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Finals 2013-14 FIN FASTRACK Team NETWORTH Abhishek Agarwal Akhil Mittal Gaurav Pandey Akshat Sinha Gautam Sridharan Devesh Jhalani Lavanya Pandey Jyoti Nathany Mehak Chopra Rahul Ghosh Nikhil Pradeep Jalan Romil Johri Pratik Jaipuriar Shashank Shekhar Shobhit Aggarwal Shomrita Pal Shubham Agrawal

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Page 1: FIN FASTRACKspidi2.iimb.ac.in/~networth/resources/fastrack...Finals 2013-14 FIN FASTRACK Team NETWORTH Abhishek Agarwal Akhil Mittal Gaurav Pandey Akshat Sinha Gautam Sridharan Devesh

Finals 2013-14

FIN FASTRACK

Team NETWORTH

Abhishek Agarwal Akhil Mittal

Gaurav Pandey Akshat Sinha

Gautam Sridharan Devesh Jhalani

Lavanya Pandey Jyoti Nathany

Mehak Chopra Rahul Ghosh

Nikhil Pradeep Jalan Romil Johri

Pratik Jaipuriar Shashank Shekhar

Shobhit Aggarwal Shomrita Pal

Shubham Agrawal

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Contents So it begins – QE Tapering ............................................................................................................................ 5

Latest Update ............................................................................................................................................ 6

US Government Shutdown - Explained ......................................................................................................... 6

The Treasury Sell off ..................................................................................................................................... 7

Lawsuits against banks and hedge funds ...................................................................................................... 8

Gold Crash – No more a safe haven? ............................................................................................................ 8

Electronic Money – Bitcoin ........................................................................................................................... 9

Eurozone – Preview of latest data & what ECB may do ............................................................................. 11

Chinese reforms .......................................................................................................................................... 12

Japan – “Abenomics” led growth ................................................................................................................ 13

Emerging economies slowdown ................................................................................................................. 14

Detroit files for Bankruptcy......................................................................................................................... 15

Shibor Shock ................................................................................................................................................ 15

Latest RBI Policy Review: January 28th 2014. .............................................................................................. 17

Assessment: ............................................................................................................................................ 17

Policy Stance and Rationale .................................................................................................................... 17

Inflation Data – December/January 2014 – Rates Ease after a long time. ................................................. 19

Current Account Deficit – Government’s actions bears fruits. ................................................................... 19

Forex Reserves of India ............................................................................................................................... 20

Likely Impact of US tapering on India in 2014: ........................................................................................... 20

NSEL Crisis ................................................................................................................................................... 21

What does NSEL do ................................................................................................................................. 21

Genesis of the problem ........................................................................................................................... 21

Government directives ........................................................................................................................... 21

Affected Parties ....................................................................................................................................... 22

India joins the “defensive rate hike club”– engineers liquidity crunch ...................................................... 22

Chidambaram seeks 10 point action plan to revive economy .................................................................... 23

Job scenario to improve in 2014 ................................................................................................................. 23

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Infrastructure, Engineering & Exports .................................................................................................... 24

Unemployable Graduates ....................................................................................................................... 24

Measuring Employment .......................................................................................................................... 25

Notable Highlights ....................................................................................................................................... 26

Industry Sector Deal Activity ....................................................................................................................... 27

Key Statistics ............................................................................................................................................... 28

M&A - Regional Breakdown by target Region/Country .............................................................................. 29

Notable Highlights: M&A ............................................................................................................................ 30

North and South America ....................................................................................................................... 30

Europe, Middle East and Africa............................................................................................................... 31

Asia-Pacific .............................................................................................................................................. 31

League Tables .............................................................................................................................................. 32

M&A - Global........................................................................................................................................... 32

Private Equity - Global ............................................................................................................................ 33

M&A - INDIA ............................................................................................................................................ 33

Microsoft Nokia Deal .................................................................................................................................. 35

Verizon Vodafone Deal ............................................................................................................................... 37

HUL Unilever Deal ....................................................................................................................................... 38

Ambuja Holcim Deal .................................................................................................................................... 39

Jet Etihad Deal ............................................................................................................................................ 40

Apollo Tyres – Cooper Tire Deal .................................................................................................................. 41

Just Dial IPO ................................................................................................................................................ 43

June 2013 .................................................................................................................................................... 44

July 2013 ..................................................................................................................................................... 45

August 2013 ................................................................................................................................................ 46

September ................................................................................................................................................... 47

October 2013 .............................................................................................................................................. 49

November 2013 .......................................................................................................................................... 50

December 2013 ........................................................................................................................................... 51

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Table 1 Highlights ........................................................................................................................................ 26

Table 2 Deals Payment type wise ............................................................................................................... 28

Table 3 Deals Payment type wise ............................................................................................................... 28

Table 4 Deals size wise ................................................................................................................................ 28

Table 5 Deal type summary ........................................................................................................................ 29

Table 6 Deals premium wise ....................................................................................................................... 29

Table 7 Regional breakdown of deals ......................................................................................................... 30

Table 8 North and South America Deals ..................................................................................................... 31

Table 9 Europe, Mid east and Africa deals ................................................................................................. 31

Table 10 Asia Pacific Deals .......................................................................................................................... 32

Table 11 Deal Count Company Wise ........................................................................................................... 32

Table 12 Private Equity Deal company wise ............................................................................................... 33

Table 13 M&A India .................................................................................................................................... 34

Figure 1 10 Year US treasury yields ............................................................................................................... 7

Figure 2 Gold Price ........................................................................................................................................ 8

Figure 3 Gold annual returns ........................................................................................................................ 9

Figure 4 Bitcoin Price .................................................................................................................................. 10

Figure 5 Japanese demand ......................................................................................................................... 13

Figure 6 Shibor rates ................................................................................................................................... 15

Figure 7 Sector Breakup of deals ................................................................................................................ 27

Figure 8 M&A activity across the globe ...................................................................................................... 27

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AROUND THE WORLD

So it begins – QE Tapering On December 18th 2013, the US Federal Reserve (Fed) announced that it will begin reducing its bond

buying program by $10 billion a month to $75 billion a month. In a press conference after the federal open

market committee (FOMC), Chairman Ben Bernanke stated that the reduction in monthly pace at which

long term securities were added to the fed’s balance sheet was done reflecting cumulative progress and

an improved outlook for the job market.

Moreover, the committee stated that the pace of the taper will be data driven. If the economy made

progress in terms of inflation and job growth then the reduction in bond buying may be continued at each

meeting. If the economy slows down then it may skip the decision for successive meetings. If the economy

starts accelerating at a rapid pace it may accelerate the tapering program.

However the Fed has said that it will keep the current target range for the federal funds rate well past the

time that the unemployment rate declines below 6.5%, especially if projected inflation continues to run

below the Committee's 2% longer-run goal.

Key excepts from minutes of FOMC indicate the following key reasons for their decision which came

despite the economy not meeting Evan’s rule of 6.5% unemployment rate and 2.5% inflation rate –

Cost/Benefit of QE – There was concern about the marginal cost of additional asset purchases arising from

risks to financial stability. A highly accommodative stance of monetary policy could provide an incentive

for excessive risk-taking in the financial sector. Additionally, a majority of participants judged that the

marginal efficacy of purchases was likely declining as purchases continue.

Economic Outlook - The rate of growth of economic activity was believed to strengthen in coming years

and the unemployment rate would gradually decline toward levels consistent with their current

assessments of its longer-run normal value.

Labor Market – The increases in nonfarm payroll employment of more than 200,000 per month in October

and November and the decline in the unemployment rate to 7% were considered as encouraging signs of

ongoing improvement in labor market conditions. Other indicators of progress in the labor market, such

as the decline in new claims for unemployment insurance, the uptrend in quits, or the rise in the number

of small businesses reporting job openings that were hard to fill were also cited.

As an immediate reaction to the announcement stocks rallied and treasury yields fell. The 10 year treasury

yields had already rallied from 1.63% to 3% after the rumors of QE tapering hit markets earlier this year.

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Latest Update In the latest FOMC meet on January 28 – 29, the committee decided to further cut its bond buying

program by $10 bn. Now the pace of asset purchase stands at $65 bn per month ($35 bn MBS and

$30bn Treasuries). According to Fed growth in economic activity picked up in recent quarters. Labor

market indicators were mixed but on balance showed further improvement. The unemployment rate

declined but remains elevated. Household spending and business fixed investment advanced more

quickly in recent months, while the recovery in the housing sector slowed somewhat.

Source: Bloomberg

US Government Shutdown - Explained A confrontation over budget led to a partial shutdown of the U.S. government from Oct. 1 to 16, exposing

significant political divisions. Ten days after the Congress decided to end the shutdown, public opinion

polls reveal plunging public trust in government.

Why did the shutdown happen?

According to the CBO estimates, Washington overspent their projected budget by $1.1 trillion that fiscal

year while the U.S. national debt approached $17 trillion. In response, the Congress enacted a series of

spending cuts known as sequestration. But with the start of the new fiscal year (1st October) and the

implementation of the Affordable Care Act (ACA) fast approaching, the Congress needed to either agree

to extend their current budget with allotments for the new healthcare legislation or draft and pass a new

one before it expired at the end of September.

The Democrat-led Senate passed a resolution to the Republican-led House of Representatives to extend

the current U.S. budget, with sequester-level budget cuts and no other amendments.

The House of Representatives sent the continuing resolution back to the Senate but added amendments

delaying the implementation of the ACA — President Barack Obama’s health reform overhaul and center-

piece legislation. That version of the budget also appealed taxes on medical devices and cancelled

insurance subsidies Congress members would receive.

The Senate removed the amendments and sent the bill back to the House of Representatives. The House

then again added a delay to the ACA mandate, proposed to cancel insurance subsidies for members of

Congress and added a request to negotiate with the Senate on the budget. The Senate refused to

negotiate, again stripped the amendments and sent the bill back to be approved.

The back-and forth continued, with the House adding amendments and the Senate refusing to negotiate.

This continued until October 1st, when without any budget for the New Year, the government officially

shut down.

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What were the consequences & outcome of the Shutdown?

More than 80,000 federal employees were made to leave, and those workers deemed “essential” were

forced to work without pay. National memorials and parks were shut down in Washington D.C., including

the war memorials on the national mall, the Smithsonian museums and the national zoo.

The outcome of the shutdown was that Congress voted to end the U.S. government shutdown by

extending the debt ceiling for the thirteenth time. (Debt Ceiling is a cap placed on the amount of money

that the U.S. federal govt. can spend even though it doesn’t actually have that money).

Sources:

http://www.globaljournalist.org/stories/2013/10/24/the-government-shutdown-explained/

http://edition.cnn.com/interactive/2013/09/politics/government-shutdown-impact/

The Treasury Sell off The US 10 year bond yield rose sharply in 2013. The treasury yield spiked from 1.63 % on May 2, 2013 to

2.74 % on July 5, 2013 and then briefly traded above 3% on December 2013. The extent of rise has been

extremely rapid. Many large investment banks and hedge funds have stated that the current bond market

sell - off is “real”. According to Bill Gross, also

referred to as “The Bond King” by the

mainstream, the bull market in the U.S. 30-year

bond probably ended on April 29. The stronger

than expected payroll data acted as the catalyst

for the sell – off. US treasuries yields have been

on a decline continuously for the past 30 years

making it one of the longest bull market rally. It

started when interest rates in US peaked during

Paul Volcker era.

Since the financial crisis in 2008, yields have

remained depressed primarily due to safe

haven concerns and the unconventional monetary policy followed by the Fed. Now as risks in the world

are reducing and world economy is showing signs of success, there has been shift to riskier assets.

Moreover, a very important reason for dumping the treasuries can be ascribed to the Fed’s reaction

function. In the second half of 2012, the Fed’s forward guidance on the future path of the policy rate was

linked to a specific calendar date. The introduction of ‘macroeconomic thresholds’ in the Fed’s policy

guidance last December led investors to focus again on data developments.

Sources: Reuters, Bloomberg

Figure 1 US 10 Year treasury yields

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Lawsuits against banks and hedge funds Many big banks of Wall Street were caught in different lawsuits. In total banks have agreed to pay around

$30 bn to US regulators in 2013. The bank that was hit the hardest was JP Morgan. A recent settlement

between JP Morgan and the Department of Justice cost the bank $13 billion, around half of the bank’s

annual profits. It is the biggest ever settlement price for one bank alone. The fines collected will go to the

homeowners who were victims of illegal foreclosure practices and the rest will end up in treasury

department’s general fund.

JP Morgan has already paid $5.1 billion to Fannie Mae and Freddie Mac to resolve claims stemming from

the housing bubble $800 mn to settle the London Whale trading debacle, refunded $309 million to

customers and paid $80 million in fines to resolve unfair credit card practices. In July, JP Morgan agreed

to pay $410 million to settle charges it manipulated electricity markets in California and the Midwest.

Some of the biggest payouts this year came as mortgage servicers agreed to settle charges of improper

foreclosure practices. Eleven institutions agreed to settlements totaling $8.8 billion, including Bank of

America, Citigroup and Wells Fargo.

In addition, the European Commission slapped a fine of €1.7 bn fine on six firms for colluding to fix key

interest rate benchmark, the Yen Libor and Euribor. This takes the total fines for rigging Libor and key

benchmark interest rate to €4.25 bn. The European Commission is also investigating the forex market

where it believes the banks might have manipulated the market.

Apart from banks, a hedge fund, SAC Capital was also fine $1.8 bn for insider trading. It is the largest fine

ever for an insider trading case in the US history. Under the proposed settlement SAC Capital will pay $900

mn in forfeiture and another $900 mn as fine. The firm will receive credit for a $616 million penalty it

agreed to pay the Securities and Exchange Commission in March over related insider trading charges,

which brings the net total today to just under $1.2 billion. The entire fine has to be borne by Steven Cohen,

the owner of the firm from his own pocket.

