Download the original attachment

INDEX
Sr. No. Particulars 1 INDUSTRY OVERVIEW 1.1 History 1.2 Players 1.3 Industry Analysis 2 COMPANY OVERVIEW 2.1 About Group 2.2 Strength 2.3 Products 3 RESEARCH METHODOLOGY 3.1 Research Problem 3.2 Objective 3.3 Scope of Study 3.4 Data Collection 3.5 Literature Review & Data Analysis 3.5.1 Union Budget 2006-07 Emphasis on Growth 3.5.2 Macro Economic Analysis 3.5.3 Markets on High!! 3.6 Limitation of Study 4 FINDINGS & SUGGESTIONS 5 BIBLIOGRAPHY Download the original attachment Pg. No.

Project Report on

Market Still Potential to Grow..

At

ANGEL STOCK BROKING LTD.

as a partial fulfillment of Semester - IV, MBA Academic Year 2004 - 06 Prepared By: Mayur R. Barasiya Guided by: Dr. Pratapsinh Chauhan Dept. Head & Professor Submitted to: Department of Business Management Saurashtra University, Rajkot
Download the original attachment

INDUSTRY OVERVIEW
Glimpses of World Market History:
The first join stock company: There's a hot IPO up for grabs! Buy it before the issue closes! The first time that the world heard that spiel was as far back as 1553. The story has stayed the same down the ages. Create enough hype and hoopla and investors will fight to purchase shares in any business. So it was, in 1553, when Sir Richard Willoughby, an explorer in London wanted to finance a venture to find a passage to the East. His company had a wild and romantic name- The Mysterie and Compagnie of the Merchant Adventurers for the Discoverie of Regions, Dominions, Islands and Places Unknown.

Its shares were offered to a small set of merchants. The issue was subscribed fully. The investors made a killing, for Willoughby's ship returned from Moscow with riches galore. The Muscovy Company- as it was then called- had created a historic first. Of course, Willoughby died in the attempt. The Muscovy Company wasn't the first to actually come out with an IPO. But, it created a buzz in the markets, and other large enterprises with projects on hand and hungry for money tried to emulate its financing strategy. Over a period of time, as this route of financing grew popular, entrepreneurs latched on to this mode of easy money. This was how stock market as a concept was born. The term 'stock' comes from a French term " souche" which means a stub or stump of a tree trunk, and refers to the tally upon which debts and claims were notched. Speculation as an activity dates back way before the 16th century. For instance, The Bank of Venice had issued the first government bonds sometime in the middle of the 12th century. These were heavily traded by merchants in the city. Stock markets, in their earliest form, were exchange markets for goods and services. Since time immemorial merchants have gathered at key locations to trade goods. In the city-states of medieval Italy there were flourishing markets in crops, metals, textiles etc. Not only did merchants trade in actual commodities, but also took calls on the possibility of future harvests and shiploads of commodities. As a natural corollary, trading in instruments of credit also flourished. Banks traded in the future values of receivables. In the 15th century, most tradable paper was linked to government debt or commodities. As business and financing grew beyond the borders of a country, the need for stable sources of financing increased. As European countries- notably England, France, Portugal, and Holland - began to extend their political influence into Asia and Africa, business followed almost hand in glove. It was an interesting phenomenon- the political masters of the day were interested in increasing their spheres of influence, while business interests found in the Asian and African countries, a tremendous opportunity for making money through trade. Not surprisingly then, trading companies were in the forefront in offering IPOs. Hollands first widely owned company and for centuries, its largest -- was the Dutch East India Company which was set up in 1599. Monies raised were used to finance expeditions and wars. The modus operandi of companies such as this one was simple. Buy cheap in the east and sell dear in the West!

Order began to emergence: Stock Exchanges as a centre for trading were established only in the 16th century. In Antwerp, Belgium, traders gathered together in 1531 to speculate in shares and commodities. This was the world's first Stock Exchange and it was born in a city that was known for shipping and trading. Hamburg, in Germany, also a trade powerhouse, followed in 1558. Amsterdam came next, in 1619. London and Paris also set up Exchanges sometime near the end of the 17th century. Why did these Exchanges actually form at the time they did? The precise answers will probably never be known. But it is interesting to note that in each case they were set up in the most powerful business and trade centres of the day. They arose as a result of the dual need for financing by businesses, and for returns by those providing the finance. Whatever be the reasons, this was an idea whose time had finally come. Almost a hundred years later, in 1792, came the New York Stock Exchange (NYSE). The last would be a seminal event- the NYSE is today one of the most powerful exchanges in the world. It was started when refinancing of government debt into tradable bonds, together with a stock issue by the Bank of the United States, had fueled rapid speculation in securities. Consequently, around 20 brokers decided it was worth their while to actually form an Exchange. It wasn't roses all the way. Almost right from the beginning stock markets were, to the unwary investor, pits of danger and greed. Companies that offered to create perpetual-motion machines often came to the markets. "Take every gain without showing remorse about missed profits" said Joseph de la Vega, author of "Confusion de Confusiones," published in 1688. "These Stock Exchange people are quite silly, full of instability, insanity, pride and foolishness. They will sell without knowing the motive; they will buy without reason." As an example of a speculative disaster there is precious little to beat the "Tulipmania," that swept the world in the 17th century. Tulip bulbs, as part of an inexplicable fad, began to be treated as the most precious of commodities. Traders began to buy and sell exotic tulip bulbs on exchanges. Prices doubled weekly. People began to buy shares of a single bulb. But by around 1637, the madness subsided, as investors pulled out triggering a huge crash. Theres another example of madness. The South Sea Bubble Company bought many in London to the verge of ruin. The South Sea Company had been granted a trading monopoly with South America and the Pacific. In 1720 speculators bid up shares nearly tenfold. England's King and Prime Minister got into the act! A crash soon followed when expectations did not quite match up to reality.

The Big Push to Here and Now: It can be said that the law of averages has consistently operated in favour of equity investment. We only have to look at the experience of US investors in the 20th century, since this is one market where long-term data exists. In the years from 1926 to 1997, the S&P 500 Index has provided the highest annualised returns (11 per cent) as compared to all other classes of investment, i.e. Long Term Corporate Bonds (5.7 per cent), Long Term Government Bonds (5.2 per cent), Intermediate Term Government Bonds (5.3 per cent) and US Treasury Bills (3.8 per cent). Meanwhile inflation has averaged 3.1 per cent through this period. In the 20th century, a continuing surge in volume has required Exchanges to embrace more sophisticated technology. Screen-based trading has become the order of the day though, of course, the NYSE still follows a variation on the open outcry system with specialists. The capital markets have mirrored the shifts in the world eeconomy. Thus the Far East and Japan now boast some of the leading Exchanges. Emerging market investing has become a field for specialists. Meanwhile a bewildering array of developments in structure and content - fundamental and technical analysis, derivative trading, cross border trading, futures and options, etchas brought increasing complexity. And some investors such as Warren Buffet, Peter Lynch, Mark Mobius- have even become cult figures. And as has been seen in the past in the currency markets, sometimes they become even more powerful than governments. Of course Stock Exchanges continue to change under the pressure of technology. In the future, with increasing Internet usage, they will change again. The merger between Frankfurt and London is one possible direction. All kinds of investors will be logged on directly. And Exchanges could merge to become one vast virtual global market. That may happen in the near future. The 20th century: After the First World War (1914-1919), there was a period of great economic prosperity. In the 1920s, many of the Dow Jones Industrial Average (DJIA) stocks rose more than five-fold in value. This spurred on investors with little or no knowledge of equities to make a quick buck. The classic example is an article in the August 1929 issue of the Ladies Home Journal, titled "Everybody Ought to be Rich". This article claimed that returns of 20 per cent on equities would now be a common phenomenon. Everyone got into the game, and brokers promised investors the earth.

