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Macro -economicsEconomic Analysis
Macro –Economic Environment
GDP Saving & Investment Interest Rates Inflation
Budget Tax Structure Balance of Payment
Monsoon & Agriculture
Infrastructure Facilities
Demographic Factors
Monetary Policy
Fiscal Policy
Economic Cycle
Factors in Macro Economics
Interest Rates GDP Inflation
Balance of PaymentIIPExchange
Rates
Interest rates
Interest Rates
Impact of Rising Interest Rates
• A Bank has taken a deposit of 100 from public and CRR is 9 and SLR is 25 then available funds to lend from deposits with the bank will be 100-9-25=66
• Raising interest rates are required to control excess liquidity in the markets
Terms in Interest Rates
• CRR(Cash Reserve Ratio)
• Repo Rates
• Reverse Repo Rates
• SLR(Statutory Liquid Ratio)
Cash Reserve Ratio
• Amount of cash that bank is to kept with RBI
• To secure solvency of the bank and to drain out the excessive money from the banks.
• Present Rate is 4%
• If RBI decides to increase the percent of this, the available amount with the banks comes down (To reduce liquidity in market)
Repo Rate
• Rate at which our bank borrow rupees from RBI
• Short term measure and to fill gaps between demand and supply of money in a bank
• Present Rate is 7.75%
• Decreased from 8.00% which was continuing since 17/04/2012
Reverse Repo Rate
• Rate which is paid by RBI to banks on Deposit of funds with RBI(surplus fund with bank)
• Present Rate is 6.75%
• Decreased from 7.00% which was continuing since 17/04/2012
Statutory Liquidity Ratio (SLR)
• Bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers
• SLR rate is determined and maintained by the RBI in order to control the expansion of bank credit
• Present rate is 23%• Decreased from 24% which was continuing
since 18/12/2010
Impact of Interest Rates on Stock Market
Interest Rate in World
TOP ECONOMIES LAST PREVIOUS HIGHEST LOWEST
AUSTRALIA 3.00 3.00 17.50 3.00
BRAZIL 7.25 7.25 45.00 7.25
CHINA 6.00 6.00 10.98 5.31
EURO AREA 0.75 0.75 4.75 0.75
FRANCE 0.75 0.75 4.75 0.75
GERMANY 0.75 0.75 4.75 0.75
INDIA 7.75 8.00 14.50 4.25
UNITED KINGDOM 0.50 0.50 17.00 0.50
UNITED STATES 0.25 0.25 20.00 0.25
Interest Rates
Details Facts
Frequency Quarterly8 to 12 announcement
Low Interest Rate High liquidity positive for Stocks, Currency but negative for bonds
High Interest Rate Low liquidity negative for stocks , currency but positive for bonds
Below or above the benchmark
Short term Volatility
Gross Domestic Product (GDP)
Gross Domestic Product (GDP)
Total market value of all final Goods & Services Produced
Within the country in a given period of time
GDP = Consumption + Gross Investment + Government Spending + (Exports – Imports)
Debt to GDP in World
TOP ECONOMIES LAST PREVIOUS HIGHEST LOWEST
AUSTRALIA 22.90 20.40 31.70 9.70
BRAZIL 65.10 66.20 79.80 63.50
CHINA 25.80 33.50 33.50 1.00
EURO AREA 87.30 85.40 87.30 66.20
FRANCE 86.00 82.30 86.00 20.70
GERMANY 80.50 82.50 82.50 55.60
INDIA 68.05 69.43 84.30 67.62
UNITED KINGDOM 85.00 79.40 85.00 31.30
UNITED STATES 101.60 99.40 121.70 31.70
GDP Rate in WorldTOP
ECONOMIES LAST PREVIOUS HIGHEST GDP (USD Billion)
AUSTRALIA 3.10 3.70 9.00 1371
BRAZIL 1.40 0.90 10.10 2476
CHINA 7.90 7.40 14.20 7298
EURO AREA -0.90 -0.60 5.00 13075
FRANCE -0.30 0.15 4.90 2773
GERMANY 0.10 0.40 4.70 3750
INDIA 4.50 5.30 10.20 1847
ITALY -2.70 -2.40 10.30 2194
JAPAN 0.30 0.40 9.40 5867
UNITED KINGDOM
0.30 0.20 10.20 2431
UNITED STATES 1.60 2.60 13.40 15094
GDP Rate
GDP Rate in World
GDP
Details Facts
Frequency Quarterly (Revised monthly)
High GDP Positive for Stocks, Currency strong(Due to foreign investor) but negative for bonds (Also create risk of high inflation)
Component of GDP Sector perform as per the growth contributed by each sector
Below or above the benchmark
Short term Volatility
Index of Industrial production (IIP)
Index of Industrial Production (IIP)
A short term indicator
Measures industrial growth till the actual result available
Used by Ministries, Industrial Associations, Research Institutes & Academicians
IIP Data & Stock Market
IIP Data & Stock Market
IIP Data & Stock Market
IIP Rate in World
TOP ECONOMIES LAST PREVIOUS HIGHEST LOWEST FREQUENCY
AUSTRALIA 4.33 2.69 13.72 -8.00 Quarterly
