Weekly Report (29th March – 1st April)

US Market
US Markets closed higher for the week ended. Dow Jones Industrial Average (DJIA)
closed at 12221 up 3.1 percent from the previous week whereas NASDAQ closed at 2743
up 2.8 percent from the previous week. For the whole week events in the aftermath of
March 11 earthquake and Tsunami remain in spotlight. GDP growth for the last quarter of
the current fiscal year was also revised upwards to 3.1 percent from earlier estimates of
2.8 percent during the previous week, which was in line with the expectations. Overall the
economy is expected to grow at 2.9 percent as compared to -2.6 percent last year.

Going into the next week market is likely to be affected by global news and events and
can have an impact on the opinions on earnings for the quarter and the next year. Market
is expected to remain volatile due to continual crisis in Japan and Libya. Latest reports
suggest that there is an increase in radiation levels in Japan due to the damaged reactor at
the Fukushima power plant. In Libya NATO forces are trying to take control of the no fly
zone and growing fight can have an impact on oil prices which are hovering around $105
levels. Other big issue which can affect the market in near term is the monetary and
bailout situation in Europe involving “PIG” countries of Portugal, Ireland and Greece. S
& P reduced sovereign debt rating of Portugal and it may default eventually.

In the next week economic data that can have an impact on markets is unemployment rate
and motor vehicle sales data that is to be released on April 1. Unemployment rate is
expected to fall to 8.9 percent and motor vehicle sales is expected to come down to 13.3
million from 13.4 million last month.

European Markets
All the major European markets closed higher in the previous week. FTSE 100 closed at
5901 up 3.1 percent from the previous close while CAC gained 2.6 percent to close at
4275.

Going into the next week market is expected to be affected from Euro zone debt crisis and
especially from events unfolding in Portugal which can soon be forced to join Greece and
Ireland in seeking a fiscal bailout. Two day summit of European leaders in Brussels was
unable to find any major breakthrough to deal with the ongoing debt crisis. Leaders also
agreed to a package of measures, now being called as “euro-plus pact” that is designed to
increase economic coordination across the euro zone. The yield on two-year Portuguese
bonds jumped by around 0.35 percentage point, topping 7% . Portugal faces €4.3 billion
in bond redemptions in April and a further round of more than €4 billion in redemptions
in June. However the plight of Portugal was well anticipated by market and that is
seeming to dim the response.

The lack of progress on plans to provide a larger backstop for troubled euro-zone
countries was a clear disappointment. In Germany analysts saw upcoming state elections
as the main reason chancellor Angela Merkel sought to slow the pace at which euro-zone
countries will provide €80 billion in base capital to the ESM.
In addition to these there is the ongoing war in Libya, the uprising in additional Arab
countries such as Yemen and Syria and the aftermath of the tsunami and earthquake in
Japan. These news items will continue to be among the major news events that might
affect the financial markets and commodities’ prices such as oil and gas prices in next
week.

Asian Markets
In Japan Nikkei closed at 9536 up 1.06 percent for the week. It gained strongly at the start
of the week on Tuesday but then it a dip before bouncing back to close higher. In the
aftermath of earthquake and tsunami of March 11 Japanese markets took a severe beating
which were further enhanced by fear of rising nuclear radiation. However investors
showed tremendous resilience and helped Nikkei gain after the first week of disaster.

But there are still doubts about the long term impact of tsunami on the economy which is
likely to contract sharply in the near term due to the shock on both demand and supply
sides. Earning estimates of some automakers and semiconductor companies are likely to
be downgraded but most of them have already been factored in prices. Moreover firmness
in domestic consumption can help in boosting the sentiments.

In the coming week Investors will get a look at Hutchison Whampoa Ltd.’s full-year
financial results and will also focus on two March reports on manufacturing activity in
China as well as industrial-output data from Japan.

The Bank of Japan will release its quarterly tankan survey of companies’ business
sentiment and their capital-investment plans towards the end of the week however that
survey was conducted before Marc 11 and might not reflect the actual situation after the
earthquake. On Wednesday, Japan will report on industrial output for February. In
January, output rose for the third straight month but fell short of forecasts. Manufacturers
surveyed in last month’s poll said they expected output to rise 0.1% in February. After a
up move in last two weeks markets may consolidate due to lack of good news and rising
concerns about increase in radiation levels in Japan due to the damaged reactor at the
Fukushima power plant.

In China concerns about the tightening measures of the government may affect the
market sentiments. Inflationary pressures are also expected to dampen demand. China’s
official purchasing manager’s index, as well as a second compiled by HSBC, are slated
to come out Friday. China’s official purchasing manager’s index was 52.2 in February as
compared to a 52.9 in January. However, it can come down due to holidays across the
country to mark the start of lunar new year.

In India sensex surged 5.2 percent during the previous week to close at a high of two
months at 18815 whereas Nifty closed at 5654. Financial stocks, including banks and
realty, put in some big gains after Finance Minister Pranab Mukherjee introduced
proposals to reform tax and banking laws Monday.

Mainly global sentiments were the major driving force behind this up move and lack of
negative news from Libya and Japan helped the markets. However, low volumes in the up
move and increasing volatility in the markets is a major cause of concern for investors.
Crude oil prices may affect the markets and a surge in oil prices will impact the current
account deficit of the country which is already under pressure. There are some worries
about the sustaining high level of inflation which was earlier expected to come down to 6
percent at the fiscal end but that is estimate is now revised to 8 percent. Overall market
looks poised to consolidate and remain range bound after strong gains last week.