1. The World This WeekMay 23 May 28, 2011

2. Equity:Concerns are again emerging in the peripheral Eurozone countries. Greece has been finding it difficult to bring its budgetdeficit under control and European and IMF officials are expected to make an announcement on that this week. This issomething which needs to be closely watched. In the US, the Q1 GDP growth has been pegged at 1.8% which is lower thanpreviously estimated. The consumer spending data was also on the lower side. The dollar weakened on the back ofnegative news flow and dollar index moved down 76.5 to 74.5 leading to a bounce back in commodity pricesCrude oil prices continue to remain high. Brent crude price had corrected from $125 to $110 per barrel in early May.However, the price is now around $115 which remains to be a cause of concern for the Indian equity markets.In India, we have seen a hike in the petrol prices by Rs.5 and there is expectation that the diesel prices will also be hiked byRs.5 in the next government meeting on June 9. The net impact of this diesel price hike would be 75bps rise in inflation. Weexpect the inflation to remain high at around 9% in the near term.On the results front, we saw numbers from Tata Steel and Tata Motors. Tata Steel posted good results with significantimprovement in the performance of their European subsidiary Corus. Corus EBITDA margins improved and we expect thefull impact of steel price hikes to reflect in the numbers next quarter. Tata Steel continues to be our top pick in the metalspace. Tata Motors standalone numbers were disappointing. There was a negative surprise on in the margins front. The JLRvolumes continue to be very robust which led to the tripling of Tata Motors for the full year.On the monsoon front, the monsoons have hit Kerala two days in advance. IMI expects rainfall to be 98% of the long termaverage, which will be a positive for the markets.

3. NEWS:DOMESTIC MACRO: The food price index rose 8.55 percent picking up pace from an annual rise of 7.47 percent a week ago. The fuel price index climbed 12.11 percent, unchanged from a week earlier. Headline inflation at 8.66 percent in April remains considerably above the RBIs comfort level and will pressure rates higher. The economy is expected to have grown 8.5 percent in fiscal year 2010/11 that ended in March, just below the 8.6 percent estimated by the government. India is likely to revise down its growth forecast for the current fiscal year, currently 9 percent. Indias fiscal deficit in FY12 could rise to 5.1-5.5 percent of gross domestic product, above the governments target of 4.6 percent, due to subsidy burden and lower tax collection, Citigroup Global Markets Indias foreign exchange reserves rose to 308.534 billion from $307.493 billion in the previous week GLOBAL MACRO U.S.: New U.S. claims for unemployment benefits unexpectedly climbed to 424,000 last week from a revised 414,000 in the prior week, pointing to a painfully slow improvement in the nations job markets. Gross domestic product growth was unrevised at annual rate of 1.8 percent, below economists expectations for a 2.1 percent pace. China: Chinas foreign exchange reserves increased by $138 billion in the first quarter on hefty growth in the capital account surplus which grew by 82 percent a year earlier. Goldman Sachs has trimmed its economic growth forecasts for China to 9.4 percent this year, from 10 percent previously, citing a recent run of surprisingly weak data, high oil prices and supply constraints.

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