The World This Week - 07th to 11th March, 2016

1. The World This Week
March 7 – March 11, 2016

2. Equity View:
Week gone by was eventful on the Policy front, both globally as well as domestic. The markets rejoiced
the ECB policy of pushing the interest rates further downwards. This enthusiasm was short lived after
comments from the Governor that any further interest rate declines will happen only under extreme
circumstances but the fact remains that interest rates in the euro zone are more benign than they were
in the last week. On the local front, there were 3 developments, namely, the Real Estate Regulatory Bill,
the Aadhar Bill and the Inland Waterways Bill.
The Inland Waterways bill will open up a new avenue for infrastructure development in India, especially
for cargo movement. The Real Estate Regulatory Bill has been passed at a very favorable time since Real
Estate is going through a tough time currently. This is primarily due to the lack of confidence of both, end
users as well as investors, in the developer community. Aadhar getting a statutory backing is a welcome
step, because from now on, all government benefits can be directly passed through the cash transfer
route to the individual accounts. Over a period of time we can expect both, food and fertilizer subsidies
to be passed through the Aadhar route.
For around 18 months, Mid Caps and Small Caps have been performing better than the Large Caps. But
the Year to Date trends show that due to corrections and subsequent churning of the markets, Sensex is
down by 5.5%, the Mid Caps are down by 7.8% and the Small Caps are down by 13.4%. The FIIs all along
have been sellers while domestic investors have been buyers. This Month to Date, FIIs have turned
buyers and the domestic investors have turned sellers. This is good news for long term investors. The
volatility in the past 3 months has spooked the domestic investors. The US was down by 2.7% YTD, India
was down by 5.5% YTD, China was down by 20% YTD and Japan was down by 11% YTD. Another trend
which was seen was that the commodities sector has started bouncing back on the backdrop of all other
sectors being in negative. This might be a temporary bounce back due to bottoming out of commodities.
IIP data published shows third consecutive month with a contraction at -1.5%. The main culprit for this
has been Capital Goods.
In the near term, we can expect the markets to rally a bit more and the FIIs infusing more money into
India. The key advice during these market conditions would be to stay invested in the long term into
consumption oriented stocks as far as possible.

3. News:
DOMESTIC MACRO:
India's retail inflation is expected to have eased in February helped by falls in prices of some food items,
after edging up for six straight months, raising expectations of a central bank rate cut next month. Analysts
say Raghuram Rajan, Governor of the Reserve Bank of India, could soften monetary stance after Finance
Minister Arun Jaitley stuck to a fiscal deficit target of 3.5 percent of GDP for next fiscal year in his third
budget last month.
Factory output contracted for the third month in a row in January, driven by a sharp decline in production
of capital goods and consumables, signaling that growth momentum in the economy remains vulnerable.
During the month, the Index of Industrial Production (IIP) shrank 1.5%, against a 1.2% contraction the
previous month and a 3.2% contraction in November.
GLOBAL MACRO
EURO
The European Central Bank has surprised financial markets by cutting interest rates in the euro zone to
zero, expanding its money printing program and reducing a key deposit rate further into negative territory
as it seeks to revive the economy and fend off deflation.
The euro area is showing signs of strain from the global slowdown. Weaker growth and deeper price cuts
by companies, as captured in a monthly report by Markit Economics, report said that its composite
Purchasing Managers Index for the euro zone fell to 52.7, the lowest in more than a year, from 53.6. In
Germany, manufacturing took a hit from falling overseas demand, while the composite gauge for France
signaled “sluggish” economic growth.
United States
The Federal Reserve won't raise interest rates this week, but will likely make clear that as long as U.S.
inflation and jobs continue to strengthen, economic weakness overseas won't stop rates from rising fairly
soon.
U.S. import prices fell in February for an eighth straight month, weighed down by declining costs for
petroleum and a range of other goods, but the pace of decline is slowing as the dollar's rally fades and oil
prices stabilize. The Labor Department said on Friday import prices slipped 0.3 percent last month after a
1.0 percent decrease in January. Import prices have decreased in 18 of the last 20months, reflecting a
robust dollar and plunging oil prices.
China
China will not reintroduce the circuit breaker mechanism to its stock markets in the next few years, Liu
Shiyu, chairman of the China Securities Regulatory Commission (CSRC) told, A circuit breaker mechanism
introduced in January by Liu's predecessor Xiao Gang was dismantled after only a few days. The
mechanism was blamed by investors for worsening a sharp selloff in Chinese stocks.
The cut in the credit ratings outlook on China and its financial institutions is a "misjudgment," Shang Fulin,
chairman of the China Banking Regulatory Commission (CBRC), told reporters in Beijing on Saturday
without identifying any rating agencies, Moody's reduced its outlook on Chinese government debt to
"negative" from "stable", citing uncertainty over authorities' capacity to implement economic reforms,
rising government debt and falling reserves.

4. Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
8/3/2016 24,659 10,199 16,971 17,261 11,728 12,265 7,477 15,855 10,925 7,565 8,795 1,695 1,178 5,867
9/3/2016 24,794 10,296 17,184 17,408 11,636 12,464 7,476 15,908 10,977 7,505 8,795 1,719 1,195 5,901
10/3/2016 24,623 10,262 17,168 17,279 11,621 12,253 7,413 15,907 10,831 7,532 8,703 1,711 1,183 5,830
11/3/2016 24,718 10,271 17,241 17,248 11,612 12,284 7,505 15,992 10,829 7,480 8,746 1,703 1,179 5,832
0.24% 0.70% 1.59% -0.08% -0.99% 0.15% 0.38% 0.86% -0.88% -1.12% -0.55% 0.48% 0.15% -0.61%
Commodities and Currency:
Date USD GBP EURO YEN
Crude (Rs.
per BBL)
Gold (Rs.
Per 10gms)
7/3/2016 2416
8/3/2016 67.34 95.90 74.19 59.59 2458 29365
9/3/2016 67.46 95.70 74.06 59.92 2537 29202
10/3/2016 67.05 95.23 73.62 58.99 2550 29080
11/3/2016 67.09 95.75 74.94 59.13 2583 29080
0.37% 0.16% -1.00% 0.78% 5.55% -0.97%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 7.30
-3
2-Year 7.48 2
5-Year 7.80 4
10-Year 7.62 -1

5. Phani Sekhar Ponangi Jharna Agarwal
Nupur Gupta Rishi Ahirkar
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