Gold Crash – No more a safe haven? Gold market witnessed a secular bull market for the past decade. In

fact it performed so well that it did not witness any yearly correction

in prices for the past 12 years. The price rally of gold and its year on

year return in times of crises established the fact that it is a safe

haven.

However, this year gold’s winning streak broke and it was down for

the year. In fact it fell big. The annual return for 2013 has been -

28.9%. The magnitude of fall has shaken investors who were

predicting gold to move much higher. John Paulson, the largest

investor in the SPDR Gold Trust, the biggest exchange-traded product Figure 2 Gold Price

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for the metal, pared his stake to 10.2 million shares in the three months ended June 30 from 21.8 mn.

Billionaires George Soros and Daniel Loeb sold their entire

SPDR stakes in the first quarter of 2013, U.S. Securities and

Exchange Commission filings showed.

The exit from gold started as the US started showing signs

of sustained recovery, the European crisis got over and

fears over Chinese hard landing subsided. Also the

speculation over the Fed tapering its asset purchase

program caused substantial pressure on gold prices which

has been going up due to inflation fears from increased

money supply.

Source: Kitco, Bloomberg

Electronic Money – Bitcoin Recently there has been a lot of hype about what bitcoins are and whether they are just a bubble, a hype?

In order to allay many of these worries, this article aims at explaining the Bitcoin system, the pricing

mechanism, the transactional procedure and finally, what lies in store for the future.

What are bitcoins?

Bitcoins is a form of virtual currency- meaning, if you have bitcoins, you do not physically purchase goods

by handing notes or tokens to the seller. Bitcoins are used for electronic purchases and transfers. Every

single purchase is immediately logged digitally on a transaction log that tracks the time of purchase and

who owns how many bitcoins (analogous to an audit trail). This digital transaction log is known as a

“blockchain”. The people who are constantly verifying the blockchain, ensuring that all the information

is correct and updating it each time a transaction is made are called 'miners'.

How are bitcoins priced?

Bitcoins are like any other currency: they fluctuate in value relative to other currencies. The value of a

bitcoin is constantly changing, and there is no centralised exchange for it. Think of it this way: each time

a bitcoin changes ownership from seller to buyer, the two parties need to agree on its price. There is no

'fixed' price. Usually, it's the seller's responsibility to give a fair price to the buyer based on what rate

bitcoins are being traded in elsewhere. The difference between bitcoins and other currencies is that there

is no centralised bank that prints the currency and sets relative values. Through transactions, the value of

bitcoin fluctuates through supply and demand.

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Figure 3 Gold annual returns

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Here's a graph covering few months of the relative value of bitcoins against US dollars; as you can see,

there have been wild fluctuations in the value

over the past two months.

What’s the point of having bitcoins if I have

regular currency for my purchases?

Obviously, having bitcoins gets rid of the

hassle of carrying cash everywhere. Also, the

Bitcoin network removes the trouble of

counterfeit notes to a great extent.

Moreover, compared to credit card

payments, there is no transaction fee for

bitcoin transactions compared to a 2-3% transaction fee

charged by credit card companies.

How do I get started & from where I can get the bitcoins?

Before getting bitcoins, one needs to get a Bitcoin Wallet – this is just like an ordinary wallet, except for

the fact that it can be downloaded like an app on you device. The three most common ways of getting

bitcoins are – a) Start accepting payments in bitcoins, b) Trade bitcoins for traditional currencies, or c) Buy

bitcoins from the Bitcoin Exchange like BTC –e and Tradehill.

How do I transact with bitcoins?

Just like any ordinary internet transaction, making payments with bitcoins is extremely easy – Enter the

recipient’s address, enter the amount and press send. The slightly different thing here is the concept of

addresses. There are two components to a Bitcoin address: a public address, and a private address. Each

Bitcoin address has its own Bitcoin balance. Every time a transaction is made, the public address of each

user is made public to the entire network. Therefore, it is recommended that the sender creates a new

address for each transaction.

Eg. If you want to purchase $2500 worth goods from “American Athicas”, you will a) First, look up on the

internet, and check for the exchange rate. Say it’s $500/bitcoin. b) Next, go to Athicas website, and check

for the quoted rate. Say it’s also 5bitcoins/good. c) Open your Bitcoin Wallet (the downloaded software

on your device), create a new address for this transaction and enter the “public bitcoin address” of

Athicas. Then instruct the app to transfer 5 bitcoins. d) The bitcoin client will then “electronically” sign the

transaction with your “private address”. (Public addresses are visible to everyone on the bitcoin network

but the Private address is known only to you), and soon, the miners will approve the transaction.

So, now that you know the nitty-gritty of bitcoin, what can one expect in future? Is this just a bubble?

Figure 4 Bitcoin Price

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Undoubtedly, the bitcoins have fluctuated a lot in value as was shown earlier, but still they are gaining

huge popularity. Many big companies like WordPress, Overstock.com, and Reddit accept Bitcoin, and a

growing numbers of brick and mortar stores are starting to accept them internationally as well. More than

$1.5 billion worth of bitcoins are currently in circulation around the world, with millions of transactions

occurring daily.

As Bitcoin gains popularity, governments, however, are slowly but surely starting to take stances

against/for it. For instance, the RBI issued a vague warning last week that Bitcoin usage is unsafe due to

potential money laundering and cyber security risks. The government of China took it one step further by

barring financial institutions and payment institutions from accepting bitcoins as a form of payment.

Governments are cracking down on "black markets" that accept bitcoins as a form of payment.

In India, it's not very easy to convert rupees to other currencies since the Indian currency is not freely

convertible. Due to this hindrance, obtaining bitcoins is not as hassle free as it is in other countries.

Another problem with obtaining bitcoins in India is that there is electronic method to transfer funds safely;

most transfers happen through NEFT. Due to these hindrances, liquidity of bitcoins is relatively scarce in

India, but is picking up.

All said, it will still be difficult for governments to 'shut down' Bitcoin. In fact, there are talks that virtual

currencies are the wave of the future due to their inherent associations of being decentralized,

transparent, secure and hassle free.

Source:

http://profit.ndtv.com/news/your-money/article-bitcoin-explained-in-laymans-terms-376029

http://go.bloomberg.com/tech-deals/2013-04-15-explaining-bitcoin-without-buzzwords/

Eurozone – Preview of latest data & what ECB may do The latest Eurozone (EZ) didn’t give very clear signals: inflation continues to be weak, soft economic data

showed improvement, EZ excess liquidity is drying up, and the euro is around the level ($1.36) of the

December meeting (after a rise to $1.38 around yearend). It is expected that the ECB will stay on hold—

with a dovish bias. If there is a majority for more action, it will be via liquidity operations rather than a

rate cut: for example, by no longer sterilizing the SMP purchases (though that is mostly a symbolic gesture

to begin with).

PMIs in the EZ for December (52.1) are barely in expansionary territory but enough to support the ECB’s

view of a gradual improvement. EZ inflation for December came in at just 0.8% y/y (down from 0.9% y/y

in November). While part of that was driven by methodological changes in Germany, there was also no

improvement in unaffected components like industrial goods (0.2% y/y). With core inflation dropping to

a record low of 0.7% y/y and industrial producer prices falling by 1.2% y/y, it is clear that in a normative

sense, more monetary accommodation is warranted.

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However, as the latest ECB statements showed, the Council is aware of (and apparently comfortable with)

a prolonged period of subdued inflation and a gradual recovery in 2014 and beyond. What is more, the

euro stands at 1.36—not enough to trigger a response.

There is one scenario, however, that might see a slight response. If the core ex-Germany finds that its

economies (Netherlands, Belgium, Finland, France) could benefit from some monetary stimulus, they

might use the liquidity provision to strengthen the ECB’s dovish bias.

For example, by no longer sterilizing the SMP purchases, the ECB would signal that it intends to keep

excess liquidity elevated, easing liquidity conditions for banks. The 2y swap rate is (at 53bps) already 10bps

higher than at the time of the December meeting, and during our recent conversations with central

bankers in Europe (see link), we did perceive that there was reduced resistance toward abolishing this

measure. If “sold” as a pure liquidity measure, the end of SMP sterilization should not be read as conducive

to full-fledged QE.

For the next months, we expect mixed data to continue: weak (if a little higher) inflation readings, stable

soft indicators, mixed hard data. The euro will be a key trigger: if it strengthens towards $1.40, the current

discomfort with the strong euro will turn into pain, inducing a cut in both refi and deposit rates (to 0.10%

and -0.10% respectively). QE, if it will ever arrive, would be a matter for H2 2014.

Core EZ yields and US Treasury yields should continue to diverge in H1, on the back of different monetary

policy stances: the spread between the respective 10y yield should reach 115bps by the end of Q1.

Perhaps this divergence would become even more accentuated at the shorter end (say, at 5y maturity).

Sources:

http://www.roubini.com/forum#%7B%22thought_id%22%3A%22thought.1389124790778%22%7D

http://www.bloomberg.com/news/2014-01-21/germany-s-zew-investor-confidence-unexpectedly-fell-

in-january.html

Chinese reforms

China started the year with the announcement that Chinese GDP grew 7.8% YoY, which was the lowest

since 1999. Since, then there have been speculation about Chinese growth on a long term downward

trajectory.

However, China bounced back in July – September after three quarters of GDP decline. Its economy grew

by 7.8% from a year earlier, up from 7.5% expansion in the previous quarter. One of the factors that hit

Chinese economy was the lack of growth in US and European markets. As these economies stabilized,

China has picked up on its export growth.

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Moreover, in November China unveiled its boldest ever set of economic and social reforms. It relaxed its

one child policy and further freed up market to make the economy more stable. A document released by

the Communist Party following a four-day conclave of its senior leaders promised land and residence

registration reforms needed to boost China's urban population and allow its transition to a western-style

services- and consumption-driven economy. Pricing of fuels, electricity and other key resources - now a

source of major distortions - would be mainly decided by markets, while Beijing also pledged to speed up

the opening of its capital account and further financial liberalization.

Additionally, Beijing pledged to end some monopolies, improve SOE management and allow the private

sector to invest in projects with SOEs. Such steps could make SOEs more competitive and allow greater

scope for more productive private enterprise. Xi also plans to liberalize prices on commodities like water

and natural gas, as well as in transport and telecom; speed deregulation of interest rates and capital flows;

reduce curbs on foreign investment; and allow private investors to set up small banks. All of this will

expand the role of the private sector in the economy and permit resources to be allocated more

intelligently.

Japan – “Abenomics” led growth Recently, the International Monetary Fund upgraded its economic outlooks for Japan in 2014. IMF said

that the temporary fiscal stimulus being pushed by Prime Minister Shinzo Abe’s government “should

partly offset the drag from the consumption tax increase to 8 percent from the current 5 percent in April”.

As a result, annual growth is expected to remain broadly unchanged at 1.7 percent in 2014 compared with

2013, raising its October projection by 0.4 percentage point. The RGE consumption momentum index

(CMI) for Japan showed that nominal household spending probably grew at around 1.5% y/y in Q3, the

fastest pace in over a year. Also some segments of the GDP deflator have been increasing y/y for the first

time in years.

The recent labor market data have also continued to show

robust jobs growth, but as has been a theme all year, that

growth came entirely from non-regular employment. That

said, almost every other labor market indicator looks

healthy, including jobs-to-applicants ratios and workers'

nominal income growth, the latter of which grew a robust

2.8% y/y in September following three months of strong

gains. Real income growth was less impressive, due in large

part to the increase in consumer prices versus a year ago.

But from a historical perspective, the trend continues to

look encouraging. The weak yen and strong stock market

have lifted consumer spending, kick-starting the recovery

and emergency economic measures have boosted public

works spending. Companies that had put off capital spending

Figure 5 Japanese demand

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during the depths of deflation, when the economy was stagnant, are starting to invest again. Machinery

orders returned in November to levels last seen in July 2008, before the global financial crisis, according

to Cabinet Office statistics released in January 2014. Orders rose 9.3% on the month to 882.6 billion yen

($8.33 billion), excluding those for ships and from electric power utilities. Both the manufacturing and

nonmanufacturing sectors saw increases.

Japan has a GDP of around 470 trillion yen a year, with individual spending accounting for about 60% and

capital investment 15%. The sales tax is slated to go up to 8% from 5% in April, which is expected to cause

a drop-off in consumer spending after the current surge in demand leading up to the hike. If the pickup in

capital spending gains momentum, "it would make up for the (post-sales-tax-hike) slump in consumer

spending and make it easier for the economy to get back on track toward recovery". However, the

problem is foreign demand, with machinery orders from overseas, a leading indicator for exports,

dropping 12.2% on the month in November, marking the second double-digit decline in a row. Many

contend that the global economy is finding its footing, but this has not given any momentum to Japanese

exports. As its population shrinks, Japan is growing more dependent on foreign demand. If business

abroad does not pick up, more companies may put off capital spending.

Sources: http://www.roubini.com/region/country/japan.php (Our Research & Our Thoughts tabs)

http://asia.nikkei.com/Politics-Economy/Economy/Japan-s-recovery-now-buoying-capital-investment

Emerging economies slowdown The emerging economies’ share of the world output is no longer rising as fast as it did in the 2000s. 2009

saw a year-on-year increase of almost 1.5 percentage points. Tallying with a striking slowdown in the BRIC

growth rates, once again the output is back to below one percentage point. Putting it in another

perspective, in 2008, the emerging economies accounted for two-thirds of world GDP growth. In 2011,

they accounted for half of it, and in 2012, even less than that. Predictions from IMF tell that this will

remain the same for another 5 years.

Is this just a blip or a sign of trend?

