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RBI SLASHED REPO RATE BY 50bps TO BOLSTER THE ECONOMY GROWTH….

Majority of the Global economies performed on the gains but a sense of cautious was seen on account of rise in

European debt crisis widely gaining grip on the countries like Spain and Italy while Greece and Ireland already struggling

hard to come out from the deep debt burden. Although much has been done by the Troika i.e. European Commission

(EC), the IMF and ECB but the crises situation would take its own time before it gets fade away from the system.

In Europe, the chance of government bond purchase program by European Central Bank has increased as the

economists are of the debt crisis are worsening.

Spain’s jobless rate rose to 24.4% in the first quarter, the highest in almost two decades and the economy is mired in a

recession that the IMF predicts will cause it to shrink by 1.8% in

2012. The real estate industry of Spain bust is the biggest test to

date for European Authorities. Whereas, Spain’s economy is almost

twice that of Greece, Portugal and Ireland combined. Yield on

Spain’s 10-year bonds climbed by nine basis points to 5.86% from

April, approaching the level of those countries when they had to be

bailed out. Spain and Ireland have had the similar type of problems

and symptoms i.e. availed cheap credit, a construction boom and

over investment in various projects without realizing the revenue

outcome potential from it.

The expectations of easing by Bank of Japan led to fall in the yen against all the major currencies.

Further monetary easing in China is increasing as the corporate are seeing erosion in profitability. Chinese 764

companies released this year annual combined growth of 14.9% in the profits as compared to 38% reported last year.

Monetary stimulus in the immediate future to prosper the growth arrested the appreciation in Yen. Banks lending in

China increased sharply in the month of March after the cut in Reserve Ratio Requirement by the People’s Bank of

China. The China government is assuring the record credit growth in the sense that the government would not let

growth dip sharply and would continue to alter the policies in synchronies with the changes in the macro environment.

For the first time since 2007, China has widened the Yuan’s trading band to 1% from 0.5% which reflects that China is

moving further on its stance against currency. Economic growth slowed in the first quarter to 8.1% , the least in almost

3yeras.

Monthly Newsletter

(May 2012)

To bolster the economic growth RBI slashed the Repo rate by 50 bps (basis points) to 8%. RBI hinted that risks to

inflation may limit the scope of further reductions in the policy rates. Indian economy has been facing challenges on

Inflation; slow down in GDP growth (Projection of current year growth at 7.3%) fiscal deficit and current account

management. After analyzing all these constraints it would not be possible for RBI to further rate cut by more than

75bps.

RUPEE VOLATILITY – A BIG WORRY

Year 2011-12, India economy was in a very bad state because interest rates were going up, inflation was not coming

under control; FIIs were not bringing in any fresh money. The global situation was also bad. So if we compare calendar

year 2011 with 2012, we were more vulnerable then. At present there are challenges like bringing down interest rates.

The high fiscal deficit is a given.

Catalysts - Play

Equity Markets are about optimism - people buy equities only when there is optimism about growth. Currently, there is

no optimism. For that you need catalysts. The reversal of the interest rate cycle, rupee appreciation, lower inflation and

signs of corporate investment activity are the main catalysts for optimism.

India's economic outlook remains worrisome, given problems such as a widening current account deficit and slowing

growth. These concerns have now been compounded by the prospect of a ratings downgrade after Standard & Poor's

cut of the country's outlook.

Oil will play a big role in Indian economy- if prices could come down to $100 (per barrel), then it will be a big catalyst. So,

it looks like the second half will be better than the first half. Markets are going to be highly volatile, but will move

sideways. Our advice to people is that it is not a trading market, not just equities, but also currency.

The rupee settled flat at 52.54/55 to the dollar against 52.55/56 on 26-Apr. It fell

nearly 1 percent for the week. India is buffeted by twin current account and fiscal

deficits, which added to slowing policy reforms and relatively high inflation, is

making for a potentially toxic mix.

A Reuter’s poll on 26-Apr showed market players had nearly doubled short Indian

rupee bets, largest since November.

The one-month offshore non-deliverable forward contracts were at 52.90. In the currency futures market, the most-

traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange

all ended around 52.88 on a total volume of $2.6 billion.

A Positive Side on Rupee falls - to make industry competitive

An Import- Export trade deficit pressures, the Indian rupee exchange rate is moving somewhat downwards. In fact, It’s

good for the economy so that the industry does become somewhat more competitive and imports do come down. Now,

of course, that does mean that if our exchange rate moves further downwards and there is inelastic demand for

commodities like oil, it would put further fiscal pressures domestically and also some price pressures.

