Why Invest

1. Benign interest rate regime

a. Interest softening - Interest cut by 25 bps this fiscal
i. Repo at 7.25%
ii. Reverse repo 6.25%
iii. CRR 4%
iv. SLR 21.50%
v. MSF 8.50%
2. Temporary solution for MAT issue (1st June page 14)
a. AP Shah committee to meet stakeholders from 29th June to 6th July
i. CBDT officials and few of 68 FPIs who were sent notice will be
met to understand the stakes
b. Till then no further notice
c. I-T officers to go slow
d. Brings short term relief to FPIs
e. FITCH and Moodys confirmed the FPI outflow wont change Indias
credit rating as
i. They are confident about the fundamentals of the economy and
ii. long term growth potential
3. Good start for budgetary spending (1st June page 1)
a. 8.7% of the total took place in April itself compared to 6.7% last year
b. Best start in 2 decades
c. Total spend was 1.55 lakh crore out of which 17% went to capital
account (What is capital account?)
4. NITI ayog proposing framework to make PPP more effective (1 st June page 9)
a. Vikay kelkar (former finance secretary and economist)panel is sending
its proposal
b. 900 projects crucial for meeting huge infrastructure gap present in the
country
5. Interest rate cut by 25 BPS (2nd June)
a. Bringing down marginal cost of funding for banks even further
b. Prompting some banks to cut rates whereas others are expected to
follow
6. IIP revives
a. At 4.1% in April from 2.1 in March
b. Manufacturing constitutes 75% has grown by 5.1%
a. Mining
c. Capital goods 11.1%
2. Comparatively better valued than China (5th June page 9)
a. Current PE of NIFTY is 22 and Sensex is 19 whereas Sanghai is trading
at 24 after 142% rally in last one year
3. Monsoon may not be as bigger a threat(5 th June page 7)
a. IMD projects it at 102%
b. Crucial grain bowl areas have better rain projection vs 2014
i. North west 85 (79)
ii. Central 90(90)
iii. South 93(92)

iv. North East 88(90)

c. Reservoir in better position due to winter rainfall with 136% extra of 10
year long term average reserves at 43.14 bn cubic meter
7. New debt restructuring allows 51% stake to be taken over by banks (8 th June
page 1)
a. Comes in case of default in loan payment through corporate debt
restructuring(CDR) fails
8. Inflation
a. WPI -2.65
b. CPI 5.01% - still well under 6% 2016 target and RBIs comfort zone
9. Manufacturing PMI
a. 52.6 in May up from 51.3 last month
10.Healthy CAD at 1.3 billion
11.Stalled projects worth 1.15 Lakh crore cleared
a. 42 projects under this likely to get green signal against 50 in last 9
months combined worth 1.45 lakh crore
i. 10 power generation projects
ii. 3 oil and gas
b. PMG was set up by UPA
i. 155 projects were 5.5 lakh crore in first 16 months
c. 91 by NDA till date worth 2.6 lakh crore
d. Overall 404 projects are stalled worth 19 lakh crore have been brought
under PMGs purview to get clearance
12.Forex reserves crossed $350 billion mark for the first time to reach $351.9
billion
a. Payment to be made in foreign currency
b. Arresting rupee volatility
c. 9th highest in world
d. Makes india better placed in case of US rate hike and potential
downside of rupee
13.Black money bill implemented
14.Gold returns slowing down
a. To slow down further if US hikes rate
15.Real estate returns stagnant for last 1 year due to sluggish demand and high
supply
16.Comparatively attractive valuations after correction
a. Horizon has to be long term
17.Systema says monsoons will be normal
18.Indirect tax collection rose for the second month straight
a. 37.3% growth in May after 46.2% in April
b. Led by central excise which rose by 82% after 112.3% last month
19.Rise in car sales for second consecutive month after 2 years
a. Car sales up by 7.7% in May after 18% in April
i. 1,60,067 units sold
ii. Medium to heavy consumer vehicle (considered barometer of
economic condition) rose for the 10th straight month by 24%
20.Moody raises outlook from stable to positive
a. BAA3 positive (from stable) rating maintained
b. S&P BBB- positive

c. Fitch BBB- stable

i. Moody has 21 different gardes starting from AAA to C ; top 10
are investment grade (up to BAA3) - with acceptability to pay
short term debt then bottom 11 are speculative grade(BA1 to C)
with very little acceptability to pay short term debt
ii. Fitch and S&P have similar notation of AAA to BBB- total 10
investment gardes and BB+ to NR for speculative grade or not
rated
iii. Brazil, Venezuela, Pakistan, Greece, Russia who has higher 10
year g- sec yield/ return - all of them has speculative grade
rating
21.GST
a. What is to expect
i. Expected To be implemented from 1st April 2016
ii. Multi layered taxation will be replaced by one tax regime where
revenue will be shared by state and centre
iii. Formula to find out the share of state and also how revenue loss
if any will be compensated
iv. GST is international practice already accepted by near 150
countries
v. Accounting will be easier
vi. Manufacturing can save both time and money
1. Lower pricing and hence higher margin or lower end user
price to boost manufacturing
vii. Could push up GDP by .9-1.5% through higher output
viii. Competitive pricing will make products attractive in international
market making export grow
ix. Tax collection expected to go up due to mere simplicity of
execution
1. $15 billion higher tax collection expected
x. Employment will rise
xi. New Zealand the last country to implement GST got a rise of
45% in revenue
b. Opposition
i. States are worried about reduction of revenue
ii. Robust IT infra is required to implement
c. Status
i. Bharatiya Kisan Sangh farmers body of Rashtriya Swayam
Sevak Sangh has diluted 2 of the contentious issues when they
submitted their 6 point agenda to joint parliamentary committee
on 10th June
1. Done away with SIA(social impact assessment) and
2. Reduced requirement of consent clause to 51% from 80%
earlier
22.142 in the ease of doing business rank
a. Aim to reach top 50
i. Bankruptcy code

