The World this Week December 12' - December 16' 2011
The World This WeekDec 12 – Dec 16, 2011
Equity View:A sharp correction of 4.5% was witnessed in Indian Equity markets. IIP number for month of October came in at -5.1%,worst IIP number in last couple of years. WPI came in at 9.11% for the month of November, which is slightly aboveconsensus expectation. Inflation has stayed above 9% for more than 12 months now.On Friday, RBI came up with its mid quarter review policy, wherein it mentioned that the rate hikes is over and goingforward reversal of interest rate cycle can be witnessed. We expect the January inflation number to be around 8% onback of significant decline in the food inflation number. Food Inflation number has softened and cooled off from around10% to 4.35% last week. Also some cooling off in commodities prices has been witnessed in last week on back ofsignificant movement in the dollar index. Hence some cooling can be witnessed in the inflation number.Historically, it has been seen that equity markets have bottomed out around the peaking of the interest rate tighteningcycle. We expect the reversal of interest rate cycle will happen in near future. We expect RBI to have policy action in thform of CRR or Repo Rate action on 24 January 2012 when RBI will meet for its policy review.In US, macro-economic data continues to remain positive with retails sales, job data & consumer index all remaining rdpositive. There are no signs of any recession for next 2 quarters. 3 quarter GDP number is expected to come during this thweek followed by corporate earnings which will come on 10 January 2011.Real Estate View:Residential prices have been at the same levels now for long time & no price correction is been witnessed in theresidential space. Similar to restructuring that we are witnessing in debt which would continue till month of March, wewould witness a same kind of restructuring in real estate sector till March. Hence we expect prices not to correct tillMarch.On commercial space it is good time to buy. Anything between Rs. 3000-5000 per sq. ft. is considered as good purchase.News:DOMESTIC MACRO: Indias food inflation eased to 4.35% in the year to December 3, from an annual 6.60% rise in the previous week. Its lowest reading since late February 2008 The Reserve Bank of India sent a strong signal on Friday that its next move is likely to be an easing of monetary policy as risks to economic growth increase, but left its policy rate on hold at a three-year high as it acknowledged high inflation.
GLOBAL MACROEuro: Fitch Ratings, the third-biggest of the major credit rating agencies, on Thursday downgraded Goldman Sachs, Deutsche Bank and five other large banks based in Europe and the United States, citing "increased challenges" in the financial markets. Markits Eurozone Composite Purchasing Managers Index, which measures the activity of thousands of euro zone companies, rose for a second month in December to 47.9 from 47.0 in November. Greek Unemployment jumped to 17.7% the third quarter from 16.3% in the previous three-month periodUS: By a vote of 67-32, the Senate approved the legislation that passed a $915 billion bill to fund most federal agency activities through next September and avert a government shutdown. The fate of legislation in the U.S. Congress to extend a payroll tax cut for two months was uncertain on Saturday as the measure appeared to face strong opposition in the House of RepresentativesChina: Chinas economic growth could be slowing further as data on Thursday showed the first year-on-year drop in foreign direct investment in 28 months and a fresh fall in new orders signaled a further contraction in factory activity.
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