The World This Week: Oct 3 - Oct 7'2011

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The week has important domestic events lined up which might have significant impact on market movement.

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The World This Week: Oct 3 - Oct 7'2011

  1. 1. The World This WeekOctober 3 – October 7, 2011
  2. 2. Equity View:This week has important domestic events lined up which might have significant impact on market movement. Q2results season will officially kick-start with tech major Infosys this Wednesday. We expect 4-5% Q-o-Q growth in profitfor Infosys. The important point to watch in Infosys’ results would be the management guidance with reference tobusiness outlook as well as how the clients in US & Europe are planning their budget for next year.In terms of our overall expectations for Sensex companies we are expecting 12% Y-o-Y growth in profits & close to 20%growth in revenue; however the profits could be lower due to high interest rates and commodity prices which havebeen existing for several months. We expect private sector banks to lead the results season with almost 20-25% profitgrowth. We also expect Pharma, Technology & FMCG to deliver a good set of numbers. We continue to be cautious interms of growth & earnings outlook for real estate & capital goods space.On the economic front, we have the IIP number on Wednesday and the inflation number on Friday. The IIP would be avery critical number to watch out for, especially on back of last month’s data which was much below consensusexpectation. This number will provide us an indication of any relative slowdown in industrial activity in the last coupleof months.The U.S. economy added 103,000 jobs in September, but the nations unemployment rate held steady at 9.1 percentfor the third straight month. The results season will be beginning in US with Alcoa coming with its results on Tuesday.In Europe, status quo situation still remains; there has been neither a positive development nor any negativedevelopment. Last week, European Central Bank announced liquidity measures which entailed buying €40 bn (US$53bn) worth of covered bonds, which are an important source of long-term funding for the European banking sector. TheCentral bank also announced that it would provide an uncapped amount of collateralized longer-term loans at fixedrates to commercial banks. One of the banks in Euro area is almost on the verge of collapsing as this bank had heavilyinvested in government debt. There have been talks of the bank capitalisation in Europe which could be extremelycritical especially in light of most of the banks holding significant amount of peripheral Euro debt. So, this remains to bea key issue which will be monitored in the short to medium term.News:DOMESTIC MACRO:  Food inflation jumped to 9.41% for the week ended September 24 from 9.13% in the previous week,  Indias foreign exchange reserves fell to $311.482 billion as on Sept. 30, from $312.707 billion in the previous week.  The HSBC Markit India Manufacturing PMI fell more than two points to 50.4 from 52.6 in month of september.  Indias August exports rose 44.25 percent to $24.3 billion from a year earlier, while imports for the month rose 41.82 percent to $38.4 billion, leaving a trade deficit of $14 billion, government data showed.
  3. 3. GLOBAL MACROEuro:  Moodys lowered its rating on Italys bonds by three notches to A2 from Aa2 on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt and warning that further downgrades were possible.  The International Monetary Fund could buy Spanish or Italian bonds alongside the euro zone bailout fund if needed, to help boost investor confidence in those countries, the IMFs Europe head Antonio Borges said on Wednesday.  Euro zone finance ministers are reviewing the size of the private sectors involvement in a second international bailout package for Greece, a move that could undermine the aid programme and hasten the threat of a Greek default.  Greeces economy will continue to shrink by 2.5 percent next year, compared with a 5.5 percent contraction in 2011, according to the countrys 2012 budget draft released on Monday.US:  The unemployment rate remained at 9.1 percent for the month of September.  U.S. regulators closed two banks on Friday, bringing the total number of foreclosures this year to 76.
  4. 4. Swapnil Pawar Varun Goel Jharna AgarwalPalak Nanjani Neha Arora Kanika Khorana DisclaimerThe information and views presented here are prepared by Karvy Private Wealth or other Karvy Groupcompanies. The information contained herein is based on our analysis and upon sources that we considerreliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personalinformation 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 maketheir own investment decisions based on their specific investment objectives and financial position and usingsuch independent advice, as they believe necessary. While acting upon any information or analysis mentionedhere, investors may please note that neither Karvy nor any person connected with any associated companies ofKarvy 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 theabove-mentioned companies from time to time. Every employee of Karvy and its associated companies arerequired to disclose their individual stock holdings and details of trades, if any, that they undertake. The teamrendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares orother securities till such a time this recommendation has either been displayed or has been forwarded to clientsof 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 applicableto them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this couldchange the applicability and incidence of tax on investmentsKarvy Private Wealth (A division of Karvy Stock Broking Limited): Operates from within India and is subject toIndian 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 registrationNo’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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