THE WORLD THIS WEEKTHE WORLD THIS WEEK

June 27– July 1, 2016

EQUITY VIEW

EQUITY VIEW

• After the uncertainty of the Brexit verdict got over, the market rallied in the last week. The market got off on the

wrong foot on the day of the Referendum results and corrected by almost 1000 points. But the market soon

realized that the renewal in trade agreement between UK and Euro is not going to happen anytime soon and it will

take around 1-2 years. India being an emerging nation, the impact of this event is quite limited. After this the

market resumed its uptrend. Since budget, the nifty is up by 1000 points, and in percentage terms it has gained market resumed its uptrend. Since budget, the nifty is up by 1000 points, and in percentage terms it has gained

22%. We should remember that it is still 10% off of the it’s all time high, which was achieved in March 2015.

• Despite the fact that the PE multiple of the Indian Markets is 17 – 18 times, the FIIs continue to invest in India on

account of better growth prospects, better earning visibility. India is the only trillion dollar economy which is

growing on 7.5%, which makes it a lucrative long term story.

EQUITY VIEW

• India is currently at a sweet spot, as U.S. initially showed the signs of growth, but now once again it is showing the

signs of tapering which will bring down the global growth rate. Europe is struggling with slowdown and the impacts

of Brexit, Japan is struggling with negative rates and many of the emerging nations have not given a clear growth

visibility. So India in this particular sweet spot where global growth will slow down and at the same time going

forward our domestic macros will help us to move forward. forward our domestic macros will help us to move forward.

• After the gap of almost 2 years, we are seeing signs of a normal monsoon. The June month stared with the deficit

of 20% but now if one see the statistics, the deficit is narrowed down to almost 6%, which only means that in June

and August, the rainfall would be very good and this will help the farm production. The food prices would come

down this should help to lower the inflation which has currently spiked only because of the pulses.

EQUITY VIEW

• Typically above average normal monsoon will help us having Agri growth, during bad monsoon years our agri GDP

was hardly 1% to 1.5% but this time it can be as high as 3% to 4% if things remain good. If it happens this will

have twin benefits, lower interest rates and also it will be push the overall GDP above 7.5% to 7.8% where it has

been stuck for almost 3 years now.

• Apart from this, on the reforms front, the bankruptcy bill has got cleared, and if the GST bill gets cleared in the • Apart from this, on the reforms front, the bankruptcy bill has got cleared, and if the GST bill gets cleared in the

monsoon session, it would be a bigger and a welcome positive. So typically our economy will get a push from 3

different sides, one from the agriculture side, second from the reform side and the third from the seventh pay

commission which will definitely increase disposable income of the middle income class, as two thirds of our

economy is run by private consumption. So in the longer term of 2 to 3 years, we will probably in relative, as well

as absolute terms outperform all other markets.

NEWS

DOMESTIC MACRO

• Indian manufacturing activity edged up to a three-month high in June, driven by stronger demand, but

firms barely raised prices, a private survey showed, leaving the door open for another rate cut by the

central bank this year.

• India's infrastructure output grew an annual 2.8 percent in May, its slowest pace in five months, primarily • India's infrastructure output grew an annual 2.8 percent in May, its slowest pace in five months, primarily

dragged down by a slowdown in output of electricity, steel and refinery products, government data

showed. The output expanded 5.5 percent from a year ago between April and May.

GLOBAL MACRO• Britain will face two key challenges, inflation and recession, after Britons voted to leave

the European Union, or Brexit. In the short term there is a difficult challenge for the British

economic and monetary policy between two contradictory challenges: there is the

challenge of inflation, with the effects on inflation of the fall of the pound, which is down 11

percent since Brexit according to European Central Bank Governing Council member

Francois Villeroy de Galhau.

EURO

Francois Villeroy de Galhau.

• Britain’s exit from the EU poses “a downside risk” to Germany’s economic outlook and it

may lower growth forecast for Europe's biggest economy in the coming weeks. Britain is

an important trade partner for Germany, and significant changes in the economic

relationship between the two countries will have repercussions for Germany, according to

the International Monetary fund.

