This weekly report provides an equity market outlook and summarizes domestic and global macroeconomic news. It expects Indian companies to report 12% annual earnings growth and private banks to lead the results season with 20-25% profit growth. Key economic data to be released this week includes the IIP on Wednesday and inflation on Friday. In Europe, the situation remains unchanged with discussions ongoing around bank capitalization. The US added 103,000 jobs in September while the unemployment rate held steady at 9.1%.

1. The World This Week
October 3 – October 7, 2011

2. Equity View:
This week has important domestic events lined up which might have significant impact on market movement. Q2
results season will officially kick-start with tech major Infosys this Wednesday. We expect 4-5% Q-o-Q growth in profit
for Infosys. The important point to watch in Infosys’ results would be the management guidance with reference to
business outlook as well as how the clients in US & Europe are planning their budget for next year.
In terms of our overall expectations for Sensex companies we are expecting 12% Y-o-Y growth in profits & close to 20%
growth in revenue; however the profits could be lower due to high interest rates and commodity prices which have
been existing for several months. We expect private sector banks to lead the results season with almost 20-25% profit
growth. We also expect Pharma, Technology & FMCG to deliver a good set of numbers. We continue to be cautious in
terms of growth & earnings outlook for real estate & capital goods space.
On the economic front, we have the IIP number on Wednesday and the inflation number on Friday. The IIP would be a
very critical number to watch out for, especially on back of last month’s data which was much below consensus
expectation. This number will provide us an indication of any relative slowdown in industrial activity in the last couple
of months.
The U.S. economy added 103,000 jobs in September, but the nation's unemployment rate held steady at 9.1 percent
for the third straight month. The results season will be beginning in US with Alcoa coming with its results on Tuesday.
In Europe, status quo situation still remains; there has been neither a positive development nor any negative
development. Last week, European Central Bank announced liquidity measures which entailed buying €40 bn (US$53
bn) worth of covered bonds, which are an important source of long-term funding for the European banking sector. The
Central bank also announced that it would provide an uncapped amount of collateralized longer-term loans at fixed
rates to commercial banks. One of the banks in Euro area is almost on the verge of collapsing as this bank had heavily
invested in government debt. There have been talks of the bank capitalisation in Europe which could be extremely
critical especially in light of most of the banks holding significant amount of peripheral Euro debt. So, this remains to be
a key issue which will be monitored in the short to medium term.
News:
DOMESTIC MACRO:
 Food inflation jumped to 9.41% for the week ended September 24 from 9.13% in the previous week,
 India's foreign exchange reserves fell to $311.482 billion as on Sept. 30, from $312.707 billion in the previous
week.
 The HSBC Markit India Manufacturing PMI fell more than two points to 50.4 from 52.6 in month of september.
 India's August exports rose 44.25 percent to $24.3 billion from a year earlier, while imports for the month rose
41.82 percent to $38.4 billion, leaving a trade deficit of $14 billion, government data showed.

3. GLOBAL MACRO
Euro:
 Moody's lowered its rating on Italy's bonds by three notches to A2 from Aa2 on Tuesday, saying it saw a
"material increase" in funding risks for euro zone countries with high levels of debt and warning that further
downgrades were possible.
 The International Monetary Fund could buy Spanish or Italian bonds alongside the euro zone bailout fund if
needed, to help boost investor confidence in those countries, the IMF's Europe head Antonio Borges said on
Wednesday.
 Euro zone finance ministers are reviewing the size of the private sector's involvement in a second international
bailout package for Greece, a move that could undermine the aid programme and hasten the threat of a Greek
default.
 Greece's economy will continue to shrink by 2.5 percent next year, compared with a 5.5 percent contraction in
2011, according to the country's 2012 budget draft released on Monday.
US:
 The unemployment rate remained at 9.1 percent for the month of September.
 U.S. regulators closed two banks on Friday, bringing the total number of foreclosures this year to 76.

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