The document provides a weekly summary of domestic and global macroeconomic indicators and equity market performance for the week of June 09-13, 2014. Key points: - In India, inflation cooled slightly while industrial output growth surprised positively in April. The markets corrected 5% on the mixed economic data. - Globally, data showed steady growth in China and rebounds in Eurozone industrial production and US business inventories. - The upcoming Indian budget on July 10th is expected to focus on infrastructure spending, GST implementation, and reforms to direct taxes and FDI limits.

1. The World This Week
June 09 – June 13, 2014

2. Equity View:
The markets corrected around 5% last week amongst two data points which were released around the
same time. The IIP growth for the month of April surprised streets at 3.4% as this was much higher than
expected. Since October last year, the trend in IIP has largely been negative however this time, the big
drivers have been electricity generation and mining while the consumer data continued to be negative.
We believe that with manufacturing and industries showing minor recovery, there would be some
positives for IIP in future. The CPI was released at 8.28% which was lower than last week’s 8.56% while
the core inflation stayed flat at 7.7%. We expect inflation to stay between 7.5-8.5% at least till October
due to concerns about monsoon and its impact on food and vegetable prices.
The two positive macro-economic indicators would give a sentimental boost to investors. In terms of
equity markets, the next big trigger would be the earnings of this quarter which would initiate by the 1st
week of July. We would expect IT companies to deliver a decent growth of around 3-5% in their dollar
revenue growth and some bounce back in capital goods and infrastructure. This would be based on the
improved macroeconomic scenario and a small relief on the interest rates.
The budget is expected on 10th
of July and we expect government to work on a few key things such as,
excise duty exemptions on 4 wheelers and 2 wheelers, GST, etc. The government would require a huge IT
support to execute GST which is not in place yet and could take at least 1 to 2 quarters. Thus, this might
not be part of the budget but is expected to come sometime this year. There could also be reforms
especially on the direct taxes for enhancement of the limits of tax deductions or in terms of deduction
that can be claimed for interest rates on housing loans. Some major announcement could be made for
opening up of Defence for private players. As of now, FDI allowed is only 26% which could be risen all the
way to 100%. The government seems keen to have domestic production of Defence because it is very
important for the currency. India being the largest importer of arms in the world, any big change in the
production of Defence equipments could significantly help current account deficit. Some other areas like
insurance and pension might also witness FDI limit going up to 49%.
More importantly the thrust this year is going to be on execution for projects especially on the
infrastructure side which are stuck because of various reasons. These process changes can impact the
GDP growth by around 1.5-2% in the immediate future.

3. News:
DOMESTIC MACRO:
 May retail inflation cools to 8.3 percent
 April industrial output rebounds 3.4 percent
 Exports speed up in May, trade talks planned with U.S.
 Exports in May jumped 12.4 percent from a year earlier to $28 billion, while imports were down 11.41
percent to $39 billion, helped by a 72 percent drop in overseas gold purchases.
 India needs to rationalize gold import duty - trade secretary
GLOBAL MACRO
EURO
 Euro zone industrial production increased by 1.4% on an annualized basis in April after growing by an
upwardly revised 0.2% in March.
United States
 US retail sales rose 0.3% in May after an upwardly revised 0.5% rise in April.
 Initial jobless claims for US state unemployment benefits rose by 4,000 to 317,000 in the week ended
June 7.
 US import prices increased 0.1% in May after falling 0.5% in April; export prices ticked up 0.1% in
May after falling 1% the prior month.
 US business inventories increased 0.6% in April (the largest since October) after rising 0.4% in March.
China
 China May data shows growth steadying, but more stimulus may be needed
Japan
 Japan’s core machine orders spiked 17.6% in April on a yearly basis after surging 16.1% in the previous
month.

4. Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
2/6/2014 24,685 8,651 14,701 17,510 7,842 15,442 6,808 10,221 8,458 12,522 11,163 2,218 1,921 4,860
3/6/2014 24,859 8,705 14,744 17,479 7,955 15,636 6,757 10,170 8,454 13,155 11,360 2,250 1,982 4,861
4/6/2014 24,806 8,866 14,842 17,570 8,019 15,830 6,742 10,175 8,347 13,310 11,217 2,266 2,013 4,812
5/6/2014 25,020 8,956 14,956 17,501 8,077 15,992 6,842 10,192 8,454 13,753 11,437 2,310 2,026 4,868
6/6/2014 25,396 9,099 15,185 17,789 8,207 16,124 6,932 10,334 8,401 13,706 11,988 2,327 2,128 4,854
2.88% 5.18% 3.29% 1.59% 4.66% 4.41% 1.81% 1.11% -0.67% 9.46% 7.38% 4.93% 10.76% -0.12%
Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per 10gms)
9/6/2014 59.06 99.34 80.61 57.65 6429 26633
10/6/2014 59.26 99.62 80.59 57.95 6496 26665
11/6/2014 59.32 99.41 80.32 57.99 6491 26704
12/6/2014 59.32 99.68 80.30 58.13 6523 26793
13/6/2014 59.47 100.93 80.71 58.28 6705 27055
-0.70%
Rupee
Depreciated
-1.59%
Rupee
Depreciated
-0.12%
Rupee
Depreciated
-1.09%
Rupee
Depreciated
4.29% 1.58%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 8.35 15
2-Year 8.35 11
5-Year 8.48 14
10-Year 8.60 09

5. Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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