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The World This Week October 15 - October 19 2012


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The World This Week October 15 - October 19 2012

  1. 1. The World This WeekOct 15 – Oct 19, 2012
  2. 2. Equity View: Last week, the Indian equity markets witnessed another flat week. Both Sensex and Nifty closed almost flat on a week on week basis. As the earnings season continued we saw several companies announcing their quarterly results last week. The private sector banking space continued to deliver good results. Axis bank announced its results. It delivered 16% year on year basis increase in its profits. Also, the asset quality has continued to improve. In the IT space, TCS and HCL came up with very good set of numbers. HCL Tech witnessed 85% growth in profit on year on year basis and TCS also came with almost 50% growth in profits year on year, with a quarter on quarter volume growth of around 3.5% and PAT growth of 5%. TCS continues to give a much better business commentary and guidance as compared to what Infosys has given which results into believing that Infosys is facing more of company level issues than industry level issues. We continue to maintain a preference for stocks like Tech-Mahindra in the IT space and we believe that it will still take couple of more quarters for Infosys business to really turn around from current levels. We have the monetary policy on the 30th of this month in which it is widely expected that RBI will cut interest rates. People are expecting a Repo rate cut of 25 basis points and that should be accompanied by 25-50 basis points in CRR. We believe that even if the repo rate doesn’t come in we would definitely see a CRR cut in the review. We have seen most of the banks both public and private which have cut their respective base rates. The home loans and the car loans specially have cooled off in the last 2 quarters and we believe that going forward the trajectory of the monetary policy is to bring the interest rates down. We expect significant amount of monetary easing in the next 12 months. By March 2013, we believe that another 50 - 75 basis points in cut repo rate should happen which should definitely give a booster to the GDP growth. RBI has already cut interest rates by 50 basis points in the month of April followed by monetary easing through various other instruments like CRR and SLR. The last two policy reviews had seen a SLR cut of 25 basis points and in the last policy there was a CRR cut of 25 basis points. RBI has continuously been on an easing curve although it has been using other instruments than repo to carry out this easing. We believe that in this policy also since the headline inflation in the month of September was 7.8% higher than the expected number, RBI might decide not to go with the repo cut but should continue the monetary easing by cutting CRR.News:DOMESTIC MACRO: Rising fuel prices boosted inflation in September to 7.8 percent, up from August 7.55% its highest level since November, undermining the governments case for an interest rate cut by the RBI this month to boost the sluggish economy. Banks advances grew 2.2 percent to 48,093.84 billion rupees as of October 5 since the start of the fiscal in April, data from the Reserve Bank of India showed on Wednesday. In the year-ago period, loans grew 7.1 percent. During the period, deposits grew 4.9 percent to 64,110.36 billion rupees, compared with a growth of 9.7 percent in the corresponding period last year.
  3. 3. GLOBAL MACROEURO Moodys kept Spain’s rating at Baa3 but assigned a negative outlook, leaving both the rating and the outlook in line with that of rival agency Standard & Poors, which rates Spain at BBB-minus. Fitch Ratings grade for Spain remains one notch higher at BBB but also with a negative outlook. European Union leaders agreed on Friday a single supervisor will take responsibility for overseeing euro zone banks from next year. German Chancellor Angela Merkel said on Friday that a single European banking supervisor would be built up in the course of next year and must be completed before euro zone rescue funds may directly recapitalise troubled banks. At a two-day summit that ended on Friday, EU leaders discussed the idea in more detail, with Herman Van Rompuy, the president of the European Council and chairman of the summit, saying it was an anomaly for a currency union not to have a common budget or, as he put it, a common "fiscal capacity".US Initial claims for state unemployment benefits rose 46,000 last week to a seasonally adjusted 388,000, the Labor Department said. The number of Americans filing new claims for jobless benefits spiked last week, reversing a sharp decline in the prior week but still pointing to a labor market that is slowly healing.China Chinas economy grew 7.4 percent in the July-September quarter from a year earlier, the National Bureau of Statistics said on Thursday, the slowest pace since the first quarter of 2009 as the global financial crisis raged. Industrial output grew 9.2 percent versus expectations of 9.0 percent and retail sales in September rose 14.2 p ercent on a year ago versus an estimated 13.2 percent in a Reuters poll.
  4. 4. Satadru Mitra Varun Goel Jharna Agarwal Abbas Naheed Kinjal Mehta DisclaimerThe information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock BrokingLimited) or other Karvy Group companies. The information contained herein is based on our analysis and upon sourcesthat we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is forpersonal 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 owninvestment decisions based on their specific investment objectives and financial position and using such independentadvice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may pleasenote that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arisingfrom 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 disclosetheir individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysisand investment recommendations are restricted in purchasing/selling of shares or other securities till such a time thisrecommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restrictedto 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. Investorsare advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We alsoexpect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicabilityand incidence of tax on investmentsKarvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indianregulations.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-SEBIRegistration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”