2. Equity View:
Last week, the Indian equity markets witnessed another flat week. Both Sensex and Nifty closed almost
flat on a week on week basis. As the earnings season continued we saw several companies announcing
their quarterly results last week.
The private sector banking space continued to deliver good results. Axis bank announced its results. It
delivered 16% year on year basis increase in its profits. Also, the asset quality has continued to improve.
In the IT space, TCS and HCL came up with very good set of numbers. HCL Tech witnessed 85% growth in
profit on year on year basis and TCS also came with almost 50% growth in profits year on year, with a
quarter on quarter volume growth of around 3.5% and PAT growth of 5%. TCS continues to give a much
better business commentary and guidance as compared to what Infosys has given which results into
believing that Infosys is facing more of company level issues than industry level issues. We continue to
maintain a preference for stocks like Tech-Mahindra in the IT space and we believe that it will still take
couple of more quarters for Infosys business to really turn around from current levels.
We have the monetary policy on the 30th of this month in which it is widely expected that RBI will cut
interest rates. People are expecting a Repo rate cut of 25 basis points and that should be accompanied by
25-50 basis points in CRR. We believe that even if the repo rate doesn’t come in we would definitely see a
CRR cut in the review.
We have seen most of the banks both public and private which have cut their respective base rates. The
home loans and the car loans specially have cooled off in the last 2 quarters and we believe that going
forward the trajectory of the monetary policy is to bring the interest rates down. We expect significant
amount of monetary easing in the next 12 months. By March 2013, we believe that another 50 - 75 basis
points in cut repo rate should happen which should definitely give a booster to the GDP growth. RBI has
already cut interest rates by 50 basis points in the month of April followed by monetary easing through
various other instruments like CRR and SLR. The last two policy reviews had seen a SLR cut of 25 basis
points and in the last policy there was a CRR cut of 25 basis points. RBI has continuously been on an
easing curve although it has been using other instruments than repo to carry out this easing. We believe
that in this policy also since the headline inflation in the month of September was 7.8% higher than the
expected number, RBI might decide not to go with the repo cut but should continue the monetary easing
by cutting CRR.
News:
DOMESTIC MACRO:
Rising fuel prices boosted inflation in September to 7.8 percent, up from August 7.55% its highest level
since November, undermining the government's case for an interest rate cut by the RBI this month to
boost the sluggish economy.
Banks' advances grew 2.2 percent to 48,093.84 billion rupees as of October 5 since the start of the fiscal
in April, data from the Reserve Bank of India showed on Wednesday. In the year-ago period, loans grew
7.1 percent. During the period, deposits grew 4.9 percent to 64,110.36 billion rupees, compared with a
growth of 9.7 percent in the corresponding period last year.
3. GLOBAL MACRO
EURO
Moody's kept Spain’s rating at Baa3 but assigned a negative outlook, leaving both the rating and the
outlook in line with that of rival agency Standard & Poor's, which rates Spain at BBB-minus. Fitch Ratings'
grade for Spain remains one notch higher at BBB but also with a negative outlook.
European Union leaders agreed on Friday a single supervisor will take responsibility for overseeing euro
zone banks from next year. German Chancellor Angela Merkel said on Friday that a single European
banking supervisor would be built up in the course of next year and must be completed before euro zone
rescue funds may directly recapitalise troubled banks.
At a two-day summit that ended on Friday, EU leaders discussed the idea in more detail, with Herman
Van Rompuy, the president of the European Council and chairman of the summit, saying it was an
anomaly for a currency union not to have a common budget or, as he put it, a common "fiscal capacity".
US
Initial claims for state unemployment benefits rose 46,000 last week to a seasonally adjusted 388,000,
the Labor Department said. The number of Americans filing new claims for jobless benefits spiked last
week, reversing a sharp decline in the prior week but still pointing to a labor market that is slowly
healing.
China
China's economy grew 7.4 percent in the July-September quarter from a year earlier, the National Bureau
of Statistics said on Thursday, the slowest pace since the first quarter of 2009 as the global financial crisis
raged.
Industrial output grew 9.2 percent versus expectations of 9.0 percent and retail sales in September rose
14.2 p ercent on a year ago versus an estimated 13.2 percent in a Reuters poll.
4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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