Deepening Euro zone crisis resonated sharply across the risk asset spectrum, keeping sentiments for equities subdued in July. However, ECB’s stated willingness to make outright bond purchases is a significant positive step, in our view, although uncertainty persists with regards to the probable timing of action. Meanwhile, India was an underperformer in July, but retained its pole position as one of the top performing markets YTD. Furthermore, despite sector-wise pain points, by and large, Q1FY13 earnings have so far surpassed expectations. The big concern emerging is the tardy pace of monsoon, with rain deficit for the season so far standing at 19% below normal. This certainly poses downside risks to growth and upside risks to inflation.
