This document provides a weekly summary of global and domestic economic news and market performance for the week of August 8-12, 2016. Some key points: - India's wholesale and consumer price inflation increased in July driven by higher food prices. Industrial production growth slowed in the Eurozone and China. - US retail sales were flat in July and the budget deficit declined, while China's economic growth slowed with the weakest investment growth in over 15 years. - The Indian stock market ended the week slightly lower, with the Sensex falling 0.11%. Most sectoral indices also declined over the week except for banking. Commodity prices were mixed with gold falling slightly while crude oil rose.

1. THE WORLD THIS WEEK
August 8– August 12, 2016

2. EQUITY VIEW

3. EQUITY VIEW
• A macro recovery was expected which was observed on a larger basis while there was a huge divergence in terms
of large cap stocks. Thus, the results season is about to end on a mixed note.
• There are stocks that have given better than expected results while some others have disappointed. In spite of
this, double digit returns have been observed in the last earning season. Therefore, it is the surplus liquidity which
is driving the markets.

4. EQUITY VIEW
• Global market indices are performing well suggesting that India and most other emerging economies are
performing and giving good returns.
• Over the last six months, large caps have given more than 25% returns. There have been flows of more than
40,000 crores in the last two quarters or YTD in 2016 thus, without a doubt it is a liquidity driven rally.
• Also, at the time of turnaround, valuations always looks rich but rather than looking at valuations, there is need to
foresee a good earnings growth happening over the next 3-4 quarters or in the next 1-2 years, then these rich
valuations tend to sustain.

5. EQUITY VIEW
• The important thing to be kept in mind is that markets will continue to look costly till actual earnings are witnessed.
However, this does not mean that markets will correct as this is a liquidity driven rally. Minor corrections of 2-5%
may be seen in the market. Also, this rally is not backed by quarterly earnings season so there could be some
amount of volatility experienced over the next one month or so. However, the long term trend remains stable.
• There were no rate cuts announced. The inflation remained high and there was growth in IIP. However, if the
impact of monsoon does not percolate into food prices, there is no possibility for rate cut in the near future.

6. NEWS

7. DOMESTIC MACRO
• India's wholesale prices rose at a faster-than-expected pace in July, gaining 3.55 percent from a year
earlier on higher food prices, government data showed. Wholesale food prices last month rose 11.82
percent year-on-year, compared with a provisional 8.18 percent gain in June.
• India's core annual consumer price inflation in July accelerated slightly to around 4.6 percent year-on-
year from around 4.5 percent in June, according to a snap survey of three analysts. Data released earlier
showed India's annual consumer price inflation accelerated at a faster-than-expected pace to 6.07
percent in July, mainly driven by higher food prices.

8. GLOBAL MACRO
• Economic stagnation in France and Italy contributed to a slowdown in growth in the euro
zone from April to June after a strong performance in the first three months of the year,
estimates showed. The quarterly rate of growth halved from January-March's 0.6 percent
expansion, while the annual rate of growth was only marginally slower than the first
quarter's 1.7 percent.
• Euro zone industrial production increased more than expected in June on a monthly
basis, after having plunged in May. The euro zone output rise in June partially offset the
steep fall in output recorded in May when production went down 1.2 percent monthly.
Euro stat revised down to 0.3 percent the output growth in May year-on-year, which was
initially estimated at 0.5 percent.
EURO

9. GLOBAL MACRO
• U.S. retail sales were unexpectedly flat in July as Americans cut back on
discretionary spending, pointing to a moderation in consumption that could
temper expectations of a sharp pickup in economic growth in the third
quarter.
• The U.S. government posted a $113 billion budget deficit in July, a 24
percent drop from the same month last year, according to the Treasury
Department. The government had a deficit of $149 billion in July 2015,
according to Treasury's monthly budget statement.
UNITED STATES

10. GLOBAL MACRO
• China's economic activity slowed in July, with investment growing at its
slowest pace since the turn of the century, as the world's second-largest
economy grappled with the painful restructuring of its older industrial
sectors.
• China's factory price deflation moderated further in July, with prices falling at
their slowest pace in two years, taking pressure off the central bank to cut
rates as policymakers turn their focus to structural reforms and ballooning
credit.
CHINA

11. INDICES
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
8/8/2016 28,183 12,824 21,816 21,657 12,318 15,165 8,704 16,331 10,985 9,815 10,891 2,082 1,632 6,012
9/8/2016 28,085 12,780 21,691 21,654 12,373 15,110 8,653 16,215 10,983 9,747 10,795 2,077 1,628 6,006
10/8/2016 27,775 12,644 21,273 21,359 12,182 14,938 8,564 15,940 10,963 9,698 10,558 2,045 1,607 5,989
11/8/2016 27,860 12,648 21,178 21,324 12,161 14,904 8,687 15,975 10,993 9,632 10,636 2,053 1,592 5,998
12/8/2016 28,152 12,753 21,405 21,757 12,193 14,999 8,741 15,961 10,944 9,754 10,628 2,070 1,585 5,975
-0.11% -0.55% -1.88% 0.47% -1.02% -1.09% 0.42% -2.26% -0.37% -0.63% -2.42% -0.57% -2.91% -0.61%

12. COMMODITIES AND CURRENCY
Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms)
8/8/2016 66.74 87.28 74.06 65.4 2958.00 30876.00
9/8/2016 66.96 86.99 74.18 65.36 3029.00 30895.00
10/8/2016 66.74 87.04 74.38 65.84 3012.00 31180.00
11/8/2016 66.86 86.95 74.65 65.91 2940.00 31225.00
12/8/2016 66.83 86.63 74.46 65.44 3078.00 31018.00
-0.13% 0.75% -0.54% -0.06% -4.06% -0.46%

13. DEBT
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 6.84 -1
2-Year 6.84 -1
5-Year 7.03 -5
10-Year 7.10 -7

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

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