Monthly Report April 2011 Highlights Indian Equity Markets Rally

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Monthly Report
April 2011
Monthly Report April 2011 Retail Research

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Table of Contents
Title Slide No.
Monthly Equity Commentary 03
− Market Statistics 05
− Bond yields, commodities and currencies 09
− Comparison of Equity Returns in various emerging
markets 15
− Outlook Going Forward 20
Technical Commentary 29
Learning Technical Analysis 34
Derivatives Commentary 37
Learning Derivatives 39
Extract of Calls during March 2011 43
FII & Mutual Fund Flow & Indices moves during March 2011 44
Gainers & Losers – March 2011 45
Disclosure 46

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Monthly Equity Commentary

BSE SENSITIV-Dly .25/02/11-04/04/11 I-1 TREND
Price
M 04/04/11
19600
O 19474
19400 H 19730
L 19449
19200 C 19702
19000 V 1630541
V 321245
18800
18600
18400
18200
18000
17800
17600
11 M A
After two months of correction, the Indian markets bounced back smartly in March 2011 to end the month with
robust gains. The BSE Sensex & Nifty surged 9.1% & 9.4% respectively in the month. The markets started off the
month on a positive note on the back of positive announcements from the Union Budget, expansion in the
manufacturing sector and in line GDP growth in Q3FY11, but witnessed correction in the middle of the month,
on the back of tension in Middle East and North Africa region and a major earthquake in Japan. However, the
indices bounced back smartly in the fourth & fifth week on the back of positive comments from Warren Buffet
on the Indian economy, easing food inflation & the decline in India’s trade deficit during April-Feb 2011.
Market friendly measures announced by Finance Minister Pranab Mukherjee in the Union Budget 2011-12
presented on Feb 28 2011 pushed the markets higher in the first week ending March 04. The BSE Sensex & Nifty
ended higher by 4.4% each for the week. The FM announced a cut in surcharge on corporate tax on domestic
firms to 5% from 7.5% and projected a lower fiscal deficit target of 4.6% for FY12. Further, he refrained from
raising excise duty. Some other favourable announcements made in the budget included a lower-than-expected
net borrowing programme, a thrust on infrastructure and agricultural sectors, permission for foreign
investors to invest in mutual fund schemes and plan to move towards direct transfer of cash subsidy to
people living below poverty line. Among the other news, India’s GDP grew by 8.2% in Q3FY11, up from 7.2% in
corresponding quarter in previous fiscal aided by strong growth in agriculture, mining and financial services.
Also, the manufacturing sector expanded at its fastest clip in three months in Feb 2011. Further, the output of
six key industries expanded by 7.1% in Jan 2011, faster than a downwardly revised growth of 6.1% in Dec
2010, while the exports in Jan rose 32.4% Y-o-Y to $20.6 bn. Even the auto sales were better than expected in
Feb 2011. All these improved the sentiments further on the domestic bourses.

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Monthly Equity Commentary contd…

The market edged lower for the second week ended March 11, 2011 as tension in Middle East and North Africa
region and a major earthquake in Japan on Friday March 11, sapped risk appetite. Political worries early in
the week, which abated later, triggered volatility. With the ongoing violence in Libya keeping crude-oil prices
above $100 a barrel, market participants feared that the government might soon have to let fuel prices from
state-owned energy firms rise. The BSE Sensex & Nifty corrected 1.7% each in the week. The market ignored a
series of positive news flow during the week like better than expected IIP numbers for the month of Jan (up
3.7% Y-o-Y), easing of food inflation (to 9.52%) for the week ended Feb 26, growth in the net direct tax
collections during April 2010-Feb 2011 (up 20.75%) and 49.8% Y-o-Y rise in the exports in the month of Feb
2011 (on the back of increased demand from markets like North America & Africa).
The market continued to fall in the third week ending March 18 on concerns over developments in Japan and
its impact on the global recovery. The RBI raised key interest rates repo & reverse repo by 25 bps each at a
mid-quarter policy review and said that it would continue with its anti-inflationary stance. The central bank also
warned that continuing uncertainty about energy and commodity prices may vitiate the investment climate,
posing a threat to the current economic growth trajectory. This put the pressure on the market. Political
uncertainty in India also weighed on the market following fresh allegations of government corruption.
(Wikileaks cable suggested the Congress party bought votes in parliament in 2008 to secure a civilian nuclear deal
between India and the US). Some of the positive events, which were ignored by the investors during the week
were the easing of food inflation & robust increase (24%) in the advance tax collection. The BSE Sensex &
Nifty ended lower by 1.6% & 1.3% respectively in the week.
The indices rallied smartly in the fourth week ending March 25. The stocks rose in four out of five trading
sessions in the week with bullish comments on India from billionaire legendary investor Warren Buffett and
on hopes for economic reforms, aiding the rally. The Sensex & Nifty surged 5.2% each in the week. Mr. Buffet
said that his firm Berkshire Hathaway is looking to park funds in large investment destinations and India fits
the bill perfectly. During the week the government also tabled some key reforms bills in parliament. The
Finance Minister made some crucial changes including, reducing dividend distribution tax (DDT) threshold for
foreign companies to 26%, withdrawal of 5% service tax on air-conditioned hospitals with more than 25 beds
and on diagnostic services, increasing the abatement from 40% to 55% in case of 10% excise duty levied on
branded apparel and reducing the import duty on raw silk from 30% to 5% to push imports. Further, during
the week, Dr Manmohan Singh reiterated that none from the Congress Party or the Government had bribed
anyone to win the trust vote in 2008.

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The rally continued in the last four trading sessions of the month, as the Sensex & Nifty gained 3.3% & 3.2%
respectively, thus ending the month on a positive note. Hopes on easing of tension between India and Pakistan
aided gains after Pakistan agreed to allow an official team from India to travel to Pakistan to probe the 2008
Mumbai terrorist attacks. Further, the government eased rules on foreign investments during the week,
stating that the foreign companies operating in India won't need prior approval from their existing joint-
venture partners to operate separately in same business segments. Reports added that this measure will
promote the competitiveness of India as an investment destination & it will be instrumental in attracting
higher levels of FDI and technology inflows into the country. Moreover, India’s trade deficit during April-Feb
2010-11 declined to $97.06 bn from $100.24 bn in the same period previous fiscal. Also the food inflation
eased back to single digits, aided mainly by a dip in items such as vegetables and cereals. Food inflation, based
on the annual WPI, rose 9.5% in the week ended March 19, lower than the previous week's annual increase of
10.05%. All these events lifted the sentiments on the domestic bourses.
Given below is an overview of global markets’ performance during March 2011
Indic es Feb-11 Mar-11 % Change
US - Dow Jones 12226.3 12319.7 0.8
US - Nasdaq 2782.3 2781.1 0.0
UK - FTSE 5994 5908.8 -1.4
Japan - Nikkei 10624.1 9755.1 -8.2
Germany - DAX 7272.3 7041.3 -3.2
Brazil - Bovespa 67383.2 68587 1.8
Singapore - Strait Times 3010.5 3105.9 3.2
Hong Kong – Hang Seng 23338 23527.5 0.8
India - Sensex 17823.4 19445.2 9.1
India - Nifty 5333.3 5833.8 9.4
Indonesia - Jakarta Composite 3470.4 3678.7 6.0
Chinese - Shanghai composite 2905.1 2928.1 0.8
The world markets ended the month of March 2011 on a mixed note with India, Indonesia & Singapore being
the top three gainers, which rose 9.1% (Sensex), 6% & 3.2% respectively. However, Japan, Germany & UK
underperformed, falling by 8.2%, 3.2% & 1.4% respectively. The Japanese market fell sharply during the
month on the back of a massive earthquake, tsunami over there, killing thousands of people.

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Average daily volumes on BSE during the month of March 2011 fell by 7.5% M-o-M as markets witnessed volatility
(NSE daily average volumes were lower by 12.2% - M-o-M). The average daily derivatives volumes on NSE fell by
10.7% to Rs. 1,30,814 cr in March (In Feb 2011: Rs. 1,46,465 cr). Mutual funds were net buyers for fourth
consecutive month to the tune of Rs. 28 cr during the month of March 2011 after being net buyers of Rs.
1,426 cr in Feb 2011. FIIs were reported as net buyers to the tune of Rs. 6,731 cr in cash markets in March
2011 (Data available till March 30) after being net sellers of Rs. 5313 cr in Feb 2011 (excl. data for Feb 15). FIIs
were net buyers in 14 out of 21 trading sessions in the month (till March 30). In CY11, FIIs have sold stocks
worth Rs. 5066 cr (net).
All the sectoral indices ended the month of March with robust gains. Realty, Auto, Banks & Consumer Durables
were the top four gainers, which rose by 17.9%, 12.6%, 12.3% & 10.8% respectively. The other indices like
Oil & Gas, IT, PSU, Capital Goods, Healthcare, Metals & FMCG reported single digit gains in the range of 4-9%,
with FMCG gaining the least by 4.8%.
Realty index, which was the biggest loser amongst all the indices in Jan & Feb, stood as a top performer during
March 2011. The index performed well right from the start of the month on interest rate subvention scheme
being continued and enhanced (in terms of values). The government provided 1% interest subvention on
home loans up to Rs. 15 lacs in the Union Budget. The stocks also rose on anticipation of a reduction in crude
prices following the earthquake & tsunami in Japan, which could ease the liquidity situation in the country.
The index gainers were mainly led by major realty players like DLF, India Bulls Real Estate, Unitech, Sobha
Developers & HDIL, which rose sharply by 26%, 19.7%, 19.3%, 17.8% & 11.2% respectively. These companies
have 79.8% weightage in the Realty index. Unitech surged during the month after, JP Morgan upgraded the
stock to "overweight" from "neutral" citing cheap valuations, reasonable gearing, comfortable liquidity and high
embedded land value.
Auto index outperformed on higher sales in February 2011 and as the government kept excise duties on
automobiles unchanged in the Budget, contrary to market expectations of a 2% hike. The stocks also rallied
due to positive sales announced by OEMs (Original Equipment Manufacturers). However, some analysts are of the
opinion that such a rally is not sustainable due to high interest rates and commodity prices. However, the
government's focus on the rural economy may spur demand for two-wheelers and cars. Tata Motors, Bajaj Auto,
M&M, Hero Honda & Maruti, which together have ~83.5% weightage to the overall Auto index, ended the
month with gains of 15.3%, 15.1%, 13.8%, 8.3% & 4.7% respectively. The rise in the M&M stock price was on
the back of announcement made by the company that it has plans to set up a plant in Andhra Pradesh.

