Project
the analyst monthly fund factsheet for July 2013
the analyst
Indian Economy
July 2013
monthly fund factsheet
Welcome to the world of uncertainty and consequent large movements in all asset classes. Globally all asset classes were in turmoil as US Federal Reserve has hinted that they may be withdrawing quantitative easing in gradual fashion as US economy is strengthening. India has also felt the tremor. INR has depreciated against USD by 5% while touching life time low at 60.73, yield on benchmark 10 year Government bond inched up by 22 bps while Sensex was down by 2.4% during the month. India’s foreign exchange reserves has hit a ten month lows to $287 billion from a high of $320 billion in September 2012. The depreciating rupee, demand for foreign exchange from oil companies and FII’s capital out flow has compelled RBI to intervene in foreign exchange market intermittently to curb the volatility. This will be keeping foreign reserves under pressure in near future. RBI has also adopted the cautions stance while keeping its key policy rate & CRR unchanged in its June 2013 monitory policy review after three successive repo rate cuts. This will help assess the recent and expected currency movement and the impact of the same on inflation, Current Account Deficit (CAD) and foreign capital flows. Indian economy continues to face both demand and supply headwinds, which is reflected in recent data points. IIP grew by 2.0% YoY in April 2013 against 2.5% YoY in the month of March 2103, after posting better than expected figures in the previous three months. The weakness is prevalent across all components of the IIP except consumer non- durable which grew by 12.3% YoY. The growth in manufacturing and capital goods dipped to 2.8% and 1.0% respectively, compared to 4.2% and 9.0% in March 2013. The manufacturing PMI has been declining for 3 months in a row and fell to a 50-month low of 50.1 in May 2103. The IIP too seems to be reflecting this downward trend with a
the analyst
Indian Economy
July 2013
monthly fund factsheet
Welcome to the world of uncertainty and consequent large movements in all asset classes. Globally all asset classes were in turmoil as US Federal Reserve has hinted that they may be withdrawing quantitative easing in gradual fashion as US economy is strengthening. India has also felt the tremor. INR has depreciated against USD by 5% while touching life time low at 60.73, yield on benchmark 10 year Government bond inched up by 22 bps while Sensex was down by 2.4% during the month. India’s foreign exchange reserves has hit a ten month lows to $287 billion from a high of $320 billion in September 2012. The depreciating rupee, demand for foreign exchange from oil companies and FII’s capital out flow has compelled RBI to intervene in foreign exchange market intermittently to curb the volatility. This will be keeping foreign reserves under pressure in near future. RBI has also adopted the cautions stance while keeping its key policy rate & CRR unchanged in its June 2013 monitory policy review after three successive repo rate cuts. This will help assess the recent and expected currency movement and the impact of the same on inflation, Current Account Deficit (CAD) and foreign capital flows. Indian economy continues to face both demand and supply headwinds, which is reflected in recent data points. IIP grew by 2.0% YoY in April 2013 against 2.5% YoY in the month of March 2103, after posting better than expected figures in the previous three months. The weakness is prevalent across all components of the IIP except consumer non- durable which grew by 12.3% YoY. The growth in manufacturing and capital goods dipped to 2.8% and 1.0% respectively, compared to 4.2% and 9.0% in March 2013. The manufacturing PMI has been declining for 3 months in a row and fell to a 50-month low of 50.1 in May 2103. The IIP too seems to be reflecting this downward trend with a