1
Apr 05, 2018
Economy & Strategy
For private circulation only. For important information about Karvy’s rating system and other disclosures refer to
the end of this material. Karvy Stock Broking Research is available on Thomson Reuters & Bloomberg
(Code: KRVY<GO>)
Economy & Strategy
Economic Insights
India Research - Stock Broking
RBI maintains yet another status-quo policy
The MPC committee voted 5-1 to keep the repo rate and reverse repo rate
unchanged at 6.0% and 5.75% for the rst bi-monthly policy for 2018-2019 and
reiterated commitment to maintain CPI at 4.0% within a band of +/- 2%.
Despite the last ination print (4.4% vs consensus of 4.7%), RBI remains cautious
on account of potential upside risks to ination from volatility in the price of crude
as well as potential increase in minimum support price of farm products. Thus,
RBI maintains a neutral stance. Bond yields which remained high till March-end
(7.623% on 26th March) have declined notably after the government announced
lower-than-expected scal borrowings, and closed the day at 7.127%.
The RBI has lowered its ination projection to 4.7% from 5.1% for H1 2018-19
and for H2 2018-2019 ination projection has been lowered to 4.4% from 4.6%
accounting for moderation in food prices. Low capacity utilization at 71.8% in the
latest RBI survey indicates that inationary pressures are yet to build.
March 2018 round of the Ination Expectations Survey of Households (IESH)
reveals that households ination expectations have risen marginally. Three months
ahead and one year ahead median ination expectations increased by 30 bps and
10 bps, respectively, as compared to December 2017.
Analyst Contacts
Vivek Ranjan Misra
Jayasree Ram
040 - 3321 6300/6296
vivekr.misra@karvy.com
jayasree.ram@karvy.com
Data for the day
Repo Rate (%) 6.00
Reverse Repo Rate (%) 5.75
India at a glance
GDP growth % (FY18E) 6.60
GVA growth % (Q3FY18) 6.70
IIP Growth % (Jan 2018) 7.50
WPI % (Feb 2018) 2.48
CPI % (Feb 2018) 4.44
Exports growth % (Mar 2018) 4.48
Imports growth % (Mar 2018) 10.41
Fiscal decit % (FY18E) 3.30
Debt / GDP % (Q3FY18) 50.10
Credit growth % (Feb 2018) 11.13
Composite PMI (Feb 2018) 49.70
Manufacturing PMI (Mar 2018) 51.00
Services PMI (Mar 2018) 50.30
CRR % 4.00
SLR % 19.50
Repo Rate % 6.00
Reverse Repo % 5.75
Call Money Rate % 5.80
3-M T-bill Yld % 6.11
1-Y T-bill Yld % 6.42
10YR Govt Bond Yld % 7.29
1-Y CP Rate 7.88
Forex Reserve (Bln $) 422.53
Source: Bloomberg, Karvy Research, *As on Apr 05, 2018
Exhibit: RBI Estimates for CPI
Source: RBI, Karvy Research
5.1
4.7
4.6
4.4
4.0
4.3
4.5
4.8
5.1
Initial Estimate
Revised
H1FY19
H2FY19
Exhibit: Monetary Policy Rates (%)
Source: RBI, Bloomberg, Karvy Research
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec
-15
Feb-16
Apr-16
Jun
-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Repo Rate (%)
Reverse Repo (%)
2
Apr 05, 2018
Economy & Strategy
Exhibit: India Calendar
Date Event Month Prior
12-Apr-18 CPI YoY Mar
4.44%
12-Apr-18 Industrial Production YoY Feb
7.50%
16-Apr-18 WPI YoY Mar
2.48%
Source: Bloomberg, Karvy Research Data Updated at Apr 05, 2018 17:20 IST
Exhibit: India Consumer Price Inflation
Source: Bloomberg, Karvy Research
0
2
4
6
8
10
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
CPI (%)
Core CPI (%)
3M Moving Avg CPI (%)
GDP growth is expected to strengthen at 7.4% in FY18-19 as compared to 6.6% in
FY17-18. We note that India’s manufacturing PMI slipped to 51.0 in March 2018 from
54.0 in December 2017 which indicates continuing expansion, though at moderate
pace. IIP growth at 7.5% for Jan 2018 could be understood for the low base last
year due to demonetization. However, strong growth in commercial vehicle sales at
19.3% YoY (Apr-Feb 2018) indicates positive rural demand. Private consumption
has accelerated on the back of steady growth in domestic air trac (22.9% YoY in
February 2018) and automobile sales (up 14% during Apr-Feb 2018).
