introduction... naga

8/10/2019 Introduction... Naga

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“Global Economical Crisis-Impact on Indian Stock Markets”

1.1 INTRODUCTION

Global Financial Crisis of 2008

The global financial crisis of 200 is a ma!or ongoing financial crisis" the #orst of its

kind since the Great $epression% &

It became prominentl' (isible in September 200 #ith the fail)re" merger or conser(ator

ship of se(eral large *nited States-based financial firms% The )nderl'ing ca)ses leading

to the crisis had been reported in b)siness !o)rnals for man' months before September"

#ith commentar' abo)t the financial stabilit' of leading *S and E)ropean in(estment

banks" ins)rance firms and mortgage banks conse+)ent to the s)b-prime mortgage crisis%

,eginning #ith fail)res of large financial instit)tions in the *nited States" it rapidl'

e(ol(ed into a global crisis res)lting in a n)mber of E)ropean banks fail)res and declines

in (ario)s stock inde.es" and significant red)ctions in the market-(al)e of e+)ities /stock

and commodities #orld#ide% The crisis has led to a li+)idit' problem and the de-

le(eraging of financial instit)tions especiall' in the *nited States and E)rope" #hich

f)rther accelerated the li+)idit' crisis% 1orld political leaders and national ministers of

finance and central bank directors ha(e coordinated their efforts to red)ce fears" b)t the

crisis is ongoing and contin)es to change" e(ol(ing at the close of ctober 200 into a

c)rrenc' crisis #ith in(estors transferring (ast capital reso)rces into stronger c)rrencies

s)ch as the 3en" the $ollar and the S#iss 4ranc" leading man' emergent economies to

seek aid from the International Monetar' 4)nd% The crisis has roots in the s)b-prime

mortgage crisis and is an ac)te phase of the financial crisis of 2005-200%

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Sub-Prim !or"#a# Crisis

S)b-prime" as the #ord s)ggests" is an'thing that is not prime% In the s)b-prime crisis

conte.t" it simpl' means lending mone' to s)b-prime borro#ers" i%e%" lending to people

#ith lo# or poor credit #orthiness% M)ch tho)ght and energ' has alread' been spent in

the literat)re in )nderstanding the ca)ses of the s)b-prime crisis%

To p)t it (er' simpl'" the s)b-prime crisis #as ca)sed beca)se the lending norms in the

*S8 #ere (er' la.% It is !oked abo)t in the academic circles that an' man #ho #as not on

a respirator #as gi(en a loan #itho)t an' regard to his or her credit-#orthiness% This #as

bro)ght abo)t b' the 9spend 'o)rself o)t of the post dotcom b)st recession9 polic' of the

8merican go(ernment at that time%

The +)estion is #hether the 8merican crisis has seen its #orst" or #ill it deepen: The *S

4ederal ;eser(e ,oard has c)t the interest rates b' a steep 0%5< percent on =an)ar' 22"

200>% There is an e.pectation that the *S econom' #ill stabili?e as a &res)lt% 1ill s)ch

meas)res s)cceed: It is )nlikel'% The' still do not remo(e the basic #eakness of the

8merican econom'%

The firs" #eakness is in the ser(ice sector% @re(io)sl' the *S #as leading in soft#are

prod)ction and ne# designs" etc% This s)premac' is no# being challenged b' Indian

companies like TCS" Infos's and 1ipro% Man' leading companies are transferring their

research departments to India beca)se #ages are lo# here% Similar trends can be seen in

man' areas like clinical trials" translation" architect)ral designing" tele-marketing" and

p)blishing and printing% This #eakness can onl' marginall' be managed from

de(al)ation of the dollar% It is rooted more in the morib)nd nat)re of the *S ed)cation

s'stem%

The scon$ so)rce of #eakness is in the a)to-loans and credit cards% 8nother crisis" like

that in the s)b-prime ho)sing sector" is in the making% The present tro)bles started here%

The *S 4ederal ;eser(e ,oard enco)raged people to take loans to b)' ho)ses% The

conse+)ent demand from the ho)sing sector kept the *S econom' ch)gging for abo)t

three 'ears% ,)t the borro#ers co)ld not repa' their ho)sing loans beca)se of decline in

“6et 1orth Stock ,roking 7imited”




salaries and #ages d)e to international competition% The loans #ent into defa)lt% ,anks

sei?ed the ho)ses" b)t had to sell them at m)ch lo#er prices" and had to book h)ge losses%

8 similar crisis is in the making in the a)to-loans sector% Car ma!ors are e.tending loans

to borro#ers% The loans backed b' sec)rit' of an a)tomobile are considered safe" m)ch

like the s)b-prime ho)sing #as considered safe% The borro#ers are likel' to defa)lt on

these a)to-loans and also credit cards !)st as the' did on ho)sing loans%

The "%ir$ so)rce of #eakness is high oil prices% 8mericans lo(e big and fast cars% The'

ha(e to import h)ge +)antities of oil to keep them r)nning% This is a big drain on the

8merican econom' especiall' in (ie# of the rising oil prices% The 8merican econom' is

more energ' intensi(e than" sa'" India% The' cons)me more oil per dollar of income

generated% Conse+)entl'" high oil prices ha(e a greater negati(e impact on that econom'%The ad(erse impact on India is red)ced for another reason% The oil-rich 8rab co)ntries

are making grand pro!ects like hotels on artificial islands% The manpo#er for these

pro!ects is s)pplied in large meas)re b' India% These #orkers send remittances back

home% Th)s" part of the mone' spent b' the #orld in b)'ing 8rab oil flo#s to India% The

negati(e impact of high oil prices is partl' cancelled b' remittances for India b)t not for

8merica%

The four"% so)rce of #eakness is the e.pendit)re that co)ntr' has taken )pon itself b'

acting as the global policeman% The *S is inc)rring h)ge e.pendit)res in #ars in Ira+ and

8fghanistan% There seems to be no end to these in sight%

Global Rs&onss

n September A<" 200" China c)t its interest rate for the first time since 2002% Indonesia

red)ced its o(ernight repo rate" b' t#o percentage points to A0%2< percent% The ;eser(e

,ank of 8)stralia in!ected nearl' B A%< ,illion into the banking s'stem" nearl' three times

as m)ch as the markets estimated re+)irement% The ;eser(e ,ank of India added almost

B A%2 ,illion" thro)gh a re-finance operation" its biggest in at least a month%

In Tai#an" the Central ,ank on September AD" 200" said it #o)ld c)t its re+)ired reser(e

ratios for the first time in eight 'ears% The Central ,ank added B %<> ,illion into the

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foreign-c)rrenc' interbank market the same da'% ,ank of =apan p)mped B 2>% ,illion

into the financial s'stem on September A5" 200" and the ;eser(e ,ank of 8)stralia

added B %< ,illion the same da'% The E)ropean Central ,ank in!ected B >>% ,illion in

a one-da' mone'-market a)ction% The ,ank of England p)mped in B D ,illion%

8ltogether" central banks thro)gho)t the #orld added more than B 200 ,illion from the

beginning of the #eek to September A5" 200%

US Rs&onss

The 4ederal ;eser(e" Treas)r'" and Sec)rities and E.change Commission took se(eral

steps on September A> to inter(ene in the crisis% To stop the potential r)n on mone'

market m)t)al f)nds" the Treas)r' also anno)nced on September A> a ne# B <0 ,illion

program to ins)re the in(estments" similar to the 4ederal $eposit Ins)rance Corporation

/4$IC program% @art of the anno)ncements incl)ded temporar' e.ceptions to Section

28 and 2, /;eg)lation 1" allo#ing financial gro)ps to more easil' share f)nds

#ithin their gro)p% The e.ceptions #o)ld e.pire on =an)ar' 0" 200>" )nless e.tended b'

the 4ederal ;eser(e ,oard% The Sec)rities and E.change Commission anno)nced

termination of short-selling of 5>> financial stocks" as #ell as action against naked short

selling" as part of its reaction to the mortgage crisis%

'mrican Crisis an$ In$ia

The basic reason for the decline is crisis in the *S econom'% Indian and 8merican

economies are interlinked in t#o #a's - thro)gh trade in goods and flo# of capital%

The demand for Indian e.ports declines as the 8merican econom' sinks% ,)t India

certainl' gains from cheaper imports in the same meas)re% Garment e.porter s)ffers

beca)se his orders are cancelled b)t soft#are engineer makes merr' beca)se he gets

1indo#s soft#are cheap% The combined effect of e.ports and imports on the econom' is

nearl' ?ero% Fo#e(er" share markets respond to the #oes of e.porters #ho are listed on

the bo)rses and not to the gains of cons)mers% Th)s" there is a negati(e impact on Indian

share markets altho)gh there is little impact on the econom'%

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The interlinkage thro)gh capital flo#s is trick'% There is an o)tflo# of capital from India

in the short r)n as the 8merican econom' sinks" b)t there is greater inflo# to#ards India

in the long term%

Global ,anks inc)r losses as tro)bles of the 8merican econom' deepen% 7oans gi(en b'

them to 8merican home-o#ners are not repaid% The' ha(e to resort to sale of shares in the

Indian markets to raise mone' to meet these losses in the *S% The decline in &Indian

share markets in the last t#o #eeks started #ith s)ch a sell off b' foreign banks%

The Go(ernment of India is concerned that global black mone' is being in(ested in

Indian share markets% The recent clamp-do#n on @romissor' 6otes #as made to pre(ent

s)ch inflo#s% The

Im&ac" of "% Crisis on In$ia

1hile the o(erall polic' approach has been able to mitigate the potential impact of the

t)rmoil on domestic financial markets and the econom'" #ith the increasing integration

of the Indian econom' and its financial markets #ith rest of the #orld" there is

recognition that the co)ntr' does face some do#nside risks from these international

de(elopments% The risks arise mainl' from the potential re(ersal of capital flo#s on a

s)stained medi)m-term basis from the pro!ected slo#-do#n of the global econom'"

partic)larl' in ad(anced economies" and from some elements of potential financial

contagion% In India" the ad(erse effects ha(e so far been mainl' in the e+)it' markets

beca)se of re(ersal of portfolio e+)it' flo#s" and the concomitant effects on the domestic

fore. market and li+)idit' conditions% The macro effects ha(e so far been m)ted d)e to

the o(erall strength of domestic demand" the health' balance sheets of the Indian

corporate sector" and the predominant domestic financing of in(estment%

8s might be e.pected" the main impact of the global financial t)rmoil in India has

emanated from the significant change e.perienced in the capital acco)nt in 200-0> so

far" relati(e to the pre(io)s 'ear /Table 1% Total net capital flo#s fell from *S B A5%

,illion in 8pril-=)ne 2005 to *S B A%2 ,illion in 8pril-=)ne 200% 6onetheless" capital

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flo#s are e.pected to be more than s)fficient to co(er the c)rrent acco)nt deficit this 'ear

as #ell%

1hile 4oreign $irect In(estment /4$I inflo#s ha(e contin)ed to e.hibit accelerated

gro#th /*S B AD%5 ,illion d)ring 8pril-8)g)st 200 as compared #ith *S B %< ,illion

in the corresponding period of 2005" portfolio in(estments b' 4oreign &Instit)tional

In(estors /4IIs #itnessed a net o)tflo# of abo)t *S B D% ,illion in 8pril-September

200 as compared #ith a net inflo# of *S B A<%< ,illion in the corresponding period last

'ear%

Similarl'" e.ternal commercial borro#ings of the corporate sector declined from *S B 5%0

,illion in 8pril-=)ne 2005 to *S B A%D ,illion in 8pril-=)ne 200" partiall' in response to

polic' meas)res in the face of e.cess flo#s in 2005-0" b)t also d)e to the c)rrent

t)rmoil in ad(anced economies%

1ith the e.istence of a merchandise trade deficit of 5%5 per cent of G$@ in 2005-0" and

a c)rrent acco)nt deficit of A%< per cent" and change in perceptions #ith respect to capital

flo#s" there has been significant press)re on the Indian e.change rate in recent months%

1hereas the real e.change rate appreciated from an inde. of A0%> /,ase A>>->A00

/*S B A ;s% D%A2 in September 200D to AA<%0 /*S B A ;s% 0% in September

2005" it has no# depreciated to a le(el of A0A%< /*S B A ;s% %5 as on ctober "

200%

decline of the dollar has forced global in(estors to look for another place to in(est their

capital% The Sa)di ;o'al 4amil'" for e.ample" is earning h)ge amo)nts from the sale of

oil d)e to high prices that are pre(ailing% Till recentl'" the' #ere in(esting this income in

6e# 3ork% ,)t this #ill no# flo# to M)mbai" and Indian share markets #ill glo#%

;emember the Indian share markets ha(e been scaling ne# heights as the *S econom'

has been sinking in the last t#o 'ears% S)rel'" Indian share markets !itter e(er' time bad

ne#s comes from 8merica%





Trn$s in Ca&i"al Flo(s

US ) !illion

Com&onn" Prio$ 200*-08 2008-0+

4oreign $irect In(estment to India 8pril - 8)g)st "<D AD"5

4IIs /6et H 8pril - September 2D A<"<0 -D"2A

E.ternal Commercial ,orro#ings /6et 8pril - =)ne D">>0 A"<<>

Short-Term Trade Credits /6et 8pril - =)ne A"0 2"A5

Memo

EC, 8ppro(als 8pril - 8)g)st A"5< "A25

4oreign E.change ;eser(es /ariation 8pril - September 2D "< -A5">0

4oreign E.change ;eser(es /End-@eriod September 2D" 200 25"5D2 2>A"A>

, $ata on 4IIS presented in this table represent inflo#s into the co)ntr' and" th)s" ma'

differ from data relating to net in(estment in stock e.changes b' 4IIs%

Im&ac" on "% In$ian anin# S/s"m

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ne of the ke' feat)res of the c)rrent financial t)rmoil has been the lack of percei(ed

contagion being felt b' banking s'stems &in EMEs" partic)larl' in 8sia% The Indian

banking s'stem also has not e.perienced an' contagion" similar to its peers in the rest of

8sia%

8 detailed st)d' )ndertaken b' the ;,I in September 2005 on the impact of the s)b-

prime episode on the Indian banks had re(ealed that none of the Indian banks or the

foreign banks" #ith #hom the disc)ssions had been held" had an' direct e.pos)re to the

s)b-prime markets in the *S8 or other markets% Fo#e(er" a fe# Indian banks had

in(ested in the Collaterali?ed $ebt bligations /C$s J bonds #hich had a fe#

)nderl'ing entities #ith s)b-prime e.pos)res% Th)s" no direct impact on acco)nt of direct

e.pos)re to the s)b-prime market #as in e(idence% Fo#e(er" a fe# of these banks dids)ffer some losses on acco)nt of the mark-to-market losses ca)sed b' the #idening of the

credit spreads arising from the s)b-prime episode on term li+)idit' in the market" e(en

tho)gh the o(ernight markets remained stable%

Conse+)ent )pon filling of bankr)ptc' )nder Chapter AA b' 7ehman ,rothers" all banks

#ere ad(ised to report the details of their e.pos)res to 7ehman ,rothers and related

entities both in India and abroad% )t of 55 reporting banks" A reported e.pos)res to

7ehman ,rothers and its related entities either in India or abroad% 8n anal'sis of the

information reported b' these banks re(ealed that ma!orit' of the e.pos)res reported b'

the banks pertained to s)bsidiaries of 7ehman ,ros Foldings Inc%" #hich are not co(ered

b' the bankr)ptc' proceedings% (erall" these banks e.pos)re especiall' to 7ehman

,rothers Folding Inc%" #hich has filed for bankr)ptc'" is not significant and banks are

reported to ha(e made ade+)ate pro(isions%

In the aftermath of the t)rmoil ca)sed b' bankr)ptc'" the ;eser(e ,ank has anno)nced a

series of meas)res to facilitate orderl' operation of financial markets and to ens)re

financial stabilit' #hich predominantl' incl)des e.tension of additional li+)idit' s)pport

to banks%





Im&ac" on IT Sc"or

The air of pessimism of a possible slo#do#n of the *S econom' has been a ca)se of

concern for the Indian IT ind)str' at large% Most Indian IT ser(ice pro(iders generate

more than <0K of their re(en)es from the *S market" and it is nat)ral that a possible

slo#do#n #ill impact their re(en)es" either directl' b' a shift in the demand of IT

ser(ices from specific ind)stries in the *S" or indirectl' b' a shift of in(estments to other

fa(orable markets and assets%

8ltho)gh it is too earl' to ga)ge #hether this slo#do#n #ill ha(e a net positi(e or

negati(e impact" the follo#ing ind)str'-#ise anal'sis #ill foc)s on possible trends in the

demand of IT ser(ices in specific ind)stries directl' or indirectl' impacted b' the s)b-

prime crisis% &

The c)rrent crisis parallels the 200A-2002 b)st especiall' for Indias IT /e.port sector%

8ppro.imatel' DAK of the Indian IT sectors re(en)es are from *S clients% If 'o) !)st

take the top fi(e India pla'ers #ho acco)nt for DK of the IT ind)str's re(en)es" the

re(en)e contrib)tion from *S clients is appro.imatel' <K% 8bo)t 0K of the ind)str'

re(en)es are estimated to be from financial ser(ices% In addition" from a +)alitati(e stand-

point" the tentacles of the financial sector b)siness are +)ite #ell-entrenched and ha(e

significant str)ct)ral impact as #ell%

8 recent st)d' b' 4orrester re(eals that K of 1estern companies are c)tting back their

