- Indian markets reached fresh highs in July due to continued foreign institutional investor (FII) inflows of $12 billion into equities and $14 billion into debt so far in 2014. - Monsoon rainfall has improved from June deficits, though some areas like Gujarat and Maharashtra remain drier; overall crop production is still expected to be positive. - Corporate earnings have been in line with expectations, with IT companies showing decent growth and mid-cap banks struggling with asset quality and margins.

1. The World This Week
July 21 – July 26, 2014

2. Equity View:
The markets made fresh lifetime highs on the back of continued FII inflows. Since January, FIIs have
pumped in around $12-Bn in equity markets and around $14-Bn in debt thus making a total of healthy
$26-Bn. We believe that FII inflows in equity will continue on the back of improving macro economic
conditions in the country.
The equity markets bottomed out in September last year since then there has been more than $20-Bn
inflows in to equity. On comparing the data of past several years, we find out that 2010 witnessed $25-Bn
as equity inflows and 2007 more than $20-Bn. Thus we believe that in any good equity market year,
Indian markets can easily get $20-25 Bn inflows and this year the same is $12-Bn so far. Also as macro
economic conditions improve and GDP growth shows a bounce back, we might see more equity inflows
this year. We maintain a Sensex target of 29300 this year and continue to be extremely bullish on the
Indian equity.
Monsoon has been showing recovery from its status in the month of June. So far, across India the status
of rainfall is around 29% below normal which was almost 40% in the beginning of last month. In this
month, rainfall has been good with some areas having to deal with flood-like situation. We believe that
largely rainfall deficit has been addressed thus there is no reason to be too worried about monsoon
situation. Of course in some parts of the country like Gujarat and parts of Maharashtra, the rainfall is still
scanty but more or less, in the aggregate belt in North and East things are fine and we do not believe that
there will be a significant drop in food production in Kharif crop. The sowing area has been lesser if
compared to last year at the same time period but we believe that fresh sowing will happen as more rain
is seen in the next few months.
Corporate results have been in line with expectations. IT companies have delivered decent set of
numbers. The top 3-4 companies have shown decent volume growth in dollar terms in last quarter. We
believe that IT companies will continue to deliver strong earnings growth in the next 2-3 quarters and
should end the year around 12-15% with further upside in most of these names. On the other hand,
some of the midcap BFSI companies have been seen struggling in terms of asset quality and a much
muted Net interest income growth in some companies largely because of some compression in net
interest margin.
There has been significant cool off in the bond market yields in the last few weeks and expect that in
future as things normalize there will be some respite to the borrowing of these (banking) companies from
market. Although we do not expect a rate cut in this calendar year, we believe that interest rates have
peaked out thus the direction of bond yield from this point could largely be downward.

3. News:
DOMESTIC MACRO:
 Government’s indirect tax collections in April-June stood at Rs 1.14 lakh cr, up 4.5% from Rs 1.09 lakh cr
collected during the same period last year.
 Government approves 19 proposals for foreign investment worth Rs 2327 cr.
 Cabinet gives go-ahead to FDI cap hike in insurance to 49% with a rider that management control will
remain in the hands of Indian promoters.
 India's foreign exchange reserves surged for the seventh straight week, rising by $813.2 mn to $317.85 bn
in mid July.
 World Bank offers India up to $18bn in financial support over the next three years.
GLOBAL MACRO
EURO
 Euro zone’s services PMI climbed to a 38-month high of 54.4 in July, from 52.8 in June.
 UK retail sales volume rose 0.1% in June after a 0.5% fall in May.
 UK’s economy expanded 3.1% on an annualized basis in Q2 2014, the fastest pace since the end of
2007, following 3% GDP growth in the previous quarter.
United States
 US new home sales fell 8.1% in June to a seasonally adjusted annual rate of 406,000, compared to a
downwardly revised 442,000 in May.
 US initial claims for state unemployment benefits declined 19,000 to a seasonally adjusted 284,000 for
the week ended July 19, the lowest level since February 2006.
China
 China’s HSBC/Markit Flash Manufacturing Purchasing Managers' Index rose to 52.0 in July from June's final
reading of 50.7.
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
21/07/14 25,715 9,300 15,717 17,617 8,536 15,836 6,983 11,847 9,374 13,234 10,835 2,214 1,962 5,281
22/07/14 26,026 9,311 15,774 17,663 8,635 15,727 7,040 11,962 9,541 13,371 11,023 2,206 1,973 5,388
23/07/14 26,147 9,312 15,804 17,705 8,667 15,747 7,046 11,941 9,755 13,319 11,039 2,203 1,972 5,481
24/07/14 26,272 9,293 15,808 17,782 8,587 15,778 7,106 11,911 9,843 13,515 11,018 2,196 1,978 5,517
25/07/14 26,127 9,178 15,610 17,543 8,468 15,604 7,158 12,136 9,789 13,200 10,844 2,153 1,925 5,479
1.60% -1.31% -0.68% -0.42% -0.80% -1.46% 2.50% 2.44% 4.43% -0.26% 0.09% -2.76% -1.87% 3.75%

4. Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per
10gms)
21/07/2014 60.19 102.87 81.48 59.45 6470 28108
22/07/2014 60.24 102.87 81.44 59.32 6481 27950
23/07/2014 60.18 102.68 81.03 59.34 6465 27942
24/07/2014 60.00 102.19 80.68 59.13 6502 27801
25/07/2014 60.14 102.22 81.02 59.11 6424 27724
0.07%
Rupee
Appreciated
0.64%
Rupee
Appreciated
0.57%
Rupee
Appreciated
0.58%
Rupee
Appreciated
-0.71% -1.37%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 8.63 -5
2-Year 8.32 -19
5-Year 8.43 -19
10-Year 8.67 -10

5. Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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