InternationalGlobal investor sentiment was impacted by relatively weak economic data from key economies.The sharpdeclines in commodity prices exacerbated selling pressure and the MSCI AC World Index closed down2.17%. Equity markets in select Emerging economies notched gains, on hopes that the recent fall incommodity prices will ease inflation and current account pressures. As per IMF, recent policy efforts havehelped contain short-term risks, however medium to long term downside growth risks remain elevated.IMF’s global economic growth projections were largely unchanged - 3.2% in 2013 (from 3.5%) and 4% in2014, and has indicated that the macro environment has improved over the last 6 months. It has highlightedthe issues facing advanced economies (with the exception of the US). Whilst short term risks have beencontained by policy measures, structural issues such as soaring government debt and eventual deficitreduction efforts impacting growth, continue to pose downside risks. Major Treasury bond markets reversedgains at end of week on speculation stimulus measures will continue.Towards the close of week, commodityprices rebounded from the sharp sell-off seen earlier, but the Reuters Jefferies CRB Index still closed down1.40%. G20’s acceptance of Japan’s monetary policy stance led the Japanese yen lower.• Asia-Pacific: Gains in India, China and Indonesian equity markets helped regional equities outperformglobal counterparts. China’s economy grew by 7.7% in Q1-2013 compared to 7.9% reported in thesequentially previous quarter. Both local demand and external factors contributed to the slowdown.Japanese exports continued to gain in March helped primarily by increased exports to the U.S. Japaneseindustrial production data also reinforced signs of improvement – February’s revised industrial datashowed an increase of 0.6% mom (sa) compared to a 0.1% mom fall reported earlier. South Korea unveileda $15.3 bln stimulus package focused on small businesses, creating jobs and lifting property markets.• Europe: Global growth concerns weighed on European equity markets this week. French governmentrelaxed austerity targets while Portugal announced new spending cuts to plug the gap stemming fromthe Constitutional court ruling earlier this month. Fitch cut UK’s credit rating one level to AA+ citingweaker economic and fiscal outlook. German manufacturing orders rose 2.3%mom in February. InTurkey, the monetary policy committee (MPC) cut all key interest rates by 50 bps. Riksbank left policyrates unchanged and indicated the accommodative stance will be maintained for longer period of time.On the corporate front, DISH Network offered $25.5 bln for Sprint Nexel.• Americas: The mood in US equity markets was dampened by weak economic and earnings data.Reportsof higher initial jobless claims renewed concerns about labour market. Bank of Canada remained on hold,while Brazil raised the benchmark Selic rate by 25 bps to 7.5%, citing rising inflationary pressures.Colombia’s $2.7 bln stimulus package contained a host of measures to curb currency appreciation(including higher provision for private pension fund investments overseas) and boost local industries &infrastructure.Venezuela elected Nicolás Maduro as president. Blackstone ended its pursuit for Dell, citingamongst other reasons the recent sharp fall in PC sales.Market ReviewWEEK ENDED APRIL 19, 2013
Weekly Weeklychange (%) change (%)MSCI AC World Index -2.17 Xetra DAX -3.68FTSE Eurotop 100 -2.14 CAC 40 -2.07MSCI AC Asia Pacific -1.36 FTSE 100 -1.53Dow Jones -2.14 Hang Seng -0.34Nasdaq -2.70 Nikkei -1.25S&P 500 -2.11 KOSPI -0.91India - EquityIndian equity markets were buoyed by the steep correction in global commodity prices this week. GivenIndia’s large dependence on imports for crude oil, high gold consumption and subsidy regime, the fall inglobal prices assuaged investor concerns on twin deficits (current account and fiscal) & inflation.Improved corporate earnings newsflow also had a positive impact. Gains in large cap stocks outpaced thosein mid and small cap segment. Except technology, all sectoral indices notched up gains. FIIs boughtequities to the tune of $101 mln in the first three trading days of the week.• Macro: Growth in India’s exports accelerated to 7%yoy in March from 4.2%yoy in February helped by alow base effect and seasonality.At the same time,led by fall in oil prices,imports fell by 2.9%yoy.These trendshelped the trade deficit narrow to $10.3 bln from $14.9 bln in February ($191 bln for FY13).This meansthat the current account deficit (CAD) could ease from record highs touched last quarter.Monthly Trade Balance (USD bln)Source: CLSA Asia-Pacific MarketsThe recent sharp correction in international commodity prices along with fall in gold prices augurs well forIndia’s trade balance. This along with signs of improving external demand amidst large stimulus andcontinued FII inflows can help contain pressures on India’s Balance of Payments in the near term.The tradepolicy unveiled this week contained some measures to boost exports,but more concerted efforts are requiredfor sustainable reduction in CAD.
Weekly change (%)S&P BSE Sensex 4.24CNX Nifty 4.60CNX 500 4.00CNX Midcap 2.76S&P BSE Smallcap 1.76India - DebtIndian treasury bond markets rallied as the fall in global crude oil and gold prices, along with positive WPIdata stoked expectations of policy rate cuts.• Yield movements: Yields eased across the yield curve - benchmark 10-year gilt yield decreased 12 bps,while yields on the 1 year paper moved down 10 bps.Yields on the 5 and 30-year paper eased 12 and14 bps respectively.• Liquidity/borrowings: Overnight call money rates hovered around 7.5% levels and demand for liquidityunder the RBI’s LAF window was lower compared to previous week. Scheduled auctions of four GOIsecurities worth Rs. 15,000 crores were oversubscribed close to 4x.• Forex: Helped by positive trade data and commodity markets news flow,the Indian rupee extended last week’sgains and closed up 1%.As of Apr 12, Indian forex reserves stood at around $295.2 bln, about $1.4 bln higherthan previous week levels.Headline inflation trendsSource: Citigroup• Macro: March headline inflation reading surprised positively.Wholesale price inflation eased to 5.96% from6.84% last month and core inflation came in below 4%.A negative however was the sharp upward revision toJanuary inflation numbers to 7.2% from 6.6%. Given that tradables account for 57% of the WPI basket, theongoing decline in commodity prices could aid faster deceleration in headline inflation.