The World This WeekOctober 17 – October 21, 2011
Equity View:Last week in the European Union summit, it was agreed to have a € 109 billion bailout package for recapitalisation fundsfor European banks which was a positive. Steps were taken to ensure orderly restructuring of Greek debt. Although noconsensus have been arrived yet; but efforts are being taken to arrive at amicable solutions. One major issue remainsseeking approval of every member of the Euro area for bail out packages which leads to delays. There are considerabledifferences between the French & the German Government over use of ECB in the bailout package. The Germans are notagreeing to print Euros to solve this crisis in the short term. We continue to be hopeful that some kind of announcement th rd thwould be made on 26 Oct 2011. The summit will continue on 3 and 4 Nov 2011 when a major road map to solve theEuro area crisis is expected to be announced.RBI policy will be released on 25th October 2011. The consensus expectations are 25 basis points hike in repo rate. Alsothe GDP growth forecast is expected to be downgraded from 8% to 7.5-7.75%. The 25 bps hike expected is alreadyfactored in the market valuations. What remains to be seen is the RBI commentary which will be an indicator of furtherrate hikes.On the results front, Axis Bank declared Q2 results last week. Company delivered a 25% growth in PAT YoY; Net InterestIncome moved up by 24%. Axis Bank has been able to pass on the repo rate hike by the RBI & continues to maintain ahealthy net interest margin and good asset quality.A disappointing set of numbers was declared by Asian Paints. Company showed de-growth in profits of around 20% withmarginal de-growth in sales. Major reasons for this decline are high input cost & rupee depreciation. L&T declared its Q2 results last week. PAT increased by 15% & sales were up by 20%. Company seems to face marginpressures and has also scaled backed its next years order inflows guidance growth from 15% to 5% which is a concern forthe whole capital goods industry in the short to medium term.News:DOMESTIC MACRO: Indias food price index rose 10.60% from last week’s 9.32% and the fuel price index climbed 15.17% from 15.10% in the year to Oct. 8. Banks credit grew at a 19.5 percent to 41.486 trillion rupees from 34.731 trillion rupees last year, while deposits grew a slower 17.4 percent to 56.249 trillion rupees from 47.929 trillion rupees a year ago. The oil ministry has sought cash subsidy of 140 billion rupees ($2.84 billion) from the finance ministry to partially compensate state-run oil marketing firms for selling fuels at state-set cheaper rates, Oil Secretary G.C. Chaturvedi said on WednesdayGLOBAL MACROEuro: Euro zone finance ministers threw Greece a lifeline on Friday by agreeing to approve an 8 billion euro loan tranche that Athens needs next month to pay its bills. Private holders of Greek debt may need to accept losses of up to 60 percent on their investments if Greeces debt mountain is to be made more sustainable in the long-term, a downbeat analysis by the EU and IMF showed on Friday.
US: U.S. Federal Reserve Chairman Ben Bernanke said on Tuesday that central banks may need to resort to monetary policy to combat asset bubbles, although regulation should be a first line of defense.China: China’s gross domestic product expanded 9.1 per cent in the third quarter from a year earlier, the slowest pace for the world’s second-largest economy since early 2009 and down from a 9.5 per cent increase in the second quarter.
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