Way2Wealth making investing simpler, more understandable and profitable.Financial Markets & Investing July 2010

Agenda

Why and How to Invest in equityIndian Capita Markets - History, Exchanges & Performance Other Derivatives Regulator Research Outlook Indian Financial MarketsFinancial Markets Rationale, Players & Structure

Financial Markets Rationale & Players

Financial Markets Broad Structure Financial Assets represent a claim to the payment of a sum of money sometime in the future and/or periodic payment in the form of interest or dividend.

Provided resources needed by medium and large scale industries/individuals

Purpose for these resources

Establishment of New Business ExpansionInvestmentsMergers and Acquisitions

Deals in both short term & long term instruments & funds

*Firm commodities and return of the financials led FTSE score among the matured economies, closely followed by DowjonesHit by exports, firm currency and weaker domestic demand leave Nikkei 225 remain under performer among matured economiesBuoyed commodities Brazil tops the performers list among emerging economies, followed by domestic demand driven IndiaThough rest of Asia perform well, remain laggard in the latest months as exports remain moderate with signs of asset price inflationLate reaction on both fiscal and other policy let Russian equity to be the under performer among the emerging economiesFinancial Markets Global Snapshot

Financial Markets Global Snapshot

Exchange at US and Europe continue top the total market capitalization But the growth in capitalization is higher among Asian and Latin American countries Key global indices are DJIA, Nasdaq Composite, FTSE, Nikkei, Hangseng, Sensex etc

Equity Market Capitalization (bln USD)Exchange 20092008% ChangeKey IndiceNYSE Euro next (US)11 8389 20928.5%Tokyo Stock Exchange Group3 3063 1166.1%NikkeiNASDAQ OMX (US) 3 2392 24944.0%Nasdaq CompositeNYSE Euro next (Europe)2 8692 10236.5%NASDAQLondon Stock Exchange 2 7961 86849.7%FTSEShanghai Stock Exchange 2 7051 42589.8%Shanghai CompositeHong Kong Exchanges2 3051 32973.5%HangsengTMX Group1 6081 03355.6%BM&FBOVESPA1 337592125.9%BovespaBombay SE1 306647101.9%SensexSource: WFE

Indian Financial Markets Derivatives Performance

Top exchanges by number of stock index futures contracts tradedExchange20092008% Change1.CME Group 703072 175882432 628-20.3%2.Eurex 367546 179511748 879-28.2%3.National Stock Exchange India 195759 414202390 223-3.3%4.Osaka Securities Exchange 130107 633131028 334-0.7%5.Korea Exchange83117 06266436 91225.1%Source: WFE

Top exchanges by number of stock index options contracts traded Exchange20092008%change1.Korea Exchange 2920990 6552766474 4065.6%2.Eurex364953 360514894 678-29.1%3.National Stock Exchange India321265 217150 916 778112.9%4.Chicago Board Options Exchange222781 717259496 193-14.1%5.Taifex 76177 09798122 308-22.4%Source: WFE

Indian Financial Markets Derivatives Performance

Top exchanges by number of single stock futures contracts traded Exchange20092008% change1.NYSE Liffe Europe165796 059124468 80933.2%2.National Stock Exchange India161053 345225777 205-28.7%3.Eurex 113751 549130210 348-12.6%4.Johannesburg Stock Exchange88866 925420344 791-78.8%5.BME Spanish Exchanges37509 46746237 747-18.9%Source: WFE

Largest growth by total value of bond trading in 2009 Exchange% change1.Amman Stock Exchange 316.4%2.Irish Stock Exchange252.2%3.Colombia Stock Exchange105.0%4.Egyptian Exchange98.0%5.Bombay Stock Exchange86.6%6.Oslo Bors 82.8%7.Tokyo Stock Exchange73.2%8.National Stock Exchange India 69.9%9.Shenzhen Stock Exchange53.4%10.TMX Group52.5%

Agenda

Financial Markets Rationale, Players and Structure Indian Capital Markets - History, Exchanges & PerformanceOther Derivatives Regulator Research Opportunities & Challenges Outlook What and How to Invest in EquityIndian Financial Markets

*Financial Markets Concept Of EquityWhy Company issue Shares

To rise capital Equity Vs. Debt and Equity comes with less cost To enhance the current business activity, acquire new or venture into a new area of business To manage working capital To gain the market share and increase the presence Increase the visibility of the company

*Financial Markets Concept Investing What is Investing? Identifying and translating all the financial needs of an individual to monetarily measurable goals.Why do we need to Invest

To fund our future needs

To protect our future from unforeseen contingencies

To maintain the same standard of living even after retirement

To mitigate risk through diversification

To choose assets commensurate with the investors life and wealth stages

To beat the ravages of inflation

*Financial Markets Concept Of Investing Objectives Of Investing

Identify requirement for money for different purposes and prioritise the same

Converting requirements into need & in terms of money and time

Take stock of current financial position to ascertain, net worth & income/expenses

Plan savings and investments in a manner that enable one achieve the pre-determined goals

Optimise returns through adequate diversification in sync with the ones riskreturn

Can one individually chart Investment Plan?

Are you & your family are financially secure with the investments you have made

Do the cash flows arising from your investments be sufficient to match the expected expenses & are tax efficient?

Have you made adequate provisions for special purposes (Childrens education & marriage)

If your answer is NO to any one or all of the above questions, you need a specialist to handle your finances and that is where the W2W helps your investments to grow

*Financial Markets Concept Of Investing Systematic Investing Equity markets are synonymous with uncertainty and volatility. The average investor invariably suffers from such market gyrations. Systematic investing is a strategy of not only preserving capital but also translating into substantial creation of wealth in long run

It simply means investing Fixed Amount every month

A method of investing regularly to benefit from the stock market volatility

The first step towards achieving financial goals and objectives.

