Macrodata Jm
Transcript of Macrodata Jm
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Weaker Industrial prodn. second month in a row
The Industrial production growth further slowed down in Jul ’14 to 0.5%YoY
on account of weakness in the manufacturing sector even as the Aug’14 CPIinflation moderated marginally to 7.8%YoY. While the Jun’14 Industrial
production number was revised upward marginally (with a likely encore for
the current month in the next release), overall weakness in the
manufacturing sector, if persisted, is worrisome. The monsoon has picked
up in the last two weeks easing partially, concerns over the Rabi crop
output. These two macro releases are the last ones before the RBI’s next
monetary policy on 30th Sep. Despite weakness in the Industrial sector and
moderate down-tick in the CPI inflation (which will continue till Nov’14 in
our opinion), we believe that the RBI will maintain status quo on the Repo
and the Reverse Repo in the monetary policy given that it has already
shifted focus to Jan’16 inflation target of 6% and thereby tamed easing
expectations of the market expectations in 2014.
Aug’14 CPI Inflation at 7.8YoY%: The Aug'14 CPI Inflation came in at
7.8%YoY (7.96%YoY last month), in-line with consensus expectations driven
by a rise in the fruit & vegetable prices. Barring the Food+ sub-index, all the
other sub-indices saw deceleration in inflation. The rural CPI Inflation
continued to remain higher at 8.35% compared to the urban CPI Inflation at
7.04% and the Consumer Food Price Inflation (CFPI) remained firm at 9.4%.
Core inflation at 6.9%YoY is the lowest registered in the current series.
Jul’14 Industrial production at 0.5YoY%: The Jul'14 Industrial production
came in at 0.5%YoY, lower than consensus expectations second time in a row
(Consensus ~1.8%YoY). Electricity sector growth was seen strong at 11.7%.
Weakness was driven by continued slowdown in the Consumer durables
sector (contraction of 20.9%YoY) as the manufacturing sector contracted by1%YoY giving away strength of Q1FY15. The ever-volatile Capital goods sector
growth contracted by 3.8%YoY vs. a 36-month high growth of 23% last month.
Monsoon picks up in the last two weeks. Deficit down to ~11% of LPA:
The monsoon has picked up in the last month with overall deficit narrowing
down to ~11% of long period average (vs. IMD’s prediction of 3%). The deficit
rainfall in 12 of 36 subdivisions has reduced net sown area by ~3% compared
to last year. A pick up in the reservoir level to 77% of Full Reservoir Level
(FRL), while lower than last year’s 84%, eases worries on the Rabi output .
Inflation trajectory after Nov’14 – key focus: While inflation slowed down
marginally in vegetables, fruits continued to see build-up of inflationary
pressures and concerns remain on the volatility of these two categories goingforward. Despite a slowdown in the industrial activity and the fact that the
inflation print will be down from here on till Nov’14, RBI’s shift of focus to
Jan’16 inflation target of 6% (Jan’15 target of 8% looks achieveable now) has
meant that the expectations of easing of the rate cycle have been pushed
back and inflation trajectory post Dec’14 is a key thing to watch out for in our
opinion. Thus, we expect a status quo in the monetary policy on 30th Sep.
Prasad [email protected]
Tel: (91 22) 663030
Exhibit 1: CPI Inflation Trend
4
5
6
7
8
9
10
11
12
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Source: MoSPI, JM Financial
Exhibit 2: Core, Food+ and Fuel+ inflat
Source: MoSPI, JM Financial
Exhibit 3: IIP growth trend
Source: MoSPI, JM Financial
4
6
8
0
2
4
6
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Ju
)Food+ Fuel+ Core
3)
2)
1)
0
1
2
3
4
5
6
Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14
Macro data release
15 September 2014
India | India Strategy
JM Financial Research is also available Bloomberg - JMFR <GO>, Thomson Publisher & Reute
Please see important disclosure at the end of the rep
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Jul’14 Industrial Production growth at 0.5%
Industrial Production growth slows down further to 0.5%: Jul’14 Industrial
production growth came in at a 4-month low of 0.5%, lower than consensus
expectations (~1.8%YoY). The Electricity sector showed a robust growth of
11.7%YoY but the Manufacturing sector growth disappointed with a
contraction of 1.0%YoY. 1.
