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Editor-in-Chief & Publisher: Rakesh Bhandari
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Beyond Market
19th Nov ’10
DB Corner – Page 5
A Job Well Done
To keep pace with the changing times, SEBI has introduced a number of changes in the interest of investors and traders alike – Page 6
A Window Of Opportunities
The flood of IPOs in India and the stimulus package released by the US are creating opportunities for investors to pump money into the markets – Page 8
More To It Than Meets The Eye
The recent rate hike by the RBI, aimed at containing inflation, maintaining a consistent interest rate regime and actively managing liquidity, is only a knee-jerk reaction as a lot needs to be done in this direction – Page 10
Beating Expectations
The revenue and earnings growth figures for the quarter ended September ’10 have been strong so far and may help in pushing up the Sensex and the Nifty by a few hundred points more – Page 13
For The Swish Set
Despite sky-high prices, developers are hoping to see a robust demand for luxury homes in major cities like
Mumbai and Delhi – Page 16
Tapping Greener Pastures
Several companies are shifting their focus from oversaturated urban markets to unrealized rural markets.
Greater aspirations and higher disposable incomes are further fuelling this move – Page 18
Marketing – The Key Differentiator
The marketing expenditure on OTC products has risen manifold vis-à-vis R&D by pharmaceutical companies, to beat competition and increase revenues – Page 21
Mix And Match
SEBI has paved the way for consolidation or merger of mutual fund schemes, which will benefit both fund houses and investors while improving operational efficiency – Page 24
MFI – Tarnished
Timely government intervention alone will help to stem the rot in the MFI industry and prevent further damage to a sector that has transformed the lives of the poor – Page 26
Great Eastern Shipping Co Ltd: Built To Last
A strong balance sheet with low leverage offers the company the flexibility to pursue vessel acquisitions, thus improving its performance and making the stock attractive – Page 29
The Gold And The Beautiful
Instead of waiting for gold prices to plummet, investors can purchase them in the demat form as they offer the flexibility to buy in a denomination as small as 1 gram – Page 32
Fortnightly Outlook For Commodities – Page 34
Fortnightly Outlook For Currencies – Page 35
Important Statistics For The Fortnight Gone By – Page 37
Dhanendra Kumar: The Competition Commando
Sixty-three-year-old Competition Commission of India Chairman, Dhanendra Kumar plays an important role in promoting competition in all sectors in the country while preventing monopolistic practices among key players – Page 44
A Technique Worth Its Candles
The Japanese candlestick techniques are unmatched in their capacity to provide strong trend reversal signals and incredible insight into market psychology – Page 47
Fooled By Randomness
Random reinforcement is the market’s tendency to reward bad behavior and punish good habits from time to time. Hence, traders and investors should refrain from getting carried away by this phenomenon – Page 51
He Came, He Saw, He Conquered
Barack Obama’s please-all approach may bolster Indo-US ties and define the new global order but his stand on
India’s neighbours will determine whether or not the relationship will stand the test of time – Page 54
It’s simplified...
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4
A
leading business daily recently stated that China and India alone are likely to account for half of the world’s economic growth in the next decade, as per the data released by Conference Board, a New York-based global, independent business membership and research association working in the interest of the public. It also says that the growth in the emerging economies in the next decade is expected to be faster than the growth in advanced economies. It mentions that India’s growth is likely to supersede that of China in the second half of the next decade.
This will attract huge FII inflows into the country. However, inflationary concerns in India and China could possibly be the dampeners for the development of these two nations and may reduce global growth too.
The Reserve Bank of India (RBI), the country’s central bank, also sees inflation as one of the major concerns. This is clearly evident from the recent rate hike, which was announced in the second quarter review of the Monetary Policy for 2010-11. By increasing the repo and reverse repo rates, the RBI is aiming at containing inflation as well as trying to maintain a consistent rate regime while managing excess liquidity in the country. Moreover, steps have to be taken to control the possible economic factors that could hamper the country’s growth. We have tried to decipher what the policy review infers in our cover story.
Other articles include one on some of the changes introduced recently by the Securities and Exchange Board of India (SEBI) in the interest of market participants, another on the opportunities being created by initial public offerings (IPOs) in the primary markets along with the impact of the stimulus package recently doled out by the Federal Reserve in the US and even one reviewing the quarterly results of companies that make up the Nifty Index. We have also featured an article on the renewed guidelines for the consolidation or merger of mutual fund schemes, which is likely to benefit mutual fund investors and fund houses.
Sectorally speaking, we have covered real estate and pharmaceuticals too. The demand for luxury homes in the realty space is seen to be gaining ground once again. The real estate developers are taking advantage of the demand and creating masterpieces as well as offering EMI schemes to lure prospective buyers. On the other hand, pharma companies are incurring heavy marketing expenditures to beat competition and increase revenues. What is worth mentioning is the fact that this expense is bigger than their spending on R&D activities.
In the Beyond Commodities section, we have spoken about e-gold, a new concept, which tracks the price of gold and makes it available to retail investors in smaller denominations in the dematerialized form.
Taking our role in investor education further, we are now conducting commodity camps across the country. The first camp was held at
Kolkata, while the next one is lined up for Delhi on the 25th of November. Delhiites, do not miss this golden opportunit Y!
Beyond Market
19th Nov ’10 It’s simplified...
T he results season has almost concluded and the second quarter results of listed companies in
India for 2010-11 have been better-thanexpected. The results were 3.7% ahead of consensus with a year-on-year (y-o-y) increase of 32.4% on profit after tax (PAT) for Nifty 50 companies.
However, the markets are expected to remain volatile over international and domestic concerns. On the international front, the inability to reach a consensus on the revaluation of the Yuan at the recently concluded G20 meeting has created a conflict between the United States and China. This could pose a major problem for the world markets. Meanwhile on the domestic front, high inflation and weak IIP (index of industrial production) numbers could pose a problem. ceuticals Ltd (LTP: ` 317.30), Shree Renuka Sugars Ltd
(LTP:
`
93.90), Whirlpool Of India Ltd (LTP:
`
303.25),
Windsor Machines Ltd (LTP: ` 96.60), Mangalore
Chemicals & Fertilizers Ltd (LTP:
`
42.40), Coal India
Ltd (around the ` 300 level) (LTP: ` 317.20) and TVS
Motor Company Ltd (LTP:
`
77.90) can be looked at with both investment and trading perspectives at the given support levels as well as on decline S.
Market participants should avoid buying on upper levels.
The Nifty has upper resistance at the 6,170 level and has strong support at the 5,950 level.
However, traders can take long positions if the Nifty crosses the 6,200 level with a stop loss at the 6,140 level.
Stocks like Syndicate Bank (LTP: ` 158.05), UCO Bank
(LTP: ` 145.95), Canara Bank (LTP: ` 807.60), IDBI
Bank Ltd (LTP: ` 193.30), Orchid Chemicals & Pharma-
Beyond Market
19th Nov ’10
Sensex: 20,309.69
Nifty: 6,121.60
(As on 15th Nov ’10)
Disclaimer
It is safe to assume that my clients and I may have an investment interest in the stocks/sectors discussed. Investors are required to take an independent decision before investing. Investment in equity is subject to market risk. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing.
It’s simplified...
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I ndia’s market regulator, Securities and Exchange
Board of India (SEBI), has undertaken a number of key initiatives in the interest of retail investors.
Foremost of them is raising the upper limit of investments in public issues for retail investors.
In an attempt to redefine the term ‘retail investors’, SEBI has enhanced the upper limit for participation in public issues to ` 2 lakh. This limit was raised from ` 50,000 to
` 1 lakh in the year 2005.
The recent move was necessitated by the changes in the overall market condition as well as investment and inflationary conditions in the past five years.
Moreover, 35% of the public issue is reserved for retail investors at present. Till 2005, only 25% of the public issue was reserved for retail investors.
The limit of a mere ` 1 lakh and only 25% reservation in public issues for retail investors made it difficult for public issues to get a good response from the portion reserved for them.
Also, any investment by retail investors above ` 1 lakh would come under the ambit of high net worth individuals (HNIs), for whom the reservation is only for 15%.
Hence, an application above ` 1 lakh would limit the investors’ chance of getting an allotment as the reservation for HNIs is only 15 %.
Beyond Market
19th Nov ’10 It’s simplified...
Those against the revision argue that this move will lead to high net worth individuals taking away the cream as they alone will be able to afford the enhanced limit and further alienate the ‘retail investor’. closure between the 7th and the 8th minute, order matching from 9.08 am to 9.12 am.
Clearly, in a scenario where the upper limit for participation in public issues is raised to ` 2 lakh, the chances of a retail investor who invests a small sum of ` 10,000 to
` 20,000, getting higher allotment get further slim. This is mainly due to the huge size of retail investors.
Another viewpoint is that SEBI is believed to have got an idea of things that were going wrong in the system, from the poor response that initial public offerings (IPOs) and follow-on public offers (FPOs) by public sector undertakings, got.
But the fact that the base of retail investors is itself small in India and that they do not have the muscle to fully subscribe to a larger public offer, justifies SEBI’s move.
Justifying the move, SEBI said, “At present, most of the applications from retail investors have come in the size of ` 75,000 to ` 1 lakh.” With a mammoth target of raising
` 40,000 crore form divestments, a better response from retail investors is sought by the government to avoid political backlashes, even at the cost of smaller investors.
Usually, if the retail portion is undersubscribed, the shortfall gets lapped up by institutional investors. So even as a few small investors are left with a sour taste, the move by the regulator would enable at least some investors to participate in this wealth-building exercise called public issue.
On the same lines, SEBI also kick started a mechanism called the ‘pre-open session’ on the Indian bourses from
18th October this year. Though not a novel concept for the Indian markets, it is a resurgence of sorts after the
1990s debacle.
Even now it is receiving a lukewarm response from market participants. Nevertheless, it is a good move in line with other world markets.
The pre-open trading session that uses call auction lasts for 15 minutes, from 9:00 am to 9:15 am. This session involves order collection from 9.00 to 9.07, random
This is followed by a silent period from 9.12 am to 9.15 to facilitate the transition from pre-open session to the normal market. For the time being, the pre-open session has been introduced only for index stocks.
A price band of 20% will be applicable on securities during the pre-open trading session with an appropriate margin and other risk management procedures.
Simply put, the pre-opening session is a methodology to discover opening prices of the securities. The equilibrium price determined in the pre-open session is considered as the opening price for the day.
NEED FOR PRE-OPENING SESSION
In case another ‘Satyam’-like event occurs, then on the next trading session, when the markets open, it will witness huge volatility in early trades, leading to a huge disparity in prices at which the buyers and sellers match their orders.
But, with a pre-opening session, all the orders (buy as well as sell) will be collected in the first 8 minutes, matched and then executed at a price (equilibrium).
Hence, both buyers and sellers will get a fair price, which will depend on supply and demand and the regular market will get a fair opening price.
Such special events could be merger and acquisition announcements, open offers, delisting, debtrestructurings, credit-rating downgrades or rumours regarding any such event.
The pre-opening session of 1990 received poor response.
To avoid the occurrence of a similar event, call auctions can improve market outcomes only when they can attract sufficient order flows. The crowding of orders should be from well-informed investors for the equilibrium price to make sense.
With increasing depth of the Indian markets and a move towards technology-driven trades, call auction could prove beneficial and may enable better price discovery during market disruptio N.
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EQUITIES | DERIVATIVES | COMMODITIES | CURRENCY | MUTUAL FUNDS | IPOs | INSURANCE | PMS | DP
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Beyond Market
19th Nov ’10 It’s simplified...
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Beyond Market
19th Nov ’10 It’s simplified...
I t’s a herculean task to create records in the investing arena, especially after the global financial turmoil of
2008. But, Coal India, the latest disinvestment player, has created multiple bangs with its public offering of $3.47 billion. is also that the currency moves in several emerging economies are sound as stronger growth prospects attract capital from the developed world.
While, the 10% divestment of Government of India’s stake is Asia’s largest-ever public equity offering, the investors’ response and oversubscription was overwhelming. Not just that, the scrip got listed at ` 245 a share, the upper end of the price band ( ` 225-245) and made investors richer by nearly 40% on its listing day, having closed over ` 342.
Higher inflation is also pushing interest rates higher, which in turn, is triggering capital from low interest rate developed markets to chase higher yields in emerging markets. “If the flood of money into India continues, surely it will be met with a policy response, especially given the fact that India has the biggest inflation problem,” says Gubbi.
FII Net Inflows (Equity)
7.00
What does Coal India, the fourth most valued Indian firm, behind only Reliance Industries, ONGC and SBI, have to do with quantitative flooding? Though a global event, Coal India is a cent percent local story with a lot of global investor participation. All of that showed in the
BSE Sensex, which surged by 428 points to touch a high of 20,893.57 points – just 313 points short of the lifetime high of 21,206 that it touched in January ’08.
So, quantitative flooding, in the context of the Indian markets, relates to Coal India’s success episode. Analysts believe that this is a serious boost to the confidence of investors in the government’s divestment plan through which the Centre plans to raise ` 40,000 crore this fiscal.
More big ticket public issues by Indian Oil, ONGC,
SAIL and Power Grid Corporation are expected to hit
Dalal Street in the coming weeks.
1.00
0.00
-1.00
-2.00
-3.00
6.00
5.00
4.00
3.00
2.00
Source: SEBI (Nov flows upto 12th Nov ’10)
Having received $ 28.8 billion in net FII inflows (equity), in the current year (up to 12th Nov ’10), the scenario clearly indicates a ‘problem of plenty’. Needless to say that intervention, if essential, is not a free of cost affair and has its limits. So far, in the current year, the current account deficit helped to absorb capital flows. But beyond a point, capital inflows would be overwhelming with policy implications.
On the global front, the US Federal Reserve met recently where it unfolded its plan for quantitative easing through the purchase of $600 billion worth long-term treasury securities by the end of the second quarter of 2011. This amounts to the pumping of about $75 billion of liquidity per month in the US alone. Lower than desired GDP growth and higher unemployment numbers have been pushing the Fed to act in this manner.
But from the equity market and particularly from a disinvestment perspective, there are a few positives.
Being a dollar-driven market and owing to the inverse relationship between the markets and the dollar index, the quantitative easing will certainly move markets.
In a research note, Pramod Gubbi, Director of Equity
Sales at UK-based Execution-Nobel points out: “What finally emanates from quantitative easing is a wall of liquidity towards global commodities and attractive emerging market assets.”
In the simplest of cases, cheaper than otherwise, inflows are chasing returns. And pieces of public sector enterprises from one of the fastest growing economies make good investing sense too.
The second round of quantitative easing in the US is coming at a time when global policy co-ordination is deteriorating, especially with emerging currency wars.
“India’s Central Bank has risen to the challenge so far, letting the exchange rate float, but faces a real challenge,” says Gubbi.
Coal India is certainly the case in point. Against 63.16 crore equity shares offered for sale, Coal India saw a demand of over 960.36 crore shares, which translated into a whooping ` 2.35 lakh crore. While the retail investors’ portion was over-subscribed two times, the HNI segment was over-subscribed 25.4 times. And shares reserved for qualified institutional buyers, which includes FIIs, were oversubscribed 24.70 times.
RBI’s intervention has been aimed at ironing out volatility in the rupee exchange rate, he explains. The problem
It seems to be another beginning, where the liquidity from quantitative easing could find its way to India’s navratnas and maharatna S.
Beyond Market
19th Nov ’10 It’s simplified...
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Beyond Market
19th Nov ’10 It’s simplified...
U nlike popular expectation, the Reserve Bank of India (RBI), in its second quarter review of the monetary policy for 2010-11, did not pause on its tightening drive. At the heart of the policy was a further increase in the repo and the reverse repo rates by 25 basis points (100 basis points make one per cent) each.
The repo rate (at which banks borrow from the RBI) has been raised to 6.25% and the reverse repo rate (at which banks park their surplus liquidity with the RBI) to 5.25%.
Since the RBI started reversing its monetary policy stance in March ’10, the repo rate has increased by 150 basis points and the reverse repo rate by 200 basis points.
especially given QE-2 (US Fed’s Quantitative Easing-2)
– surprises us,” says Siddhartha Sanyal, Chief Economist
- India, Barclays Capital in a research note.
While the US Fed is yet to announce its QE plans, the
RBI has already factored that in its policy making. The
RBI did take cognizance of the fragile and uneven nature of the recovery and large unemployment in advanced economies, which raised concerns about the sustainability of the global turn around.
