ecoscope.pdf

7/29/2019 Ecoscope.pdf

1/10

Dipankar Mitra ([email protected]); +91 22 3982 5405 1Investors are advised to refer through disclosures made at the end of the Research Report.

ECOSCOPEThe Economy Observer

14 February 2013

WPI inflation

Jan-13 WPI inflation at three-yearlow of 6.6%

Food inflation accelerates on base

effect and seasonality; primary

inflation still lower

Fuel inflation falls sharply as a huge

base effect absorbs the fuel price

hike, especially bulk diesel

Manufacturing inflation decelerates

to a 37-month low of 4.8%, core

inflation at 34-month low of 4.1%

CPI inflation inched up to 10.8%;

CPI and WPI expected to converge

from Mar-13 onwards

Expect end-March WPI inflation at

much lower than the 6.8%

estimated by RBI

Expect RBI to cut rates by 25bp in

19th March policy

Jan-13 inflation at 3-yr low of 6.6%

Core inflation down to 4.1%; Expect 25bp rate cut in Mar-13 Jan-13 inflation was at three-year low of 6.6% and lower than expectations.

While the underlying index increased, it was lower than the average for

FY13 so far, signifying absence of any generalized price pressures on the

economy.

Food inflation, however, accelerated on a low base and seasonal effect.

Within food group, inflation eased for cereals and milk. However, it

accelerated for vegetables, fruits and non-veg items. However, the rising

food inflation was overwhelmed by easing non-food and minerals inflation

to result in a deceleration in primary inflation.

Fuel group inflation eased significantly as a huge base effect helped absorbthe impact of increased international oil price and hike in domestic fuel

prices, especially bulk diesel.

Manufacturing inflation eased further to 37-month low since Dec-09 and

came within the tolerable limit of RBI for the second successive month.

Core inflation eased further to 4.1%, the lowest for 34 months, capitalizing

on easing international commodity prices and stable INR.

Reflecting the acceleration in food prices, CPI (rural-urban) inflation for

Jan-13 accelerated to 10.8%. The divergence between WPI and CPI is expected to remain for the month of Feb-13 too

before converging from Mar-13 onwards.

Recent data releases, both a decline in industrial output and easing inflationary pressures, are supportive of further easing

of the monetary policy. We expect RBI to cut policy rates by 25bp in the March 19, 2013 policy measure.

I. Jan-13 inflation at three-year low of 6.6%; Mar-13 target to be over-

achieved

Inflation lower than expectations at 6.6%: Jan-13 inflation at 6.6% was lower than

expectations (MOSL 6.9%; Consensus 7%). This is the lowest inflation for more

than three years since Nov-09 and represented significant deceleration from the

near 7.2% of previous three months.

No revision in past data: There was no change in the Nov-12 inflation data that

remained static at 7.2% level. It may be recalled that the Oct-12 data was revised

downwards by only 13bp. Thus, the extent of data revision has come down.

Index rises after barely moving for 4 months: After remaining nearly static for

four months, WPI index increased by 4% MoM, still lower than the average increase

of 5% for FY13 so far. This signifies moderation in generalized price pressures on

the economy.

Inflationary build-up lower at 5.1%: As a result of some increase in MoM inflation,

the inflationary build-up inched up to 5.1% (from 4.7% in Dec-12). At this rate,

RBI's Mar-13 inflation projection (that was revised upwards to 7.5% in Oct-12 policy

from 7% projected in Apr-12 and then again brought back to 6.8% in Jan-13) would

be over-achieved by a wide margin.


2/1014 February 2013 2

Inflation dipped to three-year low of 6.6% Inflationary build-up at 5.1%; MoM index rises slowly

Source: CSO, MOSL

II. Food inflation rises but core inflation down to 4.1% Food inflation rises: Food inflation, however, accelerated (to 11.9% v/s 11.2% in

Dec-12) both on base effect as well as seasonal increase in food prices. Going

forward, food inflation is likely to stay in double digit for Feb-13 too before

moderating to single digit level by Mar-13.

