The World This Week -7th to 12th Sept, 2015

1. The World This Week
September 07 – September 12, 2015

2. Equity View:
The global markets are witnessing correction and India is no exception. Volatility remains high globally
with US touching levels of 40 and India currently at 25 but as markets stabilize volatility is expected to
come down. The downfall is due to global concerns like Chinese currency devaluation and US Fed rate
hike. On the domestic side, El Nino has led to 15% rainfall deficit in the nation. This is important because
earlier it was expected that government would not increase minimum support price (MSP) and would try
to support reduction in inflation. This rainfall deficit will certainly hamper rural growth and we should be
very careful while selecting sectors for investment.
The latest Index for Industrial Production (IIP) number released at 4.2% is above expectations however
considering revision in these numbers for previous month, IIP stood at 4.4% thus the current 4.2% is little
lower in comparison. The headline number looks good but few sub segments like Mining, electricity and
consumer non-durables have not performed well though the Manufacturing and capital goods segment
has contributed strongly. Capital goods grew at 10.6% which can tempt RBI governor for a rate cut.
Consumer Price Index (CPI) number is awaited today with an expectation of levels between 3% - 4%. This
week would keenly watch for data on inflation in India, US Fed rate hike and other macro news.
Current market valuations remain reasonable and we expect index within +/-5% range for next two-three
months. FIIs sold around 7000 crores during the month and exited around $3 Bn in total during the
downfall which is negligible as compared to other emerging nations thus this is not worrisome. In 2008,
total outflow was $8 Bn and now at higher price levels it is just $3 Bn this proves that India is in a strong
zone. DIIs include Mutual funds, Insurance companies and Private institutions. When FIIs exit the markets
DIIs buy but pattern of investing is different and thus it does not reflect in the Index movement. Eg: FIIs
sell index weighed stocks and DIIs buy more of mid caps thus DIIs’ buying may not stop Index correction.
The prices of Crude and commodities are not only affected by over-supply but also due to hedging and
other market movements. Whenever Dollar weakens, prices of Crude and commodities move up. The
demand for Crude and commodities is inelastic in nature and with China slowing down, long term growth
of both looks weak which could benefit India. The cost of producing shale gas is around $55 - $60 and
cost of producing Crude from new well is around $45 - $50 but the oil wells in gulf which are operating
since decades have brought down the marginal cost of production to around $15 - $20. In reality, prices
would not touch these levels but if in case it does than many economies could go bust. India benefits the
most if the price of Crude remains between $30 and $50 for next 10 years.

3. News:
DOMESTIC MACRO:
 Data from the Reserve Bank of India (RBI) showed that India’s Current Account Deficit (CAD) narrowed to
$6.2 billion (1.2% of GDP) in Q1 of 2015-16 from $7.8 billion (1.6% of GDP) a year ago.
 The Union Cabinet has cleared spectrum trading guidelines under which telecom operators will be able to
sell radio waves to other service providers. The move will help address the problem of spectrum shortage.
As of now, only the Government is allowed to allocate spectrum to telecom firms through auction.
 The Union Cabinet has approved the National Offshore Wind Energy Policy. The move will pave the way for
development of this renewable source of energy and help in setting up of projects and research in the
area.
 According to Moody’s, the RBI is likely to lower interest rate as the wholesale price-based inflation is
expected to decline further to 4.3% in August. The credit rating agency added that it expects further rate
cuts from the Central Bank on the back of continued decline in domestic inflationary pressures.
 The Government has decided not to hold special session of Parliament to pass the constitution amendment
bill for rolling out Goods and Services Tax.
GLOBAL MACRO
EURO
 Data from Eurostat showed that GDP of the Euro zone economy advanced 0.4% sequentially after rising
0.5% a quarter ago. The growth rate for the second quarter was revised up from 0.3%.
 Survey figures from Sentix revealed that Euro zone investor confidence dropped sharply in September to
its lowest level since the beginning of the year, driven by weakness in Asia amid economic slowdown in
China. The investor confidence index dropped to 13.6 from 18.4 in August.
United States
 Data from the U.S. Labour Department showed that import prices tumbled by 1.8% in August following an
unrevised 0.9% decrease in July. The report also showed that export prices slumped by 1.4% in August
after falling by a revised 0.4% in July.
 Survey figures from Sentix revealed that Euro zone investor confidence dropped sharply in September to
its lowest level since the beginning of the year, driven by weakness in Asia amid economic slowdown in
China. The investor confidence index dropped to 13.6 from 18.4 in August.
China
 According to the National Bureau of Statistics, China has revised its annual economic growth rate in 2014
to 7.3% from the previously released figure of 7.4%. Gross Domestic Product stood at 63.6 trillion yuan
($10.00 trillion) last year, down 32.4 billion yuan from the initial estimate.

4. Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
7/9/2015 24,894 10,133 16,787 18,050 10,548 15,141 7,496 16,696 10,864 6,952 8,454 1,697 1,221 5,932
8/9/2015 25,318 10,236 17,077 18,702 10,422 15,619 7,433 16,823 10,910 7,114 8,542 1,751 1,253 5,955
9/9/2015 25,720 10,434 17,576 19,019 10,656 15,889 7,479 16,902 11,062 7,366 8,663 1,791 1,287 6,054
10/9/2015 25,622 10,503 17,699 18,994 10,469 16,035 7,480 16,892 10,980 7,310 8,648 1,788 1,279 6,006
11/9/2015 25,610 10,520 17,648 18,994 10,500 15,951 7,511 16,921 11,028 7,198 8,620 1,786 1,289 6,017
2.88% 3.82% 5.13% 5.23% -0.45% 5.35% 0.20% 1.34% 1.50% 3.53% 1.97% 5.24% 5.59% 1.44%
Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per 10gms)
07/09/2015 66.74 101.36 74.27 55.93 3294 26401
08/09/2015 66.60 102.30 74.60 55.60 3179 26280
09/09/2015 66.29 101.88 73.98 55.07 3298 26208
10/09/2015 66.58 102.29 74.71 55.14 3154 25952
11/09/2015 66.38 102.59 74.89 55.00 3255 26001
0.54%
Rupee
Appreciated
-1.20%
Rupee
Depreciated
-0.83%
Rupee
Depreciated
1.69%
Rupee
Appreciated
-1.18% -1.52%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 7.46 1
2-Year 7.69 -3
5-Year 7.90 -3
10-Year 7.77 -3

5. Kaushik Dani Jharna Agarwal
Nupur Gupta Aakash Mehta Ridhdhi Chheda
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