The document provides an equity market outlook and summary of recent domestic and global macroeconomic news. In India, industrial production growth was lower than expected in December, while inflation is projected to be around 7%. Globally, Greece faces a major debt repayment deadline and negotiations over an EU bailout package. The US and China both reported slower economic growth. Overall, the outlook remains cautiously positive with expectations for continued foreign investment inflows to support the Indian market rally.

1. The World This Week
Feb 06 – Feb 10, 2012

2. Equity View:
Last week, Nifty moved up by around 1%. The Index of Industrial Production (IIP) recorded a sluggish growth of 1.8% for
the month of December, much below the market expectations. The WPI data for the month of February is expected to
come this week; our expectation is that WPI could be around 7%. A low inflation number along with continuous
slowdown in IIP numbers should encourage the RBI to consider a Repo rate cut in the month of March itself. We are
expecting a 25 bps cut in repo when the RBI meets in the month of March.
Results season is almost over in India and so far the results have been in line with the expectations. The sales growth has
been robust with a number in excess of 15%. There was considerable pressure on profit numbers because of very high
interest cost and forex losses due to exposure to export markets.
We expect Q4 earnings to stay more or less in similar levels. We are expecting a profit growth of about 10% for Q4.
Overall for the FY12 we expected a total profit growth of around 10% for Sensex companies and so far companies are in
line to achieve the profit growth numbers. We expect FY13 growth numbers to be around 15%. Based on FY 13 numbers
the market is trading close to 12.5-13 times FY 13 earnings, which is still lower than the 5 year average, hence we believe
that the rally has more steam left. And as the easy liquidity regime continues in the Europe we would find more foreign
money coming in to India.
There is a big Parliament meet scheduled in Greece to pass the austerity measures worth €130 Billion. This bail out
package is expected for Greece from European Union nations and IMF. Greece has to make a €14.5 Billion debt
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repayment by March 20 2012. Hence, Greece needs to find a bail out package for which all EU nations need to agree on
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before the deadline. Also, ECB would comes up with a LTRO package on 29 February, in which European Union Banks
specially in troubled countries like P.I.G.S are expected to borrow massively and are expected to re-invest this into
borrowings made in LTRO 1 by buying sovereign debt. Hence, we would expect this easy liquidity regime in Europe to
continue for some more time. It has been the policy of the ECB chairmen Mr. Mario Draghi to keep the liquidity condition
extremely easy, which would provide cushion to bond yields in the peripheral euro zone area.
News:
DOMESTIC MACRO:
The Index of Industrial Production (IIP) recorded a sluggish 1.8% growth in December 2011, considerably weaker
than the 8.2% growth in December 2010, with a weaker performance across all the use-based categories except
consumer non-durables.
The government forecast 6.9% annual growth for the fiscal year that ends in March, the slowest pace since the
2008 financial crisis, and a tad below the 7% to 7.5% growth predicted by several government officials.
The Indian government on Friday approved 10.34 billion rupees worth of foreign direct investment proposals,
the finance ministry said in a statement.
GLOBAL MACRO
Euro:
Greece will likely not achieve sustainable debt levels with a 70% reduction in the value of bonds held by its
private creditors, Standard & Poor's warned on Wednesday, putting pressure on the official sector also to take
losses.
The Greek cabinet approved a draft bill spelling out reforms required by the EU and the IMF on Friday, taking
Athens closer to getting a new 130 billion-euro bailout after the prime minister warned the alternative was
"catastrophe".

3. Rating agency Standard & Poor's downgraded 34 Italian banks on Friday, including heavyweights UniCredit and
Intesa Sanpaolo, citing a reduced ability to roll over their wholesale debt and expected weak profitability. The
move follows S&P's downgrade of Italy's sovereign rating last month to BBB+, part of a mass downgrade of nine
euro zone countries.
US:
President Barack Obama will seek billions of dollars for jobs and infrastructure in his 2013 budget, an appeal to
voters that draws election-year battle lines over taxes and spending as Republicans slammed him for "debt,
doubt and decline."
Federal Reserve Chairman Ben Bernanke on Friday issued a call to action to restore U.S. housing markets, saying
depressed house prices and sales are a serious drag on the economic recovery.
China:
China's economic expansion struck a 2-1/2 year low of 8.9% in the last three months of 2011, extending a steady
slowdown that had prompted the government in the autumn to switch policy settings to support growth. It has
gently eased monetary and fiscal conditions since.
Imports sank 15.3% in January 2012 versus January 2011 -- the lowest since August 2009 -- while exports fell
0.5% over the same period, the worst showing since November 2009. China's imports in January fell the most
since the depths of the global financial crisis, raising concerns that demand may be weaker than previously
thought even allowing for Lunar New Year factory shutdowns

4. Swapnil Pawar Varun Goel Jharna Agarwal
Palak Nanjani Abbas Naheed Kanika Khorana
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