The World This Week - 5th to 9th Sept, 2016

1. THE WORLD THIS WEEK
September 5 – September 9, 2016

2. EQUITY VIEW

3. EQUITY VIEW
• There was a global correction on Friday mainly due to correction in bond prices which had been slugging off for
the past three months at least.
• There is a major dislocation in the global financial markets. However, this does not meant that the correction of
that dislocation has started with Friday’s move. But what it means is that we have begun to see the symptoms of
that dislocation.
• Markets do not move linearly with a cause and effect. How long it will take the markets to correct is something that
cannot be predicted. Investors have to wait for symptoms to play themselves out which will bring volatility with
itself.

4. EQUITY VIEW
• There might be a situation where there is correction for 3-4 trading sessions and then it is some sort of a scare
monger for the Fed which is meeting on the 21st of this month. Since the Fed for some reason has the interest of
Wall Street ahead of the interest of main street, the Fed might be coaxed to say that there are going to be no hikes
in interest rates. This is highly plausible and is more likely to happen.
• There might be business as usual for a few more trading sessions. Generally, the global financial ecosystem does
not give comfort to a long term investor. One has to be extremely careful.
• The Indian markets have been a major beneficiary of easy global liquidity. So while investing it is better that we
wait like we did in the last quarter instead of rushing in. However, there is need to be prepared to live in an age of
volatility and also sense opportunities whenever there are corrections.

5. EQUITY VIEW
• There is need to sensitize the lurking volatility rather than paint an all is good picture for the investor. However,
investors also need to be made aware of the fact that it is during this volatility that they can get the best returns for
the long term.

6. NEWS

7. DOMESTIC MACRO
• India's consumer inflation is expected to have eased to a four-month low in August, helped by smaller
rises in food prices, but it likely remains too high for a rate cut next month when the central bank's new
governor presents his first policy review.
• Registering robust growth, the Centre’s tax receipts rose to 5.25 lakh crore by August end 2016. Data
released by the Finance Ministry revealed that direct tax collections grew 15.03 per cent up to August
2016 to amount to 1.89 lakh crore of net collection. However, while gross corporate tax collections rose
by 11.55 per cent, the net collections dipped by 1.89 per cent after refunds. Net growth in personal
income tax collections was a buoyant 31.76 per cent.

8. GLOBAL MACRO
• German exports fell unexpectedly in July, posting their steepest drop in nearly a year,
while imports also edged down, suggesting Europe's biggest economy started the third
quarter on a weak footing after Britain's vote to leave the European Union.
• A push by some euro zone countries to issue debt that won't need repaying for many
decades may come at a price - but for borrowers who lived through the bloc's 2010-2012
crisis, it's probably a price worth paying. France, Belgium and Spain have all sold 50-year
bonds this year, locking in record low borrowing rates, and Italy is considering following
suit. Ireland and Belgium have even sold 100-year bonds, albeit in relatively small sizes.
EURO

9. GLOBAL MACRO
• U.S. services sector activity slowed to a 6-1/2-year low in August amid sharp
drops in production and orders, pointing to slowing economic growth that
further diminished prospects for an interest rate hike from the Federal
Reserve this month.
• Six years after the Great Recession ended, jobless older workers are the
forgotten story of the economic recovery. U.S. employers are creating
hundreds of thousands of new jobs every month, but millions of older
workers who want a job cannot find work. The economic data documenting
the problem is clear. So is one of the most important causes: age
discrimination.
UNITED STATES

10. GLOBAL MACRO
• China's foreign exchange reserves fell to the lowest since 2011 in August as
the central bank intervened to support the yuan currency as it weakened to
near-six year lows. While the $15.89 billion drop was in line with market
expectations and was described by analysts as modest, it was the biggest
decline since May and could signal fresh capital outflows from the economy
even as it starts to show signs of steadying.
• Associated British Foods (ABF) said on Monday it has agreed to sell its cane
sugar business in southern China to a consortium led by Shenzhen-listed
Nanning Sugar Industry Co Ltd. ABF did not disclose the value of the deal
but two people with direct knowledge of the matter said the transaction
value, including debt, was about $500 million.
CHINA

11. INDICES
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
6/9/2016 28,978 13,474 22,941 23,480 12,843 15,246 8,945 16,339 10,436 10,063 11,112 2,121 1,544 5,721
7/9/2016 28,926 13,459 22,978 23,496 12,719 15,432 8,941 16,360 10,424 10,169 11,072 2,135 1,559 5,714
8/9/2016 29,045 13,479 23,188 23,487 12,871 15,550 9,031 16,720 10,165 10,263 11,091 2,140 1,607 5,610
9/9/2016 28,797 13,345 22,844 23,250 12,716 15,403 8,872 16,587 10,207 10,081 11,194 2,127 1,612 5,616
-0.62% -0.96% -0.42% -0.98% -0.98% 1.03% -0.81% 1.52% -2.19% 0.18% 0.74% 0.30% 4.39% -1.84%

12. COMMODITIES AND CURRENCY
Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms)
5/9/2016 3130.00
6/9/2016 66.5469 88.6471 74.1665 64.2 3184.00 31030.00
7/9/2016 66.3618 89.0376 74.6902 65.46 3145.00 31278.00
8/9/2016 66.4483 88.6088 74.7676 65.33 3184.00 31240.00
9/9/2016 66.5462 88.5863 75.0242 65.13 3322.00 31191.00
0.00% 0.07% -1.16% -1.45% -6.13% -0.52%

13. DEBT
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 6.79 -3
2-Year 6.79 -4
5-Year 6.94 -7
10-Year 7.09 -2

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

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