According to Kantar research data, while the expectation of growth is to continue, it will be at a lower

rate than in recent decades. Businesses looking for sources of growth in emerging markets need to take a

more granular look at the opportunities. They advise:

Look beyond the BRIC model. Investing mainly in emerging markets in search of growth is a one-

horse bet which will leave you stranded if the horse falters.

Don't assume that the next few years will be like the last few years.

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Make sure that your economics analysis pays attention to uncertainties caused by non-economic

factors such as institutional and environmental constraints.

Take a more granular view of emerging markets and the opportunities within them-the emerging

middle class in São Paulo is different from that in Senegal.

Detroit files for Bankruptcy The city of Detroit filed for Chapter 9 bankruptcy on July 18, 2013. It is the largest municipal bankruptcy

filing in U.S. history by debt, estimated to be $18–20 billion, exceeding Jefferson County,

Alabama's $4 billion filing in 2011. Detroit is also the largest city by population in the U.S. history to file

for Chapter 9 bankruptcy, more than twice as large as Stockton, California, which filed in 2012. Detroit’s

population has declined from a peak of 1.8 million in 1950. Numerous factors over many years have

brought Detroit to this point, including a shrunken tax base but still a huge, 139-square-mile city to

maintain; overwhelming health care and pension costs; repeated efforts to manage mounting debts with

still more borrowing; annual deficits in the city’s operating budget since 2008; and city services crippled

by aged computer systems, poor record-keeping and widespread dysfunction.

Some of the other cities in the US that have recently been downgraded by Moody’s and are considered

to be potential for bankruptcy filings are –

City Population Annual Budget Shortfall, 2012 2011 unemployment Rate

Camden, New Jersey 517,234 20.2% 11.1%

Cincinnati, Ohio 331,285 20% 8.7%

Baltimore 599,657 15% 9.4%

Source: Forbes

Shibor Shock Ever since Bagehot wrote his book “The Lombard Street”, the Central

Banks have been considered as the lenders of last resort. However,

June 2013 saw a slight departure from this when the PBOC refused

to intervene even though the Chinese economy was reeling with

what was called the Shibor (Shanghai Interbank Offer Rate) Shock –

referring to the sharp hike in the 7 day repo rate to 12% and a

moderate hike in the 3 month SHIBOR on June 20th. In the previous

week, the banks had faced a sudden liquidity crunch, caused by

primarily two factors – first was the crackdown on illicit capital Figure 6 Shibor rates

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inflows, and second was the withdrawal of deposits and payment of taxes before the Dragon Boat holiday.

While due to this illiquidity banks were struggling to acquire the required reserve capital, the PBOC

refused to intervene. According to Economist “Why was the PBOC so hard-nosed? It sets an explicit target

for money-supply growth and an implicit target for credit growth. These targets are supposed to be

consistent with each other and with economic stability. From its point of view, if banks find themselves

short of money they must have provided too much credit. That may well be the case. Although

straightforward bank loans are under control, banks have simply invented new ways of lending.” Though

the reasons why PBOC didn’t jump in are debatable, yet this deterrence on the part of the central bank to

act as the lender of the last resort, led to the crippling of the Chinese Banking system and thus, the Shibor

Shock.

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INDIAN MACRO

Latest RBI Policy Review: January 28th 2014. In its third quarter review of the monetary policy for the year 2013-14, RBI has decided to:

increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from

7.75 per cent to 8.0 per cent; and

keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent

The reverse repo rate under the LAF stands adjusted at 7.0 per cent, and the marginal standing

facility (MSF) rate and the Bank Rate at 9.0 per cent.

Assessment:

Since the Mid-Quarter Review of December 2013, the global recovery is gaining traction, led by the

strengthening of the US economy, but it is still uneven and subdued in the Euro area and Japan, and

a slowdown in China seems to be underway.

Domestically, some loss of momentum of growth is likely in Q3 of 2013-14, despite a strong pick-up

in rabi sowing. Industrial activity remains in contractionary mode, mainly on account of

manufacturing, which declined for the second month in succession during Q3

While retail inflation measured by the consumer price index (CPI) declined significantly on account of

the anticipated disinflation in vegetable and fruit prices, it remains elevated at close to double digits.

For the period April-December 2013, the trade deficit has shrunk by 25 per cent from its level a year

ago, with merchandise exports increasing on a y-o-y basis for the sixth consecutive month in

December, while non-oil imports have continued to decline. Accordingly, the current account deficit

(CAD) for 2013-14 is expected to be below 2.5 per cent of GDP as compared with 4.8 per cent in 2012-

13.

Policy Stance and Rationale In the Mid-Quarter Review on December 18, 2013, the policy decision was to wait for more data

before acting. With the subsequent substantial fall in food prices, especially of vegetables, headline

inflation has fallen significantly.

The Dr. Urjit Patel Committee has indicated a “glide path” for disinflation that sets an objective of

below 8 per cent CPI inflation by January 2015 and below 6 per cent CPI inflation by January 2016.

Real GDP growth can be expected to firm up from a little below 5 per cent in 2013-14 to a range of 5

to 6 per cent in 2014-15, with risks balanced around the central estimate of 5.5 per cent. A pick-up in

investment in an environment in which external demand continues to be supportive of export

performance could impart an upside to this forecast.

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Source: RBI Website

Source: RBI Website

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Inflation Data – December/January 2014 – Rates Ease after a long time. The wholesale price index (WPI)—India’s preferred inflation measure—decreased 1.27% over the

previous month in December, which marked the sharpest fall since December 2008. The reading

contrasted the 0.44% increase registered in November and primarily resulted from a significant decline in

prices for food, particularly for fresh food.

Wholesale prices increased 6.2% in December 2013 over December 2012, which came in below the 7.5%

rise observed in November over the same month last year, marking the first decline in inflation after six

consecutive months of increase. The annual reading undershot the 6.9% increase the market had

expected. As a result of the fall in the annual figure, annual average WPI inflation inched down from

November’s 6.4% to 6.3% in December.

The Consumer price index decreased 1.00% over the previous month in December (November: +1.31%

month-on-month), which is the fastest decrease that has been recorded since records began in January

2011. Annual inflation plunged from 11.2% in November to 9.9% in December.

Current Account Deficit – Government’s actions bears fruits. Current account deficit (CAD) in India, the difference between outflow and inflow of foreign exchange,

narrowed sharply to $5.2 billion, or 1.2 per cent of GDP, in the July-September quarter (Q2) of 2013-14

on the back of turnaround in exports and decline in gold imports. It was USD 21 billion, or 5 per cent of

the GDP, in the second quarter of last fiscal.

However, despite the lower CAD during April-September (H1) of 2013-14, there was a drawdown of

foreign exchange reserve to the tune of USD 10.7 billion as against an accretion of USD 400 million in same

period last fiscal mainly due to a decline in net capital inflows under the financial account.

Both the government and RBI are expecting the CAD to be below USD 56 billion in the current fiscal

compared to the record high of USD 88.2 billion, or 4.8 per cent of the GDP last fiscal.

The following steps taken by the Government and RBI are believed to be responsible for this welcome

trend:

Government’s actions on encouraging pick up in exports taking advantage of depreciating

rupee.

A sharp decline in gold imports, which was one of the main contributors to high CAD last year.

The government has hiked in gold import duty to 10 per cent and imposed restrictions on

import of gold bars and medallions, to restrict CAD. India's gold imports crashed 95% in August

to just 2.5 tonne from month before, easing pressure on policymakers as they struggle to

contain the depreciation of the Indian rupee to the US dollar while addressing an elevated

current account deficit (CAD).

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Bullion industry executives said gold purchases from abroad tumbled last month as lack of

clarity on recent central bank guidelines on imports, coupled with an absence of festivals, and

curbed demand from jewellers in the world's top consumer.

Gold imports slumped from 47.5 tonne in July, 31.5 tonne in June, 162 tonne in May and 142.50

tonne in April.

Forex Reserves of India India’s foreign exchange (forex) reserves increased by $177.8 million to $293.28 billion for the week ended

Jan 10, 2014. Foreign currency assets, the biggest component of the forex reserves, grew by $190.3 million

to $267.14 billion. The foreign currency assets, expressed in US dollar terms, include the effect of

appreciation or depreciation of non-US currencies held in reserve such as the pound sterling, euro and

yen.

The value of special drawing rights (SDRs) decreased by $8.6 million to $4.42 billion during the week under

review. India’s reserve position with the International Monetary Fund (IMF) was down by $3.9 million to

$1.99 billion. The value of India’s gold reserves remained stagnant at $19.72 billion.

Likely Impact of US tapering on India in 2014: After the knee jerk reaction to a possible US tapering in 2013, Asian Markets, including India are preparing

themselves for the actual tapering that is likely is 2014.

Between June and August 2013, FIIs pulled out 230 billion rupees ($3.7 billion) from the stock market,

dragging the Sensex down 2000 points or by 10 percent, speculating on a possible tapering.

The rupee was also hit, losing 27 percent in three months and the RBI was forced to take emergency

measures to stop and reverse its fall.

But the actual tapering was never announced. Federal Reserve Chairman Ben Bernanke changed his mind

because growth, by his reckoning, was too slow. Tapering was postponed although the intention to taper

was not abandoned. If the decision is to taper, possibly from January 2014, it is very unlikely that the world

markets will be shattered once again

The announcement in May was a shock. The markets have now come to expect that tapering is inevitable

and will be initiated. In India, steps have been taken by the RBI to make up for the outflow of FII investment

that can follow. Besides, since September, the parameters that influence the markets for stocks and

currency have perceptibly changed.

Exports have recovered and non-oil imports declined, resulting in a 20 percent reduction in trade deficit.

Consequently, in the quarter ending September, the current account deficit dropped 76 percent to 1.2

percent, which, along with the $34 billion that the RBI mobilized, would give the rupee stability.

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Also, FIIs themselves may not be motivated to take money back since the U.S. Fed, along with the Bank of

Japan and the European Central Bank, is committed to maintaining low interest rates. It appears that

tapering, even if it comes as early as January, will not have a significant impact on the stock and currency

markets. It will be the domestic factors that will predominate.

NSEL Crisis

What does NSEL do

NSEL was set up as a spot exchange where farmers and industrial producers could sell commodities to

traders through an electronic trading platform. According to the rule, all spot contracts should settle

within 11 days i.e. (T+10 basis; trading plus 10 days). Sellers were required to deposit physical commodity

in the NSEL warehouse. However, NSEL was offering contracts over T+10 settlement cycle. It allowed

buyers who could not pay for commodities they bought more time and sellers who could not deliver

commodities sold on time. This amounted to forward trading, which is in violation of NSEL’s mandate.

Genesis of the problem

The root of the crisis lies in the long-dated contracts offered by NSEL that along with spot contracts

facilitated financing of commodity producers while offering 15-16% annualized returns to the investors or

lenders. While operating as a spot exchange where contracts are settled within one or two days of a trade

(T+1, T+2), NSEL also offered contracts for which the settlement cycle ranged anywhere between 25 to 36

days for various commodities. Such long-period contracts effectively acted as forward contracts which are

long-dated derivative products typically provided by an over-the-counter market.

For example, in a commodity where prices were trending up, the investor would buy a contract while

simultaneously selling a contract of the T+25 settlement cycle. The supplier or processor of the commodity

acted as the counter-party to both these trades. As a result, the supplier could utilize the money earned

in the first tranche of the trade for financing working capital requirements while the investor could

execute an arbitrage trade which offered 1% to 2% of returns over the duration.

In effect, the ownership of the commodity just changes hands on paper without involving a change in

possession. Sugar, castor seed, paddy and raw cotton were amongst the 11 commodities on which these

trades gained popularity. The extent of money involved in these trades ballooned as most of the times

the positions were rolled over for another trade cycle and lenders collected the interest amount from

each preceding trade.

Government directives

On July 10, Consumer Affairs Secretary held meeting with spot exchanges (NSEL and NCDEX Spot

Exchange). The ministry seeks an undertaking from NSEL that: (a) no further/fresh contracts will be

launched until further instructions; and (b) all existing contracts will be settled on the due dates. Following

the directives, NSEL issued a directive to its members that all contracts have to be settled within 11 days

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or a (T+10) basis and that too on payment against delivery basis. It also restricted traders from putting

buy or sell trades at the same time to square off the exposure to the market. The directive was to close

the contracts and settle these on July 31. But NSEL cited “grave emergency” and market “disequilibrium”,

deferring the settlement by another 15 days. Later, it said it wanted another 5 months for this.

Affected Parties

Over Rs 5,600 crore trades remain unsettled. About 15,000 investors have to receive funds from the

exchanges. Half of these investors are small investors. Several leading brokering house like Motilal Oswal,

Indian Infoline, Geojit also suffered as their clients had exposure to the tune of Rs 700 crore.

Source: Economic Times, Business Standard

India joins the “defensive rate hike club”– engineers liquidity crunch The last two quarters saw India joining the “defensive rate hike club” along with Indonesia, possibly

Turkey, and to some extent Brazil. In order to deal with the INR depreciation, the authorities had three

options: FX intervention; attracting new capital inflows through a sovereign issuance, raising caps on

foreign portfolio investment and/or lifting ceilings on FDI in specific sectors; defensive rate hikes1.

Though the RBI did try to intervene into the FX market to reduce volatility and speculation, yet the effect

was pretty modest given the large amount of FII outflows. Thus, it decided to squeeze liquidity by

restricting proprietary trading, lowering open position limits and raising margin requirements in an effort

to curb speculation.

Moreover, it also took an unorthodox approach to tightening. Rather than hiking the repo rate (the main

policy rate) RBI engineered a liquidity squeeze to raise the cost of shorting INR and attract capital

inflows/reduce outflows.

First, Subbarao raised the Marginal Standing Facility (MSF) rate by 200bps to 10.25% thus widening the

policy rate corridor. The Bank Rate which is tied to the MSF was also raised by 200bps. Second, the RBI

has placed a limit on the amount banks can borrow from the RBI’s main overnight window—the liquidity

adjustment facility (LAF)—to 1% of net demand and time liabilities. Finally the RBI announced open

market operations to sell government securities and thus absorb liquidity.

