An overview of the factors that affected domestic & international markets for the week

1. The World This Week
Mar 18 – Mar 22, 2013

2. Equity View:
Last week, the Indian equity markets corrected sharply on back of heightened political instability. The
Sensex fell by 3.77% last week while the Nifty closed down by 3.56%. We have seen a lot of concerns
being raised that the Lok Sabha elections could happen midyear. As of now the government continues to
have outside support from the Samajwadi party and the Bahujan Samaj Party because of which it
manages to survive. Going forward there could be further concerns on the stability of this government.
In terms of global events, we’ve seen a deal being reached in Cyprus with a new banking bail out coming
in place without penalizing all depositors, as what was planned initially. Currently, the sense is that there
will be no penalty on deposit holders which are less than € 100,000, because of which people believe that
this bailout would be more politically palatable for the people of Cyprus and the politicians of Cyprus as
compared to the bailout which was seen earlier. On the back of this we could see some bounce back in
the global markets, including equities and bonds.
Back home, we had the RBI monetary Policy in which we saw a 25 bps cut in Repo rate. RBI also indicated
that there could be no further repo cuts in the next couple of months. The RBI is concerned about the
fiscal consolidation and the Government’s current borrowing program which it deems to be quite
aggressive. Hence, we expect the RBI to pause for another 2 -3 months before carrying out any rate cuts
this fiscal year.
News:
DOMESTIC MACRO:
 The RBI lowered the repo rate by 25 basis points on Tuesday for the second time this year in a
bid to help revive growth in Asia's third-largest economy, but warned that the scope for further
easing is limited.
 In its mid-quarter policy review, the Reserve Bank of India lowered its policy repo rate to 7.50
percent as expected. The reverse repo rate is now at 6.50 percent. It also left the cash reserve
ratio for banks unchanged at 4.00 percent, in line with expectations.
GLOBAL MACRO
EURO
 Markit's Flash Eurozone Composite Purchasing Managers' Index, seen as a reliable economic
growth indicator for the bloc, fell more than expected, to 46.5 in March from 47.9 in February.
The index has now been below the 50 mark that separates growth from contraction for all but
one of the past 19 months.
 Greece has agreed on a deal for the takeover of local units of stricken Cypriot banks, the two
nations said on Friday, helping shield Greek banks from the fallout of the island's crisis and
allowing Cyprus to shrink its bloated banking sector
 Britain looked poised to lose its AAA rating from a second ratings agency after Fitch Ratings
warned on Friday it was likely to downgrade the country in the coming weeks, citing high
government debt levels and weak growth.

3. US
 Markit's Flash U.S. Manufacturing Purchasing Managers Index rose to 54.9 this March from 54.3
in February, and the pace of hiring in the sector increased.
 The Federal Reserve on Wednesday pressed forward with its aggressive policy stimulus despite
improvements in the U.S. economy, pointing to still-high unemployment, fiscal headwinds out of
Washington and risks from abroad.
China
 The HSBC China PMI for March rose to 51.7 in March from 50.4 in February, but remained below
a two-year high reached at the start of the year.

4. Satadru Mitra Varun Goel Jharna Agarwal
Abbas Naheed Kinjal Mehta
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