2. Equity View:
Last week, we witnessed high volatility in the equity markets across the globe with the Indian equities correcting by
almost 3.5%. Net FII investments in India turned negative for the current year as heavy outflows were witnessed in the
last couple of weeks. Rupee further depreciated, slipping to an all time low of around 52.5 levels. This led to some RBI
intervention on Thursday & Friday but it was not officially announced. The objective of RBI intervention is to hold the
rupee around the current levels. We do not expect the rupee to depreciate further from the current levels unless some
global catastrophe occurs, however we are also not expecting it to bounce back to 45 levels in the short term.
A new round of volatility was witnessed in Europe due to the increasing bond yields. The Italian bond yields have risen
beyond 7%. The current 2-year, 5-year & 10-year yields are at an all time high. In a very difficult bond auction last week,
Germany failed to find enough bids for the 10-year bonds which was a major negative. Investors are getting worried
about the rising borrowing costs in most of the Euro zone countries. At this point some serious immediate steps need to
be taken to prevent further volatility. It is expected that the European Central Bank & European political leadership
backed by France & Germany would be taking the desired steps to prevent the contagion from spreading further.
In India the Government announced opening of foreign direct investment in the retail space up to 51% in multi brand
retail & 100% in single brand retail. This reform has been facing severe political opposition. The Parliament was closed for
almost a week since the beginning of the winter session and it is expected that only half of the states would probably
allow the retail FDI to come in.
In the coming week on Wednesday, the GDP data for Q2 will be announced. The consensus expectation is around 7.2% -
7.3%. This number is very significant since it will help one know the kind of investment growth that can be expected as
there is serious weakness in terms of infrastructural activity in capital goods space.
News:
DOMESTIC MACRO:
The government on Thursday approved 51 percent foreign direct investment in the supermarket sector, paving
the entry of firms such as Wal-Mart, Tesco and Carrefour into one of the world's largest untapped markets.
India's food price index slips to 4-month low to 9.01% from last week’s 10.63%.
India's foreign exchange reserves fell to $308.624 billion on Nov. 18, from $314.339 billion in the previous week.
The RBI has removed the limit of $100 million placed on net supply of foreign exchange in the market through
rupee swaps.
India's fiscal deficit in the current fiscal year will exceed 4.6 percent of the gross domestic product target, though
the final figures would depend on the actual expenditure, Planning Commission deputy chairman Montek Singh
Ahluwalia told on Monday.
3. GLOBAL MACRO
Euro:
A "disastrous" German bond sale on Wednesday sparked fears that Europe's debt crisis was starting to threaten
even Berlin, with the leaders of the euro zone's two biggest economies still at odds over a longer-term structural
solution.
Moody's warned France, euro zone's second largest economy might lose its coveted AAA status because of
sustained rise in its debt yields coupled with weakening economic growth.
US:
Moody's Investors Service on Wednesday warned that its top credit rating for the United States could be in
jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years.
A U.S. congressional "super committee" on Monday failed to reach a deal on reducing federal government
deficits, the co-chairs of the panel said.
China:
In factory towns across China's export powerhouse in the Pearl River Delta, a vicious cycle of slowing orders
from the West and increasing wage pressures has led to a series of major strikes that could reverberate through
the economy.
4. Swapnil Pawar Varun Goel Jharna Agarwal
Palak Nanjani Neha Arora Kanika Khorana
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