Slowdown in the Consumer durables sector (-20.9%YoY) continued even as
favorable base of the last year will likely optically improve the numbers from
here on. The ever-volatile Capital goods sector contracted by 3.8%YoY vs. a
36-month high growth of 23%YoY last month.2.
12 of 22 industry groups in the manufacturing sector have shown positive
growth as compared to the corresponding month of the previous year.
Jun’14 growth was revised up to 3.9%YoY from 3.5%YoY earlier on account of
an upward revision in manufactured goods and Mining output and a similar
revision is not ruled out for the Jul’14 numbers either.
While marginal down-tick in the Mining and Electricity was expected (Jun’14
strength was partly driven by deficit monsoon helping coal, electricity and
cement), the weakness in the manufacturing sector is worrisome.
E3.Vicky
Exhibit 4. Industrial Production at a glance
(%YoY) Weight Jul-14 Jun-14 May-14 Apr-14 Mar-14 Feb-14 FYTD (%YoY
Index of I ndus tri al Producti on 1 00 .0 0.5 3.9 5.0 3.7 (0.5) (2.0) 3.
Mining & Quarrying 14.2 2.1 4.5 2.9 1.7 0.5 2.3 2.
Manufacturing 75.5 (1.0) 2.5 5.1 3.0 (1.3) (3.9) 2.
Electrici ty 10.3 11.7 15.7 6.7 11.9 5.4 11.5 11
Basic goods 45.7 7.6 10.0 6.4 8.6 4.6 4.5 8.
Capital goods 8.8 (3.8) 23.3 4.3 13.4 (11.5) (17.6) 8.
Intermediate goods 15.7 2.6 2.4 3.2 3.0 1.3 4.0 2.
Consumer goods 29.8 (7.4) (9.7) 4.2 (4.8) (2.2) (5.2) (4
Consumer Durables 8.5 (20.9) (23.4) 3.4 (7.7) (11.8) (9.8) (12
Consumer Non - Durables 21.4 2.9 0.6 4.8 (2.7) 5.0 (2.0) 1.
Use based Classification
Source: MoSPI, JM Financial
Exhibit 5. Industrial Production growth trend
By sector By use-based Classification
Source: MoSPI, JM Financial
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Exhibit 6. Manufacturing sector which contributed to revival in IIP in Q1FY15 showed contraction in Jul’14
Contribution to IIP growth by sector Contribution to IIP growth by use-based classification
Source: MoSPI, JM Financial
Exhibit 7. Electricity and Mining have shown strength so far even as manufacturing IIP contracted after initial streng
Electricity IIP Index growth – Cumulative FYTD (%YoY) Manufacturing IIP Index growth – Cumulative FYTD (%YoY)
Source: MoSPI, JM Financial
Exhibit 8. Consumer Durables production continued to contract but base effect will bring some respite in near-term
Consumer Durables IIP Index growth – Cumulative FYTD (%YoY) Capital Goods IIP Index growth – Cumulative FYTD (%YoY)
Source: MoSPI, JM Financial
0
50
100
150
200
250
300
Mining Electricity Manufacturing
0
100
200
300
400
500
600
700
Basic goods Interm edia te
goods
Capital goods Consumer goods
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Exhibit 9. Manufacturing PMI reading also weakened - albeit with a lag
Manufacturing PMI and Industrial production growth Business Expectation Index and Industrial production growth
Source: HSBC Markit, RBI, JM Financial
Vicky
Exhibit 10. Industrial Production at a glance
Sub-Index Weight Jul-14 Jun-14 May-14 Apr-14 Mar-14 Feb-1
Food products and beverages 7.3 5.6 1.8 5.0 8.2 6.2 2
Tobacco products 1.6 (7.8) (0.9) 37.1 9.1 (3.8) 0
Textiles 6.2 1.1 1.5 7.0 7.1 0.1 7
Wearing apparel; dressing and dyeing of fur 2.8 (7.4) (5.8) 10.6 (22.1) 26.0 (21.
