Dear Niveshaks,

Yet another eventful fiscal year has come to an end. The financial year ending March 31, 2011 started off quite well with signs of economic recovery and growth trajectory back to the pre-crisis levels. However, towards the end of fiscal year, problems emerged both at the global and domestic level. At the global level, the major concerns were the slow recovery in theUS economy, the European debt woes and the crisis in the Middle East. The natural calamity in Japan further dampened the sentiments at the global levels. At the domestic level, the GDP growth in the last fiscal year was a strong 8.6 per cent in real terms. The major concerns at the domestic level last fiscal were the slowing production and the continued high inflation, particularly that of food items. The monetary measure taken up by the RBI is expected to moderate the inflation in the coming fiscal year.

The outlook for the fiscal year FY 12 remains positive with strong growth expected both in the emerging and developed markets. The sharp increase in the oil prices owing to the MENA crisis has added a bit of uncertainty to the pace of global recovery. However, it is a temporary phenomenon and the long term outlook remains positive. The inflationary pressures in most EMEs remain high and the central banks in most EMEs have responded by raising the key interest rates which should control the inflation in the financial year ahead. As far as India is concerned, the GDP in the current fiscal year is projected to grow by a healthy 9 per cent. Even though the IIP continues to be weak, other indicators such as the Purchasing Manager Index(PMI), direct and indirect tax collection, exports and bank credit suggest that the growth momentum persists. However, continuing uncertainty about energy and commodity prices may vitiate the investment climate, posing a threat to the current growth trajectory. In particular, the weak performance of capital goods in the IIP suggests that investment momentum may be slowing down.

The quarterly results of major companies remained in the headlines this month. The quarterly results have been mixed. While some big companies such as Infosys and Reliance missed the market expectation, the results of the companies in the auto, pharma and metal space remained in line with expectation. There was no significant impact of results on the markets with the markets remaining range bound through the month. The interest rate and the liquidity scenario have remained tough in the last few months. The outcome of the RBI policy review meet and its impact on the market would be something to watch out for in the coming weeks.

This issue brings to you some more interesting and insightful topics. The cover story this month focuses on the rally in the gold prices, the reasons for the same and the way ahead for the gold prices. The article of the month explores the monetary transmission mechanism in India and ways and means of improving the same by developing the BCD nexus in India. Another article in this issue focuses on the convergence of the Indian accounting standard towards IFRS and its implications for India. The issue also features an article on the new regulatory framework released by RBI for the subsidiarisation of foreign banks in India. Lastly, the Classroom this month explains the topic of leasing. Hope you find the issue an interesting read.

Stay invested.

Rajat Sethia
(Editor -Niveshak)

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