2. Equity View:
The crude prices shot up last week due to tensions building up in Iraq with Brent crude trading almost at
$114.50/Bbl. Iraq contributes around 3-4% of global oil production thus its impact on the world crude oil
dynamics is limited. This is also as Saudi Arabia and other gulf countries are already having incremental
supplies available with them. Currently the supply is being carried out as the oil producing southern part
of Iraq is still under direct control of the official government. However due to the nature of
unpredictability of the issue getting resolved soon, there could be some volatility in crude oil prices in the
near term. Though the prices have risen only by 4% if compared with the last year’s average, this could
be absorbed by India. Thus apart from inflation management which could become difficult, it could not
alter the overall macroeconomic situation in India.
The WPI inflation was released at 6%, up from 5.2% in the last month and the highest since Dec 2013.
This was due to an increase in core inflation largely as the pricing power remains with the manufacturing
sector which is surprising considering the fact that the demand has been subdued. This could also be one
of the few indicators of demand coming back and reviving economy. We have already witnessed
increased sales in cement, 2-wheelers and 3-wheelers segment.
We believe that there would no rate cut atleast in the next few months until there is a stable decline in
WPI and CPI inflation. The RBI’s core unit of measurement remains CPI which has been almost constant
for the last few months. However due to some probability of unfavorable monsoon there could be an
increase in food inflation thus CPI. We expect CPI to range between 8 and 9% until September when the
base effect could play out.
Both Iraq tensions and inflation issues are not powerful enough to alter our positive view on equities with
Sensex target of 29000. In the short term the markets will be driven by Q1 earning expected to start by
the second week of July. IT companies should be the first one to release their results.
News:
DOMESTIC MACRO:
Government clears seven big-ticket investment projects worth Rs 21000 cr.
India’s wholesale price index (WPI)-based inflation rose to a five-month high of 6.01% in May
against 5.20% in the previous month, driven by costlier protein-based items, fuel & some manufactured
products.
Government hikes import tariff value on gold and silver to $411 per 10 grams and $632 per kg as
global prices have increased due to escalating violence in Iraq.
World Bank to provide financing of $500 mn for projects in north-east India including healthcare, e-
governance, infrastructure, and water management.
World Bank projects a 5.5% growth for India in 2014-15, 6.3% in 2015-16 and 6.6% in 2016-17.
3. GLOBAL MACRO
EURO
UK’s retail sales dropped 0.5% in May compared to a downwardly revised gain of 1% in April
Annual inflation in the Euro zone fell to 0.5% in May from 0.7% in April.
United States
US Federal Reserve reduced its monthly bond buying program from $45 billion to $35 billion starting
in July.
US current account deficit widens to $111.16 bn in Q1 2014 from 87.32 bn in Q4 2013 and 105.49 bn in the
same quarter a year ago.
IMF cuts US growth outlook for 2014 to 2% from the 2.8% it predicted in April, due to a weak first quarter.
China
China's average home prices fell 0.2% in May for the first time in two years and price weakness spread to
more major cities, adding to signs of cooling in the property market which are posing a growing risk to the
broader economy.
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
16/06/14 25,190 8,967 15,032 17,221 8,200 15,674 6,889 10,839 9,032 13,093 11,365 2,227 2,029 5,091
17/06/14 25,521 9,101 15,127 17,613 8,259 15,976 6,877 10,849 9,071 13,300 11,690 2,269 2,046 5,129
18/06/14 25,246 9,035 14,974 17,424 8,128 15,829 6,827 10,856 8,976 13,177 11,523 2,235 2,003 5,091
19/06/14 25,202 8,997 15,016 17,265 8,204 15,734 6,843 10,921 9,145 13,067 11,165 2,217 1,996 5,160
20/06/14 25,106 8,962 14,878 17,197 8,489 15,603 6,842 10,817 9,149 12,982 11,114 2,199 2,007 5,163
-0.34% -0.05% -1.02% -0.14% 3.53% -0.45% -0.68% -0.20% 1.28% -0.84% -2.21% -1.24% -1.09% 1.43%
4. Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per 10
gms)
16/06/2014 60.0059 101.998 81.2541 58.96 6459 26802
17/06/2014 60.368 102.4807 81.8665 59.21 6436 26788
18/06/2014 60.124 102.0004 81.431 58.81 6444 26731
19/06/2014 60.0031 102.0473 81.7106 58.94 6432 26673
20/06/2014 60.2785 102.7688 82.12 59.17 6451 26679
-0.45%
Rupee
Depreciated
-0.75%
Rupee
Depreciated
-1.05%
Rupee
Depreciated
-0.35%
Rupee
Depreciated
-0.12%
-0.46%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 8.37 2
2-Year 8.29 -6
5-Year 8.58 10
10-Year 8.72 12
5. Varun Goel Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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