1. The World This Week
Dec 19 – Dec 23, 2011

2. Equity View:
A sharp rally in the Indian equity market was witnessed last week with the Nifty going up by around 1.3%. The fiscal
deficit data for the year till date is expected to come in on Friday which will be very carefully watched by market. The
number is expected to be in the range of 5.8%-6% which is far more than the target of 4.6%. Government has not been
able to achieve the targeted disinvestment of Rs. 40,000 Crs, being able to raise only Rs. 1,200 Crs. This would also
contribute to the strain in fiscal deficit.
A new drug price control order in Pharmaceuticals space has come where in foreign drug company’s drug prices will be
regulated by the government which will have a significant negative impact on few pharmaceuticals companies.
US stock market on year to date basis has moved in to the positive territory on back of good macro-economic data
coming in for last few weeks. It is reported that the US housing statistics and building permits jumped to one and a half
year high in November 2011 as demand for rental apartments rose, suggesting the housing market was entering in to the
recovery mode. Also, unemployment data fell for the week. Jobless claims fell by 4,000 to 364,000 in the week ended
Dec. 17 from 368,000 in previous week.
In Europe, European Central Bank (ECB) lent around €500Bn to banks to ease the liquidity crisis that banks have been
facing for long time. It is expected that the banks could use this money to support some euro zone countries by buying
government bonds. Last week, yields of many euro zone countries rose sharply. There are no fresh bond options for next
couple of weeks & hence there is no big negative news which is expected from Europe.
Commodity View:
Rupee denominated gold prices are largely determined by currency volatility. Last week, an announcement was made
that India and Japan will have a multi-billion dollar bilateral currency swap agreement which will prevent adverse
contagion effects during the crisis fuelled by speculative investment, which will help stem the rupee’s fall. This would
lead to further appreciation in rupee which will lead to rupee denominated gold to subdue in next couple of weeks. In
dollar denominated gold, we do not see any activity in next 2-3 weeks.
WTI Crude is trading in range of $94-99 per barrel will be mostly subdued in next week. One positive note in crude is
approval of payroll tax cuts in US which will have some kind of revival in US economy & hence will boost the price.
News:
DOMESTIC MACRO:
 India's food inflation eased to 1.81% in the year to December 10, from an annual 4.35% rise in the previous
week.
 The trade deficit for 2011/12 is expected to widen sharply to between $155 billion and $160 billion from $104.4
billion a year ago, posing further downside risks to the rupee, which hit a record low last week.
 India's foreign exchange reserves stood at $302.100 billion as of December 16, down from $306.775 billion in
the previous week
 India's plan to give foreign supermarkets access to its retail industry is still a government priority and has not
been shelved, Finance Minister Pranab Mukherjee said on Friday, weeks after the government was forced to
backtrack on the reform.

3. GLOBAL MACRO
Euro:
 Euro zone ministers agreed on Monday to boost IMF resources by 150 billion Euros to ward off the debt crisis
and won support for more money from EU allies, but it was unclear if the bloc would reach its 200 billion euro
target after Britain bowed out.
 The European Central Bank's offer of cheap long-term cash is an attempt to prevent a rapid bank deleveraging
shock rather than U.S.-style money printing that will filter through to the real economy and leach into other
markets.
US:
 Fitch Ratings on Wednesday warned again that the United States' rising debt burden was not consistent with
maintaining the country's top AAA credit rating, but said there would likely be no decision on whether to cut the
rating before 2013.
 The number of Americans filing new claims for jobless benefits hit a 3-1/2 year low last week at 364,000 from
previous week’s 368,000.
 The U.S. government fell deeper into the red in fiscal 2011 with net liabilities swelling more than $1 trillion as
commitments on government debt and federal benefits rose

4. Swapnil Pawar Varun Goel Jharna Agarwal
Palak Nanjani Abbas Naheed Kanika Khorana
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