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Banks stocks ended the month on a strong note after the Union Cabinet cleared the Banking Regulation
(Amendment) Bill 2011, which will now be placed for parliament's approval. The Banking Regulation
(Amendment) Bill seeks to give shareholders of banks voting rights in proportion to their holding. Currently,
the voting rights of a shareholder are limited to 1% of the holding for state-run banks and 10% for private banks.
Several banks and investors have been demanding changes to these rules. The bill also proposes that an
individual or institution can hold a more than 5% stake in a bank only after receiving approval from the
central bank. Hopes that India’s economic growth story would stay intact and in turn boost demand for loans
pushed the index higher. Also, during the month, the SBI amendment Bill was passed in Parliament. The Bill seeks
to bring down government’s holding in SBI from the current 59.4% to 51% (at par with other PSU banks). The Bill
also provides for increasing SBI’s authorized capital from Rs. 1,000 cr. to Rs. 5,000 cr. ICICI Bank, HDFC Bank,
SBI & Axis Bank, which together have ~75.8% weightage to overall index registered robust gains of 14.6%,
14.3%, 5.2% & 14.7% respectively during the month.
Even the Consumer Durable index outperformed, reporting double digit gains mainly on the back of good
performance by companies like VIP, Whirlpool, Gitanjali Gems, Blue Star & Titans, which rose 27.8%, 15.9%,
15.6%, 15.2% & 14.5% respectively during the month. VIP industries registered good gains as private equity
player Blackstone reportedly bought a 2% stake in the company valued at Rs. 360-400 mn during the month by
way of secondary market purchases.
The rise in the Oil & Gas index was on account of a rise in RIL & ONGC, which rose 8.6% and 7.2%
respectively during the month. Buying emerged in index heavy-weight Reliance Industries on the back of an
announcement from DGH stating that the company's gas output from east coast block may touch 67 mmscmd in
April. Current gas output from the D6 block in Krishna-Godavari basin is 53 mmscmd.
Capital Gas index surged up on continued buying support, after the output of the six core infrastructure
industries grew by 7.1% in January. Sentiments were also buoyed after Finance Minister Pranab Mukherjee
announced several key initiatives in the Budget to boost the infrastructure sector, including creation of an
infrastructure debt fund and raising the limit of foreign institutional investors in corporate bonds. The
buying could also be attributed to sector’s underperformance for a longer time primarily due to sluggish order
intake and higher material prices impacting the input cost. Now that the valuations are looking a bit cheap, value
buying seems to have emerged.

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IT stocks surged during the month on the back of improving industry scenario, especially in the US and in
anticipation of robust Q4FY11 results. The prospects for the Indian IT companies appear brighter after the
US companies like Oracle and Accenture Plc delivered higher earnings growth for the period. Wipro, Infosys,
HCL Tech & TCS, which together account for 94.5% of the overall IT index weightage, reported robust gains of
9.1%, 7.8%, 7.8% & 6.2% respectively during the month.
The FMCG index gained the least, since the sector looks a bit overvalued & there are also concerns that rising
input cost could put pressure on the margins of FMCG companies.
Top gainers amongst the F&O stocks included Deccan Chronicle (up 40.2%), Apollo Tyres (up 32.6%), DLF
(up 26.8%) & Hindustan Oil Exploration (up 26.7%). Even R Com, Escorts, Ambuja Cements, Hexaware, Sterlite
Technologies & Reliance Capital performed well, rising in the range of 22-26%. Major losers from the F&O space
included Areva T&D (down 10.4%), Educomp Solutions (down 10.3%), National Aluminium (down 9.9%) &
Piramal Healthcare (down 9%). Mc Dowell, Glaxo Smithkline Pharmaceuticals, Adani Power, Suzlon, Mphasis
Ltd. & Dabur were some of the other underperformers, which fell in the range of 3-8%.
Fund Activity:
Net Buy / Sell Net Buy / Sell Open Interest Open Interest In the equity space, the FIIs were reported as net buyers of Rs.
FII Activity 6,731 cr in March 2011 till March 30 (In Feb, they were net
Mar-11 Feb-11 Mar-11 Feb-11 sellers of Rs. 5313 cr). In the F&O space, the FIIs were net buyers
Equities (Cash) * 6731 -5313 in the Index Futures & Options segment. This was along with the
increase in the open interest. This indicates long positions being
Index Futures 4241 1968 19429 11209 held by FIIs in futures segment & more call buying (since the
Index Options 8551 2569 58998 44317 market went up substantially, it appears that call buying was more
than call writing) in options during the month. In the Stock
Stock Futures -1752 4346 32521 25742 Futures segment, the FIIs were net sellers, while the open
Stock Options -1.5 23 1139 586 interest increased over Feb, which indicates short positions
Note: * Figures for March 11 are upto March 30. undertaken (to hedge the market) or cash-futures position
being undertaken. The Stock Options segment witnessed very low
participation during the month.

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Bond Yields:
Indian G-Sec bond yields closed the month at 7.98%, which is a drop of 3 bps for the month ended March 2011.
Bond yields exhibited mixed movements through the month of March 2011. During the month the yields touched
a high of 8.01% and a low of 7.93%. On 17th March 2011 the RBI announced its monetary policy. It raised the
interest rates by an expected quarter percentage point, and flagged inflation as a big concern spurring
expectations for more tightening measures. The Reserve Bank of India (RBI) warned of both inflationary pressures
and emerging risks to growth, after raising its short-term rates for the eighth time in the past 12 months. The
central bank raised its forecast for headline inflation at the end of March to 8 percent, from its earlier 7 percent,
and indicated it was likely to stay with its anti-inflationary stance.
1 0 Y e a r G o v e r n m e n t B o n d Y ie ld - T r e n d
1 0 .0 0
8 .0 0
%
6 .0 0
4 .0 0
12/28/2008
12/23/2009
12/18/2010
9/29/2008
3/28/2009
6/26/2009
9/24/2009
3/23/2010
6/21/2010
9/19/2010
3/18/2011
7/1/2008
P e r io d
Commodities:
The Reuters/Jefferies CRB Index of 19 raw materials ended higher by 1.94% to 359.43 for the month of
March 2011. The key constituents pushing the index up were natural gas, cattle, hogs and sugar, which
climbed around 1.5% each for the month. During the month the index touched a high of 362.89 and a low of
338.14. The index exhibited mixed moves during the month. Most of the metals registered a drop for the
month except for aluminium and lead, which rose by 2.81% and 5.7% for the month of March 2011. On the
other hand Nickel, Zinc and copper were the major losers with each dropping by 9.15%, 6.89% and 4.39%
respectively.

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Behaviour of Metal prices (LME 3 month buyer prices) during the month of March 2011:
Metals 31-Mar-11 28-Feb-11 % Chg

Aluminium 2631 2559 2.81%
Copper 9408 9840 -4.39%
Zinc 2331 2504 -6.89%
Nickel 26125 28755 -9.15%
Tin 31545 32200 -2.03%
Lead 2670 2526 5.70%
International lead prices on the LME registered a rise of 5.7% for the month of March 2011. During the month
lead prices exhibited mixed movements and touched a high of USD 2700 per ton and a low of USD 2414.5 per
ton Lead witnessed industrial buying at the LME, which pushed up the prices for the month. This could be
attributable to reports suggesting that demand for lead in Japan, the third-biggest economy, was high and is
expected to remain on an upward trend as the country seeks batteries and generators to help it recover from
the destruction caused by the strongest earthquake on record and tsunami. The disaster crippled the Fukushima
Dai-Ichi nuclear power plant, causing power disruption and other radiation hazards. Japan consumed 2.4% of the
world’s lead last year and the disruption of the power plant could result in the higher demand of batteries (as an
alternate source of power), which use lead as an essential input
International Copper prices registered a drop of 4.39% for the month of March 2011. Copper prices were
buoyant for the initial part of the month and later on were consistently on a downward trend. During the month
the copper prices touched a high of USD 9979 per ton and a low of USD 8990 per ton. Copper prices remained
weak for a major part of the month due to the reduced off take by consuming industries amid weakening
trend at London Metal Exchange. During the month one of the strongest earthquake and a tsunami hit Japan,
which resulted in halting of industrial activities. Most of the industries in the country were badly hit and hence
stopped production activities. This had its cascading effects on the base metal pack in the form of reduced off-
take. Towards the end of the month China, which is one of the major metal consumer, announced that it could
step up monetary tightening after data showed that manufacturing accelerated for the first time in four months

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International gold prices registered a modest rise of 2.0% for the month ended March 2011. During the month
gold exhibited mixed trends. The yellow metal touched a high of USD 1438.9 per ounce and a low of USD
1392.8 per ounce. Towards the beginning of the month the yellow metal firmed up and exhibited a buoyant
trend. Towards the second week the gold prices were almost flat with movements within a specific range. Gold
fell in the initial part of the second week as a stronger dollar prompted some investors to sell the metal after
unrest in the Middle East and northern Africa pushed prices to a record but it bounced again towards the end of
the week. Towards the middle of the month the yellow metal rose as the investor’s demand for an
alternative to gyrating currencies rose. The rise in the yellow metal continued through to the end of the month
primarily as a demand for safe heaven investments rose in the light of the ongoing turbulence in the Middle East,
Japan and Europe.
International crude oil prices (WTI) exhibited mixed movements for the month ended March 2011 and touched a
high of USD 106.72 per barrel and a low of USD of 96.67 per barrel. The international crude oil prices rose by
10.05% to close the month at USD 106.72 per barrel. Most part of the month saw the impact of the political
unrest in the Middle East and Africa taking its toll on the crude oil prices. In the initial part of the month
crude prices rose primarily on the unrest in Libya and the expectation that this could spread to Nigeria and
Angola, which are the other oil producing nations. In the second week of the month the crude oil prices softened
as Japan’s strongest earthquake on record resulted in halting the industrial activities in Japan. Japan is the third
largest consumer of crude oil. Towards the middle of the month oil prices continued to remain soft as Libya said
it would cease military operations against rebels and begin talks aimed at resolving the dispute that has curtailed
crude shipments. However in the second half of the month, particularly towards the last week the oil prices
firmed up on concerns of escalating unrest in Libya, Yemen and the Middle East, which posed concerned over the
supply of oil. Oil-rich Libya produced 1.69 million barrels a day of oil before the unrest, according to the
International Energy Agency and post the unrest it produced a meagre 400,000 barrels a day.