“The slow momentum of recovery has prompted the central banks of some advanced economies to initiate (or consider initiating) a second round of quantitative easing to further stimulate private demand,” said Subbarao.
It is a clear sign of caution given that, in its mid-quarter review in September, the Reserve Bank of India had stated that its tightening measures “had brought the monetary situation close to normal” and actions thereafter would depend on the prevailing and expected macroeconomic situations.
“While the ultra-loose monetary policy of advanced economies may benefit the global economy in the medium-term, in the short-term, it will trigger further capital inflows into emerging market economies and put upward pressure on global commodity prices,” the RBI chief added.
“The hike indicates that while the RBI is confident on the growth front, it is not satisfied with the progress on inflation,” says Dharmakirti Joshi, Chief Economist,
Crisil in an impact note compiled by Crisil Research.
And that’s a fair assessment because in calibrating this policy move, the RBI took into account both global and domestic macroeconomic situations. In particular, says
RBI Governor D Subbarao, the central bank was guided by three considerations.
One, domestic growth drivers are robust which should help absorb the negative impact of any slowdown in global recovery to a large extent . Two, inflation and inflationary expectations remain high as both demand side and supply side factors are at play.
On the domestic side, RBI’s assessment is that the economy is operating close to the trend growth rate, driven mainly by domestic factors. The normal south west monsoon and its delayed withdrawal have boosted the prospects of both kharif and rabi agricultural production, which should also stimulate rural demand.
Most industrial and service sector indicators also point towards sustained growth. Taking into account the good performance of the agriculture sector and a range of indicators of industrial production and service sector activity, the baseline projection of real GDP growth for
2010-11, for policy purposes, is retained at 8.5%
Inflation, however, remains RBI’s primary concern.
Albeit some moderation in recent months, headline inflation continues to be significantly above its mediumterm trend and well above RBI’s comfort zone.
“Given the spread and persistence of inflation, demandside inflationary pressures need to be contained and inflationary expectations anchored,” says Subbarao. And three, even though liquidity deficit is consistent with
RBI’s anti-inflation stance, it needs to be contained within a reasonable limit to ensure that the economic activity is not disrupted.
Food inflation has not shown the expected post-monsoon moderation and has remained persistently elevated for over a year now, reflecting in part the structural demand-supply mismatches in several commodities.
The only uncharacteristic supply out of the policy has been RBI’s conclusive guidance. “Based purely on current growth and inflation trends, the Reserve Bank believes that the likelihood of further rate actions in the immediate future is relatively low.” This is in line with general expectations that the RBI will pause for the remainder of FY11.
“Still, the explicit mention of a pause in direct terms –
“This has elevated inflation expectations,” says
Subbarao. “The risks of expectations spilling over to prices of other commodities are significant when the economy is growing close to trend,” he warns. And that could potentially offset the recent moderation as well.
Another important issue for the RBI is capital inflows that have a role to play in the current account deficit – which had widened in the first quarter of 2010-11.
Beyond Market
19th Nov ’10 It’s simplified...
11

According to the RBI, if the current trend persists, the current account deficit as a percentage of GDP for the full year, will be significantly higher than last year. It is generally perceived that a current account deficit above
3% of GDP is difficult to sustain over the medium term. maintain an interest rate regime consistent with price, output and financial stability. And it would actively manage liquidity to ensure that it remains broadly in balance, with neither a surplus diluting monetary transmission nor a deficit choking the fund flows.
“The challenge, therefore, is to rein in the deficit over the medium-term and finance it in the short-term,” says
Subbarao who believes that the medium-term task has to receive policy focus from both the government and the
Reserve Bank.
And the caution did not pause there. Considering the risks emanating from the housing loan portfolio of banks, the RBI has proposed a few proactive checks on real estate lending.
“The short-term task is to see that the current account is fully financed while ensuring that capital flows are not far out of line with the economy’s absorptive capacity and that the component of long-term and stable flows in the overall capital flows is high,” he adds.
These include a cap on loan-to-value (LTV) ratio of 80% to prevent excessive leveraging by banks. Also, the bank provisioning for teaser loans should be increased to 2% from the current 0.4%, owing to the high-risk nature of such loans.
However, it has often been debated that the widening of interest rate differential between the domestic and international markets will result in increased debtcreating capital flows.
And the risk weight for residential housing loans of ` 75 lakh and above should be increased to 125%, irrespective of the loan-to-value ratio. Currently, the risk weights on these loans with LTV ratio up to 75% are 50% for loans up to ` 30 lakh, and 75% for loans above that amount.
“While it is true that large interest rate differential makes investment in domestic debt instruments and external borrowings by domestic entities more attractive, we need to keep in view three aspects in the Indian context,” says the RBI chief.
For loans where the LTV ratio is more than 75%, the risk weight of all housing loans, irrespective of the amount of loan, is 100%. “The move will ensure prudence in lending to the real estate sector and also help keep a tab on speculation,” says Crisil’s Joshi.
“First, the economy’s capacity to absorb capital flows has expanded, as reflected in the widening of the current account deficit. Second, despite the already large differential between domestic and international interest rates, capital flows in the recent period have been predominantly in the form of portfolio flows into the equity market. This suggests that the interest rate differential is not the only factor that influences capital flows. Third, in line with our policy of preferring equity to debt-creating flows, we still maintain some controls in respect of debt flows,” he adds.
Given these challenges, RBI’s monetary policy stance aims to contain inflation and anchor inflationary expectations, while being prepared to respond to any further build-up of inflationary pressures. RBI also intends to
Back to the macro scenario, despite the signaled pause the RBI is suggesting that the end to the tightening cycle is not necessarily just around the corner. “They are essentially taking a wait and watch position in the context of heightened global economic uncertainty and to asses the effectiveness of the tightening undertaken so far,” says
Leif Lybecker Eskesen, HSBC’s Chief Economist for
India and ASEAN, in a research matter.
And that is undoubtedly true for a central bank guarding the growth of an economy, which decoupled from global economic pressures in record time. “In an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either a global or a domestic environment,” Subbarao reiterated in his conclusive remarkS.
12
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Beyond Market
19th Nov ’10 It’s simplified...
A fter going through an oscillatory phase in the last couple of months, the Indian stock market is once again slated to witness an upward move. Huge FII inflows - mainly from the US, strong economic fundamentals of India and good second quarter results so far have kept investor sentiments upbeat in the Indian markets. The Coal India public issue is a good example of the same.
Investors as well as fund managers always look forward
Beyond Market
19th Nov ’10
to the earning results at the end of each quarter. The results help them in revising their earnings per share
(EPS) guidance, as this impacts the stock price of the company considerably.
This time around, the revenue and earnings growth figures for the quarter ended September ’10 have been strong so far. And this may help in pushing up the broader market indices like the Sensex and the Nifty by a few hundred points more.
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The analysis of the Nifty companies that have declared their results so far reveals that the companies have managed to do reasonably well in this quarter. And it is apparent if one were to compare the second quarter result with the first quarter result.
For instance, the aggregate net sales of 26 non-banking and financial services and non-oil and gas companies, which have declared their results so far, grew by 18.6%
(on a year-on-year basis), which is a tad higher than the
11.3% growth rate registered in the first quarter of FY11.
For the purpose of this analysis, we have excluded banking, financial services as well as oil and gas companies while reviewing the aggregate results. This is because banking and financial services companies have a different profit and loss reporting structure. Similarly, oil
& gas companies are large in size and are highly regulated and this may skew the aggregate result.
Even on a sequential basis, the second quarter of FY11 has performed better than the first quarter. The aggregate net sales of the mentioned 26 companies grew by 11% on a sequential basis, whereas it was in the negative territory during the first quarter. Though there is an element of seasonal impact on such sequential comparison, a change from a negative to a double-digit positive territory is quite commendable.
Aggregate Results of Nifty Companies
Jun ‘09
Sept ’09
Dec ‘09
Mar ’10
Jun ‘10
Sept ’10
4.5
2.3
13.6
14.7
11.3
18.6
3.6
14.0
30.8
37.9
1.2
14.0
3.1
13.7
19.0
44.8
1.1
8.6
Source: Company Note: The results include 26 non-banking /
financial services and non-oil & gas Nifty companies names like Hindalco, Bharti Airtel, DLF, State Bank of
India and Bharat Petroleum are likely to announce their results in a week or two. Most of the oil & gas companies have also not announced their quarterly results so far.
These big results may change the overall direction of the earnings growth for Nifty companies and hence may set new thresholds for broader stock market indices.
The larger picture for earning results also looks good. As per a research report, the y-o-y revenue and net profit growth for more than 300 companies which announced their results by the end of October was in the range of
20% and 25% respectively. And these are surely some good numbers to cheer about.
SECTORAL PERFORMANCE
Even on the operating margin front, these companies have done well. The aggregate operating profit grew by a whopping 14%, reckoned on a y-o-y basis. And this rate looks more sustainable than what we have seen in the previous quarters. This is because there is a lesser base effect on this number.
Like any other quarter, there are some sectors which have outperformed others this time as well. Fast Moving
Consumer Goods (FMCG), Banking and Information
Technology (IT) are some of the sectors that have performed relatively better than others. On the other hand, sectors like Auto and Cement were among the losers in this quarter.
The aggregate operating profit of these 26 companies grew by a mere 1% in the previous quarter. Like net sales, the operating profit growth figures too moved from a double-digit negative number to a double-digit positive number on a sequential basis.
The net profit kept similar pace with the operating profit.
However, interest expenses shaved off some profitability. The continuous tightening of monetary policy resulted in higher outgo of cash flows in terms of interest expenses. The aggregate net profit for the quarter ended
September ’10 increased by roughly 8.6%, when compared to the same period last year. And this is more than 700 basis points higher than the net profit growth rate witnessed in the first quarter.
While the result of many biggies appears to be good so far, there are many heavyweights that have not yet declared their results. Tata and Reliance Group are going to announce their results in the coming weeks. Other big
IT is one sector which has done impressively well. The performance of Tier-I companies in the sector reflects the strong demand recovery for software services. Companies continued to show volume momentum (more than
6% for all top four) with TCS (Tata Consultancy
Services) leading the pack with 11.2% quarter-on-quarter
(Q-o-Q) volume growth.
This time the growth for IT companies was not restricted to BFSI (Banking, Financial Services and Insurance) alone. Additional growth came from other sectors like retail, manufacturing and healthcare. The margin performance, however, was varied with TCS showing the best margin performance.
Going forward, the companies getting more revenue from healthcare and retail are expected to do better.
Though hiring during the quarter was strong, attrition could be a concern in the future. High volatility in the
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currency market can also work adversely against the companies in the IT sector.
In the banking sector, which was not part of the aggregate result analysis, leading private sector banks like
ICICI Bank and HDFC Bank beat street estimates with their robust numbers. ICICI Bank’s strong performance was driven by better net interest margins (NIM) and lower-than-expected provisions. companies, sales volume was low, while for two-wheeler companies there was a decline in operating margins.
Maruti , Ashok Leyland and TVS Motors are some of the companies with less-than-expected quarterly results.
However, Bajaj Auto had a robust quarter with a whopping 45.7% growth in sales volume. The average realisation too grew by 2.7% leading to a growth of 50% and
60% in the top and bottom line respectively.
The net addition to ICICI Bank’s NPAs was almost zero during the quarter. Other positives were 13% quarteron-quarter (q-o-q) growth in core operating profits, driven by strong fees and provision cover at 69%. The net interest income (NII) and net profit of ICICI Bank grew at 8.3% and 18.9% respectively, reckoned on a y-o-y basis.
Similarly, HDFC Bank’s net profit grew upwards by
33% driven by robust net interest income and lower provisions. The credit growth at 38.2% was higher than expected. Other positive factors were growth in fee income and improvement in NPA (non-performing assets) coverage.
FMCG companies like ITC and Hindustan Unilever
(HUL) reported healthy numbers during the quarter.
Both the companies reported double digit top line growth compared to the same period last year. For ITC, the net profit grew by 25% whereas HUL’s bottom line increased by 5.2%, the highest in the last four quarters.
However, there is concern about increased competition in this consumer-centric centre.
Most auto companies failed to cheer investors in this quarter. Except for Bajaj Auto, most other companies reported muted results this time. For four-wheeler
Similarly, the two cement majors on the Nifty, namely,
ACC and Ambuja Cement, disappointed investors with their quarterly results. For the second quarter ended
September ’10, Ambuja Cements reported a 52.2% y-o-y decline in net profit due to the fall in realisations and increased raw-material and power costs. Realisations declined by 8.5% y-o-y to ` 3,595/tonne. Ambuja’s operating margin declined by 913 basis points y-o-y to
19.1%, on account of lower realisation and higher import of high-cost imported coal and pet coke.
Coal imports increased due to the lower availability of domestic linkage coal. Moreover, increased production of clinker during the quarter resulted in a 38% increase in power costs, resulting in the lowering of the company’s operating margin.
Similarly, ACC’s second quarter standalone results were below analysts’ expectations. Poor realisations coupled with cost pressures drove down operating margins to its lowest levels in the last seven years. Lower demand due to good monsoons and oversupply scenario led to an
11.1% drop in average realisation to ` 3.5k/mt. Input cost pressure aggravated the problem further, leading to margins contraction by 2,200 basis points to 13.1%.
EBITDA margins and net profits too were lower than analysts’ expectation S.
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#
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Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing.
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16
T he Indian luxury real estate market, which was the first to be hit during the economic slowdown of 2008, is back in a big way despite concerns that the rising residential prices might stifle the demand for luxury homes.
In the last one year, real estate developers have been launching luxury properties especially in the cities of Mumbai and Delhi, which is a clear indication that the demand for luxury homes has rebounded. Luxury projects typically provide facilities like closed-circuit surveillance, swimming pools, gyms, clubs, private terraces, etc.
Lodha, a premium real estate company was one of the first to test the luxury market after the slowdown due to the sub-prime crisis in USA. The developer deviated from its usual super luxury projects exclusively for high net worth
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individuals (HNIs), by launching luxury homes constructed for the middle class.
In December ’08, Lodha launched a sub brand ‘Casa’, to provide luxury living for the middle income segment. The
Casa brand of homes are gated communities with open spaces, parks, clubs and gyms. The first project through the Casa brand was Univis at Thane. Later, Lodha launched many mid-income luxury projects such as Casa Royale, Casa Ultima at Thane and Casa Essenza at Dahisar.
A year later in September ’09 another Mumbai-based developer, Indiabulls launched Indiabulls Sky, South Mumbai’s first residential high-rise with managed private residences. The
65-storey tower will have residences, which will be serviced by a dedicated butler, who will be on call round-the-clock to meet every resident’s request.
The company has sold more than 350 units (90% of the apartments) in Indiabulls Sky and buoyed by its success, the developer launched another high-end tower of managed private residences, Indiabulls Sky Suites right next to
Indiabulls Sky.
More recently, in June, this year, Lodha launched ‘World One’ in Upper Worli, which the developer claims will be the tallest residential tower in the world. The 1,450 feet tall building will have 117 storeys. The apartments will cost between ` 9 crore and ` 10 crore.
In a bid to stimulate demand for luxury homes, Mumbai developers including Indiabulls Real estate (Sky suites, Sky forest),
Lodha (World Crest) and Neptune (100 above) are offering deferred EMI schemes for their premium and mid-income housing in Central Mumbai and Central suburbs.
Besides DLF, the Uppal group is also developing boutique luxury homes in Delhi in Vasant Kunj and Shanti Niketan, where the rates would be around ` 40,000/sq ft. In Gurgaon near Delhi, Ireo, a private equity fund is building the tallest residential tower of North India called Ireo Victory Valley which has homes costing between ` 94 lakh and ` 5.2 crore.
In Hyderabad, Dax Properties, part of Countryside Realtors
Pvt Ltd, has sold 70 villas in its Golf Retreat Project, a luxury retreat project at Shadnagar, about 30 km from the Hyderabad
International airport.
Luxury real estate market has primarily picked up due to demand from HNIs and Non Resident Indians. India, with a
20.5% increase in the number of high net worth individuals to
1,00,015 recorded the second-highest growth rate in high net worth individuals globally, according to the annual World
Wealth Report by Merrill Lynch and Cap Gemini.
India is only behind Singapore in terms of increase in high net worth individuals. Developers have realized the opportunity this presents and are launching luxury homes to cater to the requirements of this segment. Also, aspirations are on the rise and the super rich now want homes with a swimming pool, gym and other luxury amenities.