IT spend and nearl' 0 percent are scr)tini?ing IT pro!ects for better ret)rns% Some of this

can lead to off-shoring" b)t the impact of o(erall red)ction in discretionar' IT spends"

incl)ding offshore #ork" cannot be denied% The slo#ing *S econom' has seen 50 percent

of firms negotiating lo#er rates #ith s)ppliers and nearl' D0 percent are c)tting back on

contractors% 1ith b)dgets s+)ee?ed" !)st o(er 0 percent of companies plan to increase

their )se of offshore (endors

The *S financial crisis p)ts a +)estion mark on gro#th for Indian IT in the short-to-

medi)m term% 8t the time of LA res)lts" #e sa# gro#th n)mbers that #ere re(ised do#n

b' 2-K after sentiments started b)ilding )p against the *S financial sector% 8 #orse

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do#n#ard re(ision is e.pected this +)arter as #ell" tho)gh some larger pla'ers like TCS

and Sat'am ha(e officiall' denied an' possible impact on gro#th% Going b' Inf'

n)mbers" a gloom' forecast can be e.pected%

Im&ac" on anin# Financial Srics

The real losses inc)rred b' most financial instit)tions from the e.pos)re to mortgage

b)siness are 'et to be confirmed% S)ch )ncertainties on o(erall pro!ected earnings #ill

call for stricter b)dgetar' controls and the o(erall demand for IT ser(ices #ill go thro)gh

a sl)mp in the first t#o +)arters of 200% Fo#e(er" most financial instit)tions #ill

introd)ce ne# controls to their credit risk management processes% These initiati(es #ill

not onl' be (ol)ntar' in nat)re b)t also be made mandator' as the reg)lators #ill demand

more transparenc'% ;eg)lator' and process impro(ement initiati(es #o)ld become the

primar' sponsors of ne# IT initiati(es #ithin these organi?ations%

IT ser(ice companies" #ho ha(e foc)sed on b)ilding strong (ertical e.pertise in the areas

of credit risk management" compliance and b)siness intelligence" #ill ha(e a first mo(er

ad(antage in +)ickl' aligning their ser(ice portfolio to the needs of the &b)siness and still

generate ne# so)rces of re(en)es in the ,anking and 4inancial Ser(ices sector% IT

prod)ct companies #ith niche prod)cts on risk management and compliance #ill lead the

pack d)ring the initial b)dgetar' control periods%

Im&ac" on !anufac"urin# - 'u"omo"i 3i#%-Tc%

These ind)stries in the *S #ill ha(e the most knock-on effect of the s)b-prime crisis on

their sales (ol)mes% 6egati(e sa(ings and higher monthl' pa'ments on mortgages #ill

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make si?eable pop)lation of the 8mericans in the a(erage and lo# income ranges to think

t#ice before o#ning a ne# car or sa((' electronic e+)ipments% In addition" the credit

cr)nch #ill also impact the a(ailabilit' of eas' credit for ac+)iring ne# a)tomobiles and

e.pensi(e electronic goods% ;ising oil prices #ill onl' make things #orse%

In the face of red)cing sales (ol)mes and the need to keep )p the prod)cti(it' gro#th"

!ob-c)ts #ill be prominent in these ind)stries% 8ltho)gh the red)cing sales (ol)mes #ill

ha(e an o(erall drag on IT spends" more !ob c)ts #ill call for f)rther a)tomation of

b)siness processes% ;ising press)re on margins #ith competition from 8sian and

E)ropean man)fact)rers #ill create the demand for leaner and efficient b)siness

processes res)lting in a demand for process re-engineering and s'stem integration

ser(ices% 8ltho)gh most large Indian IT ser(ice pro(iders ha(e foc)sed (erticals aro)ndthese ind)stries /8ppro.imatel' A0K of the re(en)es of both TCS and Infos's come from

Man)fact)ring" niche IT and b)siness process cons)lting ser(ice pro(iders #ill ha(e an

ad(antage o(er others in this segment #ith a stronger foc)s on b)ilding b)siness process

cons)lting capabilities%

Im&ac" on R"ail

Standing ne.t to a)tomobile and electronics segment is the retail segment" #hich #ill

ha(e a considerable impact d)e to red)ced cons)mer spending ind)ced b' higher

mortgage pa'ments and a ps'chological drag to spend on f)rther credit #ith credit cards%

8ltho)gh the 2005 Christmas sales (ol)mes of ma!or retailers in the *S did not sho# an'

alarming signs of red)ced cons)mer demands" a possible recession in the 'ear 200 #ill

force most retailers to slice do#n their prod)ct prices to attract cons)mers%

Dalin# (i"% "% Im&ac" of "% Global Financial Crisis

4ln Poin" '#n$a for In$ian 4conom/5 6/ Issus





• $omestic li+)idit' shortage

• E.change rate (olatilit' and red)ction in access to foreign c)rrenc' f)nds• & Inade+)ate

credit a(ailabilit' and slo#do#n in demand

•

$ecline in b)siness and in(estor confidence and optimism

3i#%li#%"s of Rcommn$a"ions• Cr$i" Flo( Im&"us "o Gro("%

• Establishment of a corp)s for lending to SMEs

• Speed' release of go(ernment f)nds for (ario)s pro!ects to ens)re timel'

implementation and generation of economic acti(it'

• 4ast tracking of all infrastr)ct)re pro!ects to sp)r in(estments and gro#th thro)gh inter-

sectoral linkages

Doms"ic 7iui$i"/ In"rs" Ra"s

• 4)rther red)ction in repo rate b' at least <0 bps and in C;; b' A<0 bps to ens)re

ade+)ate li+)idit' and reasonable cost of f)nding

• @ro(ision of li+)idit' to m)t)al f)nd and 6,4C sectors" to enable orderl' operation of

financial markets

• G)arantee for all bank deposits for a t#o 'ear period" to maintain depositor confidence

in the banking sector

Fori#n 49c%an# !ana#mn"





• 4oc)sed e.change rate management to pre(ent (olatilit' #itho)t red)cing r)pee

li+)idit'

• @ermitting higher le(els of 4$I in order to attract foreign capital

•

*tili?ation of foreign e.change reser(es for meeting critical foreign c)rrenc' needs• ;emo(al of the cap on 6;E and 4C6; /, deposits

Communica"ion

• Comprehensi(e comm)nication e.ercise b' Go(ernment and reg)lators in cons)ltation

#ith ind)str' to artic)late the approach to &mitigate risks arising o)t of the global

financial crisis and strengthen confidence in the econom'

1.2 O:4CTI;4S OF STUD<

A% To kno# #hat financial crisis%

“6et 1orth Stock ,roking 7imited”A>




2% To find the orgin of the crisis going on c)rrentl' in the financialmarketJ%

% To )nderstand the s)b-prime theor' in the *S market

% To kno# the impact s)b-prime on the *S global market

<% To )nderstand the ins)rance of the *S on the Indian market%

D% To find o)t impact financial crisis specified on each sector of Indianstock market%

5% n micro to kno# the financial crisis on its impact on Indian stock

market%

% To kno# ho# the financial infl)ences the stock market

>% To anal'sis #hat the preca)tions can be taken to a(oid iss)es likes)b prime theor' and non-6@8 in India%

A0%To anal'sis the step to be taken to control the financial crisis and ho#to o(ercome from c)rrent scenario%





1.= R4S4'RC3 !4T3ODO7OG<

Sam&l Si>5

T%r sc"ors

T%r in ac% Sc"or

Sam&lin# Tc%niu5

Sim&l Ran$om Sam&lin#

'nal/sis5

Tc%nical anal/sis5 T%rou#% "% Tabls an$ Gra&%s

Da"a5

Scon$ar/ $a"a from 01-01-200+ "o 01-02-200+

In"r&r"a"ion5

Prcn"a# of c%an# of ac% com&an/ an$ r&rsn"s "% 'ra# of c%an#

"o "% (%ol sc"or momn" of sc"or.

Sc"orial momn" s%o(s (%"%r "% sc"or is &osi"i or n#a"i. 'n$ "%

sc"or s%o(s im&ac" on In$ian S"oc !ar".

“6et 1orth Stock ,roking 7imited”2A




1.? 7imi"a"ions

Sam&l Si> is "%r sc"ors (%ic% ma/ no" b abl "o s%o( "%a" 9ac" &ic"ur

of "% mar".

@ "oo "%r com&an/As in ac% (%ic% ma/ no" b abl s%o( "%a" 9ac"

&ic"ur of "% sc"or

Tim &rio$ of sc"or is for "%ir"/ $a/s (%ic% is "o fin$ ou" "% mar"

momn"

T% fun$amn"al n(s an$ com&an/ rsul"s ma/ s%o( "% im&ac" on "%

s"u$/ $urin# "% s"u$/ &rio$.

Sub &rim crisis in s"ill s%o(in# i"s im&ac" on "% mar" on f( sc"or

maBori"/





2.1 CO!P'N< PROFI74

A world of intelligent investing

E(er since its inception in A>>" 6et #orth Stock ,roking 7imited

/6S,7 has so)ght to pro(ide premi)m financial ser(ices and information"

so that the po#er of in(estment is (ested #ith the client% 1e e+)ip those

#ho in(est #ith )s to make intelligent in(estment decisions" pro(iding them

#ith the fle.ibilit' to either tap into o)r e.tensi(e kno#ledge and e.pertise"

or make their o#n decisions% 6S,7 made its deb)t into the financial #orld

b' ser(icing Instit)tional clients" and pro(ed its high scalabilit' of

operations b' gro#ing e.ponentiall' o(er a short period of time% 6o#"

po#ered b' a top-notch research team and a net#ork of e.perts" #e pro(ide

an arra' of retail broking ser(ices across the globe - spanning India" Middle

East" E)rope and 8merica% C)rrentl'" #e are a $epositor' participant at

Central $epositor' Ser(ices India /C$S7 and aim to become one at

6ational Sec)rities $epositor' /6S$7 b' the end of this +)arter% )r

strong s)pport" technolog'-dri(en operations and b)siness )nits of research"

distrib)tion and ad(isor' coalesce to pro(ide 'o) #ith a one-stop sol)tion tocater to all 'o)r broking and in(estment needs% )r c)stomers ha(e been

participating in the booming commodities markets #ith o)r membership at

the M)lti Commodit' E.change of India /MCN and 6ational Commodit'

$eri(ati(es E.change /6C$EN thro)gh 6et#orth Stock%Com 7td%


http://www.networthstock.com/index.aspx




2.2INFR'STRUCTUR4

O 8 corporate office and di(isional offices in C,$ of M)mbai #hich

ho)ses state-of-the-art dealing room" research #ing management

and back offices%

O 8ll of 2<D branches and franchisees are f)ll' #ired and connected to

h)b at corporate office at M)mbai% 8dd on branches also #ill be #ired

and connected to central h)b

O 1eb enabled connecti(it' and soft#are in place for net trading%

O 200 operati(e I$Qs for dealing room

O State of the 8rt acco)nting and billing s'stem" on line risk

management s'stem in place #ith A00K red)ndanc' back )p%

O In ho)se technolog' backs )p team to ens)re )n-interr)pted

connecti(it'%

“6et 1orth Stock ,roking 7imited”2<




2.= PRODUCTS 'ND S4R;IC4S 'ND PROTFO7IO

O ;etail and instit)tional broking

O ;esearch for instit)tional and retail clients

O $istrib)tion of financial prod)cts

O Corporate finance

O 6et trading

O $epositor' ser(ices

O Commodities ,roking

“6et 1orth Stock ,roking 7imited”2D




Services






1 0 7 b r a n c h e s

2




T% N"(or"% connc"ii"/ (i"% 2 branc%s an$ #ro(in#

N"(or"% Rsarc% Pro$uc"s

O In$ia Dail/ No"s E Market Insight for the da'

O !ar" !usin# E 1hatQs Fot and 1hatQs not RRR

O ullion Tracr & 8nal'sis of trends in Gold Sil(er

O 4conom/ Puls & Monthl' o(er(ie# of macro factors

O Com&an/-S&cific R&or"s E $etailed f)ndamental report

s)bse+)ent to plant (isit management meet

O Pr-uar"r Rsul" Pri(s E ;es)lt pre(ie# of companies )nder

co(erage

O Rsul" U&$a" & @ost res)lt re(ie# of companies )nder co(erage

O S"oc S"anc - Management isit 6ote

O T%m-as$ R&or"s E ,)dget 8nal'sis" $i(idend

NS7 - ObBc"is of "% Com&an/5

“6et 1orth Stock ,roking 7imited”2>




To increase its in(estors all o(er the co)ntr'

To pro(ide better ser(ices to their clients

To maintain good relation #ith the clients

Increasing the profits of the compan'

To lead their transactions )nder the control 8ct of Sec)rities E.change ,oard of

India A>>2

NS7 - Pro$uc" Sric &ro$uc$5

Fere the prod)ct means ser(ice relate to the compan' the compan' ,rokerage Ser(ices%

Its has spreaded across o(er the co)ntr' #ith e.perienced and e.perti?ed in the

,rokerage ser(ices rendered b' the ,rokers in their ,ranches to their In(estors%

NS7 E !ar" Rsarc%

Market research is one of important Methodolog' for finding the problem and make

anal'?e and interpret and sol(e the problem% In e(er' area it has sharing the contrib)tion

to#ards s)ccessing the pro!ects J problems%

In the 6S,7 compan' has also adopted this techni+)e b' ;esearch anal'sts to these

brokers )tili?es and )nderstands their researches then the' #ill mo(ing in a right path%

The research anal'sts anal'ses the compan' performance and #hat are the compan'Qs

stocks are mo(ing #h' the compan'Qs scrips prices are fl)ct)ating and #hat are the

effects for this sit)ations )nder the circ)mstances% Then the compan' s)ccessf)ll'

operating their acti(ities prod)ce of good operating ;es)lts%





NS7 E O&ra"in# Rsul"s5

The perating ;es)lts of the 6S,7 compan' is satisfactor' compare to its competitors

are India ,)lls" 6et#orth Stock ,roking ltd" India info line etc%" The' are gi(ing +)alit'

ser(ices to their clients and impro(ing their retained gains% Thro)gh this the' are creating

ne# clients thro)gh adopting different strategies for attracting the clients to#ards its

b)siness then its f)t)re glorio)s%

NS7 E Fu"ur Ou"loo5

Its f)t)re #ill be Glorio)s beca)se it has recentl' la)nches ne# ser(ice to

e.pand its b)siness i%e%" 6S,7 - I6S*;86CE it tie )ps #ith other ins)rance companies

like ;eliance ins)rance and ,a!a! life ins)rance to gather the c)stomers to#ards their

compan' to other ins)rance companies the' #ill gain the profit like the compan' 6S,7

planned for the f)t)re make its fr)itf)l





has mo(ed India firml' into the front ranks of the rapidl' gro#ing 8sia @acific region

and )nleashed the latent strengths of a comple. and rapidl' changing nation%

Indias process of economic reform is firml' rooted in a political consens)s that spans her

di(erse political parties% Indias democrac' is a kno#n and stable factor" #hich has taken

deep roots o(er nearl' half a cent)r'% Importantl'" India has no f)ndamental conflict

bet#een its political and economic s'stems% Its political instit)tions ha(e fostered an

open societ' #ith strong collecti(e and indi(id)al rights and an en(ironment s)pporti(e

of free economic enterprise%

Indias time tested instit)tions offer foreign in(estors a transparent en(ironment that

g)arantees the sec)rit' of their long term in(estments% These incl)de a free and (ibrant press" a !)diciar' #hich can and does o(err)le the go(ernment" a sophisticated legal and

acco)nting s'stem and a )ser friendl' intellect)al infrastr)ct)re% Indias d'namic and

highl' competiti(e pri(ate sector has long been the backbone of its economic acti(it'% It

acco)nts for o(er 5<K of its Gross $omestic @rod)ct and offers considerable scope for

!oint (ent)res and collaborations% Toda'" India is one of the most e.citing emerging

markets in the #orld% Skilled managerial and technical manpo#er that match the best

a(ailable in the #orld and a middle class #hose si?e e.ceeds the pop)lation of the *S8

or the E)ropean *nion" pro(ide India #ith a distinct c)tting edge in global competition%

8 firm faces se(eral t'pes of risks% Its profitabilit' fl)ct)ates d)e to )nanticipated

changes in demand" cost" price" ta.es" interest rates" e.change rates" etc% managers ma'

not be able to f)ll' control these risks" b)t to some e.tent" can decide the risk that a firm

can bear% The' adopt man' strategies to red)ce the risk b' keeping se(eral options open"

#hich )ltimatel' creates fle.ibilit' that might bail them o)t in diffic)lties% ne ma!or

#a' of red)cing the e.pos)re to risk is b' entering into financial deri(ati(es% ;isk

management is an integral part of the financial ser(ice ind)str' and d)e to globali?ation

the Indian financial market #ill see an increase in the prod)cts in this categor'%