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The Baltic Dry Index (BDI), which is a measure of the international shipping prices for raw materials rose by 22%
for the month of March 2011. The Baltic dry index is more influenced by the movement of goods from/to China
primarily that of iron ore. During the month the BDI exhibited mixed movements. In the initial days of the month
the index was on an upward trend while it softened during the middle of the month and than was again on an
upward trend towards the end of the month. The index touched a high of 1585 and a low of 1251. During the
month, initially the BDI rose due to the expectations of a pick up in the cargo availability. The index
continued its buoyant trend towards the middle of the month on the back of increased cargo shipments.
However the BDI remained soft for some days in the middle of the month primarily due to unavailability of the
cargoes and the devastating earthquake in Japan, which halted most of the industries. Towards the end of the
month the BDI was on an upward trend primarily due to the increasing bunker costs and (port) congestion,
coupled with slow steaming
Currencies
The US dollar fell against most of its peers for March 2011 except for the Argentina Peso and the Japenese Yen.
The USD rose against the Argentina Peso and the Yen by 0.4% and 1.4% respectively for the month. The USD
dropped the most against the Euro, Bhat, Indian Rupee and Korean Won by 2.8%, 2.4%, 1.5% and 1.9%
respectively
Given below is a table that shows the depreciation (-)/appreciation (+) of the dollar against various
currencies for the month of March 2011:
USD to : 28-Feb-11 31-Mar-11 % Chg The USD depreciated against the Indian Rupee by 1.5% for the
Pakistani r upee 85.8 85.65 -0.20% month of March 2011. USD exhibited mixed trends against the
Hong Kong dollar 7.9 7.79 -1.40%
Indian rupee for the month. The USD / INR exchange rate touched
Chinese yuan
I ndian r upee
6.58
46.07
6.57
45.4
-0.20%
-1.50%
a high of Rs 45.27 and low of Rs 44.65. The rupee rallied against
Taiwan dollar 29.82 29.48 -1.10%
the dollar primarily due to frantic buying by foreign funds in
Singapore dollar 1.27 1.26 -0.60% booming domestic equities amid a weak dollar overseas. Market
Ar gentine peso 4.03 4.05 0.40% reports suggest that sustained sale of dollars by exporters and
Eur o 0.73 0.71 -2.80% some banks also aided the rupee rise. The benchmark index (BSE
Thai baht
Malaysian r inggit
31.13
3.05
30.39
3.03
-2.40%
-0.70%
Sensex) exhibited an upward trend for a major part of the month
I ndonesian r upiah 8849.56 8748.91 -1.10%
due to the frenzied FII buying amid firm global cues. Foreign
Japanese yen 81.73 82.87 1.40% Institutional Investors picked up shares worth over USD 1.2 billion
Br az ilian r eal 1.66 1.65 -0.80% towards the end of the month. This helped push the USD down
Kor ean won 1127.65 1105.83 -1.90% against the INR.

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USD depreciated against the Euro by 2.8% for the month of March 2011. In the initial part of the month the US
dollar dropped against the Euro on expectations of a likely interest rate hike in the European nation. Later
the USD gained ground against the 16 nation currency as the EU leaders planned to enter a final round of
bargaining in their attempt to hammer out a package to snuff out the euro-area crisis by March 25 deadline.
Bond yields in Greece & Portugal touched euro-era records this week & debt ratings of Greece & Spain were cut.
In the second half of the month the Euro zone leaders had reached an in principal agreement on a pact for
the Euro to coordinate economic policies. In talks was the establishment of a new European Stability Mechanism.
This would probably spark increased optimism as the markets hoped for a stabilized Euro Zone. During the week
ending 21st March 2011 the German ZEW Economic Sentiment data came out lower than expected and this
weakened the Euro. The European Central Bank President Mr Trichet suggested that the ECB intends to raise
interest rates next month. This increased speculation by currency traders on a Euro interest rate hike.
The USD appreciated against the JPY for the month of March 2011 by 1.4%. The yen rose against the USD for a
major part in the first half of the month after the worst earthquake in at least a century struck Japan, spurring
domestic investors to buy the currency as a safe haven. The Japanese currency strengthened against all of its
major counterparts after the 8.9-magnitude temblor and as a tsunami of 10 meters (33 feet) engulfed towns
along the northern coast, increasing speculation that the insurance companies and investors will buy back yen
to pay for damages. The rebuilding process in general was perceived as positive for the yen. The yen
continued its rally in the second half of the month as well primarily due to the repatriation of Japanese
Yen, as Japanese investors sold foreign denominated assets for yen to fund the recovery. Towards the end of the
month the Yen plunged against the dollar as Group of Seven nations jointly intervened in foreign-exchange
markets for the first time in more than a decade by selling the currency. As the nuclear crisis in Japan continues
to bear down on market sentiments, with investors expecting to see a large wave of repatriation in the near
future, the impact of the intervention may taper off, and the USD/JPY could face increased volatility over the
near-term as policy makers weigh alternative measures to shore up the ailing economy.
The USD depreciated against the Korean won for the month of March 2011 by 1.9%. The USD / KRW pair
registered one of the biggest gains in the month of March 2011. The South Korean won appreciated as the
improved outlook for the global economy boosted confidence in the country’s assets. Foreign investors
increased their holdings of Korean stocks, as the Kospi Index of the nation’s shares climbed during the period.
The key reason sited for the rise in the Korean stocks is the expectations of improvement in the economic
situation of the nation.

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The US dollar depreciated against the Malaysian ringgit by 0.7% for the month of March 2011. Ringgit rose
after the Federal Reserve upgraded its growth assessment for the world’s largest economy, helping damp
concern that devastation from Japan’s earthquake will derail the global recovery. The currency climbed after
slumping the most in more than three months, when damage to Japan’s nuclear power plants curbed demand for
emerging-market assets. Asian stocks halted a four-day loss after the Federal Open Market Committee said in a
statement that the pickup in the U.S. economy “is on a firmer footing, and overall conditions in the labor
market appearing to be improving gradually.” Malaysian bonds gained as well. Malaysia shipped 61 billion
ringgit worth of exports to the U.S. in 2010. The US is the fourth-largest market after Singapore, China and Japan
for Malaysia.
The USD depreciated against the Brazilian Real by a meagre 0.8% for the month of March 2011. The Brazilian
government is planning to impose a financial operations tax on overseas bond issues by Brazilian companies.
The tax is part of a government drive to reduce U.S. dollar inflows and arrest the appreciation of the Brazilian
real against the U.S. dollar. The real has gained 45% against the dollar over the past two years, hurting
exports. According to a brazillian newspaper, which cited an unnamed person close to the government, officials
are also concerned about a recent increase in dollar-denominated debt among Brazilian companies. The
appreciation of the Real has prompted the Brazilian Central Bank to adopt multiple measures over the past few
months to curb it. But, so far the measures have failed to produce the desired result. The “Greenbacks” value
continues to shrink and the net USD inflow from January to mid-March surpassed that registered in the entire last
year.

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Comparison of Equity Returns in various markets - MSCI Indices in US$ terms
Monthly 3 Month Y TD 1 Y ear Monthly 3 Month Y TD 1 Y ear

MSCI Index Last Returns Returns Returns Returns MSCI Index Last Returns Returns Returns Returns
Emerging Mark ets Developed Mark ets
BRI C 367.1 5.5% 3.0% 3.0% 9.6% EUROPE 1,542.5 -1.1% 5.9% 5.9% 9.5%
EM (EMERGI NG MARKETS) 1,170.9 5.7% 1.7% 1.7% 15.9% G7 I NDEX 1,144.4 -1.6% 4.4% 4.4% 11.5%
EM ASI A 474.1 7.1% 1.3% 1.3% 16.8% THE WORLD INDEX 1,334.9 -1.2% 4.3% 4.3% 11.2%
EM EUROPE 591.5 5.4% 11.7% 11.7% 20.7%
EM EUROPE & MI DDLE EAST 502.8 5.4% 11.7% 11.7% 21.1% JAPAN 2,348.9 -10.1% -5.9% -5.9% -0.6%
EM LATIN AMERICA 4,632.2 3.3% 0.4% 0.4% 11.1% UNI TED KI NGDOM 1,169.5 -2.9% 2.8% 2.8% 9.9%
SWI TZERLAND 3,942.6 -2.1% 0.7% 0.7% 7.1%
CHI NA 68.2 5.3% 2.9% 2.9% 7.0% I RELAND 114.4 -1.5% 7.6% 7.6% -12.1%
I NDI A 530.3 11.1% -5.2% -5.2% 8.0% GREECE 258.4 -0.9% 15.2% 15.2% -28.9%
I NDONESIA 871.4 9.6% 4.7% 4.7% 24.8% SPAI N 566.2 -0.8% 12.9% 12.9% -0.2%
KOREA 436.4 11.6% 6.5% 6.5% 29.8% AUSTRALI A 912.7 1.7% 3.2% 3.2% 10.3%
MALAYSI A 469.4 5.0% 3.7% 3.7% 26.9% NETHERLANDS 2,204.4 1.9% 10.3% 10.3% 11.3%
PHI LI PPI NES 334.9 8.3% -4.4% -4.4% 20.3% I SRAEL 273.9 2.7% -2.9% -2.9% -9.6%
TAI WAN 299.3 1.7% -4.3% -4.3% 17.8% NEW ZEALAND 102.0 3.0% 2.6% 2.6% 11.4%
THAI LAND 352.3 7.5% 3.5% 3.5% 38.6% FI NLAND 498.6 3.4% 1.2% 1.2% -2.1%
BRAZI L 3,835.1 3.6% 2.0% 2.0% 6.4% SI NGAPORE 4,181.0 4.8% -0.7% -0.7% 19.2%
CHI LE 2,668.4 4.0% -8.3% -8.3% 30.0%
COLOMBI A 1,112.5 4.7% 0.0% 0.0% 27.9% Frontier Mark ets
MEXI CO 6,505.5 2.6% 0.5% 0.5% 17.5% FM (FRONTI ER MARKETS) 560.6 0.3% -6.6% -6.6% 0.8%
PERU 1,562.7 -3.4% -14.0% -14.0% 28.2%
CZECH REPUBLI C 586.6 8.1% 16.3% 16.3% 7.9% BANGLADESH 986.4 12.1% -28.9% -28.9% -14.8%
HUNGARY 797.1 3.5% 20.2% 20.2% -4.7% ROMANIA 509.1 11.2% 32.2% 32.2% 6.8%
POLAND 1,086.6 4.7% 6.9% 6.9% 15.5% UNI TED ARAB EMI RATES 206.9 10.9% -6.4% -6.4% -14.8%
RUSSI A 1,083.9 5.2% 16.3% 16.3% 27.7% TUNI SI A 1,152.0 10.2% -10.5% -10.5% -4.0%
TURKEY 590.8 7.4% -5.5% -5.5% 7.8% CROATI A 734.4 8.7% 12.9% 12.9% 9.6%
EGYPT 655.9 -2.8% -23.7% -23.7% -24.5% UKRAI NE 397.4 -4.8% 21.4% 21.4% 21.8%
MOROCCO 486.5 -2.5% 5.5% 5.5% 9.6% NI GERI A 382.4 -5.7% -2.7% -2.7% -6.2%
SOUTH AFRI CA 594.3 4.2% -2.8% -2.8% 22.1% KENYA 718.4 -6.9% -10.9% -10.9% 0.5%

