market review may 2011 - fundsupermart · ¾rbi has hiked policy rates by 50 bps on may 3....
TRANSCRIPT
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Market ReviewL&T Investment Management Ltd
May 2011
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Macro EconomicsMacro Economics
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IMF Pegs Japan’s Growth At 1.4%
IMF pegs Japan’s economic growth at 1.4% for 2011 from 1.6% expected earlier
Leaders of BRICS nations calls for a revamp of global monetary system that relied less on US dollar
US Federal Reserve leaves interest rates unchanged at 0-0.25% and discount rate unchanged at 0.75%
People’s Bank of China raises its benchmark 1-year lending rate to 6.31% from 6.06% and the 1-year
deposit rate to 3.25% from 3%
Portugal asks for EU bailout, joining Greece, Ireland
Russian central bank – Bank Rossii raises refinancing rate by 25 bps to 8.25% from 8%
Moody’s cut Ireland rating two levels to Baa3 from Baa1, outlook negativeMoody s cut Ireland rating two levels to Baa3 from Baa1, outlook negative
Fitch lowers China’s local-currency credit rating to negative from stable
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Key Global Economic Data Releases
US
GDP grows at 1.8% annualized in first quarter of 2011 from 3.1% growth previous quarter
ISM Manufacturing for April falls to 60.4 from 61.2 last month
Advance Retail Sales grow 0.4% in March compared with rise of 1.1% last month
Euro-zone
UK GDP grows 0 5% q-o-q in first quarter of 2011 as against 0 5% drop previous quarterUK GDP grows 0.5% q o q in first quarter of 2011 as against 0.5% drop previous quarter
Euro-Zone PMI Manufacturing for April climbs to 58 from 57.7 last month
Euro Zone CPI estimate accelerates to 2.8% in April from 2.7% last month
iAsia
Japan's industrial production declined by 15.3% m-o-m in March from increase of 1.8% rise last month
China’s economy grows at 9.7% in first quarter of 2011 and inflation accelerates to 5.4% in March
South Korea’s GDP rises 1.4% in first quarter of 2011 compared to 0.5% growth in previous quarter
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Key Domestic Economic Data Releases
Industrial production
Grows by 3.60% in February against
rise of 3.70% in January
Core sector
Posts growth of 7.40% in March
against 6.80% in February
Exports
Jump by 43.80% in March to
USD 29 13 bn
Source: Mospi
USD 29.13 bn
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Continue…...
Headline WPI inflation
At 8.98% in March against 8.31% lastmonth
Rupee strengthens
By 0.82% over the month to Rs 44.22against US dollarg
Forex reserves rise by USD 6.2 bn toUSD 309.71 bn as on April 23 fromMarch 25
Source: Mospi
Bank credit
Stands at Rs 39,56,407 crs as on April8 growth of 0 5% over the fortnight8, growth of 0.5% over the fortnightand rise of 22% overthe year
Source: Bloomberg
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Commodity Prices Rise
Reuters Jefferies CRB Index climbs
3.1% over the month to 371
MCX Comdex surges
6.55% during the month to 3,734
Oil prices jump
6.76% over the month to
USD 113 93 a barrelUSD 113.93 a barrel
Gold prices rally
9 17% during the month to Source: Bloomberg9.17% during the month to
USD 1,563.70 an ounce
Source: Bloomberg
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Equity Market Review
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Global Markets Rally
MSCI AC World climbs 3.86% whileMSCI Emerging Marketsg grises 2.83%
Dow Jones moves up 3.98%, whileFTSE climbs 2.73%
Nikkei rises marginally 0.97%, whileShanghai Composite falls slightly0.57%
Source: Bloomberg
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Indian Equities Fall
Sensex, Nifty decline
By 1.59% and 1.44% respectively
Top 3 Losers – DLF, Infosys &
RCom
Drop 23 50% 10 22% andDrop 23.50%, 10.22% and
7.34% respectively
BSE Mid & Small cap o tperformBSE Mid & Small cap outperform
larger counterparts
Mid-caps index moves up 3.21%
hil S ll i d
Source: BSE/ NSE
while Small-caps index
surges 6.60%
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Sectors in Limelight
BSE sectoral indices register
a divergent trend
FMCG, Healthcare and Auto gain the
most
With rise of 4.42%, 3.47% and
2.90 % respectively
Realty, IT fall the most
With decline of 6.71%, 6.17%t dec e o 6 %, 6 %
respectively
Source: BSE
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FII Flows Remain Positive
FIIs
Remains net buyers in equities
worth Rs 3,680 crs (USD 853 mn
provisional) in April
MFs
Turns net sellers in equities worth
Rs 463.70 crs (USD 100 mn)s 63 0 c s (US 00 )
in April
Source: Sebi
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Sensex Drivers
Major positive contributors Scrip Name Chg in Index Points
ITC, ONGC and Bharti
Major negative contributors
gITC 71
ONGC 40Bharti 35M&M 34
Infosys, RIL and L&TM&M 34
Hero Honda 15Infosys (202)
RIL (148 )L&T (38)L&T (38)
Jindal Steel (24)DLF (23)
Source: Bloomberg
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Outlook
Markets are likely to focus on domestic events especially the earnings season togauge the impact of commodity and wage inflation on corporate numbers andprobable earnings cut for FY12 Sensex earnings. Election outcome in five states mayset future course of action on Government’s ability to carry forward the reformset future course of action on Government s ability to carry forward the reformprocess.