All this came to a spectacular end. The crash of 1929 in New York, brought misery to one and all. It is said that brokers and bankers jumping out of skyscrapers was a common sight. On October 24, 1929, (Black Thursday) the Dow lost 30 per cent in value, thus signalling the end of a decade (known as the Roaring Twenties) of market growth. Paper millionaires became destitute overnight. The mayhem ended in mid-1932, with the Dow down a whopping 90 per cent in value from its peak in 1929. The drop in stocks was worth $30 billion, which was about 30 per cent of the GDP! Soon afterwards the linkages between the markets and the economy was amply demonstrated, when the US entered its longest and deepest economic slump. It would take the Dow 25 years to get back to the highs established in 1929. The Great Depression, as the post crash slump came to be known is still remembered and studied in the US as a time of great despair. Taking Root: Rise,fall and rise again The years 1929-1954 are also known more for the structural reforms on Wall Street than any major speculative activity. In 1934, for instance, the Securities and Exchange Commission (SEC) was established to police Wall Street behavior and protect investors from fraud. Also, after 1929, there was an increasing interest in study and development of techniques of stock market investment. As a result equity and technical research were given an added impetus. In these years also, came about the setting up and development of Exchanges all the world over. The first great bull period came in the US in the 1950s, from 1954 to 1969. The 50s in particular were years of great economic prosperity for Americans and this was reflected in one of the longest bull runs in history; from 1954 to 1969. The next decade would not be so good. The 1970s, in fact, were some of the worst years in stock market history. This would happen in the aftermath of the oil shocks of the early 1970s, and the currency devaluations that followed. Then came the mergermania induced bull run of the 1980s, the period that was dominated by the junk- bond king, Mike Milken and Ivan Boesky. There was another period of panic, "Black Monday," October 19, 1987, when the Dow lost 23 per cent in value on a single day. However, within a year the market was scaling new heights. The next wave would come about in the late 1990s the period everyone now refers to as the dotcom revolution. Too much has been said and written about this phase and to mention it here would be an overkill. It can be said, however, that this period has taken valuations to abnormally high levelsaverage P/Es of 35 or so on the NYSE, as compared to the historical 15. Whether these levels are sustainable is anyone's guess.

From Here, Where? It can be said that the law of averages has consistently operated in favour of equity investment. We only have to look at the experience of US investors in the 20th century, since this is one market where long-term data exists. In the years from 1926 to 1997, the S&P 500 Index has provided the highest annualized returns (11 per cent) as compared to all other classes of investment, i.e. Long Term Corporate Bonds (5.7 per cent), Long Term Government Bonds (5.2 per cent), Intermediate Term Government Bonds (5.3 per cent) and US Treasury Bills (3.8 per cent). Meanwhile inflation has averaged 3.1 per cent through this period. In the 20th century, a continuing surge in volume has required Exchanges to embrace more sophisticated technology. Screen-based trading has become the order of the day though, of course, the NYSE still follows a variation on the open outcry system with specialists. The capital markets have mirrored the shifts in the world economy. Thus the Far East and Japan now boast some of the leading Exchanges. Emerging market investing has become a field for specialists. Meanwhile a bewildering array of developments in structure and content - fundamental and technical analysis, derivative trading, cross border trading, futures and options, etchas brought increasing complexity. And some investors such as Warren Buffet, Peter Lynch, Mark Mobius- have even become cult figures. And as has been seen in the past in the currency markets, sometimes they become even more powerful than governments. Of course Stock Exchanges continue to change under the pressure of technology. In the future, with increasing Internet usage, they will change again. The merger between Frankfurt and London is one possible direction. All kinds of investors will be logged on directly. And Exchanges could merge to become one vast virtual global market. That may happen in the near future.

The Great Indian Share Bazaar

The First Great Bull Run: The stock markets always look ahead. That is a bedrock principle of its existence. But sometimes there are moments - when you walk through the history-laden bylines near Dalal Street in Mumbai, look up to the Bombay Stock Exchange towering above, watch

row upon row of traders poring over iridescent screens, observe the impersonal and often cruel workings of high finance - when you wonder if the past should always be discounted so easily. For, the client who orders a trade, the broker who executes that order in the Stock Exchange and the various organizations and agencies that watch over them, are only players in a tradition that goes back far beyond memory, and will carry on long after they have gone. These are questions to which there are no easy answers. Who was, one wonders, the first securities trader in India, which was the first trading ring, and what was the first trade ever made? Where it began: The answers are obscured in the mists of time. Historical records, as and where they exist, rarely speak about business and speculative activity except in passing. However, one can probably say that the seeds of stock broking in India were probably sown by the British East India Company way back in the 18th century. The term paper (promissory notes, debt instruments) floated by the company to finance its activities is one of the first recorded instances of group speculative activity of any kind in India. But is this as far as official records go? Speculation existed in India even prior to the advent of British rule in India, at various points in time. Hundis or bills of Exchange were vigorously bought and sold by almost all trading communities in India, especially in the medieval ages. One cannot, however, classify this as an organized speculation. That is built around an Exchange, which requires political and economic stability, an enforceable legal code and the rudiments of uniform business practices. And it was only when John Company's, (as the East India Company was commonly known) power and reach began to extend across India that a whole new field of speculation emerged, built around the trading company's loan securities. The 19th century saw Indian business enterprises flourish and merchants and speculators in Western India began to actively trade in the loan securities and shares of companies. This was facilitated by the formation of joint stock companies that sprung up around banking, real estate and the cotton industry. Trading was irregular and revolved around a select group of businessmen who hailed from prosperous trading zones of India. Around 1860-61 Indian business received a big boost, when demand for cotton was generated by the onset of the American Civil War. Prior to the Civil War, mills in England imported only around 20 per cent of their requirements from India. But the Civil War pushed up cotton prices and by 1865 Bombay registered a whopping 70 million pound sterling in the cotton trade.

A surge in business activity led to speculation. Brokers sprang up to deal in barter stocks of companies that were doing great business- banks, real estate and cotton companies. By January 1865, Bombay had 31 banks, eight land reclamation companies, 16 cottonpressing companies, 20 insurance companies, and 62 joint stock companies. But it took one man- as it often does- to bring matters to a head. That was Premchand Roychand. He was the first big bull of speculative trading in India and had a fan following and prestige in Bombay that was unrivalled even by some of the biggest businessmen of the times. Known variously as the Cotton King, and the Bullion King, Roychand's life is the stuff of romance. He came to Mumbai in search for work and became one of the most successful traders in the city. He made his first fortune during the cotton boom, and founded the Bank of Bombay. He lived in a huge mansion in Mazagaon. In fact, he donated money for the famous Rajabai Clock Tower (named after his mother) and the library in the University of Mumbai. Roychands market operations were simple. Realizing that an aggressive business community had discovered ways of making quick money through buying and selling of shares, he proceeded to create the conditions that would best suit these speculators. Hundred years later, Harshad Mehta, the controversial broker would follow his example. Roychand utilised a loophole in the law that allowed banks to give advance on government securities and other public companies. He promised banks quick returns on their loans. Banks became interested in lending funds to buy securities that purportedly had sound fundamentals. Roychands Bank of Bombay also was in this game. This money was then used to ramp up stock prices of the same scrips, and the classic boom cycle was underway. Prices soared and one particular stock, The Back Bay Reclamation share, traded at Rs.50,000! Factoring for inflation this is probably the most expensive share in the history of the bourses even now! Back bay Reclamation Company, was the leader of a series of land reclamation schemes extant at that time in Mumbai. Not surprisingly, broking housing almost quadrupled in five years to 250 by the beginning of 1865. The business was still unstructured with no common meeting place or a trading room. Trading took place at predetermined spots in and around what is today known as Dalal Street in Mumbai. Great crash birth on BSE: The inevitable crash came in mid 1865. The American Civil war ended and a number of companies went bankrupt as orders from the USA dried up. Companies collapsed and so did the prices of their scrips

Adding to the mess, speculators defaulted on payments for scrips purchased during the boom. The market mover, The Back bay Reclamation Company went bust and triggered the first great crash. interests of the community and the public at large. And thus, in 1875, was set up the Stock Exchange, Bombay. It was intended as a voluntary, non-profit making association that was termed the "The Native Share and Stockbrokers Association". In the early days, trading was conducted under a banyan tree in front of the town hall. The tree can still be seen in the Horniman Circle Park! Roychand was at the forefront in framing rules, procedures and conventions for trading. In fact, to him also goes the credit of being the first broker who could speak and write in English. The Exchange was established with 318 members with a fee of Re. 1 per member. The next seminal step came in 1887, when the objectives and rules of the Stock Exchange were framed by a charter, objectives that are in force even today. They are:

To safeguard the interest of the investing public having dealings with the Exchange and the members To establish and promote honorable and just practices in securities transactions. To promote, develop and maintain a well-regulated market for dealing in securities To promote industrial developments in the country through efficient resource mobilizations by way of investment in corporate securities.

A few years later, in January 1899, the Brokers' hall was inaugurated by one James M Maclean. After the First World War the Exchange was shifted to an old building near the Town Hall. In 1928, the present plot of land where the BSE stands today was acquired and a building constructed in 1930.