16

Comparison of Equity Returns in various markets - MSCI Indices in US$ terms
The Equity markets across the globe ended the month of March 2011 on a mix note. While the developed
markets underperformed the other indices, reporting negative returns, frontier markets stood flat.
However, emerging markets were clear outperformers during the month.
While the Developed markets fell in the range 1.1% to 1.6% (with G7 Index falling the most by 1.6%), some
constituents amongst them fell much more than that. Japan, UK & Switzerland were the top three losers,
which fell by 10.1%, 2.9% & 2.1% respectively. Even other developed markets like Ireland, Greece & Spain fell
marginally by 1.5%, 0.9% & 0.8% respectively. However, further index losses were restricted due to
outperformance by some of the developed markets like Singapore, Finland, New Zealand, Israel,
Netherlands & Australia, which gained 4.8%, 3.4%, 3%, 2.7%, 1.9% & 1.7% respectively.
Japanese markets fell sharply during the month after a 8.9-magnitude earthquake hit northern Japan on
March 11, triggering massive tsunamis that swept across towns apparently killing hundreds and nuclear
disaster. The tsunami was followed by powerful aftershocks that were felt in Tokyo. The economy contracted
1.3% more than the government initially estimated in Q4CY10 because of a downward revision to capital
investment and consumer spending. However, there was some relief after the Japanese officials said that they
would backstop the country's financial system, with a cash injection of more than $180 bin, to buffer it against
the economic impact of the earthquake and tsunami. Morgan Stanley MUFG Securities Co has said that the
March 11 disaster may cause Japan’s GDP to shrink by as much 12% on an annualized basis in Q2. As per the
World Bank report, the real GDP growth of Japan will be negatively affected through mid-2011, but will pick
up in the subsequent quarters when the reconstruction efforts, which may last five years, gain momentum.
U.K. underperformed, as the house prices fell for an eighth month in Feb as the supply of homes for sale
increased the most in three years. The country’s consumer confidence fell to a record low in Feb, as Britons
grew more pessimistic about the sustainability of the economic recovery and the outlook for jobs. An index of
sentiment dropped 10 points to 38, the lowest since records began in 2004.
Spanish market fell during the month after Moody's slashed Spain's sovereign credit rating by a notch to Aa2
and warned of further cuts, expecting the country's plans to clean up the battered banking sector will cost
more than government expects and add to its debt burden.

17

Singapore markets outperformed during the month after news reports said that the Singapore Stock Exchanges, in
its bid to take over Australia's ASX is faltering due to political opposition. The majority of market players feel
that if the deal doesn't go through then that's better, partly because of the pricing (of the deal). Also the
news reports that Japan's nuclear crisis is getting contained boosted the risk appetite. Further the country’s
exports grew at a decent rate by 7.8% in Feb 2011 Y-o-Y (though lower than what economists expected).
Frontier markets ended the month on a flat note. This was mainly due to outperformance by some of the
markets like Bangladesh, Romania, UAE & Tunisia were the top four gainers, which rose 12.1%, 11.2%, 10.9% &
10.2% respectively. Even Croatia did well, rising 8.7%. However, Kenya, Nigeria & Ukraine were some of the
markets, which restricted index gains, as they fell 6.9%, 5.7% & 4.8% respectively.
Bangladesh markets outperformed during the month due to increased participation from institutional
investors. The reforms made by the country in 2010 like removal of all the paper shares from the stock
exchanges and replacement of same by demat transactions, Introduction of Book building method for the first
time, making compulsory submission of quarterly financial Statements by the listed companies, almost in
line with other countries, to help investors gain more knowledge of the listed companies. fixing the tenure of
Closed-end mutual funds, allowing mutual funds to participate in the Book Building process, etc have put the
Bangladesh stock market on a fast forward track, particularly inviting institutional confidence from FIIs in putting
funds in Bangladesh stock markets due to higher corporate transparency and improved compliances and
governance in place.
Romania index surged during the month as the sales of new passenger cars in Romania rose by 7.9% on the
year to 8,632 in the first two months of 2011. Market sources predict that Romania's GDP will grow by 1.5%
in 2011, marking the economy's first growth following the 2008 crisis, which would be mainly led by increasing
external demand continuing to bolster export volumes.
Nigerian markets underperformed during the month of March, as political turmoil in Libya curbed demand for
frontier- and emerging-market assets. Even the Ukrainian Equities Index continued to underperform as its
biggest stock, Ukrnafta VAT, the former Soviet republic’s biggest crude oil producer and which makes up 25%
of the index’s weighting, witnessed a record fall and violence in Libya sent oil prices surging, threatening to
stoke inflation and damp global growth.

18

Emerging Markets outperformed the other indices, surging 5.7% during the month. Amongst the emerging
markets, EM Asia was a top performer, which increased by 7.1%. This was due to outperformance by markets
like Korea, India & Indonesia (top three performers amongst the EM Asia), which ended the month with robust
gains of 11.6%, 11.1% & 9.6% respectively. Even the other Asian markets like Philippines, Thailand, China &
Malaysia did well, rising 8.3%, 7.5%, 5.3% & 5%. However, Taiwan gained the least, rising marginally by 1.7%
during the month.
The South Korean market performed well as the country’s industrial production grew at the fastest pace in
five months by 13.7% Y-o-Y in January 2011, driven by overseas demand for the country’s cars and electronics.
Production gained 4.6% from De 2010. Also the index went up on some speculation that some local industries
would benefit from the record-breaking earthquake in Japan. The South Korea's bank chief called for "multi-
pronged" policy responses to contain inflation expectations, saying that price stability was the greatest challenge
facing the country. An analyst at Bookook Securities was not so bullish on the country stating that if oil prices
remain above $100 per barrel for an extended period amid Middle East turmoil, a lot of Seoul-listed companies'
earnings would suffer. South Korea is the world's fifth-largest crude oil importer.
The Indonesian economy outperformed on increasing forex reserves and on statement made by Finance
Minister Agus Martowardojo that the increase in oil prices would not pose a serious problem with the state
budget because the higher oil prices could be compensated with a stronger rupiah. The Indonesian bourse
expects the Jakarta Composite index (JCI) to rise 25-30% in 2011 as profits for listed companies grow, and as the
number of initial public offerings increase. The Jakarta Globe reported during the month that Indonesia’s coal
production is forecast to increase by 20% this year as coal prices continue to rise, according to the Indonesian
Coal Mining Association. Indonesia is a home to several coal miners, including Bumi Resources, the world leader
in thermal coal exports.
Chinese market increased during the month as an indicator of China’s economic outlook rebounded, easing
concerns that the government’s campaign to curb inflation and asset bubbles may lead to a sudden
slowdown in the world’s second-biggest economy. The index rose 0.3% to 155 in Jan M-o-M. FDI in China
climbed 32.2% to $78bn in Feb, indicating investor confidence to boost household incomes.
The BRIC index was the second best performer amongst the emerging markets, which surged 5.5% during the
month. India was a top performer (with 11.1% gains), while China, Russia & Brazil also did well, rising 5.3%,
5.2% & 3.6% respectively.

19
HOME

The Russian market rose amid the geopolitical events. Russia may be the one country that stands to gain from
the various calamities in 2011. First, the general unrest in the Middle East has increased the price of oil by 18.5%.
As the second largest oil exporter — and one not bound by OPEC production quotas — the increase in price goes
directly into the Kremlin’s swelling coffers and is a welcome addition after the severe economic recession in
2009. Second, the Libyan unrest has cut off the 11 bn cubic-meter natural gas (bcm) Greenstream pipeline
to Italy, causing Europe’s third largest consumer of natural gas to turn to Russia to make up the difference.
Similarly, Japan’s nuclear imbroglio has forced Tokyo to turn to Russian emergency shipments of liquefied
natural gas (LNG) to fuel its natural gas-burning power plants.
EM - Europe & EM - Europe & Middle East both did well, rising 5.4% each during the month. The index gains were
led by Czech Republic, Turkey & Russia, which surged 8.1%, 7.4% & 5.2% respectively. Even Poland &
Hungary performed well, rising 4.7% & 3.5% respectively.
The Czech Republic’s main equity index rose during the month as Japan moved closer to containing its nuclear
crisis, restoring investors’ demand for risk worldwide. The index surged amid speculation a Group of Seven
meeting will calm global markets after Japan's nuclear disaster. Further, the country’s industrial output
grew 16.9% on the year in January after a revised annual rise of 12% in December, driven by a steady expansion
in manufacturing. This boosted the sentiments further & drove the market higher.
EM - Latin America gained the least among the emerging market index, rising 3.3% during the month. Colombia,
Chile, Brazil & Mexico all did well, surging 4.7%, 4%, 3.6% & 2.6% respectively. However, Peru
underperformed, falling by 3.4%.
Brazil outperformed during the month as steelmakers rallied, offsetting concerns that Brazil will face higher
inflation and lower growth than previously expected. Also, the index climbed as the rising commodity prices
boosted the outlook for Brazil’s producers, outweighing concern domestic growth will slow more than previously
forecast. Alan Gandelman, chief executive officer at broker ICAP Brasil said during the month that Bovespa
might rise 10% this year.
Chile outperformed during the month as investors continued to buy shares at attractive prices and as
forecasts pointed to the imminent end of a long-drawn drought, boosting power producers. Many industry
analysts are forecasting that drought conditions due to the La Nina weather phenomenon, will likely end
soon, bringing a reprieve to power generators and end users alike. Also the Ipsa ended higher as it tracked rising
U.S. stocks, which were boosted by encouraging earnings from technology companies and U.S. jobs data.
The Peru index underperformed during the month, as the construction & energy stocks declined on investor
concern over the crises in Libya and Japan.

