- Global equity markets declined for the week as investors focused on the upcoming US fiscal cliff and weak Eurozone economic data. Safe haven assets like gold and US Treasuries rose. - In Asia, regional markets fared better than global peers helped by gains in Taiwan and Australia. Chinese economic data showed signs of recovery. Japanese machinery orders declined again. - In Europe, equity markets fell on weak economic reports from Germany. The ECB and BoE kept rates unchanged. The Greek parliament approved austerity measures. The EC cut its growth forecast for Germany.

1. Market Review
WEEK ENDED NOVEMBER 9, 2012
International
With US-election related uncertainty out of the way, global investors turned to focus on the upcoming US
fiscal cliff and the weak Eurozone newsflow. Economic data out of US and China was quite positive, but
this had little impact on equity markets and the MSCI AC World Index finished down 2.16%. At the G20
meet this week, leaders agreed to adjust the pace of fiscal consolidation such that growth is not stifled. The
reduced risk appetite bolstered global treasury bond prices and the US dollar touched multi-month highs.
The Reuters Jefferies CRB index closed a volatile week only marginally lower as safe haven demand
boosted gold prices and uptick in US and Chinese economies helped crude oil and some of the other raw
material prices gain. The euro lost ground as the European Union reduced the region’s 2013 growth
forecast to 0.1% from 1% and key Eurozone economies reported lackluster growth. At the same time, the
yen benefited from demand for safe havens.
• Asia-Pacific: Regional equity markets fared relatively better than global counterparts helped by gains in
Taiwan and Australia. Shanghai markets edged lower as the Chinese leadership kicked off the 18th Party
Congress. Latest economic data showed signs of recovery underway – growth in industrial production, retail
sales and fixed asset investment data accelerated. Helped by strong domestic demand, Indonesia’s economy
expanded by 6.2% in the September quarter, only slightly less than 6.4% previous quarter. Japanese core
machinery orders recorded second consecutive decline and current account surplus narrowed sharply in
September. Central banks in Australia, Malaysia, South Korea and Indonesia left policy rates unchanged. An
Australian federal court ruled that S&P inappropriately awarded AAA rating to a complex financial
product.
• Europe: Regional equity markets were adversely impacted by weak economic and earnings reports.
ECB and BoE maintained status quo on monetary policy. The Greek Parliament narrowly approved of
cuts in pension and public sector wages to secure its next bailout tranche. German policymakers also
agreed to cuts in public spending and borrowing for 2013. On the economic front, German exports and
industrial production contracted. The European Commission reduced its 2013 growth forecast for
Germany by half to 0.8%. UK economic data was mixed - industrial production slowed while trade gap
narrowed more than expectations in September. Poland central bank cut rates by 25 bps to 4.5%. Fitch
upgraded Turkey’s sovereign ratings to BBB- from BB+.
• Americas: The US elections delivered a verdict in favour of the status quo in terms of the President,
Senate and the House of Representatives. As a result, there have been increased concerns that
policymakers may not be able to reach a compromise and avoid the automatic tax increases and
spending cuts (estimated about $600 bln), impacting market sentiment. US economic reports retained
recent positive tone - home prices rose and consumer sentiment improved. A surge in exports helped
the US trade deficit narrow from $43.8 bln to $41.5 bln in September. Elsewhere in the region, Peru
left key policy rates unchanged. On the M&A front, Priceline is buying Kayak for $1.8 bln

2. Weekly Weekly
change (%) change (%)
MSCI AC World Index -2.16 Xetra DAX -2.72
FTSE Eurotop 100 -1.56 CAC 40 -1.97
MSCI AC Asia Pacific -1.05 FTSE 100 -1.68
Dow Jones -2.12 Hang Seng -3.29
Nasdaq -2.59 Nikkei -3.24
S&P 500 -2.43 KOSPI -0.75
India - Equity
Frontline equity indices closed the week marginally lower primarily due to weak global sentiment, despite
positive FII flows. Mid and small cap stocks managed to eke out gains and outperformed large caps.
Sectoral index trends were mixed - real estate stocks notched up sharp gains while capital goods and oil
& gas stocks closed in the negative territory. FII inflows amounted to $312.8 mln in the first four trading
days of the week.
• Institutional ownership trends: Latest data reflects the recent trends of strong FII inflows and outflows
from domestic equity funds. Since the policy changes over the last few months, FII flows have picked up
pace (around $9 bln since July 2012) and FII holding in BSE 500 companies is at 19% (including
ADR/GDR), just 1% below all-time highs of 20% touched in Dec 2006. The value of the portfolio is
also lower than the Dec 2010 high. Compared to the previous peaks witnessed in 2006-07, this time
around FII exposure appears to be mainly towards sectors such as financials and consumer discretionary
(previously it was in industrials and materials).
Source: Bloomberg, CMIE and Citi Research
• Corporate: Activity picked up on the M&A front - Diageo agreed to acquire majority stake in United
Spirits for $2.1 bln and Tata Power picked up 26% stake in Indonesian company Baramulti Sukses Sarana
Tbk. Gulf Oil is buying US based company Houghton International for $1.8 bln. Sun Pharma entered
into an agreement to acquire stake in DUSA, a dermatology company, for $230 mln.
Corporate India’s performance in the past quarter was broadly in line with expectations - topline growth
remained stable and downward pressures on margins appear to have peaked out. FMCG companies and
private banks continued to report strong growth, while results from the IT services sector were a mixed
bag, with only select players reporting good performance in a slower growth environment. There was
some evidence of slowdown in demand for consumer discretionary goods - consumer durables and autos.

