2. Equity View:
Last week, we saw a 2% fall in Nifty on the last day on the back of fresh concerns emanating about the
stability of the Rupee. We expect fresh measures by the Finance Ministry to curb another fall in Rupee.
We expect an announcement this week about fresh NRI deposits raising plan. There could also be some
bond issuances by state run companies to the extent of $5 bn – $10 bn. We also expect some curbs as far
as import of consumer goods are concerned. India has been importing a significant amount of IT
hardware which essentially includes laptops, tablets and other such products. Therefore for all the
products which could be manufactured locally in India, there is no need for those products to be
imported and to that extent there could be increase in import duty in most of these products.
The Rupee has fallen almost 12% since the beginning of this fiscal year and it has caused significant
pressure on both the fiscal account and the current account. RBI has reacted to this with increase in
interest rates and we believe that it might take some time for the Rupee to achieve some measure of
stability. Over the weekend, RBI decided auction of around Rs 22,000 Crs of 1 year securities and this
would be carried out every month for the next four months. In total this would take out around Rs 88,000
Crs of liquidity from the Indian debt market in the next four months which would lead to some further
hardening of interest rates in the short term.
Other macro economic data which is expected this week is the IIP, we expect the negative trend in the IIP
to continue with a -1.3 number expected for the month of June. We believe that the manufacturing
sector continues to face a lot of challenges and as such, the growth is expected to stay muted for the next
few months. As far as the results season are concerned, we have seen most of the larger companies from
Nifty coming out with the results which are largely in line with the expectations. Most of the Pharma, IT
and FMCG companies have delivered results in line or better than expectations. We’ve also seen some
disappointments from public sector banks in terms of the results, however private sector banks have
continued to deliver a good set of numbers. This week we have the SBI numbers coming in. We expect
pressure to sustain on the asset quality, we also expect NIMs to come down in the next couple of
quarters and we remain negative on the public sector banking space.
In terms of the top sectoral picks we continue to maintain that considering the weakening rupee, we
have a bias towards exporters like Pharma and IT and also telecom space needs to have rediscovered it’s
pricing power with most of the companies raising voice tariffs and data tariffs in the last few months. We
are now fairly bullish on the telecom space which we believe is a secular growth story for the next year
from now.
3. News:
DOMESTIC MACRO:
The Reserve Bank of India (RBI) did not get any bids at its special repo auction for banks to lend to
mutual funds. The special repo auction was held at 10.25 percent.
The rupee hit a record low of 61.80 on Tuesday, marking a 10 percent fall so far this year - the
worst performer in emerging Asia in currencies. Over two years, it is down 26 percent.
The Reserve Bank of India said on Thursday its board approved the transfer of 330.10 billion rupees
dividend or surplus profit to the government for the accounting year ended June 30, 2013. In the
previous year, it paid a dividend of 160.10 billion rupees.
GLOBAL MACRO
EURO
In Britain, the Market/CIPS services PMI leapt to 60.2 in July from 56.9, its highest level since
December 2006.
Gross domestic product in Italy marked its eighth straight quarter of contraction, dropping 0.2
percent on the quarter and 2.0 percent an annual basis.
USA
The U.S. central bank is buying $85 billion in long-term securities each month in order to keep
interest rates low and boost hiring and investment.
A government report on Friday showed that the jobless rate last month fell to 7.4 percent in US.
China
Exports rose 5.1 percent in July from a year ago, a turnaround from their first fall in 17 months in
June and Imports fared even better with a 10.9 percent jump from a year earlier leading to a
smaller-than-expected trade surplus of $17.8 billion.
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
05/08/2013 19,182 5,444 10,297 11,532 6,463 7,725 6,721 8,957 7,583 6,684 8,359 1,404 1,217 4,324
06/08/2013 18,733 5,302 10,225 11,082 6,104 7,527 6,585 8,863 7,548 6,467 8,138 1,359 1,162 4,281
07/08/2013 18,665 5,337 10,076 11,139 6,167 7,491 6,495 8,828 7,427 6,681 8,362 1,397 1,221 4,231
08/08/2013 18,789 5,409 10,215 11,204 6,198 7,523 6,530 8,809 7,468 6,856 8,345 1,417 1,250 4,270
-2.05% -0.63% -0.79% -2.84% -4.10% -2.62% -2.85% -1.65% -1.52% 2.57% -0.18% 0.94% 2.73% -1.25%
5. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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