#ith (er' little interest e(inced b' the general p)blic% There had been m)ch fl)ct)ation in

the stock market on acco)nt of the 8merican #ar and the battles in E)rope% Sir

@remchand ;o'chand remained a kingpin for man' 'ears%

Sir @hiro?e =ee!eebho' #as another #ho dominated the stock market scene from A>D to

A>0% Fis #ord #as la# and he had a great deal of infl)ence o(er both brokers and the

go(ernment% Fe #as a good reg)lator and man' crises #ere a(erted d)e to his #isdom

and practicalit'% The ,SE b)ilding" icon of the Indian capital markets" is called @%=% To#er

in his memor'% The planning process started in India in A><A" #ith importance being

gi(en to the formation of instit)tions and markets The Sec)rities Contract ;eg)lation 8ct

A><D became the parent reg)lation after the Indian Contract 8ct A52" a basic la# to be

follo#ed b' sec)rit' markets in India% To reg)late the iss)e of share prices" the Controller

of Capital Iss)es 8ct /CCI #as passed in A>5%

The stock markets ha(e had man' t)rb)lent times in the last A0 'ears of their e.istence%

The imposition of #ealth and e.pendit)re ta. in A><5 b' Mr% T%T% rishnamachari" the

then finance minister" led to a h)ge fall in the markets% The di(idend free?e and ta. on

bon)s iss)es in A><-<> also had a negati(e impact% 1ar #ith China in A>D2 #as another

memorabl' bad 'ear" #ith the res)ltant shortages increasing prices all ro)nd% This led to a

ban on for#ard trading in commodit' markets in A>DD" #hich #as again a (er' bad

period" together #ith the introd)ction of the Gold Control 8ct in A>D%

The markets ha(e #itnessed se(eral golden times too% ;etail in(estors began participating

in the stock markets in a small #a' #ith the dil)tion of the 4E;8 in A>5% M)ltinational

companies" #ith operations in India" #ere forced to red)ce foreign share holding to

belo# a certain percentage" #hich led to a comp)lsor' sale of shares or iss)ance of fresh

stock% Indian in(estors" #ho applied for these shares" enco)ntered a real lotter' beca)se

those #ere the da's #hen the CCI decided the price at #hich the shares co)ld be iss)ed%

There #as no free pricing and their form)la #as (er' conser(ati(e%

“6et 1orth Stock ,roking 7imited”<




The ne.t big boom and mass participation b' retail in(estors happened in A>0" #ith the

entr' of Mr% $hir)bhai 8mbani% $hir)bhai can be said to be the father of modern capital

markets% The ;eliance p)blic iss)e and s)bse+)ent iss)es on (ario)s ;eliance companies

generated h)ge interest% The general p)blic #as so )nfamiliar #ith share certificates that

$hir)bhai is r)mo)red to ha(e distrib)ted them to ed)cate people%

Mr% %@% SinghQs fiscal b)dget in A> #as pathbreaking for it started the era of

liberali?ation% The remo(al of estate d)t' and red)ction of ta.es led to a s#ell in the ne#

iss)e market and there #as a del)ge of companies in A><% Mr% Manmohan Singh as

4inance Minister came #ith a reform agenda in A>>A and this led to a res)rgence of

interest in the capital markets" onl' to be p)nct)red b' the Farshad Mehta scam in A>>2%

The mid-A>>0s sa# a rise in leasing compan' shares" and h)ndreds of companies" mainl'

listed in G)!arat" and got listed in the ,SE% The end- A>>0s sa# the emergence of etan

@arekh and the information" comm)nication and entertainment companies came into the

limelight% This period also coincided #ith the dotcom b)bble in the *S" #ith soft#are

companies being the most fa(o)red stocks% There #as a melt do#n in soft#are stock in

earl' 2000% Mr% @ Chidambaram contin)ed the liberali?ation and reform process" opening

)p of the companies" lifting ta.es on long-term gains and introd)cing short-term t)rno(er

ta.% The markets ha(e reco(ered since then and #e ha(e #itnessed a s)stained rall' that

has taken the inde. o(er A000%

Se(eral s'stemic changes ha(e taken place d)ring the short histor' of modern capital

markets% The setting )p <of the Sec)rities and E.change ,oard /SE,I in A>>2 #as a

landmark de(elopment% It got its act together" obtained the re+)isite po#ers and became

effecti(e in earl' 2000% The setting )p of the 6ational Stock E.change in A>" the

introd)ction of online trading in A>><" the establishment of the depositor' in A>>D" trade

g)arantee f)nds and deri(ati(es trading in 2000" ha(e made the markets safer% The

introd)ction of the 4ra)d)lent Trade @ractices 8ct" @re(ention of Insider Trading 8ct"

Takeo(er Code and Corporate Go(ernance 6orms" are ma!or de(elopments in the capital

markets o(er the last fe# 'ears that has made the markets attracti(e to foreign

instit)tional in(estors%

This histor' sho#s )s that retail in(estors are 'et to pla' a s)bstantial role in the market

as long-term in(estors% ;etail participation in India is (er' limited considering the o(erall

“6et 1orth Stock ,roking 7imited”D




sa(ings of ho)seholds% In(estors #ho hold shares in limited companies and m)t)al f)nd

)nits are abo)t 20-0 million% Those #ho participated in secondar' markets are 2-

million%

Capital markets #ill change completel' if the' gro# be'ond the cities and stock

e.change centers reach the Indian (illages% ,oth SE,I and retail participants sho)ld be

acti(e in spreading market #isdom and empo#ering in(estors in planning their finances

and )nderstanding the markets%

=.2 C'PIT'7 !ar"s

Sec)rities market ma' be classified is b' the t'pes of sec)rities bo)ght and sold there%

The broadest classification is based )pon #hether the sec)rities are ne# iss)es or are

alread' o)tstanding and o#ned b' in(estors% 6o# #e see follo#ing chart for

)nderstanding market t'pes%


Ca&i"al !ar"

Primar/ !ar" Scon$ar/ !ar"

Or#ani>$

49c%an#s

Or T%

Coun"r




Primar/ mar"5

Sec)rities a(ailable for the first time are offered thro)gh the primar' sec)rities markets%

The iss)er ma' be a brand-ne# compan' or one that has been in b)siness for man' 'ears%

The sec)rities offered ma' be a ne# t'pe for the iss)er of additional amo)nts of a

sec)rities )sed fre+)entl' in the past% In primar' market f)nds are mobili?ed in the

primar' market thro)gh prospect)s" rights iss)es" and pri(ate placement%

Scon$ar/ mar"5nce ne# iss)es ha(e been p)rchased b' in(estors" the' change hands in the secondar'

markets% This market also kno#n as stock market% In India the secondar' market consist

of recogni?ed stock e.changes operating )nder r)les" b'-la#s and reg)lations d)l'

appro(ed b' the go(ernment% There are act)all' t#o broad segments of the secondar'

markets

'. Or#ani>$ mar"5

rgani?ed e.change are ph'sical marketplaces #here the agents of b)'ers and sellers

operate thoro)gh the a)ction process% There are n)mber of organi?ed e.changes in India%

6SE /6ational Stock E.change and ,SE /Stock E.change M)mbai are main stock

e.change% ther than this there are more then A> stock e.changes%

. Or T% Coun"r OTCJ5

The TC market is not a central ph'sical marketplace b)t a collection of broker-dealer

scattered across the co)ntr'% This market is more a #a' of doing b)siness than a place%

,)'ing and selling inters in )nlisted stocks are matched not thro)gh the a)ction process

on the floor of an e.change b)t thro)gh negotiated bidding" o(er a massi(e net#ork of

telephone and telet'pe #ires that link tho)sand of sec)rities firms here and abroad%





!ON4< !'R64T5

The mone' market has 2 components-The organi?ed )norgani?ed% The organi?ed

market is dominated b' commercial banks% T% o"%r maBor &ar"ici&an"s ar RI

7IC GIC an$ UTI. The main f)nction of it is that of borro#ing lending of short termf)nds% n the other hand )norgani?ed mone' market consists of indigeno)s bankers

mone' lenders% This sector is contin)o)sl' pro(iding finance for trade as #ell as personal

cons)mption%

D4RI;'TI;4S5-

$eri(ati(es are contracts that are based on or deri(ed from some )nderl'ing asset"

reference rate" or inde.% Most common financial deri(ati(es are for#ards" f)t)res" options

and s#aps%

$eri(ati(es trading commenced in India in =)ne 2000 after SE,I granted the final

appro(al to this effect in Ma' 2000 for trading in inde. f)t)res% C)rrentl'" the Indian

markets pro(ide e+)it' deri(ati(es of the follo#ing t'pes

• Inde. 4)t)res

• Stock 4)t)res

• Inde. ptions

• Stock ptions

$eri(ati(es help to impro(e market efficiencies beca)se risks can be isolated and sold to

those #ho are #illing to accept them at the least cost% *sing deri(ati(es breaks risk into

pieces that can be managed independentl'% Corporations can keep the risks the' are most

comfortable managing and transfer those the' do not #ant to other companies that are

more #illing to accept them% 4rom a market-oriented perspecti(e" deri(ati(es offer the

free trading of financial risks%

N44D FOR D4RI;'TI;4S5





The deri(ati(es market caters to the follo#ing needs of prospecti(e in(estors

• Mo(ing the risk from the risk a(erse to risk taker%

• $isco(ering the c)rrent as #ell as f)t)re prices%

• Catal'?ing entreprene)rial acti(ities%

• Increase the (ol)me of sa(ings and in(estments%

T/&s of $ria"is5

For(ar$s5 it is a c)stomi?ed contract bet#een t#o parties" #here the settlement takes

place on a specific date in the f)t)re at the contract price%

Fu"urs5 it is an agreement bet#een t#o parties to e.change commodit' or financial

asset for a certain consideration after a specified period% TheeUse t'pes of contracts are

e.change-traded%

O&"ions5 it is a t'pe of contract #hich pro(ides the b)'er the right b)t not the obligation"

to b)' or sell a specific asset or commodit' at a specific price%U" on or before an' time

prior to the specific date%

@arran"s5 options #ith longer mat)rit' are refereed to as #arrants%

as"s5 these are options on portfolio of )nderl'ing assets%

S(a&s5 it is a contract #hereb' the parties agree to e.change a predetermined series of

pa'ments" or e.change interest pa'ments or one set of interest pa'ment #ith another" for

a specified time%





INFOR!'TION F7O@ IN D4RI;'TI;4 !'R64T5-

ne of the important f)nctions of the f)t)res market is to pro(ide hedging facilities to

hedge price risk% This market also pro(ides scope to spec)lators d)e to lo# transaction





cost and le(erage% This paper tests #hether f)t)resQ trading is going to#ards hedging

price risk or to#ards f)lfilling the spec)lati(e desires of sophisticated traders%

,eing traded in the *S for o(er A00 'ears commodit' f)t)res are still )nidentified long

term assets% This ma' be d)e to the inflict difference of commodit' f)t)res #ith that of

corporate sec)rities s)ch as stocks" bonds and other con(entional assets #here" in(estors

bear the risk d)ring recession period #here as in(estors in commodit' f)t)res are

compensated for bearing short-term price fl)ct)ations% The research paper “4acts and

4antasies abo)t Commodit' 4)t)res” tries to address some commonl' raised +)estions

like f)t)re risk and ret)rn on in(estments% The +)estions are being addressed #ith respect

to the asset class as a #hole" rather than indi(id)al commodit' f)t)res%

?.1 G7O'7 4CONO!<5

1e sho)ld consider that #e are in a recession and #e need to #ait for the 6ational ,oard

of Economic ;esearch /6,E; to opine on #hether #e ha(e t#o consec)ti(e +)arters of

decline in the Gross $omestic @rod)ct /G$@" b)t that #ill not happen for )p to a 'ear

after the fact% Fere are some of the economic factors that lead me to this concl)sion

A% The !obs o)tlook is detracting% 4or 4ebr)ar' the go(ernment reported that the econom'

lost D"000 !obs% 8ct)all'" the pri(ate sector lost A0A"000" meaning that go(ernment

hiring contin)es to increase% $)e to the #a' the go(ernment co)nts the impact of births

and deaths" this factor s)pposedl' added A<"000 ne# !obs% This bit of statistical

chicaner' probabl' means that the real loss in !obs #as probabl' m)ch larger% Moreo(er"

the )nemplo'ment rate fell slightl' to %K from %>K d)e to a sharp contraction in the

total n)mber of people looking for #ork% This is not a good sign%

Generall'" emplo'ment is a lagging indicator and is is highl' )n)s)al to see t#o months

in a ro# of !ob losses and not e.perience a recession% 3es" that is rightV !obs fell in

=an)ar' as #ell%





2% The *%S% dollar hit ne# lo#s against the basket of nineteen c)rrencies" trading as lo#

as 52%D% The dollars #eakness is one of the reasons #e are seeing the price of most

commodities climb higher" since it takes more dollars to b)' s)ch commodities as oil% 8

falling dollar is considered good for an' companies that e.ports from the *%S% as their

goods and ser(ices are less e.pensi(e each time the *%S% $ollar falls% n the other hand"

a falling *%S% dollar depreciates the (al)e of the *%S% go(ernment" so in(estors and

co)ntries that are holding this debt ma' sell part of their holdings to find higher ret)rns%

If this happens it tends to raise interest rates on this debt" #hich can ca)se the *%S% to

e.perience higher inflation and raises the cost of o)r o#n debt% The best scenario is

stabilit' in the *%S% dollar #hich allo#s in(estors to ha(e more confidence in their

holdings%

% il is trading aro)nd BA0< a barrel% 8s mentioned part of this high price is d)e to the

falling *%S% $ollar" as oil is priced in that c)rrenc'% @art is d)e to concern that ene)?ela"

Ec)ador and Col)mbia #ill escalate the c)rrent saber rattling and act)all' go to #ar% It

looks like this risk is no# o(er as the presidents of the co)ntries in(ol(ed ha(e backed

a#a' from their threats and no# seem to #ant to a(oid f)rther confrontation% ,)t s)ch is

the stor' of oil% There seems to be ne# problems poking its head )p all o(er the #orld

#hen there are large reser(oirs of oil%

There are >> of companies that comprise this gro)p% 8nd as Tom said" “In the casino

b)siness" the' #o)ld be kno#n as #hales%” The #hales can and do mo(e the market%

Then the' mo(e on to the ne.t thing that interests them and the market gets back to

normal%

% The inde. of 7eading Economic Indicators /7EI contin)es to pl)nge" and is not far

a#a' from le(els last seen in 200A% S)ch a drop b' the 7EI has al#a's been accompanied

b' a recession% *%S% leading inde. decreased 0%A percent #hich is the fo)rth straight

month of declines%

<% @ersonal income for the a(erage *%S% cons)mer rose b' the same amo)nt as inflation"

aro)nd 0%K" and #ith rising energ' and food costs" it is no #onder that retail sales are





do#n and falling% The sa(ings rate is still negati(e" #hich means cons)mers are )sing

sa(ings to maintain their cons)mption%

The #orlds richest man" 1arren ,)ffett recentl' said that an' reasonable person belie(es

the *%S% is in a recession%

Goin# Do(n from 3r

The 4ederal ;eser(e has some of the best economists" so it pa's to listen to #hat the'

ha(e to sa'% The table belo# is from the min)tes of the 4ederal pen Market Committee

/4MC held =an)ar' 0-A" 200% 8s 'o) can see the a(erage 4ed member is more

bearish no# than the' #ere in ctober% 4or those of 'o) inclined to read the min)tes the'

are a(ailable at this link%

The 4eds Central Tendenc' forecast indicates that the *%S% G$@ #ill be A% to 2%0 K for

200 do#n from their forecast of A% to 2%< in ctober% It looks like their forecasts are

trending do#n #hich is not a good sign" especiall' gi(en the f)rther #eakness #e are

no# seeing% I s)spect #e #ill see an e(en lo#er forecast in the release of the min)tes

from their ne.t meeting in March%

f f)rther concern is the )p#ard trend in inflation as meas)red b' the Core @CE no#

pro!ected to be 2%0 to 2%2 )p from A%5 to A%>% 4irst" this is no# abo(e the 4eds o#n target

for inflation #hich is belie(ed to be belo# 2%0% Second" #ith the =an)ar' Cons)mer @rice

Inde. reports in at %K tells )s that inflation is rising not falling% Fo#e(er" the 4ed

e.pects inflation to fall f)rther later in 200% @erhaps this is beca)se the econom' #ill be

m)ch #eaker than it is no#" #hich #ill ca)se do#n#ard press)re on prices" helping to

red)ce inflation% This is )s)all' #hat happens d)ring a recession% If so" then that means

the' reall' e.pect m)ch slo#er gro#th% 8n interesting conflict in their forecasts%

If #e see f)rther rate c)ts" and man' anal'sts belie(e there #ill be" then it is a sign the

4ed is e(en more #orried abo)t economic gro#th and not as #orried abo)t inflation%

Moreo(er" do not e.pect the 4ed to predict #e are in or abo)t to enter a recession% 4irst"

the markets are likel' to react m)ch more negati(el' to s)ch an anno)ncement and the