Overall, we believe there is a risk of a 25 bps rate hike in late 2018 or early 2019
in order to keep ination expectations anchored. Also, higher MSPs for Kharif
produce and implementation of increased HRA can be viewed as potential barriers
for easing ination.
3
Apr 05, 2018
Economy & Strategy
Exhibit: GDP Trillion $ & Growth (%)
Source: Bloomberg, Karvy Research
Exhibit: CPI Inflation (%)
Source: Bloomberg, Karvy Research
Exhibit: Mcap/GDP (%)
Source: Bloomberg, Karvy Research
Exhibit: Fiscal Deficit / GDP (%)
Source: Bloomberg, Karvy Research
Exhibit: Unemployment Rate (%)
Source: Bloomberg, Karvy Research
Exhibit: Yld-CPI Spread
Source: Bloomberg, Karvy Research, Represents 10YR Govt Bond Yld
Globe at a Glance
Trillion $ Economies
3.1
0.9
0.8
0.8
-0.9
-1.3
-2.5
-2.9
-3.3
-3.4
-3.4
-3.7
-5.0
-5.5
-7.3
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
SPAIN
RUSSIA
GERMANY
S.KOREA
AUSTRALIA
CANADA
ITALY
UK
INDIA
US
FRANCE
CHINA
JAPAN
MEXICO
BRAZIL
5.3
4.4
2.9
2.8
2.7
2.2
2.2
2.2
1.9
1.6
1.5
1.5
1.3
1.2
0.9
0.0 1.0 2.0 3.0 4.0 5.0 6.0
MEXICO
INDIA
CHINA
BRAZIL
UK
US
RUSSIA
CANADA
AUSTRALIA
GERMANY
FRANCE
JAPAN
S.KOREA
SPAIN
ITALY
16.6
10.9
8.9
8.8
8.2
5.8
5.6
5.3
5.0
4.3
4.1
3.9
3.6
3.2
2.5
0
6
12
18
SPAIN
ITALY
FRANCE
INDIA
BRAZIL
CANADA
AUSTRALIA
GERMANY
RUSSIA
UK
US
CHINA
S.KOREA
MEXICO
JAPAN
164
148
144
132
124
114
105
104
72
70
67
49
43
39
32
0
30
60
90
120
150
180
US
CANADA
JAPAN
UK
S.KOREA
INDIA
AUSTRALIA
FRANCE
GERMANY
CHINA
SPAIN
BRAZIL
RUSSIA
ITALY
MEXICO
4.95
2.85
2.03
1.99
1.31
0.85
0.84
0.73
0.56
-0.03
-0.07
-0.78
-1.10
-1.34
-1.47
-2
-1
0
1
2
3
4
5
RUSSIA
INDIA
BRAZIL
MEXICO
S.KOREA
ITALY
CHINA
AUSTRALIA
US
SPAIN
CANADA
FRANCE
GERMANY
UK
JAPAN
18.6
11.2
4.9
3.5
2.6
2.5
2.3
1.9
1.8
1.5
1.4
1.3
1.2
1.2
1.0
0
2
4
6
8
-1
3
7
11
15
19
US
CHINA
JAPAN
GERMANY
UK
FRANCE
INDIA
ITALY
BRAZIL
CANADA
S.KOREA
RUSSIA
SPAIN
AUSTRALIA
MEXICO
GDP (Trillion $)
GDP growth (%)
4
Apr 05, 2018
Economy & Strategy
Equities
EQUITY INDEX LTP 1D %Chg 1Y %Chg 52WH 52WL PE (x)
INDIA NSE NIFTY 10128 (1.1) 9.6 11172 9075 22.0
US S&P 500 2577 (1.4) 9.2 2873 2329 20.8
US NASDAQ 6849 (1.3) 16.2 7637 5805 26.0
CHINA SHANGHAI 3131 (0.2) (2.8) 3587 3017 15.8
EURO STOXX 50 3318 (0.9) (4.7) 3709 3262 14.8
JAPAN NIKKEI 225 21320 0.1 13.3 24129 18225 15.7
UK FTSE100 6995 (0.5) (4.5) 7793 6867 13.0
HONGKONG HANGSENG 29519 (2.2) 21.7 33484 23724 12.4
CANADA TSX 15181 (0.2) (3.1) 16421 14786 17.3
FRANCE CAC 40 5109 (0.8) 0.2 5567 4980 15.9
AUSTRALIA ASX 200 5761 0.2 (1.6) 6150 5630 16.9
