- The Nifty was down 1% last week while SBI reported better than expected quarterly results with increased net interest income and reduced NPAs. - Tata Steel's results were below expectations due to losses in Europe and higher raw material prices. - Global markets fell sharply due to concerns over Greece's elections and future in the Eurozone while oil prices cooled somewhat.

1. The World This Week
May 14 – May 18, 2012

2. Equity View:
Nifty was down by around 1% on Friday from previous week’s closing. State Bank of India announced its quarterly results on
th
18 May 2012. The quarterly results were better than the consensus expectation. The Net Interest Income (NII) for the bank
increased by 45% to Rs.11,000 Crs. The gross NPA came down to 4.44% from 4.6%; the net NPA has also reduced. We believe
that going forward we might see some stabilization in terms of asset quality. We maintain our preferences on the private
banking space; the Tier I private sector banks like Axis bank, ICICI bank and HDFC bank continue to be our preferred picks at
this point of time.
Last week, we also had Tata Steel coming out with results. The standalone and consolidated numbers were below
expectations. The company was hit by Forex losses and losses in its European subsidiary. There was also pressure from raw
material as prices of both coke and iron ore have moved up during the last couple of quarters.
Globally, equity markets had much bigger fall on the back of concerns in Greece. Re-elections are expected to be held in
Greece during Mid-June and a new government is expected to be formed. The results should be out on the same day; post
which there would be some clarity with respect to the future of Greece. There are lots of concerns and doubts on whether
Greece wants to stay in the Euro Zone or wants to exit. Also, there are concerns about the austerity measures which have
been imposed on Greece. Greece has been under recession for almost 5 years now, which results into a key risk to the global
risk assets. Most of the asset classes like equities, crude, metals etc have been corrected in both developed markets and
emerging market equities in last couple of weeks and hence clarity on what happens in Greece would help in further course of
action.
th
The leaders of the G-8 countries met on 20 May 2012 and have agreed to put their fiscal houses in order and accord priority
to growth and jobs by revitalising the global economy. With respect to Greece concerns, all the countries are awaiting the
outcome of Greece elections and the best possible outcome could be that the new government is able to take shape then
decide on the future of Greece.
The big social networking giant Facebook listed on Friday 18th at $38 per share. The IPO was oversubscribed by almost a 100
times and the share price did saw an upside during the early stage of listing but later the price cooled off and share closed
flattish. IT stocks in U.S. have been rallying for the past 6 months now and this seems to be an Internet V2.0 like the one we
had around the year 2000 when we had a big boom in IT and e-commerce shares and hence we would maintain a cautious
stance on Facebook at the current price.
In terms on Global commodity prices, one very positive development for India is that the Brent crude prices have started to
cool off and were around $107per barrel levels, which is almost $20 lower than the peak that we saw in the month of March.
India would partially benefit from this fall in crude as Rupee has also weekend in the last couple of months. In near future, if
rupee starts to stabilize and fall in prices of Brent crude continues it would result in terms of fiscal deficit and current account
deficit numbers and the whole negative sentiment about India might reduce to some extent, if the crude oil prices fall further
by around 10% from current levels. A significant cool off in crude oil prices remains the biggest upside risk to the Indian equity
markets in the short to medium term.
News:
DOMESTIC MACRO:
India's inflation accelerated in April to 7.23% as price pressures for food, fuel and manufactured items all picked up,
adding to the RBI's bind in trying to control inflation when economic growth has slumped to a near three-year low.
WPI in March was 6.89%.
The rupee fell to a life-time low of 54.91 to the dollar on Friday, and is the worst performer among Asian currencies so
far this year. The RBI has sold $20.69 billion in spot markets from the start of September 2011 through March 2012
and has separately sold dollars in the forwards market to defend a battered rupee.
India's consumer price inflation accelerated in April to 10.36%, making life harder for the RBI as it looks to kickstart a
flagging economy, In March, consumer prices rose 9.47%.

3. GLOBAL MACRO
Euro:
A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity -
an approach long driven by German Chancellor Angela Merkel - with a new dose of U.S.-style stimulus seen as vital to
healing ailing euro-zone economies.
The Bank of Spain said bad loans rose to 8.37% of banks' outstanding loans in march , the highest since August 1994
and up from 8.3% in February, which was also revised higher.
Fitch Ratings Agency on Thursday downgraded Greece's credit rating to CCC from B-minus, citing the heightened risk
that the country might have to leave the euro zone.
Moody's Investor Service carried out a sweeping downgrade of 16 Spanish banks on Thursday, including Banco
Santander, the euro zone's largest bank, citing a weak economy and the government's reduced ability to support
troubled lenders.
Greece abandoned a nine-day hunt for a government on Tuesday and called a new election that may hand victory to
leftists who might cut the nation's financial lifeline, pushing it closer to bankruptcy and out of the euro zone.
US:
President Barack Obama on Saturday called on the U.S. Congress to back his efforts for tough new financial industry
oversight, saying a $2 billion trading loss at JPMorgan(JPM.N) underscored the need for such regulation.
China:
Annual consumer inflation moderated to 3.4% in April from 3.6% in March, while food prices - which are of most
concern for China's people and policymakers - rose by 7%, compared with 7.5% in March.

4. Satadru Mitra Varun Goel Jharna Agarwal
Palak Nanjani Abbas Naheed Kanika Khorana
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