Variation within food basket: Within food group, inflation eased for cereals (18.1%

from 19% in Dec-12) and milk (4.5% from 5.9% in Dec-12). However, it accelerated

for vegetables (28.5% from 23.3% in Dec-12), fruits (8.4% from 5.8% in Dec-12),

and non-veg items (10.8% from 10.2% in Dec-12).

Primary group inflation eases nonetheless: The rising food inflation, however,

was overwhelmed by easing non-food (10.5% from 13.2% in Dec-12) and minerals(2.1% from 3.7% in Dec-12) inflation to result in a deceleration in primary inflation

(to 10.3% from 10.6% in Dec-12).

Sharp fall in fuel group inflation on base effect: Fuel group inflation eased

significantly to 7.1% (from 9.4% in Nov-12) largely due to the base effect. The

large base effect helped absorb the impact of increase in international oil price

(somewhat mitigated by moderate INR gains) and hike in domestic fuel prices,

especially bulk diesel.

Manufacturing inflation eases further to 4.8%: Manufacturing inflation eased

further (to 4.8% from 5% in Dec-12) i.e., a 37-month low since Dec-09 and came

within the tolerable limit of RBI. Core inflation declines to 4.1%: Core inflation eased further to 4.1% (from 4.2% in

Dec-12), the lowest for 34 months. Core basket capitalized on easing international

commodity prices and stable INR.

Primary group contribution increases: The contribution of three major groups,

viz, primary (wt ~20%), fuel group (wt ~15%) and manufacturing (wt ~65%) to

inflation have undergone further change MoM to 40:18:42 from 38:21:41 in Dec-

12.

Most manufacturing commodities show signs of easing: Manufacturing inflation

inched lower MoM for 10 of 17 broad groups (by -0.1% to -2.2%), while it increased

(by 0.1% to 0.8%) for the remaining 7 items.


3/1014 February 2013 3

Easing fuel and manufacturing overwhelm higher food Core inflation eases to 4.1% on declining commodity

inflation prices and stable INR

Source: CSO, CMIE, MOSL

III. High CPI notwithstanding, latest IIP and WPI data to prod a 25bp rate

cut in Mar-13

Higher CPI for only two more months: Reflecting the acceleration in food prices

that was by the base and seasonal effect, CPI (rural-urban) inflation for Jan-13

accelerated to 10.8% (from 10.6% in Dec-12). The divergence between WPI and

CPI is expected to remain for the month of Feb-13 too before converging from

Mar-13 onwards.

WPI inflation lower and stable: The average WPI inflation in FY13 so far at 7.5% is

significantly lower than the average of 9% inflation in FY12 and 9.6% inflation in

FY11. Moreover, inflation has been range bound in FY13 so far, within a band of

6.6-8.1%, in sharp contrast to the range of 7.2-10% in FY12 and 8.2-10.9% in FY11.

WPI inflation to ease rapidly in 4QFY13: Helped by a favorable base and on account

of stable international commodities and INR, WPI inflation is likely to ease at an

accelerated pace henceforth. However, some residual inflation risks remain -- i)

oil prices are high again, ii) food inflation and CPI are in double digit and would

ease only from Mar-13 and iii) headline inflation at 6.6% is still higher than RBI's

5% comfort level. On balance though there are unmistakable signs of definite

easing.

Expect 25bp rate cut in 19th Mar policy: Recent data releases, both a declining

industrial output and easing inflationary pressures, are supportive of further easing

of the monetary policy. We expect RBI to cut policy rates by 25bp in March 19, 2013

policy measure.


