- The Indian equity markets continue to rise in anticipation of a positive budget and government efforts to remove infrastructure bottlenecks. Business confidence remains positive. - Monsoon rainfall in June was 40% below normal, raising concerns for agricultural production, but forecasts indicate rainfall in July will offset the deficit. Agricultural impact on GDP is expected to be limited. - The author remains positive on the Indian equity markets, expecting strong earnings from IT and select other sectors, and more economic reforms from the government that will benefit sectors like banking, oil and gas, and infrastructure.

1. The World This Week
June 23 – Jun 28, 2014

2. Equity View:
The markets continue to rise in anticipation of a positive budget and that the government would work
hard to remove infrastructural bottlenecks. CII Quarterly Business sentiment index which indicates the
business confidence is positive above 50 and in Q1 FY15 this was 53.5. In the last few months, market
sentiments have improved; the car sales have risen in last month. Inflation has been flattish with a recent
slight increase but nothing serious to interpret out of the same.
Government has been working to resolve issues related to the environment ministry, power projects and
their pricing, roads, ports, etc. Thus there are hopes of big announcements in the budget. There are also
discussions that FDI could be allowed in Defence and Railways. This is an incremental positive for
companies linked to these spaces.
Monsoon in the month of June has been 40% below normal thus there are concerns over agricultural
production this year. However as per the recent forecasts, the rainfall post 7th
July would cover up for the
deficit seen. The fact is that the month of June contributes only 20-25% to the overall rainfall received
during monsoon in India thus the concerns to the agricultural production are not grave as of now. The
impact of rainfall on the agricultural production would be known after the statistics released this month.
Agricultural contribution to the overall GDP is less than 15% thus even in situation of severe drought the
GDP figures would not be completely changed from the forecasted figures though the impact would be
there.
Q1 earnings should start from 11th
July. We expect strong earnings from IT companies with 3-4% volume
growth. We continue to like select IT and Pharma stocks as they are expected to deliver strong earnings
growth. With more reform measures being announced, we would be positive on Banking – both public
and private, Oil and Gas companies, esp. the downstream companies and select infrastructure
companies. The railway passenger fares have been hiked after 11 years and we expect more such price
hikes in the near future. A big movement could be an increase in kerosene prices which has not
happened in the last 12 years. There could be more strong steps to improve fiscal deficit whose target for
FY15 is 4.1%. We expect the disinvestment programme to be helpful in this with around 60,000 Crores
worth of government shares being sold this fiscal (the highest in a long past). Thus we remain positive on
the Indian equity markets.

3. News:
DOMESTIC MACRO:
 According to RBI’s financial stability report, India’s economic growth, inflation, and banks’ asset quality are
still concerns.
 Government imposes a minimum export price (MEP) of $450 per tonne on potatoes to augment domestic
supply of the vegetable.
 Government extends excise duty concession for the automobile and consumer durables sectors by
six months to December 31; also mulls bringing back excise duty in the branded garments category in the
coming budget.
 According to a CARE Ratings report, Indian retail asset securitization market volumes decreased marginally
by around 6% to Rs 28,300 cr in FY14 as against Rs 30,300 cr in FY13.
 RBI directs banks to give data about willful defaulters every month or more frequently to the credit
information companies from the beginning of 2015.
GLOBAL MACRO
EURO
 UK’s annual GDP growth rate in the first quarter of 2014 was revised down to 3% according to the
final estimate from 3.1% estimated earlier.
 Euro zone economic sentiment slumped to 102 in June from a revised 102.6 in May
United States
 US personal income rose 0.4% in May, after gaining 0.3% in April, while personal spending rose 0.2% last
month, compared with a flat reading April.
 US Services PMI hit 61.2 in June, the highest reading since the survey began in October 2009, compared
with May's final reading of 58.1; composite PMI hit 61.1 in June, a record high, versus 58.4 in May
China
 China's June official PMI seen at a six-month high at 50.8 in May.

4. Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
23/06/14 25,031 9,018 14,987 17,273 8,413 15,688 6,564 10,869 9,006 13,129 11,272 2,203 2,015 5,106
24/06/14 25,369 9,161 15,146 17,535 8,618 15,883 6,643 10,860 9,034 13,273 11,517 2,248 2,079 5,123
25/06/14 25,314 9,209 15,260 17,460 8,693 15,772 6,618 10,951 9,047 13,262 11,426 2,256 2,097 5,123
26/06/14 25,063 9,181 15,280 17,262 8,753 15,911 6,594 10,987 9,049 13,110 10,982 2,238 2,039 5,131
27/06/14 25,100 9,205 15,198 17,182 8,821 15,854 6,626 11,260 9,271 12,940 10,990 2,254 2,056 5,222
0.27% 2.07% 1.41% -0.53% 4.85% 1.06% 0.95% 3.59% 2.94% -1.44% -2.50% 2.29% 2.01% 2.28%
Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per 10gms)
23/06/2014 60.1927 102.5623 81.9065 59.05 6921 28250
24/06/2014 60.105 102.3228 81.752 58.94 6869 28316
25/06/2014 60.2785 102.2806 82.0475 59.15 6880 28193
26/06/2014 60.1618 102.2329 82.044 59.12 6872 28096
27/06/2014 60.0958 102.3972 81.882 59.27 6811 28086
0.16%
Rupee
Appreciated
0.16%
Rupee
Appreciated
0.03%
Rupee
Appreciated
-0.37%
Rupee
Depreciated
-1.59% -0.58%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 8.50 13
2-Year 8.36 7
5-Year 8.62 4
10-Year 8.75 3

5. Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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