But on the other hand, it would certainly be good for the external sector that pressure on imports be reduced. Also, a

greater incentive for exporters. So, that as a consequence of some of the current pressures, our exchange rate does

adjust to a more competitive and realistic rate, which would make Indian industry more competitive. Also, it would

make the IT companies more competitive as well as more profitable. So, that would make a difference and that the

external sector can indeed improve from where we are today.

Downgrade - Ratings

Global ratings agency Moody's Investors Service said on 30-Apr, it has placed on review India's three top private sector

lenders ICICI Bank, HDFC Bank and Axis Bank for possible downgrade.

The review is mainly because of lower sovereign ratings of India. Standalone

credit assessment ratings of these lenders are currently positioned above

India's sovereign debt rating.

"Moody's expects to position the standalone credit assessments of most

banks globally at (or below) the rating of the sovereign where the bank is

domiciled," Moody's said in a report. The review is expected to be concluded

in three months. All the three lenders enjoy Baa2 foreign currency long-term

ratings from Moody's. This is a medium grade rating and shows that these

companies have acceptable ability to repay short-term debt.

Ratings agency Standard & Poor's mid of Apr month cut its outlook to negative from stable on India's sovereign ratings

and leading lenders including ICICI Bank, HDFC Bank, and Axis Bank.

A downgrade in rating means that the government or companies are less capable to meet their debt obligations. This

results in higher cost to borrowings. Also it becomes difficult for the firms and the government to raise money from

overseas markets.

Moody’s Credit Rating reviews take into account (i) the extent to which the banks' business depends on the domestic

macroeconomic and financial environment; (ii) the degree of reliance on market-based, and therefore more confidence-

sensitive, funding; and (iii) direct or indirect exposures to domestic sovereign debt, compared with their capital bases.

Subsidy Outgo continues to Balloon:

The subsidy outgo for India has actually ballooned to a massive size. The chart shows, except for FY11, subsidy payout

has just been rising every year since FY07. Subsidies

have had a negative impact on the government's

finances and have thrown the fiscal position off the

balance. Higher fuel prices combines with higher food

prices have led subsidies to grow at breakneck speed. At

the same time the GDP growth (Gross Domestic Product)

has not really kept in pace. Therefore the denominator in

the subsidy as a percentage of GDP has grown at a

slower pace as compared to the numerator. And as

discussed above, in all likelihood, subsidy outgo for next

year is already set to be higher than what it was in FY12.

Source: Financial Express (* Budget estimates)

Measures to Boost Indian Economy

>>Allow Foreign Individual to Invest in Corporate Bond Market:

To boost the investments in the bond market, the Finance Ministry has asked the Reserve Bank of India to open a US$ 10

bn window. This window is to allow foreign individuals to invest in the corporate bonds. As per the finance ministry, this

would boost the foreign investments in the bond markets as the foreign investors would be able to earn higher returns

on Indian debt as compared to what they earn in US or Europe.

This does come as good news for the underdeveloped bond

market in the country. However, foreign investors would

prefer to wait and see the tax implications of such

investments. For the scheme to be successful, the foreign

individual investors should be taxed at the same rate as the

foreign institutional investors (FIIs). Currently the FIIs can

invest up to US$ 15 bn in government securities and US$ 20

bn in corporate bonds. However, FIIs have been pulling their

money out of the Indian markets since the start of the global

crisis.

Source: Economic Times (* Data till April 22, 2012)

>>RBI – Rate Cut, Increasing Liquidity

The Reserve Bank of India (RBI) finally succumbed to pressure from the economy and has announced a rate cut after

three years of tightening. Inflation has seen moderation over the previous year;

but it still remains sticky on account of global commodity prices and supply side

constraints. However, growth in the Indian economy has been the major letdown,

falling to 6.1% in 3QFY12. This forced the central bank's hand and in the first

monetary policy review of FY13, the RBI decided to reduce the rates at which it

lends to banks (repo rate) by 0.50%. Thus the repo rate now stands at 8% from

8.5% previously. The rate at which RBI borrows from banks (reverse repo) now

stands 7% post the review. The central bank left the cash reserve ratio (CRR)

unchanged at 4.75. The central bank's growth forecast for FY13 now stands at

7.3%, moderately higher than that seen in FY12. The RBI has however indicated that the scope for further rate cuts is

remote.

