2. Equity View:
The winter parliament sessions started on Thursday last week. The first two days saw no movement in stance
because of various issues like whether there should be a voting on FDI in retail, whether the parliament should
be discussing it and so on. There is still no political consensus on how to resolve these issues. There are 10
more days to go for the winter session of parliament and it is absolutely necessary that few of the key
measures announced by the government in the month of September are passed in the parliament. Few of the
key measures include the insurance bill, the company’s bill and the pension bill. These are the 3
announcements that the cabinet had made in the month of September and had cleared those reforms at the
cabinet level. However each of them required are to have legislative action and each of them needs an
approval from Lok Sabha and Rajya Sabha. The markets continue to look through the political leadership to
demonstrate some action on each of these measures. For the continuation of the upward market rally
witnessed since the month of September, it is important that some of these legislative actions are pushed
through in parliament.
India’s GDP data for FY 13 Q2 would be released on 30th November 2012. Our view is that the growth would be
around 5.5%. India’s GDP growth has bottomed out in the last 2 quarters with 5.3% in Q4 FY12 & 5.5% in Q1
FY13. In this quarter, the expected number for GDP growth is 5.5%. These numbers give ample indication that
the growth has bottomed out around 5.5% and would probably bounce back in the next 2 quarters.
The disinvestment program was started last week with Hindustan Copper coming up with offer for sale of
shares. The government sold almost 4% of its ownership in the company. However the issue was not very
successful with most of the shares picked up by public sector companies like LIC and SBI Treasury. As we
discussed earlier the government also has a very ambitious disinvestment program amounting to around Rs.
30,000 Crores. If the government needs to achieve this target then it will need participation from private
sector names also. The other big issue which has already been lined up is NTPC, in which the government
wants to sell around 10% of its stake for around Rs. 13,000 Crores. Similar kind of stake sale was done in NTPC
two years back at the price of Rs. 200. The current price is Rs. 160 and hence people who had participated in
that issue have not made good returns. Hence, the government would find it difficult to push during this issue.
However, considering the fact that if the disinvestment program of Rs. 30000 crore doesn’t go as per the plan
then there will be a further pressure on the fiscal deficit. The fiscal deficit is already inching upwards because
of the failed 2G auction and any slippage on the disinvestment program will also be taken negatively both by
the equity as well as the bond markets.
In terms of global news we saw very good festival sales season in US with the black Friday sales numbers
turning out to be more or less in line with the expectation. The US macroeconomic scenario has drastically
improved in the last one year. This quarter GDP growth is expected to be around 2.9% which is a very decent
growth as per the US standards.
From a global perspective things continue to improve and we continue to expect a good macroeconomic
scenario in US in the next quarter also. There is a negotiation about the US fiscal cliff again and there’s a lot of
talk and a lot of media hype about what will happen. We continue to believe that these issues will again be
settled between the two parties i.e. the republicans and the democrats. The markets will try to react positively
on any development. In the short term it remains the key news item to be monitored in U.S.
3. As far as Europe is concerned we continue to see discussions about the Greece package. We believe that most
of these stories coming out of Europe will kind of shake the market once in a while. However we do not expect
any dramatic event to happen. Most of this news eventually will be treated as just news events and will have a
very short impact on the market. However, in medium to long term there would be minimal impact as the
fiscal and monetary authority in Europe will eventually be able to settle these things out.
News:
DOMESTIC MACRO:
The RBI likely sold dollars via state-run lenders as the rupee slid to a more than two-month low below
55.50, four traders said on Friday. The partially convertible rupee hit 55.53 on friday, its weakest since
September 11.
India's fiscal deficit could miss the revised official target and swell to as much as 5.6 percent of GDP, a top
government official told Reuters on Thursday, making it tougher for the government to avoid a credit
rating downgrade.
GLOBAL MACRO
EURO
Standard & Poor's rating agency confirmed France's long-term rating of AA+ on Friday and negative
outlook but warned the government was likely to miss its public deficit target next year.
Greece's international lenders failed for the second week running to agree how to get the country's debt
down to a sustainable level and will have a third go at resolving their most intractable problem in six
days' time.
US
Federal Reserve Chairman Ben Bernanke said on Tuesday that 2013 could be a "very good year" for the
U.S. economy if politicians can strike a quick deal to avoid the so-called fiscal cliff.
China
The China HSBC Flash Manufacturing Purchasing Managers Index (PMI) rose to a 13-month high of 50.4 in
November, the latest indicator of recovery in the real economy after data showing solid credit growth,
firmer exports and rising industrial output in the previous month.
4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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