Read the current economy of the world

1. The World This Week
Aug 06 – Aug 08, 2012

2. Equity View:
Last week Indian equity markets closed flat on back of poor macro-economic data which came out during the
week. IIP for the month of June contracted by 1.8%, lower than the consensus expectations. This has led to lot of
concern related to significant slow down of industrial activities. IIP for FY 13 Q1 has been approximately 1% and
has continued to be extremely depressed for a long time. This could result into low GDP growth for FY 13. The
capital goods number which is a part of IIP continues to show lot of concerns about capital goods creation. The
CAPEX cycle remains almost at a standstill for almost a year now and serious intervention is needed by the
government to boost up the CAPEX cycle.
Many brokerage houses and economist have slashed the GDP growth forecast for FY 13 to approx. 5.5%. We
continue to believe that as and when the rate cuts happen there will be some kind of revival in the industrial
activity which would help the GDP to reach 5.5%-6%. It is very likely that RBI would start focusing on growth over
inflation in the second half of the year and rate cuts to the tune of probably 50-75 basis points could happen,
which would help GDP to bounce back. RBI has already done 50 basis points of repo rate cut in April 2012. It
typically takes 6 months for rate cuts to show effects in the economy and hence we believe that from September -
October we will see some impact in a broader economy.
The quarterly results of most of the companies were in line with expectations with an overall increase of 9-10% in
profits, excluding government backed PSUs and Oil & Gas marketing companies which have a very high subsidy
burden on account of high crude all prices. Private sector banks also declared a good set of numbers. We continue
to maintain positive stance on names like Axis Bank, ICICI Bank and HDFC Bank. We continue to maintain a positive
bias for FMCG and Pharma space. FMCG and Pharma companies have delivered a 20% growth in profits. For the
remaining part of the year we might see some marginal expansions in these stocks as the commodity prices cool
off.
US markets continue to rally very strongly on the back of very positive macro economic numbers. The S&P has now
crossed 1400 and the US corporate earnings have been broadly in line with the expectations. Markets are
expecting some kind of stimulus announcements from either the FED or the ECB. We continue to believe that if
there is no big stimulus announcement the markets could cool off from the recent rally that we have seen.
News:
DOMESTIC MACRO:
India's industrial production contracted 1.8% in June, driven down by a slump in manufacturing. The
output for May was revised to 2.5% from 2.4%.
Rating agency CRISIL slashed India's growth forecast to 5.5% for the fiscal year ending March, one of the
lowest estimates on the street, just two months after pruning its projection to 6.5% from 7%.
GLOBAL MACRO
EURO
Ratings agency Standard & Poor's on Tuesday revised Greece's outlook to negative, saying the debt-
ridden euro zone country could require more help from its international creditors.
The European Central Bank kept a lid on its bond purchase programme last week as it presented plans to
launch a new and more transparent scheme that will be tied to intervention by the European rescue
funds and political action.

3. US
Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 361,000, the Labor
Department said.
Exports in June increased 0.9% to a record $185.0 billion, with consumer goods such as pharmaceuticals
posting strong gains. Motor vehicle exports increased 5.7%. Overall imports of goods and services
declined 1.5% to $227.9 billion.
China
China's industrial output growth slowed to 9.2% year-on-year in July, weakest since May 2009, down
from 9.5% in June.
The consumer price index rose 1.8% last month compared with a 2.2% rise in June. China's annual
consumer inflation fell to a 30-month low in July, suggesting the central bank has scope to ease monetary
policy further after rate cuts in June and July to keep China's economy on track to meet an official 2012
growth target of 7.5%.

4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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