The result was favorable: INR strengthened about 1% against USD, short-rates spiked by around 250 bps

as the bond and swap curve flattened and/or inverted, and rate sensitive sectors (real estate,

infrastructure and banking) sold off heavily.

The bottom line was that RBI effectively hiked overnight rates despite leaving the main policy rate

untouched. If sustained the resulting tighter financial conditions, like a normal rate hike, could have posed

a downside risk to the already weak growth outlook, but Raghuram Rajan who succeeded Subbarao, has

tried to reverse the steps, given the stabilization of INR vis-a-vis USD.

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Chidambaram seeks 10 point action plan to revive economy In an attempt to kick-start a wider set of measures to revive the economy and improve business

sentiment, Chidambaram came up with ten-point action plan that would implement or prioritize these

ideas over the coming months. This was also used as mechanism to send out a signal that the government

was for the time done with steps to stabilise the rupee and wants to move on to other pressing issues.

One key initiative that the

government was working on

was to open up the ports sector

and the real estate investment

trusts (REITs) to help attract

more equity. The action plan

also included impediments that

were felt to be removed in

order to revive growth from its

low levels of 4.8%.

Another action point on Chiddu’s list was to contain the current account deficit at $70 billion, 3.7%

of GDP against 4.8% last year, and he outlined a plan to fund this deficit without drawing on the

country's forex reserves.

Also the government further increased the duty on gold and silver while the Reserve Bank of India

lowered the limit on outbound investment through the automatic route for corporate and also reduced

the amount individuals could send out under the liberalized remittances schemes to 75,000 dollars from

200,000 dollars.

Other than keeping a check on deficits, Chidambaram's agenda for reforms also include accretion to forex

reserves, revival of the investment cycle, pushing through the capex programme of public sector firms

and capital infusion in public sector banks.

Finally he also emphasized on the need to resolve the impasse relating to “coal, iron ore, environment

and land acquisition issues”.

Job scenario to improve in 2014 The employment scenario in the country is likely to witness a surge in 2014 with the banking segment

expected to hire aggressively and a rebound in economic growth raising prospects for jobs across sectors.

A deep economic slowdown and delay in implementation of projects have hurt jobs in several sectors,

particularly in manufacturing. The slowdown in developed economies also hit jobs in the export and other

allied sectors.

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The banking sector has drawn up ambitious hiring plans for officers as well as administrative staff. State-

run banks are expected to recruit about 55,000 officers and clerical staff in 2014. Other sectors which are

likely to benefit from the economic recovery, in terms of jobs, are retail, hospitality, logistics, engineering,

consumer goods, life sciences, pharmaceuticals and medical diagnostics.

Infrastructure, Engineering & Exports Infosys, the country's second biggest software services exporter, has plans to hire 15,000 to 16,000

engineers next year. An improvement in demand for outsourcing in the US and other countries is expected

to raise job prospects for engineers, programmers and others.

"Though 2013 marked a year of disappointment on hiring front, 2014 seems promising. The upcoming

national elections coupled with the improvement in the global economic conditions are expected to pull

the market out of the guessing phase and bring cheer," said Ashok Reddy, managing director of TeamLease

Services, a recruitment consultancy firm.

"In fact, as the year progresses companies are expected to come out and invest again, automatically

leading to talent search," he said, adding that sectors such as consumer goods, durables, telecom, retail

and hospitality are expected to drive growth.

The infrastructure sector is also likely to benefit as projects get off the ground. Several stalled projects are

expected to kick off, stoking demand for skilled and unskilled workers. Demand for jobs will come from

the planned industrial corridors, which will link key cities.

"As the core sector improves, floodgates should open. There has been considerable amount of investment

in big ticket projects," said K Sudershan, managing partner at EMA Partners International, a global

executive search firm.

"There is a fair degree of optimism," he said, adding that the job scene may gather pace after the national

elections in 2014. Sudershan said sectors such as metals, power and real estate could witness demand for

jobs as clarity emerges on the policy front and sentiment improves. He further said a "significant amount

of retirements" in the next two to three years in the manufacturing sector could drive demand for

engineers.

Unemployable Graduates While the jobs scenario is expected to improve, for employers it will be a challenge to find employees who

possess the right skills. "There is ample opportunity for people with the right DNA. But, the fact is that

most of the graduates are not really employable. Employers have become far more quality conscious,"

said Ronesh Puri, managing director of Executive Access, a search firm.

"Unfortunately universities are churning out sub-optimal talent. They have not been able to reorient to

market needs. There has to be major shift in the way universities and institutions are imparting

education," Puri said, adding that 2014 would be a far better year for jobs compared to the past two years.

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While the government has mounted an effort to upgrade skills, experts say it has to be on a war footing

as millions of young men and women enter the job market. And, the options should be outside the farm

sector, which still employs a large chunk of the population.

"..India has to focus on an agenda to create jobs outside of agriculture, which will help us reap the

demographic dividend and also improve livelihoods in agriculture," the Economic Survey of the

government said earlier in the year.

Measuring Employment Another area which requires close attention is the way employment is measured in the country. In

developed economies, employers are required to provide data and the other source of information is from

the unemployment doles that people opt for when they lose jobs. More than 85-90% jobs are in the formal

sector, while in India only 8% employment is in the organized sector.

"Nearly 92% of the workforce is self-employed or in the informal sector. In India, we have to depend on

household surveys, which is expensive," said Pronob Sen, chairman, National Statistical Commission. The

surveys are conducted every five years and the results are released within nine months.

According to the usual principal status method, the unemployment rate is 2.8%, which experts say is low.

Added to this is the problem of massive underemployment. The usual principal method refers to whether

one has been employed in half of the last one year. "We are trying to improve the quality of information

of some of the indicators," Sen said, pointing to the planned changes to ensure a far more comprehensive

assessment of the jobs scenario.

Source: The Times of India, Dec. 28 2013

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MERGERS AND ACQUISITION

This section focuses on M&A activity for the year 2013 across the globe, and various other regions.

Notable Highlights Year 2012 2013

Global M&A activity (volume) $2.33 trillion $2.24 trillion

Global M&A activity (no of deals) 27,965 27,830 Table 1 Highlights

• The Americas (North and South) accounted for $1.42T of global volume – representing 61% of the

total global volume in 2013. This is comparable to the activity seen in the region in 2012. Deal volume

in EMEA reached $1.02T, increasing by 8.9% from last year.

• Asia saw a 3.4% decline in annual volume, with the deal count decreasing by the same amount.

• Global M&A volume in the fourth quarter fell 27.8% to $576.75B compared to the same period last

year. Deal count also decreased by 2.8% compared to the same period last year, contributing to the

overall drop. Despite this, overall volume for the year increased 4% to $2.33T from $2.24T in 2012

(excluding terminated deals).

• Aggregate M&A volume in the US was nearly 32% greater than the activity of the remaining top five

acquirers combined in the fourth quarter. Annual volume in the region rose 8% in 2013 to $1.22T from

$1.15T in 2012.

• Deal volume in EMEA increased by 8.5% from the previous year as its most active acquirer, the U.K.,

saw a 2.2% increase in deal making in the fourth quarter.

• Asia-based companies experienced overall declines in deal volume in 2013, though China saw a jump

of 32.7% in M&A volume to $216.47B from $163.09B in 2012.

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Industry Sector Deal Activity • Financials was the most active industry in terms of M&A in 2013, driven in the fourth quarter by

American Realty Capital’s $9.85B acquisition of Cole Real

Estate Investment in late October – the second largest deal

of the quarter. Despite having the largest deal of the

quarter – Oi SA’s pending acquisition of Portugal Telecom

– activity in the Communications industry in the last 3

months of the year declined to only 11% of total volume,

down from 35% in the third quarter.

• The Communications industry exhibited the largest growth

by deal volume year over year, up nearly 42% from 2012.

This was due primarily to Verizon Communications Inc’s

$130.1B agreement to buy Vodafone Group’s stake in its

wireless joint venture business.

• The top target industry for Private Equity by volume was Consumer, Non-Cyclical. Investment in the

industry rose by $26.2B YoY, and was largely attributable to 3G Capital and Berkshire Hathaway’s

$27.4B takeover of HJ Heinz.

• Despite a 48% year over year drop in total deal volume, targets in the Basic Materials industry earned

the highest premiums with an annual average of 54.4% compared to 28.4% in 2012.

The following charts give a complete picture of M&A activity across the globe and various regions, for the

last 5 years:

Figure 8 M&A activity across the globe

Figure 7 Sector Breakup of deals

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Key Statistics • The majority of deal making in 2013 (97% of deal count) occurred in the mid-market range (below

$500M). There was a decrease in the number of deals valued between $1B-$5B as compared to the

previous year; with 353 deals being brokered against 390 in 2012.

• Payments with the cash or stock option increased by 83% as a share of total deals compared to 2012,

being used in 2.28% of all transactions.

• The number of deals with announced premiums greater than 100% represented 0.62% of total

volume this year, as compared 1.83% of total volume last year. Terminated deals also increased

significantly this year, representing 7.36% of total deals as compared to only 3.34% in 2012.

Payment Type Summary Number of Deals Volume Percent

Cash 17146 1.52T 67.68

Stock 1048 220.67B 9.81

Cash & Stock 657 193.43B 8.6

Cash, Stock & Debt 29 136.85B 6.08

Undisclosed 7457 100.43B 4.46

Cash or Stock 55 51.4B 2.28

Cash & Debt 85 13.25B 0.59

Debt 109 8.41B 0.37

Stock & Debt 29 3B 0.13 Table 2 Deals Payment type wise

Public Target Multiples Number of Deals Min - Max Median

Net Income 1214 .00 - 3601.22 18.71

EBIT 1152 .00 - 3690.48 13.14

EBITDA 1032 .01 - 3014.93 8.06

Book Value 1839 .00 - 3288.83 1.78

Stockholder Equity 1852 .00 - 3288.83 1.75

Revenue 1811 .00 - 1421.51 1.27

Market Cap 1590 .00 - 205.94 1.27

Enterprise Value 1474 .00 - 175.52 1.04

Total Assets 1985 .00 - 305.05 0.79 Table 3 Deals Payment type wise

Deal Size ($ million) Number of Deals Volume ($ billion) Percent (%)

>10,000 16 365.41 0.06

5,000-10,000 35 240.49 0.13

1,000-5000 353 711.75 1.27

500-1000 432 301.60 1.55

0-500 26994 709.09 97.00

Table 4 Deals size wise

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Deal Type Summary Number of Deals Volume ($ billion) Percent (%)

Company Takeover 11196 127000.00 54.68

Cross Border 9307 1050.00 45.2

Asset sale 6220 517.78 22.24

Additional Stake Purchase 3472 412.89 17.73

Private Equity 5798 369.67 15.88

Majority purchase 2205 246.04 10.57

Minority purchase 6580 216.94 9.32

Tender Offer 437 146.39 6.29

PE Buyout 667 134.76 5.79

Joint Venture 895 43.75 1.88

Secondary Transaction 262 41.31 1.77

Recapitalization 31 40.46 1.74

Venture Capital 3707 40.21 1.73

Private Placement 618 37.51 1.61

Going Private 36 28.59 1.23

Management Buyout 187 25.13 1.08

Other 1158 164.61 7.05

Table 5 Deal type summary

Announced Premiums Number of Deals Volume ($ billion) Percent (%)

>100% 46 6.54 0.62

75 -100% 32 3.55 0.34

50 -75% 88 26.30 2.49

25 -50% 229 132.88 12.58

10 -25% 214 226.05 21.39

0 -10% 185 96.47 9.13

Table 6 Deals premium wise

M&A - Regional Breakdown by target Region/Country

1/1/13 - 12/31/13 2013 2012 VOLUME CHANGE FIRM

VOLUME DEAL VOLUME DEAL

USD (Mln) COUNT USD (Mln) COUNT

Americas $1,151,562 12,693 $1,134,137 13,144 1.54%

Latin America $94,572 900 $112,642 1,055 -16.04%

North America $1,068,805 11,929 $1,050,844 12,200 1.71%

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Canada $87,180 1,539 $126,289 1,554 -30.97%

United States $962,759 10,162 $886,671 10,460 8.58%

EMEA $672,577 7,004 $636,683 6,726 5.64%

Eastern Europe $82,569 1,174 $129,026 952 -36.01%

Western Europe $533,282 5,199 $460,029 5,173 15.92%

UK $128,083 1,863 $179,541 1,874 -28.66%

Germany $87,255 758 $63,750 744 36.87%

France $57,935 487 $33,627 512 72.29%

Asia-Pacific ex-Japan $444,338 6,418 $372,927 6,333 19.15%

Australia $65,512 910 $54,880 860 19.37%

New Zealand $3,064 109 $4,388 132 -30.18%

China $182,830 2,308 $133,634 2,382 36.81%

Hong Kong $28,366 421 $17,346 349 63.53%

South East Asia $70,177 1,070 $75,222 982 -6.71%

India $20,949 602 $32,545 704 -35.63%

Japan $58,368 1,543 $90,129 1,597 -35.24%

Global $2,330,349 27,890 $2,235,357 27,966 4.25%

Table 7 Regional breakdown of deals

Notable Highlights: M&A

North and South America Summary

Number of Deals 15261

Volume $1.4T

Average Deal Size $188.9M

Average Premium 36.80%

Announce Date Target Name Acquirer Name Total Value (mil.)