>> TRAI – 2G Auction and New Licensing Policy

India's telecom regulator, TRAI, has proposed a single licensing regime for new companies

wanting to enter the telecom sector. Under the new regime, only one permit will be given

to operate in the entire country. The permit will cost Rs 150 m. It may be noted that right

now, telecom companies have to take separate licences for operating in each of the 22

telecom circles. The said proposal is currently under discussion and can be a part of the

new telecom policy scheduled to be announced in June.

>>Fuel Price Hike: Pros & Cons with respect to Indian Economy

A fuel price hike looks inevitable, and that carries both good and bad news for investors. Raising fuel prices would

improve the government's fiscal standing, and give foreign investors some hope that India is getting serious about its

woeful finances, especially if diesel prices see some kind of deregulation.

However, the trade-off would inevitably come in the form of higher inflation. Standard Chartered, for example, says a

fuel price hike would push up WPI above 7 percent. Inflation may prove the bigger factor for bond markets, whereas,

after yields have already moved towards December 2011 highs on expectations for a reduced scope of further rate cuts

from the RBI. However, oil stocks such as Indian Oil and Bharat Petroleum Corp. are likely to rally once the move is

announced given the obvious impact on profit margins and the rupee could gain. However, the bigger positive to the

rupee would be in the form of a hopeful boost to foreign investor confidence, which has been badly rattled in recent

days on policy paralysis in government.

IMF’S EXPECTED GLOBAL ECONOMY GROWTH 3.5% IN 2012 & CONCERNS……..

GLOBAL - ECONOMY REVIEW

Have the developed world countries started showing signs of recovery? The picture is looking brighter from one side. For

instance, according to the Economist, Japan is expected to grow by around 2% in 2012 after a terrible 2011. The IMF's

World Economic Outlook has revised expected global growth in 2012 to 3.5% from

3.3% in January. In September last year, the IMF opined there was a 10% chance of

global growth dipping below 2% in 2012. Now it believes the chance is just 1%.

But this optimism is facing tough criticism. There are a few factors that could spoil the

party. First are commodity prices. Many years of high food and metals prices have

given a fillip to production. But oil remains an exception as supply fails to catch up

with rising demand. Thus, any nasty surprises notably in the form of steep oil price

hikes could topple global growth.

The worsening crisis in Europe also remains a cause for concern. The European Central Bank (ECB) had provided over

US$ 1.3 trillion in three-year liquidity to banks. Austerity measures have also been stressed upon. The hopes from this

have faded as European countries still struggle to stay afloat. The recent deteriorating scenario in Spain has only made

matters worse. GDP in the country has contracted for two successive quarters pushing the country back into recession

after showing some recovery before that. Political uncertainty has taken centre stage in France and the Netherlands as

disagreements have arisen between parties on budget cuts. All this does not paint a bright picture.

So far the global economy had been just about managing despite the crisis in Europe. But if the recession deepens or if

the Eurozone breaks up, both of which seem very likely possibilities, then the turmoil would only rise further. This in

turn is bound to have an impact on the US, Japan and the Asian economies. Thus, unless Europe comes out with some

meaningful solutions besides austerity measures, global growth would be in peril in the coming months or even years.

>> The global financial crisis has certainly taken its toll on

Europe, US and Japan. But European countries appear to have

borne the maximum brunt. The chart shows the GDP per

person that has been lost since the crisis broke out in 2008.

This is by comparing the actual figures in Q4 2011 with what the

trend would have been had the crisis not taken place. Ireland

has suffered the worst in this regard, while Germany the least.

Britain – Economy Shrank 0.2% in Q1, 2012

Britain is in a tough situation. The Cameron government is serious about sticking to its austerity plan with the aim of

eliminating most of the budget deficit by 2017. But this has led to the economy tripping.

The British economy shrank 0.2% in the first quarter after contracting 0.3% in the fourth

quarter of last year. As a result, Britain has slid back into recession. This has also put the

Bank of England in a spot. Expecting the economy to post some growth, the bank had

almost decided to halt more stimulus measures and focus more on inflation. But with the

economy contracting, it may be compelled to rethink its position.

Obviously, there are voices from various quarters questioning the extent of austerity

measures that the British government has imposed. One thing is certain. Taking on more

debt to solve the problem of debt is not going to do the British economy any favours in

the long term.

