Markets are looking for a much bigger and significant role of European Central Bank in resolving the crisis.

1. The World This Week
Dec 05 – Dec 09, 2011

2. Equity View:
European Union summit was held last week. The key takeaways from euro summit are:
1. European nations will move towards fiscal integration by having an automatic penalty for countries which will
exceed its fiscal deficit target. It is expected this will come into play next year.
2. A €200Bn package will be given to IMF which in turn can lend money to weaker countries like Portugal, Italy &
Spain.
3. €500Bn European Union Stability Fund will be set up as a bailout fund which is expected to come into effect next
year.
The above mentioned steps may completely solve the crisis, however can be perceived as the first step towards
resolution of European nation issues.
Markets are looking for a much bigger & significant role of European Central Bank in resolving the crisis. Currently, ECB
has refused for any monetization of debt. It is expected that this measure would become impossible to evade & a more
active intervention by ECB in the resolution of European scenario may be witnessed.
In India, the IIP data will be released in the coming week. Consensus expectation is -0.7% for the month of October. The
negative expectation was last witnessed two and half years back. A significant slowdown in the industrial activity &
manufacturing sector has been witnessed which could probably mark October as the worst month in the long time.
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WPI number for the month of November will be announced on Wednesday, 14 November 2011. It is expected to stay
around 9%. Food inflation number is at 6.6% for week ended Nov. 26, versus a 9% seen in last month which is sign of
cool-off in inflation.
IIP & Inflation data will give RBI some relief and something to think on growth trajectory. RBI mid quarter policy review is
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scheduled on 16 December 2011, wherein it is expected that RBI would announce a pause in the interest rate hikes.
Even though it is still early to announce reversal of policy as we do not expect any cuts in interest rates or in CRR,
however looking at the macro-economic data & IIP numbers we could expect the RBI stance to change to dovish from
hawkish, which was maintained for last several months. Many South-East Asian countries have started cutting the
interest rates aggressively including China in last couple of weeks. India is the only country in the Asia-Pacific region,
which is still on the path of monetary tightening.
We have some announcement on insurance deregulation by allowing foreign investments in insurance space which has
been opposed in the Parliament. This reform measure would be critical to watch after the witness of opposition of FII in
the retail space.
News:
DOMESTIC MACRO:
 Food inflation sharply eased to 6.60 percent in the year to November 26, government data on Thursday showed,
from an annual 8.00 percent in the previous week.
 The economy is likely to grow in the range of 7.25 percent to 7.75 percent in the fiscal year ending March 2012,
the finance ministry said in a mid-year economic review presented in parliament on Friday.
 India's foreign exchange reserves rose to $306.844 billion on December 2, from $304.365 billion in the previous
week.

3. GLOBAL MACRO
Euro:
 The European Central Bank cut interest rates by a quarter of a point on Thursday to counter the twin threats of
recession and deflation in the euro zone, and is expected to unveil fresh measures to help banks hurt by the
bloc's debt crisis.
 Europe secured an historic agreement to draft a new treaty for deeper economic integration in the euro zone on
Friday, but Britain, the region's third largest economy, refused to join the other 26 countries in a fiscal union and
was left isolated.
 Greece's economy contracted 5.0 percent year on year in the third quarter, shrinking less than in previous
quarters
 The EFSF could be downgraded by one or two notches, and the lower rating would depend on whether the six
triple-A rated nations in the euro zone are cut.
US:
 The U.S. unemployment rate fell to a 2-1/2 year low to 8.6% in November from 9.0% in October.
 The U.S. recovery is catching some wind in its sails, brightening prospects it can withstand the economic storms
from Europe and a spreading global slowdown.
China:
 China's central bank plans to create a new vehicle to manage investment funds worth a total of $300 billion to
improve returns on the world's largest stockpile of foreign exchange reserves,
 China's annual consumer inflation rate tumbled in November to 4.2% from October’s 5.5%, the lowest level
since September 2010

4. Swapnil Pawar Varun Goel Jharna Agarwal
Palak Nanjani Neha Arora Kanika Khorana
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