GERMANY DAX 11869 (1.1) (3.4) 13597 11727 13.6
SWISS MARKET INDEX 8530 (1.2) (1.4) 9616 8492 28.4
SOUTH KOREA KOSPI 2408 (1.4) 11.4 2607 2118 17.3
TAIWAN TAIEX 10822 (0.6) 10.3 11270 9622 15.3
SPAIN IBEX35 9463 (0.9) (8.7) 11184 9328 13.9
BRAZIL BOVESPA 83087 (1.8) 26.3 88318 60315 20.9
NETHERLANDS AEX 523 (1.0) 1.8 573 506 15.5
SWEDEN OMX 30 1489 (1.3) (5.0) 1682 1482 16.5
ITALY MIB 22279 (1.0) 10.0 24050 19443 11.9
SINGAPORE STRAITS 3340 (2.1) 5.1 3612 3114 10.9
THAILAND SE THAI 1725 (2.3) 8.9 1853 1532 17.3
INDONESIA JAKARTA 6157 (1.2) 8.9 6693 5577 21.3
MEXICO BOLSA 46684 1.9 (5.4) 51772 45785 19.9
MALAYSIA BURSA KLCI 1816 (1.9) 3.9 1881 1708 17.1
NEW ZEALAND 50 8398 0.8 15.9 8635 7188 21.0
Source: Bloomberg, Karvy Research
Currencies
Currency pair with $ Unit LTP %1D %1Y 52WH 52WL
INDIAN RUPEE INR / 1 $ 65.148 (0.2) (0.2) 65.9 63.2
EURO $ / 1 EUR 1.230 0.2 15.2 1.3 1.1
JAPANESE YEN JPY / 1 $ 106.31 0.3 4.2 114.7 104.6
BRITISH POUND $ / 1 GBP 1.408 0.1 13.2 1.4 1.2
CANADIAN DOLLAR CAD / 1 $ 1.283 (0.2) 4.4 1.4 1.2
AUSTRALIAN DOLLAR $ / 1 AUD 0.769 0.1 1.7 0.8 0.7
NEWZEALAND DOLLAR $ / 1 NZD 0.730 0.5 4.6 0.8 0.7
SWISS FRANC CHF / 1 $ 0.959 (0.0) 4.5 1.0 0.9
NORWEGIAN KRONE NOK / 1 $ 7.841 (0.0) 9.5 8.7 7.6
SWEDISH KRONA SEK / 1 $ 8.398 (0.0) 7.3 9.1 7.8
CHINA RENMINBI CNY / 1 $ 6.302 (0.2) 9.3 6.9 6.2
HONGKONG DOLLAR HKD / 1 $ 7.849 (0.0) (1.0) 7.8 7.8
INDONESIAN RUPIAH IDR / 1 $ 13766 (0.0) (3.2) 13817 13126
MALAYSIAN RINGGIT MYR / 1 $ 3.869 (0.1) 14.5 4.4 3.9
PHILIPPINES PESO PHP / 1 $ 52.100 (0.1) (3.7) 52.5 49.3
SINGAPORE DOLLAR SGD / 1 $ 1.313 (0.1) 6.5 1.4 1.3
SOUTH KOREAN WON KRW / 1 $ 1060 (0.5) 5.9 1158 1054
TAIWAN DOLLAR TWD / 1 $ 29.194 (0.2) 4.4 30.7 29.0
THAI BAHT THB / 1 $ 31.241 (0.2) 10.3 34.8 31.1
RUSSIAN RUBLE RUB / 1 $ 57.748 (0.3) (3.0) 61.0 55.6
S AFRICAN RAND ZAR / 1 $ 11.880 (0.5) 14.7 14.6 11.5
BRAZILIAN REAL BRL / 1 $ 3.355 (0.4) (7.8) 3.4 3.1
MEXICAN PESO MXN / 1 $ 18.272 (0.3) 3.0 19.9 17.5
DOLLAR INDEX Spot 90.058 (0.2) (10.4) 101.3 88.3
Source: Bloomberg, Karvy Research
Bonds
10Y Govt Bond Yld% 1D Chg BPS 1Y Chg BPS 52WH 52WL
INDIA 7.127 (3.8) 64.3 7.8 6.4
US 2.766 (0.9) 40.6 3.0 2.0
GERMANY 0.496 (0.5) 23.9 0.8 0.2
FRANCE 0.721 (1.0) (20.7) 1.0 0.6
CHINA 3.738 (1.5) 44.5 4.0 3.3
JAPAN 0.033 0.3 (3.3) 0.1 (0.0)
UK 1.359 (0.1) 29.1 1.7 0.9
BRAZIL 9.745 25.0 (24.3) 11.8 9.4
ITALY 1.749 (4.5) (52.7) 2.4 1.6
RUSSIA 7.152 (2.1) (87.5) 8.2 7.1
CANADA 2.130 (1.9) 54.5 2.4 1.4
AUSTRALIA 2.632 2.6 2.7 2.9 2.3
