Indian GDP

Consumer Outlook Index

Business Cycle Indicator
Economic Forecasts
Core WPI (Ex-Fuel & Food)
Consumer Price Index
INR/USD Exchange Rate
Asset Allocation Shift
Macro Alert Equity Allocation Score
INDIA
July 2014
Macro Indicators
ZyFin Proprietary Data
Macro Indicators Current Previous 3M Mov Avg
GDP Growth Indicator (YoY%)
Monthly GDP
3.9
Apr14
3.3
Mar14
Consumer Sentiment
Consumer Outlook Index
42.0
May14
40.6
Apr14
Industrial Activity (YoY%)
Business Cycle Indicator
5.0
May14
5.0
Apr14
Economic Forecasts Forecasts Actual 3M Mov Avg
Core Inflation Forecast (YoY%)
Core WPI (Ex-Fuel & Food)
3.6
Aug14
2.8
Apr14
CPI Forecast (YoY%)
Consumer Price Index
8.5
Jun14
8.3
Apr14
Currency Forecast (Month Avg)
INR/USD Exchange Rate
59.3
Aug14
59.3
May14
Source (Actual Core WPI, Consumer Price Index, INR/USD Exchange Rate) : RBI
With healing sentiment among consumers and investors, Indias demand-driven economy has finally regained the
opportunity to turn its drooping fortunes around. Early indications are that it is responding well to the challenge, as
many of our proprietary macro indicators are showing an uptick.
Our GDP data indicates that India has started the current financial year on a healthy note, reflected by a
strengthening manufacturing and services sectors. The ZyFin Business Cycle Indicator remained stable in May
after falling for two consecutive months, showing early signs of bottoming out in economic activity. The most
optimistic improvement, however, is the sizeable recovery in consumers willingness to spend, as captured by
the ZyFin Consumer Outlook Index. The Spending Sentiment Index recovered sharply in May 2014 after falling
for four consecutive months, auguring well for the automotive, consumer durables and real estate sectors. With
the RBI signalling a softer interest rate regime, a strong recovery in these sectors is in the offing.
The current risk factors include exchange rate volatility and inflation. The recent spike in crude oil prices has once
again led to volatility in the rupee. However, the rate should stabilise soon, with the September quarter
averaging at 58.5. Indian foreign reserves have been improving quite steadily over the past few months and
volatility in crude prices is being driven largely by sentiment. With the ISIS still far away from Iraqs major oil fields
and US navy ships already training their guns in the Persian Gulf, we are hopeful this situation can be contained
before these supplies are impacted. Incidentally, Iraq accounts for 4% of global supplies. Inflation, though, has
started heating up once again after indicating some decline in April. Although food articles continue to be major
contributors, it is encouraging to note some decline in the rate of inflation in essential food items such as cereals,
wheat, rice and vegetables. Milk and poultry products, however, continued to see price appreciation in May. We
expect prudent supply management by the new Government to play a large role this year in controlling food
inflation; this has the potential to annul any adverse price impact resulting from unfavorable weather conditions.
RecoveryBid Finds
Factual Basis
ZyFins proprietary indices
strongly suggest that the Indian
economy is healing. To start with,
there has been marked progress
in consumer sentiment, as
measured by the ZyFin Consumer
Outlook Index. This is its first
improvement after a prolonged
period of decline. Moreover, the
Indian business cycle is showing
early signs of bottoming out as
captured by the ZyFin Business
Cycle Indicator. ZyFin views the
recent aggravation in exchange-
rate-related risk as a temporary
phenomenon. Our forecasts also
suggest a stabilising inflation
rate by September.
Asset Allocation Shift
Macro Alert Equity
Allocation Score
EQUITY
DEBT
Since
Feb 2014
For further details, contact
Tanvi Toprani + 91 9920722007 tanvi@zyfin.com Please refer to the disclaimer at the end of the report
ZyFin
01
INDIA July 2014
MACRO
INDICATORS
ZyFin provides India's first
monthly YoY GDP growth data. It
is released by the 20th of each
month for two months prior (data
for July is available by September
20th). Official data is released for
every quarter, with an eight-
week delay.
01
India mGDP improves
to 3.9% in April 2014
from 3.3% in March
02
Rising exports and
stabilising forex rate
key growth drivers
03
Agricultural growth
slowed once again;
remains a prime
concern
04
Retail inflation a major
bottleneck, but latest
data suggests cooling
05
ZyFins proprietary
indicators show
healing consumer
sentiment, pick-up in
industrial activity
Indian GDP
Strengthening manufacturing and services
sectors yield upward shift in April GDP
Potential bottoming out
ZyFin monthly GDP estimates suggest that a bottoming out in economic activity has been
underway starting March 2014. ZyFin estimates YoY growth to have picked up in April to
3.9% from 3.3% in March 2014. Economic forces appear to be aligning in favour of the
country once again, with multiple real economic data points suggesting a turnaround.
Growth drivers
Improvement in Indias external sector, fuelled by rising exports and a stabilising foreign
exchange rate, is one key driver; other positive developments include the expanding
manufacturing sector, especially intermediate goods, and growth in IT and financial services
on the domestic front.
Strengthening components
The seasonally-adjusted data indicates strengthening in services and manufacturing sectors
during this period. The slowing agricultural sector, however, remains a prime concern.
Agriculture slowed once again in April 2014, as compared to March 2014.
Inflation bottleneck
The major bottleneck is a sticky inflation rate, though latest data on retail inflation suggests
cooling there as well. Once inflation falls within the central banks comfort zone and the
interest rate regime softens, the consequent uptick in consumer demand should nudge the
economy toward recovery.
Positive developments
Our proprietary macro indicators give reasons to be hopeful about the coming months. The
ZyFin Consumer Outlook Index reflects a healing consumer sentiment and the ZyFin Business
Cycle Indicator suggests a small pick-up in industrial activity. Sectors such as automotive, real
estate and consumer durables should, therefore, show improvement over the next quarter.
For further details, contact
Tanvi Toprani + 91 9920722007 tanvi@zyfin.com Please refer to the disclaimer at the end of the report
02
INDIA July 2014
ZyFin GDP data suggests bottoming out in economic activity has been underway since
March 2014
Source : ZyFin Research
3.9
4
4.7
5.8
6.3
5.9
5.1
4.3
3.7
3.1
3.3
3.9%
0
1
2
3
4
5
6
7
M
a
y
-
1
3
J
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n
-
1
3
J
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-
1
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A
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1
3
S
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F
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1
4
M
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-
1
4
A
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-
1
4
Y
o
Y
%