02-09-2013 Cellco Partnership Verizon Communications Inc 1,30,100.00

14-02-2013 HJ Heinz Co Multiple acquirers 27,403.30

05-02-2013 Virgin Media Inc Liberty Global PLC 21,627.16

28-07-2013 Omnicom Group Inc Publicis Groupe SA 19,420.43

12-02-2013 NBCUniversal LLC Comcast Corp 16,700.00

05-02-2013 Dell Inc Multiple acquirers 16,435.60

15-04-2013 Life Technologies Corp Thermo Fisher Scientific Inc 15,900.98

02-10-2013 Portugal Telecom SGPS SA Oi SA 14,297.19

15-07-2013 Shoppers Drug Mart Corp Loblaw Cos Ltd 13,007.36

29-05-2013 NV Energy Inc Berkshire Hathaway Inc 10,365.59

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Table 8 North and South America Deals

Europe, Middle East and Africa Summary

Number of Deals 9022

Volume $1T

Average Deal Size $237M

Average Premium 25.00%

Announce Date Target Name Acquirer Name Total Value (mil.)

02-09-2013 Cellco Partnership Verizon Communications Inc 1,30,100.00

15-07-2013 French Republic Caisse des Depots et Consignations 23,361.29

05-02-2013 Virgin Media Inc Liberty Global PLC 21,627.16

28-07-2013 Omnicom Group Inc Publicis Groupe SA 19,420.43

02-10-2013 Portugal Telecom SGPS SA Oi SA 14,297.19

16-04-2013 National Bank of Greece SA Hellenic Financial Stability Fund 12,852.55

23-07-2013 E-Plus Mobilfunk GmbH & Co KG Telefonica Deutschland Holding AG 11,296.26

24-06-2013 Kabel Deutschland Holding AG Vodafone Group PLC 11,185.66

23-04-2013 Piraeus Bank SA Hellenic Financial Stability Fund 10,966.97

18-01-2013 Orascom Construction Industries OCI 10,488.09

Table 9 Europe, Mid east and Africa deals

Asia-Pacific Summary

Number of Deals 9397

Volume $668.3B

Average Deal Size $98.1M

Average Premium 23.47%

Announce Date

Target Name Acquirer Name Total Value (mil.)

14-06-2013 PetroChina United Pipelines Co Ltd Multiple acquirers 9,786.65

22-11-2013 Galeao airport concession Multiple acquirers 8,308.09

31-05-2013 SM Land Inc SM Prime Holdings Inc 7,329.99

29-05-2013 Smithfield Foods Inc Shuanghui International Holdings Ltd 6,955.21

24-09-2013 Tokyo Electron Ltd Applied Materials Inc 6,794.36

06-05-2013 BMC Software Inc Multiple acquirers 6,735.72

16-12-2013 LSI Corp Avago Technologies Ltd 5,595.53

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02-07-2013 Bank of Ayudhya PCL Mitsubishi UFJ Financial Group Inc 5,505.43

02-07-2013 Kashagan caspian oil project KazMunayGas National Co JSC 5,400.00

12-04-2013 Port Kembla & Port Botany Australia Multiple acquirers 5,324.51

Table 10 Asia Pacific Deals

League Tables

M&A - Global Firm 2013 2012 Market

Share Change

Rank Market Share

Volume ($ million)

Deal Count

Rank Market Share

Goldman Sachs & Co 1 24.5 5,69,728 350 1 25.3 -0.8

Morgan Stanley 2 21.1 4,91,145 291 2 21.4 -0.3

JP Morgan 3 21.0 4,89,946 244 3 20.1 0.9

BofA-ML 4 19.9 4,62,769 217 8 14.9 5.0

Barclays 5 17.0 3,84,679 197 6 17.0 -0.5

UBS AG 6 12.0 2,80,622 162 10 8.8 3.2

Citigroup Inc 7 10.2 2,37,620 200 4 18.6 -8.4

Deutsche Bank AG 8 9.7 2,26,864 156 7 16.4 -6.7

Credit Suisse Group Group AG

9 8.7 2,03,582 211 5 17.1 -8.4

Lazard Ltd 10 8.4 1,96,119 204 11 8.1 0.3

Moelis & Co 11 5.8 1,34,224 90 23 2.1 3.7

Guggerheim Capital LLC 12 5.7 1,32,825 2 - - 5.7

PJT Capital LLC 13 5.6 1,30,100 1 - - 5.6

BNP Paribas SA 14 5.3 1,22,617 101 15 4.4 0.9

Rothschild Ltd 15 4.3 1,00,396 184 9 9.7 -5.4

Centerview Partners LLC 16 3.9 90,952 27 22 2.2 1.7

Evercore Partners Inc 17 3.7 85,949 110 13 5.5 -1.8

RBC Capital Markets 18 3.3 77,600 150 14 5.1 -1.8

Well Fargo & Co 19 2.4 55,670 53 25 1.8 0.6

HSBC Bank PLC 20 2.1 49,385 62 17 3.3 -1.2

Total 2,330,349 27,890 2,235,357

Table 11 Deal Count Company Wise

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Private Equity - Global Firm 2013 2012 Mkt.

Share Chang

e

Rank Market Share

Volume ($ million) Deal Count Rank Market Share

JP Morgan 1 25.3 93,522 68 4 21.0 4.3

Goldman Sachs & Co 2 24.2 89,410 85 1 25.6 -1.4

BofA-ML 3 20.0 73,965 35 8 10.4 9.6

Credit Suisse Group AG 4 18.8 69,367 64 6 14.9 3.9

Deutsche Bank AG 5 14.8 54,541 41 7 14.5 0.3

Barclays Capital Group 6 14.1 52,007 54 3 21.0 -6.9

Centerview Partners LLC

7 12.6 46,403 5 18 3.0 9.6

Morgan Stanley 8 12.5 46,344 67 2 21.8 -9.3

Lazard Ltd 9 11.5 42,488 59 19 2.9 8.6

RBC Capital Markets 10 11.4 42,245 36 9 8.7 2.7

Moelis & Co 11 9.9 36,534 22 21 2.3 7.6

Citigroup Inc 12 9.3 34,495 43 5 15.9 -6.6

Wells Fargo & Co 13 9.1 33,792 15 29 1.3 7.8

Evercore Partners Inc 14 5.7 21,104 21 16 4.1 1.6

UBS AG 15 5.4 19,992 43 14 5.5 -0.1

BNP Paribas SA 16 5.0 18,440 22 22 1.9 3.1

GCA Savvian Corp 17 4.6 16,813 6 34 1.1 3.5

LionTree Advisors LLC 18 4.4 16,436 2 26 1.6 2.8

Jefferies LLC 19 4.4 16,164 29 13 6.2 -1.8

Macquarie Group Ltd 20 3.4 12,555 18 17 3.7 -0.3

Total 369,768 5,811 453,109 Table 12 Private Equity Deal company wise

M&A - INDIA Firm 2013 2012 Mkt.

Share Change

Rank Market Share

Volume ($ million) Deal Count

Rank Market Share

Citigroup Inc 1 23.3 7,471 6 2 40.5 -17.2

BofA-ML 2 19.8 6,347 5 7 31.9 -12.1

UBS AG 3 18.9 6,076 2 19 3.0 15.9

HSBC Bank PLC 4 15.5 4,987 4 20 2.6 12.9

Morgan Stanley 5 14.8 4,741 8 1 42.4 -27.6

Ernst & Young 6 12.4 3,979 34 11 6.5 5.9

Standard Chartered Bank 7 11.2 3,581 4 21 2.3 8.9

Credit Suisse Group AG 8 11.1 3,561 4 9 16.3 -5.2

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Moelis & Co 9 6.6 2,128 3 66 0.0 6.6

Barclays Capital Group 10 6.2 1,997 4 5 36.0 -29.8

Goldman Sachs & Co 11 5.3 1,707 8 4 37.7 -32.4

Kotak Mahindra Bank Ltd 12 5.3 1,693 14 16 4.2 1.1

Jefferies LLC 13 5.0 1,600 1 22 2.1 2.9

Axis Bank Ltd 14 4.2 1,341 9 10 6.5 -2.3

Rothschild Ltd 15 3.0 962 8 12 5.0 -2

JP Morgan 16 2.7 860 5 6 32.7 -30

Macquarie Group Ltd 17 2.6 836 2 42 0.2 2.4

KPMG Corporate Finance LLC

18 2.3 750 11 3 38.4 -36.1

PricewaterhouseCoopers LLP

19 2.2 698 13 18 3.1 -0.9

ICICI Bank Ltd 20 2.1 662 13 26 1.1 1

Total 32,090 728 44,225

Table 13 M&A India

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Microsoft Nokia Deal

In a game-changer, world’s largest software maker by revenues - Microsoft Corporation announced on 3rd

September, 2013 that they will purchase largely all of Nokia's Devices & Services business, license its

patents, and mapping services.

The transaction terms require Microsoft to pay € 3.79 billion to purchase almost all of Nokia's Devices &

Services business, € 1.65 billion to license Nokia's patents, for a total transaction price of € 5.44 billion in

cash. Funding will be sourced primarily through its cash resources outside US. Nokia will pay the software

giant € 37.9 million if its shareholders do not approve the deal. Approximately 32,000 people are expected

to transfer to Microsoft.

Nokia will retain its patent portfolio and will grant Microsoft a 10-year non-exclusive license to its patents.

Microsoft will grant Nokia rights to use Microsoft patents in its HERE (formerly Nokia Maps) services. In

addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity. As

part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with

Qualcomm, as well as other licensing agreements.

The deal revolves around increased synergies, faster innovation, unified branding and marketing for

Microsoft. Numerous reports have dubbed Steve Ballmer’s attempt to synchronize mobile hardware and

software services as replicating Apple’s. Nokia’s shareholders were expecting it to make a strategic shift

to the leading mobile operating system Android for the past one year.

Analysts’ insights suggest that poor numbers from the exclusive Windows OS strategy initiated in February

2011 as a major reason for the deal.

Nokia alone constituted more than 90% of Windows phone sales in the first half of 2013. However

Microsoft aims to leverage the success from Lumia range of phones. Lumia phones accounted for more

than 75% of Windows phones across the globe in 2012-13. Lumia handsets have grown in sales in each of

the last three quarters, with sales reaching 7.4 million units in the second quarter of 2013. Another reason

doing the rounds is the close relationship between Nokia CEO Stephen Elop and Microsoft, with the former

being erstwhile head of Business Division in Microsoft credited for launching Office 2010. In fact, Nokia

expects that CEO Stephen Elop and others would transfer to Microsoft at the anticipated closing of the

transaction.

Announced Date 03-09-2013

Target Name Nokia (Devices and Services Business)

Acquirer Name Microsoft Corp

Announced Total Value $ 7.2 billion

Acquirer Financial Advisor Goldman Sachs

Target Financial Advisor JP Morgan

Deal Sector Technology

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A sneak peek into numbers illustrates that operations planned to be transferred to Microsoft generated

an estimated € 14.9 billion, or almost 50 percent of Nokia's net sales for the full year 2012. Microsoft

expects the deal to be accretive to adjusted earnings per share in FY 15.

As part of the deal, Microsoft will procure the Asha brand and will use the licensed Nokia brand with

existing Nokia mobile phone products. Nokia will continue to own and manage the brand. This provides

an opportunity to Microsoft to extend its service offerings to a larger consumer base across the globe,

while letting Nokia's mobile phones to serve as a platform for Windows OS phones. It will take over Nokia's

Mobile Phones division which had sales of 53.7 million units in Q2 of 2013.

Microsoft will also immediately make available to Nokia € 1.5 billion of financing in the form of three €

500 million tranches of convertible bonds.

Another important part in the deal is the restriction up to end of 2015 from further licensing the Nokia

brand with respect to mobile devices sales. Furthermore, the restriction is on using the brand on its own

devices as well, which implies Microsoft will call the shots. Fingers are crossed over the expected synergies

for the two companies.

Announced Date 02-09-2013

Target Name Cellco Partnership (Seller – Vodafone Plc)

Acquirer Name Verizons Communications Inc

Announced Total Value $ 130.1 billion

Acquirer Financial

Advisor

BofA ML/ Barclays/ Guggenheim Partners/ Adviser/ JP Morgan/ Morgan

Stanley

Target Financial

Advisor Goldman Sachs/ UBS

Deal Sector Communication

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Verizon Vodafone Deal September 2, 2013 marked a historic day in the world of Mergers & Acquisitions when Verizon

Communications Inc. announced that it will acquire Vodafone's 45 percent ownership in Verizon Wireless

for a whopping $130 billion, making it the 3rd largest M&A deal ever. The deal size is worth more than the

GDP of more than 70% of the countries on this planet!

It is the largest deal in more than a decade. The previous largest deal was worth $203 billion when

Vodafone acquired Germany’s Mannesmann AG in 2000. M&A advisory league tables have shaken up

globally with six investment banks leading the deal as mentioned in the table. The transaction is expected

to be incremental to the company's EPS by 10 percent approximately immediately. Verizon also

announced an increase in quarterly dividend by 53 cents per share simultaneously with the deal. This

increases Verizon's dividend 6 cents per share, from $2.06 to $2.12 per share YoY.

The bulk of the proceeds from the deal - 71% - will go to Vodafone shareholders, who could cash in their

Verizon shares to take the entire windfall as cash. The transaction would provide Verizon with 100 percent

ownership in the US after 13 years of partnership with Vodafone. Chairman and CEO Lowell McAdam

claims that as a wholly owned entity, Verizon Wireless will be able to exploit the continuing progress of

consumer demand for wireless, video and broadband services, and also get the most out of the changing

competitive dynamics in the market. He expects the transaction to close in the first quarter of 2014.

Verizon Wireless’ sheer size can be adjudged from 100.1 million retail connections, largest 4G LTE

network, 73,400 employees and more than 1,900 retail locations in the US, as of the end of Q2 2013. It

was started in 2000 as a joint venture of Verizon and Vodafone. It reported $75.9 billion in operating

revenues in 2012, $39.5 billion in the first half of 2013, and an impressive operating income margin of

28.7 percent in 2012 and 32.6 percent in the first half of 2013, as per company reports.

