2. Equity View:
Last week saw a correction of around 2.4% in Nifty. This was after a big run in Indian equity markets that we have
been witnessing since almost a month now. FII’s continue to pour money with almost Rs.8,000 Crores coming into
the system.
On Friday there was a big meeting of central bankers in Jackson Hole in which the US Fed governor Mr. Ben
Bernanke made a comment that he is open to give in further monetary stimulus which is contingent on how the
unemployment scene pans out in US. Markets were reassured to some extent with that announcement and they
continue to look forward towards further monetary easing. There is a FOMC meeting on 12 th and 13th September
and the market is now looking forward to the same for the announcement of QE3. Meanwhile, the Fed continues
to carry on its ‘Operation Twist’ which it has been carrying on for almost 1 – 1.5 years which will help the long term
yields come down and encourage investments in the US economy.
This week is also crucial in terms of data points. We will have the US Non-farm payroll numbers come in on Friday.
Those numbers would be extremely crucial in deciding the short term trend of the markets. We also have ECB
meeting on 6th September in which they are supposed to decide on the next set of policy easing measures for
Europe. There are a lot of expectations that they will be announcing some kind of a band for all sovereign debt in
Europe to trade in. Last month there was a little bit scare because the Spanish and Italian yields have shot up
again. The ECB Chairperson Mr. Mario Dragi had announced that they are open to carry out further monetary
easing and do whatever it takes to calm the situation so this week is going to be extremely crucial in terms of the
markets seeing what the ECB is finally deciding to do.
Back home, we had the FY13 Q1 GDP data coming out on Friday. It came at around 5.55% which is broadly along
expected lines. The slowdown in the economy seems to be more or less over now. We believe that from next
quarter onwards we should be seeing some kind of improvement. The effect of interest rate cut that was carried
out in the month of April will take some time to have an effect on the economy. Also we have a monetary policy
meeting on the 17th September by RBI in which further rate cuts of around 25 bps in CRR and repo rate could be
announced. We believe that as and when these monetary actions take place we will see the effect of the same on
the broader economy towards the 2nd half of the year. We continue to believe that the growth has bottomed out
in the short term and probably we might concentrate at 5.5 to 6% for one more quarter, post which you should see
a rebound in the economy in the 2nd half of the fiscal year.
News:
DOMESTIC MACRO:
India's quarterly GDP grew 5.5 percent, driven by a rebound in construction and financial services,
provisional government data showed on Friday, just above the 5.3 percent posted in the three months
ended in March
India's fiscal deficit during the April-July period rose to 2.64 trillion Indian rupees or 51.5 percent of the
full fiscal year 2012/13, government data showed on Friday.
Growth in India's property market is expected to fall to less than 5 percent over the next 12 months
compared with an annual rate of 17 percent since 2007, according to Jones Lang LaSalle Inc (JLL.N), the
world's second-largest property consultant.
3. GLOBAL MACRO
EURO
Germany's Angela Merkel makes her second trip to China in half a year this week, hoping to strengthen
booming trade ties and obtain assurances from Beijing that it will support the fragile euro zone by buying
the bonds of its stricken southern members.
The European Commission, the executive arm of the European Union, plans to give the European Central
Bank oversight of all banks in the euro zone. Under the plans, the ECB will oversee all banks that have
tapped the European Stability Mechanism from January next year, all banks relevant to the financial
system from July and all remaining banks from 2014.
US
Federal Reserve Chairman Ben Bernanke on Friday left the door wide open to a further easing of
monetary policy, saying the stagnation in the U.S. labour market was a "grave concern," but he stopped
short of providing a clear signal of imminent action.
The U.S. economy fared slightly better than initially thought in the second quarter. Gross domestic
product expanded at a 1.7 percent annual rate in the second quarter.
China
China is prepared to buy more EU government bonds amid a worsening European debt crisis that is
dragging on the world economy, Premier Wen Jiabao said, in the strongest sign of support for its biggest
trading partner in months.
4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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