1. International
The fresh debate over the withdrawal of monetary stimulus weighed on global equity markets, which pulled
back from record levels and soft economic data out of China added to the weak investor sentiment.The MSCI
AC World Index declined 1.40% led by sharp fall in Asia Pacific markets, especially Japan. Global treasury bond
yields rose as Fed’s latest comments indicated that it is closely monitoring economic data and may reduce
purchases if the economy strengthens. Bond yields however closed off highs as increase in yields spurred
renewed investor interest towards the close of week. In commodity markets, crude oil and industrial metal
prices witnessed selling pressure following fall in Chinese manufacturing PMI.The US dollar weakened and
the yen & swiss franc gained ground this week amidst increased investor interest in safe havens.
• Asia-Pacific: Concerns about the sustenance of global easy liquidity along with weak China data led to
a sharp sell-off in regional equity markets. Japan,Australia and Hong Kong equities were the top decliners.
China’s preliminary HSBC manufacturing PMI for May declined from 50.4 to 49.6, indicating industry
output may be contracting. Japan’s trade deficit widened in April as rising import prices offset benefits of
larger exports.Thailand economy grew at a much slower pace in Q1-2013, 5.5%yoy vis-à-vis 18.9%yoy in
Q4-2012, as strengthening baht weighed on exports. In contrast, Singapore GDP surprised on the upside,
as strength in financial services helped economy expand by 1.8%qoq. Bank of Japan maintained status quo
on policy.
• Europe/Africa: European equity markets fell in line with broad global indices. Initial PMI readings
showed some improvement in manufacturing and services sectors but the index remained below the 50
mark, separating growth from contraction. Output in both large economies, France and Germany,
remained weak. UK affirmed Q1-2013 GDP growth estimates at Q1-2013. German business and
consumer confidence indices gained reinforcing hopes of improvement. South Africa maintained policy
rates at 5% and issued a dovish statement. Spain’s Bankia sold City National Bank of Florida for $883
mln to Chilean BCI as part of efforts to shore up capital.
• Americas: US equity markets retreated but markets in Brazil and Canada registered gains for the week.
The FOMC left monetary policy unchanged this week but comments indicated a gradual step down in
bond purchases may take place if economy continues to recover. It however reiterated that this may not
necessarily be a straight line reduction and, bond purchases may be increased if economy weakens again.
US economic data was largely positive – both existing and new home sales increased and initial jobless
claims decreased by 23,000. Orders for durable goods firmed up 3.3%, and the core orders index was
up 1.2%.Valeant is reportedly close to acquiring Bausch & Lomb for about $9 bln.
Market Review
WEEK ENDED MAY 24, 2013
2. Weekly Weekly
change (%) change (%)
MSCI AC World Index -1.40 Xetra DAX -1.10
FTSE Eurotop 100 -1.69 CAC 40 -1.11
MSCI AC Asia Pacific -2.74 FTSE 100 -1.02
Dow Jones -0.33 Hang Seng -2.01
Nasdaq -1.14 Nikkei -3.47
S&P 500 -1.07 KOSPI* -0.67
* As of May 24, 2013
India - Equity
Weak global sentiment and mixed corporate earnings data led Indian equity markets to snap recent
gaining streak. Mid and small cap indices witnessed larger declines compared to large caps. Except
technology, all sectoral indices closed in the red. FII flows aggregated $1 bln in the first four trading days
of the week, significant share of which was towards increased issuances being witnessed.
• Earnings: Corporate India’s latest earnings reports were lacklustre and reflected the impact of
moderating consumer demand. Results were particularly downbeat for infrastructure & capital goods,
FMCG, auto and consumer discretionary (particularly auto) sectors. In contrast, healthcare and IT
services (except Infosys) reported good set of numbers.While earnings from public sector banks were
short of expectations, private sector banks continued to perform well. Well-established telecom
companies put up a strong show vis-à-vis small/marginal players. Infrastructure companies showed
little improvement in order books during the quarter, while metals sector managed to beat market’s
low expectations, despite the fall in prices. In our view, the latest results are unlikely to spur large
downgrades in consensus earnings estimates and the ongoing disinflationary trend along with lower
interest rates is likely to help corporate margins improve over the next few quarters.
There has been an increase in corporate equity issuances as companies seek to increase floating stock
to meet SEBI guidelines (minimum 25% public holding; PSUs 10%).Amidst low rates and high global
liquidity, issuances have witnessed strong FII demand. Unlike expectations, the large supply has not
impacted markets much. Markets continue to look reasonably priced with all downsides factored in.
Weekly change (%)
S&P BSE Sensex -2.87
CNX Nifty -3.29
CNX 500 -3.33
CNX Midcap -4.48
S&P BSE Smallcap -3.33