The Middle Years-The Stock Exchange Culture Spreads: In the years that were to follow, a stock Exchanges/trading culture took hold in India. The second stock Exchange came up in 1894 at Ahmedabad, not surprisingly since it was one of the largest industrial and trading centers in India at the time. The Calcutta Stock Exchange (CSE) was the third Exchange to be born, in June 1908. It is interesting, and in hindsight logical, how regional Exchanges developed around the industries nearby. Tea, Coal, Railways and Jute company shares were commonly traded on the CSE, while the Madras Stock Exchange, set up in September 1937, catered to the

mills and plantations in the area. India's fifth Exchange, the Delhi Stock Exchange was formed by the incorporation of two different Exchanges on June 25, 1947. Today there are 24 Stock Exchanges located across the length and breadth of the country. Since the 90s, the country has seen the formation of three Exchanges-the formation of the Over the Counter Exchange of India (OTCEI) and The National Stock Exchange Of India (NSE), and the Interconnected Stock Exchange of India. Independence and afterwards While Exchanges have risen, and sometimes fallen, progress for the first hundred years was neglected against the overpowering backdrop first of India's struggle for independence and then of a socialist economy. In 1945, the BSE had 500 members on its rolls of which only half were active. Most of trading was speculative in nature. When the country gained independence in August 1947, the markets did not react at all. However, Jawaharlal Nehru's five-year plan strategy had an unintended impact on the bourses-- in building the temples of modern India, the government kick started trading. Not too many memories survive to give witness to the first two or three decades of the post independence era. The 50s and 60s, however, were largely speculative periods. Brokers were considered "little better than gamblers". The biggest broker of the 50s was one Hathibhai who, old timers say, would put even some current big bulls to shame with the size of his operations. Hathibhai's favorite was TISCO. In the 1960s, the favored scrips were Tisco and Century Mills. Other favored scrips were Bombay Dyeing, Telco, and Indian Iron. During that time, the big bull was Mahindra Mansukh, who mainly speculated in the Standard Mills counter. The other names to be reckoned with were Subhangh Chand and Manik Chunni Lal. Incidentally forward trading was banned in June 1969 because it was alleged that Morarji Desai wanted to prevent industry baron Ramnath Goenka from cornering the shares of Indian Iron. The ban was lifted in its entirety only in March 2000. The first real fillip towards attracting a larger mass of retail interest came about in the 1970s. The government nationalized industries and in the process asked foreign companies to dilute their equity. With the enactment of the Foreign Exchange Regulations Act (FERA), MNCs were forced to dilute equity. The middle class realized that there was easy pickings in the market and thus brought in a new era of investing.

It was short lived though. In July 1974, the markets crashed, as in a quixotic move the government decided to restrict payment of dividend by companies. The rationale for such a move was that since they government had impounded dearness allowance of its employees, this too was fair game. Emergency was imposed a year later and the market reacted adversely. The Years of Great Change: Looking back, it seems that the real investor story came in the 1980s. There were two main trends that set apart this decade. First, and foremost, retail interest in investing took a great leap forward. It is exemplified best by one Dhirubhai Ambani, who foresaw and took advantage of a pent up retail interest through his vehicle, Reliance Industries Ltd (RIL). Others, such as Bombay Dyeing, too made their mark. But one scrip ruled among them all- TISCO, which was the barometer of the market almost right through the 1980s. In 1985, Rajiv Gandhis government partially liberalized the economy and that energized the markets. The most dramatic changes in the 125 year long history of the bourses, however, have taken place only in the 1990s. In fact, the last decade has seen some of the most farreaching changes ever. It began innocuously. In 1991, Prime Minister Narasimha Rao and his finance minister Manmohan Singh started to unshackle the Indian economy piecemeal. One year later, in 1992, there was a bull run to end all bull runs. In a market that was dominated by broker cliques, lack of transparency and multi- institutional participation, it was doomed right from the start. In a near replica of Premchand Roychand a hundred years ago, Harshad Mehta and his group of brokers took advantage of banking loopholes that allowed them to borrow money and pump it into the stock markets. These huge funds were used to create and pump up demand for obscure shares, Karnataka Ball Bearings and Mazda Leasing being some of the most famous examples. In June 1991, the sensex was at 1170 points. By April of next year it had shot up to 4467 points. When the scam broke, through an article written in the Times of India, the sensex was down to 2800 in a week. And yet another bear phase started. Harshad Mehta almost went into oblivion, as did his coterie of brokers, bogged down by legal and taxation problems. Mehta was fighting his legal and financial battles till and of his life. Government Cracks the Whip: In the dust and din of allegations, bankruptcies, recriminations and government led investigations; some key changes began to be effected. The Securities and Exchange Board of India (SEBI) was created in January 1992 to regulate the capital markets,

modeled on the lines the Securities and Exchange Commission (SEC) in the United States of America. Through this institution the government sought to effect some critical structural and legal changes, aimed at making the markets more transparent and professional. Since 1992, series of regulations have been passed to bring order to the stock market. Just listing the names of some of these provides a perspective on the change that has taken place - The Merchant banker Regulations (1992); Insider Trading (1992); Underwriters Regulations (1993); Bankers to an Issue (1994); FIIs regulations (1995), Mutual Fund Regulations (1996); Depositories Regulations (1996) and the Venture Capital Regulations (1996). Incidentally, in 1995 another historic practice came to an end - the BSE switched over from the open out-cry system to screen based trading for the first ever time since its inception. While the process of enforcing order on the Exchanges continues, the National Stock Exchange (NSE) has had perhaps the most impact. It commenced trading operations in the Debt Market segment in June 1994 and followed with equities in November 1994. The latter was a critical milestone. In six short years, the NSE has done more for the markets than any other institution. Most important, it has broken the domination of the BSE, which till then was the premier Exchange of the country. It created a new member class of professional brokers, who could now afford to ignore the BSE, its antiquated rules, reluctance to change and the old boy network of insiders. NSE brought in greater degree of professionalism and as result corporate entities and individuals began to buy into memberships of the bourses. Equity Research as a new job sector also commenced around this time. As trading interest began to shift to the NSE, other Exchanges, including the BSE were forced to modernize. They became more investor friendly and accountable. In fact the other most visible impact of the NSE has been a rise in trading volume and accessibility of the markets to investors everywhere. It has also created the ground for dematerialization of shares (through the NSDL). The two other Exchanges that were set up in the 90s with great fanfare have been the Over The Counter Exchange of India (OTCEI) and the Interconnected Stock Exchange (ISE). The OTCEI, begun on the lines of NASDAQ, has not clicked. Meanwhile, the jury is still out on the ICSE, the Exchange that is to link up the 'secondary' bourses in the country. New Players, New Games:

The 1990s have seen three bull runs. Post-1992, the next bull run commenced in January 1994. It petered out by September/October of that year. There was another bull run in 1996 but that too ran out of steam in six or seven months. And, at the moment we are poised tantalizingly in one of the biggest bull markets of the decade, one that begannear the end of December 1998. Over the 1990s the number of players who have the ability to impact on the bourses have also increased- a healthy sign. In fact the last two bull runs have been dominated largely by FIIs. Over the years, also, the direction of equity investment has changed so radically as to be unrecognizable. Old blue chips- Telco, Tisco, ITC, HLL all- have been discarded for scrips in the ICE (Infotech, Communications, Entertainment) sectors. Infosys, Zee, Wipro and Satyam have become the new touchstones of punters everywhere. The next thrust will come in the shape of Internet based trading, which is starting off gingerly. It is believed that this single innovation, which permits small investors to trade unaided on the Net, will greatly expand the reach of the equity culture to all parts of India. Increased Mutual Fund and FII domination, greater corporatisation of brokerages, and a greater retail thrust are probably going to be the trends of the future. And, yes, broker domination of the markets has not gone away entirely. There are the big players like Ketan Parikh. In the bull run three months ago, Ketan Parikh was the one name that dominated markets. In fact, his power over the stock markets is perhaps greater than even Harshad's in 1992. But unlike his predecessor Harshad, Ketan Parikh believes in keeping a very low profile. Its been a long journey for the Indian capital markets. The 1990s especially have seen a bewildering array of structural and procedural changes. One does not know what Premchand Roychand would have made of it all, were he to come back today. But, like the best of punters, he probably would have rolled up his sleeves, and plunged right in!

PLAYERS IN THE STOCK BROKING INDUSTRY

A) Angel Broking Ltd.

