July 2011: A month of negative surprises ::JPMorgan

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 MSCI India (US$) lost 2.5% over the month and underperformed
the MSCI Emerging markets index (down 0.7%). Telecom, Consumer
Discretionary and Health Care companies were relative outperformers,
while Industrials, Energy and Materials underperformed.
 RBI surprises again with higher-than-expected rate hike. The Central
bank hiked benchmark Repo and Reverse Repo rate by 50 bps each,
against consensus expectations of 25 bps. RBI also maintained its
hawkish stance and increased the fiscal-year-end inflation forecast from
6.0% to 7.0%. RBI’s key objective remains anchoring still-elevated
inflationary expectations in the economy.
 Disappointing Q1 FY12 earnings reporting’s so-far. A large set of
companies – 45% of JPM’s coverage universe – have reported
disappointing quarterly earnings performance owing to margin
pressures. No clear sectoral trend is apparent, though.
 May IP disappointed. May IP grew at a significantly lower-thanexpected
5.8% oya. The disappointment came from the Capital goods
and Consumer Durables segment.
 FIIs buyers, DII sellers. FIIs were buyers over the month and bought
US$1,807mn into Indian equities. DII were sellers over the month.
Insurance companies sold US$167mn while domestic mutual funds
bought US$122 mn over the month.
 Other key developments over the month:
 INR appreciated by 1.5% vs. the US$ over July
 Headline WPI Inflation for June reported at 9.44%.
 10 year treasury yield increased 15 bps to 8.45% over July