1. The World This WeekJun 13 Jun 18, 2011

2. KPW Asset Class ViewEquity:Last week RBI in its mid-quarter policy review increased the Repo Rate by 25bps to 7.5%; Reverse Repo Rate by 25bps to6.5% We are expecting another 50bps hike in the rest of the calendar year & should see the reverse repo rate peak inaround 8%. For the RBI, managing inflation continues to be the priority. It is monitoring the non-food manufacturedinflation which is a proxy for core inflation number and has been moving up consistently. Unless we see signs of thatnumber going down, RBI is going to remain concerned about the inflationary trend in the economy. In the short term,sacrificing on the economic growth would become unavoidable for the RBI. Currently the growth outlook, at 7.5% - 8% forFY12, has not been changed. The hike was in the line with the market expectations. So from the market perspective it was anon-event. We continue to maintain our neutral stance on banking space where we are bullish on private sector banks vis--vis the public sector banks. Asset quality of the public sector banks remains a concern and hence we believe that privatesector banks are a better bet at this point of time. Also we continue to remain zero-weight in real estate as it is expected toremain under some pressure at least for next 2 quarters owing to the high interest rates and poor corporate governancetrack record.In the Euro zone, the finance ministers of Euro area are meeting today and it is expected that some bailout package wouldbe announced. 30th June is the deadline which they have set amongst themselves in terms of coming come out with somecredible plans of dealing with the Greek sovereign debt crisis. One big hurdle in the Greece Debt restructuring is now beenremoved with Germany softening their stand on restructuring of debt. Any dithering on this crisis would have a big impacton the short term outlook of global equity market. We continue to watch it very carefully.In the U.S. FOMC meeting is there on 22 June and market expects some kind of statement on the monetary policy goingforward. As of now there are no signs of QE3 happening however the slow pace of economic recovery might force thegovernment to go in for some kind of stimulus in the months going forward.Oil has cooled down by around 3% in last week. Nymex crude was around $93 per barrel and Brent crude around $112 perbarrel. Any further decline in the oil prices will be a positive for Indian equity markets.

3. News:Domestic Macro: In the RBI policy it raises repo rate by 25 bps to 7.50 percent, reverse repo rate by 25 bps to 6.50 percent, Cash reserve ratio retained at 6 percent and Marginal standing facility also up 25 bps at 8.5 percent Indias food price index was down at 8.96 percent from 9.01 percent last week and the fuel price index climbed 12.84 percent from 12.46 percent. The wholesale price index rose an annual 9.06 percent in May, above the median forecast for an 8.70 percent and the April figure of 8.66 percent.Global Macro:U.S.: The International Monetary Fund cut its forecast for U.S. economic growth. The forecast is that the U.S. gross domestic product would grow 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent and 2.9 percent growth, respectively.China: Chinas central bank raised bank reserve ratios for the ninth time since last October to 21.5%, a record high after data showed inflation rising in May to 5.5 percent, its highest level in almost three years.

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