The Angel Group has emerged as one of the top 5 retail stock broking houses in india, having memberships on BSE, NSE and the two leading commodity exchanges in the country i.e. NCDEX and MCX. Angel Broking Ltd is also registered as a depository participant with CDSL. The group is promoted by Mr. Dinesh Thakkar, who started this enterprise as a small sub-broker in 1987 with staff strength of 3 personnel. As on date, the group is managed by a team of 150 professionals & 700 support staff and a nation wide network comprising 40 branches, over 2000+ sub brokers and business associates and 6000 terminals which cater to the requirements of more than 1 lacs retail clients. B) ShareKhan (SSKL) ShareKhan, Indias leading stock broker is the retail arm of SSKI(S S Kantilal Ishwarlal) an organization with over eighty years of experience in the stock market. Sharekhan offers depository services and trade execution facilities for equities, derivatives and commodities backed with investment advice tempered by decades of broking experience. Its team of dedicated analysts are constantly at work to track performance and trends. Sharekhan runs India's largest chain of share
shops with around 250 outlets in 113 cities. C)

ICICI Securities Ltd. ICICI Web Trade Limited (IWTL) maintains www.icicidirect.com (hereinafter referred to as the "Website") and owns, has the license to use or otherwise has the right to use, free of any pending or threatened liens, all content, graphics, HTML and CGI or other scripts displayed and used on the Website. Whereas IWTL is an Affiliate of ICICI Bank Limited and the Website is owned by ICICI Bank Limited. This site gives the facility of 3-in-1 accounts. I.e. the 3-in-1 account integrates your banking, broking and demat accounts. This enables you to trade in shares without going through the hassles of tracking settlement cycles, writing cheques and Transfer Instructions, chasing your broker for cheques or Transfer Instructions etc.

D) Kotak Securities Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank and Goldman Sachs (holding 25% - one of the worlds leading investment banks and brokerage firms) is Indias leading stock broking house with a market share of 5 6 %. Kotak Securities Ltd. has been the largest in IPO distribution - It was ranked number One in 2003-04 as Book Running Lead Managers in public equity offerings by PRIME Database. It has also won the Best Equity House Award from Finance Asia - April 2004

The company has 42 branches servicing around 1,00,000 customers. Kotakstreet.com the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments. Kotak Securities Limited manages assets over 1700 crores under Portfolio Management Services (PMS) which is mainly to the high end of the market. Kotak Securities Limited has newly launched Kotak Infinity as a distinct discretionary Portfolio Management Service which looks into the middle end of the market.
E) India

Infoline Ltd.

5paisa is the trade name of India Infoline Securities Private Limited (5paisa), member of National Stock Exchange and The Stock Exchange, Mumbai. 5paisa is a wholly owned subsidiary of India Infoline Ltd, Indias leading and most popular finance and investment portal. 5paisa has emerged as one of leading players in ebroking space in India. It offers two types of product: Investor Terminal (IT): - Investor Terminal is recommended for infrequent investors, who fall into the "Buy and Hold" school of investing. Trader Terminal (TT): Trader Terminal is for the dedicated day traders, who churn their portfolio on minor movements in the market, sometimes several times a day. F) Indiabulls Ltd. Indiabulls is India's leading retail financial services company with 77 locations spread across 64 cities. While our size and strong balance sheet allow us to provide one with varied products and services at very attractive prices, over 750 Client Relationship Managers are dedicated to serving unique needs. Indiabulls is lead by a highly regarded management team that has invested crores of rupees into a world class Infrastructure that provides clients with real-time service & 24/7 access to all information and products. The flagship Indiabulls Professional Network offers real-time prices, detailed data and news, intelligent analytics, and electronic trading capabilities, right at ones finger-tips. This powerful technology is complemented by knowledgeable and customer focused Relationship Managers. We are Creating a world of Smart Investor- This is what indiabulls is saying.. Indiabulls offers a full range of financial services and products ranging from Equities to Insurance to enhance customers wealth and hence, achieve their financial goals.

INDUSTRY ANALYSIS

ANGEL BROKING LTD.

About the Group:

The Angel Group has emerged as one of the top 5 retail stock broking houses in India, having memaberships on BSE, NSE and the two leading commodity exchanges in the country i.e. NCDEX and MCX. Angel Broking Ltd is also registered as a depository participant with CDSL. The group is promoted by Mr. Dinesh Thakkar, who started this enterprise as a small subbroker in 1987 with staff strength of 3 personnel. As on date, the group is managed by a team of 150 professionals & 700 support staff and a nation wide network comprising 40 branches, over 2000+ sub brokers and business associates and 6000 terminals which cater to the requirements of more than 1 lacs retail clients.

Strengths
Angels biggest strength is that we understand the needs of a sub broker and retail investors very well. Strict adherence to our business philosophy of providing the best value for money to our customer, has enabled us and our association to grow rapidly in an increasingly competitive market. The promoters vision of providing world class broking services to the Indian investors and a customer centric work culture has led to several innovation in the areas of technology, processes and people. This spirit of innovation helps you to grow your business volumes. Angel have always endeavored to provide timely research based advice to our clients from the nimble footed day traders to the long term value investors. Its 15 member equity research team comprises of experienced fundamental and technical analysts, sector specialist and derivative stringiest, who are constantly looking for new trading/ investment opportunities. This team is armed with the latest analytical tools and uses international news services like Bloomberg and Reuters to keep abreast with the latest national and global trends. Angel Commodities Broking (P) Ltd. Promoted by Angel Group, started its operations in July 2004. It has membership in Indias two premier commodities exchanges i.e. National Commodities & Derivative Exchange and Multi Commodities Exchange. At present the commodities broking services are available at all existing branches and select franchisees.

Angel Commodities Research team comprises of senior professional with relevant experience in commodities business and a sound understanding to the global scenario. Our research product are designed to suit the needs of all categories of investors. The commodities research desk provide a daily technical report, weekly report, monthly review and reports on specific commodities. This team is armed with the latest analytical tools and uses international news services to keep abreast with the latest national and global trades.

Angel Business Philosophy

Ethical practices & transparency in all our dealings Customer interest above our own Always deliver what we promise Effective cost management

Trading in securities / commodities using the internet platform is a convenient option. We provide you an opportunity to trade on BSE / NSE (Cash and F&O), NCDEX and MCX from the comfort of your home or office. Our internet trading platform gives you state-of-the-art trading facility, order and trade confirmation, e-contracts and 24X7 on-line web enabled back-office system at the click of a button.

Salient features of angel trade:

Multiple exchanges on a single screen: You can trade online on BSE, NSE-Cash and F&O, MCX and NCDEX on a single screen. Speed: We use the latest technology to generate efficient uptime and greater stability to give you high speed. Competitive brokerage rates: We believe in providing our clients the best value added services at the most competitive brokerage rates. Optimum margins: Angel gives you the trading exposure at optimum margin level Online funds transfer: The clients enjoy the convenience of online transfer of funds from their bank accounts, to the margin account of Angel, online. Personalized service: HNI clients can avail of personalized advisory services from our trained and experienced dealers, regarding trading opportunities.

Off line services: You are free to make a telephone call to any of our 40 well equipped branches across the country. Technology: Angel provides the latest infrastructure tools to support and integrate the backend and front office functionalities. Back office infrastructure: We provide an automated web enabled centralized back-office whereby the clients can have access to their trade confirmation reports, holding statement, their net position, the margins and the statement of accounts and ledgers on a 24 X 7 basis. Technical support: We remove technical difficulties through an online support system manned by qualified professionals. E - Contract notes cum bills: We provide contract notes cum bills in electronic form resulting in ease of access to trades carried out by the clients on any particular day.

Web-Enabled Centralized Back-Office Web Enabled Centralized Back-Office

All the clients registered with Angel Group have a 24*7 access to our web enabled centralized software. The clients can view their trade confirmation reports specific to BSE & NSE correspondingly for a specific day, view their ledger extracts and statements and analyze holding statement along with delivery report status, net position, margin and cash & non cash collateral related to the NSE F&O segment and evaluate profit and loss statement linked to the cash statement.

Centralized Help Desk Services

The angel group has commissioned a centralized help desk team at its corporate office under direct supervision of the cmd. This team is available from 9:00a.m. to 7:00p.m. and it is empowered to resolve all your queries and complaints on an online basis. The team is available either via the telephone (022) 2835 5000 or the e-mail feedback@angelbroking.com.

E-contract Notes cum Bills

Angel provide contract notes cum bills in electronic form. The software facilitates downloading of relevant contract notes and bills. Angel have taken adequate care and precaution about the data security, so that all our clients are assured that the data is only accessed by them and not shared with anyone else.

Chat Facility

Depository Participant
You must be aware that Angel Broking Ltd has started its depository services by registering with CDSL. There are various benefits of holding your demat account with us but the biggest advantage is that you shall be ensured of a risk free, prompt and efficient depository process. What differentiates angel DP from other DPs? : (1) Since our association is slated for a long time, we are in a much better position to know your requirement regarding your holding and transfer of securities. (2) No physical instructions are required for your sell obligations. We also offer to our clients the automated pay in facility for trade done through Angel Broking Ltd / Angel Capital and Dept Market Ltd. (3) The transaction charges that are being levied by us are the lowest in the industry as we believe in providing quality services at the most affordable costs. (4) You have an option of choosing the products offered by CDSL: a). Easy facility: You can view, download and print the updated holding of your demat account along with valuation of holding. b). Easiest facility: You can, by using this facility, submit your own delivery instructions on the internet without the intervention of your DP. This is in addition to all the facilities provided under the Easy facility. (5) We would like you to know that the state of art technology being arranged for you is the best in the industry and all this is done so that you have convenience of accessing information from any desired location.

