India: Market Snapshot 9-Aug-2010 India Food Inflation Slows to 13-Month Low as Rains Intensify Indias food inflation

slowed to a 13-month low as the country received more rainfall than forecast by the weather office, aiding sowing of lentils and rice. An index measuring wholesale prices of farm products compiled by the commerce ministry rose 9.53 percent in the week to July 24 from a year earlier. Food prices rose after last years June-September monsoon rains, the main source of irrigation in the country, were the least in almost four decades, reducing farm output. India faces a shortage of 3.5 million tons of lentils, Trade Minister Anand Sharma told lawmakers on August 2. Rains in July, the wettest month of the monsoon season, were 102.5 percent of the 50-year average of 292.4 millimeters. Indias Manufacturing Growth Accelerated Last Month Indias manufacturing growth accelerated in July, increasing pressure on the central bank to raise interest rates. Bond yields touched a three-month high. The Purchasing Managers Index rose to 57.6 from 57.3 in June. The data, along with rising bank credit and automobile sales, adds to evidence of strengthening consumer demand in Asias largest economy after Japan and China. Reserve Bank of India Governor Duvvuri Subbarao last week increased rates for the fourth time in five months and pointed to capacity constraints building up in industries. By contrast, Chinas manufacturing contracted in July for the first time in more than a year. Indias Life Insurance Says Assets Rise 32% to $250 Billion Life Insurance Corp. of India, the countrys largest money manager, said its assets under management rose 32 percent in the fiscal year ended March 31. The Mumbai-based insurers assets increased to 11.52 trillion rupees ($250 billion) and it reported a valuation surplus of 234 billion rupees for the period. Total premium income climbed 18 percent to 1.86 trillion rupees, the insurer said. Life Insurance, which manages more money than all Indian mutual funds combined, bought the nations equities in 2008 as overseas investors shunned emerging-market assets in the midst of the global credit crisis, triggering the largest outflows from Indian stocks that year and their biggest annual slump. The insurer plans to invest 2 trillion rupees in stocks and bonds in the fiscal year that started in April 1 Coal India Said to Plan $3.3 Billion Initial Public Offering India may raise as much as 150 billion rupees ($3.3 billion) from the sale of shares in Coal India Ltd. in what would be the nations largest initial public offering. The worlds biggest producer of coal will file its draft sale prospectus with Indias capital markets regulator early next week, and plans to sell shares around mid-October. The IPO, likely to surpass the 116 billion rupees raised by billionaire Anil Ambanis Reliance Power Ltd. in January 2008, would bring Prime Minister Manmohan Singh closer to his target of raising a record 400 billion rupees from asset sales in the year to March 31. The cabinet in June approved the governments plans to sell a 10 percent stake in Kolkata-based Coal India. India Seeks $3 Billion Subsidy for State-Run Refiners Indias government sought parliamentary approval to give state refiners 140 billion rupees ($3 billion) as compensation for selling fuels below cost. The amount will be given in cash to the refiners. Indian Oil Corp. and state-owned rivals posted losses in the first quarter of the current financial year after failing to get compensation for selling fuels below cost to help curb inflation in Asias third-biggest energy consumer. Their profitability may improve after the government freed gasoline prices from state control in June and increased rates of diesel, cooking gas and kerosene.

Market Indicators

Week Close

Returns % Week 2010 YTD

Market Indicators

Week Close

Returns % Week 2010 YTD

Broad markets S & P CNX Nifty BSE Sensex CNX 100 CNX Mid-Cap Index BSE Mid-Cap Index BSE Small-Cap Index BSE 200 S & P CNX 500 Sectors 5 439 18 144 5 416 8 546 7 534 9 584 2 311 4 540 1.33 1.54 1.29 1.56 1.71 2.52 1.30 1.45 4.58 3.89 5.83 14.98 12.16 14.68 6.01 4.87

Emerging Markets

MSCI Emerging Markets MSCI Asia-Ex Japan

MSCI China MSCI India MSCI Indonesia MSCI Brazil MSCI Russia Fixed-Income Markets Repo Rate Reverse Repo Bank Rate Cash Reserve Ratio Statutory Liquidty Ratio 91-Day T Bill 10-Year G-Sec Call Rate NSE Mibor AAA-Spread (5yr) in bps* *1 bps = 0.01% FII Flows MF Flows (30 Jul) $ million Currency