4/1014 February 2013 4

Trends in manufacturing inflation

Source: CSO, MOSL


5/1014 February 2013 5

ECOSCOPE Data Monitor

Macro Economic Indicators

Annual FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13E FY14E

I. National Income (Growth %)

Nominal GDP (USDb) 618 721 834 948 1,239 1,226 1,366 1,710 1,872 1,845 2,094

Gross Domes tic Product 8.1 7.0 9.5 9.6 9.3 6.7 8.6 9.3 6.2 5.0 6.5

Agricul ture 9.0 0.2 5.1 4.2 5.8 0.1 0.8 7.9 3.6 1.8 3.5

Foodgrains (M Ton) 213 198 209 217 231 234 218 245 255 250 255

Rainfa l l (% of long period average) -20.0 5.0 -9.0 -1.0 -5.0 -1.0 -10.0 -19.0 2.0 -7.0 0.0

Indus try 7.3 9.8 9.7 12.2 9.7 4.4 9.2 9.2 3.5 3.1 5.3

Services 8.1 8.1 10.9 10.1 10.3 10.0 10.5 9.8 8.2 6.6 7.7

II. Inflation (Y-o-Y %)

WPI (Annua l Averages )

Al l commodities 5.5 6.5 4.4 6.5 4.8 8.0 3.6 9.6 8.9 7.2 5.5

Primary articles 4.3 3.7 2.9 9.6 8.3 11.1 12.7 17.8 9.9 9.7 6.8

Fuel & power 6.4 10.1 9.5 6.5 0.0 11.6 -2.1 12.3 13.6 9.8 6.5

Manufactured products 5.6 6.3 3.1 5.6 4.9 6.1 1.8 5.7 7.3 5.4 3.5

CPI-IW 3.9 3.8 4.4 6.7 6.2 9.1 12.4 10.5 8.2 10.0 7.5

III. Fiscal Situtaion (as % of GDP)

Total receipts 17.2 15.6 14.3 13.6 14.3 15.8 15.9 15.6 14.8 14.9 14.2

Direct tax 3.8 4.1 4.5 5.4 6.3 6.0 5.8 5.8 5.6 5.6 5.6

Indirect tax 5.4 5.3 5.4 5.7 5.6 4.9 3.8 4.5 4.5 4.8 4.9

Net tax 6.8 6.9 7.3 8.2 8.8 7.9 7.1 7.4 7.2 7.5 7.6

Total expenditure 17.1 15.4 13.7 13.6 14.3 15.8 15.9 15.6 14.8 14.9 14.2

Plan 4.4 4.1 3.8 4.0 4.1 4.9 4.7 4.9 4.8 4.7 4.6

Non-plan 12.7 11.3 9.9 9.6 10.2 10.9 11.2 10.7 10.0 10.2 9.6

of which s ubs idies 1.6 1.4 1.3 1.3 1.4 2.3 2.2 2.3 2.4 2.4 2.0

Fiscal defici t 4.5 3.9 4.0 3.3 2.5 6.0 6.5 4.9 5.9 5.4 4.9

Revenue defici t 3.6 2.4 2.5 1.9 1.1 4.5 5.2 3.3 4.4 4.1 3.4

Combined fi sca l defici t (centre + s ta tes ) 8.4 7.2 6.5 5.4 4.1 8.5 9.6 7.4 8.0 7.5 7.0

Publ ic debt 86 82 79 75 71 72 71 66 66 64

IV. Money and Banking (Y-o-Y%)Res erve money 18.3 12.1 17.2 23.7 31.0 6.4 17.0 19.1 9.2 8.0 9.0

Money Supply (M3) 16.8 12.3 21.2 21.3 21.4 19.3 16.9 15.9 13.0 12.5 14.0

Deposi ts 17.6 10.8 23.4 23.8 22.4 19.9 17.2 15.8 13.4 13.0 15.0

Bank credit 16.0 26.2 38.0 28.1 22.3 17.5 16.9 21.4 17.0 16.0 17.0

V. External Sector

(in USDb)

Exports 66 85 105 129 166 189 182 251 310 290 308

Imports 80 119 157 191 258 309 301 381 500 489 504

Trade Defici t -14 -34 -52 -62 -91 -120 -118 -130 -190 -199 -196

Invis ible Surplus 28 31 42 52 76 92 80 86 112 110 115

Current A/c defici t 14 -2 -10 -10 -16 -28 -38 -44 -78 -89 -81

Net capi ta l flows 17 28 25 45 107 7 53 57 68 85 90

Forex Reserves 113 142 152 199 310 252 279 303 294 295 305(As % of GDP)