SPAIN 1.170 (2.0) (44.7) 1.8 1.2
S.KOREA 2.610 (2.7) 48.0 2.8 2.1
MEXICO 7.328 (1.3) 21.6 7.8 6.7
INDONESIA 6.589 (1.0) (45.0) 7.3 6.1
NETHERLANDS 0.643 (0.5) 13.7 1.5 0.4
NORWAY 1.848 (1.4) 22.6 2.0 1.5
SWITZERLAND (0.006) (2.8) 12.0 0.2 (0.2)
HONG KONG 1.986 0.9 32.0 2.1 1.2
SINGAPORE 2.315 (1.1) 11.1 2.5 1.9
SOUTH AFRICA - 2.0 (25.4) 9.5 8.3
PORTUGAL 1.630 (0.7) (229.6) 4.0 1.6
GREECE 4.102 (15.2) (297.7) 7.2 3.6
Source: Bloomberg, Karvy Research
Commodities
Commodity Unit LTP %1D %1Y 52WH 52WL
BRENT CRUDE OIL $/bbl 67.0 (1.7) 22.6 70.4 47.2
NYMEX CRUDE OIL $/bbl 62.3 (1.9) 18.2 66.6 44.3
NATURAL GAS $/mmbtu 2.7 1.2 (4.9) 3.0 2.5
GOLD $/troy ounce 1342.9 0.8 6.9 1366.2 1204.9
SILVER $/troy ounce 16.3 (0.9) (11.1) 18.7 15.2
PLATINUM $/troy ounce 917.0 (0.9) (4.6) 1028.7 873.2
ALUMINIUM $/MT 1978.0 (1.3) 1.3 2290.5 1855.0
COPPER $/MT 6796.0 1.2 18.1 7312.5 5462.5
ZINC $/MT 3280.0 0.2 21.1 3595.5 2427.5
NICKEL $/MT 13465.0 1.2 36.7 14420.0 8680.0
LEAD $/MT 2392.0 (0.1) 4.6 2685.0 2043.5
IRON ORE $/ MT 62.7 (2.5) (21.0) 80.4 53.8
COAL $/ MT 92.5 0.9 22.8 92.5 75.3
COKING COAL $/ MT 198.8 0.4 12.4 314.0 141.2
CORN Cents / bu 378.8 (2.5) (5.9) 430.0 353.8
WHEAT Cents / bu 452.8 (1.0) (9.7) 609.8 423.8
SOYBEAN Cents / bu 1002.5 (3.4) 4.1 1082.5 928.8
ROUGH RICE $ / 100 lb 12.4 (0.2) 12.2 12.9 11.8
CRUDE PALMOIL MYR / MT 2454.0 0.7 - 2604.0 2350.0
SOYBEAN OIL Cents / lb 31.7 (1.9) (2.8) 36.5 31.4
COFFEE Cents / lb 116.9 0.3 (22.7) 157.1 115.9
SUGAR Cents / lb 12.4 (0.9) (28.1) 17.7 12.2
COTTON Cents / lb 80.0 (2.5) 9.5 86.6 66.6
ETHANOL $ / Gal 1.4 (2.1) (8.9) 1.5 1.4
RUBBER Cents / KG 134.4 (1.8) (25.3) 185.9 123.0
BALTIC DRY INDEX Index 1016.0 (3.7) (19.0) 1743.0 818.0
Source: Bloomberg, Karvy Research
Global Markets at a Glance
5
Apr 05, 2018
Economy & Strategy
Exhibit: Nifty
Exhibit: S&P 500
Exhibit: Euro Stoxx 50
Exhibit: Nikkei
Exhibit: Shanghai
Exhibit: INR
Exhibit: Dollar Index
Exhibit: Eur
Exhibit: JPY
Exhibit: CNY
Exhibit: India 10 Yr Yld %
Exhibit: US 10 Yr Yld %
Exhibit: Germany 10 Yr Yld %
Exhibit: Japan 10 Yr Yld %
Exhibit: China 10 Yr Yld %
Source: Bloomberg, Karvy Research
Global Markets at a Glance
64.70
64.80
64.90
65.00
65.10
65.20
65.30
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
2,560
2,580
2,600
2,620
2,640
2,660
2,680
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
88.0
88.5
89.0
89.5
90.0
90.5
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
2.75
2.77
2.79
2.81
2.83
2.85
2.87
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
