1. International
Global equity markets moved up as investors took comfort from increased central bank bias towards growth,
even as latest manufacturing data came in weak. Sentiment was also boosted by the latest US payroll data
and the MSCI AC World Index closed up 1.72%. Bond yields were largely unchanged as comfort from
policy support was offset by increased demand for riskier assets and data out of US. Strong rally in gold and
crude oil helped the Reuters Jefferies CRB Index close up 1.67%. In currency markets, the Chinese
renminbi touched record highs and there is speculation the government may be willing to widen the
trading band. Better payroll numbers helped the US dollar index pare losses at close of week.
• Asia-Pacific: Regional equities were largely trading higher, with the exception of key markets such as
Japanese and Indonesian equity markets. Japan industrial output increased marginally in March while
retail sales fell 0.3%. China’s official PMI index dropped from 50.9 to 50.6, the headline trend was in
line with the readings from the HSBC index revealed in the week before.Taiwan’s economy grew at a
relatively slower pace of 1.5% in Q1-2013 due to fall in demand from key trading partners. India’s central
bank announced another 25 bps cut in rates to 7.25%, but was circumspect about future rate cuts.
• Europe: European equity markets moved up amidst positive policy action and formation of a
coalition government in Italy. ECB lowered its benchmark refinancing rate by 25 bps to 0.5% and
indicated it remains on stand-by to take further action if required. The European Commission
lowered 2013 & 2014 growth forecasts for the region to -0.4% (from -0.3%) and 1.2% (from 1.4%)
respectively and said there is scope for easing the pace of austerity. Greece agreed to divest its
controlling stake in gaming company OPAP for €712 mln. Portugal proposed reducing public sector
jobs to meet its deficit reduction targets. UK economic data beat market expectations - April
Manufacturing PMI inched up from 48.6 to 49.8. The Czech National Bank left policy rates
unchanged and Romania’s central bank narrowed its standing facility corridor.
• Americas: US equity indices outperformed global markets and the S&P 500 touched record all-
time highs amidst better than expected economic and positive corporate news. Non-farm payrolls
expanded by 165,000 in April and the unemployment rate fell to multi-year lows of 7.5%. Payroll
data for February and March were revised upwards.The April ISM manufacturing index retreated to
50.7 from 51.3 in March, but the Conference Board’s consumer confidence index rose. The US
Federal Reserve said it will continue its asset purchase programme, but will tweak the quantum/pace
of purchases based on evolving economic conditions. Elsewhere in the region, Canada GDP grew
by 0.3% for the second consecutive month in February. On the corporate front, Apple commenced
a $17 bln bond offering, one of the largest bond issuances ever.
Market Review
WEEK ENDED MAY 3, 2013
2. Weekly Weekly
change (%) change (%)
MSCI AC World Index 1.72 Xetra DAX 3.94
FTSE Eurotop 100 1.88 CAC 40 2.70
MSCI AC Asia Pacific -0.23 FTSE 100 1.48
Dow Jones 1.78 Hang Seng 0.63
Nasdaq 3.03 Nikkei* -1.37
S&P 500 2.03 KOSPI 1.09
*As of May 02, 2013
India - Equity
Positive global sentiment and hopes of monetary easing helped markets extend gains during the holiday
shortened week. However, markets pared gains after RBI provided a cautious guidance on further rate
cuts. Mid-cap stocks outperformed large caps. Amongst sectoral indices, the FMCG and technology
indices were the top gainers.The former benefitted from a spike in the shares of Hindustan Unilever, after
its parent company Unilever announced an open offer to purchase additional stake. In other corporate
developments, Bharti Airtel is raising equity through sale of 5% stake to Qatar Foundation Endowment.
FIIs bought equities to the tune of $605 mln in the first three trading days of the week.
• Macro: Latest manufacturing data was mixed - India’s index of eight core infrastructure industries
recorded growth of 2.9% in March as against a decline of 2.5% in February. Growth was led by growth
in steel, petroleum refinery and cement production. On the other hand, the HSBC Manufacturing
Purchasing Managers' Index (PMI) dipped from 52 to 51 in April, indicating economic activity
remains sluggish.
• Banking Sector: In its annual monetary policy review, RBI announced a slew of prudential measures
aimed at plugging systemic risks and increasing transparency.The central bank said it will issue draft
guidelines on wealth management services/distribution of third party products and has disallowed
direct incentives to bank employees through distribution and tightened KYC norms. Other policy
measures announced include lower risk weightages for credit to residential real estate developers and
norms for dynamic loan loss provisioning as well as restructuring of credit. Separately, the bank has
also rolled out measures to increase financial inclusion and boost sector’s reach. In an unusual move,
RBI has announced controls on banks’ ability to import gold, besides introducing additional
restrictions on lending against gold. It aims to put in place guidelines for NBFCs dealing in gold loans.
The measures are positive and should lead to better governance and correct pricing of risks within
the system. One will have to see the detailed guidelines to evaluate any impact on fee income for
banks. Broadly in our view, private banks remain well placed vis-à-vis public sector peers due to their
higher capital adequacy levels and asset quality. Overall, India’s financial sector will be one of the key
beneficiaries of rising income levels and the growing demand for financial services/products. In
addition, efforts to promote financial inclusion and increasing comfort with market-linked
investments are positive trends for the sector.
3. Weekly change (%)
S&P BSE Sensex 1.50
CNX Nifty 1.24
CNX 500 1.47
CNX Midcap 2.36
S&P BSE Smallcap 0.14
India - Debt
Indian bond yields closed the week mixed after RBI delivered a 25 bps cut in repo rate but warned there
was limited scope for further monetary easing.The policy tone weighed on market sentiment, but markets
managed to recover from the sell-off and ended below highs.
• Markets: : Treasury bond yields at the shorter end of the curve eased – both 1 & 5 year gilt yields
traded 5 bps lower. In contrast, yield on the 10-year benchmark paper increased 6 bps. Overnight call
money rates slid from around 7.5% to 7.2% levels.The Indian rupee was bolstered by government move
to cut withholding tax on FII debt holdings and relaxation of Tax Residency Certificate rules.
Source: RBI
• Liquidity/borrowings: The policy outcome was in line with expectations, amidst softer economic
data and fall in global commodity prices. However, the tone was cautious (compared to market
expectations), despite the latest inflation and current account deficit (CAD) data.Whilst acknowledging
the growth slowdown, the central bank said it is ready to use “all instruments under its command” to
keep inflation at desired levels (about 5% by March 2014).The central bank sees supply side-imbalances,
particularly in food and infrastructure segment, along with rise in wages and MSPs (minimum prices for
agricultural goods), as the key drivers of inflation. Besides, it has cited CAD as well as its funding as the
biggest risks to macro-economic stability.
GDP growth projections for FY14 at 5.7% represent only a marginal recovery over its FY13 estimates
(5.5%) and factor in tepid growth in manufacturing amidst weak external environment and stalled
investment cycle. It has clearly stated the recovery will not be sustainable without meaningful rebound
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