Last week, the Indian equity market ended 2% positive. On Friday evening, diesel, kerosene and LPG prices were hiked by the government. Diesel price was hiked by Rs. 3/litre which would lead to 35bps rise in direct inflation. After the hike, the fuel subsidy bill is expected to go down by around 23,000 Crs.

1. The World This Week
Jun 20 – Jun 25, 2011

2. ASSET CLASS VIEW
Equity:
Last week, the Indian equity market ended 2% positive. On Friday evening, diesel, kerosene and LPG prices were hiked by
the government. Diesel price was hiked by Rs. 3/litre which would lead to 35bps rise in direct inflation. After the hike, the
fuel subsidy bill is expected to go down by around 23000 Crs. The government has also cut customs and excise duty on
crude products to the extent of 49000 Crs for this fiscal. The overall benefit for oil marketing companies could be around
75000 Crs. The total under recovery for petroleum products this year goes down from around 1, 80,000 Crs to 1, 05,000 Crs
which is a big relief for the oil marketing companies and upstream oil companies.
Last week Indian Meteorological department downgraded the overall forecast for monsoon for this year from 97% to 95%
of long term average which is slightly lower than expected. However this is not expected to have very big impact on the
food production in the country.
Nymex & Brent Crude fell down very sharply over the week. Brent is trading around $105 per barrel which is much lower
than levels of $127-128 per barrel seen in April & May. The event of continuing correction of oil prices will be a big positive
for Indian markets.
In Europe, EU officials said that they are looking at a bail out package for Greece in July. The Greece PM won the trust vote
that was tabled in the Greece Parliament & this week they have to get the austerity measures approved by their own
parliament. We will be monitoring that event very closely.
In China, the Chinese Prime Minister signaled that they are expecting the inflation to peak out now. Hence the interest
rates may not be raised further. As a result of which the Chinese market rallied almost 4% during the last week.
Real Estate:
In the residential space, specifically the Tier-l cities, demand is stagnant as the rates have been on the higher side.
Registration across cities is not picking up. Also due to higher cost of credit these times are tougher for investors as well as
developers. Thus we are not expecting the markets to go up. There is a correction possible which has been anticipated for
the last six months but the developers have good holding frame due to the non-resident investors. Markets like Mumbai,
Noida, NCR region seem very bullish; they have still not corrected. The other markets like Pune, Kolkata are stagnant. In
most of the residential properties we are witnessing new developments. In Tier-ll cities, as soon as developers see
saturation of demand, they open up new projects.
For people not having homes, we recommend investing in under-construction properties at lower prices than higher priced
ready flats. Typically the price of under-construction properties is 15% lower than ready properties.
Commercial leasing is looking up; IT takes almost 75% space. However yields are compressed due to excess supply and
lower rent.
Land is rising with the Government support on infrastructure building in most developed and under-developed areas.

3. News:
DOMESTIC MACRO:
 Foreign direct investment (FDI) flows into India bounced back in April, on an investment surge in services,
construction and auto sectors, reversing a steep drop recorded in the previous fiscal year. In April, FDI into India
rose an annual 43 percent. The service sector, which saw investments rise an annual 21 percent in April, was the
top recipient of FDI inflows.
 India's food price index rose 9.13 percent and the fuel price index climbed 12.84 percent last week. In the previous
week, annual food and fuel inflation stood at 8.96 percent and 12.84 percent respectively.
GLOBAL MACRO
U.S.:
 The number of Americans filing new claims for unemployment benefits rose last week, suggesting little
improvement in the labor market this month after employment stumbled in May.
 The Federal Reserve cut its forecasts for U.S. economic growth, but offered no hint of further monetary support,
saying the recovery should gradually pick up heading into 2012. The Fed estimated the economy should grow 2.7
percent to 2.9 percent this year, down from a forecast range of 3.1 to 3.3 percent made in April.
China:
 Private sector activity slowed in China and Europe this month just as the outlook for the United States has
darkened, which suggests a global slowdown is becoming more entrenched.
 China's growth is slowing under the weight of Beijing's anti-inflation campaign and weaker global demand, but any
investors betting on a hard landing would be underestimating the resilience of the world's second-largest economy

4. Swapnil Pawar Varun Goel Jharna Agarwal
Palak Nanjani Neha Arora Kanika Khorana
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