While the demand for the recently-launched luxury homes has been good, of late volumes have been under pressure because of rising prices. For instance, in Mumbai, prices have gone up by as much as 70% to 100% in the last one year. According to
Liases Foras, a realty research firm, the weighted average price of apartments in Mumbai is ` 1.91 crore, one of the highest in the country.
Under the scheme, buyers need to pay only 10% of the cost upfront and the rest can be paid after possession. Banks will pay construction-linked payouts to the developer, but the buyers’ EMI will begin only after possession. Till then, the developer will pay the interest cost to the bank.
This is one of the main reasons for premium property developers such as Lodha offering EMIs to lure buyers. While such schemes have always existed, it is the first time that this has been introduced for luxury and super luxury homes.
Analysts say developers are using such schemes to boost volumes, which have reduced due to the increase in residential prices. Indiabulls was the first to launch its premium projects under this scheme, followed by Lodha and Neptune. The scheme has seen good response from buyers, say developers.
Fearing an oversupply of luxury homes, Mumbai developers have introduced such schemes to bring in more buyers by offering them easy payment options, say analysts. Oversupply is already beginning to creep into the luxury home segment especially in Central Mumbai, where developers had bought land at expensive rates through government auctions. The problem with such expensive land acquisitions is that developers have no choice but to build luxury homes on the land to recover the heavy price paid for the land.
The luxury market in Delhi has also picked up with DLF, the market leader launching flats at ` 4 crore in the final phase of the Capital Greens project near Moti Nagar. Within two days of the launch of the project, the developer claimed to have sold three-fourth of the 150 flats. In Gurgaon, DLF launched three high-end projects like Park Place and Golf Links. The developer also plans to construct exclusive villas in Shimla, Kasauli and Goa.
According to estimates based on the approvals granted by
Brihanmumbai Municipal Corporation to developers, around
7,000-10,000 new luxury apartments, priced above
H.
` 4.5 crore each, will come up in Central Mumbai in the next two years.
When the fresh supply comes in, there are possibilities that the luxury property market could see either a price correction or a fall in demand or even bot
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18 Beyond Market
19th Nov ’10
It’s simplified...
I ndia’s consumer story is undergoing a dynamic change. Gone are the days when companies in the consumer space would be content with a huge number of consumers to cash in on by leveraging on their marketing team’s abilities and product portfolio.
Now with increasing competition things have changed, especially the way companies approach the scope of the markets - rural and urban, available to them. Even as the urban market provides decent and sustainable sales for companies in the consumer space, the extent of margin expansion has not been very significant.
In fact, in the past few years, the growth in sales of products for companies in the consumer space in rural markets has been faster than urban markets. Here is a lowdown on how rural markets are becoming crucial for companies in the consumer space.
One of the factors responsible for the upswing in company earnings in the consumer space is robust consumer demand and increasing income level, quite understandably, in the urban market. However, with the growing number of players coming into the market, competition has grown immensely, forcing companies in the consumer space to shift their marketing focus from saturated urban markets to untapped rural markets. The chief reason behind this is the increase in the disposable income of individuals in rural areas.
Take for instance; the allocation for National Rural
Employment Guarantee Act (NREGA) in the Union
Budget. National Rural Employment Guarantee Act is a job guarantee scheme that ensures one hundred days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work at a statutory minimum wage of
` 100 per day.
The Budget in FY11 increased its allocation to this scheme from
`
` 113 billion in FY07 to and a skilled worker would get `
` consumer space to increase their presence.
410 billion in
FY11. The social sector spending is pegged at
5,272 per month, semi-skilled worker would get
`
`
1,380 billion, which experts believe would boost rural disposable income and hence rural demand.
Recently, the government increased the minimum wages by 33%. Due to this, an unskilled worker would get
5,850
6,448 per month. This has presented a huge opportunity for companies in the
Much of this optimism for rural markets can be seen in the sales and demand figures. It is estimated that today
53% sales for Fast Moving Consumer Goods (FMCG) companies come from rural markets. Not surprisingly, this is due to the fact that growth in rural markets has been faster than urban markets as they saturate sooner.
It is reported that the sales of FMCG companies in the rural market have grown from a -1% in calendar year
2005 to 18% in calendar year 2009, while on the other hand, sales of FMCG companies in urban markets have fallen from around 9% in calendar year 2005 to 11% in calendar year 2009. This pace of growth has become one of the compelling reasons for these companies in the consumer space to look at the rural market with renewed vigour and enthusiasm.
Another major factor that has brought rural areas in focus for companies is improvement in infrastructure, ensuring access to education and communication. Today, farmers have direct access to markets, which ensures that they sell vegetables directly at a high margin.
A case in point is Bihar, which was found to be one of the fastest growing states of India in the last five years. In
Bihar, school enrolment rose from 160 children to 195 in just six months of opening of the school.
Also Sudha Dairy, the state’s leading dairy firm has increased its presence in 10 cities in Bihar in the last one-and-a-half years. Besides this, the improvement in tele-density has ensured improvement in access to information for rural dwellers.
According to the department of telecom, tele-density in rural areas has increased from around 10% in FY07 to around 25% in FY10. All these factors have brought about a shift in consumer preferences in rural areas.
Today, aspirations of consumers in rural areas have increased copiously. Two factors have fostered growth of sales of consumer companies in rural areas. A rural consumer would definitely prefer branded products and is increasingly dependent on non-farm income. A consumer need not go for a known and prominent brand but an economical and ‘value for money’ brand. In essence, rural consumers go for quality.
Another prominent feature seen among the rural folk is the importance given to pricing of products. For instance, a rural consumer would buy 10 sachets of 3 ml shampoos instead of 30 ml.
Hindustan Unilever, Emami, Dabur and Godrej
Consumer Products are four prominent FMCG players that have more than 40% exposure to the rural markets.
Detergent and soap segments provide maximum volumes for these companies.
While segments such as hair oil, toilet soap, skin cream,
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shampoo, fruit beverages and toothpaste remain underpenetrated segments, going forward, these segments are expected to grow faster in volumes and prove to be significant contributors to the topline of the aforementioned companies.
However for this to happen, companies would also have to fight a stiffer competition with local, unknown players in the under-penetrated segments. In fact, this competition has resulted in a situation where companies in the consumer space are fighting wars on many fronts. Some are trying measures on the organic level, while some are taking the inorganic route to increase the possibilities of revenue growth and brand presence.
Hindustan Unilever has lost the market share in 10 of its
11 product categories in the last five years. By employing price cuts and increasing advertising expenditure, the company is responding to the competition it faces from
ITC in the personal care segment and price war from
Procter & Gamble (P&G).
Dabur, on the other hand, has adopted the inorganic route of acquiring brands to increase its presence. The company had acquired the oral care brand ‘Balsara’. It has toothpaste brands such as Babool, Promise and Fem
Care. Recently, the company acquired Turkey-based personal care product maker, Hobi Kozmetic.
As these players make their war turf stronger and bigger with such measures, one important factor that stands before them is the unacknowledged competition from local brands in rural settings. There is still huge demand for these brands considering their volume game strategy and economical pricing. However, considering the size of these players, companies in the consumer space wouldn’t find it difficult to acquire them or present stiff competition to nullify their presenc E.
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SS ales and marketing are essential tools that help a company to sell its products and also create awareness in the minds of the consumers. In the absence of product patent protection till 2005, the market was flooded with too many brands for the same molecule; sometimes 20 to 100 brands of a single molecule used to compete for the same indication.
The Indian pharma industry concentrates and promotes the manufacture and sale of quality affordable generic drugs. Branding has thus been the best marketing strategy so far and aided in adding value to the drugs and distinguishing them as ‘branded generics’ in the market.
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This is especially important for the Indian pharma industry as there are over 57,000 brands competing for attention. Besides, it helps in differentiating the product from the competition and also in establishing a positive image of the brand and the company in the market.
A recent trend seems to point towards the growth of the over-the-counter (OTC) product market in India.
Globally, the Indian pharma industry ranks 3rd in terms of volume and 13th in terms of value. India ranks 11th globally in terms of the OTC market size with an estimated OTC market of US$ 1,793 million, growing annually at the rate of 23%. the amount of expenditure vis-à-vis the prospective revenue they can expect from such expenditures.
If we look at the top five Indian brands, we will find that no brand has even crossed the ` 500 crore figure when it comes to annual sales revenue. But the pharmaceutical industry has grown at the rate of 5.5% over 2008.
Lipitor continues to be the topmost brand the world over with sales of US $13.2 million, followed by Plavix at US
$9.1 million and Nexium at US $8.2 million. The top 15 global brands combined form US $752 million of revenues globally.
OTC or non-prescription medicines in India seem to be growing faster than the global average of approximately
5% despite being perceived as less effective than prescription drugs. According to IMS health, the global pharmaceutical sales in 2009 crossed US $820 billion, growing at 4-5 %. As expected, 87% of sales came from
USA, Europe and Japan; USA alone clocked over US $
300 billion in sales.
While there are over 106 blockbusters (sales exceeding
US$ 1 billion each), the mother of all brands continues to be Pfizer’s cholesterol lowering drug Lipitor
(Atorvastatin), which clocked in sales of US $11.4 billion with a de-growth of 8%. Due to ‘pharmerging’, markets like Brazil, India, China, Russia, Korea, Mexico and Turkey exceeded sales of US $110 billion with a growth of 14-15%. This clearly indicates that the market is displaying healthy growth and will continue to do so in the coming decade.
Innumerable branded drugs are available globally. For lesser regulated markets like India, Brazil, China and
Russia, there are branded versions of every patented drug as well, known as branded generics.
Global pharmaceutical companies are driving costs down in areas like promotional medical education, e-marketing, medical affairs, sales training, medical communication and publication planning. What is interesting is that there is an emergence of very specialized and high expertise offshore service providers that are helping the global pharmaceutical industry work through the challenges.
In highly regulated markets like North America, Western
Europe and Japan, brands are usually developed for novel innovator molecules and branded generics are few in number.
India ranks 3rd globally in terms of volumes and 14th in terms of value. This is largely because Indian drugs cost
10% to 15% less than international drugs. On an average, pharma companies spend 15-20% of their revenue on sales and marketing.
The market still has a number of pharma brands, including products for many whose patents have expired and yet the branded drug is being sold. Most of these medicines are innovative products developed after extensive research. There are very few Indian brands available in highly regulated markets, mainly in the US.
Pharmaceutical marketing in India is quite a challenge due to the highly fragmented nature of the market, with over 60,000 brands battling for a pie of the $9 billion domestic market. The result is that even the industry leader has just about 6% of the market share.
Marketing expense does not have a direct correlation to sales. However, it does spur sales to an extent depending upon the product and its acceptability. Increased sales expenditure can lead to increased revenues till a point where the product features outweigh the sales push on the product.
This is mainly because branded generics in these markets have a very limited scope and it also requires a lot of marketing. In less regulated markets like Africa, south east Asia, Brazil, etc, Indian companies develop their own brands. Some of the brands developed by Indian companies in highly regulated markets are Desquam-X,
Exelderm, Eurax, Ultravate, Halog, Kenalog by Ranbaxy, Synalgos, Elixophyllin, by Caraco (Sun Pharma), etc. Apart from the above, OTC drugs sold without prescriptions need to have their own brands since they are based on consumer perception.
Thus, increased sales and marketing allocation will have an impact on the annual results of the company.
However, pharma companies need to take a wise call on
An industry analyst says, “The top 10 Indian pharma companies spend a significant amount of their earnings on sales promotion, training of medical representatives and brand building. This definitely helps them position
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19th Nov ’10 It’s simplified...
their products better in the crowded market and ensure higher brand recall from prescriber’s, which in turn spurs sales and helps the company boost its top line. The western marketing strategy of one molecule-one brand is not practised in India, resulting in no mega brand like
Lipitor. It is virtually impossible for a busy doctor to remember more than say six to seven brands for the same indication, which goes to show how difficult it is to build a pharmaceutical brand in India, unlike in the west.
Direct to Consumer (DTC) marketing for prescription drugs, widely prevalent in the west, is still in the nascent stage in India. DTC builds awareness about the disease and solutions available, thus bringing the patient to the doctor`s office. All major prescription brands in USA are heavily promoted through DTC using mass media.
Marketing budgets of most pharma companies vary from product to product. A newly launched product obviously needs more marketing thrust till it reaches a critical mass.
More than the marketing rupee spent, it is the quality of the spend and the innovative approach that makes the brand stand out.
In India medical representatives continue to be the main backbone of marketing strategy. With over six lakh doctors in the country, doctor coverage also becomes an important issue. No wonder most pharma majors have engaged an army of thousands of representatives to retail their product. Since headcount is a sensitive issue for most MNCs, they are grudgingly using this model, by largely depending on field force effectiveness rather than increasing the headcount.
To enhance their products further, the companies are not only seeing clear savings but are also seeing the possibility of driving multiple innovative marketing ideas and programs due to the low cost of innovation and also the fact that really high quality resources can be thus leveraged by the M.
S M S ‘ B A N G’ t o 5 4 6 4 6 w w w. n i r m a l b a n g. c o m
Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing.
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T o facilitate the consolidation or merger of mutual fund schemes, the Securities and
Exchange Board of India (SEBI) recently issued a circular. It states that as long as the fundamental attributes of the surviving scheme (the scheme which remains in existence after the merger or consolidation) are retained and the circumstances merit merger or consolidation without the interest of the unit holders being compromised at all, the merger or consolidation will not be seen as a change in the fundamental attributes of the surviving mutual fund scheme.
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After the approval, the mutual fund houses will have to file the consolidation or merger proposal with the regulator, which will, in turn communicate its observations within a specified time frame. After incorporating
SEBI’s observations on the new guideline, letters will be sent to the unit holders.
This is an about turn from the circular issued in 2003, wherein SEBI had stated that the surviving scheme would undergo a change in fundamental attributes. The new move will make the process of consolidation or merger much easier than before, which is likely to bring about a wave of mergers and consolidations of schemes in the industry.
tion, unit holders of scheme Y need not be given an exit option as long as the guidelines are met with. This will simplify the consolidation and merger process.
According to a recent announcement, Franklin Templeton Asset Management will be consolidating Templeton
Floating Rate Income Fund (TFIF) by merging the Short
Term Plan (ST) of TFIF into Long Term Plan (LT) of
TFIF as on 26th Nov ’10. Subsequent to the merger, the nomenclature ‘Long Term Plan' will be deleted and it will be referred to as the Templeton Floating Rate
Income Fund.
In case an investor does not wish to continue to hold units in view of the said changes, he will have the option to exit the said scheme at the prevailing NAV, without any exit load.
SEBI Chairman CB Bhave says, “If the industry throws over 3,000 schemes at investors, how can one expect them to make a choice?” He maintains that several schemes have not even reached a critical mass. So he feels that this new guideline will help in reducing the number of schemes floating in the market, thus making it easier for investors to choose from a narrower universe of mutual fund schemes.
The said exit option can be availed of between 28th Oct
’10 and 26th Nov ’10. The aforesaid exit option will not be available to investments in TFIF-LT (i.e. merged plan) made on or after 28th Oct ’10.
LIKELY IMPACT - MARKET VIEW
Some fund houses, however, do not agree with SEBI’s argument that there are too many schemes. The fund houses believe that as ‘manufacturers’ they need to offer customers a gamut of schemes to choose from.
According to an industry expert, product rationalization is important for the growing mutual fund industry as it improves efficiencies. The change in regulations should help in reducing operational complexities without hampering investor interests, he says. A Chief Investment Officer (CIO) of one of the top 5 fund houses said, “Look at any other industry. Take for instance, FMCG players. The companies in this sector have a lot of products to offer. Same applies to banks and insurance companies as they keep coming up with new schemes. Then why is the mutual fund industry being singled out? The industry has not reached a stage which could result in overlapping of products.”
A similar view was expressed by the Chief Marketing
Officer of a leading fund house. He feels that there is a need to re-align schemes to simplify products by consolidating smaller schemes for good economic scales.
The main objective of this guideline is to reduce the number of mutual fund schemes available as there are over 3,000 of them at present, making it confusing and difficult to choose from the wide array of schemes.
This change announced by SEBI will benefit fund houses and investors alike. Several schemes have a corpus which is below the threshold and hence do not justify existence.
The simplicity of the merger and consolidation process will encourage mutual fund houses to relook their portfolio, which will result in product rationalization.
According to the latest directive, mutual fund companies need not give unit holders of the surviving scheme an exit option if the guidelines are met with.
