1. The World This Week
May 20 – May 24, 2013

2. Equity View:
Last week we saw a 3% cut in broader markets on the back of fresh concerns about the U.S. Fed
continuing with the ongoing Quantitative Easing (QE) program. Fed Chief Mr. Ben Bernanke made a
statement that Fed might look at reducing the quantum of bond buying if the economic recovery in U.S.
is stronger than expected. At this point of time, the US recovery has been pretty strong. Though we have
seen continuous improvement in employment numbers, but there are no signs yet that there could be
roll back of QE, they are still looking at a much more aggressive number in terms of unemployment which
is currently around 7.5% and the expected target is close to 6.5% and hence we believe there is a long
way to go before any major step is taken.
There is a Fed meeting on 18th and 19th of June in which we expect that a status quo would be
maintained. Hence we don’t believe there are significant risks to the equity markets because of the U.S.
Fed QE program currently. We believe that easy liquidity regime will be tapered off towards end of this
year when unemployment is expected to be much lower than what it is today. We don’t perceive any
short term risks as far as the QE is concerned.
There was also a correction in Japanese equity markets because of the bond yields spiking there. We
believe the Japanese markets have run up almost 60% - 65% in the last 6 months and some easing is
definitely warranted and what we are seeing is probably the beginning of a 10% - 15% correction.
In terms of other global news we’ve seen weakness last week across various markets because of concerns
about Chinese macro economic data also. Data inputs coming in from China have been on a weakening
spree for the last several months. There were some positive indicators in the month of March and April
but it looks like the slowdown in China is much more spread out as compared to what was initially
expected. Accordingly, we believe that commodity prices would continue to cool off. We have seen metal
prices like aluminum, zinc, copper, nickel, and steel cooling off if Chinese demand continues to come
down. This turns out to be positive for commodity importers like India where cooling of commodity
prices - especially crude oil - will lead to significant cooling off of fiscal deficit.
In terms of data points in India we are expecting the Q4 GDP numbers to come out on Friday. We are
expecting that to be in the range of 4.5% – 5%. The last quarter GDP was 4.5%, so there will be a small
uptick but not a very big one for now. We expect GDP growth for FY 14 to be around 6% which would be
almost 100 basis points increase from the average that we are expecting from FY13.

3. News:
DOMESTIC MACRO:
Foreign investors will be eligible to benefit from lower withholding taxes for interest income
accrued between June 1, 2013 and May 31, 2015 regardless of when the debt was bought, the
Finance Ministry said in a notice on Tuesday.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao went against the suggestion of a majority
of external members of the central bank's monetary policy committee that recommended no
change in the policy repo rate at a May 3 policy meeting, according to minutes of the meeting seen
by Reuters
GLOBAL MACRO
EURO
Markit's flash Eurozone Services PMI, which surveys around 2,000 companies ranging from major
banks to caterers, rose in May to 47.5 - a three-month high - from 47.0 in April.
US
A decision to scale back the $85 billion in bonds the Fed is buying each month could come at one of
the central bank's "next few meetings" if the economy looked set to maintain momentum,
Bernanke told Congress.
Initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 340,000
last week, the Labor Department said on Thursday. Economists had expected claims to fall to
345,000.
China
The flash HSBC Purchasing Managers' Index (PMI) for May fell to 49.6, slipping under the 50-point
level demarcating expansion from contraction for the first since October and sending Asian
financial markets sharply lower. The final HSBC PMI stood at 50.4 in April.
Indices:
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
20/05/2013 20224 6588 11294 15075 7453 10368 6671 9000 5983 8793 8954 1835 2018 3600
21/05/2013 20112 6547 11097 14941 7454 10333 6647 8923 6031 8735 8881 1815 1966 3616
22/05/2013 20062 6493 11053 14876 7447 9954 6703 8960 6038 8685 8795 1803 1898 3624
23/05/2013 19674 6364 10878 14453 7297 9437 6642 8843 5999 8521 8561 1732 1785 3584
24/05/2013 19704 6387 10873 14592 7433 9589 6660 8730 5955 8657 8569 1747 1798 3561
-2.6% -3.0% -3.7% -3.2% -0.3% -7.5% -0.2% -3.0% -0.5% -1.5% -4.3% -4.8% -10.9% -1.1%

4. Commodities and Currency:
Debt:
Tenor Gilt Yield in % (Thursday) Change in bps (Week)
1-Year 7.24 -32
2-Year 7.24 -4
5-Year 7.26 -2
10-Year 7.34 0
Date USD GBP EURO YEN
Crude
(Rs. per BBL)
Gold
(Rs. per 10 gms)
20/05/2013 55.04 83.61 70.68 53.60 5743 25811
21/05/2013 55.04 83.95 70.93 53.67 5768 26347
22/05/2013 55.52 84.09 71.67 54.07 5719 26419
23/05/2013 55.99 84.19 71.86 55.04 5697 26481
24/05/2013 55.61 83.98 71.94 54.71 5736 26408
25/05/2013
0.1%
Rupee
Appreciated
0.9%
Rupee
Appreciated
1.0%
Rupee
Appreciated
0.9%
Rupee
Appreciated
-0.1% 2.3%

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