4ed #o)ld not #ant to take the blame% Second" e(en tho)gh the 4ed is an independent

agenc' it still m)st report to the Congress% The 4ed needs to keep its independence" so it

is (er' )nlikel' to forecast the econom' is going into a recession% If the' did so" man' in

congress #o)ld #ant to take a#a' some of their po#er" thinking the elected

representati(es co)ld do better% Talk abo)t o)t of the fr'ing pan and into the fire" or ho#

to make a bad sit)ation #orse%

7ooin# for "% o""om

The bear market started #ith the problems in the mortgage ind)str' that are spilling o(er

into other parts of the credit arena% ,anks and in(estment firms m)st ha(e the necessar'

li+)idit' to meet their margins calls and pro(ide s)fficient capital to remain a going

b)siness% 8s a res)lt" in(estors keep tr'ing to determine if the problems in the mortgage

b)siness #ill end an' time soon%

8s of 6o(ember" ho)sing #as do#n %K% It is certainl' #orse no#" b)t that is a place to

start for this disc)ssion% The +)estion is" ho# m)ch f)rther do#n can it go: Goldman #as

the firm that sa# the problems in the mortgage b)siness coming and managed to short

some of the market" th)s a(oiding the hit to earnings that other financial firms

enco)ntered% 8ccording to Goldman if there is no recession" the ho)sing market #ill fall

b' A<K% n the other hand" if there is a recession" then ho)sing prices co)ld fall b' 0K%

)chR That is s)bstantiall' more than the %K e.perienced )p thro)gh last 6o(ember%

8long comes 4irst 8merican /484" #ho has calc)lated ho# man' homeo#ners #ill be

e.periencing negati(e e+)it' in their homes if the prices fall A<K and then 0K% It is not

a good pict)re as the table belo# sho#s%

TT87 K $EC7I6E I6 F*SI6G@;ICES

@E;CE6T M;TG8GES 1ITF 6EG8TIEEL*IT3

%K /toda' A%<K

A<K /6o ;ecession 2AK

0 K /;ecession >K





If this forecast from Goldman and the anal'sis from 4irst 8merican is correct" then b' the

end of 6o(ember A%<K of the mortgages o)tstanding are backed b' homes #ith

negati(e e+)it'% This not m)ch of s)rprises" since man' of the mortgages that ha(e been

#ritten in the last fe# 'ears #ere #ith little or no mone' do#n% 8ll parties co)nted on the

appreciation in homes to contin)e% 1hen the (al)e of the ho)se falls" the borro#er is

pa'ing for an asset that is #orth less than the o)tstanding loan/s% This ca)ses people to

#alk a#a' from their commitments and the ho)se goes into foreclos)re%

If Goldmans prediction of a A<K decline in the (al)e of ho)sing " then 2AK of the

o)tstanding mortgages #ill be backed b' negati(e e+)it'% Moreo(er" this is #itho)t a

recession% Fo#e(er" #e are in a recession" so" according to Goldman" #e #ill see a 0K

decline in the (al)e of homesV and #ith it" >K of the mortgages #ill be backed b'negati(e e+)it'%

This means the financial crisis #e are no# e.periencing has more to go% There are going

too be more )nhapp' s)rprises coming from the financial sector as this problem #orks

thro)gh the s'stem% eep in mind that more defa)lts on these loans ca)se the banks and

other o#ners of these credits to e.perience losses that m)st be #ritten off% These #rite

offs ca)se the instit)tions to either sell off their good loans or sell additional e+)it' to

meet the minimal capital re+)irements% ,)t no one #ants to b)' these loans" since the'

are ha(ing the same problem% It creates a (icio)s c'cle that brings do#n the good firms

along #ith the bad% It also makes borro#ing more diffic)lt as rates climb e(en for the

firms #ith the best of credit% The recent implosion b' ,ear Stearns is !)st one e.ample%

The 4ed sees this" #hich is #h' the' are pro(iding B200 billion in emergenc' credit and

backing the bail o)t of the ,ear Stearns in(estors% ,)t so far that hasnt fi.ed the

problem% I s)spect that #e #ill see more fail)res that #ill then ca)se them to b)' more of

these sec)rities to get them off the books of these firms% In the mean time the econom'

#ill s)ffer e(en more%





?.2 INDI'N 4CONO!<5

STOC6 !'R64TS IN INDI'

4olu"ion an$ s"ruc"ur

India is one of the oldest stock markets in the #orld #ith a strong presence of domestic

and local intermediation% It #as the e.tent of the indigeno)s e+)it' broking ind)str' in

India that led to the formation of the 6ati(e Share ,rokers 8ssociation in A5< #hich

later came to be kno#n as ,omba' Stock E.change /,SE% 8s earl' as in AD" there

#ere more than A"000 brokers in M)mbai trading in stocks% Figh premi)ms #ere also not

something ne#% 8t the height of the stock market boom in the AD0s" follo#ing the

8merican Ci(il 1ar #hich led to the formation of a large n)mber of !oint stock

cottonJginning mills that stirred the e+)it' c)lt)re later booming into #hat #as then

called share mania" share prices reached stratospheric le(els% ,omba' at that time

en!o'ed the distinction of being kno#n as a ma!or financial centre in the 8sia region

ha(ing head+)arters of A banks" 20 ins)rance companies and D2 !oint stock companies%





Stock markets in India s)rged once again follo#ing the introd)ction of a #ide range of

economic reforms" #ith liberalisation of financial markets as one of the central themes%

,)o'ed b' greater freedom and fle.ibilit'" stock markets in India sho#ed gro#th in the

last one and half decades% $espite ma!or setbacks in the earl' A>>0s and 2000s that led to

e.tensi(e in(estigations into the stock markets b' the =oint @arliamentar' Committees"

stock markets in India contin)ed to sho# rob)st gro#th%

Some of the f)ndamental changes that f)elled rapid pace of market gro#th and at the

same time bro)ght in orderliness in the manner and the cond)ct of the operations are a

large n)mber of reforms that e+)ipped Indian markets #ith the best of the processes and

practices that incl)ded abolition of open o)tcr' and introd)ction of electronic trading

/secondar' markets" allo#ing foreign o#nership /foreign instit)tional in(estment of

shares" permitting Indian companies to raise capital from abroad /8$;sJG$;s"

e.pansion in the prod)ct range /e+)itiesJderi(ati(esJdebt" book b)ilding process and

transparenc' in I@ iss)ance /primar' markets" TP2 settlement c'cle /pa'ments and

settlements" depositories for share c)stod' /demateriali?ation of shares go(ernance of

the stock e.changes /dem)t)ali?ation and corporatisation of stock e.changes and

internet trading /e-broking% These changes res)lted in dramatic gro#th of the stock

markets in India as #ell as the e+)it' broking firms% The broking ind)str' is emerging as

a rapidl' gro#ing segment in Indian finance" in terms of b)siness gro#th" distrib)tion

and net#ork and enterprise (al)e%

Indian stocks markets ha(e an e.tensi(e market infrastr)ct)re in terms of a large n)mber

of instit)tions and intermediaries%





In$ia in Global !ar"s

The stat)re and significance of India is gro#ing in the #orld capital markets% India is not

onl' attracting greater interest from #orld markets" b)t is also ass)ming increasing

importance in global finance%

a. India is a maBor rci&in" of foreign instit)tional flo#s amongst the emerging

markets% Since the opening )p of domestic stock markets to foreign in(estors" c)m)lati(e

net 4II in(estments reached *SB D5 bn b' 6o( 05

b. Indian companies are reg)larl' co(ered b' global and regional in(estment banking

research

c. India is maBor $s"ina"ion of pri(ate e+)it' flo#s into the emerging markets

$. India #as host to the ann)al meetingsJconference of the 1orld 4ederation of

E.changes /200< and International rgani?ation of Sec)rities Commission /ISC

/2005

. India emerged a "rillion $ollar mar" capitali?ation market in 2005" and #as among

the top A0 stock e.changes in the #orld in terms of market capitalisation

f. India is amongst the "o& fif"n stock e.changes in the #orld in respect of e+)it'

t)rno(er #. India emerged as a la$in# &la/r in commodities f)t)res market

%. India is amongst the "o& fi in the n)mber of transactions

i. India is among the "o& fi in respect of (ol)me traded in Stock Inde. 4)t)res and

Stock 4)t)res

B. India is one of the fe# markets #ith e.tensi(e demateriali?ation of shares

. IndiaQs TP2 sec)rities settlement c'cle is on par #ith the global standards

l. Indian stock markets ha(e largest n)mber of listings% Trading takes place in abo)t

2<00-000 stocks

m. IndiaQs mos" &o&ular stock inde. /Sense. is constr)cted on the basis of f)ll float

methodolog'" one of the firsts in the 8sia region and a global standard

n. Indian market indices s)ch as Sense. and C6N 6ift' are listed in foreign e.changes

for trading as ET4s%

“6et 1orth Stock ,roking 7imited”<0




Rcn" &olic/ Ini"ia"is

Se(eral polic' inno(ations #ere e(ident in the 'ear 2005% 8 fe# of the important ones

pertaining to primar' and secondar' markets" foreign in(estors" m)t)al f)nds and stock

e.changes are s)mmari?ed belo#%

A% 8n Integrated Market S)r(eillance S'stem /IMSS that monitors across stock

e.changes /6SEJ,SE and market segments /cash and deri(ati(es aimed to enhance

efficac' of s)r(eillance f)nction became operational #ith effect from $ec A" 200D

2% 7isted companies are no# re+)ired to maintain a minim)m le(el of p)blic share

holding at 2<K of the total shares iss)es #ith some e.ceptions

% Grading of I@s #as made optional% In case an iss)er opts for the grading" then these

grades incl)ding the )naccepted ones sho)ld be disclosed in the detailed and abridged

prospect)s

% G)idelines on iss)e of Indian $epositor' ;eceipts /I$;s #ere iss)ed

<% L)alified Instit)tional @lacement /LI@ #as facilitated to enable companies raise f)nds

b' #a' of pri(ate placement from L)alified Instit)tional ,)'ers% In case of LI@" the

iss)er is not re+)ired to file a draft offer doc)ment #ith SE,I% ;eso)rces raised )nder

LI@ sho#ed a +)ant)m !)mp in the first eight months of the 'ear

D% ,SE and 6SE began maintaining a reporting platform for corporate bonds" tho)gh

(ol)mes in corporate debt trading remain sl)ggish% 8t the instance of SE,I" ,SE and

6SE !ointl' la)nched a common portal at ###%corpfiling%co%in #hich #ill disseminate

filings made b' companies listed in both the e.changes% In f)t)re" #hen the s'stem

becomes streamlined" a compan' #o)ld be re+)ired to file the information onl' once"

irrespecti(e of the e.change #here it is listed

“6et 1orth Stock ,roking 7imited”<A




6SE and ,SE reported pri(ate placement of corporate debt to the t)ne of ;s 55D bn

d)ring 8pr-6o( 2005% Trading in corporate debt at the e.changes for the first eight

months of 430 amo)nted to ;s 2< bn in ,SE and ;s 2A bn in 6SE% $)ring the same

period" m)t)al f)nds mobilised ;s A"<A bn as against ;s A"00 bn d)ring the same

period last 'ear%

,' =an 200" 2< bn shares #ere )nder demateriali?ed form #ith the 6ational Sec)rities

$epositor' 7td and 2 bn shares #ith Central $epositor' Ser(ices 7td% Shares of abo)t

5"000 companies are )nder demateriali?ation% The market capitali?ation of shares )nder

demateriali?ation rose from ;s "5D> bn in 8pr 2005 to ;s D"D>A bn in 6o( 2005%

There are abo)t 5"000 $@ locations in the co)ntr'% 6S$7 holds > million depositor'

acco)nts #ith a geographical co(erage of 5>2 cities and to#ns%

!ar" In"rm$iaris

The n)mber of stock brokers registered #ith Sec)rities and E.change ,oard of India

sho#ed a net increase of A0 from >"< in 430D to >" in 4305% There #ere 2D

additions and A<< cancellations d)ring the 'ear% 6ational Stock E.change of India has the

highest n)mber of brokers /A055 follo#ed b' Calc)tta Stock E.change />D0" Inter-

Connected Stock E.change />2< and ,SE />0A% The proportion of corporate members

at 6SE #as at >2K and at ,SE at 5DK% The n)mber of s)b brokers registered d)ring

4305 rose from 2"5> in 430D to 25"<A% 6SE and ,SE acco)nt for ><K of all s)b

brokers% This segment sho#ed a gro#th of A5%K d)ring the 'ear% 8s on =an 2<" 2005"

A"2D> 4oreign Instit)tional In(estors and "5D0 S)b 8cco)nts #ere registered #ith SE,I%

8s on Mar A" 2005" 0 m)t)al f)nds #ere registered #ith SE,I of #hich #ere in the

pri(ate sector and se(en in the p)blic sector% The n)mber of domestic (ent)re capital

f)nds rose to >0 d)ring 4305 from 0 in the pre(io)s 'ear% 6)mber of foreign (ent)re

f)nds do)bled from > to 5 d)ring the period% The fees charged of market intermediaries

b' the reg)lator rose from ;s <0 mn to ;s 2"0A0 mn% Ma!or heads that generated fees

incl)ded take o(er fees /;s <20 mn" stock brokers and s)b-brokers /;s <0 mn" offer

doc)mentsJprospects /;s 0 mn" m)t)al f)nds /;s 2A0 mn" deri(ati(e members /;s

“6et 1orth Stock ,roking 7imited”<<




AA0 mn and 4IIs /;s >0 mn% 8s a part of in(estigations" SE,I s)spended <2 market

intermediaries" iss)ed #arning to 25 intermediaries and prohibiti(e directions iss)ed to

< intermediaries and non intermediaries d)ring 4305%

8n important feat)re of the Indian stock markets as compared to other emerging markets

as also de(eloped markets is the large n)mber of listed companies and also a good

n)mber of member brokers% 1hile the share of top sec)rities in the total t)rno(er is

declining o(er the 'ears" the share of top brokers in trading (ol)mes is increasing% 4or

instance in 430A" the top A0 sec)rities acco)nted for 50K of the t)rno(er in ,SE #hich

grad)all' fell to 2K in 4305% Similarl' in 6SE" the top A0 sec)rities acco)nted for 5K

of the (ol)me in 430A" #hich came do#n to 2K in 4305% The top A00 sec)rities no#

acco)nt for 5AK of the trading (ol)me in ,SE and K in 6SE% The top A0 members of

,SE" #ho acco)nted for AK of the t)rno(er in cash segment in 430A" sa# their share

climbing to 2K in 4305% In 6SE" the share of top members rose from AK to 2<K

d)ring 430A-05% The top A00 members no# acco)nt for 5K and 5<K of the cash market

t)rno(er of ,SE and 6SE respecti(el'%

Commodities f)t)res markets" #hich began in India in the earl' 2000s" are sho#ing rapid

gro#th and progress% Total (al)e of trading at all commodities e.changes for the period

8pr 2" 2005 - =an A" 200 stood at ;s A"DA0 bn as against ;s 0"A bn d)ring the

corresponding period in 4305% Commodities f)t)res markets in India ha(e taken off in a

big #a'V b)t concerns arising from sharp sp)rt in prices of certain essential commodities

and limits imposed on trading of a fe# agric)lt)ral commodities dampened the gro#th in

their (ol)mes" tho)gh trading in other commodities contin)es to gro#% Tho)gh a large

n)mber of e+)it' broking ho)ses offer commodities trading also" e.cl)si(e commodit'

brokerages are emerging as a separate class%

“6et 1orth Stock ,roking 7imited”<D




I!P'CT OF FDI ON INDI'N 4CONO!<5

78TE73 I6$I8 has emerged as the latest and the most sort after destination for 4$I"

reasons for this are man'% ,eing the A0th largest econom' in the #orld and the th in

terms of @@@ India has emerged as a potential pla'er for 4$I and 6;I in(estment% India

has a large reser(oir of skilled laborer at internationall' competiti(e cost and a large

entreprene)rial base and a di(ersified man)fact)ring str)ct)re makes it eas' to find

partners for collaborations% The co)ntr' has a (ast scientific and technical manpo#er of

o(er 20 million #hose si?e e.ceeds the pop)lation of Tai#an %The n)mber of literates in

India is more than the combined pop)lation of 4rance and =apan%

India has a (ast domestic market of 00 million strong middle class pop)lation ha(ing a

s)bstantial p)rchasing po#er and another 500 million people #hose capacit' to p)rchase

is grad)all' increasing% ,eing a (ibrant democrac' #ith a large democratic set)p together

#ith a broad based legal frame#ork incl)ding arbitration and an independent !)dicial

s'stem co)pled #ith a (ast net#ork of bank branches" financial instit)tions and #ell-

organi?ed capital and mone' markets makes India a fa(orable destination for 4$I and

6;I in(estments% The co)ntr' also has a h)ge net#ork of technical and management

instit)tions of highest international standards for de(elopment of e.cellent h)man

reso)rces% India has a record of meeting its international financial obligations as per

sched)le and has ne(er been a defa)lter% The co)ntr' has a strong English lang)age base

for b)siness p)rposes %The strong and (ibrant small-scale sector is again good for

establishing strategic alliances #ith the foreign co)nterparts% Strategic location of the

co)ntr' for the third #orld markets partic)larl' for the rapidl' gro#ing So)th and So)th

