The World This Week - 22nd to 26th Aug, 2016

1. THE WORLD THIS WEEK
August 22– August 26, 2016

2. EQUITY VIEW

3. EQUITY VIEW
• Results are broadly in line with expectations. Banking and technology sectors have disappointed while Automobile,
Cement, Housing Finance Companies and select FMCG and Pharma have given very encouraging results.
Overall, the result season did not lead to any major shakeup.
• In line with expectations, improvement in the American economy can be seen particularly in the labour market.
Therefore, USA seems to be on track to achieve the 2% inflation mark which makes a case for a rate hike in
September with contradictory opinions for October.
.

4. EQUITY VIEW
• The rate hike has been exaggerated because the rate hike would be impacting the developed markets more. The
major concern for the emerging markets would be China’s growth and whether there would be any impending
slowdown.
• In the current week one will look out for further macro occurrences. During the week we should be expecting the
core sector data which can show a growth of 4-5%. If it is above or below the range, markets will take note of it or
it will ignore the same.
• GDP for Q1 was at 7.9 % which was an abnormally high number and such numbers can’t be expected to get
repeated. The GDP for Q2 should be anywhere between 7.6-7.8% which if achieved should make the markets
happy.

5. EQUITY VIEW
• In September, the numbers for auto sales will come in so we can see how the August month has performed.
Broadly, markets should continue to consolidate. Whether or not a price correction happens, time correction is
needed which will happen in the form of consolidation over the next few weeks or month or so.
• The markets can be expected to trade within a range of 8500-8800 till further triggers come into the picture.

6. NEWS

7. DOMESTIC MACRO
• The Reserve Bank of India announced a slew of debt market reforms to simplify participation and
enhance liquidity, besides allowing the use of newly-introduced instruments such as Masala Bonds. To
boost financing of infrastructure and affordable housing, RBI has proposed to allow banks to issue
Additional Tier-1 bonds in the form of perpetual debt instruments, besides allowing issuance of Tier-2
bonds.
• Indian economy is expected to clock 7.9 per cent growth in the current fiscal driven by better monsoon,
government pay hike, key reforms and FDI inflows. GDP is expected to improve gradually and for the
April-June quarter it may slow a tad to 7.8 per cent, in part due to unfavorable base. It had grown at 7.9
per cent in the previous quarter according to Goldman Sachs.

8. GLOBAL MACRO
• Gold hit four-week lows, under pressure from upbeat U.S. data in the run-up to a speech
by Federal Reserve Chair Janet Yellen this week that will be watched for clues on
monetary policy. Market players are hoping Yellen will give a clearer signal on the path of
U.S. interest rate hikes when she addresses a meeting of central bankers in Jackson
Hole, Wyoming.
• Big financial groups in London are losing faith in a quick fix to get access to the European
Union after Britain leaves the bloc and are instead drawing up contingency plans to avoid
becoming hostage to Brussels politics.
EURO

9. GLOBAL MACRO
• Borrowings by U.S. companies for capital investment in July fell 17 percent
from a year earlier, In the first seven months of 2016, total new borrowings
declined 8 percent from a year earlier according to the Equipment Leasing
and Finance Association (ELFA).
• U.S. economic growth was slightly more tepid than initially thought in the
second quarter as businesses aggressively ran down inventories, offsetting
a spurt in consumer spending. Gross domestic product expanded at a 1.1
percent annual rate, according to the Commerce Department. That was
modestly down from the 1.2 percent rate it reported last month and also
reflected more imports than previously estimated as well as weak
government spending.
UNITED STATES

10. GLOBAL MACRO
• China's central bank injected cash into money markets through 14-day
reverse repo agreements for the first time since February in a sign
policymakers were worried rising leverage could stoke bubbles in the bond
market.
• Companies in China may save up to 150 billion yuan ($22.5 billion) a year if
they are allowed to contribute less to employees' social security and housing
plans, according to a research institute at the top economic planning agency.
China aims to cut financing, labour, energy and logistics costs and reduce
the annual tax burden for firms over the next few years.
CHINA

11. INDICES
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
22/08/16 27,986 12,981 21,226 22,176 12,227 15,106 8,753 16,083 10,424 10,081 10,804 2,104 1,582 5,734
23/08/16 27,990 12,945 21,194 22,199 12,218 14,940 8,681 16,018 10,614 10,051 10,644 2,081 1,577 5,836
24/08/16 28,060 13,024 21,231 22,209 12,222 14,939 8,689 16,227 10,659 10,029 10,803 2,095 1,580 5,858
25/08/16 27,836 12,978 21,104 22,136 12,121 14,858 8,716 16,165 10,522 9,885 10,834 2,086 1,570 5,779
26/08/16 27,782 13,000 21,235 22,006 12,298 14,673 8,706 16,056 10,390 9,870 10,910 2,076 1,552 5,722
-0.73% 0.15% 0.04% -0.77% 0.58% -2.87% -0.54% -0.17% -0.32% -2.09% 0.98% -1.34% -1.86% -0.22%

12. COMMODITIES AND CURRENCY
Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms)
22/08/2016 67.19 87.67 75.81 66.67 3405.00 31267.00
23/08/2016 67.09 88.29 76.04 67.03 3303.00 31280.00
24/08/2016 67.13 88.39 75.81 66.9 3352.00 31281.00
25/08/2016 67.09 88.66 75.59 66.84 3293.00 31281.00
26/08/2016 67.03 88.59 75.74 66.72 3332.00 31066.00
0.24% -1.05% 0.09% -0.07% 2.14% 0.64%

13. DEBT
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 6.82 0
2-Year 6.84 1
5-Year 7.03 0
10-Year 7.12 2

14. KIASL TEAM
Jharna Agarwal
Head- Advisory
Jharna.agrawal@Karvy.com
Nupur Gupta
Lead Advisor
Nupur.gupta@Karvy.com

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