The deal break up is as follows: The common stock portion valued at approximately $60.2 billion will be

distributed to Vodafone shareholders, with a minimum price of $47 and a maximum price of $51. The

cash portion of $58.9 billion will be funded by a $61 billion bridge credit agreement with several banks.

The bond issue is the largest ever above Apple’s bond issue of $17 billion. In addition, Verizon will issue

$5 billion in notes payable to Vodafone.

Analysts suggest that Verizon was keen towards the deal due to anticipated economic recovery in US and

rising interest rates. Also, Verizon would no longer have to operate its wireless and wire line business

separately, and helps it take decisions much faster. However analysts are worried about the high price

paid at a time when growth is slowing in US wireless industry and smaller rivals are competing aggressively

on price. Shareholders have not been enthusiastic after the deal as reflected by the stock prices.

Vodafone too, has been focused towards reducing debt levels and facilitating acquisitions particularly in

Europe. The deal also involved Verizon giving out its 23% share in Vodafone Italia for a value of $3.5 billion

as part of the consideration. Its stock prices indicate a positive response from the shareholders.

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HUL Unilever Deal Announced Date 30-04-2013

Target Name Hindustan Unilever Ltd.

Acquirer Name Unilever NV

Announced Total value Rs. 191819.5 million

Acquirer Financial Advisor HSBC Bank Plc

Target Financial Advisor -

Deal Sector Consumer Goods

On April 30, Anglo-Dutch consumer goods giant Unilever Plc will spend $ 5.4 billion (over Rs 29,380 crore)

to hike stake in its Indian arm Hindustan Unilever to 75 per cent through an open offer. Unilever Plc's $

5.4 billion bid for a 23 per cent stake in Hindustan Unilever is the largest Asia Pacific cross border inbound

merger and acquisition (M&A) deal so far this year and is the fifth largest India Inbound M&A transaction

on record till date.

Unilever will pay Rs 600 a share in an open offer to raise its stake in Hindustan Unilever to 75 per cent

from the current 52.48 per cent. Unilever is paying nearly 36 times the unit's forecast earnings for the

year ending March 2014, according to Thomson Reuters data. It trades on a price/earnings ratio for the

next 12 months of 29.5, compared with 19 for Unilever Plc. The offer of INR 600 per share values the

transaction at approximately INR 191.74 billion or €2.49 billion. Based on the shares tendered which

represent 14.78% of HUL, the Unilever Group will increase its stake from 52.48% to 67.26%. The Anglo-

Dutch giant said it planned to lift its share in Hindustan Unilever India's largest consumer goods maker,

known for its Dove and Lipton brands, to as much as 75 percent from 52 percent at present.

The offer valued Hindustan Unilever at 37 times the subsidiary’s earnings before interest, taxes,

depreciation and amortization. The median multiple for similar deals was 10.8 times EBITDA, according to

data compiled by Bloomberg.

The deal, the largest single investment in the Indian consumer goods sector, is a major vote of confidence

in the Indian economy, where growth is at its lowest for a decade.

It fits Unilever's strategy of increasing its presence in fast-growing markets. Emerging markets, which

make up 57 percent of its turnover, have contributed double-digit growth in recent quarters.

The offer valued HUL at 37 times the subsidiary’s earnings before interest, taxes, depreciation and

amortization (EBITDA). The median multiple for similar deals was 10.8 times EBITDA, according to data

compiled by Bloomberg.

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Ambuja Holcim Deal Date July 24 ,2013

Target Company Ambuja Cements

Sector Cement and Refractories

Acquirer Name Holcim

Announced Total Value INR 11000 Cr

Acquirer Financial adviser Citi Bank, Homburger AG

Target Financial Adviser Axis Capital, Amarchand & Mangaldas

Holcim, the Zurich-based company, through a chain of intra-group transactions involving both cash and

stock swaps, raised its stake in Ambuja from its earlier 50.01% to 61.30% and Ambuja in turn bought

Holcim’s 50.1% stake in ACC. Ambuja Cements issued 58.4 crore shares to Holcim in the proposed merger

swap ratio of 6.6 Ambuja shares for 1 ACC share. While Ambuja became the flagship enity for Holcim’s

India operations with ACC as a subsidiary, both continue to operate as listed entities with their existing

brands and separate go-to-market strategies.

As on 31 March 2013, the Swiss cement giant had a net financial debt of 10.8 billion Swiss Francs, or Rs

68,000 crore, on its balance sheet. Last December, the cement maker had announced restructuring of its

European operations. The company had said that the group had introduced a leaner management

structure for Europe to adapt better to the lower level of construction activity.

Within weeks of it, several global transactions surfaced. For instance, barely a month before proposing

the restructuring of ownership of its Indian operations, Holcim had sold its New Caledonia plant (Holcim

Nouvelle Caledonie) to Japanese firm Tokuyama Corporation for an undisclosed sum.

The deals were valued by BSR and Associates & Price Waterhouse & Co., India (both joint venture for ACL

and HIPL) with Axis Capital Limited providing the fairness option. The tax advisers were D.B. Desai (for

ACL) and KPMG, India (for HIPL/ Holderind Investments limited)

A lot of bankers involved in the deal argued that this was not a premium deal. However, from the

perspective of Ambuja Cement’s shareholders, the cost of this deal was around Rs 14,600 crore when the

current market cap of ACC was around Rs 23.000 crore. That means that the deal was at a premium to

the current market price and the Indian shareholder was paying a much higher premium. But from the

perspective of a Holcim shareholder, the 9.76-percent stake in Gujarat Ambuja being valued at Rs 11,000

crore would be cancelled and the net cash and stock that he received was at the same price at which the

50-percent stake was valued.

Holcim, on its website, put up a statement saying, "Holcim simplifies group structure in India". But its key

man in India, Weijde knows it won't be that simple to explain it to investors.

The deal was quick to invite the wrath of brokerages and investors' associations who called it "daylight

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robbery". Some said that this will turn cash-rich Ambuja into a net-debt company; while concerns were

also raised about minority shareholders' interest as using the company's cash to buy a stake in ACC had

restricted their choice. "The cash could have been used alternatively for a buy-back," said Credit Suisse in

a note. "Additionally, Ambuja has committed to acquiring an additional 10 per cent stake in ACC over 24

months. In our view, this will convert Ambuja into a net debt company," the note said.

However, Ambuja proved the earlier predictions wrong. Its stocks in September jumped up by 7.9%.

On October 17, 2013, Ambuja Cements closed at Rs 196.20, down Rs 1.65, or 0.83 percent. The 52-week

high of the share was Rs 219.50 and the 52-week low was Rs 147.55. The company's trailing 12-month

(TTM) EPS was at Rs 8.60 per share as per the quarter ended June 2013. The stock's price-to-earnings (P/E)

ratio was 22.81. The latest book value of the company is Rs 57.00 per share. At current value, the price-

to-book value of the company was 3.44.

Jet Etihad Deal

The Jet Airways board agreed to sell a stake to Abu Dhabi's Etihad Airways. This is the first deal in the

Indian aviation space ever since the government last September relaxed ownership rules and allowed

foreign airlines to buy up to a 49 per cent stake in Indian airlines.

The Abu Dhabi-based airlines acquired 24 percent stake in Jet and hence were not required to make the

mandatory open offer for Jet. According to Sebi rules, a buyer acquiring a 25 per cent stake in a listed

company will have to make an open offer to the shareholders of the target company, and the minimum

stake that the acquirer can own after the open offer is 51 per cent. However, the government of India

allows foreign airlines to own only up to a 49 per cent stake in Indian carriers.

At 754.74 per share, the offer price was a 31.55 per cent premium to Jet's closing price of Rs. 573.85 on

the Bombay Stock Exchange and of Rs. 573 on the National Stock Exchange as on 24th April, 2013.

After a lot of fiasco, Etihad Airways won Indian government backing to invest in Jet Airways (India) Ltd.

(JETIN), paving the way for the first share sale by a carrier in the Asian country to a foreign airline since

restrictions were eased.

The approval will result in foreign investment of 20.6 billion rupees ($332 million), the government said.

Date April, 2013

Target Company Jet Airways

Sector Aviation

Acquirer Name Etihad

Announced Total Value USD 150.00 Million

Acquirer Financial adviser PWC, HSBC, Amarchand & Mangaldas

Target Financial Adviser Ernst & Young, Credit Suisse, Merrill Lynch, Economic Laws Practice,

Gagrats & Co.

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‘The deal is important to Jet, which is facing significant financial challenges. The deal will also help the

Indian civil aviation industry by enhancing capacity, increasing competition and bringing down airfares,"

said Amber Dubey, partner and head aerospace and defense at global consultancy firm KPMG.

"The step will instill confidence in the airlines industry in India. It particularly benefits both the partners

and in general improves the prevailing investment climate in the country," said Rajiv Chib, associate

director, PricewaterhouseCoopers.

As the Jet-Etihad hub will be located in Abu Dhabi, passengers will have access to a number of new routes

to cities on Africa, the USA and Europe. With Jet Airways getting access to low cost fuel, flying could

become cheaper.

However, the deal also has some drawbacks as the investment will not come for free. Most of the new

airlines will look to take a large chunk of traffic from India and domestic airlines will lose out. Air India will

be adversely impacted as their key market remains the West Asia while Indian airports in Delhi run by

GMR and Mumbai by GVK will have to wait longer to realise their dream of turning it into hubs for south-

east Asia. The intense competition could also damage some of the Indian operators as Aviation Turbine

Fuel.

Apollo Tyres – Cooper Tire Deal

Announced Date 12-06-2013

Target Name Cooper Tire & Rubber Co

Acquirer Name Apollo Tyres Ltd

Announced Total value Rs. 135424.4 million

Acquirer Financial Advisor BofA ML/Ernst & Young/Morgan Stanley

Target Financial Advisor Credit Suisse/UBS

Deal Sector Energy Sector

The offer price of $35 per share in cash represents a 40% premium to the 30-day volume-weighted

average price. Target will be delisted post transaction.

Morgan Stanley and Deutsche Bank Securities served as financial advisors and Greater Pacific Capital acted

as strategic and financial advisor to acquirer. Sullivan & Cromwell and Amarchand & Mangaldas served as

legal advisors to acquirer. Standard Chartered is the sole provider of transaction financing at the acquirer

and is also the structuring advisor. Morgan Stanley Senior Funding, Inc., Deutsche Bank Securities Inc.,

Standard Chartered and Goldman Sachs Bank USA are joint lead arrangers providing committed funding

to acquirer s acquisition subsidiary. BofA Merrill Lynch served as financial advisor and Jones Day served

as legal advisor to target.

There are three major issues in this entire deal. Firstly, the stock markets have learnt that big deals rarely

yield big returns. Evidence suggests that 3 out of 4 M&A deals fail. Hence, the assault on the shares of

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Apollo Tyres. Secondly, the premium of 40% over the market price is not justified as in the case of Cooper

Tire, the stock even after the recent surge trades at a P/E multiple of 8 times compared to its peers across

various geographies (Goodyear, Pirelli, Bridgestone) all which trade at 12 times and above. Thirdly, there

was apprehension regarding the structure of payment. The entire amount would be paid through debt

pushing the debt/equity ratio to 1.35 times from 0.53 times. The debt will be for a 7-8 period having an

interest of 10 percent per annum. This implies that interest expense for the company after tax will be

around USD 175 m.

The big question was: How can one justify a leveraged buyout where the target generates nearly double

the revenues of the acquirer?

Apollo had justified the acquisition on the three following grounds: 1) Cooper's strong financials, which

reported an EBITDA of USD 526 million in 2012. 2) A foothold in Asia where Cooper's revenues in 2012

stood at USD 1.3 billion apart from access to the Chinese market through two manufacturing facilities. 3)

The strategic brand fit of Cooper in Apollo's portfolio which also owns premium tyre brand Vredestein.

However, in the last four months the situation has changed drastically. A few backs Cooper reportedly

lowered its EBITDA guidance for 2013 to just USD 257 million, which the lowest in the last four years.

Last week, Apollo's demand for a price reduction in the deal, citing problems related to the US firm's

operations in China and concessions to the union, was rejected by Cooper. According to Cooper, Apollo

wanted a price renegotiation "far greater than the USD 2.5 reduction it had earlier proposed, and at one

point referencing 'USD 8 or USD 9' per share. The disagreement over price came to light after Cooper on

Friday filed a complaint in a U.S. court to force Apollo to close the acquisition "expeditiously. In response,

Apollo Tyres has asked a US court to declare that conditions precedent to closing the USD 2.5 billion

mergers with Cooper Tire & Rubber Company have not been satisfied.

The two companies have until the end of the year to resolve their pricing dispute and close the transaction,

to be funded entirely through debt. If completed, the deal would turn the Indian company into the world's

seventh-largest tire maker and give it access to the U.S. and China markets. It would also represent the

second-largest U.S. acquisition by an Indian company.

Cooper shares closed down 13 percent at $25.72 on the New York Stock Exchange on Monday, just $1

above its trading levels prior to the deal announcement in June. On October 18, 2013, at 12:31 hrs Apollo

Tyres was quoting at Rs 67.30, up Rs 0.40, or 0.60 percent. The 52-week high of the share was Rs 101.50

and the 52-week low was Rs 54.60.

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Just Dial IPO Issue Open May 20, 2013 - May 22, 2013

Issue Size 17,497,458 Equity Shares of ₹ 10

Issue Size ₹ 919.14 Crore

Issue Price ₹ 470 - ₹ 543 Per Equity Share

Sector IT Enabled Services

CRISIL IPO Grading 05-May

Listing Date June 5, 2013

Listing Price ₹ 530 per share

IPO Registrar Karvy Computer Share Pvt Ltd

Lead Managers Ctitgroup, Morgan Stanley

Incorporated in 1996, Just Dial Limited (Just Dial) is popular local search service provider in India. Just

Dial’s search services are available to use₹ through Internet, mobile Internet, telephone and text (SMS).

