2. Equity View:
Indian equity markets ended on a flattish note last week with a heightened volatility on back of concerns about the taxation
status of P-Notes in India. There is a lot of talk about government amending the Mauritius rules and FII’s getting taxed along
the way which led to sharp negative reaction by the market. By the end of the week, the Finance Minister clarified that there
will be no blanket tax on the position of P-Notes which led to positive reaction and the markets witnessed a huge bounce back
on the last day of the week. Hence, the equity markets closed 0.2% to 0.3% positive for the week. The fiscal year for SENSEX
and NIFTY ended at about -9 to -10%.
The core sector growth numbers for the month of February came in at 6.8% which is a seven months high. This was mainly led
by coal production growth. Both Services and Manufacturing PMI numbers have been positive. These combined with the core
sector numbers for February indicate that GDP growth may have bottomed out in third quarter and fourth quarter onwards a
spike bounce back in GDP growth could be witnessed.
Major events that are expected during the next month include the Q4 results that are expected to come from the first week of
April. Infosys and TCS are expected to declare the results during the second week of the month. The short term direction of
market will depend on the results outcome. Our own sense is that the earnings have bottomed out in Q3 and a bounce back in
earnings should be witnessed in the Q4 which would be lead by banks automobiles and IT companies.
Last month, Brent crude came down to $123/bbl from the highs of $126/bbl. India is one of the leveraged crude players
because whenever the crude prices go up sharply Indian equity markets are the worst hit and when the crude prices come
down sharply, India is the biggest beneficiary. Hence, if fall in crude prices continues then a massive boost to Indian equity
markets could be witnessed.
Real Estate View:
The most important variation that happened during year in real estate was in terms of pricing. Largely, during the last two
quarters the real estate PE’s have been under stres to exit as they are not finding any easy exits. Lease transactions ended 8%
high which shows that there is some confidence IT-ITES sector which is only growing in cities which are predominantly on IT
expansion which are only in Southern and Western states in India.
Real estate regulations are been seen as a hindrance which might dampen the investor community. The real estate regulations
are coming with lot of transparency which favours the consumer perspective however it has not helped the prices to come
down. One such example being the balconies and other such areas which are called “Fungible FSI” are included in FSI in
Maharashtra and Mumbai. This with the increase in property prices has led to increase in the overall price of the property.
Similarly, the property taxes across India have been raised to 12% from 10%. Hence, trends are seen which are not helping in
bringing the prices down even though there were expectations that property prices will have to comedown and some
sensibility would prevail. However, we have not seen any stress as far as the sales are concerned.
As far as the loan rates are concerned, we expect them to be stable at 9-10%. However we do not see the loan rates would
dampen the property purchase.
The residential property rates have not really come down in Mumbai and Gurgaon where as in rest of the country we have
witnessed the rates have been very stable at around Rs. 3000-4500 per sq. ft. at any sub prime location categorized as of A-
Category building or A-category location.
3. News:
DOMESTIC MACRO:
The government’s borrow limit from the Reserve Bank of India during April-June as short-term loans is been set at Rs.
500 billion and up to Rs. 450 billion during July-September, the central bank said in a statement on Friday.
India's consumer price index (CPI) for industrial workers rose 7.57% in February from a year earlier, faster t h an
January's annual rise of 5.32%, government data showed on Friday.
India's fiscal deficit during April to February was Rs. 4.94 trillion, or 94.6% of the revised full fiscal year 2011/12 target,
government data showed on Friday. Earlier this month, the government revised up the fiscal deficit target for the
2011/12 fiscal year to 5.9% of GDP from 4.6% projected earlier.
India's infrastructure sector output grew 6.8% in February from a year earlier, sharply higher than the upwardly
revised annual growth of 0.7% in the previous month.
GLOBAL MACRO
Euro:
Euro zone finance ministers agreed on Friday to increase their financial firewall to €700 billion to ward off a new flare-
up of Europe's sovereign debt crisis, drawing a positive initial reaction from G20 partners and markets.
US:
Gross domestic product increased at a 3.0% annual rate for the fourth quarter, the quickest pace since the second
quarter of 2010. GDP growth for third quarter was at 1.8%.
China:
The authorities is loosening of the strings this month to allow wider yuan moves, as it has boosted both opportunities
for short-term profit because of rise in volatility, and long-term risks, with yuan appreciation.
4. Satadru Mitra Varun Goel Jharna Agarwal
Palak Nanjani Abbas Naheed Kanika Khorana
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