You will enjoy the following distinctive benefits by registering with Angel :

No risk of loss, wrong transfer, mutilation or theft of share certificates. Hassle free automated pay-in of your sell obligations by your clearing members, ABL / ACDL (No need for physical instruction at all).

Reduced paper work. Speedier settlement process. Because of faster transfer and registration of securities in your account, increased liquidity of your securities. Instant disbursement of non-cash benefits like bonus and rights into your account. Efficient pledge mechanism. Wide branch coverage. Personalized / attentive services of trained help desk. Acceptance & execution of instruction on Fax. Zero upfront payment. Daily statement of transaction & holding statements on e-mail . No charges for extra transaction statement & holding statement. All in one combined Monthly Bill-cum-Transaction-cum-Holding-cum-ledger statement.

About Angel Commodities ANGEL COMMODITIES BROKING (P) LIMITED promoted by ANGEL GROUP, started its operations in Indian commodities market by acquiring memberships in India's premier multi-commodity exchanges of NCDEX (Membership No:00220) and MCX (Membership No: 12685). ANGEL COMMODITIES offers trading opportunities in commodity markets through the chain of its branches spread across the country. ANGEL COMMODITIES provides expert research / analysis to its clients in various commodities, listed in NCDEX and MCX including the international perspective of the commodities traded. It provides best technical analysis from desk of its trained and qualified analysts.

The research team of angel commodities consists of professionals who are industry veterans. The team is capable of formulating trading strategies depending on risk-return profile of the client. Today we offer a gamut of financial products to satisfy an array of financial needs.

Why trade with Angel Commodities?

Online application based trading software Online web based trading platform Online daily, weekly and monthly research Transparent and fair trade execution Individual client attention 24*7 online back office Training/education facilities / conduct of seminars State-of-the-art technology Digital contract notes cum bill: View your accounts from any where, any time Efficient risk management Competitive brokerage rates

Private Client Group Angel offers personalized advisory services to HNI investors and actively assists them in managing their portfolio. PCG can seek guidance on specific stocks in their portfolio and can get pro active advice for timely exit and fresh investments. The portfolio advisory process at angel starts with understanding each investor's risk / reward / expectations. In order to systematically diversify the holding of clients across varied sectors and with an intention to give them handsome returns, angel devised the concept of the modern portfolio:

Angel came out with its first modern portfolio in august 2002. Since then it has come out with modern portfolios which have consistently outperformed the sensex YOY. In fact, the latest portfolio by angel has successfully outperformed the sensex by a whopping 80%.

Salient features of the PCG:

The portfolio comprises fundamentally strong scrips. The ticker size of the portfolio is Rs. 5 lacs for residents and Rs. 10 lacs for NRIs. The portfolio is non discretionary. Time horizon for the portfolio ranges for a period of 12 months to 18 months.

Daily Services

Fundamental Services

Technical Services

Commodities Services

Angel Broking Ltd., Angel Securities Ltd. and Angel Commodities Broking Pvt. Ltd., Angel Capital & Debt Market Ltd. (hereinafter referred to as 'Angel') has its own unique privacy policy features. Please read the following to learn more about our privacy policy. Privacy Policy Covers... This Privacy Policy covers Angel's behavior towards the personal information which is stored while you are exploring our site and using the services on the site. Gathering and Utilization of Information... 1. Angel collects personally identifiable information while registering for Angel account, Online Trading, Derivatives.

Information Sharing and Disclosure... 1. Angel will preserve your personal information without selling or renting it to anyone. 2. Only those people or companies will have access to the information who are authorized to do so. 3. Angel will need to share your information with your consent only. Cookies... Angel may set and access Cookies on your computer. Edit Your Account Information and Preferences... Angel provides the facility to edit your Account Information and preferences at any time. Security... Your Angel Account Information is password-protected for your privacy and security. Amendments in the Privacy Policy... Angel may change this policy from time to time. You will be notified by posting a prominent announcement on our pages in case of substantial amendments in the way we use your personal information. Suggestions or Queries... You are invited to forward your queries and suggestions to the the email id feedback@angelbroking.com.

Protect Your Online Brokerage Account:

The Internet and, more recently, wireless technology have made it easy for investors to check brokerage account information and initiate investment transactions on the go. Angel is issuing this Alert to warn investors to take precautions to help ensure the security of their brokerage accounts. Not doing so puts your account information and investments.at.risk

Problems :

Today all class of investors are in the equity market but they are not aware of the current situation either to invest or not or to exit from their older/current holdings. This research is basically conducted for the investors who are not really aware of the market; and how their investment would be in a long run.

Objective :
o

The objective of research consist of equipment, people & procedures together with sorting, analysis, evaluation of timely accurate information to marketing decision makers. To help out small investors and laymen about the future prospects as well as benefits of investing, for a long term view.

Scope of the Study:

This study may be helpful to those investors who are in the dilemma of to invest or not to invest in this highly bullish and booming market. This study may provide direction to the existing investors to take decisions about their investments. This study would be a judgment tool for the bulls and bears, about their existing strategy and their future strategies. Due to focus on the key economic issues it looks the macro and micro economic issues this study would be the guideline to take the decisions on their own, rather than depending upon the unreliable market tips.

Data Collection:

Post Budget Strategy 2006 - Angel Broking

Top Picks - 2006 - Angel Broking

Union Budget Documents - IL&FS Investmart

Angel Research and Investment Advisory

Capital Market (March 2006)

Business World (March 2006)

NJ India Invest - Fund Runner Presentations

HDFC Mutual Fund - Fund Runner Presentation (Premier Multicap)

Franklin Templeton MF - Fund Runner Presentation (FISCF)

Sensex at the landmark 11,500 mark..... Is it worth to enter now?

Union Budget 2006-07 - Emphasis on Growth
The markets rejoiced and touched an all-time high of 10,400 post announcement of the Union Budget 2006-07. The rally is still continuing with the Sensex at an all-time high crossing the 10,700 level. Industry and the different strata of society too expressed a sense of satisfaction with the Budget as it had no major negatives. The Budget continued to focus on the UPA government's National Common Minimum Program (NCMP) with the focus on core sectors of Agriculture, Infrastructure and Social Welfare. The government targets to achieve a GDP growth of 10% and take the Indian economy into a new growth orbit Inevitable focus on Agriculture The Budget has upheld the UPA government's National Common Minimum Program (NCMP) and has laid emphasis on the inevitable part of the Indian economy - Agriculture and the rural populace depending on it. The Budget has enumerated various measures to

boost agricultural output, which would in turn help achieve the targeted GDP growth of 10%. .
Exhibit: 1 Contribution of Agriculture to GDP

Source : Economic Survey 2005-06

The Service sector, which contributes significantly to the overall GDP of the country, has also been growing at a steady pace. Similar growth trend is visible in Industry. However, a remarkable GDP growth has always been backed by a higher contribution by Agriculture. Accordingly, the governments target to achieve a GDP of 10% can be met only if agricultural performance improves. The various sops extended to the Agricultural and Related industries include: Access to low-cost short-term Institutional Credit Better Irrigation facility Creating proper market for the produce Rural Infrastructure Development Agriculture Insurance Micro Financing Encouraging Food Processing industry Higher Infrastructure Spend Elimination of bottlenecks

In the governments continued thrust on infrastructure, the Budget spelt out measures for segments like road transportation, power sector, ports, airports, etc. An outlay of around Rs 23,475cr has been earmarked for improving the countrys Railway infrastructure (announced in the Railway Budget 2006-07). The Roads infrastructure, which has been a prime focus area of the government in recent years, once again found ample mention in the Budget with the directive given to fasten the process. The deadline of June 2006 has been set by the government for completion of the Golden Quadrilateral (GQ) while the North-South, East-West Corridor is to be completed by end 2008.The total amount allocated for various infrastructure schemes in the Budget as a part of Plan expenditure is Rs. 23,757cr. Over and above it, the government has announced several other projects covering the state highways, express ways, linking higher number of village through roads, etc., to be executed in the next few years.

Exhibit 2: Plan Expenditure & Infrastructure Spend

Source: Budget Document, Note: Spend on Infrastructure includes Roads, Highways, Rails, Ports, and Airports.