GLOBAL MACRO• The pace of U.S. auto sales slowed in June compared to a year ago, as

slumping sales of sedans offset strong demand for pickups and sport utility

vehicles. The seasonally adjusted annual sales pace for June was 16.66

million, according to Auto data Corp, down from 17 million vehicles a year

earlier. Sales fell for General Motors Co, Toyota Motor Corp and

Volkswagen.

UNITED STATES

Volkswagen.

• U.S. factory activity expanded at a healthy pace in June as new orders,

output and exports rose, new industry data showed, providing another sign

that U.S. economic growth was regaining its footing after weakness early

this year. Automakers reported higher June sales amid strong demand for

pickup trucks and sport utility vehicles, but on an annualized basis, the June

industry selling rate came in at 16.66 million units, well below May's sales

pace of 17.45 million.

GLOBAL MACRO• Growth in China's manufacturing sector stalled in June, an official survey showed,

adding to expectations that Beijing will have to roll out more stimulus soon to boost

the sluggish economy. While output hit a 12-month high, nearly all other measures

showed signs of weakening, suggesting a spring bounce in activity is fizzling.

Export orders and inventories fell and factories shed workers at a faster rate.

CHINA

• China's pledged supplementary lending facility stood at 1.67 trillion Yuan ($251.02

billion) at the end of June, compared with 1.50 trillion Yuan at the end of May, in

June, the People's Bank of China made 171.9 billion Yuan ($25.81 billion) in loans

to three policy banks, The PSL programme, initiated in 2014, is designed to help

the central bank better target medium-term lending rates while boosting liquidity to

specific sectors by offering low-cost loans to selected banks according to the

Central bank.

INDICES

Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck

27/06/16 26,403 11,404 19,128 20,029 11,663 14,529 8,245 15,226 11,096 8,213 9,482 1,911 1,442 5,971

28/06/16 26,525 11,459 19,183 20,090 11,654 14,583 8,390 15,327 10,997 8,296 9,561 1,921 1,451 5,944

29/06/16 26,740 11,572 19,473 20,236 11,803 14,697 8,378 15,406 11,150 8,374 9,654 1,953 1,497 6,023

30/06/16 27,000 11,717 19,745 20,531 11,973 14,875 8,453 15,493 11,200 8,520 9,721 1,996 1,533 6,069

1/7/2016 27,145 11,858 19,782 20,619 12,017 15,187 8,609 15,654 11,158 8,571 9,990 2,008 1,542 6,059

2.81% 3.98% 3.42% 2.94% 3.03% 4.52% 4.41% 2.81% 0.56% 4.36% 5.36% 5.06% 6.98% 1.47%

COMMODITIES AND CURRENCY

Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms)

27/06/2016 67.90 90.91 74.88 66.69 3,240 31,248

28/06/2016 67.89 90.17 75.06 66.69 3,146 30,698

29/06/2016 67.74 90.49 75.02 66.21 3,248 30,597

30/06/2016 67.62 90.52 75.01 65.91 3,379 30,539

1/7/2016 67.44 89.55 74.74 65.67 3,268 30,980

0.68% 1.50% 0.18% 1.53% -0.86% 0.86%

DEBT

Tenor Gilt Yield in % (Friday) Change in bps (Week)

1-Year 6.96 -2

2-Year 7.02 -2

5-Year 7.35 -8

10-Year 7.41 -6

KIASL TEAM

Jharna Agarwal

Head- Advisory

Jharna.agrawal@Karvy.com

Nupur Gupta

Lead Advisor

Nupur.gupta@Karvy.com

DISCLAIMERThe information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based on

our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for

any loss incurred based upon it.

The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial

position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note that neither Karvy nor any person

connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned here.

The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned companies from time to time. Every employee of Karvy and its associated

companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in

purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders

only through Karvy Stock Broking Ltd.only through Karvy Stock Broking Ltd.

The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax

incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidence of tax on investments

Karvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indian regulations.

Karvy Stock Broking Ltd. is a SEBI registered stock broker, depository participant having its offices at:

702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 .

(Registered office Address: Karvy Stock Broking Limited, “KARVY HOUSE”, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034)

SEBI registration No’s: ”NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O): INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL – SEBI Registration No:

IN-DP-NSDL-247-2005, CSDL-SEBI Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”