MACRO
INDICATORS
ZyFin Proprietary Data
Consumer Outlook Index
CURRENT
42.0 (May14)
PREVIOUS
40.2 (Apr14)
3 MONTHS AGO
42.6 (Feb14)
ZyFins Consumer Outlook Index is a
barometer of consumer confidence; it
reflects current and future spending
plans, employment and inflation
outlook of urban Indian consumers. A
score above 50 reflects optimism
while below 50 is an indication of
pessimism.
3M Mov Avg
Positive Trend
Negative Trend
Neutral
Consumer Sentiment
Consumer Outlook Index Rallies on Majority
Vote, with 13 of 18 cities reporting improvement
The ZyFin Consumer Outlook Index of
India improved to 42.0 in May 2014, from
40.6 in the previous month. This increase is
based on a sizeable recovery in consumers
willingness to spend in 13 of 18 cities
surveyed. The Spending Sentiment Index
improved for the first time since December
2013, to 28.1, from its lowest-ever level of
25.9 last month. This can be an early
indication of improving sentiment, linked
to a strong government infused with all
the parliamentary muscle needed to push
through reforms. Currently, however,
consumers continue to observe a stagnant
macro-economy. The Employment
Sentiment Index is almost unchanged,
improving marginally to 51.7 from 51.6,
while the Inflation Sentiment Index
improved to 25.6 after two months at 25.1.
Until policy reforms show results,
consumers are likely to remain unmoved
on these fundamental macro issues.
With the Reserve Bank of India
signaling a softer interest rate regime, it is
expected that consumers willingness to
spend will improve over the next three to
four months. This would ensure the much-
needed revival in the auto and real estate
sectors, which are key to providing a boost
to the sagging economy.
ZyFin Proprietary Data
Business Cycle Indicator
CURRENT
5.0 (May14)
PREVIOUS
5.0 (Apr14)
3 MONTHS AGO
5.4 (Feb14)
ZyFin's Business Cycle Indicator is an
independent leading indicator of the
business cycle in India. It indicates
the state of the Indian business cycle
more than two months prior to the
release of Index of Industrial
Production data, allowing reliable
and advanced detection of turns in
the business cycle. A three-month
uptrend signifies an improving
business cycle and vice versa.
3M Mov Avg
Positive Trend
Negative Trend
Neutral
Industrial Activity
June IIP to signal early recovery, but bold
reforms needed to end weak growth spell
The ZyFin Business Cycle Indicator (BCI)
for May 2014 registered a score of 5.0%,
the same as in the past month. A stable BCI
in April and May corresponds to a stable IIP
in May and June, official estimates for
which would be released in July and
August, respectively. Factors that
positively impacted the BCI for May 2014
include improving air freight and air
passenger traffic, a soaring Sensex and the
excise duty cut, which is providing relief to
the struggling auto industry. With early
signs of BCI bottoming out, this can
correspond to a recovery in real economy.
Effecting a complete revival in
industrial production, which shrunk by
0.1% in FY 2013-14, is, however, a steeply
uphill task. The bold reforms proposed by
government, including the
implementation of Direct Tax Code and
easing of gold import restrictions, indicate
its inclination to quickly put an end to the
weak growth spell.
ZyFin expects a slow but consistent
pick-up in the business cycle from July, to