East 8sian co)ntries together #ith a s)pporti(e infra str)ct)re base helps in generating a

health' en(ironment for 4$I inflo# into the co)ntr'%

8 recent international agenc' report has predicted that the Indian econom' #ill become

one of the #orldQs largest b' 20<0 8%$% 1hat became as a dri??le in the A>0Qs the boom

time of the Indian econom' is no# po)ring in torrents like the Indian monsoonal rains%

1ith a G$@ gro#th rate of per cent since 200 starting #ith a rebo)nd in the Indian

“6et 1orth Stock ,roking 7imited”<5




agric)lt)re initiall' b)t no# follo#ed #ith a boom in man)fact)ring and ser(ice

ind)stries similar to that of China%

In the last co)ple of months there has been a series of anno)ncements of big in(estments

b' big foreign and 6;I companies% ,ill Gates in his recent (isit to India has anno)nced

that the Microsoft #ill in(est aro)nd B A%5 billion o(er the ne.t fo)r 'ears in India% Intel

the largest comp)ter chips compan' of the #orld has decided to in(est o(er B A billion in

India% CISC has anno)nced plans to spend B A%A billion o(er the ne.t - 'ears in India%

4or Microsoft India is emerging as a big market to e.ploit as Microsoft doesnQt ha(e

m)ch in stake in China% ,)'ing of shares to the t)ne of B A%< ,illion in ,harti-Tele

(ent)res b' odaphone is another big 4$I inflo# into the co)ntr'% To be a gen)ine

competitor of China in 4$I" India sho)ld aim to an ann)al gro#th rate of A0 percent

#hich the Indian @rime Minister $r Manmohan Singh has also rightl' pointed o)t

recentl'% So far India has not attracted more then B - ,illion ann)all' #hen compared

to 4$I inflo#s of B <<- D0 ,illion for China% The n)mber of foreign and 6;I e+)ities

#hich ha(e in(ested in India bet#een 8)g)st A>>A & 6o(ember 2002 is A<5DA #ith a

total foreign in(estment of ;)pees 25 Crores% Fo#e(er things are impro(ing in

India too% 4$I in(estment in India has nearl' do)bled to B2%> billion d)ring 8pril &=)l'

200D from B A%< billion for the same period last 'ear representing a gro#th rate of 2<> K%

8ccording to the ;,I India has recei(ed B<0%A billion since A>>A of #hich BAD billion or

2K of it came since 8pril 200%

The negati(e side of this bo)ncing 4$I and 6;I inflo# is the constraints of Indian

economic gro#th #hich are not e.ternal b)t internal %*ps and do#ns in Indian

agric)lt)re pla's a ma!or role in constraining Indian gro#th rate co)pled #ith )nhealth'

infrastr)ct)re like pot holed roads" incomplete fl'o(ers" )nde(eloped airport facilities etc

are the main bottlenecks in the gro#th of the Indian econom'%

8gain lopsided regional (ariation in the economic gro#th of the co)ntr' is another ma!or

impediment in the gro#th of Indian econom'% Tr)ant 7eft @arties #hose s)pport is

cr)cial for the s)r(i(al of the *@8 go(ernment at the center is another ma!or hindrance in

the inflo# to 4$I in(estment in India%





Fo#e(er a (er' reass)ring de(elopment has been the tremendo)s boost )p #hich the

recent b)dget has gi(en to ind)strial infrastr)ct)re and 4$I in(estment in India% @ositi(e

side of the stor' is the tremendo)s resilience of the Indian econom'" rapid gro#th of

Indian agric)lt)re" boost )p to infrastr)ct)re" the tremendo)s global o)tso)rcing boom in

India and a #ell-reg)lated and deep capital market% 7ooking at the c)rrent rate of 4$I

inflo# India can attract a record of B A2 billion 4$I inflo# this fiscal 'ear% The commerce

minister feels it is possible tho)gh he has a note of ca)tion" “There is competition not

onl' !)st from China b)t also from others like Thailand" Mala'sia and so on% 1e canQt

lose foc)s on attracting in(estments since #e canQt get inflo#s b' gi(ing lect)res b)t

#ork on #a's to get in(estors%”

If a comparati(e anal'sis of the Indian and Chinese econom' is done some interesting

comparison emerges thro)gh India lags behind China in man' areas a lot needs to be

done if India has to catch )p #ith China% IndiaQs total pop)lation is A0 billionV ChinaQs

is A252 billion% IndiaQs labor force is <A billionV ChinaQs labor force is 5<5 billion%

IndiaQs ann)al G$@ is 5 *S B billion" ChinaQs is *S B AA<> billion% 25 per cent is the

share of Indian agric)lt)re in its G$@ in China it is onl' A< per cent %25 per cent is the

share of ind)str' in Indian G$@ in China it is <2 per cent% per cent of G$@ in India

comes from ser(ices in China it is onl' percent% ;ail ro)tes in India are D2%< tho)sand

s+ kms in China it is onl' <D%5 tho)sand s+ kms% Motor (ehicles per A000 people in India

are 5 in China it is % ; $ e.pendit)re in India is 0%D K of G6@ in China it is 0%A K%

Internet host in India is 0% per A0000 people in China it is 0%D per A0000% Ed)cation

e.pendit)re in India is %2 per cent of G6@ and in China it is 2% per cent%

*nderno)rished people in India are 2 per cent of the total pop)lation in China it is onl'

> percent%Th)s if #e look into the o(erall scene of Indian econom' #ith a booming stock

to)ching almost the A000 mark" a b)o'ant ;)pee of ;s % J$ollar and a health'

gro#th trend of the ma!or sectors of the Indian econom' the en(ironment is (er' positi(efor 4$I and 6;I inflo#s% Fo#e(er compared to China it is still behind e(en tho)gh it is

marching ahead% 8 lot more needs to be done% The Indian b)ll is no do)bt energetic no#

ho#e(er it has to r)n fast to o(ertake the Chinese dragon #hich is not impossible if

friendl' gro)nd is created%

“6et 1orth Stock ,roking 7imited”<>




“6et 1orth Stock ,roking 7imited”D0




Ins"mn" oom5 T% Rol of Fiscal Rforms

The )nprecedented economic gro#th of last fo)r 'ears has been the res)lt of the interpla'

bet#een both demand and s)ppl' side factors% 8mongst the demand side factors" rob)st

in(estment gro#th has been one of the ma!or ones% Gross capital formation /GC4 has

been gro#ing t#ice as fast as the gross domestic prod)ct /G$@ in recent 'ears" thereb'

increasing its share in the G$@ pie% 8s a percentage of G$@" the share of gross capital

formation has increased from 22 per cent in 200A-02 to o(er D per cent in 2005- 0 /as

per the CS ad(ance estimates%

The gro#th moment)m has clearl' changed gears from cons)mption-led gro#th to being

an In(estment-led gro#th since 200A-02% The gro#th rate of in(estment peaked in 200-

0< and has slo#ed do#n in recent 'ears% It ho#e(er" contin)es to be m)ch abo(e the

gro#th of cons)mption% *nlike the cons)mption slo#do#n" #hich has been hit b' the

tight monetar' polic' of the ;,I" there #ere little signs )ntil recentl' that in(estment has

been dented significantl'% The increase in the deplo'ment of incremental credit to capital

goods in 2005-0 also points to#ards the contin)ation of strong in(estment trends in theeconom'%

In recent months tentati(e signs of slo#do#n in in(estment acti(it' ha(e emerged% In

=an)ar' 200" the capital goods sector clocked a disappointing 2%A per cent gro#th - the

lo#est for nearl' si. 'ears% 1hile a blip in gro#th of capital goods sector for one month

is too earl' to represent a do#nt)rn in in(estment" it is a ca)se of #orr' - more so" if

cons)mption side is alread' reeling )nder a do#nt)rn d)e to high interest rates pre(ailing

in the econom'%

4)rther anal'sis done on the trend gro#th rate of G$@ and gross fi.ed capital formation

/G4C4 also thro#s )p some interesting insights first" both G$@ and G4C4 ha(e been

gro#ing at the rate #hich is belo# their respecti(e trend (al)es at %< and AD% percent%

“6et 1orth Stock ,roking 7imited”DA




Second" the b)siness c'cles of G$@ and in(estment had been pro-c'clical )ntil 200-0

ho#e(er" since then the pattern of gro#th has been different% In(estment gre# rapidl' and

m)ch abo(e its long r)n trend for co)ple of 'ears #hen G$@ #as in fact gro#ing belo#

its trend% 1h' has in(estment t)rned co)nter-c'clical in recent 'ears:

The impro(ement in in(estment has been dri(en b' a significant increase in the pri(ate

corporate sectors in(estment #hich has do)bled as a share of G$@ in a matter of fo)r

'ears - from D%D per cent in 200-0 to A%< per cent in 200D-05% (er the same period"

go(ernment in(estment increased from D% per cent of G$@ to 5% percent% 1hat did

pri(ate in(estment gro# rapidl' compared to G$@ after 200A-02 and e.perience a

relati(e slo#do#n in its gro#th in recent 'ears #hen the G$@ gro#th #as at all time

high: To find ans#ers to the discerning +)estions raised abo(e regarding the in(estment

gro#th o(erriding the G$@ gro#th" one needs to probe the fiscal side of the stor'% 8t the

beginning of the reform process in A>>A" fiscal imbalance #as identified as the root ca)se

of the balance of pa'ments crisis and domestic inflation% The fiscal consolidation" #hich

follo#ed in response" ho#e(er failed to s)stain itself as it lacked a stat)tor' mandate and

the re+)ired instit)tional s)pport% The enactment of the 4iscal ;esponsibilit' and ,)dget

Management 8ct /4;,M8" 200" ho#e(er" pro(ided the re+)ired mandate and lent

credibilit' to the fiscal reforms process of the go(ernment% The fiscal deficit of the centre

as a proportion of G$@ has come do#n from <%> per cent in 2002-0 to %A per cent in

2005-0 and is f)rther estimated to decline to 2%< per cent in 200-0% Similarl'" the

re(en)e deficit also declined from % per cent in 2002-0 to A% per cent in 2005-0 and

is estimated to decline to A%0 per cent b' the ne.t 'ear% The fiscal performance of the state

go(ernments has also sho#n considerable impro(ement" post 4;,M8%

@ri(ate sector sa(ings and in(estment decisions are affected b' the fiscal consolidation

steps )ndertaken b' the go(ernment both in response to specific re(en)e and o)tla's

meas)res and also as a res)lt of the impro(ed economic o)tlook that res)lts from the

impro(ed fiscal consolidation% The grad)al red)ction in both the fiscal and re(en)e

deficit mandated )nder the 4;,M b' the central go(ernment has impro(ed its credibilit'

in the regard that it is serio)s eno)gh to c)rtail non-de(elopmental e.pendit)re and





instead spend in sectors like infrastr)ct)re and ind)strial sector #hich are tho)ght to be

gro#th stim)lating sectors% E(en mere e.pectations abo)t f)t)re fiscal consolidation can

lead to increased confidence of the pri(ate sector% There ma' also be positi(e #ealth

effects associated #ith act)al or e.pected lo#er interest rates and perceptions as to

red)ced f)t)re ta. liabilities%

4iscal consolidation #ill enhance gro#th prospects b' red)cing risk premia as the

go(ernment balance sheet impro(es" and thereb' freeing more reso)rces for pri(ate

in(estment at relati(el' lo#er market interest rates% 8lso" it is kno#n that #here the fiscal

consolidation is large and part of a broader ad!)stment and reform agenda" as in the case

of India" it is more likel' to be percei(ed b' the pri(ate sector as a credible go(ernment

commitment and re(i(e pri(ate sector confidence%

ne more trend #hich has been +)ite clear and res)lted o)t of the fiscal consolidation

efforts of the go(ernment has been the impro(ement in the p)blic sa(ings% The sa(ings

rate of the o(erall p)blic sector has impro(ed from -2%0 per cent of G$@ in 200A-02 to

%2 per cent of G$@ in 200D-05" the t)rnaro)nd of <%2 percentage points of G$@ has been

a ke' factor that has enhanced not onl' o(erall domestic sa(ings" b)t also boosted pri(ate

sectors confidence in the go(ernment% The trend of increase in p)blic sa(ings is a clear

indicator of better control on p)blic sector e.pendit)re and impro(ement in efficienc' of

the go(ernment finances%

8s has been pointed o)t earlier as #ell" pri(ate in(estment as a proportion of G$@ had

started to rise onl' after the s)rge in p)blic sector sa(ings in 200-0" e(en tho)gh the

G$@ gro#th rate #as stabili?ing% In fact" for three 'ears since 200-0 the gross fi.ed

capital formation #as gro#ing m)ch abo(e its long r)n trend as sho#n in fig)re 2" e(en

#hen G$@ gro#th moderated% The reason behind this co)ld be that the pri(ate sector

essentiall' (ie#ed the slo#do#n in economic gro#th as a temporar' phase and e.pected

a long r)n moment)m to contin)e gi(en the strong fiscal position of the go(ernment%





Fo# #o)ld in(estment perform going for#ard: 1hat happens to pri(ate in(estment

going for#ard depends m)ch on the le(el and mode of financing of p)blic in(estment as

economic gro#th slo#s% 8s long as the g o ( e r n m e n t demonstrates the s)stainabilit'

of p)blic finances and a(oids an' negati(e imp)lse that poses a threat to the fiscal and

re(en)e deficit targets" pri(ate in(estment sho)ld remain resilient" tho)gh it is likel' to

#itness some f)rther slo#do#n in immediate f)t)re as the demand for their prod)cts

slo#s do#n%

8lso" corporate profits" i%e%V pri(ate corporate sa(ings are e.pected to slo# do#n and

hence more of pri(ate in(estment #o)ld ha(e to be f)nded from the e.ternal so)rces% It is

therefore" important that more and more p)blic in(estment is f)nded (ia p)blic sector

sa(ings #hich #o)ld lea(e more ho)sehold sa(ings to be transferred to the pri(ate

corporate sector for in(estment% In the immediate f)t)re" ho#e(er" #e co)ld see a period

of relati(el' #eak in(estment demand #ith firms concentrating on impro(ing efficienc'

and optimall' )tili?ing e.isting capacit'%

Conclusion

The ongoing fiscal consolidation effort has reass)red the pri(ate sector abo)t the

go(ernmentQs commitment to impro(e the health of the econom'% Since 200-0" an

increase in p)blic sa(ings and a s)bse+)ent drop in p)blic sector financing needs from

pri(ate sa(ings increased the +)antit' of reso)rces and lo#ered the cost of in(estment for

the corporate sector% It has contrib)ted to impro(ing o(erall b)siness confidence%

S)stained fiscal consolidation" especiall' (ia red)ction in re(en)e e.pendit)re" #o)ld

help maintain b)siness confidence as economic gro#th slo#s do#n% In this scenario an'

slo#do#n in in(estment acti(it' co)ld be relati(el' short-li(ed%

In$us"rial Pro$uc"ionThis is the third consec)ti(e month in #hich ind)strial prod)ction data has been

disappointing% This is clearl' a sign of gro#th slo#do#n% The o(erall ind)strial

prod)ction slipped to <% per cent in =an)ar' 200 as against AA%D per cent in last =an)ar'%

8ll the three ma!or components namel' man)fact)ring" mining and electricit' recorded





slo#er gro#th in =an)ar' 200 as compared to =an)ar' 2005% The se(erit' of the

slo#do#n can be ga)ged from the fact that both the o(erall ind)strial gro#th as also the

gro#th f its ma!or components in =an)ar' 200 are less than half of that recorded in

=an)ar' 2005%

Fo#e(er" the c)m)lati(e ind)strial gro#th for the period 8pril-=an)ar' 2005-0 looks

marginall' better at %5 per cent" as compared to AA%2 per cent for the same period last

fiscal% Man)fact)ring for the period 8pril-=an)ar' 2005-0 clocked a >%2 per cent gro#th

as compared to A2%A per cent for the same period a 'ear ago% Mining sho#ing a marginal

do#nt)rn clocked a gro#th of %D per cent for the period 8pril-=an)ar' 2005- 0 as

against % per cent for the same period last 'ear% Gro#th in electricit' also declined to

D% per cent in 8pril-=an)ar' 2005-0 from 5%D per cent in 8pril-=an)ar' 200D-05% 8

glance at the )se-based classification s)ggests that deceleration in ind)strial gro#th is

most prono)nced in the cons)mer d)rable sector as it recorded a negati(e gro#th of %A

per cent in =an)ar' 200%

Fo#e(er" #hat is more distressing and disappointing is the 2%A per cent gro#th clocked

b' the capital goods sector% It ma' be #orth#hile to point o)t that despite the dismal

performance of rate sensiti(e cons)mer d)rable sectorV it is the s)stained do)ble-digit

gro#th of capital goods sector that #as keeping the sentiments positi(e abo)t the f)t)re

prospect of ind)strial gro#th% 1hile a blip in the gro#th of capital goods sector for one

month is too earl' to represent a do#nt)rn in in(estment" it is definitel' a ca)se for

concern- more so" if cons)mption side is alread' reeling )nder a do#nt)rn%

8t 2-digit classification" o)t of A5 ind)stries onl' t#o ind)stries namel' #ood #ood

prod)cts and machiner' e+)ipment recorded negati(e gro#th in =an)ar' 200 as

compared to !)st one ind)str' - !)te fibre te.tiles in =an)ar' 2005% Fo#e(er" #hat is

more striking abo)t the gro#th pattern of ind)stries at 2-digit le(el is #ide (ariation in

gro#th across ind)stries in =an)ar' 200% Some of the ind)str' categories that recorded

