Weekly Newsletter - Sep 8 2012

Indian stock indices gained 1.5% during the week, mainly due to a powerful rally on Friday, after the ECB President delivered on the promise made by him recently in its fight against the three-year-old debt turmoil. It may be recalled that Indian indices had snapped a four-week winning streak last Friday on worries that policy paralysis will continue to be a major headwind for the Indian economy and markets. In fact, India is at a risk of losing its investment grade debt rating if the Centre fails to announce any significant reform(s) in the coming days. That could partly offset the positive vibrations generated by the ECB monetary stimulus and the impending QE3 from the Federal Reserve. Next week will be an important one again, as markets will react to the latest IIP and WPI inflation numbers. Globally, the key event to keep on one’s radar will be the two-day FOMC policy meeting. ECB President Draghi has kept its promise on monetary stimulus. Will his US counterpart do an encore on QE? We will have to wait and watch.