2. Equity View:
Last week was data-heavy with the release of major Inflation numbers. There was a significant cool off in
WPI Inflation for the month of January at 5.05% vis-à-vis 6.50% seen last month. The CPI numbers also
came down much below the expectations at around 8.80% which is almost a two-year low. There has
been some cool off in the inflation of late however it is too early to expect a clear change in the trajectory
of inflation. We believe that a large part of it is driven by food and vegetable prices and it is still difficult
to state whether this trend is going to sustain in the next few months. As of now, there is no change in
our expectations on monetary policy in which we are expecting no easing anytime soon. We believe that
interest rates are going to stay elevated for some more time until very clear signs of inflation cool off or
expectation of cool off in future. RBI is aiming for CPI inflation of 8% by January 2015 and 6% by January
2016. And we believe that it will continue to work to ensure these numbers are achieved. IIP numbers
continue to be negative in the third consecutive month. The industrial and the manufacturing growth
have been quite muted. Mining sector continues to struggle on the back of poor environmental and
forest clearances that the industry has been watching in the last few years. Though the clearances have
now started, it will take some time for the mining sector to pick up.
The Vote on Account today is going to be a quick declaration of accounts by Finance minister for next
three months until a new government comes in place. We believe that the biggest number which the
market is going to track is the fiscal deficit number for FY14 which would be kept under control and
would come around 4.8% as per the expectation of government last year. There are no major policy
announcements expected though there might be some tweaking on the indirect tax rates and budgeted
subsidies for this year; which would be inconsequential since the new government which would come
after the May elections will take its own call.
3. News:
DOMESTIC MACRO:
Cooler food prices helped bring down the overall retail inflation in India to 8.79 percent in January, its
lowest level since January 2012.
Industrial production shrank 0.6 percent in December, its third contraction in a row although the fall was
smaller than the -1.0 percent forecast and a revised 1.3 percent decline in November
India's telecoms spectrum auction ended on Thursday after 10 days of bidding, with the government
receiving bids worth about 610 billion rupees ($9.82 billion),
Central Statistical Organization said growth in the Indian economy likely to improve to 4.9% in 2013-14
from 4.5% in 2012-13.
GLOBAL MACRO
EURO
Greece's primary budget surplus which has come in at over 1.5 billion euros ($2.1 billion), has exceeded
expectations and will allow the government to boost social spending on austerity-hit citizens.
The 9.5 trillion euro economy contracted 0.4 percent overall in 2013, and the European Commission
expects it will grow 1.1 percent in 2014.
The euro zone's full year external trade surplus more than doubled to 153.8 billion euros last year, from
79.7 billion euros in 2012, with exports rising 1 percent and imports falling 3 percent.
United States
The official unemployment rate released by the government showed the jobless rate in January dropped to
6.6 percent, the lowest in more than five years.
Factory production fell 0.8 percent in January, the first drop since July and the biggest since May 2009,
when the economy was still locked in recession.
The economy is expected to grow at a rate of 2.8 percent for all of 2014, versus a previous estimate of 2.6
percent in the previous survey in November. Growth in 2015 is expected to accelerate to 3.1 percent.
China
Chinese banks disbursed the most loans in any month in four years in January, by lending 1.32 trillion yuan
($217.6 billion), beating a 1.1 trillion yuan forecast and nearly three times December's level.
5. Satadru Mitra
Varun Goel
Nupur Gupta
Jharna Agarwal
Kinjal Doshi
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