Just Dial provides search services across two main categories; company search - specific or any business

– and category search - product or service based on a given classification. The company generates revenue

from advertisers who pay for priority ranking in search results. At present the company uses the premium

number 08888888888 for receiving queries across India. In addition it has its Android and iPhone

applications in place already.

In fiscal 2012, Just Dial addressed over 254.3 million search queries from millions of users across

platforms. As of March 31, 2013 Just Dial had 7,457 employees. Just Dial has a database of approximately

9.1 million listings as of March 31, 2013 and approximately 195,100 campaigns as of December 31, 2012.

Just Dial's unconsolidated total revenue was ₹ 2,716.1 million and unconsolidated restated profits after

tax from continuing operations were ₹ 470.8 million as of December 31, 2012.

In the IPO, out of 17.5 million shares, 13.5 million shares were offered to the public and 3,936,925 shares

have been subscribed to by 15 Anchor Investors at ₹ 530 per equity share, for a total of around ₹ 208.65

crore. Just Dial reserved 75% of its IPO for institutional investors, 15% for high net worth individuals (HNIs)

and remaining 10% for retail investors. CRISIL has been assigned grade 5/5 to the proposed IPO of Just

Dial. This grade indicates that the fundamentals of the IPO are strong relative to other listed equity

securities in India. Investors bid for over 50 million shares against the 13.5 million shares on offer,

according to exchange data. In total, the IPO was subscribed over 12 times.

In the last 7 months of the issue, the share has soared over 200 % from ₹ 530 to about ₹ 1600 per share

(as of January 24, 2014). 2013 has been among the worst years for IPOs, and witnessed less than 20 IPO

listings (excluding SME listings which are not open for retail investors). Just Dial was the most successful

one among 2 others Repco Home Finance Ltd and V-Mart Ltd. According to Prime database, as many as

11 companies had raked in ₹ 6,835 crores in 2012, and ₹ 1,619 crores in 2013. This was the lowest since

2001. Fund raising through IPOs had touched a high in 2010 with a total of ₹ 37,535 crores.

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Markets at a glance

June 2013 The Benchmark indices ended negatively for the month of June 2013. While BSE Sensex fell by 1.8%, Nifty

lost by 2.4%. Continuing worries over capital outflows coupled with fresh weakness in the rupee cast a

shadow on stock markets. Depreciation of rupee value against the dollar continued to weigh on the

market sentiments.

Average daily volumes on BSE during the month of June 2013 fell 18.05% M-o-M (NSE daily average

volumes were lower by 2.15% M-o-M). The average daily derivatives volumes on NSE rose 4.7% to Rs.

1,59,544 Cr in June.

All sectoral indices ended in the negative (except IT, Oil & Gas, and Technology) in the month of June. The

top four losers for the month were Consumer Durable, Realty, Metal and Power, which fell by 20.28%,

10.32%, 8.81%, and 7.55% respectively. IT, Oil & Gas, and Tech, the only gainers, rose by 3.13%, 2.84%

and 2.12% respectively.

The government increased duty on gold from 6% to 8% to curb its import. This was the second time in six

months that the duty was raised. The Reserve Bank extended the restrictions on gold import to other

agencies in addition to banks, to keep a check on burgeoning current account deficit.

Consumer Durable Index fell making it the largest loser in the month across the board. Gitanjali Gems,

Titan Industries, PC Jewellers and VIP Industries were the top losers, falling 59.2%, 23.6%, 18.3% and

10.3% respectively. Index ended the Month on a negative note amid looming fear that the falling local

currency may further lead to overseas investors paring positions in Indian equities. Gitanjali Gems Ltd

slipped, as sharp fall in gold prices and the Reserve Bank of India's (RBI) measures to curb gold sales turned

the investment sentiment bearish. Continued depreciation of rupee was another factor weighted on gems

and jewellery stocks as sustained depreciation in currency against the dollar may dampen the growth of

the sector.

Index rose on a recent steep slide in rupee against the dollar. A weak rupee boosts revenue of IT firms in

rupee terms as the sector derives a lion's share of revenue from exports. Stocks rose on positive economic

data in the US, the biggest outsourcing market for the Indian IT firms. Satyam Computer, Tech Mahindra,

Hexaware Tech and Wipro were the top gainers, gaining 10.7%, 9.6%, 7.7% and 7.1% respectively.

West Texas Intermediate (WTI) crude traded near the highest price in more than four months on renewed

speculation that unrest in Syria will spread to other parts of the Middle East and disrupt supplies. Oil prices

surged helped by a rise in Middle East worries, after Washington said it would provide military support to

Syria’s rebels and Iran went to the polls to elect a new president.

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Rupee plunging to record level and a sharp fall in the equity market are knee-jerk investor reactions to

the US Federal Reserve's saying it will slow down bond-buying programme in view of improving American

economy. Signs of improvement in the U.S economy and speculation that the Federal Reserve might begin

scaling down its asset-purchase program sooner rather than later have pushed the dollar index up. The

Rupee continued to reel under pressure and logged an all-time low on weak economic fundamentals,

costlier imports, inflation risks rise and record high current account deficit (CAD). Selling by FIIs from

India's bond market has put pressure on the rupee.

July 2013 The Benchmark indices ended negatively for the month of July 2013. BSE Sensex fell by 0.3%. Nifty fell 1.7

percent for the month, marking its second consecutive monthly fall, after the Reserve Bank of India's

measures to raise short-term interest rates to defend the rupee have raised worries about the economic

costs. The Nifty edged down to its lowest close in a month, as lenders extended recent declines on

uncertainty about how long the Reserve Bank of India (RBI) will maintain its measures to defend the rupee

by raising short-term interest rates.

The Reserve Bank of India (RBI) in its monetary policy review meet left interest rates unchanged as it

sought to support a battered rupee but said it will roll back recent liquidity tightening measures when

stability returns to the currency market, enabling it to resume supporting growth. Indian rupee gained

modestly as the government eased rules for foreign investment, adding to measures taken by the central

bank to suck out rupee liquidity.

India's trade deficit narrowed in June to $12.24 bn from a 7-month high, helped by a slowdown in gold

imports, which should ease pressure on the current account balance and the beleaguered rupee.

Government released Consumer Price Index (CPI) inflation data which showed that the June CPI food

inflation was 11.84%, CPI Inflation at 9.87% vs 9.31% (M-o-M), The WPI inflation for the month of June

came in better than expected at 4.86%. Core inflation came in at 2%.

Average daily volumes on BSE during the month of July 2013 rose 17.9% M-o-M (NSE daily average

volumes were higher by 1.8% M-o-M). The average daily derivatives volumes on NSE fell 13.9% to Rs.

1,37,411 Cr in July.

All sectoral indices ended in the negative (except IT, Tech, FMCG, Healthcare and Consumer Durable) in

the month of July. The top four losers for the month were Bankex, Realty, PSU and Metal, which fell by

13.70%, 12.84%, 11.57%, and 11.24% respectively. IT, Tech, FMCG, Healthcare and Consumer Durable,

the only gainers, rose by 19.23%, 16.75%, 5.17%, 2.59 and 2.08% respectively.

Public sector banks (PSBs) have declined on fears of growing non-performing assets (NPAs) in sectors like

chemicals, pharmaceuticals, infra, steel and textiles, as well as the specter of a rising wage bill. The RBI

lowered the overall limit for borrowing under the daily liquidity adjustment facility (LAF) -- which offers

funds in exchange for collateral - for each bank to 0.5% of deposits from 1%. Banks have been under

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pressure in the month of July, largely weighed down by the RBI's action to shore up the currency and

pressure on asset quality on most of the PSU banks. Yes Bank, Union Bank, Canara Bank and Axis Bank

were the top losers, falling 29.7%, 28.6%, 24.0% and 21.9% respectively.

IT sector index surged to a record, led by gains in shares of Tata Consultancy Services Ltd (TCS), which also

tested a new high on Friday after beating earnings estimates. TCS posted a 15.5% rise in consolidated net

profit as volume surged to its fastest growth in seven quarters backed by growth in the US. Also, Mindtree

Ltd’s June quarter profit jumped by nearly 50%, beating market expectations, driven mainly by higher

spending by clients and forex gains. Hexaware Technology, Wipro, HCL Technologies and TCS were the

top gainers, rising 34.1%, 25.5%, 20.8% and 19.6% respectively.

Oil prices jumped boosted by concerns over rising tensions in Egypt and better-than-expected U.S.

economic data. News of protests near the Suez Canal added to the alarm for oil traders. U.S. crude oil

prices extended their string of 14-month highs.

August 2013 The Benchmark indices ended negatively for the month of August 2013. BSE Sensex fell by 3.8%. Nifty fell

4.7% for the month, weighed by a host of factors, including weakness in the currency, possible tapering

of US Fed's bond-buying program and threats of ratings downgrade. In August, India’s financial markets

remained under severe stress as the rupee lost around 9%, deepening fears about the country’s fiscal

condition.

In the first week of August, benchmark indices fell by 2.8%. This was triggered on concerns that US

monetary policy would soon become less accommodative, after two Fed Reserve officials on Tuesday, 6

August 2013, said a reduction in Fed's asset purchases is likely later this year. In July, the services sector,

the largest in the Indian economy, contracted for the first time since October 2011. On the positive side,

the Finance Ministry agreed to give Rs. 8,000 crore cash subsidy to fuel retailers IOC, BPCL and HPCL to

make up for less than a third of losses they incur on selling diesel and cooking fuel below cost. FDI into

India increased by 24.2% Y-o-Y to $3.95 bn in April-May. According to data from the Department of

Industrial Policy and Promotion (DIPP), the country had received $3.18 bn of FDI in April-May 2012.

In the second week of August, indices fell by 1%. India's inflation accelerated sharply to close to 6% in July

as a weak rupee pushed up import costs. The WPI, India's closest-watched cost-of-living gauge, rose to

5.79% from a year earlier, up nearly 1% from 4.86% the previous month. India reported a second straight

contraction in industrial production in June, underscoring the challenge for policymakers to stabilize the

battered rupee without hurting economic revival. IIP contracted 2.2% in June after falling 1.6% in May.

Manufacturing contracted by 2.2% against 2% in the previous month, while mining sector recorded de-

growth of -4.1% against -5.7% in the previous month.

In the third week of August, indices stayed flat (-0.4%). Moody's Investors Service said that the credit

quality of state- owned oil marketing and upstream oil companies in India will likely weaken for the rest

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of FY14 (April 2013-March 2014), if the government continues to ask them, as it did in April-June, to share

a higher burden of the country's fuel subsidies. Global financial firm JP Morgan, in its latest report,

downgraded India to neutral. As per Adrian Mowat of JP Morgan, the report said that high CAD will be

further exacerbated if the Rupee continues to slide. On the positive side The RBI said that it would

purchase Rs. 8,000 crore worth of bonds via open market operations. It has allowed banks to shift a part

of their AFS portfolio to HTM. The measures will restrict a sharp rise in long-term yields and reduce MTM

losses on banks' investment portfolios.

Indices stayed flat for a second week running. India's first quarter for FY14 surprised on the downside, as

it recorded a growth of 4.35% annualized rate (lowest since Q4 FY09), lower than Bloomberg consensus

estimate of 4.7%. While the GDP number got a boost from the expected uptick in the agriculture sector

(a growth of 2.72%), manufacturing contracted quite sharply by 1.19%. The market managed to wipe off

sharp losses during the week, tracking a rebound in the rupee and a slide in oil prices. India's central bank

stated that they would provide US dollars directly to state oil companies in its latest attempt to shore up

a currency that has slumped to a record low, reflecting the stiff economic challenges facing the country in

an uncertain global environment.

All sectoral indices ended in the negative (except Metal, IT and Tech) in the month of August. The top four

losers for the month were Capital goods, Realty, Consumer goods and Bankex, which fell by 13.88%,

10.88%, 10.33%, and 9.93% respectively. Metal, IT and Tech, the only gainers, rose by 13.11%, 7.63% and

3.89% respectively. The world markets ended the month of August 2013 on a negative note except

Bovespa and Shanghai. Indonesia, Singapore, Dow Jones, FTSE, DAX, Nikkei and Nasdaq were the losers,

falling 9.0%, 6.0%, 4.4%, 3.1%, 2.1%, 2.1% & 1.0% respectively. Average daily volumes on BSE during the

month of August 2013 fell 5.4% M-o-M (NSE daily average volumes increased by 15.2% M-o-M). The

average daily derivatives volumes on NSE rose 39% to Rs. 190,696 cr in August.

Gold rose by 6.33% in August as the dollar fell on lingering uncertainty about the scope and timing of the

Federal Reserve's eventual tapering of its bond-buying program and after the Chinese government posted

strong data on factory output during July. Prices posted hefty gains on reports that physical demand is

picking up, while uncertainty over the fate of monetary stimulus programs in the U.S. bolstered the

precious metal's safe haven appeal.

September Benchmark indices broadly followed an upward trend during September, opening the month at 18886.13

and closing at 19379.77. In the first two weeks of the month, a slew of positive events bolstered investor

confidence and helped markets recover. Markets climbed steeply after Dr. Raghuram Rajan took over as

the Governor of the RBI on September 5, and announced the setting up of several committees to look into

key financial sector reforms. Robust trade and IIP data further bolstered the markets. Data released during

September showed that India's trade deficit narrowed to a five-month low in August, while industrial

production unexpectedly rebounded in July. After shrinking for three months, industrial output rose by

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2.6 per cent in July from a year earlier. Growth was aided by an upturn in capital goods production.