Europe Deep Trouble Soln.: Austerity Measures

There can be no doubt about the fact that Europe is in deep trouble. Both Spain and the UK have reported a contraction

in GDP for the second consecutive quarter. This effectively means that both countries have slipped back into recession.

And the scenario appears bleak for other nations too. Indeed, Europe's problems have been the product of taking on too

much debt. There has also been much policy paralysis as member nations seem to disagree on stimulus packages and

austerity measures.

No doubt that the problem of debt cannot be solved by adding on more debt and so austerity seems the only way out.

But Joseph Stiglitz (Noble Prize winner economist) thinks otherwise. He opines that there has never been any successful

austerity program in any large country. Moreover, austerity combined with the constraints imposed by the euro only

amounts to a recipe for disaster. Stiglitz also believes that if Europe maintains the austerity approach, he sees a core

euro area of only one or two countries. What this essentially means is that unless Europe comes out with a completely

different solution to its current spate of problems, the bleak outlook will remain.

INTERNATIONAL NEWS

US industrial production remained unchanged in March after being flat in

February. Economists had been expecting production to increase by about 0.3

percent.

US initial estimates put the total level of U.S. retail sales at a seasonally adjusted level of $411.1 billion for

March, an increase of 0.8 percent over February levels.

According to a report released by the National Association of Realtors (NAR), NAR said US existing home sales

fell 2.6 percent to an annual rate of 4.48 million in March from an upwardly revised 4.60 million in February. The

drop surprised economists, who had expected existing home sales to edge up to 4.62 million from the 4.59

million originally reported for the previous month.

Hong Kong's seasonally adjusted jobless rate remained unchanged sequentially at 3.4 percent in the three

months ended March. Economists were looking for a jobless rate of 3.5 percent.

INDIA - ECONOMY REVIEW

A Revision of India's Sovereign Rating -S&P :

>> The Indian growth story has taken another hit. Ratings agency Standard and Poor's (S&P) has cut India's outlook to

negative from stable, citing the country's large fiscal deficit and expectations of only

modest progress on reforms given political constraints, battering stocks, bonds and the

rupee. However the RBI and the Indian government have put up a brave face. The RBI

believes that the Indian financial system still remains very strong. The Indian

government also opines that there is no need to panic. That may well be the case. But

certain issues persist. Unless some of the economic reforms like reduction of fuel and

fertilizer subsidies, introduction of a nationwide goods and services tax, and easing of

restrictions on foreign ownership of various sectors such as banking, insurance, and

retail sectors are not taken up, India's aim to achieve a sustainable 9% plus growth rate

could remain only a dream. Indeed, it is high-time that the Indian government comes out of vote bank politics and

introduces measures to boost growth.

>> The ratings agency believes that India is off to hell in a hand basket. It has thus cut its outlook on India's long term

debt and has also warned the emerging Asian giant of a possible downgrade.

>> Indian government will be able to maintain its fiscal deficit target said the research arm of European Bank Barclays.

"While the possibility of fiscal slippage is present, we still think the government can remain close to its fiscal targets for

the current fiscal year." said a research note by Barclays Capital Research, in reaction to a revision of India's sovereign

rating outlook from stable to negative by global ratings firm Standard and Poor's or S&P.

Weather – Predict Normal Rainfall:

With India's weather department predicting normal monsoons this year. The rainfall during June-September this year

will likely be 99% of the long-term average. This would make it a third straight

season of normal rains. India's weather department defines normal monsoon as

seasonal rainfall between 96% and 104% of the long-term (or 50-year) average.

The weather department has also said that there is a 39% probability of the

emergence of weak El Nino conditions during the latter part of the monsoon season

and a 24% probability for below-normal rains. If El Nino does lead to reduced rains, it

may prevent India from repeating the bumper harvests of summer-sown crops it recorded in 2010 and 2011. It must be

noted that this condition was precisely what led to lower rains in 2009 and significantly impacted agricultural production

thereby leading to higher food prices.

We believe that predictions made by the weather department should be taken with a pinch of salt. What matters is

what the government has been doing to reduce the dependence on monsoons for bolstering agricultural production.

Has it been making sufficient investments in ramping up irrigation techniques, water harvesting etc? Are there enough

storage facilities for foodgrains? The latter point becomes important because adequate storage of food grains during

bumper years can be used in years plagued by inadequate rainfall. This helps to keep prices of food grains in check to a

certain extent.