20
Monthly Equity Commentary

Outlook going forward
Global market outlook
Japanese economy post Earthquake & Tsunami
The whole world is now aware about the recent earthquake and ensuing tsunami that devastated much of
Japan’s northeastern Iwate prefecture. The tragic loss of life is still unfolding before our eyes. The economic
damage is estimated at $250 bn. This area represents approximately 2.0% of Japan’s population of 127 mn, and
the same proportion of GDP. Japan’s overall GDP is estimated at ~$5.2 trillion; therefore, the economic impact
to this region is about $100 bn. The three trading days following this disaster resulted in losses in the Japanese
equity markets of about $500 bn. However, the losses did not stop there, extending worldwide in the
neighborhood of $1.5 trillion.
We expect the global economy to be modestly impacted by this disaster, even though Japan represents about an
8.7% share of global GDP & comprises the world’s third largest economy, according to the International
Monetary Fund (IMF). For many years, the Japanese economy has been struggling & was not considered a source
of significant global growth. Major economic impacts to Japan will be disruptions to the supply chain within
industries like automobiles & electronics. With excess capacity in other parts of the world, this should quickly
pass.
Japan’s immediate focus is rightly on the enormous human suffering and on rescue operations, as well as
containing nuclear-reactor risks. Japan’s leaders have moved swiftly to stem fallout from the earthquake and
tsunami on all fronts, including economic.
The loss of inventories and supply-chain disruptions could cause inflation to rise temporarily from very low
levels. However, there was some relief after the Japanese officials said that they would backstop the country's
financial system, with a cash injection of more than $180 bn, to buffer it against the economic impact of the
earthquake and tsunami. Morgan Stanley MUFG Securities Co has said that the March 11 disaster may cause
Japan’s GDP to shrink by as much 12% on an annualized basis in Q2CY11. As per the World Bank report, the real
GDP growth of Japan will be negatively affected through mid-2011, but will pick up in the subsequent quarters
when the reconstruction efforts, which may last five years, gain momentum.

21

Impact on the Global economy & commodities post the devastation in Japan
Post the 1995 Kobe earthquake (which was relatively lower on Richter scale), people all over Japan showed great
resilience and commitment to rebuilding their economic base and within two months of the event, the industrial
production was back to pre-earthquake levels. With the quick response & action from the Japanese Government
& the Bank of Japan, the same kind of approach & determination is being witnessed. Further, unlike the US, the
Japanese public holds most of Japan’s debt.
The badly damaged nuclear reactors, which are now difficult to be contained appear to be Japan’s largest risk
going forward. If nuclear meltdown occurs in future over there (which is quite possible), then the human,
environmental and economic toll could rise significantly, causing a larger challenge to the global economy. While
some industries & economies could be severely impacted, some might benefit from the devastation in the short
to medium term. Major re-construction required is likely to benefit companies engaged in construction,
equipment, and materials industries. Even Technology components manufactured elsewhere should witness a
surge in business. This disaster may also reduce pressure in some of the basic commodities with the changing
consumption patterns in Japan. Korea would benefit due to their excess oil refining capacity, which will be in
greater demand from Japan. Crude oil demand may be affected in the short term, but could rise significantly in
the medium to long term, once Japan’s reconstruction bolsters. Coal demand would increase for the major
suppliers in countries like Australia as Japan replaces electricity produced from nuclear power with electricity
produced from coal.
The industries, which could be negatively impacted, include insurance companies (that have large exposure to
potential Japanese claims), banks, and other financial services companies - the severity of which may not be
known for a while. Moreover, the future growth of nuclear power generation all over the world is in difficulty.
This increases reliance on fossil fuels, especially at a time when the Middle East and North Africa are
experiencing great turmoil, potentially posing a much greater challenge to the global economy.
Asia’s growth momentum moderating, however, concerns overblown
There are some growth worries in Asia arising from rising global oil prices on the back of Mideast & Japan
concerns and potential trade disruption. However, this looks a bit overblown. While high-energy prices could
benefit certain countries who are net oil exporters like Malaysia & Indonesia, countries who are large net oil
importers like India, Korea & China could be affected significantly. However, the use of fiscal measures,
including energy subsidies/taxes/refining margins, and currency appreciation could mitigate the impact from
higher input costs. Korea, India & China could benefit from potential trade gains with the Middle East. Inflation
should still be the bigger concern of Asian central banks. Inflation has mostly surprised on the upside, prompting
upward revisions to the forecasts, & core inflation momentum has been rising broadly across the region.

22

Emerging economies to grow at a robust rate in 2011 but lower than 2010
The major emerging economies, mainly BRIC countries (Brazil, Russia, India & China) and even Mexico are
expected to grow at a robust rate during 2011. However, the growth rate is likely to be lower than in 2010 on
the back of fading monetary and fiscal policy tailwinds and some hints of overheating. With less dependence on
the inventory cycle as well as net trade and capital investments, and more confidence on domestic final
consumption as a growth driver, the growth across the major emerging markets is likely to become more
balanced.
Managing the risk of overheating in the domestic economies remains a key challenge for the major emerging
economies in 2011. The idle capacity could be marginal & cyclical inflation and input cost pressures could be
on a rise, which in turn could pose a threat to corporate profits, leading to a slowdown.
Indian Market outlook
High co-relation of earnings to global factors, high oil prices, political issues - key factors to watch out
While the Indian Government continues to remain optimistic about India’s growth story going forward, we feel
that factors like increasing oil prices, political issues & increasing co-relation of market earnings growth to the
global factors need to be closely monitored. That can actually put the premium valuations of the Indian
markets vis-à-vis other emerging markets under pressure.
Around 55-56% of earnings of the Indian market are currently co-related to global factors. These earnings
either come from global commodities or from international subsidiaries of Indian corporates. As the co-relation
of India’s earnings to global growth increases, the chances of India enjoying substantially higher premium to its
peers also reduces. The premium that India has been enjoying is likely to come under pressure.
Another major risk to the Indian market is the soaring oil prices. Even the devastation in Japan has not been
able to cool down the oil prices. This could be mainly because of the ongoing unrest in the Middle East nations
(fighting continued in Libya and there were more anti-government demonstrations in places like Bahrain,
Yemen and Syria), causing interruptions to oil supplies. The Middle-East nations account for a major portion of
the oil production. Further, once the reconstruction in Japan bolsters, the demand for oil could increase
substantially, which could drive the oil prices significantly higher from the current levels. This does not augur
well for the Indian market. For India, the two crucial spots are current account and fiscal side. In both these
places, India runs a large deficit. Oil prices impacts both these numbers. While a rebound in exports has led to
some improvement in the fiscal position during April-Feb 2011, higher oil prices are simply not good for the
Indian markets.

23

All these years, Oil prices and Sensex have had positive co-relation, contrary to the usual thinking that the
Indian economy is hurt by oil price increases. Risk-trade i.e. the global liquidity pushing up all the asset classes,
has been a major reason for such correlation. However, this co-relation has reversed recently. Not just in
terms of India underperforming relative to the region, but sectors that are negatively impacted by oil price
increases, e.g. oil marketing Companies, interest rate sensitive sectors like banks, property & autos have also
underperformed since MENA concerns surfaced. The normal perception of the Indian economy suffering due to
rises in oil prices can actually be quantified. For instance, US10 increase in global crude prices normally
increases the CAD (current account deficit) by 0.38% as a proportion of GDP and the fiscal deficit by 0.17%
(assuming that government absorbs 50% of the incremental under-recovery burden). While the “soaring crude
prices” factor threatens to be a barrier to economy’s future growth, there are certain mitigating factors like
~US$300bn forex reserve cushion, fuel price regulation and new gas discoveries, which could make the impact
less severe than the past.
The recent political issues and the government scandals are also increasingly weighing on the markets. This
factor, along with other concerns (high inflation, rising interest rates & oil prices) have been the main reason
for a sharp correction that took place in the Indian markets in January & February 2011. In some of the sectors,
we have seen most pressures on the companies in the real estate, infrastructure and industrial sectors. A lot of
investments that were expected to come through are facing some slowdowns and that would continue to be in
the minds for most investors looking at India.
Inflation - a major challenge
Inflation for the month of February stood at 8.3%, which was higher than expected. The manufactured products
reversed the moderation posted in the previous month. While the uptrend in manufactured non-food product
inflation is an indicator closely tracked by the RBI, higher oil prices are also contributing to inflation worries.
Although 100% de-regulation of domestic fuel prices looks unlikely at present, inflation could certainly be
impacted by higher oil prices, depending on how it is transmitted.
High inflation could compel RBI to go for more interest rate hikes, thus hampering India’s growth story. At its
recent policy, the RBI has also highlighted upside risks to inflation and raised its March-11 WPI estimate from
7% to 8%. We feel that if the inflation continues to remain high, RBI could go in for another 50-75 bps hike in
the interest rates. The market certainly does not seem to have factored in these possible rate hikes. Infact
with the recent ease in the food inflation, the market participates may have a feeling that the interest rates
have peaked out & there would be no further hikes. That could happen only if inflation cools down
considerably & consistently, which looks unlikely.

24

India’s consumption & investments remain buoyant - could be major growth driver
Despite strong economic growth in 9MFY11, markets have been bogged by certain concerns like lagged effects
of the RBI’s monetary tightening, high crude prices & tight money-market liquidity conditions, that could slow
India’s growth momentum. While real GDP growth may slow to around 8.5% Y-o-Y in FY12 as the economy
fights with high interest rate, high commodity prices and political uncertainty, we feel that the fears in the
market are exaggerated as India’s consumption story remains buoyant. As in 2010, the market for skilled labour
remains buoyant led by the service sector. US tech spending, supported by higher corporate free cash flow and
the need to reduce cost pressure, would remain strong, spurring additional hiring by the IT and ITeS sectors.
We believe a skilled labour shortage (reinforced by slowing population growth rate- as per he latest census),
coupled with the aggressive hiring plans by IT and ITeS, could exert significant upward pressure on salaries
across other sectors. This augurs well for urban-consumption demand. Rural consumption shall likely remain
supported by higher support prices for agricultural products and higher government redistributive expenditure.
The result of strong urban and rural income growth is reflected in strong growth in two-wheeler and passenger
car sales despite a high base. We feel that consumption could be a major growth driver for the economy going
forward.
Offlate, India’s investments have slowed considerably. The big tailback to the investments has been delays
due to environmental and land-acquisition issues. However, we feel that the worst could be over. We expect
the infrastructure spending to pick up in FY12, given the last year of the Eleventh Five Year Plan. The order
timelines for investment projects are being shifted to Q4FY11 – Q1FY12. Further, the government has also
eased the rules on foreign investments, stating that the foreign companies operating in India won't need prior
approval from their existing joint-venture partners to operate separately in same business segments. This
would promote the competitiveness of India as an investment destination and would be instrumental in
attracting higher levels of FDI (foreign direct investment) and technology inflows into the country.
Rebound in the exports witnessed, helps in improving the fiscal position
India’s exports went up by 49.7% Y-o-Y during Feb to USD 23.5 bn, taking the April-Feb 2010-11 figure to USD
208.2 bn, an increase of 31.4% over the year-ago period and past the yearly target of USD 200 bn. This is on the
back of rising demand from the US and other markets. Imports also increased by 21.2% in the month under
review to USD 31.7 bn, leaving a trade deficit of USD 8.1 bn. During April-Feb 2010-11, imports grew by 18% to
USD 305.3 bn over the same period last year. The trade gap for the period stood at USD 97 bn. The exporting
sectors which performed well during the 11 months of fiscal include engineering (81%), petroleum and oil
lubricants (34%), cotton yarn and made-ups (43%), chemicals (22%) and electronics (40%).