3. In the capital goods space, select large players reported robust performance and appeared relatively positive
(compared to past) about pick-up activity in over the next few quarters. Players are looking forward to
establishment of the proposed National Investment Board, a committee with the mandate to expedite
clearances for large investment projects.
Earnings downgrades have now stabilized and looking ahead, if margin pressures continue to abate, we
could see Corporate India RoE levels move up from the current 15-16%.
Weekly change (%)
BSE Sensex -0.38
S&P CNX Nifty -0.20
S&P CNX 500 -0.03
CNX Midcap 0.18
BSE Smallcap 0.07
India - Debt
In the absence of fresh triggers, Indian bond market yields moved in a narrow range and closed mixed.The Indian
rupee weakened against the US dollar as risk aversion in global markets boosted the greenback.
• Yield movements: Yields on the 1-year paper closed unchanged from last week levels. At the same
time, yields on the longer dated benchmark papers (5 and 10 years) eased 2 bps, while those on
the 30-year paper closed 2 bps higher.
• Liquidity/borrowings: Liquidity conditions were largely unchanged - overnight call money rates
closed slightly higher at 8.1% levels and repos averaged about Rs. 67,000 crores this week.
Scheduled GOI bond auctions received bids to the tune of over Rs. 29,000 crores, more than two
times the notified amount of Rs. 13,000 crores.
• Forex: Relative strength in the US dollar weighed on the rupee and the Indian currency closed
the week down 1.76%. As of Nov 2, India’s foreign exchange reserves stood at $294.3 bln;
revaluation of foreign currency assets led reserves to reduce by $950 mln over last week levels.
• Macro: As per latest data on monetary indicators, credit growth (16% yoy) continues to outpace
deposit growth (13.6% yoy). The credit-deposit ratio has started to move up again and now stands
at 75.39%.
Credit/deposit growth trends Cumulative trends in fiscal deficit
Source: Bloomberg, CEIC, RBI, CLSA Asia-Pacific Markets, CGA, Ministry of Finance, Citi Research

4. On government finances front, cumulative fiscal deficit for current financial year stood unchanged
from last month levels at 65.6% of budgeted estimates. Better control on expenditure along with
uptick in tax revenues helped the government to stick to last month levels.
09.11.2012 02.11.2012
Exchange rate (Rs./$) 54.75 53.56
Average repos (Rs. Cr) 66,824 80,234
1-yr gilt yield (%) 8.19 8.19
5-yr gilt yield (%) 8.17 8.19
10-yr gilt yield (%) 8.24 8.26
Source: Reuters, CCIL.
The information contained in this commentary is not a complete presentation of every material fact regarding any industry, security or the fund and
is neither an offer for units nor an invitation to invest.This communication is meant for use by the recipient and not for circulation/reproduction
without prior approval.The views expressed by the portfolio managers are based on current market conditions and information available to them
and do not constitute investment advice.
Risk Factors: All investments in mutual funds and securities are subject to market risks and the NAVs of the schemes may go up or down depending
upon the factors and forces affecting the securities market.The past performance of the mutual funds managed by the Franklin Templeton Group
and its affiliates is not necessarily indicative of future performance of the schemes. Please refer to the Scheme Information Document
carefully before investing. Statutory Details: Franklin Templeton Mutual Fund in India has been set up as a trust by Templeton International
Inc. (liability restricted to the seed corpus of Rs.1 lac) with Franklin Templeton Trustee Services Pvt. Ltd. as the trustee (Trustee under the Indian
Trust Act 1882) and with Franklin Templeton Asset Management (India) Pvt. Ltd. as the Investment Manager.
Copyright © 2012 Franklin Templeton Investments. All rights reserved