below expectations.

<a />wallpaper</a>, <a />limewire</a>

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The World This Week - Nov 7 - Nov11'2011

  1. 1. The World This Week November 7 – November 11, 2011
  2. 2. Equity View: Last week in India, the equity markets corrected by 2%. SBI declared their Q2 results last week, which was well below expectations. There was huge increase in NPAs. We expect this pressure to continue in next 2-3 quarters. Kingfisher Airlines with debt of around Rs. 8000 Crs is almost on the verge of bankruptcy. Most of this debt is lent by PSU banks. SBI alone has an exposure of around Rs. 1800 Crs. We expect the pressure on the PSU banks to continue for some more time and hence our bias would be towards the private sector names in the banking space. IIP data was released last week. IIP number for the month of September came at 1.9% much below the market expectations of 3.5%. The average IIP of first seven months of FY12 is around 5.5% which is well below the expectation at the beginning of the year. Inflation data would be released on 14 th Nov 2011 for the month which is expected to be around 9%. The inflation number will be critical as it will decide the future RBI policy action considering the growth has already weakened and any further pressure on the economy growth could emerge as a major concern. We continue to maintain the view that the 25 bps hike which was done on 25 th Oct 2011 was probably the last hike done by RBI in the interest rate cycle. The yield of Italian bonds rose above 7%, well into levels considered unsustainable. It is expected that the European Central Bank & the European Financial Stability Fund would provide some necessary support. In Greece, Lucas Papademos was announced as the new interim PM because of which some relief emerged in the political situation. Bond markets too calmed down in Greece after this announcement. The US Consumer Sentiment data improved due to some positives in the macro economic data like GDP coming in at better than expected numbers. We believe that concerns about the US going into an immediate recession can be discarded in the near future and instead expect growth in the US, though muted. Real Estate View: We have seen sales in the residential segment come down by 40%-50%. In the commercial space, yields are getting compressed and rentals are very low for large transactions. We have witnessed an overall pressure being built on the developers by the media. The Government is trying hard to address these issues concerning real estate & regulatory bill is one of the steps taken in that space. There have been talks of a Real Estate Regulatory Bill which will punish the developers who default as far as development is concerned; however there is long debate to it. Investors are still holding on their investments in real estate as they are not bullish in the current situation and continue to wait for some correction. However we feel that first home buyers, who want to buy house for consumption should consider investing now rather than waiting any more for the opportune time. Land is still hot, developers & investors are investing in land from anywhere between 10-100 acres. State governments like UP, Kolkata, Maharashtra are giving long term lease instead of transactional land. Infrastructure spending is doubling every two years due to which it seems that the present crisis will be taken care of and if in the coming two quarters there is no correction then the prices are expected to only go up.
  3. 3. News: DOMESTIC MACRO:  India's food price index declined to 11.81% from last week’s 12.21%.  India's foreign exchange reserves fell to $314.665 billion as on Nov. 4, from $320.390 billion in the previous week.  India's industrial output grew at 1.9%, its slowest pace in two years in September, providing further evidence of deceleration in the economy and raising the odds of a pause in the central bank's 20-month-long policy tightening cycle.  India's October exports rose an annual 10.8 percent to $19.9 billion, while imports for the month rose 21.7 percent to $39.5 billion.  The Reserve Bank of India (RBI) bank will consider injecting liquidity into the banking system only if the current large deficit persists over a longer time even as the interest cycle may have peaked. GLOBAL MACRO Euro:  Germany plans net new borrowing of 26.1 billion euros ($35.5 billion) next year, some 4 billion euros more than this year's estimated borrowing, as a deepening euro zone debt crisis drags on Europe's largest economy and stalls tax revenue growth. China:  China's annual inflation rate fell sharply in October to 5.5% from 6.1% in September, giving Beijing more room to fine tune policy to help an economy feeling the chill of a global slowdown. US:  President Barack Obama stepped up pressure on Friday on a deficit-cutting congressional "super committee," urging its members to act before a Nov. 23 deadline as he left for a lengthy Asian tour.  The United States on Friday welcomed Japan's request to join talks on a pan-Pacific free trade pact but said Tokyo first must show skeptics it can meet the high standards for open markets.
  4. 4. Swapnil Pawar Varun Goel Jharna Agarwal Palak Nanjani Neha Arora Kanika Khorana Disclaimer The information and views presented here are prepared by Karvy Private Wealth 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. Mumbai office Address: 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”