Market Synopsis

Yesterday, the jobless rate in the US stood at 7.6% for the month of June.    It seems the
jobless data is forming a bottom at these levels.    Further, 195,000 new jobs were created
in the previous month, much better than what the market was anticipating.    On the back
of these developments, speculations are rife in the market that tapering of the monetary
stimulus program is just around the corner.

Locally, the President of India has approved the Food Security Ordinance.    It is
anticipated that the Food Bill is likely to put pressure on the government exchequer to the
extent of Rs.125,000 crore.

In the light of these developments, equity markets in India for the coming week are
likely to remain under pressure.

Spectre of an earnings downgrade?

According to a recent RBI assessment, bank credit to most of the major sectors
continued to grow at a slower pace than last year, reflecting the continuing slowdown
in the economy.    Further, one of the broking houses has cut FY 14 EPS for 34
companies.

Development such as the above, raise one question.  
Is an earnings downgrade imminent?

Weekly Outlook

In a bold move, the government hiked gas prices from $4.2/mmbtu to $8.4/mmbtu
(million metric british thermal unit), with effect from April 1, 2014.    Investments in the
oil and gas sector will pick up.

Another positive development came in the form of the Prime Minister setting ambitious
target for investments in the infrastructure sector.    In an attempt at addressing the
bottlenecks in this sector, Rs. 115,000cr. worth of projects on PPP mode were identified
on priority basis for investments ( out of which, at least, Rs.1 lakh cr. worth of projects
are expected to kick off in the coming six months).

Markets cheered the developments with a big push upwards.    Going forward, the positive
sentiment may take Nifty to higher levels.

Weekly Review

The current account deficit data for the month of March 2013 narrowed to 3.6% of
GDP,  much below that what the market was anticipating.    At last, some breather for
the INR.    But, this is only short term.    This data may only arrest further depreciation
in the rupee for some time.   

The resurgent trend in the USD index is a strong headwind for the INR.    The finance
minister, Mr. P Chidambaram, has cautioned that current account gap may rise going
forward.

Weekly Outlook

The week gone by witnessed high volatility and nervousness, perhaps over-reacting to
the Fed.'s announcement regarding its assets buying programe.    Having said that, Nifty
is trading at 5650 odd levels.    At these levels, valuations are looking very attractive.
Some large caps and mid cap stocks are available at mouth-watering valuations.

Daredevil traders willing to go long at current valuations have risk - reward ratio in their
favour.    A sharp rebound in Nifty on the upside seems quite possible.