Exports 11.1 11.8 12.6 13.6 13.4 15.5 13.2 14.5 16.8 15.7 14.7

Imports 13.3 16.5 18.8 20.1 20.8 25.4 21.8 22.1 27.0 26.5 24.1

Trade Deficit -2.3 -4.7 -6.2 -6.5 -7.4 -9.8 -8.6 -7.6 -10.3 -10.8 -9.4

Invis ible Surplus 4.6 4.3 5.0 5.5 6.1 7.5 5.8 5.0 6.0 6.0 5.5

Current A/c defici t 2.3 -0.3 -1.2 -1.0 -1.3 -2.3 -2.8 -2.6 -4.2 -4.8 -3.9

External debt 17.8 18.5 17.3 18.2 18.1 20.5 18.9 17.3 18.7 19.0 19.5

VI. Financial Markets (Avg %)

Cal l rate 4.6 4.7 5.6 7.2 6.1 7.1 3.2 4.5 8.0 8.0 7.2

1-yr AAA corporate bond 5.1 5.5 6.7 8.5 9.3 9.8 5.9 8.1 9.6 9.5 9.0

Yield on 10-yr G-sec (%) 5.4 6.2 7.1 7.8 7.9 7.6 7.2 7.9 8.4 8.0 7.6

Exchange Rate (INR/USD) 45.9 44.9 44.3 45.3 40.2 45.9 47.4 45.6 47.9 54.5 54.0

BSE Sensex return 83.4 16.1 73.7 15.9 19.7 -37.9 80.5 10.9 -10.5 11.8P/E ratio (Tral l ing) 16.0 14.4 21.6 18.2 18.8 11.8 21.0 19.0 15.5 16.2 14.0

Market capi ta l isation (a s % of GDP) 42.3 52.4 81.8 82.5 103.0 54.8 95.5 89.1 70.2 67.7 59.7

Oil price (Indian Bas ket, USD/bbl ) 28.0 39.2 55.7 62.4 79.5 82.7 69.6 85.1 111.9 109.0 108.0

Figures in red are es timates


6/1014 February 2013 6

ECOSCOPEData Monitor


Monthly Feb '12 Mar '12 Apr '12 May '12 Jun '12 Jul '12 Aug '12 Sep '12 Oct '12 Nov '12 Dec '12 Jan '13

I. Growth and inflation (Y-o-Y %)

I IP 4.3 -2.8 -1.3 2.5 -2.0 -0.1 2.0 -0.7 8.3 -0.8 -0.6

WPI - Al l commodities 7.6 7.7 7.5 7.6 7.6 7.5 8.0 8.1 7.3 7.2 7.2 6.6

Primary articles 7.1 10.4 9.6 10.3 9.8 10.5 11.2 9.2 7.8 9.4 10.6 10.3

Fuel & power 15.1 12.8 12.1 11.5 12.1 8.4 8.7 12.0 11.7 10.0 9.4 7.1

Manufactured products 5.8 5.2 5.3 5.2 5.4 5.9 6.4 6.5 6.0 5.4 5.0 4.8

CPI-IW 7.6 8.7 10.2 10.2 10.1 9.8 10.3 9.1 9.6 9.6 11.2

II. Fiscal situation (as % of budgeted)

Total receipts 77.0 99.0 2.1 5.0 12.4 17.7 23.3 36.5 42.1 46.5 60.0

of which ta x revenue 76.9 98.4 2.0 5.3 13.6 18.5 22.7 38.1 43.3 47.9 62.8

Total expenditure 83.9 98.5 5.9 12.8 20.9 29.3 37.9 46.5 52.3 58.2 66.5

Non-plan 87.3 99.2 7.6 15.1 23.2 33.3 43.0 50.7 57.2 64.4 71.7

Plan 77.0 96.9 2.7 8.6 16.5 21.9 28.4 38.9 43.2 46.7 56.8Fiscal defici t 94.6 97.7 13.1 27.6 37.1 51.5 65.7 65.6 71.6 80.4 78.8

