2. Equity View: The equity markets have seen almost 18% move
since the beginning of this year however, some profit booking had
happened on the back of weaker global cues. There was a correction
of 3.5% in Sensex last week largely on account of profit booking.
The much awaited Budget was presented last week in which the
biggest take away was a clear break from the subsidy and the
hand-out driven approach of the previous more
growth-focused-government. Also, this budget provides clear vision
for long term growth and reliability in India through large
infrastructure spending, fiscal prudence and sustainable reduction
in CAD. More importantly, Finance Minister had mentioned the need
to maintain low inflation trajectory which supports the high
interest rate regime currently deployed by the Central Bank
governor. Based on this speech, we believe there is very little
chance of any rate cut in the second half of this fiscal. The big
push was on the infrastructure side for the treatment of long term
Infra loans as CRR or SLR by banks. The allocation to roads space
was extremely high of about 38,000 crores which is almost a 50%
increase over last year. The target is of creating 8,000km of new
roads by FY15 and also a 10 year tax holiday has been provided for
power generation and transmission companies. All this expenditure
was budgeted for housing, roads and power projects. More tax cuts
were provided as the limit of tax-free income has been increased
from 2 Lacs to 2.5 Lacs, 80C limit has been increased from 1 lac to
1.5 lacs and the housing loan exemption on interest payment has
been increased from 1.5 lacs to 2 lacs. All these 3 things will
give extra income in the hands of common man and would also help
boost financial savings. One big negative presented for debt mutual
funds was the taxation on holdings below 3 years to be set at
marginal tax rates. The tax structure until now considered anything
above 1 year as long term and a capital gain arising out of the
same was to be taxed at 10%. Now, anything which is held for a
period of more than 3 years will be taxed at 20% thus it could be
negative for debt mutual funds and 1-2 year FMPs. There has been a
clear boost given to REITs due to which we expect a lot of
announcements and new launches in this space coming in the next few
months. Broadly from equity market perspective the budget is
positive and we continue to be positive on Indian equities. On
Friday the IIP data was released at 4.57% which is 17-month high
and a pickup in investment activity has been visible after a long
time. This is also being led by the increase in manufacturing
growth rate so we believe that the economic recovery is getting
strengthened and we would see a revival in the industrial and
manufacturing cycle in the remaining part of this fiscal. The CPI
would be released today and we would expect that data to be around
7.5%.
3. News: DOMESTIC MACRO: Indias Index of Industrial Production
(IIP) for the month of May came in at 4.7% versus 3.4% in April
According to RBI data, the central bank became net purchaser of
dollars for the second consecutive month in May this fiscal by
buying $1.786 bn from the spot market. According to RBI data,
overseas direct investment by Indian firms rose by over 60.7%
year-on-year to $5.03 bn in June. India's forex reserves rises by
$614.6 mn to $316.39 bn in the first week of July. GLOBAL MACRO
EURO UKs visible trade deficit widened to 9.2 bn pounds from 8.8 bn
pounds in April. UKs industrial production declined by a seasonally
adjusted 0.7% in May, after rising 0.3% in April United States US
Treasury Department reports a budget surplus of $71bn in June,
following a $130bn deficit in May. US wholesale inventories
increased by a seasonally adjusted 0.5% in May, after rising 1% in
April China Chinas exports rose 7.2% year-on-year in June to
$186.8bn, compared with a 7% rise in May, while imports gained 5.5%
in June to $155.2bn, compared with a 1.6% fall in May; the monthly
trade surplus soared 16.4% to $31.6bn, down from $35.92 bn in May.
China's consumer price index rose 2.3% in June from a year earlier,
compared with a 2.5% rise in May Indices: Date Sensex Midcap Auto
Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 7/7/2014
26,100 9,557 16,206 17,609 9,100 16,723 6,836 11,914 9,556 13,444
11,147 2,397 2,096 5,380 8/7/2014 25,582 9,210 15,838 17,195 8,686
15,920 6,803 11,770 9,455 12,877 10,796 2,244 1,946 5,306 9/7/2014
25,445 9,077 15,453 17,109 8,725 15,686 6,858 11,601 9,331 12,809
10,887 2,206 1,915 5,242 10/7/2014 25,373 9,132 15,313 17,002 8,453
15,715 6,881 11,602 9,248 12,929 10,892 2,231 2,010 5,196 11/7/2014
25,024 8,875 15,155 16,546 8,351 14,969 6,916 11,729 9,379 12,452
10,589 2,130 1,906 5,251 -4.12% -7.13% -6.49% -6.03% -8.24% -10.49%
1.16% -1.55% -1.85% -7.38% -5.00% -11.15% -9.05% -2.39%
4. Commodities and Currency: Date USD GBP EURO YEN Crude (Rs.
per BBL) Gold (Rs. Per 10gms) 7/7/2014 59.95 102.78 81.39 58.71
6616 27786 8/7/2014 59.80 102.42 81.32 58.73 6608 27828 9/7/2014
59.73 102.36 81.38 58.79 6514 27958 10/7/2014 59.88 102.59 81.69
59.00 6467 28677 11/7/2014 60.19 103.15 81.87 59.41 6507 28470
-0.40% Rupee Depreciated -0.35% Rupee Depreciated -0.59% Rupee
Depreciated -1.18% Rupee Depreciated -1.65% 2.46% Debt: Tenor Gilt
Yield in % (Friday) Change in bps (Week) 1-Year 8.55 8 2-Year 8.46
4 5-Year 8.65 -1 10-Year 8.77 11
5. Varun Goel Jharna Agarwal Nupur Gupta Ridhdhi Chheda
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