Sustenance of crude oil at higher levels is expected to prompt Government toi i f d ki f l i O hi b kd kincrease consumer prices of auto and cooking fuel prices. On this backdrop marketwill be closely watching the RBI monetary policy.
Nonetheless, India is expected to post good nominal GDP growth over medium, p p g gterm helped by domestic consumption demand, despite the issues like inflation/ oilprices etc.
Investors should continue to increase exposure in equities systematically throughInvestors should continue to increase exposure in equities systematically throughregular investment plans as valuations remain in fair value zone.
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Debt Market Review
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Global Bond Yields Fall
US 10-year treasury yield drops 18 bps
to 3.29%
Yield on 10-year European govt bond
declines 12 bps to 3.24%
Japan 10-year govt bond yield falls 5 bps to
1.21%
Source: Bloomberg
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Indian Bond Yields Rise
Highlights
Bond yields rise across the curve amid
expectations of further interest hikeexpectations of further interest hike
Short-term rates register mixed performance
Spread
On 10-year G-sec and 10-year AAA bond
moves down by 6 bps at 95 bps
Source: Bloomberg
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Short-term Rates Show Divergent Trend
Average Call Rates
Move down to 6.65% from 8.75%
Certificate of Deposits (CDs)
Yield on 3-month CD declines 57 bps
Treasury-Bills (T-Bills)
Yield on 91-day T-Bill rises 21 bps
to 8.88%
1-year CD yield moves up 35 bps
to 7.52%
364-day T-Bill yield climbs 12 bps
to 9.85%
Commercial Papers (CPs)
to 7.76% Yield on 3-month CP falls 103 bps
to 9.33%
1 year CP yield drops 39 bps1-year CP yield drops 39 bps
to 10.35%
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G-Sec Yields Rise
10-year G-sec yield
Rises 14 bps to 8.13%
Yield on 4-year G-sec
Moves up 30 bps to 8.23%
Short term 1-year G-sec yield
Climbs 30 bps to 7.83%
Spread
On 1 & 10-year G-sec drops by 16 bpsSource: Bloomberg
to 30 bps
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Corporate Bond Yields Move Up
10-year AAA yield
Rises 8 bps to 9.24% 100 1-yr AAA 5-yr AAA 10-yr AAA
CorporateBondYield Trend(in %)
5-year AAA yield
Climbs 7 bps to 9.31%
9.509.73
9.58 9.60
9249.32 9.24
9.31924
9.5
10.0 y y y
Short term 1-year AAA yield
Moves up marginally 2 bps to 9.6%
8.899.13
8.70
8.98
9.24 9.24
8.858.98
9.20 9.19 9.169.24
8.5
9.0
Spread
On 1 and 10-year AAA bond shortensSource: Bloomberg
Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11
by 7 bps to negative of 36 bps
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Outlook
RBI has hiked policy rates by 50 bps on May 3.
Inflation would continue to remain predominant concern for debt market.
10-year benchmark G-sec yield can trade in a range of 8.00% to 8.50%.
Interest rates across all asset classes are expected to move up.
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Disclaimers
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