381 498 64 731 4 053 3 469 807

2.03 2.37 2.09 1.24 -1.57 0.78 2.63

3.71 2.70 -1.51 3.36 12.17 -4.28 1.45

BSE Auto BSE Banks BSE Capital Goods BSE Consumer Durables BSE FMCG BSE Healthcare BSE IT BSE Metal BSE Oil & Gas BSE Public Sector BSE Power BSE Realty Global Markets U S (Dow) U S (Nasdaq) U S (S & P 500) Japan Germany UK France China MSCI Emerging Markets

8 533 11 793 14 688 5 463 3 285 5 593 5 639 15 470 10 117 9 574 3 126 3 448

1.29 2.19 0.66 3.19 1.69 -0.08 3.00 0.46 -0.48 -0.03 0.49 2.24

14.75 17.56 4.05 44.33 17.66 11.45 8.73 -11.09 -3.38 0.44 -1.98 -10.56

5.75 4.50 6.00 6.00 25.00 5.98 7.85 3.4% - 5% 4.74 63.71

1 434

10 654 2 288 1 122 9 642 6 260 5 332 3 716 2 658 381

1.79 1.50 1.82 1.10 1.82 1.41 2.00 0.79 2.03

2.16 0.85 0.59 -8.57 5.07 -1.49 -5.60 -18.88 3.71

INR/$ INR/Euro INR/Yen Commodity Gold Crude LME Metals

46.15 61.28 0.54

-0.71 1.06 0.43

-0.81 -8.02 7.88

1 205 81 3 410

2.10 2.22 1.87

9.70 -2.68 0.20

Global Update Jobless Claims in U.S. Unexpectedly Climb to Three-Month High More Americans than projected filed applications for unemployment insurance last week, indicating employers kept cutting staff as the recovery showed signs of slowing. Initial jobless claims climbed by 19,000 in the week ended July 31, the most since April. The number of people receiving unemployment benefits dropped, while those getting extended payments rose. Those whove used up traditional benefits and are now collecting emergency and extended payments increased by about 258,000 to 3.92 million in the week ended July 17. President Barack Obama on July 22 signed into law a measure restoring unemployment benefits that were cut off. The bill provides retroactive aid to those whose checks were cut off when benefits expired June 2, while extending through November a program offering up to 99 weeks of assistance. ECB Keeps Rate at 1%, May Weigh Second Run at Exit The European Central Bank left interest rates at a record low as policy makers start to consider how to scale back the crisisfighting measures introduced over the past two years. The ECBs Governing Council meeting in Frankfurt today set the benchmark lending rate at 1 percent for a 16th month. The ECBs bond purchases, which split the Governing Council when they were started at the depth of the crisis in May, dropped to 81 million euros last week from 16.5 billion in the first week. The program has totalled 60.5 billion euros so far. The risk for policy makers is that they tighten policy too soon just as government austerity measures to reduce budget deficits threaten growth. Indonesian Economy Accelerates, Raising Rate Pressure Indonesias economy expanded at a faster-than-estimated pace last quarter, spurring stocks and adding pressure on the Central Bank to raise borrowing costs from a record low as inflation accelerates. Gross domestic product in Southeast Asias largest economy grew 6.2 percent in the three months to June 30 from a year earlier. Bank Indonesia has left its benchmark interest rate at 6.5 percent since August 2009, helping boost earnings at car retailer PT Astra International and putting the nation on course to meet President Susilo Bambang Yudhoyonos goal of 6.6 percent average annual growth. China Central Bank Sees Inflation Risks as Economy Stabilizes Chinas central bank said inflation risks persist as growth stabilizes in the worlds third-biggest economy. Theres still a need to strengthen the management of inflation expectations, the Peoples Bank of China said in a second-quarter report on monetary policy. Chinas inflation accelerated to 3.3 percent in July, the fastest pace in 21 months. Chinas growth will be aided by policies this year to develop western regions, accelerate public home construction and promote emerging strategic industries. At the same time as it highlighted price increases, the central bank said that slowing money and credit growth, stabilizing commodity prices and abundant domestic manufacturing capacity could help to limit the inflation threat. Greece to Pass First Test as Budget Challenges Mount Greeces austerity drive may pass its first test this week as a European Union-led mission prepares to dole out more rescue funds for a government trying to cut the euro-regions second-biggest budget gap and weather a recession. In approving the second tranche of a three-year, 110 billion-euro ($145 billion) bailout, the EU and International Monetary Fund are likely to praise Greeces progress and say more work is needed to lock in the gains. Greece is battling the highest inflation rate in the 27-nation EU, revenue is trailing targets and the bloc and the IMF forecast the economy will shrink as much as 4 percent this year.

