- The document discusses quarterly financial results for Indian companies, which were promising with revenue growth of 15% and earnings growth of 18.5-19%, the best in the last nine quarters. - Several sectors performed well such as IT, pharma, auto and private banks. The rupee stabilizing around 60 levels would be positive for IT and pharma earnings. Auto sales growth was also strong. - Indian stock markets are up 23% year-to-date, outperforming other major markets globally. Foreign institutional investments into India have reached $12.5 billion so far this year.

1. The World This Week
August 18 – August 23, 2014

2. Equity View:
The result for this quarter is extremely promising. Sensex earnings growth is around 18.5%-19% which is best among last nine quarters. Sensex revenue growth is at 15% which is quite high compared to last several quarters.
In terms of corporate earnings we have seen very good quarter after a very long time. In terms of three broad parameters i.e revenue growth, EBITDA margins & profitability all three were extremely promising. For a year as a whole, we continue to maintain projections of around 15% growth in corporate earnings. The top performing sectors are IT, Pharma, Auto & some private sector banks. IT & Pharma continue to be strong due to rupee depreciation last year. In the short to medium term rupee might stabilize around 60 levels which is healthy levels in terms of corporate earnings for IT & Pharma. There are signs of cyclical turnaround as far as auto industry is concerned. Auto sector earnings were extremely promising, Maruti Suzuki came up with a very healthy 25% y-o-y growth in volumes, if this trend continues auto sector should end up delivering a very good volume growth. A change in appetite across the country in terms of shift from bikes to scooters is being witnessed, so battery operated scooters, automatic scooters are already big hits & companies which have big presence in those areas like Honda & TVS are doing well in two wheeler segments. There are no big signs in commercial vehicles space but in next two quarters there can be some improvements as we have seen EBITDA margins going up due to price hikes undertaken by these companies.
In terms of global events, we saw Federal Reserve Governor making a statement that how employment in US still remains fragile , there is speculation in the market that the US would increase interest rates sooner than later, however we heard the Federal Reserve Governor hinting that the first rate hike is still sometime away. We expect the first rate hike to kick in early next year and the QE to fully wound down in the next couple of months. India continues to be in a much better situation in terms of current account and fiscal account is concerned, we have forex reserves of ~$ 320 bn which is ~8 months import cover. As far as current account deficit is concerned, the full year current account deficit should be ~2%.
Indian stock markets are up 23% YTD which is best in terms of major emerging markets and developed markets across the globe. Emerging Market index is up ~7% and hence India’s outperformance is huge.
In terms of FII inflows we have seen $ 12.5 bn inflow in equity so far and for the whole year we expect it to be around $ 22-25 bn.
We continue to maintain a very positive bias towards Indian equities in the month and quarters to come, we maintain our year end target on Sensex 29,300 which is a good 10-15% away from current levels.

3. News:
DOMESTIC MACRO: RBI pegs India’s growth at 5.5% for the current fiscal in its annual report for 2013-14. RBI revises liquidity management framework for banks; says it will conduct 14 day term repo auctions four times in a reporting fortnight every Tuesday and Friday starting from September 5 Government raises the import duty on sugar to 25% from 15% as part of efforts to help regional mills struggling with lower prices and higher stocks.
GLOBAL MACRO
United States US Federal Reserve Chief Janet Yellen says the economy is improving but the central bank is awaiting more evidence about the health of labour markets before deciding when to start raising interest rates. U.S. housing, jobs data bolster economic outlook - Nonfarm payrolls increased by 209,000 in July, marking the sixth consecutive month that job growth topped 200,000, a sign of strength last seen in 1997.
China China economy fears deepen as August HSBC flash PMI at three-month low
Indices:
Date
Sensex
Midcap
Auto
Bankex
CD
CG
FMCG
HC
IT
Metals
O&G
Power
Realty
Teck
18/08/14
26,391
9,170
16,608
17,658
8,796
14,667
7,234
12,684
9,834
12,963
11,142
2,093
1,834
5,510
19/08/14
26,421
9,271
16,982
17,759
8,843
14,830
7,243
12,765
9,779
13,041
11,180
2,119
1,864
5,490
20/08/14
26,314
9,276
16,887
17,707
8,814
14,754
7,192
13,139
9,801
13,007
11,032
2,135
1,873
5,495
21/08/14
26,360
9,321
17,021
17,916
9,148
14,851
7,206
13,173
9,788
12,832
11,089
2,113
1,838
5,485
22/08/14
26,420
9,341
17,034
18,100
9,132
14,874
7,170
13,190
9,948
12,849
11,081
2,106
1,822
5,539
0.11%
1.86%
2.57%
2.50%
3.82%
1.41%
-0.88%
3.99%
1.16%
-0.88%
-0.55%
0.61%
-0.61%
0.53%

4. Commodities and Currency:
Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 18/08/14 - - - - 6321 28117 19/08/14 60.73 101.48 81.04 59.19 6204 28104 20/08/14 60.67 100.81 80.73 58.80 6167 27996 21/08/14 60.77 100.72 80.56 58.53 6205 27795 22/08/14 60.44 100.24 80.35 58.29 6947 27691 0.48% Rupee Appreciated 1.24% Rupee Appreciated 0.86% Rupee Appreciated 1.54% Rupee Appreciated -1.33% -1.52%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 8.67 -8 2-Year 8.46 -30 5-Year 8.57 -5 10-Year 8.52 -20

5. Varun Goel
Jharna Agarwal
Mahesh Gaddamedi
Disclaimer
The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it.
The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned here.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above- mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd.
The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidence of tax on investments
Karvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indian regulations.
Karvy Stock Broking Ltd. is a SEBI registered stock broker, depository participant having its offices at:
702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 .
(Registered office Address: Karvy Stock Broking Limited, “KARVY HOUSE”, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034)
SEBI registration No’s:”NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O): INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL – SEBI Registration No: IN-DP-NSDL-247-2005, CSDL-SEBI Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”