be led by improving consumer sentiment,
a healing external sector and gradual
improvement in real economic conditions.
For further details, contact
Tanvi Toprani + 91 9920722007 tanvi@zyfin.com Please refer to the disclaimer at the end of the report
03
INDIA July 2014
ZyFins Spending Sentiment Index recovery
an early indication of improving sentiments
Source : ZyFin Research
Improving air freight and passenger traffic,
coupled with a soaring Sensex, positively
impacted the BCI for May 2014
Source : ZyFin Research
5.0%
28.1
Pessimism
Business Cycle Indicator (YoY%)
3-Mth Mov Avg
Optimism
Spending Sentiment Index
25
30
35
40
45
50
M
a
y
-
1
2
J
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-
1
2
S
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p
-
1
2
N
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1
2
J
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-
1
3
M
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-
1
3
M
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-
1
3
J
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-
1
3
S
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p
-
1
3
N
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-
1
3
J
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-
1
4
M
a
r
-
1
4
M
a
y
-
1
4
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
13.0
15.0
N
o
v
-
0
7
M
a
y
-
0
8
N
o
v
-
0
8
M
a
y
-
0
9
N
o
v
-
0
9
M
a
y
-
1
0
N
o
v
-
1
0
M
a
y
-
1
1
N
o
v
-
1
1
M
a
y
-
1
2
N
o
v
-
1
2
M
a
y
-
1
3
N
o
v
-
1
3
M
a
y
-
1
4
ECONOMIC
FORECASTS
Core WPI (Ex-Fuel & Food) [YoY%]
ZyFin forecasts that core inflation will
increase, to 3.6% in August 2014, from
the current level of 2.8% in April 2014.
Fears loom over rising prices of brent
crude, a benchmark for international
varieties of oil as concerns rise over
Ukraine tensions. Adverse geopolitical
developments in Iraq pose significant
risks of volatility in crude oil prices as
India imports nearly 80% of its oil.
Price of crude oil rose by 6.34% on
average in foreign markets this May.
Other than this, rise in price of key
raw materials such as basic metals and
alloys, wood and wooden products
and paper and paper products may
CPI (YoY%)
ZyFin forecasts that the Consumer Price
Index will increase marginally to 8.5% for
June 2014, from the RBIs estimate of 8.3%
for April 2014. Recent data indicates that
food inflation is cooling, but a weak
monsoon could lead to difficulty in
sustaining this trend. Fears around rising
fuel prices due to adverse geopolitical
developments pose further challenges in
controlling retailing inflation.
INR/USD Exchange Rate (Month Avg)
ZyFin forecasts that the INR will
remain at its current level of 59.3 (May
2014) in August 2014. The INR has
posted a weak recovery since the
beginning of 2014, but positive
sentiment around the new
government has increased its
resilience against the US dollar. The
RBIs removal of restrictions on
foreign exchange proprietary trades
has also deepened the currency
markets and allowed further forex
stability. The adverse geopolitical
developments in Iraq could, however,
present considerable challenges.
While there is reason to be hopeful for
a quick end to the matter, a disruption
Forecast Actual
Core WPI
(Ex-Fuel & Food)
3.6
Aug14
2.8
Apr14
CPI
(YoY%)
8.5
Jun14
8.3
Apr14
INR/USD Exch Rate
(Month Avg)
59.3
Aug14
59.3
May14