Consumer Prices Index- HIGH:

The Reserve Bank of India (RBI) may have bowed down to pressure and reduced rates in the country, but consumer

prices in India have refused to come down by much. The

chart shows that in March 2012, consumer prices in

India were still quite high when compared to both its

developed and developing peers. And it led the pack by

a huge margin. Interestingly, alhtough Britan has

slipped into recession and China's economy

comparatively has grown at a much stornger pace,

consumer prices were almost on an even keel for both

the countries during the month. This signifies that

developed countries cannot afford to entirely discount

the threat of inflation.

Data Source: The Economist

WB State Seeks Bailout:

The Left's '34 years of misrule' according to Saugata Roy, the Minister of State for Urban Development has left West

Bengal (WB) in a mess. The state has a huge debt burden, and no real way to climb out of it. Unless the Center does

something to revive the situation, the state may enter a full-blown crisis. As per the latest state budget, last year WB

paid around Rs 180 bn as interest and Rs 70 bn as loan repayment. The state's total debt was around Rs 1.8 trillion last

year. The PM has assured Trinamool Congress that the Center would do whatever possible to bail out the debt-ridden

state. But, is this the right message to give to other States with miserable finances? Does bailing out debt ridden

companies, states or even countries for that matter really help tax payers in the longer term?

STATISTICS OF INDIAN MARKET INSTRUMENTS

In last one month overall market falls, among the sectors major losers were Capital Goods, IT sectors, Technology and

Power sectors. Whereas BSE IT sector lost 13% on M-o-M basis, remained the worst performer among the sectors. Rising

dollar is also not supported to companies financial by gaining on rupee-dollar conversion.

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CORPORATE BOND MARKET

FOREX MARKET

INFLATION & GROWTH WORRIES

WPI: Table 1: WPI Inflation at a glance (in %)

Wholesale Price Index (WPI) for the month Mar 12 rose from

158.4 to 159.8 implying an annual increase of 6.89%. Mar-12

WPI inflation was higher than market expectations of 6.70%

and was marginally lower than last month‟s inflation of 6.95%.

On a M-o-M basis, all the three sub groups of WPI registered

an increase in Mar-12. Core inflation eased to 4.66% in Mar-12

compared to 5.75% in Feb-12. However the Jan-12 WPI

inflation was revised upwards to 6.89% from an earlier

estimate of 6.55%.

Primary Articles:

During the month of Mar-12, Primary articles witnessed the highest monthly increase since Apr-11 on account of sharp

rise in cereals& pulses and fruits& vegetables. Primary articles which has started rising since Jan-12, recorded a sharp

increase of 2.38% in Mar-12. Protein inflation was noted at 15.65% higher than 14.5% noted previous month. Price of

pulses increased whereas price of Milk and Eggs, Meat & Fish declined in Mar-12 compared to Feb-12 levels.

Price of non food articles inflation continued to rise sharply. The index rose by 1.29% in Mar-12 compared to 1.97% seen

in the previous month. The increase in Non Food articles index in Mar-12 is on account of sharp gains in the oilseeds

group. Minerals group registered a sharp increase of 4.07% in Mar-12 after witnessing a decline of over 3% in the

previous month.

Fuel Products:

Following an increase in non administered fuel prices, Fuel index rose by 0.46% in Mar-12 after witnessing a decline of

0.12% in the previous month. However supported by a very high base, annual Fuel inflation eased to 10.41% in Mar-12

from 12.83% in the previous month. During the month of Mar-12 ATF prices rose by 4.7%, Naptha by 2.9%, Light Diesel

Oil by 8.1% and Furnace oil by 2.4%.

Core Inflation:

Core inflation which remained sticky above 7% level for most part of the

current fiscal eased to 4.66% in Mar-12. Core inflation has fallen below 4%

after a gap of 2 years and may hover around 5% for few more months.

Manufactured Products:

Manufacturing index rose by 0.35% in Mar-12, compared to 0.14% seen in the previous month. However similar to the

trend seen in the Fuel group, high base pulled the annual rate of Manufacturing inflation lower to 4.87% from 5.75%.

