A Snapshot – Apr’15
Macro view – Global & India
• In the latest in a recent string of disappointing economic data, the Labor
Department released showing that employment in the U.S. rose by much
less than expected in the month of March. The pace of job growth slowed
to its lowest level since December of 2013. This is watched closely as
decision to raise Fed rates depends on overall growth in economy.
• With relatively lower growth globally, interest rates across various
economies are coming off. German Bond Yield continued to decline due
to QE. German 10 year bond yield fell from 0.32% to 0.17% in the month
• In India, RBI surprised the market by giving a repo rate cut by 25 bps on
March 4th 2015 outside of the meeting schedule. Headline CPI (New
Series) for Feb recorded 5.37% which is slightly higher than expectations.
The core CPI for Feb is at 4.1%.
• Challenge remains on meeting fiscal deficit. However, lower global crude
prices and continuing divestment shall help fiscal management.
Fixed Income view – India
Long Term Rates: Positive
• US Fed has removed the word “Patient” from the recent statement and is
now basing its future course of action on inflation & employment data;
rather than time.
• CPI is expected to be lower for calendar year 2015.
• We expect RBI to cut rate by 50 bps over the course of next 12 months.
• The RBI’s policy action will be gradual and data driven.
Short Term Rates: Positive
• RBI will ensure adequate liquidity to maintain overnight rates around repo
rate. Generally, 1Q of FY yield curve softens as liquidity improves.
• Short term curve would be flat to steepen (up to 2 years) on expectation
of interest rate cuts.
Equity view – India
• Indian Equity has performed well in last financial year while comparing
with global markets. In the month of Mar15, markets corrected on profit
booking and increased volatility in oil prices on account of conflicts in
• We have downgraded Equity in later half of Feb’15 from ‘Overweight’ to
‘Neutral’ and we maintain the position, as we closely watch this result
season and management guidance during the same.
Source – Kotak AMC
View on Currency & Commodity – India
• We still remain positive on US
Dollar considering strength in US
economy vis-à-vis other
economies. Also, expectation of
higher interest rates in 2015 may
keep dollar strong in future, but
with slower pace. We
stronger foreign exchange
reserves position, INR may
remain in range of Rs.60 - 63
With below expected employment data in USA the expectation of rate hike is getting
shifted towards last quarter of CY15 from mid of year. Accordingly Gold has firmed.
We think this could be just short term rally but gold to remain in range of around 1140
to 1300 in near term. In INR terms also , Gold may remain range-bound.
Source – Kotak AMC
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