“6et 1orth Stock ,roking 7imited”D<




(er' high gro#th in =an)ar' 200 are - !)te fibre te.tiles" leather leather prod)cts

basic chemicals chemical prod)cts and metal prod)cts and parts% 8s noted abo(e" the

main disappointment of =an)ar' 200 has been the capital goods sector and therfore it is

not a s)rprise to see that #hile machiner' e+)ipment clocked negati(e gro#th"

transport e+)ipments and parts clocked a paltr' A%< per cent gro#th- the t#o ke'

constit)ents of the capital goods sector%

Infla"ion

The tight monetar' polic' b' the ;,I has managed to contain the headline inflation

/meas)red in terms of the 1@I to 2%>5 per cent for the #eek ended ctober 25" 2005 b)t

mainl' on acco)nt of a larger base% 4or the first time in fi(e 'ears" a le(el of belo# per

cent #as attained% Inflation has been r)ling belo# per cent since 8)g)st A" 2005 after

to)ching D%D> per cent earlier in 2005% It #as r)ling at %<0 per cent for three consec)ti(e

#eeks and rose to %5> per cent as on =an)ar' <" 200% The rise #as mainl' on acco)nt of

rise in prices of some man)fact)red prod)cts incl)ding metals and allo's% It f)rther rose

to % per cent as on =an)ar' A2" 200 on acco)nt of rise in food prices% The point-to-

point rate of inflation based on the 8ll India Cons)mer @rice Inde. & Ind)strial 1orkers

/C@I-I1 Inde. /base 'ear 200A remained at <%<A per cent in 6o(ember 2005% E(en

global commodit' and food prices are ca)sing price press)res% The 4ood 8gric)lt)re

rganisation /48 of the *nited 6ations has predicted that food prices #o)ld be rising

at a higher rate in the ne.t <-A0 'ears than in the past" ad(ersel' impacting those

economies that ha(e accorded higher #eights to the food inde. in the inflation basket% In

India" food items acco)nt for <5 per cent in cons)mer inde. /C@I and 2D%> per cent

/primar' and man)fact)red prod)cts in the #holesale inde. /1@I that is )sed to

meas)re inflation% Global o)tlook for edible oils is also tight for the 'ear 200%

Cr)de oil had to)ched B>%D2 per barrel mark in the *%S in the first #eek of 6o(ember

2005% It crossed the B>> per barrel mark b' peaking at B>>%2> per barrel on 6o(ember 2A"

2005% n =an)ar' 2" 200" cr)de oil f)t)res to)ched the ps'chological mark of BA00 per

barrel on apprehensions that in(entories might ha(e fallen in the *%S for a se(enth #eek

in a ro#% n the demand side" the Energ' Information 8dministration /EI8 has

“6et 1orth Stock ,roking 7imited”DD




estimated that cr)de cons)mption in the *%S #o)ld increase b' A% per cent in 200

thereb' p)tting an )p#ard press)re on prices% 8lso" the report b' E8C states" “cr)de oil

prices are likel' to sta' firm% Fo#e(er" the main lesson of the past months has been that

the #orld can li(e #ith B0->0 per barrel% Cartelised oil prod)cers are th)s likel' to be

emboldened to )se prod)ction +)otas" if necessar'" to keep oil prices close to their

present highs" and higher still" if market conditions permit%”

The go(ernment has anno)nced a relief package for the domestic oil marketing and

refining companies% These companies are no# being permitted to hedge cr)de oil price

risk to the e.tent of <0 per cent of their in(entor'" based on the (ol)mes in the +)arter

preceding the pre(io)s +)arter%

So far the go(ernment has been keeping the f)el prices in India artificiall' lo#er than the

prices #orld o(er" in a bid to help the “aam aadmi”% The go(ernment is considering a

combination of meas)res to contain the impact of rising cr)de oil prices% The' are

namel'V red)ction in the e.cise d)t'" enhanced oil bonds and a marginal hike in retail

prices of petrol and diesel%





Inflation in India in 200 #ill depend m)ch on ho# the food prices beha(e globall' and

ho# m)ch of the increase in oil prices #ill be passed on to the cons)mers% 8lso" rising

s)bsidies in food" fertili?ers and petrole)m are a ma!or concern and needs to be

addressed% Thirdl'" India imports 50 per cent of its cr)de oil re+)irements%

There are 'et concerns on the demand-s)ppl' mismatch pertaining to agric)lt)re-based

items% It is also e.pected that the go(ernment might go in for imports of some of the

agric)lt)ral commodities in case there is a shortfall especiall' in the case of #heat% The

7ondon-based International Grains Co)ncil has made a preliminar' forecast for global





#heat o)tp)t at D< million tonnes for 200-0>" )p o(er 0 million tonnes from 2005-0%

nl' if this happens #o)ld there be a respite from high prices% Similarl'" the 1orld

8gric)lt)ral S)ppl' and $emand Estimates /18S$E report released b' the *%S

$epartment of 8gric)lt)re /*S$8 states that the in(entor' of #heat for 2005-0 are

pro!ected lo#er b' 2 million b)shels in $ecember 2005" reflecting higher e.pected

domestic offtake and e.ports% This implies higher demand and hence hardening prices%

Global oilseeds stocks are also e.pected to decline b' almost 2< per cent d)ring 2005-0

to <%2 million tonnes% Global (egetable oil stocks are also e.pected to decline f)rther b'

abo)t 5 per cent d)ring 2005-0 to %A million tonnes% 8ccording to *S$8" rice stocks

are e.pected to decline b' abo)t per cent in 2005-0%

FIN'NCI'7 !'R64TS5

i Fori#n 49c%an#

The past fe# months has #itnessed +)ite a fe# landmark highs of the r)pee against the

dollar% The r)pee breached the 0 le(els for the first time in September 2005 #hen it

to)ched >%>0% n 6o(ember 5" 2005" the r)pee to)ched a A0-'ear high of >%AD and then

mo(ed back do#n at the end of the trading session% The stock market fallo)t on =an)ar'

A5-A" 200 on acco)nt of 4IIs dra#ing o)t dollars has ca)sed the r)pee to depreciate"

and settle at >% (ers)s the greenback as on =an)ar' 2A" 200% The r)pee s)stained at

>%> on =an)ar' A" 200" mainl' on acco)nt of contin)ed inflo#s" despite some

do#n#ard press)re of ref)nds for ;eliance @o#er I@%

The for#ard premia has remained positi(e thro)gho)t not nearing the 0 le(el impl'ing

that the sentiments are to#ards a #eakening r)pee and conse+)entl' a strengthening

dollar% n =an)ar' A5-A" 200" the ;,I inter(ened in the fore. market thro)gh s#ap

transactions" #ith the first leg being a spot transaction /b)' and the other being a

for#ard transaction /sell% The reason for carr'ing s#ap trades #as to postpone inf)sion

“6et 1orth Stock ,roking 7imited”D>




of r)pee li+)idit' into the s'stem% This p)shed )p the D-month and A-'ear for#ard premia

abo(e 2 per cent%

The rapid gro#th in t)rno(er in the foreign e.change market #as s)stained b' large

s)rpl)s conditions in the spot market as a(erage dail' t)rno(er increased to B<0%A billion

for the +)arter ended $ecember 2005 from B25%D billion in the corresponding +)arter of

the pre(io)s 'ear%

n the fore. reser(es front" after a decline from $ecember A" 2005 & $ecember 2A"

2005" the co)ntr'Qs fore. reser(es increased b' B22 million% It #as standing at B2%>0

billion for the #eek ended =an)ar' A" 200% The reason for decline #as on acco)nt of

;,IQs inter(ention in the fore. market% The latest fig)res a(ailable for ctober 2005

sho#s that ;,IQs net p)rchase of dollars #as BA2%< billion%

ii Fi9$ Incom

The debt market in India comprises mainl' of the G-sec market and the corporate debt

market" #ith the si?e of the latter being onl' aro)nd A per cent of the total debt market%

The 4IIs are allo#ed to in(est in the Indian debt markets s)b!ect to +)antitati(e limits

that are re(ie#ed on an ongoing basis% n =an)ar' A" 200" SE,I raised the limit of 4IIs

in(estment in go(ernment sec)rities from B2%D billion to B%2 billion% The limit of 4IIs in

corporate debt market is BA%< billion% The access pro(ided to the 4IIs in the debt market is

to facilitate li+)idit' management arising from their operations in the e+)it' market since

the' ha(e liberal access to the latter in India% The second Tarapore Committee on 4)ller

Capital 8cco)nt Con(ertibilit' and the Figh-@o#ered Committee report on making

M)mbai an international financial center" ha(e recommended scrapping of caps on 4II

in(estment in r)pee-denominated debt% 8lso" follo#ing the anno)ncement of disclos)re

norms in @-6otes" 4IIs ha(e pepped )p in(estments in the debt markets%





ii aJ Cor&ora" Db"

The de(elopment of a corporate bond market in India has lagged behind as compared to

other financial market segments o#ing to man' str)ct)ral factors /8nne.)re % 1hile

primar' iss)ances ha(e been significant" most of these #ere acco)nted for b' p)blic

sector financial instit)tions and #ere iss)ed on a pri(ate placement basis to instit)tional

in(estors% The total pri(ate placements amo)nted for the period =an)ar'& $ecember 2005

amo)nted to ;s% A"A52%>0 billion% The secondar' market lacks market li+)idit'% The total

(ol)mes for =an)ar' 2005 - =an)ar' 200 #as ;s% A"002%D> billion% ;,I is also

considering allo#ing market repos in corporate bonds as one of the steps to deepen the

market /in accordance #ith recommendations b' the $eepak @arekh Committee%

@)blic Sector banks are e.pected to s#amp the domestic financial markets #ith bonds

o(er the ne.t fo)r months in order to b)ild )p their Tier II Capital" as part of the ,asel II

compliance% Some of the banks that ha(e +)e)ed )p are State ,ank of India" ,ank of

India" *nion ,ank of India" i!a'a ,ank" *C ,ank and $ena ,ank% ne of the first in

the +)e)e is ,ank of ,aroda #hich raised ;s% <"000 million thro)gh )pper Tier-II bonds

to f)nd b)siness gro#th% 8mong pri(ate banks" 3es ,ank is planning to raise ;s% <"000-

5"<00 million (ia Tier II% /8nne.)re I% This is e.pected to deepen the debt market%

bJ Gornmn" Scuri"is

The Indian 'ield c)r(e /diagram" #hich #as rising at the long-end till $ecember-end"

started to flatten% There ha(e been man' st)dies that ha(e pro(en that the 'ield c)r(e is a

predictor of the f)t)re interest rates and inflation% ,)t" the 'ields ha(e flattened o)t"

especiall' on acco)nt of the econom' entering the s)rpl)s li+)idit' mode from the deficit

mode and narro#ing of the short and long-term spreads% There is also m)ch e.pectation

that interest rates #o)ld slightl' come off before the end of fiscal 2005-0%

The gross borro#ings of the Central Go(ernment thro)gh dated sec)rities #as at ;s%

A"50 billion d)ring 2005-0 )pto =an)ar' 2<" 200% This constit)ted >%D per cent of the

“6et 1orth Stock ,roking 7imited”5A




b)dget estimates% n =an)ar' AA" 200" the go(ernment a)ctioned t#o dated sec)rities of

5%>>K 20A5 of ;s% D0 billion and %K 20D of ;s% 0 billion for the first time in the

6e# 3ear%

Fea(' (ol)mes #ere #itnessed on =an)ar' A" 200 to the t)ne of ;s% 2>%< billion"#hich res)lted in a massi(e fall in 'ields% The 'ield on the A0-'ear benchmark bond #as

5%<< per cent% Conc)rrentl'" it #as the da' of closing for the ;eliance @o#er I@ co)pled

#ith fail)re in the ;TGS s'stem" #hich drained o)t li+)idit' from the s'stem" ca)sing

call rates to break-o)t the interest rate corridor to to)ch D0 per cent% n =an)ar' 2A" 'ields

rose 2 basis points )p at 5%<5 per cent on e.pectations of inflationar' press)res and

iss)ance of MSS bonds #orth ;s% D0"000 million on =an)ar' 2" 200% 4edQs 5< basis

point emergenc' rate c)t on =an)ar' 22" 200 led to the A0-'ear benchmark 'ield to)ch a

2-'ear lo# of 5%2> per cent /on =an)ar' 2" 200%

,)t" on =an)ar' 2" 200" the 'ields bo)nced back to 5%< per cent on e.pectations that

the ;,I #o)ld c)t rates in its +)arterl' Monetar' ;e(ie# @olic' anno)ncement% n

=an)ar' 2>" 200" the 'ields !)mped to 5%<2 per cent" the #eekQs high" on similar





e.pectations% Fo#e(er" in the absence of a rate c)t" the 'ields closed at 5%<D per cent on

=an)ar' 0" 200" #ith total (ol)mes being ;s%%>< billion% Markets opened #ith 'ields

ho(ering aro)nd 5%<< per cent on =an)ar' A" 200 after the 4ederal ;eser(e c)t interest

rates b' <0 basis points%

iii 4ui"/

The market has been reining on global c)es and contin)o)s 4II inflo#s% n ctober 2>"

2005" the Sense. breached the 20"000 mark% n 6o(ember A" 2005" it registered its

biggest one-da' gain of >%< points% It #as mo(ing in the range of A"00 & A>">00

since the third #eek of ctober and to)ched 20"%0D points on $ec AA" 2005% The 6ift'

also to)ched D"0>5%2< points for the first time% n $ecember A" the Sense. to)ched

20">%AA points and the 6ift' to)ched DA<%0 points% 8gain on =an)ar' " 200" the

Sense. and the 6ift' hit a ne# record of 20"DD%> and D"25%0 points" respecti(el'% The

Sense. made a ne# record on =an A0" 200 b' to)ching 2A"20D%55 points% ,)t it lost 5<0

points on =an)ar' A" 200 and contin)ed to do so till =an)ar' 2A" 200 to the e.tent of

A"00 points" as a res)lt of global press)res and s)bse+)ent p)ll-o)t b' 4IIs% % ,' =an)ar'

2>" 200" both the Sense. and 6ift' some#hat regained their positions at A"0>A%>

points and <"20%0 points" respecti(el'% ,)t" the' bled again on =an)ar' 0" 200% The

Sense. and 6ift' closed at A5"5<%D and <"AD5%D points" respecti(el'% n =an)ar' A"

200" the markets displa'ed mi.ed sentiments as it opened #eak b)t bo)nced back on the

)pside in the latter part of the trading session%

The correlation bet#een 4IIs t)rno(er /sales P p)rchases and Gross t)rno(er of the

Sense. for the period 8pr " 200D & $ec A" 2005 #as 0%<D% *s)all' domestic M4s and

4IIs ha(e contrar' (ie#s on the market% (er the last fi(e 'ears" 4IIs ha(e been fo)nd

b)'ing in $ecember #hile M4s #ere net sellers% ,)t" this $ecember has been different

#ith both being net b)'ers% $omestic instit)tions #ere acti(e in the market to#ards the

end of C32005 and beginning =an)ar' 200 and contin)e to remain b)llish on the e+)it'

markets% The net position of M)t)al 4)nds in e+)it' #as ;s% <<"2 million from =an)ar'

A-0" 200" #hereas their net position in the debt market #as ;s% -"< million for the





same period% Interestingl'" M)t)al 4)nds #ere seen acti(e in the debt markets on =an)ar'

0" 200%

8part from bank credit" the corporate sector contin)ed to meet its f)nding re+)irements

from non-bank so)rces especiall' the capital markets% ;eso)rces raised thro)gh domestic

e+)it' iss)ances from 8pril & $ecember 200 #as ;s%A">50 million" #hich #as 0 per

cent higher than the corresponding period of the pre(io)s 'ear% Mobili?ation in the form

of e+)it' iss)ances thro)gh 8merican depositor' receipts /8$;s and global depositor'

receipts /G$;s for the same period #as ;s%AA">0 million" #hich #as per cent

higher than the pre(io)s 'ear% In a mo(e to deepen the secondar' market" the go(ernment

has allo#ed all tr)sts to in(est in the stock market as #ell as the debt market%

SE,I has permitted short selling to all classes of in(estors incl)ding s)b-acco)nts of 4IIs%

Short selling occ)rs #hen in(estors sell stocks that the' do not o#n at the time of

transaction% SE,I proposes to introd)ce the Sec)rities 7ending ,orro#ing /S7,

scheme along #ith short selling% ,orro#ing of e+)it' shares b' 4IIs #ill onl' be for the

p)rpose of deli(er' into short sale%





SU PRI!4 T34OR<K

,anks in the *S pro(ided loans to people for p)rchasing homes .

