The J.P. Morgan View Themes to buy, and not to buy ::JPMorgan

 Asset allocation –– Our investment strategy is driven by the themes of
relative growth, low macro volatility and value, and not by global growth,
asset reflation, inflation, or fading tail risks. We stay long equities and credit
vs cash, safe gov’t debt and commodities.
 Economics –– Offsetting growth forecasts changes, up in US and Japan,
and down in China and Euro area, keep the global growth view unchanged.
 Fixed Income –– Disinflationary impulse appears largely in the price for
breakevens.
 Equities –– We raise our end-2013 S&P500 target to 1715. In Japan, we
add a new end-2014 target of 1800 for Topix, while maintaining an end-
2013 target of 1400.
 Credit –– We see modest upside risk to our original full-year return
forecast of 7-8% for US HY. We pencil in 9-10%.
 Currencies –– Forecasts for commodity currencies lowered vs USD on
weaker growth in China.
 Commodities –– We stay OW energy vs. base metals.

RBI cut rate unlikely on Mon; growth to take centrestage : Moneycontrol

In the back drop of a weakened rupee, lower wholesale price index inflation over past three months and decadal low economic growth of 5 percent, all eyes are on the Reserve Bank of India 's monetary policy on Monday. Most experts believe that, given the risk of further depreciation in rupee, the central bank would avoid cutting repo rate in June, but may provide a cash reserve ratio cut of 25 basis points to improve liquidity.

Experts believe that for the rest of year at least 50-75 bps repo cut would be definitely provided by RBI given the severe squeeze in both industrial and consumer demand. Experts argued that all economic indicators are pointing that the central bank now needs to shift its gear and sharpen its focus on growth rather than inflation. Most experts believe that RBI commentary will be more growth focused in upcoming policies.

Petrol price hiked by Rs 2 per litre starting midnight

 Petrol price hiked by Rs 2 per litre starting midnight

Cement- Demand continues to be sluggish :Centrum

Demand continues to be sluggish
We interacted with cement dealers across India (25 cities) to get a sense of the demand and pricing scenario for the sector. Dealers across India believe that demand continues to be sluggish due to low construction activities and poor demand from the infrastructure segment. Also, as per dealers, demand from the trade segment has come down recently. In terms of cement pricing, there has been marginal increase in the last one month across India. In the South region, Hyderabad witnessed a steep hike of Rs90-100/bag in the last one month and current price stands at Rs300/bag. Pan-India average price increased 4.4% MoM to Rs303/bag. Barring Hyderabad, average increase in price was only 2.6% MoM. Going forward, cement dealers are expecting price cuts in coming days primarily due to weak demand and the monsoon season ahead. Though in the near-term we expect cement stocks to remain under pressure due to sluggish demand and subdued cement price in the Monsoon season, in the long run we remain positive on the cement industry. We expect despatches to improve in 2HFY14E (post monsoon) as construction activities pick up which will also help manufacturers to take price hikes.

Demand continues to remain weak: Cement dealers at most cities pointed out to a weak demand scenario and based on our discussion, we believe that cement demand was poor in May. Also, initially, there is slow off-take in June ’13. According to dealers, apart from low infrastructure spending by the government, weakness in demand was also due to scarcity of water. Also, dealers believe that the sale from the trade segment has come down in last few months.

Price rebounds in May after steep decline in April ‘13: After average price (pan- India) correction of 4.4% MoM during April ‘13, cement price increased by 4.4% MoM to Rs303/bag. However, barring Hyderabad, where the price hike was very steep, average MoM increase in cement price was 2.6% in the last one month.

Enters US… OnMobile Global ::ICICI Direct

Enters US…
OnMobile Global has announced the acquisition of Livewire Mobile,
which is a US based company providing end-to-end managed mobile
entertainment solutions for network operators and consumer device
manufacturers. The resultant entity would be a wholly-owned subsidiary
of OnMobile – OnMobile Live Inc. OnMobile would pay $17.8 million for
the deal. The purchase will also include purchase of stock of Fonestarz
Media Ltd, the managed services arm of Livewire in the UK.
Liverwire provides an integrated suite of solutions including full track
music, ringback tones, ringtones and infotainment services. With this
acquisition, OnMobile would get an entry into the US markets to
strengthen its current presence in Latin America, Europe and Asia.
OnMobile had a net cash of | 151.8 crore on its books at the end of FY13,
which we believe would be used for funding this acquisition. We maintain
BUY on OnMobile with a target price of | 45

India Consumer Off the Shelf. :: JPMorgan

Key developments in the Indian Consumer space over the past month include:
 New Product Launches: 1) Premiumisation push remains strong in oral
care space with GSK introducing another premium variant of its leading
toothpaste brand Sensodyne, Repair & Protect priced at a 35-60% premium
to other variants, 2) ITC continues to expand its personal care portfolio with
the introduction of an advanced skin care range under the Vivel Cell Renew
brand, 3) HUL’s focus on expanding the premium range of skin care
products continued with the recent launch of Ponds white beauty BB+ allin-
one fairness cream, 4) Pepsico launched its second mainstream cola
brand, Atom, exclusively created for the Indian market and likely positioned
to compete with Coca-Cola’s brand Thums Up, 5) P&G introduced a new
laundry variant, Ariel colour & style, and 6) L’Oreal expanded its mid-end
hair-care range with launch of Garnier Fructis Goodbye Damage range of
products, inc. shampoos, conditioners and serums.