Thrust on Power sector continues in Budget Re-haul of the Power sector and continuation of the Power reforms was another key highlight of the Budget. The two main sops provided to the Power sector in the Budget include extension of Section 80-IA benefit till 2010 and allocation of 20 bn tonnes of coal reserves exclusively for the sector. The Finance Minister announced capacity addition of 34,000 MW in the Budget (the highest ever in a Plan Period) to be executed in the Tenth Plan. These measures aimed at the Power segment would help in tackling the deficit and achieve the desired GDP growth. The measures reiterate the governments thrust on ramping up the installed capacity of power to 2,12,000 MW by the end of the Eleventh Plan to help realize the dream of Power for all by 2012.

Exhibit 3: Power Sector: Targeted capacity addition

Source: MoF; Angel Research

Social welfare: An Investment of its class

The Finance Minister has taken a pragmatic approach by focusing on the socio-economic development while simultaneously ensuring sustenance of the economic growth momentum. The Budget has chalked out huge expenditure for social welfare constituting almost 34% of the total Plan expenditure including Education, Health & Family Welfare, Water Supply and Sanitation and Housing, beside others. Emphasis on rejuvenating the rural economy augurs well for the overall economic development of the country in the long-term as it would enhance the purchasing power of the rural population. Thus, the amount spent on social welfare is not just for welfare but an investment of its class in the people of the country. This is substantiated by the declining infant mortality rates, illiteracy, food unavailability, lack of water supply and sanitation over the years.
Other measures Corporates and Individuals stand to gain

Apart from Agriculture, higher contribution from the Manufacturing sector is also on the governments agenda. India is now a dominant player in the Services sector and the government is now looking at widening the horizon of the manufacturing sector and emerge on the global platform. In the Budget, the government has taken initial steps to position India as a manufacturing hub for Gems & Jewellery, Textiles, Automobiles, Steel, Metals, Petroleum Products, etc., with due attention given to the Small & Medium Enterprises (SME). Some of measures in the current Budget for specific industries are higher allocation for Textile Up gradation Fund, construction of Scheme for Integrated Textiles Parks (SITP), re-financing facility for food processing industry, rationalization of FBT, reduction of peak customs duty and leaving the corporate tax structure unchanged with certain exceptions. The consumer class was also rewarded by way of the

personal Income Tax rates being left untouched, excise on small cars was slashed and there were no major cuts in the subsidies provided. Overall, the Union Budget could well be rated as positive. The government is executing the NCMP through proper budgetary administration by maintaining the Revenue and Fiscal deficit at 2.1% and 3.8% respectively, which is lower than the earlier budget estimates. Thus, the funds are allocated through a proper scheme of arrangement and are handled with prudence and accountability.

Macro Economic Analysis

The UPA government has done well in the Budget to maintain the growth momentum in the economy which has been flourishing in the past few years. This augurs well for the prevailing sound macro economic scenario. The various indicators like GDP growth, Rise in Savings, moderate tax to GDP ratio, lower current and fiscal deficit vouch for it. Robust GDP Growth The Indian economy has been growing at a healthy rate of 7.5% over the last three years and the different macro economic indicators have been sending out positive signals. CSO sestimated GDP growth of 8.1% (revised estimates) for FY2006 without much contribution from the agriculture sector (mere 2%) reflects strong buoyancy in the industrial and manufacturing sectors.
Exhibit 4: Sector-wise Real growth in GDP

Particulars 006(A)
Agriculture & Allied

2000-01

20001-02

20002-03

2003-04(P)

2004-05(Q)

2005-

6.2

(6.9)

10

0.7

2.3

Industry

6.3

2.7

7.0

7.6

8.6

9.0

- Mining & Quarrying

2.5

1.8

8.7

5..3

5.8

- Manufacturing

7.7

2.5

6.8

7.1

8.1

9.4

- Electricity, Gas & Water supply

1.7

4.8

4.8

4.3

5.4

-Construction

6.1

7.7

10.9

12.5

12.1

Service

5.6

7.1

7.3

8.2

9.9

9.8

- Trade, House, Transport & Comm

7.1

9.2

9.1

12

10.6

11.1

- Financial Service - Community Social & Personal Ser

4.1 4.7

7.3 3.9 3.8

4.5 5.4

9.2 9.2

9.5 7.9

Total GDP at factor cost 8.1

Source: Budget Document,

4.4

5.8

3.8

8.5

7.5

High Tax revenues: Dependency on borrowing reduced The government's tax revenue has been moving up and grew by 22% for 2005-06 compared to the previous year. It is expected to register a growth of around 20% for 2006-07BE taking its contribution to total revenues to 58% from 53% in 2005-06. The other significant factor viz., Tax as a % of GDP is important to measure the growth in tax revenue as compared to growth in GDP. The Tax to GDP ratio, over the years, has improved remarkably from 8.8% in 2002-03 to 11.2% in 2006-07BE. Contribution of direct and indirect tax to revenues is also encouraging with share of direct revenue increasing from mere 19.1% in 1990-91 to 47.9% in 2005-06 BE. Also, though contribution from indirect taxes has been declining, contribution from the services sector has increased from 1.4% of the gross tax revenue in 2000-01 to 4.7% in 2005-06BE. This is in line with the government's agenda to align service tax with the CENVAT rate and eventually move towards a uniform tax regime based on GST by 2010.
Exhibit 5: Direct & Indirect Tax as a % of Gross Tax Revenue

Source: Budget Documents,

Increasing contribution from the tax revenue has reduced the interest outgo as a percentage of GDP from 4.7% in 2000-01 to 3.8% in 2005-06 BE. The other important parameter to be considered is the fall in debt, as a percentage of GDP, from a high of 6.2% in 2001-02 to 4.3% in 2005-06 BE.

Exhibit 6: Borrowings & Interest Payment as a % to GDP

Source: Budget Document,

Improving Deficit Situation Fiscal deficit is the most important determinant of an economys strength. Revenue deficit is also equally important. On this front, the scenario is quite healthy as the government has been successful in managing to keep not only the Fiscal and Revenue Deficit under control but has also reduced it to acceptable levels. Going ahead, the government aims to bring the Revenue and Fiscal deficit to 0% and 3% respectively, which is very much encouraging.
Exhibit 7: Revenue & Fiscal Deficit as a % to GDP

Source: Budget Document,

Rising FDI inflow: Ample scope left The Indian economy has been able to attract huge foreign direct investments (FDI) in the last few years following opening up of several sectors by the government viz., Telecom, Media, Mining, etc. This would have a cascading effect as it increases the foreign reserves of the government and also provides huge employment opportunity. India is also preferred over other developing countries because of its strong political presence globally and huge pool of talented people. FDI investment in India in 2004 was to the tune of US$ 5.43bn. However, this is a very small sum of the total investments attracted by other countries in the world. Indias FDI / GDP ratio stands at 0.2%, which is abysmally low compared to other countries like China 1%, Malaysia 2% and Hong Kong 16%, which leaves ample scope for attracting FDI into the country.
Exhibit 8: FDI investment in Asian Countries % of GDP 2002 2003 2004 China India Indonesia Korea Malaysia 1.0 0.1 0.0 1.6 0.9 0.2 0.9 0.2

(0.1) 0.1 0.4 1.2 0.9 1.9

Philippines 0.5 Sri Lanka Thailand 0.3 0.2

0.1 0.3 0.5 8.9 7.3

0.1 0.3 0.2 14.7 16.1

Singapore 5.6 Hong Kong 5.4

Source: Economic Survey 2005-06,

In India there exists immense scope for FDI investments particularly considering the FDI investment in several other countries. The best of global companies like Intel, Posco and others have either announced their willingness to invest in India or have already committed an investment. The hike in FDI limit and opening up of sectors going forward would only help India build her foreign reserves and the economy to achieve higher growth levels. Robust Economy fueling capex by India Inc The Indian Corporates have embarked on an investment phase riding high on a buoyant economy. Capex by India Inc., has been on an upswing in the past few years and is rising at a handsome pace. Expansion plans by India Inc would cater to the growing domestic demand with rising consumerism and changing demographics. On the exports front too, India is moving a step forward from being a dominant force in the IT & ITES services on the global platform by widening the scope of business across sectors. Auto, Autoancillary, Textiles, Pharmaceuticals, Metals, etc., are some of the other sectors, which are now being eyed as an outsourcing hub for global players.
Exhibit 9: Total Capex by Manufacturing segment (Rs bn)

Source: CMIE

Exhibit 10: Industrial Investment Intentions in terms of IEMs, LOIs and DILs
Industrial Entrepreneurs Memorandum (IEMs) Number Proposed Proposed Investment (In Rs. Employment Cr.) (000s) Letters of (LOIs)/Direct Industrial Licenses (DILs) Number Proposed Proposed Investment (In Rs. Employment Cr.) (000s)

Year

1991 $ 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

3,084 4,860 4,456 4,664 6,502 4,825 3,873 2,889 2,948 3,058 2,981 3,172 3,875 5,118 6,203

76,310 115,872 63,976 88,771 125,509 73,278 52,379 57,389 128,892 72,332 91,234 91,291 118,612 267,069 353,956

769 923 703 829 1,114 696 522 521 477 411 809 380 833 856 1,271

195 620 528 546 355 522 321 145 132 203 117 89 116 100 135

2,071 13,994 12,845 17,937 14,265 29,932 9,528 3,274 827 1,042 1,318 649 1,395 5,265 2,990

34 97 100 130 91 181 96 27 17 31 14 8 14 21 23

Source: Economic Survey; $ August to December

Upturn in Capex / GDP ratio is also reflecting the investments plans announced by Indian corporates, which in turn indicates the growing confidence of India Inc.