,et#een A>0 and 2000 the *S econom' #itnessed a prolonged b)ll market

#hich sa# an appreciation of ho)sing assets% Fence in this king of a sit)ation the

banks #ere not too #orried abo)t the loans handed o)t as the appreciation of the

mortgaged propert' #as good eno)gh to hedge them against an' defa)lt%

8s the loans increased" the banks b)ndled them as sec)rities in order to spread the

loans and mitigate their risks%

The banks managed to get 888 certification from rating agencies for these

sec)rities% ;ating agencies based on the gro#th potential fo the )nderl'ing assets

#ent along #ith the banks #itho)t a thoro)gh credit check of the constit)ents of

the sec)rities%

Th)s these high rated papers got distrib)ted to (ario)s in(estors in the market%

In(estment banks themsel(es #ere one set of acti(e in(estors in these papers%

Since the )nderl'ing assets #ere appreciating 'ear on 'ear" the' #ere l)red into

making more in(estments in these papers%

The' e(en borro#ed to f)nd these in(estments since it #as looking (er' h)nk'

dor' all the #a'% 8fter all inflation #as )nder check" interest rates #re attracti(e

and hence loans #ere cheap% 7e(eraging made immense sense to the participants%

The s)b-prime sec)rities #ere )sed as collateral for the f)nds borro#ed%

“6et 1orth Stock ,roking 7imited”5<




N4HT STR'T4GI4SK

n =an)ar' 2>" 200" the IM4 has do#ngraded its global gro#th pro!ections at %A per

cent in 200 from %> per cent in 2005" mainl' on acco)nt of lo#er gro#th pro!ections of

the ad(anced economies% 1hile the Indian econom' has beg)n its !o)rne' on the gro#th

path" there are +)estions being raised on the pace of this !o)rne': If G$@ gro#th #o)ld

moderate to %<-%> per cent as is being ascertained b' different +)arters" this indicates

that gro#th in the remaining t#o +)arters #o)ld decline to -%D per cent% This is

s)bstantiall' lo#er than performance of the first t#o +)arters% This ma' be attrib)ted to

decline in e.ports" decline in domestic demand" #hich is interestingl' co)pled #ith a

resilient gro#th in in(estment demand% 1hile economic theor' /8nne.)re I endorses the

(ie# that in(estment demand creates domestic demand" its practical implication remains

to be seen% ,)t" c)rrentl' the pict)re is l)ll as the latest man)fact)ring data has !)st been

released% $omestic li+)idit' remains strong b)t there are fe# takers at the c)rrent interest

rates%

n =an)ar' 0" 200" 4ederal ;eser(e once again c)t the federal f)nds rate b' <0 basis

points to per cent from %<0 per cent% n =an)ar' 22" 200" it had c)t the rate b' 5<

basis points from %2< per cent% This is the third time that the 4ederal ;eser(e has c)t

rates in the last t#o months% n =an)ar' 2>" ;,I left its ke' interest rates )nchanged at

the L Monetar' @olic' ;e(ie#% @ostfacto" concerns ha(e been raised on the increasing

interest rate differential bet#een the t#o co)ntries% ,)t" there is not eno)gh e(idence to

state that the interest differential bet#een India and the *%S% is the sole dri(er of inflo#s%

Therefore" +)ite contrar' to 4edQs decision" ;,IQs decision of not going in for a rate c)t in

this re(ie# #as +)ite e.pected% The reason being that there are persisting inflationar'

press)res in the econom' despite the press)res of global softening of rates% 8t the same





time" it has not r)led o)t the Wreadiness to act if t)rb)lence in global markets threatened

gro#th and financial stabilit'Q%

I!P'CT OF UDG4T ON ;'RIOUS S4CTORS

.1 'N6ING S4CTOR

3ISTORIC'7 D'T' OF 3DFC 'N6

Series DatePrev

CloseOpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 998.35 996 1,019.80 996 1,014.15 1,013.75

EQ 2-Jan-09 1,013.75 1,020.00 1,032.00 1,003.20 1,016.00 1,015.65

EQ 5-Jan-09 1,015.65 1,030.00 1,049.50 1,028.05 1,049.50 1,044.10

EQ 6-Jan-09 1,044.10 1,044.15 1,113.00 1,034.00 1,110.30 1,100.40

EQ 7-Jan-09 1,100.40 1,115.00 1,125.25 996 1,024.25 1,009.25

EQ 9-Jan-09 1,009.25 1,000.00 1,057.00 975 1,013.00 1,017.50

EQ

12-Jan-

09 1,017.50 1,012.00 1,022.00 990 1,004.20 1,003.70

EQ

13-Jan-

09 1,003.70 1,000.00 1,012.00 975.1 990 988.85

EQ

14-Jan-

09 988.85 1,044.70 1,044.70 966.9 973.9 977.55

EQ

15-Jan-

09 977.55 960 960 907.05 920.4 924.8

EQ

16-Jan-

09 924.8 938 944.55 922.2 939 937.55

EQ

19-Jan-

09 937.55 949 954.5 931.5 940 941.1

EQ

20-Jan-

09 941.1 925 925 902 914 912.45

EQ

21-Jan-

09 912.45 906.8 906.8 880 883.15 889.45

EQ

22-Jan-

09 889.45 900 917 882 893 900.5

EQ

23-Jan-

09 900.5 892.6 911.3 865.1 873 872.45

EQ

27-Jan-

09 872.45 897 903.95 880 890 889.45

EQ

28-Jan-

09 889.45 898 915.8 895.35 912 911.75

EQ

29-Jan-

09 911.75 924.9 937.55 910 921.05 923.45

EQ

30-Jan-

09 923.45 892.4 935 892.4 922 925.6





U

3ISTORIC'7 D'T' OF IDI 'N6

Series DatePrev

CloseOpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 67.7 69 70 67.5 69.55 69.7

EQ 2-Jan-09 69.7 71 73.25 69.35 72.3 72.15

EQ 5-Jan-09 72.15 74 74.4 71 72.7 72.55EQ 6-Jan-09 72.55 72.65 73.95 69.2 71.75 71.45

EQ 7-Jan-09 71.45 72 72.35 62 65.85 66.5

EQ 9-Jan-09 66.5 64 68.1 63 65.3 64.65

EQ

12-Jan-

09 64.65 64 65.3 60.2 61.6 61.5

EQ

13-Jan-

09 61.5 63 64.9 60 62 61.25

EQ

14-Jan-

09 61.25 62.45 63.8 60.6 62.4 62

EQ

15-Jan-

09 62 60.5 61.75 58 59.2 59.25

EQ

16-Jan-

09 59.25 60 60.5 58.75 60 59.9

EQ

19-Jan-

09 59.9 59.95 60.85 59 60 60.4

EQ

20-Jan-

09 60.4 58.7 59.5 58.05 58.4 58.3

EQ

21-Jan-

09 58.3 58.3 58.3 56.05 56.3 56.3

EQ

22-Jan-

09 56.3 56.8 58 54.6 55.25 55.4

EQ

23-Jan-

09 55.4 56.9 56.9 50.6 54.05 53.7

EQ

27-Jan-

09 53.7 55 56.7 54.1 55.5 55.45

EQ

28-Jan-

09 55.45 56.25 56.9 55.45 56.45 56.35

EQ

29-Jan-

09 56.35 57.7 57.8 55.65 57 56.7

EQ30-Jan-

09 56.7 55.2 57.75 54.05 56.85 57.15





GR'P3IC'7 R4PR4S4NT'TION OF IDI 'N6

From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% IDI an %as n$$ u&

(i"% n#a"i from +.*"o *.1 an$ "%is s%o(s a n#a"i im&ac" on "% orall

an sc"ors.





3ISTORIC'7 D'T' OF ICICI 'N6

Series DatePrev

CloseOpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 448.1 450 466.95 450 465 464.15

EQ 2-Jan-09 464.15 465 479.8 462.25 472.55 471.25

EQ 5-Jan-09 471.25 475.5 504 474.15 500.9 499.9

EQ 6-Jan-09 499.9 480 530.7 480 526 523.45

EQ 7-Jan-09 523.45 528 538.6 454.05 462.5 467.85

EQ 9-Jan-09 467.85 458.7 483 441 445.8 456.6

EQ

12-Jan-

09 456.6 440 463.3 428.2 442 438

EQ

13-Jan-

09 438 435 448.4 418.05 428.85 425.45

EQ

14-Jan-

09 425.45 428.65 451 428.65 443.35 441.1

EQ

15-Jan-

09 441.1 429 429 398.3 410.55 408.65

EQ

16-Jan-

09 408.65 415 427.7 408.65 420.4 423.75

EQ

19-Jan-

09 423.75 425 444.4 408.5 412.35 412.6

EQ

20-Jan-

09 412.6 403 407.8 390.25 395.8 396.3

EQ

21-Jan-

09 396.3 389.7 389.7 360 366.6 369.35

EQ

22-Jan-

09 369.35 381.95 385.9 358.75 380.05 378.05

EQ

23-Jan-

09 378.05 331.55 391 331.55 365.9 363.85

EQ

27-Jan-

09 363.85 372.95 389 359.1 380 381.1

EQ

28-Jan-

09 381.1 386.95 412.5 382.45 410.9 408.05

EQ 29-Jan-09 408.05 430 433.7 402.6 404 410.1

EQ

30-Jan-

09 410.1 402 418.9 395 415.25 416.25





GR'P3IC'7 R4PR4S4NT'TION OF ICICI

From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% ICICI an %as n$$ u&

(i"% n#a"i from ??.1"o ?1.2 an$ "%is s%o(s a n#a"i im&ac" on "% orall

an sc"ors.





';4R4'G4S OF 'N6ING S4CTOR

S.NO CO!P'N< N'!4 ';4R'G4

1 3DFC ++.+

2 IDI 1.=

= ICICI ?2*.*+





C3'NG4 IN L OF T3R44 CO!P'NI4S

S.NO CO!P'N< N'!4 C3'NG4 IN L

1 3DFC -+.2

2 IDI -21.+

= ICICI -11.





'N6ING --- N4G4TI;4

Issus an$ In$us"r/ Dman$

;e-introd)ction of ta. concession on interest earned on infrastr)ct)re loans

)Js A0/2G of Income Ta. 8ct" A>DA%

,ank deposits sho)ld be bro)ght )nder section 0 7 for income ta.

ded)ctions%

;ela.ation in lock in period for sa(ings )Js 0C from <'ears to 'ears"

#hich #ill increase attracti(eness of term deposit%

Increase in ceiling of ;s A<"000 for T$S on interest earned on bank fi.ed

deposits%

Sec D /A /II8 and sec /$- ;,I norms allo#s banks ded)ction on

pro(ision made for all grades of assets b)t IT department allo#ed onl' on

bad and do)btf)l debts%

Simplification of ser(ice and fringe benefit ta. norms





@erpet)al non-c)m)lati(e preference shares to be incl)ded in Tier-I capital

and redeemable c)m)lati(e preference shares to be incl)ded in Tier-II capital

in order to impro(e C8;%

Increase the 4IIJ 4$I limit in @S* banks from 20K to >K%

4)rther liberali?ation of directed lending norms%

7e(' of ,CTT /banking cash transaction ta. sho)ld be made applicable onl'

in those cases #here people b)' drafts from banks #itho)t +)oting their

@ermanent 8cco)nt 6)mber /@86% 8ll other assesses sho)ld be o)tside the

p)r(ie# of this le('%

8llo# another ro)nd of ;S and more po#er to attract s)itable talent in @S*

banks%

Im&ac"

;eimb)rsement b' the go(ernment for loan #ai(er of farmers of ;s%D0" 000 #ill be in

'ears ha(e a ne)tral impact on @S* banks as the' #ill be able to #rite off these loans sho# a cleaner balance sheet in 200>% ,)t" @S* banks are e.pected to face press)re on

their net interest margins )ntil the s)bsid' for #ai(er of agric)lt)ral loans and one time

settlement of loans is released from the go(ernment% The cost of adding more r)ral

ho)seholds in their r)ral branches ma' increase the operating cost for the @S* banks%

1hereas" banks that recei(e di(idend from their s)bsidiaries #ill benefit from the set off

of di(idend distrib)tion ta. the creation of f)nd in 68,8;$" SI$,I 6F, and

#ithdra#n of ,CTT are the fa(orable steps% Fo#e(er" no meas)res #ere taken to compl'

#ith ,asel II g)idelines as @S* banks need h)ge cheap capital b)t stringent restrictions

on 4IIJ4$I participation str)ct)ral h)rdles like restrictions on capital a(ailabilit' /d)e

to high go(ernment o#nership" restrictions on credit deplo'ment and restricti(e labo)r

la#s" #eak corporate go(ernance ha(e impaired the abilit' of p)blic sector banks%





.2 C4!4NT S4CTOR

1.3ISTORIC'7 D'T' OF '!U:' C4!4NT

Series DatePrev

CloseOpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 70.05 70.25 71.7 69.8 70.55 70.75

EQ 2-Jan-09 70.75 71.75 72 67.85 69.5 69.1

EQ 5-Jan-09 69.1 70.5 71.6 68.25 70.05 70.1

EQ 6-Jan-09 70.1 70.5 78.4 69.1 77.3 76.4

EQ 7-Jan-09 76.4 78.65 79.2 71 72.35 72.2

EQ 9-Jan-09 72.2 71 74.5 69 72.9 72.65

EQ

12-Jan-

09 72.65 72 73.75 67.1 69.5 69.35

EQ

13-Jan-

09 69.35 68.8 71.65 68 71.65 70.5

EQ

14-Jan-

09 70.5 71 72.45 70.05 71.8 71.95

EQ

15-Jan-

09 71.95 70 70.55 68 69 69.1

EQ

16-Jan-

09 69.1 69.9 71.9 69 71 70.75

EQ

19-Jan-

09 70.75 71.75 74 70.1 73.95 73.3

EQ

20-Jan-

09 73.3 73.5 73.5 69 69.05 69.6

EQ

21-Jan-

09 69.6 68.1 71.75 68.1 70.9 70.6





From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% 'mbuBa Cmn" %as

n$$ u& (i"% n#a"i from *0.*"o *0.8 an$ "%is s%o(s a n#a"i im&ac" on "%

orall Cmn" sc"ors.

2% FIST;IC87 $8T8 4 $ECC86 CEME6T

“6et 1orth Stock ,roking 7imited”>0




From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% Dccan Cmn" %as n$$

u& (i"% n#a"i from 1??.+ "o1==.0 an$ "%is s%o(s a n#a"i im&ac" on "%

orall Cmn" sc"ors.





% FIST;IC87 $8T8 4 I6$I86 CEME6T

Series DatePrev

CloseOpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 97.7 99 101.35 97 100.6 100.3EQ 2-Jan-09 100.3 102 104.9 99.25 102.9 102.8

EQ 5-Jan-09 102.8 105 106.9 103.6 106.4 106.25

EQ 6-Jan-09 106.25 107 121 105.25 121 118.95

EQ 7-Jan-09 118.95 124 124.9 110.2 116.2 117.7

EQ 9-Jan-09 117.7 110 123.55 110 113 114.95

EQ

12-Jan-

09 114.95 123.35 123.35 110.55 114.75 113.4

EQ

13-Jan-

09 113.4 113 117.9 104.45 106.9 106.45

EQ

14-Jan-

09 106.45 108.2 112.25 108.1 111.2 110.8

EQ

15-Jan-

09 110.8 101 110 99.75 106.5 105.05

EQ16-Jan-

09 105.05 104.3 110 102.1 105 105.55

EQ

19-Jan-

09 105.55 100 109.8 100 108.3 108.05

EQ

20-Jan-

09 108.05 108 108.8 104.05 107.05 107.1

EQ

21-Jan-

09 107.1 106.45 107.95 103.05 104.1 103.65

EQ

22-Jan-

09 103.65 105.35 108.5 101 101.5 102.1

EQ

23-Jan-

09 102.1 101 104.9 98.6 101.5 101.7

EQ

27-Jan-

09 101.7 102 104.8 99.15 99.95 99.9

EQ

28-Jan-

09 99.9 100 108.6 90.65 106.8 105.9

EQ

29-Jan-

09 105.9 105.5 108.9 99.5 100.35 100.35

EQ

30-Jan-

09 100.35 99.5 104.3 99.5 102 102





GR'P3IC'7 R4PR4S4NT'TION OF INDI' C4!4NT

From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% In$ia Cmn" %as n$$

u& (i"% n#a"i from 100.= "o102 an$ "%is s%o(s a n#a"i im&ac" on "% orall

Cmn" sc"ors





';4R'G4S OF T3R44 CO!P'NI4S

S.NO CO!P'N< ';4R'G4

1 '!U:' *0.8

2 D4CC'N 122.2=

= INDI' 20=.1=

“6et 1orth Stock ,roking 7imited”><





S.NO CO!P'N< C3'NG4 IN L

1 '!U:' 0.1?

2 D4CC'N -8.+?

= INDI' 1.