Core WPI (Ex-Fuel & Food)
The ZyFin Core Inflation Forecast predicts
the rate of core inflation (ex-fuel and food)
three months in advance.
Consumer Price Index
The ZyFin Consumer Price Index (CPI)
Forecast predicts the CPI rate one month in
advance.
INR/USD Exchange Rate
The ZyFin Currency Forecast is an estimate
of INR-USD exchange rate, three months
ahead of time.
Please refer to the disclaimer at the end of the report
For further details, contact
Tanvi Toprani + 91 9920722007 tanvi@zyfin.com
3M Mov Avg
Positive Trend
Negative Trend
Neutral
04
INDIA July 2014
further raise the cost of production,
rendering the task of taming inflation
more difficult for the RBI.
8.5%
59.3
CPI Forecast (YoY%)
3-Mth Mov Avg
Currency Forecast (Month Avg)
3-Mth Mov Avg
in the supply of oil would lead to a rise in
international crude oil prices, rendering the
rupee vulnerable once again.
Source : ZyFin Research
Source : ZyFin Research
Source : ZyFin Research
-3.00
0.00
3.00
6.00
9.00
12.00
15.00
D
e
c
-
0
9
A
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g
-
1
0
A
p
r
-
1
1
D
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-
1
1
A
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g
-
1
2
A
p
r
-
1
3
D
e
c
-
1
3
A
u
g
-
1
4
Core WPI Forecast
(YoY%)
3.6%
20.0
30.0
40.0
50.0
60.0
70.0
A
p
r