Food products index rose by 0.20% on account of 1.6% increase in the edible oil prices in Mar-12. Textiles index after

declining for most part of the year has changed its direction since Jan-12. Textiles group rose sharply by 0.71% in Mar-12

compared to 0.16% seen last month. Further, Chemicals group which has the highest weight of 12.02% in Manufacturing

rose by 0.73% in Mar- 12. Chemicals index witnessed increase in each of the 12 months of FY 2011-12 in the range of

0.07- 1.31%. The rise is attributable to firmness in crude oil prices seen during

the year. Base metals index rose by 0.31% and Transport, Equipments & parts

by 0.56% in Mar-12 thus adding to the inflationary pressures.

IIP Growth at 4.1%

The Index of Industrial Production (IIP) for the month of Feb-12 stood at 174.9

implying an annual growth rate of 4.1%, lower than market expectations of

6.9%. The IIP for Jan-12 saw a sharp downward revision to 1.1% from an earlier

estimate of 6.8% owing to an error in the sugar output data. On a M-o-M basis

the IIP fell by 1.7% in Mar-12.

Sector-wise: Mining sector recorded positive growth after a gap of 6 months at 2.1% in Feb-12 supported by low base.

On a M-o-M basis the mining index after rising in the last four months fell by more than 2% in Feb-12. As the mining

index remained in negative for most part of the year, cumulative growth also remains negative at 2.1%.

Manufacturing growth further slumped to 4.0% in Feb-12 from revised 5.4% seen in the previous month. In Feb-12 18

out of 22 industries covered by IIP reported positive growth compared to 13 in the previous month. Industries group

“Publishing, Printing and Reproduction of Recorded Media” has shown the highest growth of 60.1%, followed by 52.1%

in “Medical, precision & optical instruments, watches and clocks” and 16.4% in “Motor vehicles, trailers & semi-trailers”.

Electricity growth after falling to the lowest level in FY 2011-12 at 3.2% in Jan-12, surged to 8.0% in Feb-12 aided by low

base.

Table 2: IIP-Sector Wise Growth Rates (in %) Table 3: IIP-Use Based Classification Growth Rates (in %)

Use Based: Capital goods after recording negative growth for 5 consecutive months, recorded double digit growth of

10.6% in Feb-12. However cumulative growth still remains negative at 1.2% in FY 2011-12 compared to 14.7% seen last

year. IIP ex capital goods improved to at 3.1% in Feb-12 compared to 1.5% last month. Intermediate goods also negative

growth for the third consecutive months in Feb-12 at 0.6%. Consumer goods also recorded negative growth in Feb-12

tracking falls in consumer durables by 6.7%.

RBI-Easing Key Rate (Repo 8.0%, Reverse Repo 7.0%)

The recent cut down in the key lending rate by Reserve Bank of India (RBI) hardly brought any relief to the banking

sector. Coerced into reducing lending rates, many PSU banks are already set to face

pressure on margins. To top that, every now and then there are reports of jump in

the loan restructuring. The latest numbers published in a financial daily peg the

loans referred for recast at Rs 2.05 trillion. This is 48% higher than last year! What is

more worrying is that the number is three times the total profit of the listed banks in

the country in FY11 i.e Rs 669 bn. Agreed that all the restructured loans are not to be

written off. However even if a third of them are to become delinquent, it would wipe

off an entire year's profits for the sector. It’s needless to say that the statistics are

worrying indeed. Moreover, the reporting for such restructured assets is still very

opaque. Hence it is time the RBI should come out with some guidelines to better reflect the same. Until then, investors

in the sector will have to tread very cautiously in terms of valuations.

Health Insurance:

A recent report by Deutsche Bank compares prices of US goods and services to those of other economies across the

globe. One interesting parameter, among other things, is health insurance costs. The chart shows annual premium paid

in US dollars for the most basic health insurance. As is

evident from the chart, health insurance in the US is

the most expensive in the world. Even Australia,

which is the second most expensive country in terms

of health insurance, has an annual premium which is

less than half of that of the US. On the other extreme,

emerging economies like India and China have

relatively lower insurance costs. While it is certain that

healthcare costs in India are quite cheaper in

comparison to several other countries, poor

healthcare infrastructure still remains a major hurdle.

Source: Deutsche Bank (*for a basic policy for a local resident between 25-35 years)

DOMESTIC NEWS

RBI in its annual monetary policy for 2012-13 slashed the policy rates by 50 basis points.

The repo rate at which banks borrow money from the RBI now stands at 8% from 8.50%

earlier. Similarly, the Reverse Repo Rate at which RBI borrows money from banks is now

at 7% from 7.50% earlier. However, the Cash Reserve Ratio (CRR) or the portion of

deposits banks keep with the RBI, was left unchanged at 4.75%.