Luggage, handbags, saddlery, harness & footwear;tanning and dressing of leather products 0.6 3.2 10.6 10.8 5.1 1.8 (0.8
Wood and products of wood & cork except furniture;articles of straw & plating materials 1.1 5.3 (6.1) 3.8 - (8.3) (17.
Paper and paper products 1.0 (2.2) 3.2 (1.4) 3.0 (3.4) (0.
Publishing, printing & reproduction of recorded media 1.1 (6.9) (4.9) (6.4) (4.9) (4.0) (4.0
Coke, refined petroleum products & nuclear fuel 6.7 (5.0) 1.3 (3.5) 1.4 2.0 6
Chemicals and chemical products10.1 6.0 2.2 4.2 (4.6) 2.5 3
Rubber and plastics products 2.0 7.3 3.6 1.1 (2.2) 4.6 (1.4
Other non-metallic mineral products 4.3 11.8 9.5 7.1 6.0 (0.2) 0
Basic metals 11.3 12.3 11.7 8.3 7.9 9.2 2
Fabricated metal products, except machinery &equipment 3.1 (2.2) (0.5) 1.0 8.9 (11.9) (2.
Machinery and equipment n.e.c. 3.8 4.6 4.7 10.0 9.6 0.5 (4.7
Office, accounting & computing machinery 0.3 (26.0) (60.5) (28.6) 2.3 (26.1) (0.
Electrical machinery & apparatus n.e.c. 2.0 (6.2) 69.1 33.7 66.0 (6.5) (24.8
Radio, TV and communication equipment & apparatus 1.0 (58.3) (62.9) (40.3) (31.6) (33.1) (34.Medical, precision & optical instruments, watches andclocks 0.6 1.4 3.5 0.5 (6.5) (21.5) (1.5
Motor vehicles, trailers & semi-trailers 4.1 0.3 7.3 (7.4) (14.6) (14.2) (9.4
Other transport equipment 1.8 17.1 7.7 13.9 6.6 2.8 5
Furniture; manufacturing n.e.c. 3.0 (17.4) (13.4) 60.0 (7.7) (10.2) 8
Source: MoSPI, JM Financial
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Aug’14 CPI Inflation at 7.8%
CPI Inflation at 7.8%: The Aug'14 CPI Inflation came in-line with expectations
at 7.8%YoY (Consensus ~7.8%) even as consumer food price inflation
remained firm at 9.42%. Core inflation at 6.9%YoY fell to lowest level in the
current series from a high of 10.6%YoY in Jan’14
The rural CPI Inflation continued to remain higher at 8.35% compared to the
urban CPI Inflation at 7.04%.
Fuel+ continued to moderate and will be further helped by falling crude oil
prices in the coming months and barring Food+ index, all the other indices
showed moderation in price increases.
Food+ group remained the highest contributor to the inflation at ~61%
compared to ~10% from housing sector and ~5% from Clothing and Fuel each.
Vegetable price inflation moderated marginally to ~15% from ~17% last
month even as Fruit prices continued to accelerate ~24% compared to 22%
last month.
The rainfall has picked up substantially last month but parts of the country
have received deficient rainfall (Esp. East and West UP together accounting for
~13% of Gross Cropped Area). While the overall CPI inflation print will tend
downward till Nov’14 on strong base effect and we’re on course to meet the
~8% target of the RBI in Jan’15, concerns remain on volatility in the
agricultural commodity prices in the coming months, especially after the base
effect starts waning in Nov’14.
E11.Vicky
Exhibit 12. All India CPI Inflation at a glance
Weight ( %) Aug-14 Jul-14 Jun-14 May-14 Apr-14 Mar-
CPI 100.0 7.80 7.96 7.46 8.28 8.59 8.
Food, beverages and tobacco 49.7 9.22 9.14 7.96 9.22 9.64 9.
Fuel and light 9.5 4.15 4.47 4.73 5.00 5.89 6.
Housing 9.8 8.48 8.94 9.15 9.18 9.73 9.
Clothing, bedding and footwear 4.7 8.53 8.66 8.65 8.79 8.68 8.
Miscellaneous 26.3 5.94 6.56 6.54 6.60 6.77 6.
