- The IIP data for May showed slower growth of 2.7% compared to 3.4% in April, indicating India is not completely out of the economic slowdown. - News from Europe showed the potential acceptance by Greece's Prime Minister of creditor demands, but the EU remains skeptical and a deal is not confirmed. - For Tata Motors, a slowing Chinese economy and luxury goods market may negatively impact sales and profits from JLR over the next 6-9 months.

1. The World This Week
July 06 – July 10, 2015

2. Equity View:
Two pieces of news could summarize last week. One was a relatively mild IIP data which in a way brought
all of us down to the ground. 2.7% was not a bad number considering the context. But if one
was expecting that the data will be higher month on month then one was up for a surprise. It showed
that we are not completely out of woods. A lot of work needs to be done and more importantly as
investors, before jumping onto the green shoots. It is realistic for us to appreciate
the fact that it would not be a dramatic improvement; something that we have been reiterating for
the last six months.
On the global front there was very surprising news on Friday that the Prime Minister Tsipras could
accept all the demands of the creditors. These are the same demands on which the he went to the
people to seek a referendum. However the news flow emanating from the Eurozone over the weekend
does suggest the expected which is that the EU is not buying the renewed assurances.
Our own understanding of the situation is that probably Greece wanted to buy time and now that the
banks have been shut for a couple of weeks domestic Greek people are not able to borrow more than 60
Euros in a day, pensions have been rationed and 20th
July is approaching fast where there is another
round of payment of 3.5 million Euros to the Eurozone. So the capital controls have already
started affecting the commerce.
Considering the fact that the Greek economy had shrunk by 25% last year it could be a ploy to buy more
time since it is natural that before ejecting any country out of the EU the 19-member Block will think
hard. So it was a good idea to get some necessary money and then do some more posturing.
But the hardliner in the EU led by Germany understand this and they have called
the bluff as they want not mere assurances but all these proposals to be passed by the Greek parliament
– something that might be a tough task as the ruling party’s own members are opposed to it. They may
have a fresh referendum on this. So for now the realistic way to look at this is that there is no deal.
The situation remains as fluid as it was last week. One needs to closely monitor the kind
of useful outcomes of Eurozone.
Domestically, there are concerns that the slowing China demand may hurt JLR volumes, which may
remain an overhang on Tata Motors stock. Tata Motors derives more than 30% of its operating profits
from China. It is the same on sales side too. This implies that the China piece is one and a half times of
India piece. So even if we assume that India will continue to recover over the next two years, it may not
be able to offset the decline in Chinese markets. More importantly, the JLR and Land Rover-range of
products that Tata Motors sells in China is all related to wealth effect. Usually in this type of decline the
basic consumption does not get effected but consumption of luxury goods, such as luxury cars certainly
does. We have seen that the numbers have also not really grown for the last two to three months. What
prompts our negative instance; especially for those who are sitting on profits is that recovery for Tata
Motors might not be very evident for next 6-9 months. So, we are advising investors who are sitting on
profits to book their profits and exit.
An equity investment giving the investor around 15% returns is in itself a testimony to the fact that equity
as an asset class is a bit risky. Moreover an important point to remember is that asset allocation is not ‘all
or nothing’ game which means that one should have allocation to all asset classes, including equity. It is a
good time for an investor, who can take above average risk to have 65-70% of his wealth in equity.

3. News:
DOMESTIC MACRO:
 The index of industrial production grew 2.7% in May compared with 3.4% in April, according to
data released by the Central Statistics Office on Friday.
 The International Monetary Fund has retained its forecast for India’s growth even as it marginally
lowered the global growth target for the year in its latest update of the world economy. Indian
economy is forecast to grow 7.5% in 2015, the IMF said in its update of the World Economic
Outlook, retaining its April forecast.
 Despite the government’s efforts to increase investments in the manufacturing sector to boost its
growth, services sector still continues to attract most foreign direct investment (FDI). Out of the
total FDI inflows of $31 billion received during April-March 2014-15, the services sector
accounted for almost 17 per cent of the cumulative inflows.
GLOBAL MACRO
Euro
 The European Central Bank's governing council will likely hold a telephone conference on
Monday to discuss emergency liquidity assistance to Greek banks
 The International Monetary Fund said it had trimmed Madagascar's 2015 growth forecast to 3.5
percent from 5 percent,
United States
 U.S. bank earnings to be hit by bond trading slump: analysts
 A government report last week showed employers adding 223,000 jobs in June, a slowdown from
the prior month, and the U.S. unemployment rate sliding to 5.3 percent
 Fed's Yellen says expects rate hike this year, but cites labour weakness
China
 China June trade data spurs hopes for second half, but imports shrink again

4. Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Teck
6/7/2015 28,209 10,963 19,023 21,612 10,756 17,983 7,871 16,941 10,593 9,183 10,116 2,064 6,024
7/7/2015 28,172 11,020 18,966 21,573 10,832 17,998 7,876 16,988 10,554 9,191 10,092 2,058 5,995
8/7/2015 27,688 10,877 18,541 21,207 10,757 17,910 7,800 16,866 10,398 8,834 9,943 2,043 5,923
9/7/2015 27,574 10,845 18,435 21,229 10,766 18,254 7,755 16,890 10,200 8,792 9,743 2,053 5,831
10/7/2015 27,661 10,870 18,403 21,472 10,721 18,428 7,702 17,055 10,156 8,872 9,775 2,052 5,791
-1.94% -0.84%
-
3.26% -0.65%
-
0.33% 2.48%
-
2.15% 0.68%
-
4.12% -3.39%
-
3.37%
-
0.60%
-
3.87%
Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per
BBL)
Gold (Rs.
Per 10gms)
6/7/2015 63.264 98.733 69.988 51.61 3824 26086
7/7/2015 63.476 98.144 69.821 51.81 3595 26081
8/7/2015 63.459 97.493 70.280 52.58 3603 25937
9/7/2015 63.318 97.383 70.185 52.19 3627 26026
10/7/2015 63.358 98.367 70.726 51.61 3722 26014
-0.15%
Rupee
Depreciated
0.37%
Rupee
Appreciated
-1.04%
Rupee
Depreciated
-0.00%
No Change
-2.67% -0.28%
Debt:
Tenor Gilt Yield in %
(Friday)
Change in bps
(Week)
1-Year 7.61 (4)
2-Year 7.76 (1)
5-Year 7.93 (5)
10-Year 7.80 2

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