Earlier, unit holders of both the surviving scheme and the scheme that was to be merged, had to be given an exit option. With the latest directive, this has changed. Unit holders of the surviving mutual fund scheme need not be given an exit opportunity.
So if scheme X is merging with scheme Y, then as per the old regulation, unit holders of both scheme X and scheme
Y were to be given an exit option. With the new regula-
The benefit will be two-fold. It will help to improve operational efficiency for the fund house and at the same time reduce the number of schemes floating in the market. Reduction in the number of schemes will make investment decisions for investors easier because they will have a smaller basket to choose from.
While this directive encourages consolidation and merger of mutual fund schemes and also protects investor interest, certain limitations do exist as the investment objective for every scheme is different. The next few months will reflect how this change in guideline has panned out for the mutual fund industr Y.
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M icrofinance, as the name suggests, is the practice of giving small ticket or micro loans to the poor. And it has been established as a model that enables millions of poor people in developing countries to access small ticket loans, which would otherwise have been unavailable to them through traditional platforms like banks.
Typically, micro lenders lend small amounts of money to start small business ventures. Microfinance has been around since the 1970s, but came into the spotlight in
2006 when the Nobel Peace Prize went to Bangladesh’s
Muhammad Yunus and his Grameen Bank. This bank pioneered giving tiny unsecured loans to the poor.
Following the same model, microfinance has till recently been regarded as the saviour of the poor in India. And not without reason. Consider these numbers. India has the largest scope for microfinance in the world, with some
120 million homes without any access to financial services. There are more than 3,000 MFIs and NGO-
MFIs, of which about 400 have active lending programs.
MFIs are mostly concentrated in India’s southern states, serving about 70 million people.
The gross loan portfolio of India’s microfinance sector,
(at approximately ` 23,000 crore), accounts for more than
7% of the microfinance sector’s worldwide loan portfolio size. This is because as much as 30% of the world’s microfinance borrowers are in India. Drawn to the growth and the future prospects of the industry, private equity firms have moved in, with MFIs accounting for about 40% of all Indian private equity deals in the last two years. Little wonder then that the microfinance market has grown at an average annual rate of nearly
80% over the last three years.
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19th Nov ’10 It’s simplified...
In August ’10, the microfinance sector hit headlines as the poster boy of Indian microfinance SKS Microfinance, India’s largest lender of loans to the poor, became the toast of investors when it raised ` 1,600 crore through its initial public offering in August, listing at a 10% premium to its issue price of ` 985. But good times do not last forever.
This ‘flat’ rate of interest means that it will not be calculated on reducing balance. It implies that even after the borrower has paid a few installments, the interest would still be calculated on the initial sum borrowed and not on the balance loan amount. The result is a (hidden) final rate of interest of about 24-30% or even higher for the poor who can barely afford one square meal a day.
Already facing flak for profit-making from the poor during its IPO, SKS faced an unwelcome spotlight, barely three months after it went public. The organization also came under SEBI’s scanner for letting off chief executive officer Suresh Gurumani barely eight weeks after the listing of the company on 16th August.
The problem seems to be with the business model and not the approach. In India, there are three kinds of MFIs: the government-supported self-help groups, non-profit
NGOs and the private for-profit firms.
SKS along with other small-scale lenders were hauled up following more than 30 suicides in Andhra Pradesh, where the biggest microfinance institutions in India are headquartered. The proverbial saviour of the poor had turned into the enemy of the state. MFIs faced scrutiny over high interest rates and allegations of strong-arm debt collection tactics.
While private MFIs say that the smaller entities have earned the sector a bad name, social workers and industry veterans at the grassroots say that bigger players with bigger targets have led to such incidents. In many instances, multiple MFIs lend to the same clients, resulting in repayment problems and eventually to defaults.
Even those in the business of banking are now questioning the strongly growing profits of MFIs and accusing them of coercion. Strongly critical of the practice of profit-making MFIs, Bangladeshi microfinance pioneer and Nobel prize winner Muhammad Yunus told newspersons, “Microcredit was designed to serve poor people
- to help them overcome poverty. We had no intention of making money for investors.”
After the news of the suicides surfaced, SKS said that 17 of the dead were among its borrowers but it rejected responsibility for the deaths. “Suicides are unfortunate but there might be reasons other than our loans. One thing we are sure about is that our ethical way of doing microfinance has not caused these tragedies,” said SKS
Chairman Vikram Akula recently.
Akula sees no conflict between pursuing profits and helping the poor. Justifying the high interest rates of 27% that SKS charges, he says that the rates reflect the high cost of obtaining funds and the expenses in servicing borrowers across the far and hard-to-reach areas. Microfinanciers, who borrow from commercial banks at rates of up to 15%, note their interest rates are still lower than those charged by the moneylenders. These lenders charge as much as a 70% annual rate of interest.
What is happening as a result is ‘irresponsible lending’ as there is high pressure on the staff of microfinance institutions to meet targets and they dump money on people, without judging their repayment capacity and then have
While microlenders are busy justifying themselves, those familiar with the functioning of MFIs point out that the lending model of for-profit MFIs is not exactly pro-poor.
While offering a loan, they often quote a ‘10% flat’ rate of interest, which, on the face of it, appears like a good deal. However, there is a catch. to resort to drastic measures to make the borrowers repay their loans.
Although it is fair to say that these accusations of coercive recovery practices and resultant borrower suicides against microfinance institutions (MFIs) haven’t been substantiated, there are indications that profiteering has crept into the sector in the wake of commercial successes such as SKS Microfinance. These tendencies need to be reined in.
The microfinance sector in India , which is still at a nascent stage with only four states such as Andhra
Pradesh, Tamil Nadu, Karnataka and Kerala accounting for more than 60% of its borrowing, is going through an upheaval and regulator reflexes have been prompt with suggestions of a separate regulator. There have been talks of capping interest rates, preferably linked to the average base rate fixed by banks from time to time.
While it is true that an upheaval has surely brought in the eyeballs and the regulators will have to fix the troubletorn sector, it must be remembered that microfinance has to be channelled in the right direction. This alone would help save the poor borrowers from the clutches of a debt trap and lend credibility to the financial inclusion drive in the country.
The need of the hour is to regulate the sector. However, putting a cap on interest rates or curbing the operating flexibility of MFIs will be akin to throwing the baby out with the bathwate R.
Beyond Market
19th Nov ’10 It’s simplified...
27

Present
&
Exchange Partner
T he Great Eastern Shipping Co Ltd (GES), incorporated in 1948, is India’s principal private shipping transportation company. It began operations with one vessel in 1948 and has since increased its fleet to 33 vessels, as of October
’10 (on a standalone basis).
From providing sea-logistics support in the initial years,
GES pioneered tramp shipping in India and in 1956 entered the oil tanker business through the acquisition of
India’s first oil tanker.
In 1983, GES ventured into offshore oil field services through the acquisition of Malaviya One (India’s first offshore supply vessel). GES originally operated its offshore business through wholly-owned subsidiary
Great Offshore Ltd, but in October ’06, as part of a restructuring program, GES spun-off the subsidiary.
Continuing its expansion and diversification strategy,
GES again ventured into the offshore space in 2002 through a new wholly-owned subsidiary, Greatship
(India) Ltd (Greatship), which has formed a joint venture with Norway-based DOF Subsea (the world’s leading subsea project player) to look at deep sea project opportunities off the east coast of India. Greatship owns 17 vessels as of October ’10. The company filed a DRHP in
May ’10 to come out with a public offering for its subsidiary Greatship.
Beyond Market
19th Nov ’10 It’s simplified...
29

The Great
Eastern
Shipping Co
London Ltd
The
Greatship
(Singapore)
Pte Ltd
The Great
Eastern
Chartering
LLC (FZC)
Greatship
(India) Ltd
30
Tankers Division
GES operated in the oil tanker segment through 27 owned tankers with an average age of 8.9 years. Its owned oil tanker fleet includes 5 Suezmax and 5
Aframax vessels engaged in transporting crude oil, 16 product tankers (4 Long Range, 8 Medium Range and 4
General Purpose) equipped to carry petroleum products and 1 Liquefied Petroleum Gas carrier.
The division’s clientele includes oil majors like Royal
Dutch Shell Plc, Bharat Petroleum Corp Ltd, ExxonMobil Oil Corp, Chevron-Texaco and TotalFinaElf as well as governments. as on-time charter contracts. By maintaining a balance, the company ensures that revenues are not heavily exposed to spot market volatility and at the same time permits the company to ride uptrends in spot rates.
Currently, the revenue visibility for 2H FY11 is around
Rs 336 crore.
Crude tankers and product carriers (including gas carriers) are covered to the extent of around 57% and
71% of their operating days, respectively. In case of dry bulk carriers, they are covered to the extent of around
54% of the fleet’s operating days. This ensures a steady flow of revenues and cash flows in the near term.
Dry Bulk Division
GES operates in the dry bulk segment too, with six owned carriers having an average fleet age of 13.6 years and a capacity of 0.40 mn dwt. These vessels cater to shipment requirements for bulk commodities such as grain, coal, iron and other minerals.
Vessel Acquisitions To Add Muscle To Top-line
Growth In The Long Term
GES has constantly strived to expand its fleet size by uninterrupted acquisition of vessels. Currently, it has a healthy order book in place, backed by strong credit facilities that will enable the company to sustain healthy top-line growth in the long term and maintain its leading position in the Indian shipping industry, going forward.
The division’s owned fleet comprises of 1 Capesize, 1
Panamax, 2 Supramax, 1 Handymax and 1 Handysize vessels. The division’s dry-bulk client base includes Rio
Tinto, Vale SA, BHP Billiton and ArcelorMittal.
Offshore Division
GES operates in the offshore segment through its wholly-owned subsidiary Greatship, which offers support services for offshore exploration and production
(E&P) activities.
Currently, Greatship and its subsidiaries have an asset base of 4 Platform Supply Vessels (PSVs), 7 Anchor
Handling Tug cum Supply Vessels, 3 Multipurpose
Platform Supply and Support Vessel (MPSSV), 1 ROV
Vessel and 2 Jack-up Rig.
The company has an order book of 8 vessels (3 VLCC’s,
2 Supramaxes and 3 Kamsarmax dry bulk carriers) which will result in an outlay of US $573 million. Of this amount, the company has already advanced approximately US $234 million to the yards.
Diversification Into Offshore Space – De-risking Of
Business Model
Given the demand for oil in India, the demand for offshore vessels is expected to remain robust. The Indian offshore fleet, which has grown at 10% per annum over
2000-08 is forecast to grow at 18% per annum over
2008-12 (Company Presentation, May ’09 Source:
Offshore Research, Pareto).
INVESTMENT POSITIVE
Strong Revenue Visibility In The Near Term
The company’s vessels operate in the spot market as well
Given this scenario, the scheduled offshore vessels to be delivered in FY11 and FY12 will not only provide a much-needed impetus to the company’s offshore business venture but will also hedge exposure to volatility in freight rates in both dry bulk shipping and oil tanker sectors. Greatship and its subsidiaries have an
Beyond Market
19th Nov ’10 It’s simplified...
order book of eight vessels - two MSVs in India, four
ROVSVs in Sri Lanka and two AHTSVs in Singapore.
in product market is expected to boost the need for seaborne transportation.
Strong Balance Sheet With Relatively Low Leverage
On a standalone basis, GES’s debt-to-equity ratio stood at 0.61 at the end of 1H FY11. GES’s strong balance sheet with low leverage offers flexibility in pursuing vessel acquisitions, to which end the company already has access to revolving credit and secured term loan facilities, shielding it from the credit crisis.
It has a committed capex plan of over US $1 billion, over the next three years. The low leverage and strong track record of the management gives it an edge over its peers.
SWOT Analysis
Strengths
Largest private player in India
Diversified business streams
Long-term contracts with reputed clients
Low debt-to-equity ratio
Weaknesses
Phasing out of single hull vessels
Higher fleet age of oil tankers and a few dry-bulk vessels
Opportunities
Lower leverage enables the company to expand its fleet size
Diversification into offshore segment
Strong vessel order book to assist top-line
Threats
Prolonged slowdown in global economies to impact the industry
Cancellation of contracts by customers
Renewal of long-term contracts at lower than existing rates
Source: Company Data, NB Research
OUTLOOK
Even though the freight rates have recovered, the dry bulk sector still needs to see a stronger pick up in global demand for key commodities such as coal and iron ore.
The global economic uncertainty and rising fleet supply are expected to keep dry bulk shipping rates depressed in the near term. However, improved demand with economic recovery and slippages, cancellations and scrapping activities may provide some support to the freight rates.
VALUATION
The company has displayed robust performance except for FY10 due to the recessionary conditions, which lowered the demand for shipping. However, the company’s performance has improved significantly in
1H FY11 with EBITDA margin of 44%.
Financials
FY07
Sales
EBITDA
Margin
PAT
Margin
Diluted EPS
2142
1044
49%
907
42%
59.92
Source: Company Data, NB Research
FY08
3108
1363
44%
1453
47%
94.66
FY09
3792
1555
41%
1418
37%
92.92
FY10
2857
726
25%
513
18%
33.60
1H FY11
1275
563
44%
340
27%
22.31
The possibility of a cold winter and the demand for heating oil can provide some support to the tanker rates in the short term. But, large US inventories of both crude as well as distillates could cap the possibility of strong movement of oil. In the medium to long term, the pick-up
We expect the strong performance to continue, going forward. At the current price, the stock is trading at 8.5x times on annualized EPS of 1H FY11. The NAV of the stock as of 29th Oct ’10 stood at ` 382 per share and is expected to increase with the increase in demand for shipping. Therefore, the stock looks quite attractiv E.
Beyond Market
19th Nov ’10 It’s simplified...
31

I f you think the festive season is over and the time to buy gold has passed, think again! There are plenty of options available to people who wish to invest in the yellow metal. They generally opt for jewellery-the most common and traditional form of investment, gold bars and coins.
The objective of investing in bullions differs from person to person. Some may want gold to invest their savings for their children’s marriage, others might view it as a status symbol. Some might want to gift it, while some others might want to secure their standard of living after retirement. Although bullion prices are heading northwards and may limit the scale of one’s purchases, the objective(s) of investing in the yellow metal cannot still be diluted.
However, a new form of investment called Gold ETFs
(exchange-traded funds) is fast gaining acceptance among buyers of this precious metal, over other routine investment options. The National Spot Exchange Ltd
(NSEL), under the direction of the Ministry of Consumer
Affairs, Food and Public Distribution, Government of
India, has introduced a new concept called e-gold, which tracks the price of gold and makes it available to retail investors in smaller denominations in the dematerialised form. The spot exchange allows the investor to purchase a minimum of 1 gram gold and in multiples of 1 gram thereafter. And most of all, the investor can demand for the physical delivery of the bullion. Due to its simplicity, accessibility, affordability and authenticity, e-gold is the most preferred choice of many people. It is also hasslefree, to say the least.
Bullion is commonly known to exist in only the physical form. But it has a few disadvantages:
‡ uniform throughout the country.
‡
Price Discrepancy: The price of physical gold is not
BID – ASK Dissimilarity: In comparison with the market rate, a premium is charged on the buying price, while there is a discount on the sale price.
In fact, the concept of e-trading is not new to the Indian investors. But it is only now that they have realised its importance, thanks to the advantages it offers. One advantage of trading electronically is that the authenticity of the securities need not be questioned. Electronic trading of bullion assures the authenticity of the commodity. The consumer can buy gold without any hassle as he will be buying it in the demat form. This transaction will reflect in his DP account within two working days. The transactions can occur at real time rates from Monday to Friday from10 am to 11:30 pm. ‡ Quality And Accuracy available in 22 karat. Hence, the authenticity and purity is doubtful.
: Physical gold is mostly available in 22 karat. Hence, the authenticity and purity
‡ human error is possible.
‡
Dimension Error:
Storage Risk:
Measurement slip-up due to
People need to protect gold from theft and spoilage. This often adds cost to the bearer.
Earning money is difficult. But burning it is quite easy.
People may lose their money simply by making wrong investment decisions. Hence, choosing a fool-proof investment method is more meaningful due to the benefits it offers. Instead of waiting for a correction in the prices of the yellow metal, just take the plunge with e-gold and see your life change for the bette R.
Beyond Market
19th Nov ’10 It’s simplified...
Contact:
+91 77383 80155/ 022-3027 2332
SMS
to 54646 | e-mail:
Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Investments in Securities are subject to market risk. Please read the scheme related document carefully before investing.