25

With exports growing at a much faster rate than imports, India’s trade deficit during April-Feb 2010-11
declined to $97.06 bn from $100.24 bn in the same period previous fiscal. Decline in trade gap augurs well for
the country’s current account deficit which has come down by 20.49% to $9.7 bn during the Oct-Dec quarter
over the same period last fiscal. The Centre's fiscal deficit during April-Feb 2010-11 worked out to be 68.6% of
the estimates, compared to 92% in the same period last year, showing improvement in the fiscal position.
Q4FY11 Results would be keenly watched – decent topline growth expected,margins could be under pressure
After shunning Indian equities for the past four months, investment experts are once again bullish on the
domestic growth story. The timing for the shift in their expectations is critical, given the mounting
macroeconomic challenges - India Inc enters fiscal 2012 amid unabated inflationary pressure, a higher oil bill,
and soaring borrowing costs. Even though challenges are in abundance and the journey in the new fiscal would
be choppy, the bullish expectations about India's growth story do not appear to be lacking in steam.
India Inc has staved off cost pressures in the past four quarters due to sustained growth momentum. It is
expected to repeat its resilience even during the March 2011 quarter, according to ET Intelligence Group's
estimates of the quarterly performance of Nifty 50 companies. According to the forecast, aggregate sales and
profits of the Nifty companies are expected to grow in double digits for the sixth consecutive quarter. While
the topline is expected to grow by 21.2% Y-o-Y, the operating profit growth is expected to be slightly lower at
19.6% Y-o-Y on the back of higher input cost. The extent of the cost impact should be visible in the March 2011
quarter since margins are likely to slip from 9-quarter high of 23.7% reached in Q2FY11.
At an estimated level of 23.2%, the sample's OPM is expected to erode sequentially by 50 bps for the March
quarter. Most sectors will face the hit due to inflationary pressure. Companies in automobiles, capital goods
and FMCG sectors would see lower margins despite moderate to robust growth in revenues. IT players would
continue to do better following firm outsourcing demand & expected improvement in billing rates. Banks are
also expected to show robust profits due to strong credit demand.
For the March quarter, aggregate finance charges are likely to increase in double digits for the second
consecutive quarter against a benign trend a year ago. Economists anticipate a further increase in indicative
rates by RBI, which could put pressure on the net profitability of India Inc.

26

Is market looking overvalued at current levels?
The net profit of the Nifty companies has grown at more than 20% in the trailing 12-month period for each of
the past four quarters. Considering the uncertainty on the macroeconomic front, the companies should be able
to grow profits at a conservative rate of 13-14% in FY12. On that basis the Nifty trades at a 1-year forward PE
of 16.2 (on an estimated EPS of ~Rs. 1200 for FY12), which is neither very cheap nor expensive. However, the
valuation is slightly higher than the long-term average PE (8-10 year average PE), which stands at ~15x.
The current valuations look reasonable as long as profit growth remains in double digits. However, investors
need to watch out for triggers that could impact the growth scenario substantially. FY12 will test India Inc's
resilience further, given the challenging macroeconomic factors related to soaring costs of raw materials and
expensive borrowing due to rising interest rates. Markets have traded at lower valuations like 10-11 times in
the past, but generally that does not happen unless the world goes through a catastrophe and we have a major
disappointment, like in 2008 & in early 2009. What could offer relief to investors, despite the current
challenging scenario, is the fact that valuations are far from being unreasonable i.e. much lower than the PE of
24.6 at the market peak in Dec 2007. So, though the valuations are not very cheap, they are neither too
expensive at current levels.
Sensex levels – 1 year forward PE

27

After two months of sharp correction, the Indian market bounced back sharply in the month of March on the
back of better than expected Union Budget FY12. The market has probably taken cues from the favourable
announcements made in the budget like lower fiscal deficit target set for FY12, a lower-than-expected net
borrowing programme, a thrust on infrastructure and agricultural sectors, reduction in surcharge on corporate
tax & permission for foreign investors to invest in mutual fund schemes. If the Government is able to implement
the budget proposals, then the FIIs confidence on the Indian markets could increase and the valuations could
expand from the current levels. In good times (excluding the period Sept-Dec 2007, which was a kind of
Euphoria), the Indian market has traded at 18-19x 1 year forward PE. However, in order to trade higher
valuations, it is also very important, that the oil prices cool down from current levels and settle at somewhere
near $85-90 per barrel. Though this looks difficult at present, if it happens, it could actually be a big positive
trigger for the Indian economy & the equity market as well.
Over the long term, India’s growth rates could remain attractive than most other emerging & developed
economies. Hence India remains a long-term buy on sharp dips.
Indian markets more FII driven, retail participation equally important, substantial PE expansion difficult
unless there are more earnings upgrades
It is to be noted that over the last few years, the Indian market has mainly been driven by FII flows rather than
the domestic institutions. Currently, the FII flows are at an all time high, yet the Indian markets have not
surpassed their previous highs of Jan 2008. The FIIs were net buyers worth Rs. 1426.6 bn in FY10 & Rs. 1462.9 bn
in FY11 as compared to being reported as net buyers of Rs. 661.8 bn in FY08. The main reasons could be
domestic selling & FIIs’ unwillingness to buy at higher levels. It took nearly $29 bn in investor flows in CY10 to
cause the market to rise steadily until Nov 2010 but relatively tiny outflows have caused sharp reversals. For
markets to surpass the all time high, the retail participation (directly or through mutual funds) is also
important. However, that is possible if there are more earnings upgrades in the coming quarters along with
cooling off of oil & inflation, implementation of budget proposals by the Government and general improvement
in corporate governance practices across the listed space.
Further the market PE has some correlation with the expected growth in EPS. With FY12E EPS of Sensex
expected to grow by 13.2%, there is a limit to PE expansion and the Sensex will beyond a point wait for earnings
upgrade for FY12 before breaking into new highs.

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Market to consolidate in the month of April, upside for the month looks limited
After registering a sharp rally in March 2011, the markets are likely to consolidate in the month of April before
taking any further direction. The Sensex could trade in a range of 19000-20000. Along with the oil prices,
inflation & corporate results, state elections in April & May 2011 would also be keenly watched by the market
participants & would test the Government’s pragmatic or populist approach to policy issues in this period.

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Technical Commentary contd…

Larger Picture as a Contracting Triangle
We have been assuming that the all time high, which was made at 21,207, is the starting point of the
correction from where the downward wave ‘A’ of a ‘Contracting Triangle’ started. The upward rising wave
which was going for all most 2 years was wave ‘B’ as marked on the chart above. Currently we are in wave ‘C’
and this wave is going to correct some of the rise made by wave ‘B’.

30

Lower Top Lower Bottom formation along with Faster Retracement
We have assumed that the end of the wave ‘B’ is at 20,665 because from thereonwards the real acceleration in
the downward trend started. Also from 20,665, the Sensex started forming ‘Lower Top and Lower Bottom’
formation.
The Sensex moved downward from 20,665 to 17,296 in just 28 trading sessions and which is according to us as
wave ‘A’ and this downward move was retraced by more than 61.8% by the current upward move which has
started from 17,296.
Time Rule
The downward move from 20,665 to 17,296 took 28 trading sessions and according to the rule designed by Glenn
Nelly, corrections should/ must take more time than the move it is correcting and this rule is properly followed
by the current upward move (from 17,296) as it has taken 34 trading sessions so far.

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Price Rule
According to Neely if the correcting move is more than 61.8% of the previous downward move then the
whole structure goes into ‘Flat’ realm and following are the categories given in the theory of Flats.
Flat Structure
As can be seen in the pictorial presentation given above whenever 61.8% is breached the next level is 80%. If
the Sensex is able to breach 17,575 and stays above it, the next target will be 80% which is at 19,985 and
coincidently the trendline joining all the significant recent tops is also at 20,000 level.

32
We are expecting a weak ‘B’ or a normal ‘B’ because ‘C’ which will be the next big wave which will follow the
wave ‘B’ whenever it is completed should have enough strength to perform. This is because according to the
Elliot wave Analysis the length of wave ‘B’ in relation to wave ‘A’ decides whether wave ‘C’ may or may not
exceed the beginning of wave ‘B’.
On a larger scale, the downmove from 20,665 is a larger wave C. This large wave should retrace atleast 38.2%
of the previous upmove (8,047 to 20,665) which comes to 15,845. For this to happen the low of the smaller
wave B should be breached (17,296). For this to happen the recent upmove (in the form of wave B) should be
a weak B or less than normal B suggesting a maximum upmove not exceeding 20,665. However if the present
upmove lasts beyond 20,665, then we will have to relook at the whole structure.
Overall we think that the present upmove (we are in wave e of flat – to be followed by a downtrending wave f
and uptrending wave g completing a diametric formation in wave B) could last upto a maximum of 19,985,
post which a fall could begin in the form of wave C of larger wave C. This could breach the lows of 17,296 and
go till 15,845.

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Technical Commentary - Month Gone By
The Sensex opened at 17,982 on 1st March 2011. After moving in upward direction for 2 trading sessions it
made an intermediate high at 18,737 on 4th March 2011. Post this for 11 trading sessions the trend was down
but the down trend was very slow in nature as it made an intraday low at 17,792 on 21st March 2011 and in 11
trading sessions the Sensex fell by 945 points.
After making an intraday low at 17,792 on 21st March 2011, the Sensex never looked back and started rising
continuously. In next 8 trading sessions it was continuously making Higher Highs as well as Higher Lows. It
made an intraday high at 19,575 on 31st March 2011 and finally closed near the high of the day and the month
at 19,445. On Monthly charts, the Sensex formed a Bull candle.

