S&P downgrades France, Italy and Spain sovereign rating :: CSEC Research

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S&P downgrades France, Italy and Spain sovereign rating  

Indian Equity markets ended the week in green and continued its winning streak. Mid and Small cap indices outpaced the front line indices. However, Metals and Realty stocks guided the S&P CNX Nifty and the BSE Sensex to close above 4,800 and 16,000 mark respectively. Despite Q3 being a seasonally weak quarter, IT Major Infosys posted good set of number with a revenue growth of 4.4% sequentially in constant currency terms, however its flattish Q4 guidance disappoints the market and the stock was down by 8.7% for the week. The volumes have improved compared to previous week. The FII bought shares worth Rs 9060 Million while DII remained as Net sellers for Rs 14,422 millions.

The U.S. markets remained firm as consumer confidence in the U.S. last week reached the highest level since July as the improving job market helped allay pessimism. The Bloomberg Consumer Comfort Index was minus 44.7 in the period ended Jan. 8 from -44.8 the prior week. Consumer borrowing in the USsurged in November by the most in 10 years.  Credit increased by $20.4 billion, the biggest jump since November 2001, to $2.48 trillion. DAX, FTSE & CAC remained choppy on account of Italy and Spainbond auction. Spain raised 10bn Euros in a bond auction - twice as much as its original target. The interest rate on Italian 12-month bonds also fell when compared to its previous auction. Meanwhile, Italy's cost of borrowing has fallen after the government's latest bond auction. Italy raised its target of 4.75bn euro’s (£3.96bn) in Friday's bond sale. The interest rate on the government's benchmark three-year bond fell to 4.83% from 5.62% at the last auction at the end of December. Meanwhile on Saturday, S&P has downgraded France, Italy, Spain and few more European nations. S&P blamed the failure of European leader to deal with the crisis, or even diagnose its causes correctly was the prime reason for downgrade.

Data on inflation for December 2011 is scheduled on Monday and it is likely to set tone for the markets as it could provide cues on the central bank's likely policy stance at the third quarter review of Monetary Policy 2011-12 scheduled on 24 January 2012. The street estimates on Wholesale price index (WPI) are seen at sub 8% in December 2011 from 9.1% rise in November 2011. Stock specific actions are likely to be witnessed ahead of Q3 numbers while Index heavy weights (RIL, TCS, HCL, HERO MOTOR, BAJAJ Auto, HDFC BANK) are lined up this week. Global markets are likely to react to downgrades carried out by S&P on Saturday.

Regards,

CSEC Research