Tata Steel :At last - a positive beat across segments on underlying earnings with NO one-time benefits; the worst is behind us: JPMorgan

Tata delivered a strong beat across segments after a long time and it was
essentially driven by higher volumes and lower costs. In our view, the strong
results combined with steel prices likely bottoming out, inexpensive valuations
(stock trades at GFC levels on P/BV) and under ownership should drive an up
move in the stock.

Morgan Stanley Research, :India Equity Strategy Playbook Suspend Your Disbelief

Equities in a rollercoaster in 2013, thus far
The macro climate is stabilizing, with the current account deficit,
inflation and fiscal deficit seemingly peaking and the worst for
GDP growth likely behind us. Yet, share prices have been
volatile, up just a tad since December 2012. Arguably, equities
were anticipating this positive macro delta at the start of 2013.
Our view is that the earnings trajectory will be better than what
consensus is forecasting or what appears to be priced into
equities. We see margin expansion, given the steadying
investment rate, and a greater fall in the CAD relative to the fiscal
deficit as the key earnings driver. We forecast that broad market
earnings growth will reach ~20% by end-F2014. Our end-2013
Sensex target implies a further 15% upside, mostly from earnings
progression.
Leading indicators are bullish for equities
Of the 27 leading indicators we track, absolute and relative
valuations, real rates, our proprietary earnings growth leading
indicator, and global liquidity are the most supportive of equities,
followed by hesitant sentiment (our market timing indicator) and
an improving macro (suggested by the yield curve).
What’s not in favor of equities
The most worrying signals for equities are the high level of FII
flows, the market’s apparent complacency about tail risks and
upcoming general elections. The biggest positive delta
for equities in recent weeks has been the fall in rates in
response to a fall in inflation. The lack of strength in
confirmatory signals (reported economic growth, M2 growth,
monetary policy, interbank liquidity and earnings revisions
breadth) is challenging conviction.
Our portfolio strategy
 GARP over GAAP (high FCF, high ROE, low capex).
 Cyclicals over defensives.
 Active sector positions vs. stock selection.
 We are overweight Financials, Energy, Consumer
Discretionary, Technology, Industrials and Materials, and
underweight the other sectors.
Key assumptions (and risks):
 No major risk-off in the world – so correlations do not rise
back to record highs.
 Some domestic policy tailwind, especially in terms of
continuing fiscal consolidation and infrastructure spending.
 Elections not before year-end, although elections are not
necessarily bad for equities.
 Range-bound crude oil and commodity prices.
 No major leg down in capex; importantly, public capex
seems to be turning around.

Global rebalancing: Opportunities and risks :: JPMorgan

· Cyclical and structural forces driving reduction in global
imbalances likely to persist, though domestic distortions (for
example, the imbalance between consumption and investment in
EM Asia) need to be addressed
· Capital flows related to G3 QE can overwhelm EMs. Policy should
strengthen lines of defense, including creating a crisis management
framework. EM capital markets should be deepened, not closed off
or protected, to better absorb the inflows
· After sluggish growth for more than two decades, Japan is only at
the beginning of a sharp policy shift to revive its economy. Three
pillars of Abenomics are likely to boost growth and asset prices, but
unlikely to reach the 2% inflation target
· Slower growth and inflation in China is an ongoing theme. Despite
room for further policy easing, significant changes in monetary or
fiscal policies look unlikely in the near term. Weak demand
conditions expected to persist in the next one to two quarters
· India’s near-term macro success shifts focus back to medium-term
challenges. Focus is currently on alleviating supply side bottlenecks
to boost investment and growth
· Despite near-term economic softness, outlook for Korean GDP
growth in the medium-term remains generally positive, with limited
impact seen from JPY depreciation
· Indonesia’s economic performance has been impressive, but
recently has cooled. This puts reforms, including fuel price
adjustments, into focus.

The End of the Commodities Supercycle Focus on Oil, Copper, Iron Ore and Gold:: Citi

 Citi expects 2013 to be the year in which the death bells ring for the commodity supercycle after its duly noted sunset,
ushering in a new decade of opportunities based on how individual commodities will perform against one another
and against broader market indicators such as equities or currencies. It will be a period of focus on unique individual
commodity cycles and new relations emerging between and among commodities and other asset classes from fixed income to
foreign exchange to global equities.
 The downward shift in China's economic growth rate combined with the decline in the commodity intensity of growth
have a permanent and profound impact on global markets. China has reached a new phase, less focused on infrastructure
and urbanization, both of which are highly commodity intensive. Lower single-digit economic growth shifting to a greater
emphasis on consumption rather than investment hits industrial metals, bulk commodities and to a lesser degree energy
demand.
 The recent separation of commodities from equity markets is in many respects a return to normalcy, given the
sensitivity of commodity prices to coincident conditions and of equities to anticipatory economic changes.
 The denomination effects of changes in the relative value of the US dollar is likewise going to continue to impact
commodities, and Citi’s long-term bullish view of the US dollar is likely to place an even further drag across the asset class this
year. But to the degree that commodity-producing countries depend on specific commodity exports, differentiated conditions
should impact the FX values of different commodity currencies in varied ways as well, providing further opportunities for
investors.

