The document provides a weekly summary of global and domestic economic events and market performance for the week of June 15-20, 2015. Some key points: - The Chinese stock market corrected 12-15% last week and signs point to a market bubble bursting due to high valuations. - Greece seems to be coming around in negotiations with Eurozone and a solution is in sight to avoid default on June 30th debt repayment. - India's monsoon season has started well, which is positive for rural consumption and the agricultural sector. - Indian markets rallied over the week, with the Sensex up 2.74%, as concerns over Greece and monsoons eased.

1. The World This Week
June 15 – June 20, 2015

2. Equity View:
This week has interesting data releases related to global events. The two markets to watch out for are –
China and Euro zone primarily. The Chinese market which corrected about 12-15% last week has all
eminent signs of bubble bursting. This market last year gained by 152% and added around $6-tn worth of
market cap. The economy of China being at $8-10-tn, it added 0.7 to 0.75 times its GDP and this is on top
of the already existing market cap. Usually when the Market cap-to-GDP is about 1.3 it is considered as
some sort of intermittent peak. Anything more than that by empirical evidence does suggest that market
is over heated. The margin debt of all Chinese investors put together is about $363-Bn. The median P/E
ratio of stocks in the Shanghai index is 95 times, compared to 68 in the peak time of 2007. Three weeks
back an IPO in the China stock market in a week’s time raised more funds than the market cap of entire
Indian Market. A cursory look at all these factors indicates that the conditions are ripe for some kind of
correction.
In the Euro zone, after the initial round of Brinksmanship Greece seems coming around. Late night
negotiations over the weekend have made Greek yields from it intransigent position and now deal seems
to be more or less in sight. 30th
June will be the most important day because 1.6-Bn Euros of repayment
to the IMF is due on Greece and if it does not pay, it will be deemed to be a country in default. However
it seems that Greece might finally come around and a solution might be worked out.
The first two weeks of monsoon in India have been fantastic and seems the concern is being alleviated.
This remains to be seen especially till the end of July but it is a good beginning and is good for the
sentiments as we can see that the markets in anticipation have been rallying. Banks, Financial Services,
Rural Consumption stories that were beaten down have again started picking up and that is the space
investors should start looking favourably now. If we add Greece concerns getting over it is a good
combination for the market to rally back. The only flying ointment will be China if the Chinese corrections
were to take place. But with the fundamentals of the Indian markets and Euro zone improving (hopefully
with Greece coming around), any technical correction because of China induced fears will be a very good
opportunity for investors to put their money to work.

3. News:
DOMESTIC MACRO:
 Government proposes to issue gold bonds worth Rs 13500 cr with a sovereign guarantee to divert
investment demand for physical gold to a financial instrument.
 RBI introduces a new 30-year government bond; it will be reckoned as an eligible instrument in
government security by banks for statutory liquidity ratio (SLR) purpose.
 India’s trade deficit in May narrowed to $10.40 bn compared with around $10.99 bn in April; merchandise
exports in May contracted 20.19%, reaching $22.34 bn compared with $28 bn a year ago in the same
month; imports in May reached $32.75 bn, down 16.52% compared with $39.23 bn last year in the same
month.
 India’s wholesale price index-based inflation came in at -2.36% in May, slightly higher than the 2.65%
decline in price growth registered in April.
GLOBAL MACRO
EURO
 Euro zone’s trade balance recorded a 24.9 bn euro surplus in April, compared with 14.9 bn euros in the
same month last year.
 UK retail sales rose by 0.2% in May, a slowdown from a rise of 0.9% in April.
 UK producer prices fell 1.6% in the year to May, compared with a fall of 1.7% in the year to April.
United States
 US’ University of Michigan consumer sentiment index came in at 94.6 in June, up from the final reading of
90.7 in May.
 The US current account deficit widened to $ 113.34 bn in Q1 2015 from $ 103.14 bn in Q4 2014.
China
 China’s HSBC services PMI edged up to 52.3 in March from 52.0 in February, while composite index
remained unchanged from the previous month at 51.8 in March
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
15/06/15 26,587 10,121 17,896 19,996 9,843 16,667 7,348 15,583 10,508 9,130 9,475 1,987 1,357 5,922
16/06/15 26,687 10,198 18,090 20,171 9,959 16,689 7,343 15,623 10,538 9,141 9,461 2,001 1,360 5,939
17/06/15 26,833 10,345 18,237 20,141 10,184 16,874 7,450 15,875 10,546 9,212 9,504 1,992 1,365 5,964
18/06/15 27,116 10,427 18,450 20,311 10,401 17,021 7,466 16,087 10,603 9,194 9,753 2,003 1,362 5,990
19/06/15 27,316 10,487 18,560 20,486 10,387 17,075 7,522 16,126 10,633 9,236 9,861 1,999 1,352 6,014
2.74% 3.62% 3.71% 2.45% 5.53% 2.45% 2.37% 3.49% 1.19% 1.16% 4.08% 0.61% -0.37% 1.55%

4. Commodities and Currency:
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. Per
10gms)
15/06/2015 64.0868 99.5717 71.8413 51.9300 4090 26630
16/06/2015 64.1505 100.0363 72.2720 51.9100 4098 26846
17/06/2015 64.1135 100.3184 72.1662 51.9100 4086 26668
18/06/2015 63.8495 100.9971 72.4564 51.8900 4095 26844
19/06/2015 63.8195 101.2560 72.3585 51.8300 4103 26884
0.42%
Rupee
Appreciated
-1.66%
Rupee
Depreciated
-0.71%
Rupee
Depreciated
0.19%
Rupee
Appreciated
0.32% 0.95%
Debt:
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 7.70 -3
2-Year 7.82 -10
5-Year 7.89 -24
10-Year 7.71 -18

5. Phani Sekhar Ponangi Jharna Agarwal
Nupur Gupta Ridhdhi Chheda
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