Please read the Do’s and Don’ts prescribed by Commodity Exchange before trading. The PMS Service is not offering for commodity segment. Through Nirmal Bang Securities Pvt. Ltd *Through Nirmal Bang Commodities Pvt. Ltd. #Distributors
REGD. OFFICE: 38-B/39, Khatau Bldg, 2nd Flr, Alkesh Dinesh Mody Marg, Fort, Mumbai - 400 001. E-mail: contact@nirmalbang.com; Tel: 022 - 22641234, 30272000 / 2222; Fax: 022 - 30272006.
BSE SEBI REGN No. INB011072759, INF011072759 & INE011072759, NSE SEBI REGN No. INB230939139, INF230939139 & INE230939139 DP SEBI REGN. No NSDL: IN-DP-NSDL-136-2000, CDS(I)l: IN-DP-CDSL-37-99, AMFI REGN. No. arn-49454 NCDEX REGN. NO. 00362, FMC Code-0075, MCX REGN. No. 16590, FMC Code-MCX/TCM/CORP/0490, MCX SX-INE260939139, PMS-INP000002981

34
C ommodities were outperformers in the last fortnight following the announcement by the
US Federal Reserve that it would start buying
$600 billion in government bonds to stimulate the economy over the coming months. This is referred to as QE2, meaning second round of quantitative easing. this commodity. However, the launch of new Exchange
Traded Funds (ETFs) for base metals has resulted in a fresh demand for the same. Moreover, liquidity is also playing an important role in the upside in base metals.
This measure was necessitated to avoid the formation of a deflationary environment since inflation is not rising.
Besides, manufacturing activity has recovered, industrial production has jumped and economic reports have been encouraging in USA. In such an economic environment, commodities are one of the best asset classes to be in.
But the base metals complex looks weak for the next fortnight. We recommend investors to wait for a decline and then initiate long positions in the complex. Nickel does not look fundamentally strong. So investors can go short on nickel between ` 1,050/kg and ` 1,060/kg.
Similarly, they can initiate short positions in copper between ` 396/kg and ` 398/kg.
Commodity prices have moved up despite weak fundamentals and other factors such as China raising its reserve ratio requirements for large banks, rise in property prices and spurt in inflation, drop in copper and crude oil imports in China and uncertainty in the euro zone. All these clearly indicate that liquidity in the financial markets is making its way into commodities. Liquidity may also arrest major downsides in commodities.
Prices of crude oil were seen moving up in the previous fortnight despite the 4% rise in month-on-month (m-o-m) production by Russia, the largest crude oil producer in the world. Even the sharp drop in crude oil imports by
China couldn’t stop the rally. The onset of winter season in the US is likely to drive the demand for crude oil in the next few months.
During the past fortnight, precious metals were seen breaking their all-time highs. Also, base metals continued their upward move despite negative reports of imports by China. Crude oil too rose despite a rise in production and a sharp drop in Chinese imports. Agricultural commodities, especially corn, wheat, cotton and edible oils were seen rallying during this period.
So far, weather agencies have predicted a warmer-thanexpected temperature during this season. But a severe winter season in the US can support crude oil as inventories in the US were seen dropping in the last fortnight, due to the fall in imports. Further, it may be difficult for crude oil to sustain above $92/barrel due to weak fundamentals in the coming fortnight.
Interestingly, the open interest on NYMEX Gold was at an all-time high on 9th November. On the same day, silver traded at the highest ever volume on the NYMEX.
Precious metals still look strong from a fortnightly perspective. Further, rising bond yield of Ireland poses sovereign default risk that is still haunting the euro zone and the possibility of a sharp decline in the US dollar may see investors seeking refuge in precious metals. In such a scenario, gold may test ` 20,650/10 gm, while silver may touch ` 42,500/kg over the next fortnight.
Talking about base metals , the outlook for this complex is not very attractive, going by the demand and supply for
In the agri complex , cotton prices rallied more than
45%, soybean and soya oil by more than 20% and corn prices by over 20% in the international markets, during the last fortnight. On the domestic front, there was a run up in the oilseeds, spices and guar complexes. Reports that the Chinese government may ban cotton futures led to a correction in the overall agri complex.
However, we do not expect any major drop in agricultural commodities as weather woes coupled with a sharp drop in carry forward stocks make them more attractive for investing. Soy oil may touch the levels of ` 595/kg, while soybean may touch ` 2,450/quintal, guarseed
` 2,520/quintal, mustard seed ` 610/25 kg and black pepper ` 23,500/quintal during the next fortnigh T. penny saved is a penny earned money invested is money earned
Your financial growth is our concern.
At Nirmal Bang, it’s a relationship beyond broking...
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Beyond Market
19th Nov ’10 It’s simplified...
T he Forex markets moved on the back of run-of-the-mill economic indicators and also due to the historic power shift in the US mid-term elections and Federal Open Market
Committee’s decision to inject $600 billion cash into the financial system over the next few months. However, the
G20 meeting that was being eagerly watched by Forex traders, did not throw any surprises either.
measures, coupled with the latest PMIs, which pointed at continued expansion across most of the larger economies and the confidence measures continuing to surprise on the upside.
The US dollar faced a sharp sell-off immediately after the Fed announced the stimulus package. However, improving economic conditions in the US helped the US currency to recover its lost ground against most other major currencies.
The outlook for the US manufacturing sector brightened this week when the ISM manufacturing index for
October came in at 56.9, much stronger than consensus estimates. The new orders component and the employment measure, both have improved. After four straight monthly declines, employers added 1,51,000 new employees to non-farm payrolls in October.
Additional support for the dollar came in after debt concerns re-emerged from the euro zone, triggering fresh buying in the dollar as a safe-haven asset. The dollar index, a broad gauge of dollar movement against major currencies, jumped remarkably and tested 78.5. We expect the dollar index to continue its northward movement, testing the level of 80 in the coming fortnight.
The European Central Bank stated that the “positive underlying momentum of the recovery remains in place” and expected growth to be supported by the ongoing global recovery as well as “by the accommodative monetary policy stance and measures adopted to restore the functioning of the financial system.”
These developments pushed the euro above $1.43 against the US dollar. However, the second half of the fortnight witnessed a significant sell-off in the euro when the debt concerns from Ireland resurfaced. We expect a further downside in the euro in the coming fortnight. We recommend investors to stay short in the euro and expect it to touch the level of $1.35 in the coming fortnight.
The Japanese yen traded in the narrow range of 81-82 against the greenback. It touched 82.50 in the latter half of the fortnight but exporters came in at this level, pushing it back below 82 per dollar. The yen is likely to remain range-bound in the coming fortnight in the absence of major triggers.
Most Asian currencies strengthened significantly due to
Fed’s announcement of a bond purchase program to the tune of $600 billion. This announcement raised expectations for further capital inflows into the Asian economies in search of high yields, thereby supporting most of the
Asian currencies.
The sterling remained strong against the dollar in the last fortnight. The Purchasing Managers Index (PMIs) in
United Kingdom rose in October. Besides, UK posted a stronger-than-expected growth rate in the third quarter.
Real GDP rose at an annualized rate of around 3% and the apparent expansion of the economy in October caused the Bank of England to refrain from following the
US Fed Reserve’s path of more quantitative easing.
Given these positive data points, it was not surprising that the Monetary Policy Committee (MPC) decided to stand put at its 4th Nov ’10 meeting. Investors took comfort in this development and built huge long positions in sterling which pushed it above $1.62 against the US dollar.
However, it gave up some gains later and settled at $1.60 in the last fortnight. We do not see any potential downside in sterling from the current levels. The level of $1.59 shall be used as a good buying opportunity. The euro continued its run-up against the backdrop of Fed’s easing
There were talks of capital control and central bank intervention by some of the Asian economies in the fortnight gone by. But going by the G20 release, which talks of more market-driven exchange rates agreed upon by all the members, actions like capital control and intervention can apparently be ruled out. Going forward, we expect Asian currencies to strengthen further once risk buying comes back into the markets.
The Indian rupee showed some consolidation in the first half of the fortnight. However, the bias in the USDINR pair was on the downside with IPO related dollar inflows.
But the broad strength in the US dollar towards the end of the fortnight, coupled with a strong sell-off in Asian currencies on global risk aversion, hit the rupee too. The rupee settled at 44.80 in spot against the US dollar. We expect to see further depreciation in the rupee and test the mark of 45.30-45.50 in the coming fortnigh T.
Beyond Market
19th Nov ’10 It’s simplified...
35

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Investments in Securities are subject to market risk. Please read the scheme related document carefully before investing.
Please read the Do’s and Don’ts prescribed by Commodity Exchange before trading. The PMS Service is not offering for commodity segment. Through Nirmal Bang Securities Pvt. Ltd *Through Nirmal Bang Commodities Pvt. Ltd. #Distributors
REGD. OFFICE: 38-B/39, Khatau Bldg, 2nd Flr, Alkesh Dinesh Mody Marg, Fort, Mumbai - 400 001. E-mail: contact@nirmalbang.com; Tel: 022 - 22641234, 30272000 / 2222; Fax: 022 - 30272006.
BSE SEBI REGN No. INB011072759, INF011072759 & INE011072759, NSE SEBI REGN No. INB230939139, INF230939139 & INE230939139 DP SEBI REGN. No NSDL: IN-DP-NSDL-136-2000, CDS(I)l: IN-DP-CDSL-37-99, AMFI REGN. No. arn-49454 NCDEX REGN. NO. 00362, FMC Code-0075, MCX REGN. No. 16590, FMC Code-MCX/TCM/CORP/0490, MCX SX-INE260939139, PMS-INP000002981
CHANGE IN PRICE AND OPEN INTEREST OF THE NIFTY 50 COMPANIES
25th Oct'10 11th Nov'10
Company Name Price
(Rs)
Open
Interest
Price
(Rs)
Open
Interest
Change in Price
(Rs)
Change in Open
Interest
Nifty Futures
Bank Nifty
ACC Ltd
Ambuja Cements Ltd
Axis Bank Ltd
Bajaj Auto Ltd
Bharti Airtel Ltd
Bharat Heavy Electricals Ltd
Bharat Petroleum Corporation Ltd
Cairn India Ltd
Cipla Ltd
DLF Ltd
Dr Reddy's Laboratories Ltd
GAIL (India) Ltd
HCL Technologies Ltd
HDFC Ltd
HDFC Bank Ltd
Hero Honda Motors Ltd
Hindalco Industries Ltd
Hindustan Unilever Ltd
ICICI Bank Ltd
IDFC Ltd
Infosys Technologies Ltd
ITC Ltd
Jindal Steel & Power Ltd
Jaiprakash Associates Ltd
Kotak Mahindra Bank Ltd
Larsen & Toubro Ltd
Mahindra & Mahindra Ltd
Maruti Suzuki India Ltd
NTPC Ltd
Oil & Natural Gas Corporation Ltd
Punjab National Bank
Power Grid Corporation of India Ltd
Ranbaxy Laboratories Ltd
Reliance Communications Ltd
Reliance Capital Ltd
Reliance Industries Ltd
Reliance Infrastructure Ltd
Reliance Power Ltd
Steel Authority of India Ltd
State Bank of India
Sesa Goa Ltd
Siemens Ltd
Sterlite Industries (India) Ltd
Sun Pharmaceutical Industries Ltd
Suzlon Energy Ltd
Tata Motors Ltd
Tata Power Co Ltd
Tata Steel Ltd
Tata Consultancy Services Ltd
Wipro Ltd
-24.75
-2.70
-4.40
-26.75
-3.05
-5.90
-7.95
0.80
25.70
-22.35
-46.90
1.90
96.55
-4.50
26.55
6.20
-5.15
8.95
-14.80
93.45
97.85
-40.50
-13.50
-10.00
14.40
180.00
-1.55
95.05
-16.20
8.70
4.70
-0.75
96.35
413.65
61.90
17.65
61.70
74.75
-19.25
-107.00
27.05
-5.35
-20.65
-20.05
99.45
-13.90
-20.25
9.15
43.40
-56.70
12.70
3.10
9839000
30446000
2746750
20352000
4820000
50594000
3102500
2186875
6930000
2591500
23966000
2898750
1373750
96908000
5885500
35472000
10418500
21118750
8017750
34810000
10284000
4777125
13868000
27201900
1737875
2311000
23188000
2153000
1278500
22984000
2729125
4080500
17896000
8477000
17094000
628250
2658500
1950000
5400625
1627250
2937000
18380000
12294000
1592500
14770000
360750
98856000
11050000
607000
20532000
3597500
4398740
1328.35
1357.15
99.70
586.75
177.10
820.45
1088.45
1067.45
186.60
197.65
3199.60
340.00
1245.40
202.00
3063.20
176.40
714.20
135.00
490.20
2136.55
816.65
1477.65
194.05
6232.55
12906.10
1093.55
162.10
1533.65
1574.60
319.20
2434.30
752.80
332.90
334.35
347.85
1743.60
493.20
405.60
717.65
2363.45
1809.30
235.05
309.90
836.40
187.70
2329.80
57.55
1286.15
1407.60
633.10
1072.90
431.90
11744500
26392000
3863000
33952000
6839000
35922000
3615000
3126500
10240000
2905250
26027000
3429750
2068500
35928000
6069000
35390000
11621000
22227250
8364750
32372000
8468000
3939500
16946000
31286550
1604025
2664000
28246000
3372500
1887750
19951000
2986125
5835500
15836000
6687000
16142000
932750
2819000
2226000
9832500
2772875
3584875
26550000
13692000
1707000
26251000
563750
101696000
12047500
958000
26022000
5213500
6574036
1353.10
1359.85
104.10
613.50
180.15
826.35
1096.40
1066.65
160.90
220.00
3246.50
338.10
1148.85
206.50
3036.65
170.20
719.35
126.05
505.00
2043.10
718.80
1518.15
207.55
6136.20
12492.45
1031.65
144.45
1471.95
1499.85
338.45
2541.30
725.75
338.25
355.00
367.90
1644.15
507.10
425.85
708.50
2320.05
1866.00
222.35
306.80
846.40
173.30
2149.80
59.10
1191.10
1423.80
624.40
1068.20
432.65
Change in Price
(%)
Change in Open
Interest
(%)
-15.48
-33.59
169.73
-3.02
0.23
-10.35
-4.99
-4.15
7.53
21.45
21.26
-18.16
-16.22
15.36
-28.90
-40.06
-29.52
40.84
-14.18
-30.05
-32.32
-10.80
-7.92
-6.71
-43.74
-36.01
-2.79
-8.28
-36.64
-21.10
-31.00
-33.09
-30.07
13.01
26.77
5.90
-32.65
-5.69
-12.40
-45.07
-41.32
-18.07
-30.77
-10.21
-13.06
8.34
-13.25
-17.91
-36.16
-32.27
15.20
-8.61
Source: NB Research
-1.83
-0.20
-4.23
-4.36
-1.69
-0.71
-0.73
0.08
15.97
-10.16
-1.44
0.56
8.40
-2.18
0.87
3.64
-0.72
7.10
-2.93
4.57
13.61
-2.67
-6.50
-1.18
8.31
8.37
-2.62
7.98
-1.14
1.39
0.44
-0.17
3.73
-1.58
-5.82
-5.45
6.05
-2.74
-4.76
1.29
1.87
-3.04
5.71
1.01
1.57
3.31
6.00
12.22
4.19
4.98
-5.69
-4.21
-1905500
4054000
-1116250
-13600000
-2019000
14672000
-512500
-939625
-3310000
-313750
-2061000
-531000
-694750
60980000
-183500
82000
-1202500
-1108500
-347000
2438000
1816000
837625
-3078000
-4084650
133850
-353000
-5058000
-1219500
-609250
3033000
-257000
-1755000
2060000
1790000
952000
-304500
-160500
-276000
-4431875
-1145625
-647875
-8170000
-1398000
-114500
-11481000
-203000
-2840000
-997500
-351000
-5490000
-1616000
-2175296
Beyond Market
19th Nov ’10 It’s simplified...