Exhibit 11: Announced Capex as % of GDP

Source: Industry;

Indias Credit/GDP ratio still low compared to other economies A buoyant economy and growing retail segment has resulted in a steady improvement in Credit/GDP ratio from as low as 10% as on December 1969 to over 40% by end of March 2005. However, compared to other economies, Indias Credit/GDP ratio is still low, which builds up confidence of further improvement driving the overall economic growth.
Exhibit 12:Credit-GDP Ratio in India (%) Exhibit 13:Credit-GDP Ratio in select countries (%)

Source: RBI

Source: RBI

Drawing on such strong macro-economic indicators, India would move a step ahead towards achieving the ambitious 10% GDP growth rate in the ensuing years. This is what the Indian capital markets rejoiced soon after the growth-oriented Union Budget was released.

Markets on a high!!!!
Buoyant economic growth coupled with strong corporate earnings, which was ratified by a growth-oriented Budget took the markets to new highs and it doesnt seem to be stopping!!!! The Indian markets are at an all-time high both in terms of level and optimism. Sensex past the landmark 11,500 mark The Sensex breached the 11,000 mark in 2006 and thereon it has been a smooth ride ahead. The Sensex ended 2005 at 9397 levels but failed to go past the 9500 level. The year 2006 started with a bang and the first target of 9500 was breached on the second day of trading itself at the start of the year. The next logical expectation was the magical 11,000 mark. The markets even zoomed past the 11,500 mark for the first time on 3 April 2006. Thereafter, it was no looking back for the markets which have continued to hit newer levels. The pre-Budget rally indicated that the markets were getting closer to the 11,500 mark in a span of just 15 trading session. This was mainly on the back of a good results season, superior monthly auto numbers, cement numbers, higher order flows to the EPC companies and revival in metal prices. Increasing FII inflows into the Indian equity markets and growing mobilization of domestic mutual funds also provided the momentum to the rally. Robust Fundamentals The Indian economy has been clocking a growth of 7.5% in the last three years and CSO estimates 8.1% growth in 2005-06. Indian corporates too have been on a growth trajectory. The governments thrust on infrastructure has led to burgeoning orders to the companies. This has in turn had a cascading effect on the other related industries which have benefited tremendously from the rise in domestic consumption viz., steel, cement, pipes, power, etc. Also, the governments reforms are paying off well with corporates committing huge investments in the respective industry which has again opened up lot of opportunities. This coupled with rising income levels and higher savings with moderate tax rates has spurred demand for consumer durables, realities, vehicles, etc. The inherent strength of the economy and better demographics and potential increase in demand augurs well for the economy going ahead. Overall, the Indian economy is self sufficient with majority of growth being domestic and is not dependent on exports. The exports to GDP ratio in India is very much on the lower side compared to the other Emerging Nations. Presently, it is at 10% compared to other

countries like China 41%, Malaysia 119% Thailand 58% and Taiwan 55%

Exhibit 14: Exports to GDP ratio (%)

Source: Bloomberg,

However, given the capability and competitiveness of the Indian corporates in delivering the quality products in the exports market, the government is encouraging sectors with exports potential. The various sectors which are given huge impetus are Auto, Textiles, IT, etc., which can help improve the current account deficit situation of India. In the last one year, the Indian markets have witnessed a re-rating on the back of robust fundamentals of the economy in general and companies in particular. Going ahead, the sustainability of the same is far more visible and it could only improve from hereon.

FIIs and MFs in drivers seat FII inflows into the Indian markets have been overwhelming in last few years. This has been complemented by higher mobilization by the mutual funds (MFs) especially post the investment limit in MF was increased to 1,00,000 in the last budget. A robust economy and consistently improving corporate performance have been responsible for the huge FII inflows in the last two years. Also, the Indian equity markets enjoy the distinction of a Japanese FII making its first ever investment in an emerging market. This once again reemphaises Indias economic strength and also the preference of the Indian markets by the FIIs over other emerging markets.
Exhibit 15: FII and MF inflows

Source: SEBI, Angel Research,

Total FII inflow into the Indian equity market crossed the Rs 127bn mark in 2006 itself. Total investments by FIIs in 2005 stood at Rs 458bn and the number of FIIs registered increased from 685 in March05 to 861 in March06. The MFs also poured in a lot of money and turned aggressive buyers in the latter half of 2005. Total investments by MFs in 2005 stood at Rs 133bn. Though concerns have been raised about the outflow of funds by FIIs due to a steady increase in the US interest rate in the last couple of years, all through we have been witnessing much stronger FII inflows.

Retail participation: Tremendous scope The last year budget made way for the retail individuals to invest up to Rs 1 lakh in Mutual Funds with tax benefits. This couple with the fact that equity investments score over other savings instruments in terms of returns earned over a longer period of time has still not been well exploited in India. This is evident from the fact that equities investment as a % to total savings in India is abysmally and has consistently reduced over the last decade. This opens up tremendous scope for funds to plough back to equities in the absence of other alternative investment avenues yielding better returns.
Exhibit 16: Equity Market Exposure

Source: RBI; Angel Research

Indian Markets preferred over other emerging countries The Indian Equity markets are being preferred over other emerging countries mainly on the back of sustainability of growth going forward, which would be mainly driven by higher domestic consumption. This also reduces the potential risk of lower growth even in the event of any major global shocks. Also, the Indian corporates have attained global scale and better corporate governance standards, which raises the confidence level of the foreign investors.

Exhibit 17: GDP growth comparision of BRIC countries

Source: CIA,

The GDP growth of BRIC countries depicts superiority of the Indian economy which is almost touching Chinas GDP growth.
Exhibit 18: Per Capita Income comparision (US$)

Source: CIA,

India V/s Emerging markets On objective valuation criteria like RoE and the future growth potential and looking at the rich human resources, the Indian Economy scores over its counterparts. Also, the lower Per Capita Income compared to various countries, which is growing at a rapid pace depicts the huge demand potential, which in turn would drive the future growth. Considering the overall sound macro-economic scenario, we feel that the valuations enjoyed by the Indian markets compared to the other emerging economies would sustain going forward as well.
Exhibit 19: Global Markets - Comparative Valuation Country Brazil Russia India China Malaysia Mexico South Korea P/E 10.22 18.47 19.56 21.48 15.25 14.40 12.81 RoE(%) 15.0 8.0 20.2 8.3 10.2 17.7 11.0

Thailand Taiwan US (S&P 500) UK Japan Germany

11.21 15.08 15.32 13.14 46.49 13.18

15.5 10.6 15.6 15.6 5.4 11.5 16.0 14.2

France 13.18 Italy 14.90

Source: Bloomberg,

Growth in Earnings to drive markets further

The Indian markets have witnessed a strong re-rating over the past couple of years, which was complemented by a strong economy, corporate earnings growth and active participation by institutions both foreign and domestic. The Indian markets still look reasonable taking into account a CAGR growth of 18.5% in Sensex Earnings on a consolidated basis over the FY2005-07 period. The Indian market trades at a P/E of around 15x FY2007E consolidated Earnings of Rs 695, which we believe is reasonable considering the future growth visibility going ahead.

Exhibit 20: Sensex EPS growth

Source: Angel Research

Going ahead, we believe that though there may not be further re-rating in the P/E multiple, sustained Earnings growth by India Inc., would take the markets ahead aided by liquidity support by the FIIs, Mutual Funds and higher retail participation.
Exhibit 21: Markets are not overvalued Sensex Sensex Earnings Int.Rate Charctersistics

Yield Peak MAR 1992 4285.00 P/E 54.45 1.83% 10yr yld 14.00 % Unrealistic val, on account of artififcial rally created by Harshad Mehta FEB 2000 5933.00 28.80 3.47% 10.50% Overheated tech dominated global rally ,bringing tech valuation unrealistic Still market looking undervalued

MAR 2006

11500.00 19.45

9.43%

5.95 %

Source: NJ India Invest

Market is still potential to invest even at life time high sensex, because the earning potentiality of corporate also rise so the stocks available at fare value of 19X.