BRAZIL -3.60 -1.00 20.12 -17.47 Monthly
CHINA 10.30 10.10 29.40 -21.10 Monthly
EURO AREA -2.40 -4.00 9.80 -21.40 Monthly
FRANCE -3.10 -3.20 8.50 -19.30 Monthly
GERMANY -1.10 -3.10 15.00 -22.00 Monthly
INDIA -0.60 -0.10 20.00 -7.20 Monthly
UNITED KINGDOM
-1.70 -2.40 22.60 -11.90 Monthly
UNITED STATES
2.10 2.20 62.00 -33.70 Monthly
Unemployment Rate in World
TOP ECONOMIES LAST PREVIOUS HIGHEST LOWEST
AUSTRALIA 5.40 5.40 10.90 4.00
BRAZIL 5.40 4.60 13.10 4.60
CANADA 7.00 7.10 13.10 2.90
CHINA 4.10 4.10 4.30 3.90
EURO AREA 11.90 11.80 11.90 7.20
FRANCE 10.30 10.20 11.20 7.50
GERMANY 5.90 5.30 14.20 0.40
INDIA 3.80 9.40 9.40 3.80
UNITED KINGDOM
7.80 7.70 12.00 3.40
UNITED STATES 7.90 7.80 10.80 2.50
IIP
Details Facts
Frequency Monthly
High IIP Positive for Stocks, Currency strong, Commodity but negative for bonds (Also create risk of high inflation)
Below or above the benchmark
Short term Volatility
Balance of payment
Balance of Payment
Measures the payments that flow between any individual country and all other country
Summarizes all international transaction for that country in a year
It includes Export-Import, Financial capitals,deposits,borrowings etc
Balance of Payment
• Consists of Goods & Services Account, Primary Income Account & Secondary
Income Account
Current Account
• Capital transfers receivables and payable• The acquisition and disposal of non
produced non financial assets.
Capital Account
• Involve financial assets & liabilities • Take place between residents &
nonresidents
Financial Account
Balance of Trade
Imports
Exports
Balance of Trade
TOP ECONOMIES LAST PREVIOUS HIGHEST LOWEST UNIT
BRAZIL -1276.00 -4036.33 5659.37 -4036.33 USD Million
CHINA 291.46 316.18 404.00 -319.81 USD Hundred Million
FRANCE -5349.00 -4289.00 2674.00 -7021.00 EUR Million
GERMANY 12.00 17.00 20.10 -0.50 EUR Billion
INDIA -1086.12 -965.73 13.91 -1111.46 INR Billion
JAPAN -1629.44 -643.29 1608.68 -1629.44 Billion JPY
UNITED KINGDOM
-3201.00 -3577.00 2946.00 -6067.00 GBP Million
UNITED STATES
-38539.00 -48613.00 -831.00 -67351.00USD Million
Balance Of Payment
Details Facts
Frequency Monthly
High deficit on BOP Negative for the currency (Low inflow of foreign currency) Also International commodities are also rising
Below or above the benchmark
Short term Volatility
Exchange Rates
Why Rupee Appreciate or Depreciate?
Exchange Rate
• Exchange rate means how much one currency is worth in terms of another currency. If we can buy $ 1 with Rs. 46, the exchange rate of the two currencies would be $1 = Rs. 46.
• Two types of exchange rate: Fixed and Floating
• In India, we have a Managed Floating Exchange Rate System- Indian government intervenes only if the exchange rate seems to go out of hand by increasing or reducing the money supply as the situation demands.
Factors drive the demand for a currency
• Interest Rates – Differential rates between two countries (For ex – in India interest rates 7-8% and in US 2-3% this lead to greater capital inflow in India) rupee Appreciate
• Inflation Rates- If inflation rate is lower than more good are exported which lead to currency inflow .then Rupee Appreciate
• Export-Import- If export is more than import ,more currency inflow of other country, which lead to currency appreciation
• Trading in currency in Forex Market
INflation
INflation
Inflation Rate in World
COUNTRIES PREVIOUS HIGHEST LOWEST FREQUENCY
AUSTRALIA 2.20 2.00 23.90 Dec/2012
BRAZIL 6.15 5.84 6821.31 Jan/2013
CANADA 0.50 0.80 21.60 Jan/2013
CHINA 2.00 2.50 28.40 Jan/2013
EURO AREA 1.80 2.00 5.00 Feb/2013
FRANCE 1.20 1.30 18.80 Jan/2013
GERMANY 1.55 1.70 11.40 Feb/2013
INDIA 6.62 7.18 34.68 Jan/2013
ITALY 1.91 2.20 25.64 Feb/2013
JAPAN -0.30 -0.10 25.00 Jan/2013
UNITED KINGDOM
2.70 2.70 8.50 Jan/2013
UNITED STATES 1.60 1.70 23.70
Inflation Rate in World
Inflation
Details Facts
Frequency Monthly
High Inflation Negative for currency , Increase risk interest rate hike which effect stock market ,Bonds are stable commodity are rising
Below or above the benchmark
Short term Volatility
Major Obstacles in Indian Economy
• Infrastructure Shortage• Inflation V/s GDP• Fiscal Deficit• Unemployment Rate• Financial Sector
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