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Learning Technical Analysis

Bollinger Bands (BB)
Bollinger Bands Technical Indicator (BB) is similar to Envelopes. The only difference is that the bands of
Envelopes are plotted at a fixed distance (%) away from the moving average, while the Bollinger Bands are
plotted a certain number of standard deviations away from it. Standard deviation is a measure of volatility;
therefore Bollinger Bands adjust themselves to the market conditions. When the markets become more volatile,
the bands widen and they contract during less volatile periods.
Bollinger Bands are usually plotted on the price chart, but they can be also added to the indicator chart (Custom
Indicators). Just like in case of the Envelopes, the interpretation of the Bollinger Bands is based on the fact that
the prices tend to remain in between the top and the bottom line of the bands. A distinctive feature of the
Bollinger Band indicator is its variable width due to the volatility of prices. In periods of considerable price
changes (i.e. of high volatility) the bands widen leaving a lot of room to the prices to move in. During standstill
periods, or the periods of low volatility the band contracts keeping the prices within their limits.
The following traits are particular to the Bollinger Band:
abrupt changes in prices tend to happen after the band has contracted due to decrease of volatility.
if prices break through the upper band, a continuation of the current trend is to be expected.
the price movement that has started from one of the band’s lines usually reaches the opposite one. The last
observation is useful for forecasting price guideposts.

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Learning Technical Analysis contd…
Calculation:
Bollinger bands are formed by three lines. The middle line (ML) is a usual Moving Average.
ML = SUM [CLOSE, N]/N
The top line, TL, is the same as the middle line a certain number of standard deviations (D) higher than the
ML.
TL = ML + (D*StdDev)
The bottom line (BL) is the middle line shifted down by the same number of standard deviations.

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Learning Technical Analysis contd…

BL = ML — (D*StdDev)
Where:
N — is the number of periods used in calculation; SMA — Simple Moving Average; StdDev — means Standard
Deviation.
StdDev = SQRT(SUM[(CLOSE — SMA(CLOSE, N))^2, N]/N)
It is recommended to use 20-period Simple Moving Average as the middle line, and plot top and bottom lines
two standard deviations away from it. Besides, moving averages of less than 10 periods are of little effect.
A strategy for trading Bollinger bands is to gauge the initiation of an upcoming squeeze. The Bollinger squeeze
is pretty self explanatory. When the bands “squeeze” together, it usually means that a breakout is going to
occur. If the candles start to break out above the top band, then the move will usually continue to go up. If
the candles start to break out below the lower band, then the move will usually continue to go down.

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Derivatives Commentary
The month of March 2011 began on a positive note. The markets however faced resistance at the previous Nifty
highs of 5600 and traded in a range with a negative bias. The bulls however came back strongly in the last week
of March 2010 and pushed the Nifty above their previous highs of 5600, thereby entering into a fresh
intermediate uptrend. In the process, it also moved above the crucial 200-day exponential moving averages.
Mutual funds were net buyers for fourth consecutive month to the tune of Rs. 28 cr during the month of March
2011 after being net buyers of Rs. 1,426 cr in Feb 2011. FIIs were reported as net buyers to the tune of Rs. 6,731
cr in cash markets in March 2011 (Data available till March 30) after being net sellers of Rs. 5313 cr in Feb 2011
(excl. data for Feb 15). FIIs were net buyers in 14 out of 21 trading sessions in the month (till March 30). In
CY11, FIIs have sold stocks worth Rs. 5066 cr (net).
The April series has started on a heavier note compared to the previous series. This indicates an increase in
conviction levels after the month gone by saw the Nifty breaking out of its previous highs of 5600. In terms of
value, the April 2011 series has begun with market wide OI at Rs.1,02,221crs. Vs. Rs.86,804crs. at the beginning
of the March 2011 series. It was Rs.97,692crs. at the beginning of the Feb 2011 series.

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Derivatives Commentary contd…

Rollovers to the April 2011 series too were higher. Nifty rollovers were at 71% Vs. 65% during the same time in
the previous series. Market wide rollover was at 85% Vs. 83% in the previous series. This combined with the fact
that the rollover costs were more than 0.6% during the April rollovers compared to the three month average of
0.4%, reflects the increased confidence levels that traders have in the current rally.
Coming to stock specific rollovers, the highest rollovers were seen in GTL, India Cement, Ruchi Soya and Godrej
Ind. The lowest rollovers were seen in Patni, Adani Ent, Sun TV and OnMobile.
Derivative indicators are giving healthy signals as the Nifty IV dipped to around 19% from 23-24% last month. The
Nifty OI PCR is giving bullish signals as it has climbed to 1.34 from 1.20 levels last month.
Technically, the markets have signaled that they have entered into a fresh intermediate uptrend. We can
observe on the daily charts that the Nifty has crossed its previous highs of 5600 and also trades above the 200
day exponential moving average. The current uptrend would reverse if the recent lows of 5348 are broken.
Index option activity suggests that the Nifty could remain in a range within the 5600-6100 levels during the
month of April 2011. We say this because the maximum call writing is being seen in the 5900-6100 strikes.
Maximum Put writing is being seen in the 5700-5600 strikes, implying that traders are expecting the Nifty to
remain above these levels for the time being. The 200 day EMA also resides near the 5600 levels, thereby
lending strong support to this level.

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Learning Derivatives Analysis

Options – time value decay:
Most investors and traders new to options markets prefer to buy calls and puts because of their limited risk and
unlimited profit potential. Buying puts or calls is typically a way for investors and traders to speculate with only
a fraction of their capital. But these straight option buyers miss many of the best features of stock and
commodity options - such as the opportunity to turn time-value decay into potential profits.
When they establish a position, option sellers collect time-value premiums, paid by option buyers. Rather than
struggling against the ravages of time value, the option seller can benefit from the passage of time, and time-
value decay becomes money in the bank even if the underlying is stationary. For option writers (sellers), time-
value decay thus becomes an ally instead of a foe. If you have ever sold covered calls against stock positions,
you can appreciate the beauty of selling time value.
Depending on where the underlying price is in relation to the option strike price, the option can be in, out or at
the money. When we say an option is at the money, we mean the strike price of the option is equal to the
current price of the underlying stock or commodity. When the price of a commodity or stock is the same as the
strike price (also known as the exercise price) it has zero intrinsic value, but it also has the maximum level of
time value compared to that of all the other option strike prices for the same month. Figure 1 provides a table
of possible positions of the underlying in relationship to an option's strike price.
Fig 1

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Learning Derivatives Analysis contd…

As can be seen in Figure 1 above, when a put option is in the money, the underlying price is less than the
option strike price. For a call option, 'in the money' means that the underlying price is greater than the option
strike price. For example, if we have a Reliance call with a strike price of 1100 (an example we will use to
illustrate time value below), and if the underlying stock index at expiration closes at 1150, the option will
have expired 50 points in the money (1150 - 1100 = 50).
In the case of a put option at the same strike price of 1100 and the underlying at 1050, the option at
expiration also would be 50 points in the money (1100 -1050 = 50). For out-of-the-money options, the exact
reverse applies. That is, to be out of the money, the put's strike would be less than the underlying price, and
the call's strike would be greater than the underlying price. Finally, both put and call options would be at the
money when the strike price and underlying expire at the exact same price. While we are referring here to
the position of the option at expiration, the same rules apply at any time before the options expire.
With these basic relationships in mind, let's now take a closer look at time value and the rate of time-value
decay (represented by theta, from the Greek alphabet). If we leave volatility aside for now, the time-value
component of an option, also known as extrinsic value, is a function of two variables: (1) time remaining until
expiration and (2) the closeness of the option strike price to the money. All other things remaining the same
(i.e. no changes in the underlying and volatility levels), the longer the time to expiration, the more value the
option will have in the form of time value. But this level is also affected by how close to the money the
option is. For example, two call options with the same calendar month expiration (both having the same time
remaining in the contract life) but different strike prices will have different levels of extrinsic value (time
value). This is because one will be closer to the money than the other.
Figure 2 below illustrates this concept, indicating when time-value would be higher or lower and whether or
not there will be any intrinsic value (which arises when the option gets in the money) in the price of the
option. As Figure 2 indicates, deep in-the-money options and deep out-of-the-money options have little time
value. Intrinsic value increases the more in the money the option becomes. And at-the-money options have
the maximum level of time value but no intrinsic value. Time value is at its highest level when an option is at
the money because the potential for intrinsic value to begin to rise is the greatest right at this point.

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Learning Derivatives Analysis contd…

Fig 2
In Figure 3 below, we simulate time-value decay using three at-the-money Reliance call options, all having
the same strikes but different contract expiration dates. This should make the above concepts more tangible.
Taking our series of Reliance call options, all with an at-the-money strike price of 1100, we can simulate how
time value influences an option's price. Assume the date is Feb 8. If we compare the prices of each option at
a certain moment in time, each with different expiration dates (Feb, March and April), the phenomenon of
time-value decay becomes evident. We can witness how the passage of time changes the value of the options.
Figure 3 graphically illustrates the premium for these at-the-money Reliance call options with the same
strikes. With the underlying stationary, the Feb call option has five days remaining until expiry, the Mar call
option has 33 days remaining and the Apr call option has 68 days.
As Figure 3 shows, the highest premium is at the 68-day interval (remember prices are from Feb 8), declining
from there as we move to the options that are closer to expiration (33 days and five days). Again, we are
simply taking different prices at one point in time for an at-the-option strike (1100), and comparing them.
The fewer days remaining translates into less time value. As you can see, the option premium declines from
38.90 to 25.70 when we move from the strike 68 days out to the strike that is only 33 days out.

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Learning Derivatives Analysis

Fig 3
One important dynamic of time value decay is that the rate is not constant. As expiration nears, the rate of
time-value decay (theta) increases. This means that the amount of time premium disappearing from the
option's price per day gets greater with each passing day.
Conclusion
While there are other pricing dimensions (such as delta, gamma, and implied volatility), a look at time-value
decay is a good place to start when beginning to understand how options are priced.