Exhibit 22 : Sensex Returns & loss

Source: HDFC mutual fund

There is high possibility to loss money on the short run and highly secure and safe game of 15 % -20% return on the long run investment. Chances of loss on 1 year based is 10/26. same on 3 years 5/24, 5 years 3/22, 7 years 3/20, 10 years 1/17, 15 years 0/12. possibility of losses.
Exhibit 23 : Sensex Growth from 1980 - 2006

After all, in the last 26 years, weve seen .

Two wars At least three major financial scandals Assassination of 2 prime ministers At least 3 recessionary periods 10 different governments and An unfair share of natural disasters, yet

However had one invested in the Sensex Rs 1 lacs in 1980 it has grown to 50 lacs equivalent to GDP growth of 16%

Overall, we believe that the Indian capital markets still offer good prospects for the Longterm investors.
Exhibit 24 : Age Profile Points To Secular Growth In Demand

Unmatched Demographic Profile

One quarter of worlds youth live in India 54% of Indian population is below 25 years of age By 2013, the net addition to productive population (aged 25-44 years) will be 91million or 33% of the Indian population

Exhibit 25 : Robust GDP growth prospects set to continue

Exhibit 26 : India Vs (China & Japan)

Exhibit 27 Labor cost comparison

Exhibit 28 : Growth will not be limited to domestic market only

Exhibit 29 : Market Cap to GDP

Larger Equity investments in future will lead to a improvement in the ratio

Limitations:

As we all know, security market is highly volatile. We may predict about it more accurate but due to uncertain driving forces the predictions may not work. The market risks and uncertainties are always there. Long term future of any market has impact of govt. policies and decisions. Indian economy is highly dependent on monsoon, so despite of all the precautions, projected growth rate cant be maintained.

Finding & Suggestion

One should invest in equities with a long-term horizon Risk factors while investing into equities External

Global growth? (US & Chinese among others) FII inflows and outflow International commodity prices especially oil Global terrorist threats, wars, etc

Internal

Fiscal pressures (state and central) Political risks Set backs to reform process Unpredictability of monsoon, agri-growth Loss of competitiveness of Indian cos. in domestic/global mkts

Structure Of Budget Focus on Agriculture Irrigation, Credit, Modernization, etc Inherent Employment generation theme throughout Focus on Textiles, Agriculture & Irrigation, Infrastructure, Training, translate into higher job opportunities Stress on Infrastructure development Roads, Power, Irrigation, Telecommunications, Rural connectivity would

Bold changes on Personal Direct Tax Front Rationalization of Tax brackets, Simplification would benefit the consuming class the most Changes on Corporate taxation front Reduction in Tax rates & depreciation rates, taxability of perquisites overall positive, will lead to increased profitability, service industries to gain more Bringing customs duties towards ASEAN levels, rationalizing excise Lead to investment in capital, and cheaper raw materials

Effects Of Budget
Economic Growth

Focus on Agriculture, Industry & Infrastructure will act as a catalyst for growth.Growth drivers for India & fundamentals therein get boost Employment opportunities Possibly the best budget for employment generation Focus on agriculture & irrigation, easy credit, focus on employment generating industries, training, infrastructure, etc will yield results Increased Consumption increase in disposable income will lead to increased consumption the greatest beneficiary of the budget is the common man be it a farmer, or the middle-class urban consuming group Quality of life Focus on health care, education, sanitation, training, increased job opportunities, lower taxes will help improve the living standard

Strong growth prospects Growth in earnings/profitability of the companies would be reflected in the Stock prices Sustained economic growth would lead to a secular long-term growth in Equities - More money in markets The flexible cap of 1lakh of investments would see more flow towards equities Increase in Disposable income would again strengthen the flow Increased flow of retail money would provide depth to the market, improve ---liquidity, and reduce volatility

Myths about equity investing

Equity investments is GAMBLING Successful equity investments requires right timing Equity Investments are for SHORT TERM

Good Tips are required to invest successfully

Investment & speculation:

PEOPLE OFTEN CONFUSE SPECULATION & INVESTMENTS WHEN IT COMES TO EQUITIES Speculation & investment are 2 very distinct terms. Speculation: Taking large risks, (especially with respect to trying to predict the future) in the hopes of making quick, large gains.

Day-trading, gambling etc. are the examples of speculation where the returns are based on the probability of occurrence/non-occurrence of any event.

Speculation is not an investment Reasons of Failure

Equity Investments are made on Tips & Flavors Equity Investments are tracked part time & not full time Skill sets required to understand a company is lacking Equity Investments are made for short term Equity Investments are not adequately diversified People look at acquisition price & not future value

What should any investor look at before investing into equities?

A good Market A growth opportunity

A GOOD MARKET

A powerful democratic country Better relationships with other countries in world

No big threats internal or external Government Pro-reform, and forward-looking Freedom of press, speech, etc

Strong Financial system

Our markets are now ranked among the best in terms of technology, risk management, etc The markets have adequate depth in terms of participants, number of stocks, liquidity, etc The Banking system is very strong & backbone of the financial system Presence of regulators with power India is the worlds second most populous country will overtake China in a few decades as the largest India has the seventh largest country in terms of area Indias GDP is the forth largest in the world adjusted to PPP Goldman Sachs : India has the potential to become the third largest economy in the world by 2050

GROWTH OPPORTUNITY In terms of earnings of companies, largely depends upon Market side Factors
o o o

Demand Supply Management

DEMAND Income levels are rising across the board Rich are getting richer & poor are also seeing a rise in income

- (Exhibit 24: Age Profile Points To Secular Growth In Demand)

GDP now growing by 7.5 % and 2nd fast growing nation among the world so economy is very hooted and potential to grow.

- ( Exhibit 25 : Robust GDP growth prospects set to continue )

Due to low labour cost the MNCs establish their manufacturing units in India or they outsource their products and services. - (Exhibit 27 Labor cost comparison)

- (Exhibit 28: Growth will not be limited to domestic market only)

The Global Players and FII want a large market cap ground to do their investment and now India enters in the club of large market cap as well as 1 bn.$s IPO/year club.

- (Exhibit 29: Market Cap to GDP )

India has a good Economy Scorecard & performance parameters like Forex Reserves, current a/c, saving, GDP , internal debt, inflation, FDI investment, eco. Reformed, new investment, Industrial Agri. Growth while only less discounted factors like internal fiscal debt. - (Exhibit 30 : Economy Scorecard )

SUPPPLY

A global-class and constantly improving telecommunications and physical infrastructure (transportation, real estate, etc.) catalyzing the growth industry, especially that of service, IT & software export segment.

A ready supply of qualified, high quality, English speaking, man-power

A large number of professionals with relevant domain knowledge expertise in financial, accounting, banking, insurance, healthcare, telecommunications, retail and other areas

Mature processes and global quality standards such as ISO, SEI CMM Level 5 and CMMi Level 5, adopted easily in India by many countries

Ratio of working age adults to total population high with a comparison of China & Japan. So it will create demand it self and that working age (20-35) class surged more consumption. - ( Exhibit 26 : India Vs (China & Japan) )

MANAGEMENT

Indian management is now world renowned for their knowledge & expertise Indian managers are now not shy to explore, enter into partnerships, acquire companies even large foreign cos. Indian companies are now looking at global markets and being multinational corporations Many companies are now established themselves globally

Positive Demand side factors + Positive Supply side factors + Good management = Earnings Growth Due to low labour cost the MNCs establish their manufacturing units in India or they outsource their products and services. - (Exhibit 27 Labor cost comparison)

- (Exhibit 28: Growth will not be limited to domestic market only)

Overall, we believe that the Indian capital markets still offer good prospects for the Long-term investors.

References: BOOKS:
Post Budget Strategy 2006 - Angel Broking Top Picks - 2006 - Angel Broking Union Budget Documents - IL&FS Investmart

WEBSITES:
Angel Research and Investment Advisory Anagram Broking Ltd. (moneypore.com) bseindia.com nseindia.com njfundz.com / njindiainvest.com

MAGAZINES:
Capital Market (March 2006) Business World (March 2006)

PRESENTATIONS:
NJ India Invest - Fund Runner Presentations HDFC Mutual Fund - Fund Runner Presentation (Premier Multicap) Franklin Templeton MF - Fund Runner Presentation (FISCF)