Source: MoSPI, JM Financial
Exhibit 13. CPI Inflation trend
Urban and Rural CPI Inflation All-India CPI Inflation Sub-indices
Source: MoSPI, JM Financial
Core inflation fell to lowest level of 6.9%Y
in the current series but Consumer Food
Price inflation remained firm at 9.4%YoY
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Exhibit 14. CPI Inflation trend
Urban CPI Inflation Sub-indices Rural CPI Inflation Sub-indices
Source: MoSPI, JM Financial
Exhibit 15. CPI Inflation – contribution to inflation by broad groups
All India CPI Inflation Sub-indices Rural CPI Inflation Sub-indices
Source: MoSPI, JM Financial
Exhibit 16. CPI Inflation – contribution to inflation by broad groups and rainfall by Gross Cropping Area (GCA)
Urban CPI Inflation Sub-indices Rainfall deficit in key regions and their share of GCA
Source: MoSPI, JM Financial
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Exhibit 17. CPI Inflation by sub-indices
Aug-14 Rural Urban All India
Cereals and products 7.85 6.02 7.39
Pulses and products 6.39 8.00 6.88
Oils and fats 2.24 (2.68) 0.70
Egg, fish and meat 7.94 7.35 7.71
Milk and products 11.18 12.49 11.70
Condiments and spices 7.22 14.52 9.36
Vegetables 18.95 7.68 15.15
Fruits 23.55 25.22 24.27
Sugar etc. 1.00 1.41 1.19
Non-alcoholic beverages 6.28 6.18 6.24
Prepared meals etc. 7.50 8.13 7.78
Food, beverages and tobacco 9.64 8.22 9.16
Fuel and light 5.02 2.69 4.15
Clothing and bedding 9.26 7.16 8.53
General Index (All Groups) 8.35 7.04 7.80
Consumer Food Price Inflation 9.83 8.40 9.42
Source: MoSPI, JM Financial
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Monthly Macro Indicators
Exhibit 18. Macro SnapshotIndustrial Production Unit Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-
IIP (%YoY) 2.7 (1.2) (1.3) 0.1 1.1 (2.0) (0.5) 3.7 5.0 3.9 0.5
By Sector
Electric ity (%YoY) 12.9 1.3 6.3 7.5 6.5 11.5 5.4 11.9 6.7 15.7 11.7
Manufacturing (%YoY) 1.4 (1.3) (2.6) (1.1) 0.3 (3.9) (1.3) 3.0 5.1 2.5 (1.0)
Mining & Quarrying (%YoY) 3.6 (2.9) 1.6 2.6 2.7 2.3 0.5 1.7 2.9 4.5 2.1
Economic Activity Indicators
CV sales (%YoY) (26.9) (19.8) (28.8) (25.5) (20.9) (29.8) (24.5) (24.0) (15.3) (9.0) (13.6) (5
Car sales (%YoY) 0.7 (3.9) (8.2) (4.5) (7.6) 1.4 (5.1) (10.2) 3.1 14.8 5.0 15
Two-wheelers (%YoY) 19.3 19.4 6.6 3.1 9.4 10.7 22.6 12.3 17.0 13.4 13.9 18
Cement production (%YoY) 2.5 13.9 (14.4) (4.1) 9.9 (11.5) 10.9 9.2 17.2 17.4 21.3
Coal production (%YoY) (8.3) (7.9) (12.0) (5.5) 8.3 (20.2) 53.0 2.1 12.8 9.4 11.0