Charts for the week China Rally Leading Indicator for Global Stocks The 12 percent rally in the Shanghai Composite Index the past month may bode well for global investors, as the gauge has become a leading indicator for the global stock market. The CHART shows that the Shanghai Composite rallied to a peak before the MSCI AC World Index, tracking both developed and emerging markets, on two occasions since 2007. The Chinese gauge also dropped to a bottom on Nov. 4, 2008, amid the global financial crisis, while the MSCI index reached its low for that year about two weeks later. The Shanghai and the MSCI global indexes each touched their 2010 lows on July 5, and the China measure has climbed 12 percent since. Citigroup predicts a further gain of as much as 17 percent by years end, to a reading of 3,100

Obama-Bernanke Recovery Tops 08 Amid Record Drop The American economy, the worlds largest, produced more goods and services in the second quarter than at any time in history. It will also take years to recover the ground lost during the worst recession since the 1930s. The CHART shows gross domestic product before adjusting for inflation, known as nominal GDP, climbed to $14.6 trillion in the period from April through June, exceeding the previous peak of $14.5 trillion reached in the third quarter of 2008. Including the influence of prices, so-called real growth was just shy of the fourth-quarter 2007 top. The chart also shows the so-called output gap, or how much more the economy needs to grow to return to the prior trajectory. Closing the difference will indicate the U.S. has completely recovered from the economic slump. The Obama administration and the Federal Reserve have undertaken unprecedented measures to pull the economy out of the recession. The administration passed an $862 billion stimulus package last year, bailed out the ailing auto industry, and is seeking passage this week of a package of tax cuts and credit assistance to boost small businesses. Bernanke and his colleagues have kept the benchmark interest rate near zero since December 2008 and purchased more than $1.7 trillion worth of mortgage and government debt to keep borrowing costs low.

Voices "Provided that that fiscal expenditures achieve the target of an 11.4 percent increase this year, 2010 GDP growth should be about 10 percent,". "If fiscal expenditures top the 11.4 percent target, and domestic and external demand don't drop sharply in the second half, then this year's GDP rise should be about 11 percent," Zhang Yutai Director and leader of Party group of Development Research Center of the State Council of Peoples Republic of China "I'm in favor of tax cuts, but not with borrowed money,". "Our choices right now are not between good and better; they're between bad and worse. The problem we now face is the most extraordinary financial crisis that I have ever seen or read about." Allen Greenspan, Former Federal Reserve chief The steps we took this year to reform the health-care system have put Medicare on a sounder financial footing,. Reform has actually added at least a dozen years to the solvency of Medicare, the single longest extension in history. As reform ramps up in the coming years, we expect seniors to save an average of $200 per year in premiums and more than $200 each year in outof-pocket costs, too,. Barack Obama, US president "Inflation right now is a problem and the government regonises that. In my judgment by the end of this year it will not be what it is now. It will be much close to 6 per cent, which most people regard as a comfortable level," Planning Commission Deputy Chairman Montek Singh Ahluwalia 'We could have provided the BPL(Below Poveryt Level) relief if our public distribution system was in place and working, but unfortunately it is not, so one of the decisions taken in the meeting of the chief ministers was to revamp the PDS,'. 'Central control on PDS is not possible. States will have to decentralise it to the panchayat level,'. 'If we can't implement the system, why should we venture for the universalisation?' Pranab Mukarjee Indian Finance Minister

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