Revenue defici t 96.6 97.4 15.2 33.8 43.6 61.3 79.2 75.1 81.4 91.2 85.1

III. Money and Banking (Y-o-Y%)

Res erve money 8.6 3.7 7.5 6.8 7.8 6.6 6.0 6.9 5.3 2.9 4.6 6.2

Money Supply (M3) 13.9 13.2 13.2 13.8 15.7 13.9 14.0 13.5 13.4 13.4 11.2 12.7

Bank Credit (Y-o-Y %) 15.6 17.0 17.5 17.8 18.7 17.3 17.6 15.7 15.9 17.0 15.1 16.0

Deposi ts (Y-o-Y %) 14.4 13.4 13.1 14.3 16.0 13.9 15.1 13.6 13.4 13.8 11.1 13.1

IV. External Sector

Exports (USD b) 25 28 23 25 25 23 22 24 23 22 25 26

Exports (Y-o-Y %) 6.5 -7.1 0.1 -6.7 -6.5 -14.0 -11.7 -10.2 -3.0 -4.2 -1.9 0.8

Imports (USD b) 40 42 37 41 36 41 37 42 45 42 43 46

Imports (Y-o-Y %) 21.1 23.5 1.4 -10.1 -12.5 -1.3 -6.4 5.1 8.9 6.4 6.3 6.1

Trade Defici t (USD b) -15 -14 -14 -16 -11 -18 -16 -18 -22 -19 -18 -20Forex Res erves (USD b) 296 294 295 286 290 289 290 295 295 295 297 296

Real effective exchange rate 111.0 108.6 107.6 104.1 102.2 103.9 104.3 104.2 106.8 105.1 104.7 105.0

RBI's net forex intervention -0.3 0.0 -0.3 -0.5 -0.1 -0.8 -0.5 0.0 -0.1 -0.9 0.1

V. Financial Markets (Avg %)

Cal l rate 8.7 9.1 8.6 8.2 8.1 8.0 7.9 7.9 7.9 7.9 8.0 7.9

Govt borrowing (% completed) 100.0 100.0 11.4 22.5 33.0 43.7 56.8 64.9 71.8 83.2 89.5 93.7

91-day T-bi l l 9.1 9.0 8.6 8.4 8.3 8.2 8.2 8.1 8.1 8.2 8.2 8.0

Yield on 10-yr G-sec (%) 8.4 8.5 8.7 8.5 8.2 8.3 8.2 8.2 8.2 8.2 8.1 7.9

SBI Bas e rate 10.0 10.0 10.0 10.0 10.0 10.0 10.0 9.8 9.8 9.8 9.8 9.7

CP - 3 month 11.0 11.6 10.2 10.2 9.7 9.4 9.0 8.8 8.8 9.0 9.0 8.8

CD - 1yr 10.3 10.6 9.8 9.9 9.6 9.3 9.1 8.9 8.6 8.8 8.8 9.0

AAA corporate - 1yr 9.6 9.8 9.7 9.8 9.7 9.6 9.5 9.2 8.8 8.9 9.0 8.8

Exchange Rate (INR/USD) 49.2 50.3 51.8 54.5 56.0 55.5 55.6 54.6 53.0 54.8 54.6 54.3BSE Sensex return 3.3 -2.0 -0.5 -6.4 7.5 -1.1 1.1 7.6 -1.4 4.5 0.4 2.4

P/E ratio (1 Year Forward) 14.9 14.5 14.2 13.2 14.0 13.6 13.6 14.5 14.1 14.6 14.5 14.7

Market capi ta l ization (as % of 71.6 70.1 61.7 57.7 61.2 60.3 60.2 65.1 64.1 67.0 68.6 69.6

Oil price (Indian bas ket, USD/b 117.7 123.4 118.6 108.6 94.8 100.7 110.2 111.9 109.9 108.1 107.1 109.5


