The Sensex gained 291.70 points or 1.80% for the week to settle at 16453.76 whereas the Nifty ended up by 75.50 points or 1.60% to close at 4943.25 levels.The global economy is once again passing through turbulent weather in terms of the growth trajectory. Soft economic data points coming out of western economies coupled with the perplexing sovereign debt crisis in Euro zone has once again raised the odds for a double dip recession in the troubled western economies. Hence, the downgrade of US debt (July 2011) by the rating agencies was merely a catalyst for the ruthless sell off that risky asset prices have witnessed post the downgrade, further adding to the odds of a double dip.
MSCI Developed markets were down by 15% from July 2011-September 2011 coupled with huge volatility.
The emerging markets, especially India, the main concern leading to the sell-off (MSCI EM is down 25% from July 2011-till date) was the realignment of growth expectations as the EM central bankers have been tightening to avoid a hard landing.
India remains no exception as the RBI has been ahead of the curve and raised the rates by 350 bps on 12 counts to tame spiralling price levels. Also, stalled policy reforms from New Delhi have added fuel to the fire as we are entering a moderation period wherein the growth rates are expected to cool off from 8.5% levels to 7-7.5% over the next couple of quarters.
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