The World This Week Nov 5 – Nov 9, 2012

Equity View:

Last week the world witnessed Mr. Barack Obama winning the US Presidential elections by a good margin. Earlier, there were lots of concerns whether the monetary easing policy would continue or not, because the republican candidate Mr. Mitt Romney had made his opposition to the same clear. As far as emerging markets and global liquidity are concerned, the re-election of Mr. Barack Obama is certainly a positive development. With regards to Indian equity markets, Mr. Barack Obama continuing in the US would mean continuing monetary easing, which would release liquidity for various emerging equity markets including India. So net-net it’s a positive development for India. We saw some kind of a negative reaction in the US on the day the results were announced. That was essentially because the Wall Street had been backing Mr. Romney all the way and the markets just reacted in a typical fashion. The focus would now start shifting from elections to other impending issues. U.S. currently faces a challenge of cutting its budget deficit by $1.6 trillion in the next 3 years and will have to start curbing expenditure from the month of December. U.S. of course as we all know has a debt ceiling and in order the same, U.S. requires consensus of the Congress as well as the Senate; which means consensus between Republicans and the Democrats. Coming back home, we have a big week ahead in terms of macro-economic announcements. The IIP numbers would be announced today while the headline inflation data would be announced on Wednesday. IIP numbers are expected to be around 2.8%, which is slightly better than 2.7% in the last month. We believe the growth has bottomed out and moving ahead we should witness good set of numbers. (Update on IIP Data: India's IIP for the month of September fell to a shocking (-) 0.4 per cent on a year-on-year basis)

News: DOMESTIC MACRO:

India will allow foreign investors to re-invest up to 50 percent of their debt holdings from the previous calendar year starting in January 2014, market regulator Securities and Exchange Board of India (SEBI) said in a statement.

India will allow select companies to issue tax-free bonds in the rest of the financial year, finalising details of a proposal announced in the budget in February, according to a government notification obtained from two of the eligible issuers.

The government will borrow more to fund a fiscal deficit that is now estimated at 5.3 percent of GDP this fiscal year (the previous target of 5.1 percent) , Finance Minister P. Chidambaram told Reuters late on Sunday in Mexico City.

GLOBAL MACRO

EURO

The euro zone economy shows little sign of recovering before the year-end despite easing financial market conditions, European Central Bank President Mario Draghi said on Thursday, leaving open the possibility of an interest rate cut in the months ahead.

4.8 billion euros of bonds are raised more than the targeted amount of up to 4.5 billion. Spain showed on Thursday that investors will buy even its long-term debt, with a successful bond auction that completed its 2012 issuance programme, giving the government breathing room to hold out before requesting international aid.

US

President Barack Obama has been re-elected to a second term, defeating Republican challenger Mitt Romney.

The trade gap shrank 5.1 percent to $41.55 billion, the smallest deficit since December 2010, the Commerce Department said. Economists had expected it to widen to $45.0 billion.

China

Consumer inflation eased to its slowest pace in nearly three years in October, with the 1.7 percent rise from a year ago slower than the 1.9 percent posted in September.

Satadru Mitra Varun Goel Jharna Agarwal

Abbas Naheed Kinjal Mehta

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