Quarterly Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12

I. National Income (Growth %)

Gross Domes tic Product 7.5 11.2 8.5 7.6 8.2 9.2 8.0 6.7 6.1 5.3 5.5 5.3

Agricul ture -1.0 2.9 3.1 4.9 11.0 7.5 3.7 3.1 2.8 1.7 2.9 1.2

Industry 9.4 15.1 8.3 5.7 7.6 7.0 5.6 3.7 2.5 1.9 3.6 2.8

Services 9.5 11.6 10.0 9.1 7.7 10.6 10.2 8.8 8.9 7.9 6.9 7.2

II. External Sector (USDb)

Exports 47 52 55 52 66 77 79 76 71 80 77 70

Imports 78 84 87 89 97 107 124 120 119 132 119 118

Trade Defici t -31 -32 -32 -37 -31 -30 -45 -43 -48 -52 -42 -48

Invis ible Surplus 19 19 20 20 21 24 28 25 28 30 26 26

Current A/c defici t -12 -13 -12 -17 -10 -5 -17 -18 -20 -22 -17 -22

Net capi ta l flow 15 16 17 21 13 8 24 17 8 17 16 24

Forex Res erves 283 279 276 287 296 305 316 311 297 294 290 295


7/1014 February 2013 7

GDP growth (%): Slows to decadal low of 5% GDP growth (%): Continuous slowdown for 4 quarters

Annual Quarterly/Monthly

Inflation: Showing signs of moderation Inflation: WPI inflation below 7%

Fiscal deficit (% to GDP): Consolidation process started Fiscal trend: Deficits contained in FY13 so far

Monetary indicators: Monetary indicators:

Credit growth constrained by tight money Deposit and credit growth moderates



8/1014 February 2013 8

External sector: A source of continued worry External sector: Trade growth moderates, deficit higher

Financial markets: Rates are easing though yield curve Financial markets: Interest costs are falling from their peak

flattens further for the corporate sector

Seesaw ride of the equity market Markets are fairly valued now

INR, forex reserves: Some stability now RBI intervened to stabilize INR

Annual Quarterly/Monthly



9/1014 February 2013 9

ECOSCOPEGallery

November 2012

The Economy Observer

ECOSCOPE15 November 2012


ECOSCOPE22 November 2012

FY13-14 GDP growth

Growth slowdown from bothsupplyand demand side

Kharif foodgrain 10% down, rabisowing lagging behind

Industrial stagnation broadbased,services too slows down

Demand side GDP growth lower thansupply side

Consumption, investment, netexports all decelerated After easing in 1QFY13 RBI has

hardened its stance Cut FY13 GDP growth to 5.2%, place

FY14 at 6.5%

September 2012 IIP growth

IIP plunges to -0.4%; 1HFY13at 0.1%

Wide fluctuations across sectors

Capital goods shows deepdegrowth;consumer too falls in the-ve territory

Projects investments trend support

investment slowdown, volumegrowth of FMCG companies reflectweakness in consumption story

Low exports trend shows externaldrag on domestic economy, fiscalcorrection points to lowergovt demand

Revise IIP growth down to 0.5%from

1.4% earlier; GDP to 5.2% from5.8%

The Economy ObserverECOSCOPE

12 November 2012

October 2012 inflation

Oct-12 WPI inflation drops to 7.5%

Food (6.6%) and core (5.2%) inflation

drops by 124bp and 39bp, respectively

The unregulated fuel pricesincluding

petrol declined YoY containing impactof hike inprices of regulated fuel

Latest IIP and WPI indicates thatRBI's

revised forecast of 5.8%growth forFY13 and 7.5% inflationin Mar-13 mayhave beenoverestimated

We expect 50bp cut in policy rates

However, if rate cut is deferredexpect RBI to resume OMO onceagain

January 2013

The Economy ObserverECOSCOPE

14 January 2013


ECOSCOPE29 January 2013

RBI's policy review RBI cuts key policy rates by 25bp CRR too cut by 25bp to 4% FY13 growth estimate lowered by