Monetary Policy – Low (Lower) Policy Rates for Longer:: Citi

 Except for Indonesia, EM Asia is expected to keep policy rates low (or lower) for
longer than we earlier thought — In the last month, India, Korea, Sri Lanka and
Vietnam cut policy rates, joining the ranks of other central banks that have surprised on
the dovish side (Australia, Israel, Poland and Turkey), not to mention spillover of BoJ’s
bazooka. We adopt a more dovish bias in our policy rate calls in China, India, Korea,
Sri Lanka, Thailand & Vietnam vs. the previous month, due to both slow growthdisinflation
trends, and for some, aversion to FX outperformance.
 Slow growth and disinflation theme persists, supporting dovish bias — April has
been a disappointment, and the two May data readings we have so far – China’s HSBC
PMI and Korea’s exports in the first 20 days of May – are hardly encouraging. US
growth optimism driving expectations of QE tapering has not been accompanied by
manufacturing/export turnaround yet, thus the demand dampening impact of QE
tapering weighs on sentiment more. Inflation has significantly surprised to the
downside, and we expect this has more to go amid subdued commodity prices and
also favorable base effects in some countries (India, Philippines, Sri Lanka, Thailand
and Taiwan).
 Financial stability risks may be partly addressed thru macroprudential tools —
Worries about financial imbalances are going to be a constraint for further policy easing
in some countries, but in general financial imbalances are hard to diagnose – worries
seem highest in China, but less conclusive in other countries for now. Some (e.g.
Thailand and Malaysia that have seen a buoyant credit cycle) may lean more on
macroprudential tools (MAS may serve as a guide after recently saying it has achieved
“some degree of success in the property and car markets”).
 Cautious approach to FX gains/capital flows reinforces dovish bias in some — A
guarded approach to capital flows is evidenced by some (China, Philippines, Taiwan
and Thailand) recently introducing (or threatening to introduce in Thailand’s case)
measures to reduce net capital inflows. We think some will also implicitly use lower
interest rates as a policy tool to deter FX outperformance and capital flows – the
Philippines has been the most visible case, but Korea’s latest rate cut cites “influence
of yen weakening” and Thailand is under pressure as well.
 Market Implications — We expect a tougher environment for Asia FX vs. USD outside
of CNY (but see INR correction as an opportunity to go long); further back up in US
long-end yields will prompt more curve steepening bias in some local and hard
currency curves, with a few exceptions. IDR bonds may bear flatten on inflation and
monetary policy impact of pending fuel price hike; recent SDA restrictions on trust
access loosening domestic liquidity conditions may continue to support already flat
PHP local bond curves. We still like INR bonds and other frontier markets that are more
a function of domestic dynamics

India Strategy India’s US$10 Billion Club ::Morgan Stanley Research,

India Strategy
India’s US$10 Billion Club
In India, 23 stocks have market cap >= US$10bn:
This group’s total market cap is US$575 billion or 45% of
India’s aggregate. Their daily volume is US$825 million
or 35% of India’s average daily trading. In aggregate,
FIIs are 400 bps overweight in these 23 names vis-à-vis
MSCI India. Local institutions are underweight 120 bps
(ex-SUUTI’s holdings). These 23 stocks account for
60% of FII portfolios in India. This group’s 12-month
return (equally weighted average) is 28%, a tad ahead of
the Nifty. The equally weighted average five-year CAGR
relative return is a solid 7 percentage points.
The key question – which of these stocks should be
in portfolios with a 12- to 18-month view? Here’s how
we determine our ranking.
 Good market dynamics, as we define them: High
trailing five-year return and low beta (high returns
with low volatility), where the sell-side consensus is
not bullish and institutional ownership is not high but
both are rising at the margin, and where trading
volumes are depressed relative to history (lack of
“love” for the stock). The most unloved and
under-owned names are Indian Oil and Kotak Bank.
 Determinants of robust fundamentals: We pick
strong five-year trailing ROE and earnings growth,
high forward change in ROE and earnings, and the
depth and breadth of consensus earnings revisions.
The strongest fundamentals belong to HDFC Bank
and Sun Pharma.
 Valuations: We use trailing P/B, dividend yield,
PEG, and long-term implied earnings growth minus
trailing five-year growth. The least expensive stocks
appear to be Axis Bank and Wipro.
Overall, Wipro, Axis, HDFC Bank, Sun Pharma and ITC
rank as the best. Bharti, HDFC and Tata Motors finish at
the bottom of the list. (See Exhibits 1 & 2 for details).
Focus List changes: Combining this work with our
analysts’ recommendations, we add Sun Pharma and
HDFC Bank to our Focus List. We are booking gains in
Dr. Reddy’s and Yes Bank