India's inflation declined marginally to 6.89 percent in March as compared to 6.95 percent in the previous

month.

India's exports during the fiscal year 2012 registered a growth of 21 percent at $303.7 billion, while imports

were $488.6 billion with a growth of around 32 percent and Trade Deficit at $184.9 billion.

INDUSTRY/COMPANY REVIEW

Telecom: 2G Spectrum License Auctions

Telecom operators have been fretting and fuming over the price set for 2G license

auctions. They have termed the prices are sky high and unreasonable. But the

Chairman of TRAI (Telecom Regulatory Authority of India) stands firmly behind

the math in his pricing. In his opinion, spectrum is a scarce commodity. Therefore

the pricing that the TRAI has proposed is justified. He has also stated that the

operators can look at increasing the lucrative data revenues rather than

promoting voice over the new spectrum. This would help them recover the high

spectrum prices. The truth is that the government is in dire need of funds. It was

able to make up a large part of its fiscal targets in FY11 mainly from the funds it

received from the 3G auction. So why should it lose an opportunity to repeat history with the 2G auction as well. In

reality, the price being asked for the 2G spectrum is ridiculously high. One should not forget that the 3G spectrum is

premium to the 2G spectrum. Therefore the price of the latter should ideally be below that of 3G and not higher.

Coal may no longer be referred to as the 'black gold'!

At a time when Coal India is struggling to meet the domestic demand for coal, globally the resource seems to be finding

fewer takers. As per the US Energy Information Administration estimate, share of coal in US energy generation could fall

to 40% this year. This is against 57% in 1985. The reason for the falling demand for coal is its struggle with ultra cheap

natural gas. With all the shale reserves being unlocked, gas prices have steadily declined since mid-2008.

To the point where they are hovering around US$ 2 per m British thermal units for the first time in a decade. That makes

natural gas prices lower than coal prices. And more trouble lies ahead. A number of old coal-fired plants are scheduled

to be shut down in the US by the end of 2014. There will be more such cases world over as environmental norms

beckon. That could drive another 5% of coal demand out of the market. Hence, the faster Coal India gets its act together

in meeting domestic needs, the better it will be. Else it may be too late for the PSU behemoth to reap the richness of

black gold.

Banking Sector:

>> The Export-Import Bank of India (Exim Bank) is planning to set up a new fund of USD 500 million (Rs 2,500 crore),

which will provide MSMEs with long- term foreign currency loans.

>> Standard & Poor's has lowered the outlook on 11 financial institutions, including State Bank of India and ICICI Bank, to

negative from stable. It, however, said a rating downgrade is unlikely since the individual finances of the institutions are

unlikely to deteriorate sharply. The revision follows a similar move in terms of the sovereign as financial institutions

from India cannot be viewed above the sovereign since policy changes have substantial impact on them.

Internet / Technology:

India may lag most countries in internet

penetration but it has still managed to earn the

dubious distinction of being the spam capital of

the world. A report from SophosLabs, a software

security firm states that more than 9% of all spam

messages transmitted in the first quarter of 2012

were relayed through India before coming into

people's inboxes. The US was close on India's

heels, accounting for more than 8% of all spam

mails. Countries like South Korea, Indonesia and

Russia helped round off the top five.

Source: Sophos.com

COMMODITY

GOLD

Akshaya Tritiya is considered as one of the most auspicious day to buy gold. According to Indian belief, this day is

blessed by the goddess of wealth and investment on this day is likely to grow throughout the year. The chart depicts the

volume and price of gold on Akshaya Tritiya in the years 2004-2011. The gold price has steadily increased and breached

Rs. 21,000/- mark in 2011 while the highest volume recorded in the year 2010.

According to industry estimates, a gold

sale on Akshaya Tritiya this year is

around 17 tonnes. In the spot trade,

standard gold (purity of 99.5) prices

opened at Rs. 28,820, per 10 grams and

ended at Rs. 28,885. On the other hand,

pure gold (purity of 99.9) price opened

at Rs. 28,950 per 10 grams and ended

higher at Rs. 29,025. Gold futures prices

rose 0.22 per cent to Rs. 29,242 per 10

grams.

Presently around 15 companies in India offer gold ETF's. As per the data released by AMFI, Assets under management

(AUM) with gold exchange traded funds have risen 124 per cent in March 2012 on a y-o-y basis. AUM's of gold ETF''s has

increased from Rs. 4,400 cr on March 31, 2011 to Rs. 9,886 cr on March 31, 2012.