37

Tanla Solutions Ltd
Amtek India Ltd
Koutons Retail India Ltd
Piramal Healthcare Ltd
PSL Limited
Reliance Communications Ltd
DCM Shriram Consolidated Ltd
Moser-Baer (I) Ltd
Emco Ltd
JK Lakshmi Cement Ltd
Videocon Industries Ltd
Electrosteel Castings Ltd
Ansal Properties & Infrastructure Ltd
Bharati Shipyard Ltd
IVRCL Assets & Holdings Ltd
Amtek Auto Ltd
Kesoram Industries Ltd
BARTRONICS INDIA LTD
Alok Industries Ltd
Lakshmi Energy and Foods Ltd
ICSA (India) Ltd
Sasken Communication Technologies Ltd
Essar Shipping Ports & Logistics Ltd
The Great Eastern Shipping Company Ltd
The India Cements Ltd
Gujarat Narmada Valley Fertilizer Company Ltd
Chennai Petroleum Corporation Ltd
JSL Stainless Ltd
Bajaj Hindusthan Ltd
MIC Electronics Ltd
JK Cements Ltd
Arvind Ltd
Firstsource Solutions Ltd
Tata Communications Ltd
Vardhman Textiles Ltd
Punj Lloyd Ltd
Marg Ltd
38 Beyond Market
19th Nov ’10 It’s simplified...
The second week of November saw a sharp decline in the indices due to speculation over credit tightening in
China and worrisome debt crisis in Europe while global leaders who met in South Korea struggled to soothe the currency tensions. Further, mounting speculation that Ireland - one of Europe’s most financially troubled countries - would not be able to cut public spending and may have to resort to a bailout added to the woes. they have been net sellers to the tune of ` 913 crore for the month of November (up to 15th Nov ’10) and no major buying by foreign players clearly suggests that the upmove could be limited.
On the Options side, the 6,000 Put has the highest open interest and out-of-the-money (OTM) Puts have seen additions in the last two trading sessions. On the
Call side, the 6,200, 6,300 and 6,400 levels have the highest open interest base.
Lower than expected IIP data and fears of a rate hike by China led the Nifty to close deep in the red at 6,072.
The November series opened at ` 67,391 crore as against ` 64,208 crore last month, wherein the Nifty futures was ` 17,940 crore and Stock futures were
` 49,451 crore.
Positive global sentiments and FII inflows drove the
Indian markets to a new calendar high of 6,338 on the
Nifty and 21,108 on the Sensex, in the first week of
November. Technically, a correction was due in the
Indian markets after the spectacular rally of almost
18.5%, from the lows of 5,348 to the highs of 6,338.
The Nifty premiums are also seen lowering to ` 20 from ` 40, indicating that not much of a bull action is seen happening at the current levels. The Nifty is trading below the major support level of 6,145 and if short covering is not seen, then it may also test the
5,960 – 5,845 levels.
Bank stocks continued to outperform the markets while the metal and realty counters continued to remain under pressure. Technically speaking, the
Indian markets are currently well-balanced and any decline below the 50-day moving average (DMA) could trigger another 2-4% cut in the near term.
India’s medium-term outlook continues to be promising and from here on, the domestic markets will continue to take cues from the global markets and also closely watch FII fund flows, which could be the key factor in driving the markets.
Going forward from the current levels of Nifty futures at 6,060, we see that the Indian markets are technically well shaped from a medium to long-term perspective.
But from a very short-term perspective, we believe the markets could correct a bit if it slips below the important level of 5,960, from where we have seen the Nifty taking support in the last two months.
The chart patterns suggest that the Nifty has not yet made a lower bottom formation and still continues to remain in the buy mode till it holds the 5,937 level on a closing basis. The trading range for this fortnight could be 5,885 - 6,200 with a positive bias. Major move is likely only if the markets break this range.
The markets are facing tremendous selling pressure at higher levels, close to the 6,150 – 6,200 levels and going forward, this level will continue to remain a strong hurdle for the bulls.
The quarterly results of listed companies are out and in the absence of any positive trigger, it would be very difficult for the markets to sustain at higher levels.
Huge pressure from domestic institutions is seen as
The put call ratio (PCR) for the Nifty reduced further to 1.13 from 1.28, till 12th Nov ’10, indicating a further weakness in the near term and chances of a technical bounce back from the oversold point of 0.80 in the PCR is likely in the coming days.
From a very short-term trading perspective, the
50-DMA of 6,037 should act as an immediate support and if this gets violated, then 5,960 will be the key level to watch out for in the near term. On the higher side, 6,145 – 6,185 levels should be breached and sustained with positive market breadth to maintain stability and regain investors’ confidence. The Bank
Nifty is likely to trade in the range of 12,445 – 12,900 and a big move is possible only if the Index breaks any of the given points.
Currently, from a trader’s perspective, it has become very difficult to time the market as the daily volatility
Beyond Market
19th Nov ’10 It’s simplified...
39

has risen very sharply. Traders are advised not to buy at higher levels. Instead, they should participate at lower levels in the range of 5,950 – 5,850. As the Nifty heads toward the November expiry in the coming fortnight, the important point to watch out on the spot Nifty is
5,960 and on the higher side 6,115 – 6,145. Only above
6,145 a strong upside move could be seen up to the
6,220 level.
Real estate and sugar stocks have seen considerable short build up, while banking stocks like UCO Bank,
Vijaya Bank, Syndicate Bank and IDBI Bank Ltd as well as stocks like Chambal Fertilisers & Chemicals
Ltd, IFCI Ltd, Alok Industries Ltd have shown long build ups.
Momentum stocks like Orchid Chemicals & Pharmaceuticals Ltd, IDBI Bank Ltd, Shree Renuka Sugars
Ltd, Indiabulls Real Estate Ltd can be bought on correction from a trading perspective. UCO Bank,
Syndicate Bank, Lupin Ltd, Wockhardt Ltd and SREI
Infrastructure Finance Ltd look great buys on declines from an investment perspectiv E.
Date
03 Nov'10
03 Nov'10
03 Nov'10
04 Nov'10
08 Nov'10
09 Nov'10
09 Nov'10
10 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
25 Oct'10
25 Oct'10
25 Oct'10
26 Oct'10
27 Oct'10
27 Oct'10
27 Oct'10
28 Oct'10
28 Oct'10
28 Oct'10
01 Nov'10
01 Nov'10
02 Nov'10
03 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
11 Nov'10
Ex
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
BSE
Company
Agro Tech Foods
Agro Tech Foods
Sanjivani Paren
Kalindee Rail
Gyscoal Alloys
Magma Fincorp
Magma Fincorp
Arvind Inter
Networth Stock
ICSA
IT People
Networth Stock
Guj Hotels
M&M Financial
M&M Financial
Quintegra Solut
Sujana Metal
Ruchinfra
Arrow Textiles
Tuticorin Alkal
Aksh Optifibre
Vikas WSP
Pokarna Limited
Paragon Finance
Avon Corporatio
Beryl Drugs
Guj Hotels
Shree Gan Jewel
Sea TV Network
MJP Leasing
NCJ Inter
Sky Industries
MJP Leasing
Adarsh Deriv
MAJOR BULK DEALS WHERE OVER 1% OF EQUITY WAS TRADED FROM 25th OCT’10 TO 11 th Nov’10
ITC Ltd
SBI Mutual Fund
Sainath Herbal Care Marketing Pvt Ltd
L&t Capital Company Ltd
Cresta Fund Ltd
The Royal Bank Of Scotland Nv
Macquarie Bank Ltd
Arvind Chemicals Ltd
Albula Investment Fund Ltd
Macqurie Bank Ltd
Sarswati Vincom Ltd
Albula Investment Fund Ltd
Orange Mauritius Investments Ltd
Copthall Mauritius Investment Ltd
Standard Chartered Pvt Equity (Mauritius) Ltd
Rose Burg Inc
Venkateswara Capital Management Ltd
Cresta Fund Ltd
IDBI Trusteeship Services Ltd
South Indian Bank Ltd
Deutsche Bank Ag
Goldman Sachs Investments Mauritius I Ltd
M3 Investment Pvt Ltd
Morisson Traders And Development P Ltd
Credit Suisse First Boston (Singapore) Ltd
Seahorse Mercantile Company Pvt Ltd
Orange Mauritius Investments Ltd
Macquarie Bank Ltd
Volga International Ltd
KBS Trading Pvt Ltd
Nimbus (India) Ltd
Zenith Silk Mills Pvt Ltd
IGFT Pvt Ltd
IFCI Ltd
Client Trade
Buy
Sell
Sell
Buy
Buy
Buy
Buy
Buy
Sell
Sell
Buy
Buy
Sell
Sell
Sell
Buy
Buy
Sell
Sell
Sell
Buy
Sell
Sell
Sell
Buy
Sell
Buy
Buy
Sell
Buy
Sell
Sell
Sell
Sell
Quantity % of Eq
2500000
4150000
445848
237174
1040000
1500000
213000
125000
1641799
100000
65000
1000000
188000
79500
93600
50000
74005
200000
1000000
757000
59251
854618
407500
2000000
2000000
300000
185000
621475
2330000
142864
88556
2366650
2225000
606690
3.44
2.94
2.54
1.95
1.72
1.65
1.56
1.32
2.26
1.27
2.02
3.28
1.60
1.28
1.09
1.26
1.26
1.23
1.10
4.28
1.65
1.31
1.50
1.27
2.34
2.44
2.30
4.10
3.11
1.00
6.98
2.57
1.55
1.55
Price (Rs)
Traded
31.86
110.36
23.50
9.29
37.53
120.90
206.99
109.40
754.00
754.00
16.21
32.11
30.75
16.15
11.82
25.18
310.00
310.00
63.87
169.44
95.35
77.00
77.00
31.30
55.68
130.87
33.00
56.60
111.43
74.31
24.77
155.13
74.24
25.19
Close
32.00
116.00
23.50
9.31
34.45
122.45
211.95
109.40
747.40
747.40
16.20
34.30
33.65
16.75
12.88
25.65
311.35
311.35
63.15
176.65
81.55
76.85
76.85
31.30
59.30
129.15
33.00
56.80
112.80
68.20
24.05
159.30
68.20
24.20
40 Beyond Market
19th Nov ’10 It’s simplified...
COMPANY
Cipla Ltd
Dr Reddy's Laboratories Ltd
Reliance Power Ltd
Sesa Goa Ltd
QTY
14009
428
5526
78801
84755
49916
199992
6000
386
13321
98
642
20447
5998
16350
1172
37448
25000
352548
3560
299
1968
438345
3626
Bharti AXA
Bharti AXA
Canara Robeco
DSP Blackrock
Kotak Mahindra
Motilal Oswal
PRINCIPAL
Quantum
Tata
Axis
AMC
Religare
Canara Robeco
LIC
Motilal Oswal
Religare
Axis
Bharti AXA
Canara Robeco
Motilal Oswal
Quantum
Tata
COMPANY
Kotak Mahindra Bank Ltd
Maruti Suzuki India Ltd
QTY
7200
23000
115000
18000
5386
125001
28000
AMC
Bharti AXA
Mirae Asset
Kotak Mahindra
L&T
Religare
Axis
Kotak Mahindra
Note: Data mentioned here has been extracted on 9th Nov ’10
Source: NB Research
MF Net , FII Net & Nifty
8000
7000
6000
5000
4000
3000
2000
1000
0
-1000
22 oct’10
27 oct’10 1 Nov’10 4 Nov’10 9 Nov’10
6400
6300
6200
6100
6000
5900
5800
MF FII NIFTY (RHS)
22 Oct'10
25 Oct'10
26 Oct'10
27 Oct'10
28 Oct'10
29 Oct'10
01 Nov'10
02 Nov'10
03 Nov'10
04 Nov'10
05 Nov'10
08 Nov'10
09 Nov'10
10 Nov'10
11 Nov'10
Source: NB Research
314.10
95.00
-343.90
-376.20
-80.40
17.50
338.40
17.20
-397.40
1553.80
45.20
-381.70
-390.60
-99.30
-
976.40
1379.00
1138.20
698.70
97.70
-557.80
963.80
5517.60
928.60
1297.20
6066.05
6105.80
6082.00
6012.65
5987.70
6017.70
6117.55
6119.00
6160.50
6281.80
6906.90
-
748.60
6312.45
6273.20
6301.55
687.70
6275.70
107.60
6194.25
*Net activity in Equity an apple a day keeps the doctor away regular investments keep worries away
Your financial health is our concern.
At Nirmal Bang, it’s a relationship beyond broking...
Beyond Market
19th Nov ’10
EQUITIES | DERIVATIVES | COMMODITIES | CURRENCY | MUTUAL FUNDS | IPOs | INSURANCE | PMS | DP
SMS ‘BANG’ to 54646 | e -mail: free@nirmalbang.com | www.nirmalbang.com
It’s simplified...
41

Fund House
AIG Global Investment Group Mutual Fund
Axis Mutual Fund
Benchmark Mutual Fund
Bharti AXA Mutual Fund
Birla Sun Life Mutual Fund
Baroda Pioneer Mutual Fund
Canara Robeco Mutual Fund
DSP BlackRock Mutual Fund
DWS Mutual Fund
Edelweiss Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
BNP Paribas Mutual Fund #
Franklin Templeton Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
ICICI Prudential Mutual Fund
IDBI Mutual Fund
IDFC Mutual Fund
ING Mutual Fund
JM Financial Mutual Fund
JPMorgan Mutual Fund
Kotak Mahindra Mutual Fund
L&T Mutual Fund
LIC Mutual Fund
Mirae Asset Mutual Fund
Morgan Stanley Mutual Fund
PRINCIPAL Mutual Fund
Quantum Mutual Fund
Reliance Mutual Fund
Religare Mutual Fund
Sahara Mutual Fund
SBI Mutual Fund
Shinsei Mutual Fund
Sundaram Mutual Fund^
Tata Mutual Fund
Taurus Mutual Fund
UTI Mutual Fund
Total
Source: NB Research
Corpus* as on
31 Aug '10
(Rs in Cr)
511.60
810.32
64.00
181.00
11612.81
114.98
1103.05
12298.52
415.52
66.97
29.58
6468.00
315.28
13983.08
26844.94
2577.05
15450.20
129.45
4487.94
374.30
1596.77
757.58
4275.54
278.75
1040.06
233.17
2193.99
2656.17
65.46
36678.98
840.96
87.92
18947.68
12.11
10071.43
6646.36
347.15
22937.30
207505.97
Aug '10
Cash
Holding
(Rs in Cr)
66.78
168.18
4.39
4.32
521.54
14.85
144.58
489.45
31.37
10.26
7.01
184.67
3.76
901.96
882.72
106.27
1822.57
1.27
294.44
24.46
53.93
41.59
318.51
14.59
33.67
4.92
50.55
133.67
8.59
1968.09
44.99
7.55
726.15
0.57
641.56
179.00
13.37
891.33
10817.48
Cash
Holding
(%)
13.05
20.75
6.86
2.39
4.49
12.92
13.11
3.98
7.55
15.32
23.70
2.86
1.19
6.45
3.29
4.12
11.80
0.98
6.56
6.53
3.38
5.49
7.45
5.23
3.24
2.11
2.30
5.03
13.12
5.37
5.35
8.59
3.83
4.71
6.37
2.69
3.85
3.89
5.21
Corpus* as on
30 Sept '10
(Rs in Cr)
442.07
838.07
64.82
176.16
11782.43
120.27
1266.70
12613.85
429.82
78.59
29.60
6713.43
314.33
14353.67
28822.42
2566.29
15622.27
150.90
4655.47
389.72
1564.66
757.97
4208.31
293.58
1053.88
218.39
2267.34
2532.56
62.23
37949.78
726.32
102.80
19728.84
10.84
10317.99
6748.13
366.34
24114.54
214455.35
Sept '10
Cash
Holding
(Rs in Cr)
1391.64
77.19
2039.87
1.03
379.85
29.30
54.51
35.30
277.28
7.91
44.42
7.60
40.38
78.56
11.64
2239.02
55.11
2.08
671.90
0.72
338.55
222.93
15.02
949.39
11240.52
42.17
105.92
3.78
9.11
421.49
3.00
183.75
487.80
18.13
15.51
5.01
178.68
1.78
793.22
Cash
Holding
(%)
^earlier known as Sundaram BNP Paribas Mutual Fund, # earlier known as Fortis Mutual Fund, * AUM of the Equity schemes owned by the fund house Note: Cash Position of some of the AMC schemes are not included due to unavailability of data.
3.41
6.62
3.28
3.30
4.10
3.94
5.24
3.48
1.78
3.10
18.70
5.90
7.59
2.02
13.06
0.68
8.16
7.52
3.48
4.66
6.59
2.69
4.21
9.54
12.64
5.83
5.17
3.58
2.49
14.51
3.87
4.22
19.74
16.91
2.66
0.57
5.53
4.83
3.01
42 Beyond Market
19th Nov ’10 It’s simplified...