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Extract of Calls during March 2011

Index Futures Calls
Date B/S Trading Call Entry at Sloss Targets Exit Pric e / CMP Exit Date % G/L Comments Time Horizon Avg. Entry Abs. Gain/Loss
15-Mar-11 S Nifty Futures 5438-5454 5464.0 5370.0 5464.0 16-Mar-11 -0.3 Stop Loss Triggered 1-2 days 5446.0 -18.0
18-Mar-11 S Nifty Futures 5443-5460 5470.0 5380.0 5410.0 18-Mar-11 0.6 Premature Profit Booked 1-2 days 5443.0 33.0
Stock and Nifty Options Calls

3-Mar-11 B Nifty 5400 Put Option 85-75 60.0 125.0 108.6 7-Mar-11 35.8 Premature Profit Booked 2 days 80.0 28.6
3-Mar-11 B Tata Motors 1200 Call Option 26.8 18.7 43.0 36.5 3-Mar-11 36.2 Premature Profit Booked 1-3 days 26.8 9.7
9-Mar-11 B Nifty 5300 Put Option 61-51 41.0 120.0 41.0 14-Mar-11 -26.8 Stop Loss Triggered 1-2 days 56.0 -15.0
11-Mar-11 B TCS 1050 Put Option 15.5-11 10.0 28.0 24.5 11-Mar-11 61.7 Premature Profit Booked 1-2 days 15.2 9.4
14-Mar-11 B Tata Steel 600 Call Option 15.55 10.8 25.1 20.8 16-Mar-11 33.4 Premature Profit Booked 1-3 days 15.6 5.2
17-Mar-11 B Tata Motors 1150 Put Option 43-30 25.0 70.0 25.0 24-Mar-11 -37.5 Stop Loss Triggered 5 days 40.0 -15.0
17-Mar-11 B Hindalco 200 Put Option 6.25-4.5 4.0 12.0 9.4 21-Mar-11 50.4 Premature Profit Booked 2-3 days 6.3 3.2
24-Mar-11 B Nifty 5500 Put Option 30-42 29.0 75.0 29.0 25-Mar-11 -21.6 Stop Loss Triggered 2-3 days 37.0 -8.0
Trading/BTST/Futures Calls
1-Mar-11 B Havells 328-320 318.0 350.0 338.5 1-Mar-11 3.2 Premature Profit Booked 3 days 328.0 10.5
4-Mar-11 S Punj Lloyd Fut 65-66.5 67.5 61.0 61.4 7-Mar-11 6.1 Premature Profit Booked 2-3 days 65.4 4.0
8-Mar-11 B Hind Copper 304-300 295.0 325.0 313.5 9-Mar-11 3.1 Premature Profit Booked 3 days 304.0 9.4
11-Mar-11 S Maruti Fut 238.5-1253 1261.0 1195.0 1213.0 15-Mar-11 2.6 Premature Profit Booked 1-2 days 1245.8 32.8
14-Mar-11 S ABB Futures 732-740 750.0 700.0 750.0 16-Mar-11 -1.9 Stop Loss Triggered 3 days 736.0 -14.0
14-Mar-11 S Kotak Bank Fut 416-425 430.0 390.0 430.0 23-Mar-11 -2.0 Stop Loss Triggered 5 days 421.5 -8.5
21-Mar-11 S Welcorp Futures 193-197 198.0 184.0 198.0 24-Mar-11 -0.5 Stop Loss Triggered 1-2 days 197.0 -1.0
22-Mar-11 B Bata India 346-347.5 340.0 365.0 360.8 23-Mar-11 3.9 Premature Profit Booked 2-5 days 347.3 13.5
22-Mar-11 B Dwarkesh Sugar 67.5-70 67.0 77.0 75.4 22-Mar-11 8.3 Premature Profit Booked 2-3 days 69.6 5.8
23-Mar-11 B Atlanta 81-79 78.0 87.0 86.6 24-Mar-11 8.1 Premature Profit Booked 2-3 days 80.1 6.5
23-Mar-11 B KLG Systel 60-60.7 57.8 67.0 63.5 28-Mar-11 5.1 Premature Profit Booked 2-5 days 60.4 3.1
23-Mar-11 B AP Paper 156-160 175.0 185.0 179.8 23-Mar-11 12.9 Premature Profit Booked 2-3 days 159.2 20.6
23-Mar-11 B Moserbaer 39-41.5 38.5 46.0 44.3 25-Mar-11 7.9 Premature Profit Booked 2-3 days 41.0 3.3
28-Mar-11 B LIC Housing Finance 210-204 203.0 225.0 216.3 28-Mar-11 3.2 Premature Profit Booked 2-3 days 209.5 6.8
29-Mar-11 B Piramal Life 103-95 90.0 120.0 112.0 30-Mar-11 8.7 Premature Profit Booked 10 days 103.0 9.0

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FII & Mutual Fund Flow and indices moves during March 2011
Total FII Inflow s/Outflow s during the month of Marc h 2011 (A ll figures in Rs. Cr.)
W eek Ended Buy Sold Net Cumulative
7/3/2011 10897.0 9573.0 1324.0 1324.0
14/3/2011 9279.1 8504.6 774.5 2098.5
21/3/2011 9571.7 11064.1 -1492.4 606.1
28/3/2011 11880.1 8255.6 3624.5 4230.6
31/03/2011 6660.7 4160.7 2500.0 6730.6
Total 48288.6 41558.0 6730.6

* Da ta no t a va lia ble fo r 31s t M a r 2011
Total MF Inflow s/Outflow s during the month of Marc h 2011. (A ll figures in Rs. Cr.)
W eek Ended Buy Sold Net Cumulative
7/3/2011 2302.6 2089.4 213.2 213.2
14/3/2011 1844.4 1762.3 82.1 295.3
21/3/2011 1882.1 1892.7 -10.6 284.7
28/3/2011 2963.0 2319.4 643.6 928.3
31/03/2011 1137.2 2037.1 -899.9 28.4
Total 10129.3 10100.9 28.4
BSE Indic es 31-Mar-11 28-Feb-11 % c hg BSE Indic es 31-Mar-11 28-Feb-11 % c hg

Sensex 19445.2 17823.4 9.10 Realty 2337.0 1981.7 17.93
Smallcap 8175.9 7817.3 4.59 Bankex 13299.8 11840.3 12.33
Midcap 6873.4 6373.2 7.85 Consumer Durables 6239.7 5631.6 10.80
500 7437.3 6850.4 8.57 Metal 16161.4 15348.8 5.29
200 2378.7 2185.9 8.82 IT 6548.1 6106.8 7.23
100 10095.7 9259.5 9.03 Capital Goods 13233.9 12399.8 6.73
Power 2712.1 2523.3 7.48 PSU 8960.1 8380.6 6.91
FMCG 3596.1 3432.4 4.77 Healthcare 6023.6 5718.0 5.35
Auto 9290.8 8252.9 12.58 Oil & Gas 10240.6 9459.5 8.26

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Gainers & Losers – March 2011

Top Gainers From F&O Top Losers From F&O
Pric e Pric e Pric e Pric e
2/28/2011 3/31/2011 % c hg 2/28/2011 3/31/2011 % c hg
DCHL 57.2 80.3 40.4 AREVAT&D 276.7 247.8 -10.4
APOLLOTYRE 52.5 69.6 32.6 EDUCOMP 467.8 419.4 -10.3
DLF 211.9 268.6 26.8 NATIONALUM 106.1 95.6 -9.9
HINDOILEXP 158.5 200.8 26.7 PIRHEALTH 458.3 416.8 -9.0
RCOM 85.8 107.7 25.5 MCDOWELL-N 1107.1 1024.8 -7.4
ESCORTS 113.1 141.7 25.3 GLAXO 2208.6 2063.0 -6.6
AMBUJACEM 117.9 147.4 25.1 ADANIPOWER 119.2 112.8 -5.4
HEXAWARE 53.1 66.1 24.5 SUZLON 46.7 44.6 -4.4
STRTECH 47.2 58.6 24.0 MPHASIS 431.5 415.3 -3.8
RELCAPITAL 475.5 583.2 22.7 DABUR 99.8 96.1 -3.7
Top Gainers From CNX 500 Top Losers From CNX 500
Pric e Pric e Pric e Pric e

2/28/2011 3/31/2011 % c hg 2/28/2011 3/31/2011 % c hg
BINDALAGRO 34.2 58.3 70.5 KGL 14.8 10.6 -28.4
TATACOFFEE 564.6 961.8 70.4 ASIANELEC 13.7 10.8 -21.5
PARSVNATH 29.5 45.6 54.8 MID-DAY 6.9 5.5 -20.4
FMGOETZE 142.5 202.5 42.1 MASTEK 139.9 121.6 -13.0
DCHL 57.2 80.3 40.4 RAJESHEXPO 124.8 108.8 -12.9
GUJFLUORO 266.1 358.6 34.7 SURYAROSNI 109.0 95.3 -12.6
AMTEKAUTO 112.0 150.7 34.6 DHAMPURSUG 67.6 59.7 -11.7
ALFALAVAL 1130.3 1516.4 34.2 BEPL 36.1 32.0 -11.4
APOLLOTYRE 52.5 69.6 32.6 BANARISUG 650.0 581.3 -10.6
VENKEYS 487.9 634.6 30.1 AREVAT&D 276.7 247.8 -10.4

46
RETAIL RESEARCH TEAM
Head of Research Fundamental Analyst

Deepak Jasani Mehernosh Panthaki
Technical/Derivatives Harshal Patil
Analyst
Sneha Venkatraman
Adwait Sapre
Tiju K Samuel
Subash Gangadharan
Kushal Sanghrajka
Aditi Junnarkar
Siddharth Deshpande
Mutual Fund Analyst
Dhuraivel Gunasekaran
Production
Sushma Chavan
HDFC Securities Limited, I Think Techno Campus, Bulding –B, ”Alpha”, Office Floor 8, Near Kanjurmarg Station,
Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone (022) 30753400 Fax: (022) 30753435
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for
circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an
offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not
represent that it is accurate or complete and it should not be relied upon as such. We may have from time to time positions or options
on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment banking, or other
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clients, including, but not limited to, Institutional Clients

Monthly Report April 2011 Highlights Indian Equity Markets Rally

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Monthly Report April 2011 Highlights Indian Equity Markets Rally

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Monthly Report April 2011 Retail Research

Monthly Report April 2011 Retail Research

Monthly Equity Commentary

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Metals 31-Mar-11 28-Feb-11 % Chg

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly 3 Month Y TD 1 Y ear Monthly 3 Month Y TD 1 Y ear

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Monthly Equity Commentary contd…

Monthly Report April 2011 Retail Research

Technical Commentary contd…

Monthly Report April 2011 Retail Research

Technical Commentary contd…

Monthly Report April 2011 Retail Research

Technical Commentary contd…