30bp to 5.5%; Mar-13 inflationestimate lowered by 70bp to 6.8%

Monetary stance eased to accord toppriority to growth followed byinflation and liquidity

Expect calibrated but frontloaded ratecut of 75bp more in CY13

RBI needs to conduct INR500b moreof OMO to close the structural

liquidity gap & increase effectivenessof the transmission channel


ECOSCOPE11 January 2013

December 2012


ECOSCOPE14 December 2012



RBI's 3QFY13 policy review

RBI keeps key policy rates unchanged

CRR and SLR too kept unchanged

RBI reiterated rate cut in 4QFY13

Indicated revision of growth inflationestimate in Jan-13

Admits government measures helpedbusiness sentiment and investmentclimate

Expect 50bp rate cut in Jan-13 alongwith 25bp cut in CRR

Expect continued OMO of INR400bfor remaining FY13

October 2012 IIP growth

Oct-12 IIP rebounds to 8.2%; YTDFY13at 1.2%

Capital and intermediate goodsturnsaround on very low base; consumersees double digit growthon laggedfestive demand

Empty middle persists at YTD level,cautious to suggest turnaround ofinvestment cycle

See FY13 IIP at 1.4%; GDP growth atto 5.2%

With IIP at 8.2% and CPI at 9.9%,RBImay defer rate cut.



November 2012 inflation

Nov-12 WPI inflation drops to 7.2%,

lowest in 10 months?Food inflationrises while fuel and manufacturingeases

Core inflation declines to 4.5% oneasing international prices

Expect inflation to remain below7%in 4QFY13 and near 6% byMar-13

RBI may stay put in its rate action on18th Dec-12 on high CPI and IIP

However, we expect RBI to cut CRRby 25bp.

December 2012 inflation

Dec-12 WPI inflation at 7.2%, indexstatic for four months

Food and primary inflation risepurely because of base effect

Manufacturing inflation drops to 25-month low of 5%; core inflation at4.2% lowest for 33 months

Expect WPI inflation to easesignificantly in 4QFY13 and near5.7% by Mar-13

CPI inflation in double digit at

10.6%; divergence between CPI andWPI expected for two more months Expect RBI to cut rates by 50bp.

Nov-12 IIP de-grows Nov-12 IIP de-grows at -0.1%;

YTDFY13 at 1.0% IIP remains negative in five out of

eight months of FY13 so far; Oct-12IIP growth of 8.3% seems to beseasonal exuberance

All sectors showed either negative orlow single-digit growth

Mining, Capital and IntermediateGoods down YoY

CG moderated to low single-digit fromdouble-digit growth a month back

See FY13 IIP at 1.0%; GDP gr at 5.2% Place FY14 first estimate of IIP growth

at 5.6%; GDP growth at 6.5%


10/10

DisclosuresThis report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement

to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been

furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates

or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt

or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its

affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or

employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates

or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness

for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision

based on this report or for any necessary explanation of its contents.

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest

Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.

Disclosure of Interest Statement Companies where there is interest

1. Analyst ownership of the stock None

2. Group/Directors ownership of the stock None

3. Broking relationship with company covered None

4. Investment Banking relationship with company covered None

Analyst Certif icat ionThe views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, orwill be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible

for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

Regional Disclos ures (outside India)This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to

law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.

For U.K.This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial

Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to

which this document relates is only available to investment professionals and will be engaged in only with such persons.

For U.S.Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States.

In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state

laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein

are not available to or intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional

investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major

institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended

(the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into

a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within

the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,

MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst

account.

For SingaporeMotilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors

Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore

to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Nihar Oza Kadambari Balachandran

Email: [email protected] Email : [email protected]

Contact: (+65) 68189232 Contact: (+65) 68189233 / 65249115

Office address: 21 (Suite 31), 16 Collyer Quay, Singapore 049318

Motilal Oswal Securities LtdMotilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: [email protected]

ecoscope.pdf

Documents