0
7
D
e
c

0
7
A
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g

0
8
A
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r

0
9
D
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0
9
A
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1
0
A
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1
1
D
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1
1
A
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1
2
A
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r

1
3
D
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1
3
A
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g

1
4
0.0
4.0
8.0
12.0
16.0
F
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b

1
1
J
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n

1
1
O
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t

1
1
F
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1
2
J
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1
2
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1
2
F
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1
3
J
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1
3
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1
3
F
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b

1
4
J
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n

1
4
ASSET ALLOCATION
SHIFT
Forward-looking economic
indicators designed by ZyFin
enables advance risk estimation.
The Asset Allocation Shift is an
advance risk signal to determine
equity investment horizons.
Macro Alert Equity Allocation Score
The Macro Alert Equity Allocation Score signals a bias toward an equity-led
strategy for the third consecutive month.
About ZyFin
ZyFin Research is Indias leading Macro Analytics firm. We provide unique insights and forecasts on the Indian economy and convert them
into actionable strategies for market participants.
Our unique insights are derived from an exclusive, monthly survey of 4,000 Indian consumers across 18 key Indian cities. This first-of-its-kind
survey provides us with a real-time view on consumption, employment and inflation in India. Our team of economists, strategy and market
analysts use these, along with over 100 real economy elements, to forecast a range of macro-economic variables, and create actionable strategies
for market participants.
Our clients comprise strategy, research teams and traders at buy-side and sell-side firms, commercial and retail banks, manufacturing and
services firms, multilaterals, government and academic institutions. Regulators and industry bodies use our insights as part of their policy making
activities.
Team ZyFin (info@zyfin.com)
Debopam Chaudhuri : Chief Economist & Macro Strategist
: Senior Economy Analyst Neha Saraswat
Bhavna Tejwani : Economy Analyst
Disclaimer
This Report is a compilation of data presented in the form of statistics and analysis for ease of reference and user friendliness. ZyFin (to mean and include ZyFin Research
Limited and its officers, directors, employees, affiliates, group companies, subsidiaries, parent companies, agents, representatives or subcontractors) does not, expressly or
implied, warrant, guarantee or make any representations with respect to the information or notes contained therein, concerning the use, results of use or inability to use
or contents of data, in terms of update, accuracy, reliability, completeness, correctness, prevailing, functionality, performance, continuity, timeliness or otherwise, fitness
for a particular purpose. The information contained herein is for general informational purposes only. ZyFin is not liable for investment decisions which may be based on
the views expressed in this Report. ZyFin especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report.
Nothing contained herein shall be construed as purporting to offer any information, advice or services in any manner to any person. ZyFin Research Limited is not an
investment advisory service, is not an investment adviser, and does not provide personalized investment/financial advice or act as an Investment/ Financial advisor.
Wherever possible, all the figures and data given are dated, and the same may or may not be relevant at future date. The information/graphs/charts contained herein are
based on certain assumptions and have been compiled from sources, which ZyFin believes to be reliable, but cannot guarantee its accuracy or completeness. Any forward-
looking word, phrase or expression is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those contemplated by the
said forward-looking word, phrase or expression. The opinions expressed and facts referred to herein are subject to change without notice and ZyFin is under no obligation
to update the same. Any information or data provided may contain inaccuracies and/or typographical errors. By providing data, statistics, indicators and indices of various
investment-oriented communities and platforms, no recommendation is made in any manner to invest in stocks, securities, financial products, communities or any other
asset. The information or data shall not be used to create indices, databases, risk models, analytics, software, or in connection with the issuing, offering, sponsoring,
managing or marketing of any securities, portfolios, financial products or other investment vehicles utilizing or based on, linked to, tracking or otherwise derived from the
information/data without a valid license agreement from ZyFin. All the proprietary rights, statutory or otherwise contained in the information received by such person shall
remain in exclusive property of ZyFin. Any reproduction, redistribution or transmission, for consideration or otherwise, of any such information contained herein is strictly
prohibited and would constitute a breach of the applicable laws.
Web : http://zyfin.com/research
Email : info@zyfin.com
Copyright 2012 by ZyFin Research Limited.
All rights reserved. Redistribution, reproduction and/or photocopying in whole or in part are prohibited without the written permission.
For further details, contact
Tanvi Toprani + 91 9920722007 tanvi@zyfin.com Please refer to the disclaimer at the end of the report
05
INDIA July 2014
Source : ZyFin Research
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
J
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-
0
6
O
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t
-
0
6
J
a
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-
0
7
A
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-
0
7
J
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7
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J
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J
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A
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-
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4
Green areas suggest economic risk favourable for equity exposure and
red areas suggest economic risk unfavourable for equity exposure
Kenneth Saldanha : Editor
Sanjeeva Mathur : Head of Business Development
Tanvi Toprani : Senior Business Development Manager
Macro Indicators
Gross Domestic Product
ZyFin provides India's first monthly year-on-year GDP growth data (mGDP). ZyFin's mGDP is released by the 20th of each month for two
months prior (mGDP growth data for July is available by September 20th). Official data, released by Central Statistical Organisation, is
released for every quarter, with an eight-week delay.
Consumer Outlook Index
ZyFins Consumer Outlook Index is a barometer of consumer confidence; it reflects current and future spending plans, employment and
inflation outlook of urban Indian consumers. A score above 50 reflects optimism while below 50 is an indication of pessimism.
Business Cycle Indicator
ZyFins Business Cycle Indicator is an independent leading indicator of the business cycle in India. It indicates the state of the Indian
business cycle more than two months prior to the release of Index of Industrial Production data, allowing reliable and advanced detection
of turns in the business cycle. A three-month uptrend signifies an improving business cycle and vice versa.
Economic Forecasts
Core WPI (Ex-Fuel & Food)
The ZyFin Core Inflation Forecast predicts the rate of core inflation (ex-fuel and food) three months in advance.
Consumer Price Index
The ZyFin Consumer Price Index (CPI) Forecast predicts the CPI rate one month in advance.
INR/USD Exchange Rate
The ZyFin Currency Forecast is an estimate of INR-USD exchange rate, three months ahead of time.
Asset Allocation Shift
Macro Alert Equity Allocation Score
Forward-looking economic indicators designed by ZyFin enables advance risk estimation. The Asset Allocation Shift is an advance risk
signal to determine equity investment horizons.
DEFINITIONS