3,240
3,260
3,280
3,300
3,320
3,340
3,360
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
1.220
1.225
1.230
1.235
1.240
1.245
1.250
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
0.480
0.490
0.500
0.510
0.520
0.530
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
20,200
20,700
21,200
21,700
22,200
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
103.0
104.0
105.0
106.0
107.0
108.0
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-
Apr
0.00
0.01
0.02
0.03
0.04
0.05
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-
Apr
3.72
3.73
3.74
3.75
3.76
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
6.24
6.26
6.28
6.30
6.32
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
3,100
3,120
3,140
3,160
3,180
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
6.80
7.00
7.20
7.40
7.60
7.80
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
5-Apr
9860
9960
10060
10160
10260
10360
23-Mar
26-Mar
27-Mar
28-Mar
3-Apr
4-Apr
5-Apr
6
Apr 05, 2018
Economy & Strategy
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Disclaimer
y Analyst certication: The following analysts Vivek Ranjan Misra & Economist Jayasree Ram, who is (are) primarily responsible for this report and whose
name(s) is/are mentioned therein, certify (ies) that the views expressed herein accurately reect his (their) personal view(s) about the subject security (ies)
and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specic recommendation(s) or views contained
in this research report.
y Disclaimer: Karvy Stock Broking Limited [KSBL]is registered as a research analyst with SEBI (Registration No INH200003265). KSBL is also a SEBI
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associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and
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y It is conrmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not
received any compensation from the subject company mentioned in the report in the preceding twelve months.
y It is conrmed that Vivek Ranjan Misra, Research Analyst & Jayasree Ram, Economist did not serve as an ocer, director or employee of the companies
mentioned in the report.
y KSBL may have issued other reports that are inconsistent with and reach dierent conclusion from the information presented in this report.
y Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report.
y We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities.
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