Power generation (%YoY) 12.9 1.3 6.3 7.5 6.5 11.5 5.4 11.9 6.3 15.7 11.2 12
Aviation passenger km (%YoY) 12.8 10.1 2.1 4.2 (0.4) 1.2 2.2 3.1 4.1 11.2 5.8
Railway Freight (%YoY) 11.8 (2.0) 3.1 4.5 4.1 4.0 2.2 6.1 4.2 2.6 4.3 6
Port traffic - Import growth (%YoY) (3.2) (9.6) (2.1) 2.2 (7.0) (0.7) 11.4 11.3 1.7 5.6 5.4
Port traffic - Export growth (%YoY) 19.2 8.2 (0.5) 5.7 (0.0) (2.8) (2.4) (0.1) 3.0 (4.2) (8.1)
External Sect or
Exports (US$ bn) 27 27 24 26 26 25 29 26 28 26 28
Export growth (%YoY) 10.3 13.1 2.0 1.9 2.4 (5.5) (4.8) 5.3 12.4 10.2 9.7
Imports (US$ bn) 34 38 34 36 36 33 40 36 39 38 40
Import growth (%YoY) (18.8) (14.5) (16.7) (15.3) (18.8) (18.0) (3.4) (15.0) (11.4) 8.3 5.4
Trade deficit (US$ bn) (7) (11) (10) (11) (10) (8) (10) (10) (11) (12) (12)
Services Trade (US$ bn) 5 6 6 6 7 7 6 6 6
Services trade growth (%YoY) (5.2) (0.8) 14.6 0.4 4.4 14.0 7.0 2.0 1.3
FII - Equity (US$mn) 1,994 2,927 1,130 2,527 (13) 420 3,678 1,211 2,781 1,840 1,939 1,05
FII - Debt (US$mn) (1,260) (2,095) (784) 863 2,021 2,555 1,583 (1,847) 3,425 2,674 3,839 2,82
Forex Reserves (US$ bn) 276 283 291 296 291 294 304 310 312 316 321 3
Months of imports Nos 8.1 7.5 8.6 8.1 8.0 8.8 7.7 8.7 8.0 8.3 8.0
Exchange Rate
USDINR 63.7 61.5 62.6 61.8 62.1 62.2 60.9 60.3 59.3 59.8 60.1 60
Change (%MoM) (1.2) 3.4 (1.8) 1.2 (0.4) (0.2) 2.1 0.9 1.7 (0.8) (0.5) (1
Dollar Index 1,021 1,007 1,019 1,019 1,027 1,022 1,017 1,011 1,009 1,011 1,011 1,02
Change (%MoM) 0.4 1.4 (1.1) (0.0) (0.8) 0.4 0.6 0.6 0.2 (0.2) 0.0 (1
REER (36-country trade wtd) 99.4 99.5 102.6 102.9 102.9 102.6 102.0 103.8 104.5 106.6 106.5 105
NEER (36-country trade wtd) 69.5 69.0 70.7 70.0 70.9 71.0 70.9 72.1 72.8 74.1 73.7 73
Monetary Indicators
Money supply (M3) (%YoY) 12.5 13.0 14.5 14.9 14.5 14.5 13.5 13.9 13.2 12.2 12.7 13
10-Yr Govt. Bond Yield (%YoY) 8.8 8.6 8.7 8.8 8.8 8.9 8.8 8.8 8.6 8.7 8.5 8
Wholesale PricesWPI Inflation (%YoY) 7.0 7.2 7.5 6.4 5.1 5.0 6.0 5.5 6.0 5.4 5.2
Primary Artic les Inflation (%YoY) 14.0 14.6 15.3 10.8 6.8 6.3 7.3 7.0 8.6 6.8 6.8
Fuel & Power Inflation (%YoY) 11.7 10.5 11.1 10.9 9.8 8.7 11.8 9.3 10.5 9.0 7.4
Manu. Products Inflation (%YoY) 2.4 2.8 2.9 3.0 3.0 3.4 3.7 3.7 3.5 3.6 3.7
Retail Prices
CPI Inflation (%YoY) 9.8 10.2 11.2 9.9 8.8 8.0 8.3 8.6 8.3 7.5 8.0 7
of which Food+ (%YoY) 11.3 12.4 14.5 12.0 9.9 8.6 9.2 9.6 9.2 8.0 9.1 9
Credit and Deposit
Bank credit growth (%YoY) 15.0 16.0 13.9 14.2 15.7 15.7 13.9 13.8 12.5 13.3 13.3 10
