- The Nifty index corrected by 2.5% last week, the first negative week in 7 weeks. Markets have risen 17% so far this year due to FII inflows of $5 billion. - This week has important data releases, including Q3 GDP estimates expected around 6.3-6.4% and auto/cement sales on March 1st. - On February 29th, the ECB is expected to pump €500 billion into the European financial system, which could boost risky emerging market assets like Indian equities. - The analyst maintains a positive outlook on Indian markets, expecting over 20% upside by year-end.

1. The World This Week
Feb 20 – Feb 24, 2012

2. Equity View:
Nifty corrected by 2.5% during the last week. This was the first negative week for Nifty after seven consecutive weeks of
positive movement in the Indian equity markets. The markets have rallied up by almost 17% with FII’s inflow of around $5Bn
from the beginning of the year. We believe there could be a similar kind of upside in the markets going forward and any
correction should be used as a buying opportunity. We expect monetary easing to start sooner than expected, if not by
March, then in April the possibility of the first Repo rate cut is vey high.
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This week happens to be a data heavy week. GDP data for Q3 FY11-12 will be released on 29 February 2012. We expect the
number to be in range of around 6.3% – 6.4%. Also, GDP growth will bottom out this quarter and next quarter onwards we
could witness the GDP growth of around 6.5% and making the full year growth of nearly 7%. India Infrastructure output
numbers are expected to have some kind of a bounce back in infrastructure creation space especially in Roads and Highways.
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The monthly Auto and Cement sales numbers will be released on 1 March 2012. We expect the two wheeler & tractor
segments to be robust going forward and also expect the commercial vehicles to bounce back strongly from the low levels
that were witnessed during the months of November and December last year. Hence, we are positive on the Auto space as it
would benefit from monetary easing as and when it starts.
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In Europe, LTRO facility is scheduled by ECB on 29 February 2012 in which around €500Bn would be pumped in to the
European Financial System. This liquidity is expected to find its way in to risky assets across the globe. Hence, we expect this
easy liquidity would continue to boost risky assets like Equities and Commodities of Emerging Markets. As result of this we
are clearly biased on the positive side as far as the Indian Markets are concerned and expect the markets to remain positive
with an upside of more than 20% from current levels during the remaining year.
US witnessed a healthy macro economic data flow during the last week. The higher US consumer confidence number led to
rise in US stock markets. S&P was at its peak, levels last seen in year 2008. Also, NASDAQ is at an 11-year high. US economy
continues to be in a healthy shape and any double dip recession in U.S is not expected for at least next two quarters. Also
being an election year, we expect the government to be more involved in the domestic issues hence no big flair is expected in
the Middle-East and Iran. After having two costly wars in Iraq and Afghanistan in past, U.S would not go for any kind of
military involvement in the ongoing Iran-Israel crises. With this view the crude prices to really shoot up significantly from the
current levels is not likely. As long as Brent crude stays below $130 a barrel it would not really be a big risk for the Indian
equity markets.
In terms of valuations, we believe that come Sep-Oct 2012, markets would start discounting FY14 earning numbers and our
rough cut estimate for FY14 numbers are around Rs.1,500 earnings for SENSEX and even a multiple of 15 would give us
SENSEX valuations of around 22,500. This would be our year-end target for Indian Equities which is a good 20-22% upside
from the current levels.
News:
DOMESTIC MACRO:
Indian consumer prices rose 7.65 percent in the year to January, higher than wholesale inflation for the period but still
suggesting price pressures were moderating, adding weight to views that the RBI has room to cut interest rates.
India is seeking up to 100,000 barrels per day (bpd) of extra oil every year from top supplier Saudi Arabia to feed its
growing refining capacity, its oil minister said on Thursday, denying it was trying to replace supply from sanctions-hit
Iran.

3. GLOBAL MACRO
Euro:
Fitch cut Greece's long-term ratings on Wednesday to its lowest rating above a default, becoming the first ratings
agency to make the widely expected downgrade after the country announced a bond exchange plan to ease its
massive debt burden.
Economic output in the 17 nations sharing the euro will contract 0.3 percent this year, the European Commission said
a report, reversing an earlier forecast of 0.5 percent growth in 2012. The wider, 27-nation European Union, which
generates a fifth of global output, will not manage any growth this year, the Commission forecast.
From France to Germany, Britain to Belgium, four of the region's biggest banks lined up to reveal they lost more than
8 billion euros last year from their Greek bonds holdings.
Germany is easing its opposition to a bigger European bailout fund by smoothing the way for the world's leading
economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt
crisis.
World economic powers told Europe on Friday it would have to do more to fight its financial crisis before they agree
to provide back-up in the form of a bigger IMF war-chest.
US:
Obama sought to deflect growing Republican attacks over rising prices at the pump, blaming recent increases on a mix
of factors beyond his control, including tensions with Iran, hot demand from China, India and other emerging
economies, and Wall Street speculators taking advantage of the uncertainty.

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