The world this week november 21 - november 25 2011

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  • 1. The World This WeekNovember 21 November 25, 2011
  • 2. Equity View:Last week, we witnessed high volatility in the equity markets across the globe with the Indian equities correcting byalmost 3.5%. Net FII investments in India turned negative for the current year as heavy outflows were witnessed in thelast couple of weeks. Rupee further depreciated, slipping to an all time low of around 52.5 levels. This led to some RBIintervention on Thursday & Friday but it was not officially announced. The objective of RBI intervention is to hold therupee around the current levels. We do not expect the rupee to depreciate further from the current levels unless someglobal catastrophe occurs, however we are also not expecting it to bounce back to 45 levels in the short term.A new round of volatility was witnessed in Europe due to the increasing bond yields. The Italian bond yields have risenbeyond 7%. The current 2-year, 5-year & 10-year yields are at an all time high. In a very difficult bond auction last week,Germany failed to find enough bids for the 10-year bonds which was a major negative. Investors are getting worriedabout the rising borrowing costs in most of the Euro zone countries. At this point some serious immediate steps need tobe taken to prevent further volatility. It is expected that the European Central Bank & European political leadershipbacked by France & Germany would be taking the desired steps to prevent the contagion from spreading further.In India the Government announced opening of foreign direct investment in the retail space up to 51% in multi brandretail & 100% in single brand retail. This reform has been facing severe political opposition. The Parliament was closed foralmost a week since the beginning of the winter session and it is expected that only half of the states would probablyallow the retail FDI to come in.In the coming week on Wednesday, the GDP data for Q2 will be announced. The consensus expectation is around 7.2% -7.3%. This number is very significant since it will help one know the kind of investment growth that can be expected asthere is serious weakness in terms of infrastructural activity in capital goods space.News:DOMESTIC MACRO: The government on Thursday approved 51 percent foreign direct investment in the supermarket sector, paving the entry of firms such as Wal-Mart, Tesco and Carrefour into one of the worlds largest untapped markets. Indias food price index slips to 4-month low to 9.01% from last weeks 10.63%. Indias foreign exchange reserves fell to $308.624 billion on Nov. 18, from $314.339 billion in the previous week. The RBI has removed the limit of $100 million placed on net supply of foreign exchange in the market through rupee swaps. Indias fiscal deficit in the current fiscal year will exceed 4.6 percent of the gross domestic product target, though the final figures would depend on the actual expenditure, Planning Commission deputy chairman Montek Singh Ahluwalia told on Monday.
  • 3. GLOBAL MACROEuro: A "disastrous" German bond sale on Wednesday sparked fears that Europes debt crisis was starting to threaten even Berlin, with the leaders of the euro zones two biggest economies still at odds over a longer-term structural solution. Moodys warned France, euro zones second largest economy might lose its coveted AAA status because of sustained rise in its debt yields coupled with weakening economic growth.US: Moodys Investors Service on Wednesday warned that its top credit rating for the United States could be in jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years. A U.S. congressional "super committee" on Monday failed to reach a deal on reducing federal government deficits, the co-chairs of the panel said.China: In factory towns across Chinas export powerhouse in the Pearl River Delta, a vicious cycle of slowing orders from the West and increasing wage pressures has led to a series of major strikes that could reverberate through the economy.
  • 4. Swapnil Pawar Varun Goel Jharna AgarwalPalak Nanjani Neha Arora Kanika Khorana DisclaimerThe information and views presented here are prepared by Karvy Private Wealth or other Karvy Groupcompanies. The information contained herein is based on our analysis and upon sources that we considerreliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personalinformation and we are not responsible for any loss incurred based upon it.The investments discussed or recommended here may not be suitable for all investors. Investors must maketheir own investment decisions based on their specific investment objectives and financial position and usingsuch independent advice, as they believe necessary. While acting upon any information or analysis mentionedhere, investors may please note that neither Karvy nor any person connected with any associated companies ofKarvy accepts any liability arising from the use of this information and views mentioned here.The author, directors and other employees of Karvy and its affiliates may hold long or short positions in theabove-mentioned companies from time to time. Every employee of Karvy and its associated companies arerequired to disclose their individual stock holdings and details of trades, if any, that they undertake. The teamrendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares orother securities till such a time this recommendation has either been displayed or has been forwarded to clientsof Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd.The information given in this document on tax are for guidance only, and should not be construed as tax advice.Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicableto them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force this couldchange the applicability and incidence of tax on investmentsKarvy Private Wealth (A division of Karvy Stock Broking Limited): Operates from within India and is subject toIndian regulations. Mumbai office Address: 702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra(East), off Bandra Kurla Complex, Mumbai 400 051 (Registered office Address: Karvy Stock Broking Limited,KARVY HOUSE, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034) SEBI registrationNos:NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O):INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL SEBI Registration No: IN-DP-NSDL-247-2005,CSDL-SEBI Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512