An overview of the latest events in the financial market & its impact on investments

1. The World This Week
Mar 11 – Mar 15, 2013

2. Equity View:
Last week, the Indian equity markets corrected by around 1%. We had a 4% uptick in markets the week
prior to that which led to some profit booking. In terms of global developments, we had a very significant
development today morning i.e. on the 18th March 2013 in which Cyprus -which is a part of European
Union imposed taxation on all deposits in the banking system. As per the new proposed law; every deposit
which is less than € 100,000 will be charged 6.75% and every bank deposit which is more than € 100000
will be charged 10% of the deposits plan.
This is the first instance of any sovereign government in Europe directly using the bank deposit system of
the general public to finance the government deficits. They are in an odd situation wherein if they don’t
provide € 6-7 billion of their own capital, they won’t be getting a European Union Bailout and the
government there which is a government has been forced to take this step. This of course is
unprecedented and will cause a lot of issues and concerns about the banking system as a whole and the
stability of the banking system in Cyprus and possibly in the peripheral Eurozone area.
If this trend of governments using bank deposit to fund their own deficit catches on and the other
governments in Spain, Italy, Portugal, etc. wherever the economies are in trouble, start doing it there could
be a run on the whole banking system. Of course this is a small development so far and it is only happened
in Cyprus which is only 0.5% of the Euro area GDP but it’s a very significant development. We would
continue to observe the developments closely as the outcome of this is going to be extremely critical to
the financial stability of the whole Euro area.
In terms of data points in India, we had 3 key data points. Wholesale Price Index(WPI) inflation for
Februaru which came on Thursday in which we had a small uptick last month compared to the previous
month with WPI inflation coming at 6.84% vs. 6.62% that we saw the month before that. This is essentially
on the back of uptick in fuel prices. As we know that diesel prices were increasing significantly in the
month of January and basically WPI is reacting to that. Consumer Price Index (CPI) inflation number also
came on Tuesday which came in at 10.9% which was again an uptick over last month. The food prices
continued to run high and there seems to be no cool down when it comes to fruits and vegetables prices.
The good thing about their inflation number was that the core inflation which is the non food
manufacturing products inflation came below 4% which is something which RBI observes very closely.
We also had the IIP numbers coming in for the month of January i.e. 2.4% from the previous months
number of around 1%. We believe that as far as capital expenditure activity is concerned we have seen
almost a flattish IIP number now for almost 10 months now and we think that we will see small signs of
upticks in the IIP number in the next few months.
We may not see a very big full scale revival but we have spent a lot of time around in this bottom, and the
macro economic data in India might start to see small upticks. We have the RBI policy tomorrow and we
are expecting a 25bps repo rate cut as the Governor D.Subbarao has himself noted last week that the
inflationary pressures have come down off late which has reflected in non food production inflation which
is the core inflation and also considering the fiscal consolidation that the Finance Minister has done in
Fiscal’13, we believe that there is scope for monetary easing. We expect a 25bps repo cut and also expect a
25 bps CRR cut but that is something which still remains to be seen.

3. News:
DOMESTIC MACRO:
 The Reserve Bank of India (RBI) opened the door on Thursday to foreign institutional investors
(FIIs) using investments in corporate and government bonds as collateral in the futures and
options segment of stock exchanges.
 The (WPI), the key inflation measure, rose 6.84% in February higher than 6.62% in January.
India's annual consumer price inflation accelerated to 10.91% in February from the previous
month. Consumer prices rose an annual 10.79% in January.
 Industrial output in January grew by 2.4 per cent, showing signs of recovery on account of better
performance of manufacturing and power sectors even as pressure mounted on RBI to cut
interest rates to spur growth.
 India's February exports rose 4.25% from a year earlier to $26.3 billion, while imports rose 2.6%
to $41.2 billion, leaving a trade deficit of $14.9 billion
GLOBAL MACRO
EURO
 France and Italy won support for a slightly more growth-friendly interpretation of European
Union budget rules at a summit on Thursday after French President Francois Hollande challenged
German-driven fiscal austerity.
US
 U.S. manufacturing output bounced back in February in the latest signal of strength in an
economy that is showing clear momentum despite the headwind from government austerity.
Factory production increased 0.8% in February after falling 0.3% in January, the Federal Reserve
said.
 Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 332,000
last week.
China
 Consumer prices in February rose a stronger-than-expected 3.2% from a year earlier, a big jump
from January's 2.0% pace.

4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
Disclaimer
The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking
Limited) or other Karvy Group companies. The information contained herein is based on our analysis and upon sources
that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for
personal information and we are not responsible for any loss incurred based upon it.
The investments discussed or recommended here may not be suitable for all investors. Investors must make their own
investment decisions based on their specific investment objectives and financial position and using such independent
advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please
note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising
from the use of this information and views mentioned here.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-
mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose
their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis
and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this
recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted
to place orders only through Karvy Stock Broking Ltd.
The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors
are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also
expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability
and incidence of tax on investments
Karvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indian
regulations.
Karvy Stock Broking Ltd. is a SEBI registered stock broker, depository participant having its offices at:
702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 .
(Registered office Address: Karvy Stock Broking Limited, “KARVY HOUSE”, 46, Avenue 4, Street No.1, Banjara Hills,
Hyderabad 500 034)
SEBI registration No’s:”NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O):
INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL – SEBI Registration No: IN-DP-NSDL-247-2005, CSDL-SEBI
Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”