Scheme Name
NAV
(10th Nov'10)
Absolute %
(Point to Point)
2 Weeks
Movers
Birla Sun Life Commodity Equities Fund - GPM - Ret - Gr
Birla Sun Life Commodity Equities Fund - GMC - Ret - Gr
Mirae Asset Global Commodity Stocks Fund - Gr
ICICI Prudential Banking and Financial Services Fund - Retail - Gr
Religare AGILE Fund - Gr
Laggards
JM Telecom Sector Fund - Gr
Canara Robeco Infrastructure Fund - Gr
Baroda Pioneer PSU Equity Fund - Gr
SBI Arbitrage Opportunities Fund - Gr
Birla Sun Life Enhanced Arbitrage Fund - Gr
Movers
Escorts Income Bond - Gr
Axis Triple Advantage Fund - Gr
Canara Robeco InDiGo Fund - Gr
DWS Twin Advantage Fund - Gr
DSP BlackRock Savings Manager Fund - Aggressive - Gr
Laggard
Tata FIP Fund - Series C2 - Ret - Gr
Tata FIP Fund - Series A1 - Ret - Gr
Escorts Income Plan- Gr
Religare Short Term Plan - Regular - Gr
Sundaram Income Plus- Gr
Movers
Tata Balanced Fund - Gr
Kotak Balance
UTI Balanced Fund - Gr
JM Balanced - Gr
Sundaram Balanced Fund - Gr
Laggards
Canara Robeco Balance - Gr
HDFC Balanced Fund - Gr
Escorts Opportunities Fund - Gr
PRINCIPAL Balanced Fund - Gr
DSP BlackRock Balanced Fund - Gr
Source: NB Research
14.9147
13.8548
13.2410
21.2700
7.5300
8.1537
24.1600
9.8400
13.0915
10.4931
34.4058
10.4938
10.3522
16.4323
19.2636
11.4240
11.1688
30.2460
12.8518
14.7251
88.8822
24.8200
87.3800
25.2330
52.8904
63.6900
57.8150
29.1840
33.7100
71.3170
10.6859
6.1532
5.7335
5.2970
5.1676
-2.3766
0.2490
0.3058
0.5082
0.5346
30.8802
2.5697
1.7185
1.6542
1.4750
-0.0061
-0.0054
0.1331
0.1340
0.1489
3.3829
2.8254
2.4625
2.4200
2.4069
0.8232
1.0946
1.3361
1.3835
1.3947
Disclaimer
The information provided here has been obtained from various sources and is considered to be authentic and reliable. However, Nirmal Bang Securities Private
Limited is not responsible for any error or inaccuracy in the same.
Beyond Market
19th Nov ’10 It’s simplified...
43

44 Beyond Market
19th Nov ’10
D hanendra Kumar, Chairman of the Competition
Commission of India (CCI) assumed his post in February ’09. Established in 2003, this
Commission endeavours to replace the
Monopolies and Restrictive Trade Practices Commission, in due course. This 63-year old IAS officer of the
1968 batch belongs to the Haryana cadre. He has held numerous senior positions in the state government of
Haryana and the central government. Prior to this, Kumar was an Executive Director with the World Bank.
Before joining the IAS, he worked as an assistant professor in physics from 1965 to 1968. Kumar studied Physics
(Electronics) from the Allahabad University and has an excellent academic record. On completion of his IAS, he progressed to the senior posts due to his rich experience in finance and infrastructure development.
He was the Director of Industries with the Haryana government from 1979 to 1983. Kumar was instrumental in the infrastructural development and the emergence of more than a few industrial and technology parks.
Kumar played an important role in visualizing the Manesar Industrial Township and the Udyog Export Promotion Park in Gurgaon and has also received the National
Citizenship Award by Mother Teresa for his outstanding contribution to the development of industrial parks in the state of Haryana.
The finance ministry posted Kumar as the Resident
Director of the India Investment Centre in London where he was responsible for promoting joint ventures, collaboration ventures and investments into India. He moved on to work with the Union Minister of Agriculture and was the Joint Secretary of Agriculture from 1986 to 1988. His responsibilities included policy planning and international co-operation.
Post this, Kumar also served as the Principal Secretary to
It’s simplified...
the Chief Minister. He was the Managing Director of
Haryana State Industrial Development Corporation till
1991 and went on to chair the organization from 1993 to
1996. Kumar was Additional Secretary in the Department of Telecommunication and Secretary, Telecom
Commission from 1998 to 2002 and was an integral part of the telecom policies formulated in 1999.
Subsequently, he was the Chairman and Managing
Director of the Rural Electrification Corporation, Ministry of Power from May to October in 2002. Till the year
2005, he was the Secretary in the Department of Culture in the Ministry of Tourism and Culture. airlines in the domestic passenger segment is nearly 45%.
CCI initiated its probe last year after finding evidence of cartelization. Kingfisher challenged this investigation but the Supreme Court declined it last month.
Another case in point is Anil Ambani’s Reliance Big
Entertainment (RBEL) v/s Karnataka Film Chamber of
Commerce (KFCC). Reliance Big approached the CCI with the complaint that KFCC was directing its members to boycott the distribution of films by the media company. This is when CCI intervened and restrained
KFCC from abusing its control on the supply of prints of the specified films.
In November ’05, Kumar was appointed the Executive
Director of Bangladesh, Bhutan, India and Sri Lanka at the World Bank. He was representing the four countries’ development projects in power, water and gas sectors, construction of roads and highways and installation of underground rails.
Kumar said, “As a regulator, we want to promote competition in the market through best practices, which would benefit companies and the consumer.”
IN SUPPORT OF MERGER CONTROL BY CCI
THE CCI JOURNEY TILL NOW
The MRTP Commission, which is a quasi judicial body that oversees the monopolistic, restrictive and unfair trade practices by companies, has limited powers and will come to a close in two years time.
Mergers and acquisitions of companies are dealt with in sections 5 and 6 of the Competition Act. These sections are yet to be ratified by the government even after a year of CCI operations. Under the Act, any M&A that results in a combined turnover above a certain threshold will have to be cleared by the CCI.
The Parliament passed the Competition Act in 2002 and amended it in 2007. But the Competition Commission was fully operational only from April ’09. This Act empowers the Commission with extensive power to implement efficiency and competition among the myriad industries in the country. The scope of the Commission’s jurisdiction extends to the entire economy in sectors such as banking, capital markets, insurance, telecommunications, roads and ports that already have sector-specific regulatory agencies.
Kumar said that the CCI has presented the final draft regulations, the set of rules around which the agency will function, to its parent ministry. These have been revised since the Act was passed in the Parliament. He also said that the proposed notifications will be industry-friendly and will also facilitate cross-border mergers and acquisitions. The sections 5 and 6 will provide the industry with a good forum for litigation, he added.
IMPORTANCE OF COMPETITION IN BRIC
COUNTRIES AND BEYOND
“The Competition Act prohibits anti-competitive agreements and abuse of their dominant position by enterprises to ensure that there is no adverse effect of competition in India,” says Kumar, the CCI Chairman.
CCI can impose a penalty on companies it finds guilty of being part of a cartel or abusing their position. Such fines can be up to 10% of the average (three-year) turnover of the firm or companies involved.
At the BRIC International Competition Conference held last year, Kumar emphasized on the need for current competition regulations to incorporate the existing social, economic and political characteristics of a country. He highlighted the need for governments to formulate competition policies to strengthen its commitment to promoting competition at every level and in all the sectors in the economy.
One of the investigations by the Competition Commission is the strategic tie-up of Kingfisher Airlines with Jet
Airways for fuel management, ground-handling and cross-selling of flight tickets to select destinations.
Kumar further said that to sustain the spotlight of the
BRIC platform on matters related to the developing and the least developed nations, it is essential that Brazil,
Russia, India and China join forces to initiate other member nations to chart judicial competition regulations.
Kumar said, “CCI would first watch various moves, get the relevant data and will take action, if required after analyzing them.” The current combined share of both the
Dhanendra Kumar’s interests include appreciation of art, culture and musi C.
Beyond Market
19th Nov ’10 It’s simplified...
45

I n Japan, people hardly use candles except for their aromatic purposes. However, when it comes to trading based on charting techniques and analysis, the Japanese rule the roost through one of the oldest yet sophisticated candlestick charting signals.
Constructing The Candlesticks
High
Open
The candlestick technique is based on the visual recognition of patterns called ‘candlesticks’, a special method of visualizing the behaviour of asset prices. It is a study in which investors are able to anticipate realities of the future by sorting through various candlestick shapes and patterns that have formed.
Close
Low
Candlestick charting technique has become very popular among traders on its ability to reflect short-term outlook.
Based on centuries of evolution, candlestick charts are unmatched in their capacity to assist a trader to confirm market tops or bottoms when they form and in also providing incredible insight into market psychology.
Moreover, candlestick charts are not only useful as standalone tools, but they can also be fused with any western technical tool. If oscillators are used in addition to candlesticks, the analysis becomes more robust. This highly improved trading technique can aid a trader in precisely identifying reversal signals.
Let us see how candlestick charts look and what kind of indicative human behavior these patterns reflect and what kind of trading signals they provide.
Ex 1.1. Black Candlestick
High
Open
Close
Low
Ex 1.2. White Candlestick
Drawing a candlestick requires the Open, Close, High and Low point for a given time period as depicted in Ex
1.1 and 1.2. The thick part of the candle stick is called the real body, representing the range between the period’s opening and closing levels. The thin parts above and below the real body are shadows or wicks. These shadows represent the session’s price extremes.
Further, a long black-coloured or filled-in real body
(Refer Ex 1.1) is considered a bearish sign that represents a close, which is lower than the opening for the given period. Japanese chartists consider the real body as the essential price movement, while shadows are more of an outcome of extreme price fluctuations during the period under consideration.
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47

The Power Of Doji
High
Doji
Close
Open
If the star is a doji instead of a small real body, it is called a doji star. A small real body near the lower end of the trading range, with a long upper shadow is termed as a shooting star (Ex 1.4). Emergence of a star after a long white candlestick in an uptrend signifies a shift of control from the buyers to a deadlock between the buying and selling forces. The upward energy has thus dissipated.
The Morning And Evening Star –
Confirmation Of Trend Reversal
48
Low
Ex 1.3. Doji
The term doji refers to a candlestick in which the opening and closing prices are the same (or very close to each other) for the given period. The basic interpretation is that the bulls and the bears are having a tug-of-war at a particular price point in search of a directional move.
Moreover, a doji could also trigger a trend reversal if subsequent candlesticks confirm the doji’s reversal potential. Doji is valued for its ability to call market tops.
Doji at a market top could be a warning for the bulls to cover longs and remain neutral only to further initiate shorts once the bearish confirmation is received.
Theoretically, a doji could signal trend reversal in either directions of the market. But, based on experience, doji may not prove as potent a reversal signal in downtrends as it is in calling tops – the reasoning is that with investors being jittery during a downtrend, the market could fall further due to its own weight.
The Stars – The Decisive Moment
Ex 1.5. Morning Star Ex 1.6. Evening Star
The morning star, which comprises of 3 candlestick lines, is a bottom reversal pattern (Refer Ex 1.5). The first line is a tall, black real body developed as a last leg of sell-off during the downtrend. The second body gaps down from the first (the shadow may still overlap) candlestick representing emergence of a basic star pattern, up to here. For the last candlestick after the star pattern, the market has a strong white real body to complete the morning star pattern.
Wait for confirmation by a close below this line
The third session is a white real body that moves well within the first session’s black real body. The formation of the star pattern on prior two candlesticks of the morning star pattern indicates a diminution of selling power for the bears that drives the markets lower. On the last day, a strong white candlestick emerges as confirmation of the trend reversal. Thus, this pattern signifies that bulls have completely seized control of the trend.
Ex 1.4. Shooting Star
A group of fascinating reversal patterns is one which includes stars. A candlestick that gaps away from the previous candlestick is said to be in a star position.
The evening star pattern is the bearish counterpart of the morning star pattern (Refer Ex 1.6). The only difference being that the evening star is a top reversal signal that signifies failure for bulls to push the markets higher. The star formation on prior two days of this 3 line-pattern is a first hint of the top. As a final coup, the bears pull the trigger on the third day with a long bearish candlestick moving sharply into the first line’s real body.
Usually, it is a small real body that gaps away from the large real body preceding it. The real body of the star should not overlap the prior session’s real body. The color is not too important.
Technicians watch for price clues that can alert them to a shift in market psychology and trend. The engulfing pattern is one such multiple candlestick line pattern,
Beyond Market
19th Nov ’10 It’s simplified...
The Bullish And Bearish Engulfing Pattern
– New Trend Established
The term ‘trend reversal’ need not mean that the old trend will end abruptly and then reverse to a new trend. Trend reversals usually occur slowly, keeping pace with shifting gears of the underlying psychology. It could mean that a prior trend is likely to change, but not necessarily reverse. Simply speaking, it could just be a warning of ‘rainy days’ ahead, and not instant rains at the very next moment.
Ex 1.7. Bullish Engulfing Pattern Ex 1.8. Bearish Engulfing Pattern
The next reversal pattern is the dark-cloud cover (Refer
Ex 1.9) which is a two-day bearish pattern found at the end of an upturn or at the top of a congested band. Essentially, the large black candlestick on the second day of this pattern has to open above the prior session’s upper shadow but close near the low of the day and well within the prior candlestick’s white real body. The greater the degree of penetration into the white body, the more effective is the trend reversal signal at the top.
which hints at top reversal trends in the market. The bullish engulfing pattern is formed at the end of a downtrend. Ex 1.7 depicts a bullish engulfing pattern that shows as to how a white bullish real body wraps around or engulfs the prior period’s black real body.
The successful execution of a bullish engulfing pattern requires the market to be in a clearly definable downtrend. The real body of the second day must engulf the prior real body. The colour of the second day real body should be opposite to that of the one recorded on the first day. The shorter the real body on the first day and longer the one on the second day, more the likelihood of the ensuing confirmation of the trend reversal.
The bearish engulfing pattern, which is exactly opposite to the bullish pattern, is created at the end of an up-trending market. Ex 1.8 shows how the black real body completely engulfs the previous day’s white real body. This indicates that bears are now over-whelming the bulls.
The Dark-Cloud Cover And Piercing Pattern
– Moving Out Of The Congestion Band
In dark cloud cover pattern, a series of ascending candles is ultimately capped by a final strong white candle providing healthy technical signs. The bullishness continues over the next candle line with a gap-up opening but ends with a bearish close at least halfway into the previous white capping candle.
The dark-cloud cover and piercing patterns are like bookends. A piercing candle intimates that a downtrend may be about to reverse and shorts should be covered. In the classic piercing pattern, the next session’s candle gaps below the lower shadow of the prior session (Refer
Ex 1.10). However, the white candlestick ends up more than halfway into the prior black candle sending bullish signals to the bulls waiting on the sidelines to launch a coup.
The Hammer And Hanging Man
– A Warning For Trend Reversal
Ex 1.9. Dark-Cloud Cover
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19th Nov ’10
Ex 1.10. Piercing Pattern
Ex 1.11. Hammer And Hanging Man
The last few chart patterns discussed here comprise of either 2 or 3 candlestick lines. Thus, these patterns provide a strong confirmation for trend reversal within
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itself. Now, we would have a look at a pair of single candlestick reversal pattern made up of a small real body, one long shadow and one short or non-existent shadow.
Ideally, the long shadow should be twice the height of the real body for these patterns.
Basically, the candlestick formation for hammer and hanging man patterns look exactly alike (Refer Ex 1.11).
The only classifying factor being the location of the long shadow and the preceding price action. While hammer forms after a decline and is a bullish reversal pattern, hanging man signifies a bearish reversal pattern that can also mark a top or resistance level.
The emergence of a hammer on the charts provides a hint that the market is trying to gauge the depth of water by feeling its bottom. However, the colour of the real body in either the hammer or the hanging man pattern is not
On the hanging man day, the market opens at or near the highs. But later, the market starts to sell-off from the phase of extreme exuberance and becomes vulnerable to a fast break.
However, it is especially important to wait for bearish confirmation with the hanging man. If the market opens lower the next day, those who bought on the open or close of the hanging man day are now left ‘hanging’ with a losing position.
The above list of chart patterns are strong reversal signals. There are few more candlestick patterns which are indicative of reversal patterns such as the Harami pattern, the Belt-hold lines, the Counterattack lines and
Three Mountains and Three Rivers among others.