Deposit growth (%YoY) 11.5 14.3 15.6 15.4 16.2 16.6 14.1 14.7 13.4 12.4 13.0 13
Credit/Deposit ratio (%) 78.3 76.9 75.8 76.7 76.7 77.1 78.0 76.7 76.5 77.0 76.5 76
Source: JM Financial
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Exhibit 19. Performance and Valuation SnapshotPerformance & Valuations Unit Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug
Global Indices
US (%YoY) 3.3 4.2 2.5 1.9 (2.5) 3.3 0.2 1.1 2.2 2.1 0.5 1
UK (%YoY) 4.4 8.6 (0.4) (0.7) 2.3 4.7 5.8 2.2 (2.1) (0.9) (2.0) (2
Japan (%YoY) 9.7 (1.7) 8.4 2.9 (7.2) (0.6) (1.5) (2.8) 2.8 2.8 3.7 (1
Brazil (%YoY) 7.6 0.8 (4.3) (1.1) (7.8) 0.8 4.5 4.2 0.8 1.8 7.0 6
China (%YoY) 6.9 0.4 2.1 (2.3) (4.7) 3.1 (3.3) 1.8 2.5 0.9 6.5 0
South Africa (%YoY) 6.6 3.7 (2.9) 4.0 (4.5) 5.2 4.5 (0.3) 2.6 1.7 2.8 1
Russia (%YoY) 10.6 3.9 (6.1) 1.8 (8.9) (4.1) (5.4) (3.3) 14.2 4.1 (11.1) (0 Domestic Indices
Sensex (%YoY) 7.8 3.4 (7.5) (0.5) 4.9 3.4 3.4 2.0 3.4 (2.8) 5.2 1
Nifty (%YoY) 14.2 5.5 (5.5) (8.8) (7.8) (1.5) 11.9 4.6 9.7 (1.0) 7.3 (4
Midcaps (%YoY) 7.2 6.6 (2.4) 3.0 (3.0) 2.4 6.4 0.6 7.9 3.6 3.9 1
Smallcaps (%YoY) 7.8 7.2 (2.6) 3.3 (3.5) 2.7 7.3 0.3 7.7 3.8 3.8 1
Auto (%YoY) 6.1 7.1 4.2 6.1 (6.7) 4.1 8.4 5.6 13.9 9.1 (0.4) 1
Banks (%YoY) 6.1 6.7 3.1 8.0 (5.3) 4.1 8.7 8.8 18.0 11.5 (0.6) 2
Capital Goods (%YoY) 9.4 8.1 1.9 (0.4) (5.2) 7.0 5.8 1.4 8.6 5.1 2.6 10
Infrastructure (%YoY) 11.3 13.8 (3.0) 4.3 (10.5) 5.4 19.1 1.3 16.6 (0.3) 3.0 1
Energy (%YoY) 11.9 14.4 6.2 6.2 (8.2) 9.0 17.7 2.5 18.8 7.9 (6.8) (0
FMCG (%YoY) 11.8 8.1 1.0 3.2 (9.6) 2.8 15.0 1.5 17.2 5.0 (2.8) (3
IT (%YoY) 3.3 5.3 (3.0) 2.9 (4.9) 0.9 12.2 0.9 13.9 1.1 (2.2) 3
Metals (%YoY) 10.9 (1.8) (4.7) 1.3 (1.4) 0.5 7.8 (3.8) 0.3 (2.2) 8.8 1
Pharma (%YoY) (0.9) 8.0 (1.4) 8.7 3.8 2.6 (9.1) 0.0 (4.1) 10.1 5.7 3
Power (%YoY) 8.0 5.1 2.5 8.0 (9.5) (5.1) 12.9 4.3 21.2 5.7 0.9 (5
Real Estate (%YoY) 7.3 2.7 (3.2) 5.6 1.3 5.3 (5.0) 7.1 (6.8) 12.0 9.4 8 Telecom (%YoY) 11.5 2.3 1.8 5.0 (10.4) 0.9 13.6 (0.7) 24.8 4.8 (4.0) (5
Sensex 12M Forward PE (x) 13.5 14.2 14.7 14.4 14.6 14.7 14.0 14.9 15.2 15.8 16.2 16
Commodities
Brent Crude US$/bbl 102 104 105 108 104 106 106 106 107 111 108 1
Gold US$/oz 1,347 1,316 1,275 1,221 1,248 1,304 1,335 1,301 1,289 1,286 1,313 1,2
EMBI Spread (bps) 351 337 348 339 346 366 341 316 303 281 282 3 Source: JM Financial
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Analyst(s) holding in the Stock(s): (Nil)II.
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