Market Synopsis

The RBI policy meet of June 17, turned out to be a non-event as anticipated by the
markets.    Market also ignored the seven month high trade deficit data for the month
of May.    Perhaps, Nifty was oversold at 5700 odd levels causing it to rally to 5850.

Going forward, all eyes will be on the Federal Reserve Bank over the next couple of days.
The Fed. has kept the markets guessing with regards to the future of its assets buying
programme.    While one segment of the markets believes that the QE3 will be tapered
sooner than later, my own assessment is that Mr. Bernanke may probably choose to pass
on the decision making event to his successor in legacy.    Perhaps Mr. Bernanke may not
want to cause a spoilsport in terms of sharp reaction in global markets.
 
Mr. Bernanke has got another 6 months tenure in office as the Chairman of the Federal
Reserve Bank.

Weekly Review

This week so far witnessed steep fall in the value of the emerging market currencies
vis a vis the USD caused due to the fears regarding the tapering of the QE by the
Federal Reserve Bank of the US.    The INR was the biggest hit currency followed by
currencies of other emerging economies.    The acute current account deficit was another
factor driving the depreciation of the INR.

Going forward, so long as the uncertainty regarding the downsizing of the assets buying
programe persists, markets the world over will continue to remain nervous and volatile.

Global Economic Parameters

Country                                             Business                             Consumer
                                                       Confidence                          Confidence
------------------------------------------------------------------------------------------------------------------
China                                                125.60                                   103.70
Euro Area                                            -0.76                                   -21.90
France                                                 84.00                                    78.61
Germany                                            105.70                                    36.40
India                                                   49.90                                    120.00
UK                                                       5.00                                    -22.00
US                                                      49.00                                     76.20

Vicious Circle

The dwindling returns in Nifty in dollar terms is causing the waning of FII inflows.
The dwindling FII inflows is putting more pressure on the INR vis a vis the USD
causing the INR to depreciate at a vigorous pace.    This is exactly the opposite of what
the Finance Minister would have wanted to happen.    The acute current account
deficit problem is another reason for the depreciating rupee.

The depreciating rupee may give rise to cost push inflation with a lag effect.
Something which the RBI would not want to happen, as this may restrict it from the
possibility of any further rate cut.    Now, if lending rates do not come down, how will
capital expenditure pick up?

Given this scenario, how will the government come out of this vicious circle of weak
rupee, high inflation, slow growth and almost nil capex?    Hard times ahead.

Market Synopsis

No clear trend seems to be emerging for Nifty.    INR continues to remain under
relentless pressure vis a vis the USD.

Any pullback in Nifty upto 6030 -- 6050 levels should be used to initiate fresh
shorts.    Market bias will continue to remain negative for some more time.