However, these patterns do not provide strong reversal signals and need to be confirmed in collaboration with other technical indicator S.
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Beyond Market
19th Nov ’10 It’s simplified...
Beyond Market
19th Nov ’10
B elieve it or not, the human psyche plays a very important role in the life of a stock market player. We often teach our kids that it is better to fail than to pass by cheating and copying in an exam. However, when it comes to our own life we tend to forget this important lesson.
Very often we congratulate ourselves on our success although it has been achieved through wrongful means and punish ourselves for the failures we endure by doing the right thing. We are so consumed by the notion of success that the path to reach success then becomes inconsequential.
A trader in the stock market faces such situations almost on a daily basis and the effect that such incidents have on him/her is the basis of this article, namely Random
Reinforcement.
Consider this. A trader, Mr A, a novice, enters the markets without any homework, research, tested methodology or pre-plan. Anybody who has been in the markets for long knows that this is surely a recipe for disaster. But to everybody’s surprise, he reaps huge profits in his very first trade. This makes him courageous and he re-enters the markets. He again hits the jackpot.
In fact, he has almost five to six profitable trades in a row. A string of successes at the bourses makes Mr A believe that he has a real knack for trading and that he need not put in any extra effort. Relying only on his gut feeling is enough to give him huge profits, he feels.
Conversely, Mr B, an experienced trader, has been in the market for quite some time and knows the importance of having a time-tested plan and a trading strategy. Unfortunately, he is on a losing streak despite following his time-tested strategies. He, therefore, begins doubting his
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52 methods and loses his self-confidence. Although he knows that he is right in doing what he believes in, the constant failures lead him to doubt himself and give up his methods and switch to newer, untested and inexperienced techniques. long and fulfilling career in the stock markets.
PROBABILITY & RANDOM REINFORCEMENT
Random Reinforcement is said to have occurred when a trader ascribes or credits a random outcome to either his/her own skill or lack of skill whichever may be applicable. For example, in the given case, the random event of profit or loss is viewed as being achieved owing to their own skills (Mr A) or their lack of skills (Mr B), which is far from the truth.
All you cricket fans should relate to the example cited below. Say, the national cricket team has won the toss in all the last nine matches it has played. Every time the captain had called out ‘tails’ and every time it has been
‘tails.’ All of us start thinking that the team has far exceeded their run and the chance of winning the 10th toss is next to impossible. But to everyone’s surprise, the captain calls out ‘tails’ and once again wins the toss.
Random Reinforcement is ‘having behaviours reinforced with positive and negative results on an inconsistent basis.’ Basically, you are rewarded one day for doing a particular thing and punished the next day for doing the same thing, so on and so forth in a haphazard and random manner. This makes it extremely difficult for a trader to figure out what is right and what is wrong.
How did this happen? This is because every new toss has a 50% chance of turning up ‘heads’ and a 50% chance of turning up ‘tails’. Now that there have been 10 straight
‘tails,’ does that mean the probability of the 11th one has changed. No. The probability of the 11th one being tails is still 50%.
Random Reinforcement is the market’s tendency to reward bad behaviour and punish good habits from time to time. It is these occasional rewards on which the stock markets thrive. By rewarding traders intermittently, the markets create a sense of hope in the minds of traders who keep returning despite innumerable losses in the hope of having profitable trades.
The same principle applies to stocks. If a stock has gone up 5 days in a row, we feel that it has run its course and the chance of a 6th day up is very remote and we go short on that stock. While the fact remains that on the 6th day, the probability of the stock going up in a random market is still 50%. Similarly, if a particular stock has had 5 down days, we go ahead and buy it, without understanding that the chance of the stock going down on the 6th day is still 50%.
This can be compared to a slot machine where you keep returning to it hoping to hear the sweet jingle of a few coins, which you may have won previously, but often, you forget about the thousands of coins that the machine has gobbled over the years.
Random Reinforcement is a dangerous thing for any stock market player because people forget the fact that there can be a series of profitable trades even though their strategy may be faulty, thanks to the power of randomness. Similarly, there can also be a series of losses even with a perfectly established and time-tested strategy, all because of randomness.
Just because you were successful with a flawed theory, does not mean that your strategy is a winning one. In the same way, just because your established theory has resulted in failures does not automatically imply that the strategy is flawed. Thus, Random Reinforcement can create a sense of overconfidence or loss of confidence in the minds of the market player, both of which can be extremely dangerous.
Remember this and random reinforcement will not cast its ugly spell on you. One must understand that every trade is a fresh one and it comes with its own 50:50 probability of being profitable or loss-making. To be a successful trader, you should approach every new trade with an unbiased mind.
EFFECT ON TRADER PSYCHE
It is said that for a marriage to be successful, there needs to be a much greater percentage of positive reinforcements in the form of love and respect and lesser percentage of negative reinforcements such as nagging, fighting, etc. If it is the other way round, then the marriage can be in danger.
It is no different for a trader. If randomness causes more loss-making trades than profitable ones, traders can be extremely demoralized. The fact that they are not in control, makes them try various chaotic things such as excessive trading, complete withdrawal, trading without stop-losses, obsessive-compulsive trading, trading without a plan and trading based on gut feeling.
Also, remember that even the most successful strategy is not always profitable and fine tuning and reassessing the strategy from time to time is of utmost importance for a
All this can lead to a vicious cycle of frustration, anger, panic or depression, ultimately leading to huge losses
Beyond Market
19th Nov ’10 It’s simplified...
due to which the trader quits the markets altogether or goes completely bankrupt. develop your trading plan, practice your trading plan and keep refining it till randomness has minimal effect on it.
HOW TO PROTECT ONESELF FROM THE
HARMFUL EFFECTS OF RANDOM REIN-
FORCEMENT
1. Differentiate
First and foremost, as a trader, one must learn to find out whether his profit or loss is based on his skills or whether it is a random event. This can be achieved by doing a sample study of the previous trades. However, don’t base your study on a few occasional trades. For example, if you have traded just five times in a span of six months and have had all profitable trades, then your success rate is 100%. But that is not a true indicator of your skill. You should base your study on numerous trades that are spread over a number of years, so as to delineate better between skill and sheer randomness.
4. Detachment
Random reinforcement is nothing but emotions playing tricks with your mind. If you can remove emotions from the equation, your trading will be much more disciplined, relaxing and successful. Learn to digest your losses and not get too carried away by the profits you earn.
5. Remember The Past
Always keep reminding yourself of the times when sticking to your plan gave you success and when not sticking to your plan resulted in losses. This will help you stay in perspective and not let your judgement be clouded by short-term fallacies.
2. Change your perspective
Even if you have made a loss but stuck to your plan, view it as success and praise yourself. But if you have made a profit without sticking to a plan, you have to view it as failure and reprimand yourself. This will make you a more disciplined and a successful trader in the long run.
6. Be Dynamic
The markets are constantly changing and hence no trading method, however effective, can remain success ful indefinitely. One has to keep on reassessing and fine-tuning his methodology according to the changes in the market. Just as the true nature of randomness is change, similarly your trading method should also keep on evolving.
3. Training
Always remain a student. Never think that you are an expert and you know everything there is to know about the markets. Always be open to learning newer things,
Remember, even mutual funds as well as investment schemes come with a disclaimer: “Past performances may or may not be sustained in the future,” acknowledging the true power of randomness. Who, then, are we to stand in defianc E?
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Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing.
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Beyond Market
19th Nov ’10 It’s simplified...
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54
H
Beyond Market
19th Nov ’10 It’s simplified...
T he United States President Barack Obama’s three-day India visit seemed like a well-scripted event, striking a perfect balance in the interest of both nations. An orator par excellence,
Obama introduced a new mantra that was music to Indian ears. “India is not simply emerging, India has already emerged,” the President stated, emphasizing that the
India - US ties is one of the defining partnerships of the
21st century. they occupy a rotating non-permanent ‘Asian’ seat on the
Security Council. While Obama’s endorsement may seem a gift, it may be reduced to just a feel-good statement, as a permanent seat for India on the Security
Council is bound to be a difficult as well as a timeconsuming process.
Power speeches notwithstanding, it was easy for Indians to recognize that President Obama’s prime concern was to see how US business interests could be promoted in the
Indian market.
The other significant development was Obama’s promise to equate India to the level of an ally - without being one
- by offering to remove restrictions on transfer of its advanced military technology, especially those connected with space and missile development. This opens the door for the US to emerge as India’s top major arms supplier.
This, in turn, can have a positive impact on the pace and direction of modernization of Indian armed forces.
The Indian economy, with a growth potential of around
9% annually, gives Delhi the leverage to build a diversified foreign policy. With a middle-class population of over 300 million, India is an enormous potential market for US exports and private sector investments.
US exports to India have exploded to $17 billion over the past seven years and further expansion is attainable in the short-term. In his visit, Obama neatly added up that the business deals concluded during the visit would create close to 75,000 new jobs in the US.
The Indian order for C-17 military transport aircraft from the US was worth $10 billion and would create 22,000 jobs alone. Obama’s strengthening of Indo-US bi-lateral trade relations seems particularly significant at a time when his party suffered a historic defeat in the US mid-term elections, not so long ago, that threatens to make his presidency ineffective.
Alongside comes the US decision to support India’s membership in the four multilateral export control regimes for high technology - Nuclear Suppliers’ Group,
Missile Technology Control Regime, Australia Group and Wassenaar Arrangement – “in a phased manner” with
Washington encouraging the “evolution of regime membership criteria” for India’s admission.
In essence, it accords India a parallel status, equivalent to the five nuclear weapon states. However, Indian authorities in Delhi will weigh how promises translate into actions without strings attached.
Obama’s visit to India formed a part of his Asian tour underlining that the United States is determined to “once again playing a leadership role in Asia”, as the US president put it.
From the Indian perspective, the highlight of Obama’s visit was the endorsement of India’s claim to permanent membership of the United Nations Security Council. The
US backing of India’s bid to join the select UN club, does give a shot in the arm to Delhi’s campaign on the issue.
However, the Indian establishment feels that it will take a while before India sits permanently at the high table.
He told the Indian leadership: “Like your neighbours in southeast Asia, we want India to not only ‘look East’, we want India to ‘engage East’ - because it will increase the security and prosperity of all our nations.” Obama seemed to imply India is not forthcoming enough in US strategies in the Asia-Pacific region.
Despite the fact that there is awareness in the world community that the Security Council needs to change, it is a long haul to propel this consensus towards practical action. It is not in the interest of the current permanent five members to dilute the exclusivity of their club, nor is there a consensus on what a reformed UN system ought to be.
Obama’s gentle reminder to the Indian authorities was quite poignant. “With increased power comes increased responsibility,” Obama said. Washington will closely monitor how Indian diplomats behave during the two-year probation period starting from January, when
India is a thriving example of a pluralistic democracy, a nation where people of many ethnic groups and religions live in relative peace under a secular government. It should expect, therefore, to be the focus of American attention in the region.
And it would be in America’s interest to bolster India and the relationship, as an answer to China’s power and also as a counter-example to China’s theory that a thriving economy can be built under a totalitarian government.
But, it was all too clear that USA’s principal engagement in Asia continues to be China. The US hopes to use India as a hedge against China. The big question is: are there takers in Delhi for such a role? Only time will tel L.
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19th Nov ’10 It’s simplified...
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Exchange Partner
56
Beyond Market
19th Nov ’10 It’s simplified...
N irmal Bang, one of the leading broking houses in India, in association with Zee Business, organized the first-of-its-kind commodity camp called Beyond Mandi at Hotel Hindustan International in Kolkata on 30th October this year.
Beyond Mandi is an initiative in investor education by Nirmal Bang to bridge the gap between experts and investors. The main aim of the commodity camp is to educate the investors by inviting industry experts to give sharp insights and wider perspectives, eventually enabling them to take informed decisions.
The camp was inaugurated by BC Khatua, Chairman, Forward Markets Commission (FMC), who also delivered the key note address. Anjani Sinha, MD & CEO of National Spot Exchange Ltd
(NSEL) and Kunal Shah, Head of Commodity Research at Nirmal Bang shared their views later on.
Amish Devgan, Commodity Editor and Anchor at Zee Business, and also the compere for the event gave an overview of the current commodity market scenario, ways to trade, how people can take advantage of this situation and make profits. He also spoke about the commodity exchanges and how they have improved the lives of the people involved, either directly or indirectly.
Amish Devgan
Zee Business
BC Khatua
Chairman,
Forward Markets Commission
Bishnu Charan Khatua, IAS is the Chairman of the
Forward Markets Commission. During his tenure, he permitted three new national-level bourses to start operations in addition to the three existing ones. Besides, the sub-broker system was abolished to protect investors and various other measures to regulate the markets were introduced by him.
Beyond Market
19th Nov ’10
The first speaker to address the gathering was BC Khatua, Chairman of the Forward Markets Commission (FMC). While delivering the key note address, Khatua told the audience, “Investors and traders should take advantage of the developments in the commodity markets and the opportunities arising out of them. The commodity market is both easy and difficult at the same time.”
He said people are generally happy when the markets soar but sad when it plummets. On the contrary, you will come across a huge number of people who are happy to see the fall in the commodity markets and sad when it rises due to the different roles they play. Hence, it is important to maintain the right price in the commodity markets.
Physical and future markets are two sides of the same coin. Price discovery is equally important. It is necessary to prevent market manipulation.
This is where the Forward Markets Commission comes into the picture.
Its role is to not allow anyone to take undue advantage. He also spoke about the problems affecting the agricultural sector. He said competition is the best remedy for inefficiency and overpricing. The commodity markets are affected by domestic as well as international events.
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Anjani Sinha
NSEL
Anjani Sinha is the MD & CEO of National
Spot Exchange Ltd (NSEL). He has over two decades of experience and deep knowledge of commodity derivatives and spot markets. His previous stint was with the Ahmedabad Stock
Exchange. Prior to that, he was associated with the Bombay Commodity Exchange Ltd,
Interconnected Stock Exchange of India Ltd
(ISEI) and Magadh Stock Exchange.
Anjani Sinha, MD & CEO of NSEL, followed
Khatua on the dias. He spoke about the development of the spot exchange in India. The spot exchange offers individuals a platform to invest their savings and earn returns. “NSEL has created a number of new instruments and is planning to create around 20 more instruments in the next one year. He urged people to take advantage of the spot market and make investments, adding that since the scope of the commodity markets have increased, they should diversify their portfolio by including commodities.
Kunal Shah
Nirmal Bang Securities Pvt Ltd
Kunal Shah serves as the Head of Commodity
Research at Nirmal Bang Securities Pvt Ltd.
He closely tracks precious metals, base metals, energy and agricultural commodities. He addresses seminars on the outlook of commodities across the country. He appears regularly on business channels. His views are sought by the print media and wire services on a regular basis. Prior to Nirmal Bang, he was associated with Motilal Oswal Commodities
Pvt Ltd, where he managed the research desk.
The final speaker of the event, Kunal Shah, spoke about trading and investing in the commodities market. He explained the importance of commodities as an asset class and said people can expect a run up in the commodity markets for a while.
He also mentioned about the upmove in commodity prices due to movement in currencies and liquidity. Central banks around the world are working with a similar view. He also dwelt on the possible scenario following the announcement of further stimulus package by the US. He expects a correction in risky asset classes due to the stimulus package.
“Money can buy food but not an appetite,” he said.
According to him, a correction of 5% to 10% in crude oil and base metals is likely. But he does not see any correction in natural gas prices. He feels that the upside in gold and silver is likely to continue. Although a small correction is likely, the upside will continue.
By the first quarter of 2011, gold may touch $1,400 and ` 20,500 on the MCX, while silver could reach ` 38,500. As far as base metals are concerned, he expects a downside of around 5% in copper. Nickel is likely to be around the ` 1,040-1,050 level and should be shorted with a stop loss of ` 1,075 and a target of ` 995. The outlook for edible oil is strong. He feels the level of ` 520-525 is good to enter into a long position with a target of
` 560 for soy oil. He is also bullish on black pepper and sees it touching the level of
` 22,500-24,000 in the next one or two months.
After Shah shared his views, compere Amish Devgan initiated a discussion among the panelists. This was followed by an actively participated question and answer session. The camp was well received by the audience as was evident from the huge turnout.
Beyond Mandi will travel to Delhi in the month of November. Be there to watch the action livE.
58 Beyond Market
19th Nov ’10 It’s simplified...

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