C4!4NT --- N4G'TI;4

Issus an$ In$us"r/ $man$s

;ed)ction of Central 7e(ies and E.cise $)t'" #hich constit)tes o(er D0K of

the e.-factor' price of cement%

8batement of <K-<<K on E.cise $)t'%

“6et 1orth Stock ,roking 7imited”>D




;ed)ction of 8T on cement and clinker from e.isting A2%<K to K%

8bolition of <K Import $)t' on coal and pet coke%

C$ be re-imposed to the e.tent of E.cise $)t' on cement imports%

;ed)ction in ro'alt' on limestone" c)rrentl' at ;s D5Jtonne% S)ppl' of fl' ash to cement firms at no cost%

Greater emphasis on Fo)sing and Infrastr)ct)re%

Im&ac"

The *nion ,)dget did not meet an' of the cement ind)str'-specific demands% The

ind)str' had e.pected some rebates on ta.es as cement is one of the hea(il' ta.ed items

b)t that did not come in the b)dget% n the contrar'" a ;s A00JMT increase in the E.cise

$)t' on clinker might effect sale of clinker and might s+)ee?e the margins of cement

companies% The E.cise $)t' on b)lk cement at ;s 00JMT or AK #hiche(er is higher"

#ill ha(e a negligible impact as b)lk cement does not constit)te more than 2K of the

o(erall demand% ,)t an emphasis on po#er" ho)sing" infrastr)ct)re" r)ral spends and

o(erall economic gro#th has bro)ght in e.pectations of a demand boost as the ind)str' is

positi(el' co-related #ith economic gro#th%

.= PO@4R S4CTOR

1.3ISTORIC'7 D'T' IR7' S4CTOR

Series DatePrev

CloseOpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 11 11.45 11.55 11.05 11.55 11.5

EQ 2-Jan-09 11.5 12 12.1 11.65 12.1 12.1





EQ 5-Jan-09 12.1 12.7 12.75 12.1 12.75 12.75

EQ 6-Jan-09 12.75 13 13.25 12.2 12.5 12.35

EQ 7-Jan-09 12.35 12.5 12.8 11.15 11.15 11.2

EQ 9-Jan-09 11.2 10.5 10.5 10.1 10.25 10.35

EQ

12-Jan-

09 10.35 10.25 10.4 10 10.05 10.2

EQ 13-Jan-09 10.2 10.3 10.5 10.05 10.1 10.1

EQ

14-Jan-

09 10.1 10.25 10.7 10.25 10.6 10.6

EQ

15-Jan-

09 10.6 10.95 10.95 10 10.5 10.5

EQ

16-Jan-

09 10.5 10.2 10.65 9.75 10 10.1

EQ

19-Jan-

09 10.1 10.1 10.45 10.1 10.15 10.2

EQ

20-Jan-

09 10.2 10.25 11 10 10.8 10.75

EQ

21-Jan-

09 10.75 10.45 10.95 9.85 10.3 10.3

EQ

22-Jan-

09 10.3 10.3 10.65 9.85 10.1 10

EQ

23-Jan-

09 10 10 10.2 9.55 10 9.9

EQ

27-Jan-

09 9.9 10.55 10.85 10.3 10.6 10.6

EQ

28-Jan-

09 10.6 10.45 11 10.2 10.7 10.5

EQ

29-Jan-

09 10.5 10.65 10.8 10 10 10.15

EQ

30-Jan-

09 10.15 10.05 10.5 10 10.25 10.4

GR'P3IC'7 R4PR4S4NT'TION OF IR7' PO@4R





From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% irla Po(r %as n$$ u&

(i"% n#a"i from 11. "o 10.? an$ "%is s%o(s a n#a"i im&ac" on "% orall

Po(r sc"ors

2. 3ISTORIC'7 D'T' OF I!P PO@4R 7TD

Series Date

“6et 1orth Stock ,roking 7imited”>>




PrevClose

OpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 49.75 50.9 51.95 50.9 51.95 51.95

EQ 2-Jan-09 51.95 52.8 55 52.8 53.15 53.15

EQ 5-Jan-09 53.15 53 58.5 53 58 57.6

EQ 6-Jan-09 57.6 58.8 58.8 53.15 54.05 54.05

EQ 7-Jan-09 54.05 55 55.45 49.4 50 50EQ 9-Jan-09 50 48 49.5 46.7 46.7 47.6

EQ

12-Jan-

09 47.6 46.7 50.95 46.55 46.55 46.6

EQ

13-Jan-

09 46.6 52.75 54 45.8 46.6 46.85

EQ

14-Jan-

09 46.85 47.55 50.8 47.55 48.6 49.4

EQ

15-Jan-

09 49.4 59 59 48.3 48.5 48.5

EQ

16-Jan-

09 48.5 47.05 52.4 47.05 48.15 48.15

EQ

19-Jan-

09 48.15 47.2 49 47 47 47.5

EQ

20-Jan-

09 47.5 46.2 46.2 46.2 46.2 46.2

EQ

21-Jan-

09 46.2 48.5 48.5 44 44 45.25

EQ

22-Jan-

09 45.25 47 49 41.6 42 42.2

EQ

23-Jan-

09 42.2 40 44.85 39.15 43.4 42.6

EQ

27-Jan-

09 42.6 41.55 43.2 37 37 39.15

EQ

28-Jan-

09 39.15 38 39.65 36 39.65 39.65

EQ

29-Jan-

09 39.65 47 47 40.2 42.6 42.6

EQ

30-Jan-

09 42.6 41.75 42 37 39 39.35

GR'P3IC'7 R4PR4S4NT'TION OF I!P PO@4R 7TD





From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% I!P Po(r %as n$$ u&

(i"% n#a"i from 1.+ "o =+.= an$ "%is s%o(s a n#a"i im&ac" on "% orall

Po(r sc"ors

=. 3ISTORIC'7 D'T' OF R47I'NC4 PO@4R

Series Date

“6et 1orth Stock ,roking 7imited”A0A




PrevClose

OpenPrice

HighPrice

LowPrice

LastPrice

ClosePrice

EQ 1-Jan-09 119.95 121.5 124.25 116.7 123.25 123.35

EQ 2-Jan-09 123.35 123.9 125.8 123.05 123.25 123.5

EQ 5-Jan-09 123.5 125 126.25 121.1 125 124.55

EQ 6-Jan-09 124.55 124.65 127.95 121 123.95 123.55

EQ 7-Jan-09 123.55 124.5 125.45 110.75 112.5 112.8EQ 9-Jan-09 112.8 112 120 99 106.85 106.7

EQ

12-Jan-

09 106.7 106.05 107.25 102.05 102.95 102.95

EQ

13-Jan-

09 102.95 103 105 96.2 98.15 97.8

EQ

14-Jan-

09 97.8 98.55 108.9 95.5 107.5 102.4

EQ

15-Jan-

09 102.4 101 101.35 97.15 98.35 98.9

EQ

16-Jan-

09 98.9 98.25 102.2 98.25 100.5 101

EQ

19-Jan-

09 101 101.5 103.95 100.75 101.05 101.65

EQ

20-Jan-

09 101.65 100 104.9 98.05 101.6 102.5

EQ

21-Jan-

09 102.5 100 103.6 99.25 99.7 100.35

EQ

22-Jan-

09 100.35 101 102.4 98 98.25 98.5

EQ

23-Jan-

09 98.5 97.85 99.9 97.25 98.15 98.05

EQ

27-Jan-

09 98.05 101 102.35 99.25 100.7 100.55

EQ

28-Jan-

09 100.55 101.85 103.5 100.2 102.5 102.6

EQ

29-Jan-

09 102.6 104 108.65 102.5 103.9 104.5

EQ

30-Jan-

09 104.5 103 107.4 101.7 105.85 106.4

GR'P3IC'7 R4PR4S4NT'TION OF R47I'NC4





From "% abo #ra&% an$ "abl ( can conclu$ "%a" "% Rlianc Po(r %as n$$

u& (i"% n#a"i from 12=.= "o10.? an$ "%is s%o(s a n#a"i im&ac" on "%

orall Po(r sc"ors

';4R'G4S OF T3R44 CO!P'NI4S





S.NO CO!P'N< ';4R'G4

1 IR7' 10.*2

2 I!P ?.+1

= R47I'NC4 10.=






S.NO CO!P'N< C3'NG4 IN L

1 IR7' -10.*

2 I!P -=2.02

= R47I'NC4 -1.+=

PO@4R --- N4G4TI;4

“6et 1orth Stock ,roking 7imited”A0<




Issus an$ In$us"r/ $man$s

C)stom d)t' on 4)els ils like f)rnace oil" 7SFS from A0K to <K%

C)stom d)t' on 6on-coking coke @etrole)m coke from <K to 2K%

C)stom d)t' on 6aphtha 7i+)efied propane fro <K to 2K%

C)stom d)t' on Metall)rgical coke #ith ash content to less than A2K%

Section 0 I8 to be e.tended from 43 AA to 43 A5

Im&ac"

Go(ernment promise on po#er sector reforms can clearl' be seen from the steps taken%

The onl' negati(e factor is the remo(al of e.emption of additional d)t' of c)stoms of K

from po#er generation pro!ects /other than mega po#er pro!ects" transmission" s)b-

transmission" distrib)tion pro!ects and goods for high (oltage transmission pro!ects that

#ill increase the cost of implementation of s)ch pro!ects% 4oc)s on *M@@s pro!ects #ill

speed )p the target capacit' e.pansion programme and higher allocation to 8@$;@ #ill

fastl' red)ce the losses to State Electricit' boards% Setting )p of T$ f)nd" contin)ance

of ;GG3" are other ke' positi(es for the ind)str' to take from the ,)dget 200-0>% The

ma!or beneficiaries from the abo(e action are Tata @o#er" 6T@C and ;eliance @o#er

.1 FINDINGS

“6et 1orth Stock ,roking 7imited”A0D




@ can conclu$ "%a" "% 3DFC an %as n$$ u& (i"% n#a"i from

101=.*"o +2. an$ "%is s%o(s a n#a"i im&ac" on "% orall anin#

sc"ors.

@ can conclu$ "%a" "% IDI an %as n$$ u& (i"% n#a"i from +.*"o

*.1 an$ "%is s%o(s a n#a"i im&ac" on "% orall anin# sc"ors.

@ can conclu$ "%a" "% ICICI an %as n$$ u& (i"% n#a"i from

??.1"o ?1.2 an$ "%is s%o(s a n#a"i im&ac" on "% orall anin#

sc"ors.

@ can conclu$ "%a" "% 'mbuBa Cmn" %as n$$ u& (i"% n#a"i from

*0.*"o *0.8 an$ "%is s%o(s a n#a"i im&ac" on "% orall Cmn"

sc"ors.

@ can conclu$ "%a" "% Dccan Cmn" %as n$$ u& (i"% n#a"i from

1??.+ "o1==.0 an$ "%is s%o(s a n#a"i im&ac" on "% orall Cmn"

sc"ors.

@ can conclu$ "%a" "% In$ia Cmn" %as n$$ u& (i"% n#a"i from

100.= "o102 an$ "%is s%o(s a n#a"i im&ac" on "% orall Cmn" sc"ors





@ can conclu$ "%a" "% irla Po(r %as n$$ u& (i"% n#a"i from 11.

"o 10.? an$ "%is s%o(s a n#a"i im&ac" on "% orall Po(r sc"ors

@ can conclu$ "%a" "% I!P Po(r %as n$$ u& (i"% n#a"i from 1.+

"o =+.= an$ "%is s%o(s a n#a"i im&ac" on "% orall Po(r sc"ors

@ can conclu$ "%a" "% Rlianc Po(r %as n$$ u& (i"% n#a"i from

12=.= "o10.? an$ "%is s%o(s a n#a"i im&ac" on "% orall Po(r sc"ors





.2 us"ionnairs

A% 1hat is the reason of the financial crisis: XY 8 Indian Market, @o#er sectorC @olitical Impact$ S)b-prime Crisis

2%1h' it has sho#n impact o Indian stock market: XY 8 Ma!or impact on IT sector

, Ma!or impact on banking sectorC Ma!or impact on po#er sector

$ 8ll the abo(e

%1hat is the impact on o)r Indian E.port and Import sales: XY 8 $eclined

, Figh profit orientedC 8(erage profit riented$ 6one of the abo(e

%Fo# can retail in(estors help to o(er come on the Economical Crisis: XY

8 More participating, Slight participationC 6ot participation$ 6one of the abo(e

<%1hat is the Ma!or effect on this crisis: XY 8 *n emplo'ment , 6egati(e profits C Effect on secondar' market

$ 8ll the abo(e

D%1hich sector is taking more impact on this financial crisis XY 8 E.porting sector

, IT sector C Import sales

$ 8)to mobiles

“6et 1orth Stock ,roking 7imited”A0>




5% 1here S)b-prime mortgage Crisis #as first started: XY8 *8E, *C *S8$ *SS;

% 1hat is the res)lt of banking sector based on this crisis: XY8 @ositi(e Impact, 6egati(e ImpactC Figh gro#th oriented$ 6one of the abo(e

>%1h' the ,anking sector is mo(ing more insol(enc' stage: XY 8 Irreco(erable loans

, Go(ernment s)bsidiesC @olitical iss)es$ 8ll the abo(e%

A0%1hat is the res)lt of Cement sector based on this financial crisis: XY 8 Figh gro#th, @ositi(e ImpactC 6egati(e Impact$ 6one of the abo(e

AA%1hat is the res)lt of po#er sector based on this financial crisis: XY 8 @ositi(e Impact, 6egati(e ImpactC Figh gro#th$ 6one of the abo(e

A2%1hat is the reason of the ;;, al#a's decreasing C;;" S7;" ;epo and;e(erse ;epo rate: XY 8 Getting income in to the Indian Econom'

, (er come on this 4inancial CrisisC ,enefits for the ,anking

$ @ro(iding for highest In(estment

A%1hat is the highest inflation rate in the 'ear of 200: XY

“6et 1orth Stock ,roking 7imited”AA0




8 > , A0%D

C AA%D$ 0%A

A%1hen 6et-#orth stock ,roking 7td #as established: XY 8 A><0

, A>>C A>><$ A>>0

A<% 1hen 6S,7 #as listed in ,SE: XY

8 A>>, A>D2C A>A$ A>5<

“6et 1orth Stock ,roking 7imited”AAA




.= SUGG4STIONS 'ND CONC7USIONS

@S* banks and regional r)ral banks /;;,s to offer debt #ai(er on all

agric)lt)ral loans disb)rsed )p to March 2005 and d)e )ntil the end of $ecember

2005% The total (al)e of relief to be offered to farmers is estimated at ;s D0"000

crore%

8d(ise commercial banks incl)ding ;;,s" to add at least 2<0 r)ral ho)sehold

acco)nts e(er' 'ear at each of their r)ral and semi-)rban branches%

8llo# indi(id)als s)ch as retired bank officers" e.-ser(icemen etc to be appointed

as b)siness facilitator or b)siness correspondent or credit co)nselor%

Enco)rage banks to embrace concept of Total 4inancial Incl)sion to meet the

entire credit re+)irements of SFG members%

Creation of f)nd of ;s%<" 000 crore in 68,8;$ to enhance its refinance

operations to short term cooperati(e credit instit)tions%

Creation of t#o f)nds of ;s%2" 000 crore each in SI$,I - one for risk capital

financing and other for enhancing refinance capabilit' to the MSME sector%

Creation of f)nd of ;s%A"200 crore in 6F, to enhance its refinance operations in

the r)ral ho)sing sector%

@arent compan' allo#ed to set-off the di(idend recei(ed from its s)bsidiar'

compan' against di(idend distrib)ted b' the parent compan'%

,CTT being #ithdra#n #ith effect from 8pril A" 200>%

@S* banks )nder the $ifferential ;ate of Interest /$;I scheme lend )p to ;s

20"000 per )nit at an interest rate of K%

E.cise $)t' on clinker increased to ;s <0JMT from ;s <0JMT%

E.cise $)t' on b)lk cement at ;s 00JMT or AK in proportion to the estimated

(al)e of the cement" #hiche(er is higher%

%

“6et 1orth Stock ,roking 7imited”AA2




E.emption from additional d)t' of c)stoms of K le(ied )nder section /< of

C)stoms Tariff 8ct" A>5< has been #ithdra#n from po#er generation pro!ects

/other than mega po#er pro!ects" transmission" s)b-transmission" distrib)tion

pro!ects and goods for high (oltage transmission pro!ects%

4o)rth *M@@ at Tilai'a to be a#arded shortl'V Chhattisgarh" arnataka"

Maharashtra" rissa and Tamilnad) )rged to bring fi(e more *M@@s to the

bidding stage b' e.tending the re+)ired s)pport%

;a!i( Gandhi Grameen id')tikaran 3o!ana to be contin)ed d)ring the Ele(enth

@lan period #ith a capital s)bsid' of ;s%2"000 croreV allocation of ;s%<"<00 crore

for 200-0>% 8ccelerated @o#er $e(elopment and ;eforms @ro!ect ;s%00 crore to be

pro(ided in 200-0>" 8 6ational 4)nd for transmission and distrib)tion reform to

be created%

;s bn to be pro(ided for 8ccelerated @o#er $e(elopment and ;eforms @ro!ect

/8@$;@ in 430>%

@roposal to create of national f)nd for transmission and distrib)tion reform%

Coal distrib)tion polic' and appointment of a coal reg)lator to bring reg)larit' tothe process of coal prod)ction and pricing%

“6et 1orth Stock ,roking 7imited”AA

introduction... naga

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