1. The World This Week
April 15 – April 19, 2013

2. Equity View:
Last week the Indian equity markets went upwards with a 4.5% gain in markets. This rally was largely
driven by commodity prices collapse witnessed across the world. The crude oil prices fell below
$100/barrel which lead to a significant cushion as far as the fiscal account and current account deficits
are concerned. As we’ve been talking about crude oil subsidies continuing to be the biggest drag for
India’s fiscal numbers, any cool off in crude oil will lead to some comfort on subsidies.
We have already witnessed the diesel subsidies coming down from more than Rs. 15 per litre last year to
almost Rs. 5 per litre now and this will continue to come off as crude oil continues to fall in the global
markets. Even if crude oil remains around $100 a barrel the government subsidy burden should fall
around Rs. 70,000 – 80,000 Crores for this year as compared to the number we had last year. The gross
under recoveries for crude oil and crude oil related products was around Rs. 1.70 lakh crore in last year
and this number should easily come below a lakh crore if crude oil stays at this level. However, the
inherent assumption here to be made here is that rupee continues to at 54-55 per dollar levels.
Quarterly results continued during the last week, we had good results coming in last week from private
sector banking names. Indusind & Yes Bank both declared their quarterly results last week. Both IndusInd
and Yes Bank delivered results slightly better than the market expectations. IndusInd Bank delivered a
very strong Net Interest Income Growth which came in at 42% and the net profit also increased by 30%
on y-o-y basis. Yes Bank also delivered a 30% y-o-y growth in profits. Both the banks gave a good
guidance for next year and we continue to like both the stocks from a medium to long term perspective.
Few private sector banks would announce their results this week, key among them are Axis Bank and
HDFC Bank. We expect both the banks to deliver 15-20% growth in profits on y-o-y basis with a decent
asset quality.
One of the key things to be witnessed in this year’s quarterly results for banks is that we have not seen
any material deterioration in asset quality and there are no slippages in the books of these private sector
banking names. Hence, we continue to maintain a bullish stance on the private sector banking names
versus public sector banking names.
TCS also announced its quarterly results in line with the market expectations. HCL Tech also announced
its quarterly results which were better than the expectations. We believe that the cool-off that we saw in
the IT space after the Infosys’ quarterly results showed more of a company specific issue rather than the
industry specific issue. We still think that there is some value left in the IT space as a whole for this year
and we continue to maintain IT as defensive bet for the year as the whole.
Reliance Industries also announced its results last week. The numbers were better than expectations as
we witnessed a 30% growth in profits on y-o-y basis. This growth was driven by Gross Refining Margins
(GRMs) which came in at $10 per barrel. We believe that the current levels would not really sustain and
we would see some kind of cool-off in GRMs going forward. The other businesses in Reliance Industries
continued to languish and there is no sign of recovery on that front. We believe that next round of
growth in Reliance Industries would be driven by their telecom venture and the retail venture.

3. The highlight of the results was that the retail venture is now broken even at the EBITDA level and we
believe that Reliance Retail is now a quite a size which is good enough for it to deliver a significant value
to its shareholders going forward. Reliance Retail has total revenue of Rs. 10,000 crores for this year
which is a very significant number in the Indian Retail market.
We had a monsoon prediction by one of the private agencies during the last week. It has predicated
normal monsoons for India this year. There is an expectation of total monsoon rainfall at 3% (+/-) of long
term average which is considered a good level of monsoon as far as agricultural production is concerned.
Thus, the first indication of monsoon indicates that a normal year for agricultural income and broader
FMCG sales.
Last week, there was a run up in banking space because of the rate cut expectations. Considering the fact
that both current account and fiscal account deficits are expected to come down, if the commodity prices
continue to cool-off, there is an expectation that during its Annual Policy Review on 3rd
May 2013, RBI
would cut 25 bps in repo rate. We also believe that we would have probably a 25 bps cut in CRR. RBI in its
last policy review had indicated that they are unlikely to do any more rate cuts anytime soon because it
expressed concerns about inflation and then expressed the concerns of overall fiscal situation. But
considering the fact that the overall fiscal and current account situation seems to correcting on its own,
we expect the RBI to act during its next policy review on 3rd
May 2013.
News:
DOMESTIC MACRO:
India's wholesale price index (WPI) rose a slower-than-expected 5.96 percent in March, the
lowest rate in more than three years. The reading for January was revised up sharply to 7.31
percent from 6.62 percent. February WPI was left unchanged at 6.84 percent.
Finance Minister P. Chidambaram said on Wednesday he expected India's current account deficit
for the 2012/13 fiscal year that ended in March to be around 5 percent of gross domestic
product and perhaps half that amount in one to two years.
GLOBAL MACRO
EURO
The euro zone will slow its budgetary belt-tightening to help reinvigorate economic growth, a top
EU official said on Thursday, highlighting a policy shift the United States has long been pressing
for.
US
Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 352,000 the
Labor Department said.

4. China
The world's second-biggest economy grew 7.7 percent in the first quarter from a year ago, slower
than 7.9 percent hit in Q4 2012. China's economic recovery unexpectedly stumbled in the first
three months of 2013 with slowing factory output and investment spending forcing analysts to
start slashing full-year forecasts despite official insistence that the outlook was favourable.
Moody's Investors Service on Tuesday affirmed China's government's bond rating of Aa3 but cut
the outlook to stable from positive, the second pessimistic revision by a foreign ratings agency
this month.

5. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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