The chart depicts the movement of gold price during the

period Mar 26, 2012 to Apr 24, 2012. The gold price recorded

highest level of $ 1694 per ounce and the lowest level of $

1620 per ounce.

The gold price decelerate on April 18 as investors squared off

positions from the commodity after the US dollar appreciated

against a basket of currencies pressuring most dollar-

denominated commodities. Gold futures for June delivery

declined 0.7 per cent to $1,639.60 an ounce after trading as

high as $1,655.20 and as low as $1,638.10 an ounce on the

Comex division of the New York Mercantile Exchange, whereas the spot gold prices eased 0.6 per cent to $1,639.81 an

ounce.

Gold gained more than half a percent on April 9 after disappointing U.S. jobs data revived hopes for further monetary

easing, while appetite for the metal was also boosted as China inflation spiked. Rampant inflation in China contributed

to the explosive gold demand from investors in 2011. According to the World Gold Council (WGC), China's physical gold

demand jumped 20 per cent last year, compared to a 7 per cent rise in global demand.

SILVER

On the auspicious occasion of 'Akshaya Tritiya', the silver prices

moved up by 0.34 per cent to Rs. 55,741 per kg in futures

trading. At the Multi Commodity Exchange, silver for delivery in

July traded higher by 0.33 per cent to Rs. 57,375 per kg. Silver

futures prices fell over one per cent to Rs. 56,657 per kg on April

4, 2012 as speculators reduced their holdings amid weak Asian

markets. At the Multi Commodity Exchange, silver for delivery in

May declined by 1.07 per cent to Rs. 56,967 per kg. Similarly,

July prices fell by one per cent to Rs. 58,614 per kg.

CRUDE OIL

Currently, India imports more than 2.4 million barrels of oil a day of which approximately 0.75 million barrels come from

domestic supplies. As per data from the Ministry of Petroleum and Natural Gas, the production of crude oil has dropped

in the month of March 2012. Crude oil output, which had marginally increased y-o-y in February, dropped to 3.218

million tonnes in March. This was mainly because production from Assam fields fell 100 per cent and ONGC’s Mumbai

High fields produced 4.7 per cent less y-o-y. Mumbai High fields, which account for 42 per cent of domestic oil

production, are experiencing a natural decline in output.

India which currently importing 14 million tonnes of crude from Iran has substantially reduced its imports from the

country as part of the deadline to comply with Western sanctions against Tehran looms. Iran's trading partners, such as

India, China and South Korea, are trying to stop relying on Iranian crude by the end of June this year, when US sanctions

on Iranian oil transactions would come into effect.

Crude oil climbed over half a percent to settle above $104 a barrel levels

on April 25, 2012. The fuel prices got support from the US Federal

reserve's reaffirmation to its commitment to the ultra-loose monetary

policy while refraining from employing quantitative easing measures.

Benchmark crude for June delivery added 0.55 per cent to $104.12 a

barrel, after trading as high as $104.57 and as low as $103.11 a barrel, on

the New York Mercantile Exchange. In London, June delivery Brent crude

climbed $0.96 or 0.80 per cent to end at $119.12 a barrel on the ICE.

Oil slipped below $125 a barrel on April 3, 2012 after US gasoline demand data weakened sentiment though the

prospect of tighter North Sea supplies and positive economic data provided some support. Brent crude futures were

down to $124.64 a barrel, after settling up $2.55 at $125.43 on the previous day.

COPPER

China (the top industrial metal consuming nation) aims to shut down 7.8 million tonnes

of steelmaking capacity and 700,000 tonnes of copper smelting capacity this year as

part of its efforts to reduce pollution. It is projected that this target could have a major

impact on demand and prices of copper in near future.

Copper prices decelerate around half a percent on April 25 as investors grew worried

over renewed debt crisis in Euro-zone. Copper futures for May delivery declined 0.4 per

cent to close at $3.6310 per lb, after trading as high as $3.6745 and as low as $3.6120

per lb on the Comex metals division of the New York Mercantile Exchange.

Copper prices plummeted by around two percent on April 9 because of the consumer price index inflation in China

exceeded forecasts in addition to the weaker than expected US employment report. Copper futures for May delivery

declined 2 per cent to close at $3.72 per lb on the Comex metals division of the New York Mercantile Exchange.

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