Markets slid steadily in the last two weeks of the month due to disappointing data on domestic inflation,

an interest rate hike by the RBI to counter rising inflation and signs of a weaker recovery in the US - as the

US Federal Reserve postponed the tapering of its quantitative easing (QE3) programme due to growth

and unemployment concerns.

The first week of September, markets ended high by 650 points to conclude at a 3-week high of 19,270.06

on sustained buying mainly in banking, PSU and refinery sectors. It was primarily due to various plans

announced by the new Reserve Bank Governor Raghuram Rajan to bolster the financial industry. Renewed

buying by foreign institutional investors also boosted sentiment. The Reserve Bank's move to allow a

special window to swap foreign currency non-resident (FCNR) dollar funds for boosting foreign fund

inflows was likely to fetch around $10 billion. Relaxing the recent curbs on the outward investments,

Reserve Bank allowed companies to invest up to 400% of its net worth provided it has raised the funds

through external commercial borrowings (ECBs). On the negative side, India’s manufacturing activity

slowed down to its weakest pace in four-and-a-half years in August, confirming fears that it may take

longer- than-expected to scale the slowdown hump in Asia’s third-largest economy, as GDP growth

crashed to a four-year low of 4.4% in April- June.

In the second week, the market surged in a truncated trading week on recent sharp recovery of the rupee

against the dollar and on receding geopolitical risks in Syria. The S&P BSE Sensex rose 462.70 points or

2.4% to 19,732.76. The 50-unit CNX Nifty gained 170.20 points or 2.99% to 5,850.60. India's trade deficit

narrowed to a five-month low in August as slowing gold demand helped cool imports, while the

government's efforts to encourage exporters tap newer markets drove merchandise exports higher. The

deficit narrowed to $10.9 billion from $14.17 billion a year earlier. India's slowing economy and its massive

current account and fiscal deficits are not structural problems and can be fixed with modest reforms,

according to newly appointed central bank Governor Raghuram Rajan. ndustrial output rose 2.6% in July

from a year earlier, its first expansion in three months, lifted by a robust rebound in capital goods

production. Prime Minister's Economic Advisory Council (PMAEC) has pegged India's Gross Domestic

Product (GDP) growth at 5.3% for the current financial year. This is way down from their earlier estimates

of 6.4% but higher than sub-5% growth projected by various brokerage firms and independent

economists. The annual consumer price inflation eased marginally in August to 9.52% from 9.64% in July.

The third week of September was a week of surprises. Indian Market began the week on a tepid note as

investors remained on the sidelines, wary of FOMC and RBI decisions on quantitative tapering and

monetary policies respectively. Market went on a binging spree on FII liquidity on as Fed's decision to

delay its taper boosted the sentiment that cheap global liquidity will now towards the emerging markets

such as India. However, Indian inflation unexpectedly accelerated to a six-month high in August as the

rupee’s slide stoked import costs leading the RBI to hike the repo rates by 25bps to 7.5%. The wholesale-

price index rose 6.1 percent from a year earlier, compared with July’s 5.79 percent climb. For the week

ended September 20, Sensex gained 531 points or 2.7% to end at 20,264 and the 50-share Nifty gained

162 points or 2.8% to close at 6,012.

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In the week ended September 27, BSE Sensex ended down 536 points or 2.7% to end at 19,727 and Nifty

ended down 179 points or 3% to close at 5,833, on worries that the central bank may avoid rate cuts for

now after it flagged concerns over high inflation. Positive job data from the US signaled improvement in

the world's largest economy and fueled investor fears on possible tapering. The rally in emerging markets

including India lately was on account of ample liquidity following the US Federal Reserve's bond-buying

program.

With the exception of IT, Tech and Realty, all other sectoral indices recorded impressive gains during the

month. Sectors like Capital Goods and Power rose 8.8% and 9.8% respectively on account of the strong

rally in BHEL among others. BSE IT and BSE Tech cooled off after 4 months of strong gains while BSE PSU

index recovered a handsome 9.1% after 4 months of sharp losses. BSE Oil & Gas and Consumer Durables

proved to be laggards during the month clocking in gains worth 0.8% and 2.8% respectively.

October 2013 October started with a positive note with key benchmark indices edging higher in the first week as the

rupee extended its recovery against the dollar since hitting record low in late August 2013. In the week

ended Friday, 4 October 2013, the 30-share S&P BSE Sensex gained 188.68 points or 0.96% to 19,915.95.

The 50-unit CNX Nifty advanced 74.10 points or 1.27% to 5,907.30.

In the second week as well Indian stocks surged, with investor sentiment boosted by upward revision in

revenue guidance for the full year from Infosys, data showing a sharp decline in trade deficit in Sept 2013

from Aug 2013 and the RBI’s decision to improve liquidity conditions in the banking system. FIIs were in

buying mood. The barometer index, the S&P BSE Sensex, regained the psychological 20,000 mark. The 50-

unit CNX Nifty regained the psychological 6,000 level. The market gained in four out of five trading sessions

in the week ended Friday, 11 October 2013. The S&P BSE Sensex surged 612.6 points or 3.1% to 20528.6,

while the CNX Nifty jumped 188.9 points or 3.2% to 6,096.2, their highest closing level since 19 September

2013.

Towards the end of October, the market edged lower, with stock-specific action on the basis of outcome

of second quarter results taking centre stage. The market fell in four out of five trading sessions in the

week ended Friday, 25 October 2013. The S&P BSE Sensex declined 199.37 points or 0.95% to 20,683.52,

its lowest closing level since 17 Oct 2013. The 50-unit CNX Nifty shed 44.45 points or 0.71% to 6,144.90,

its lowest closing level since 17 Oct 2013.

At the end of the first week of October, the RBI further eased liquidity by cutting the marginal standing

facility (MSF) rate by 50 bps to 9%, with immediate effect. This was the second time in less than a month

that the central bank has cut the key overnight interest rate, taking advantage from the rupee’s recent

surge.

International crude oil prices (WTI) ended lower by 2.94% for the week ended 25th October 2013 to close

at USD 97.85 per barrel. Oil fell to a fresh four-month, as concerns over the U.S. economic outlook and

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the impact on future oil demand prospects dampened the appeal of the commodity. Prices settled below

$100/bbl for the first time since July 1. U.S. crude prices have been on a downward trend in recent weeks

amid concerns the recent U.S. government shutdown created a drag on economic growth and eroded

demand in the world’s largest oil consumer.

International gold prices rose by 2.88% for the week the week ended 25th October 2013 to close at USD

1352.50 per ounce as investors bet that continuing U.S. economic stimulus from the Federal Reserve will

keep drawing funds into the precious metal. Gold rose to a three-week high after weak U.S. jobs figures

raised expectations the Fed will keep its stimulus undiminished well into 2014.

The US dollar depreciated against the rupee in the first two weeks of October. The Indian rupee

strengthened against the US dollar on continued expectations the US government shutdown would delay

tapering of the Fed's stimulus programme. Dollar sales by exporters amid positive local stocks also

supported the Indian rupee. Towards the end of October, the US dollar appreciated against the rupee by

0.57% for the week ended 25th October 2013. The Indian rupee fell against the US dollar on persistent

demand from importers and banks as the US currency strengthened overseas. Rupee dropped for a

second week on concern faster inflation will prompt the central bank to boost borrowing costs, putting at

risk an economy that’s growing at the slowest pace in a decade.

November 2013 The Benchmark indices ended negatively for the month of November 2013. BSE Sensex fell by 1.8%. Nifty

fell 2.0% for the month. Profit-taking in blue-chips such as ICICI Bank hit shares reversing some of the

previous gains on doubts about how quickly the Iranian nuclear accord would translate into higher

supplies that pressure oil prices.

Average daily volumes on BSE during the month of November 2013 rose 4.52% M-o-M (NSE daily average

volumes decreased by 3.88% M-o-M). The average daily derivatives volumes on NSE fell 6.26% to Rs.

150,271 cr in November.

Sectoral Indices for the month of November ended on a mixed note. The top four gainers for the month

were Capital Goods, Metals, Auto and Power, which rose by 7.26%, 2.56%, 2.04% and 1.71% respectively

while the losers were FMCG, Oil & Gas and Bankex which fell by 3.70%, 3.19% and 2.73% respectively.

Capital Goods Index rose on renewed buying. Sadbhav Engineering, Carborundum Uni, Crompton

Greaves, IL&FS Transport and Fag Bearings were the top gainers, rising 35.2%, 24.4%, 18.2%, 17.6% and

12.2% respectively. L&T gained after the company said it is evaluating alternatives for monetisation of

certain assets of its subsidiary L&T Infrastructure Development Projects (L&T IDPL), including a potential

initial public offering and listing in Singapore of selected road assets of L&T IDPL, through a business trust

in Singapore. Sadbhav Engineering rose after the company said it has been declared the successful bidder

by Delhi Metro Rail Corporation for a contract aggregating Rs 50.96 crore.

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FMCG Index fell on the back of concerns over slowdown in volume growth after the festive season and

high valuations resulted in sector-wide profit booking. Sector heavyweight ITC fell for the first time in two

months after the company's quarterly earnings disappointed investors and forced brokerages to

downgrade the stock. United Breweries, Tata Global, Nestle India, and Dabur India were the top losers,

falling 14.3%, 9.2%, 8.1% and 7.3% respectively. United Breweries fell after it reported net loss to Rs 185.7

million for the quarter ended Sept. 30, 2013 as compared to net profit of Rs 342 million in the same period

last year.

Gold headed lower, as expectations the U.S. Federal Reserve will maintain its economic stimulus seemed

to have been factored in. Gold weakened on the back of a surprisingly stronger-than-expected U.S.

employment report that plays into the hands of U.S. monetary policy hawks. U.S. employment report for

October showed a surprisingly larger-than-expected 204,000 rise in non-farm payroll employment.

Crude oil fell as ongoing concerns over rising U.S. inventories and weaker demand in the world's largest

oil consumer drove prices lower. Traders also waited to see whether Iran's talks with six major world

powers could eventually lead to the easing of sanctions, which have reduced its crude exports by 1 million

barrels a day in recent years. Oil declined after the US and the other world powers announced over the

weekend an agreement with the oil-rich Iran on its nuclear program. While the agreement between Iran

and the six world powers does not allow Iran to export more oil, it potentially could make it easier for Iran

to sell the oil it is allowed to sell under the 2012 sanctions.

The USD strengthened vs other currencies in November 2013 except Chinese Yuan and Korean Won.

Dollar rose after data showed the U.S. economy grew more than forecast in the third quarter and jobless

claims fell. Employers added 204,000 new jobs last month, the Labour Department said, suggesting the

government shutdown had a more limited impact on the economy than initially feared. The dollar rose

against most major peers as Federal Reserve officials said they might reduce their $85 billion in monthly

bond purchases “in coming months” as the economy improves, minutes of their last meeting show.

December 2013 The Benchmark indices ended positive for the month of December 2013. BSE Sensex rose by 1.82%. Nifty

rose by 2.07% for the month. The HSBC Manufacturing PMI, compiled by Markit, rose to 51.3 in November

from October's 49.6. However, India’s economy expanded only 4.8 per cent in July-September, the fourth

straight quarter of sub-5 per cent growth. Slower expansion of government-supported services and

continued contraction in the mining sector were major drags.

After the Reserve Bank of India (RBI) surprised markets by keeping its main lending rate viz.the repo rate

unchanged at 7.75% after mid-quarter monetary policy review, Indian stocks surged upwards in the third

and fourth week of December. Investor sentiment was also boosted by stock market regulator SEBI’s

decision to rationalize the rules on trading of thinly traded stock. RBI Governor Raghuram Rajan said he

would stick with the earlier 5% growth projection for the full year.

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The inflation data released in the 4th week of December stated WPI at 7.52% in November from 7% a

month ago mainly due to continued rise in vegetable prices. This took the wholesale price inflation to a

14 month high. Ratings agency Crisil said government will overshoot its 4.8% fiscal deficit target by 0.40%

this fiscal. The US Federal Reserve's move to cut its bond-buying program rekindled concerns of slowing

foreign inflows.

Average daily volumes on BSE during the month of December 2013 rose 1.8% M-o-M (NSE daily average

volumes rose by 0.9% M-o-M). The average daily derivatives volumes on NSE fell 11.6% to Rs. 132,835 Cr

in December. Sectoral Indices for the month of December broadly ended on a positive note except Autos.

The top four gainers for the month were IT, Tech, Metals and Realty, which rose by 7.93%, 6.60%, 5.88%

and 5.72% respectively while the loser was Autos, which fell by 0.51%. Smallcap and Midcap indices too

rose smartly by 7.4% and 6.0% respectively.

Indian G-Sec bond yields ended lower by 27 bps at 8.82% at the end of December 2013 over November

2013. Bond yields declined, which means it became less expensive for the RBI to borrow money from

investors. Gold prices fell amidst a shift in investor money to equities, and improving U.S. economy. For

gold, the price risks are skewed to the downside. The saving grace, albeit temporary, is the Chinese

demand for the New Year which falls towards the end of January. Indian consumption even during the

current seasonally strong months (wedding season) has been tepid.

WTI Crude Oil traded near the highest price in almost six weeks (+5.8% in Dec 2013) as China’s net crude

imports rebounded in November and the U.S. jobless rate fell, signaling a recovery in the world’s biggest

oil consumers. WTI crude rose after the Federal Reserve said it will reduce stimulus amid an improving

economic outlook and as U.S. fuel consumption increased.

The USD strengthened vs other currencies in December 2013 except Pakistani rupee, Indian rupee and

Euro. The dollar rose against most currencies, supported by a rise in U.S. Treasury yields a day after the

Federal Reserve announced it would begin to gradually wind down its massive bond-buying program from

January. The dollar had rallied broadly after the Fed said it would reduce its monthly asset purchases by

$10 billion, bringing them down to $75 billion. A reduction in Fed stimulus would help lift U.S. bond yields

and buoy the currency.