ii. 30 days from 90 days to start business

Why should not invest

4. NPA concern (3rd june)
a. 90% of restructured loans have gone bad in march quarter
b. Rs 56995 crore have turned bad almost twice of 29980 last year
c. Capital Adequacy Ratio fell to 11.24% from 11.40% on march 31 st on
YOY basis
d. 7940 crore re-capitalization budget for the FY
i. Inadequate as per analyst, looking at the situation
ii. Smaller PSU may miss out as per RBIs criteria of allocation
based on ROA and ROE
e. Banks have re structured loans worth 2.86 lakh crores up by 18.22%
compared to 2.42 lakh crore last year
f. Total stressed loan is at 10.(5 of the gross advances
i. It means a total of 7.05 Lakh crore compared to 5.91 lakh crore
last year
5. Monsoon will be 88% of long term average : IMD (4 th June page 9)
a. Revised estimates to 88% from 93% of Long term normal average
b. May face drought
c. Food inflation spike up
d. Unseasonal rain and banks already lowering their lending rates may
push RBI to delay its next rate cut
e. Slow 2 wheeler sales
f. Rural area demand comes down affected by no surplus cash with
farmers
g. Back to back two successive corp damages
h. FMCG market showing signs of demand side constraint from Rural India
i. FMCG market grew by 7.1% in CY 14 whereas rural growth was
10.3%
i. Rural revenue related industry to suffer
i. FMCG 30 to 50% revenue comes from rural
1. Emami 50
2. HUL 35
3. Godrej 30
4. Marico 30
ii. Automobile 30 to 50% of two wheelers and 5-30% of
passenger cars
1. Hero Moto Corp 50%
2. Maruti 30%
3. Escorts 70-75% of revenue comes form 10% tractor
market share
iii. NBFC 20 to 50% of loan book from rural demand
6. May not find much space for rate cuts if inflation plays foul as hinted by Rajan
(3rd June page 1)
a. Real interest rate decreased after cut
b. The estimated inflation number has been revised upwards to 6.4%
from 5.8%

c. Real interest rate came down to 2.25% from 2.63%

7. Bond investment has turned net seller in may (4 th June page 10)
a. Net seller of 8054 crores agsint 3062 crore buy of last month
b. They were net sellers last in April 2014 to the tune of 9185 crore
c. Almost 100% of $30 billion G-sec limit and 80% of $51billion corporate
bond limit has been used up
8. Services PMI (4th June page 11)
a. Came down in April to 49.6 from 52.4 in previous month (April)
b. First fall in 13 months
c. Restrained demand, heat wave, earth quake
d. Services contributes 51% to the economy
e. Expanded by 10.1% in 2014-15 first double digit growth in the new
series
f. Composite index at 7 month low 51.2 but is still expansionary
9. Rate hike by US fed
a. Retail sales data good
b. Health care spending shows good result
c. Situation might not be as bad as de growth of .7% of GDP makes it look
like
10.Muted earnings as corporate earning is already behind returns generated last
year , hence correction was inevitable
a. Weak corporate earnings to continue for 2 more quarters as per most
analysts
11.Land bill , GST might be stuck at Rajya Sabha
a. Opposition has more stake holders
12.Export issues led by Europe and cross currency headwinds still continues till
rupee depreciates further
a. Rupee slide continues for correction after showing strong resolve when
most of the international currencies were sliding downwards and
expected to depreciate further by another 2-4%
13.Grexit - Greek may go out of Eurozone and default on payments which could
spark negative sentiments. May force global investors to cut exposure to
emerging markets whose 17% export goes to Europe
14.Chinas sluggish growth may hurt commodities suppliers and reduce export
therefore increase in trade deficit
a. Commodity shock led by non revival of China
15.Sensex trading at 15.6 times estimated earnings against 10.8 times of MSCI
Emerging Market Index
a. Still not cheap after correction from peak in January
16.BSE 500 companies gross debit rises to Rs 24.3 Lakh crore
a. Since 2008-09 increasing at a CAGR of 20% whereas profits grew by
9%
b. Has grown more than 10 times of 2.3 lakh crore in 2001-02
c. Loss making companies make 23% of the total debt in FY14 where the
same was 7% of total debt in FY06 and 115 in FY11
d. Interest coverage ratio is at all time worst after FY03
e. 4 commodities company from MP deafilted which led to a total of 4,000
crore additional stressed asset

f.

Most stressed asset to turn to NPA according to estimates