To imbibe financial discipline

To eliminate the need to time the markets

To successfully achieve the financial goals and objectives

To harness the power of compounding by investing with a long term perspective

*Financial Markets Concept Of Investing Rupee Cost Averaging

*Financial Markets Concept Of Investing Power Of Compounding - Rs 5000 invested per monthGolden Rules Of Investing

Invest early, regularly and systematically for a longer period

Ensure adequate liquidity for contingencies of life

Ensure adequate diversification by investing across asset classes and time horizons

Do not attempt to time the market. Patience is the key

Be realistic in expectations of returns

Balance investments in accordance with your risk-return framework

Agenda

Financial Markets Rationale, Players and StructureWhy and How to Invest in Equity Other Derivatives Regulator Research Opportunities & Challenges Outlook Indian Capital Markets - History, Exchanges & PerformanceIndian Financial Markets

Indian Financial Markets HistoryHistory of Indian Stock MarketFrom Scattered and small beginning in the 19th Century, Indias stock market has risen to great heightsBy 1990, we had 19 stock exchanges (national + regional) in the countryAs a move towards integrated national level exchanges BSE & NSE became prominent by late 1990s BSE has the roots at Native shares and stock brokers association established in 1875, later recognized by GoI in 1956The launch of SENSEX in 1986 was later followed by BSE National Index (Base: 1983-84 = 100) Jan 1989BSE National Index was renamed as BSE-100 Index from Oct- 1996 (taking into consideration only the prices of stocks listed at BSE) The BSE has deployed an Online Trading system (BOLT) on March 14, 1995National Stock Exchange (NSE) got its recognition as a stock exchange in July 1993 under Securities Contracts (Regulation) Act, 1956NSE's leading index is Nifty 50 or popularly Nifty and is composed of 50 diversified benchmark Indian company stocksAlthough late than BSE, National Stocks Exchange is currently the leading stock exchange in India in terms of total volume tradedFurther liberalization India expected to see another one or two equity exchanges in the neat future

Indian market capitalization has registered a CAGR of 39.7 percent during 2002-2009 Total listed companies in domestic exchanges registered a CAGR of 2.4 percent during 2002-2009 Total New companies listed each year on exchanges registered a CAGR of 6.3 percent during 2002-2009Globalization, increased domestic retail & institutional participation resulted this phenomenal growth Indian Financial Markets Growth

*Financial Markets Performance Investing in the BSE Sensex 25 yearsData source: ICRA MFIE

Agenda

Financial Markets Rationale, Players and Structure Why and How to Invest in EquityIndian Capital Markets History, Exchanges & Performance Regulator Research Opportunities & Challenges Outlook Indian Financial MarketsOther Derivatives

Indian Financial Markets Other DerivativesCommodity Futures After much debate, commodity futures trading was permitted & exchanges were launched during 2003 -04Begin with precious metals the domestic commodity exchange offerings extended to all possible commodity segments a la BMs, Softs, Cash crops, Edible Oils, Pulses and SpicesDespite various regulatory hurdles the average volumes in the commodity exchanges continued to grow very strongly - CAGR of 73.7 percent (INR 67.7 lakh crores) during 2004-2009 Indian commodity exchanges are monitored and controlled by FMC, Ministry of Consumer Affairs & Agriculture ministry Currency Futures After commodity futures, regulatory authorities have launched currency futures during 2008-09 Started with single USD/INR pair now the currency futures are available in all major trading pairs like INR/GBP, INR/EUR & INR/JPYUnlike the commodity futures, that showed a steady participation Despite various regulatory hurdles the average volumes in the commodity exchanges continued to grow very stronglyIndian currency futures are monitored by RBI & SEBI

Agenda

Financial Markets Rationale, Players and Structure Why and How to Invest in Equity Indian Capital Markets History, Exchanges & Performance Other Derivatives Research Opportunities & Challenges Indian Financial MarketsRegulator

Indian Financial Markets Regulatory SEBI Securities and Exchange Board Of India Set up by Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992

Functions and ResponsibilitiesBroadly, SEBI has to be responsive to the needs of various groups that are part of the financial market namely, The issuers of securities Companies The investors Retail, FII & Institutional The market intermediaries Brokerage Houses

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-executiveLegislative - Drafts regulations Executive - Investigation and Enforcement of Action Judicial Pass various rulings and orders

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as required under law

Agenda

Financial Markets Rationale, Players and Structure Why and How to Invest in Equity Indian Capital Markets History, Exchanges & Performance Other Derivatives Regulator Opportunities & Challenges Outlook Indian Financial MarketsResearch

Indian Financial Markets Research Others include derivative analysis (volume, OI and Put/Call ratio) Top down approach tracking economy, sector and company long term investing Bottom up approach company, balance sheet, peer group comparison and industry short term

Agenda

Financial Markets Rationale, Players and Structure Indian Capital Markets History, Exchanges & Performance Other Derivatives Regulator Research Opportunities & Challenges Indian Financial MarketsOutlook

*Indian Financial Markets Funds FlowAs indicated earlier the capital flows remained stronger with FDI, FII and ECB turning positive since Q1 - FY09-10Though FDI and ECB remained below the previous peaks the hot money FII scaled close to the Sep07 highs Until the matured economies signal rate hike the capital flow remain intact thereby pushing the benchmark indices higher

*Indian economy GDP & Other EstimatesGenerous rise in investments and emphasis on infrastructure led IIP growth bode well for the Indian growth momentum move from cyclical to structural However, normalizing GoI incentives, monetary policy amid muted private consumption expenditure may call for moderation in the Q2 & Q3 of FY 2010-11Steady progress of monsoon, revival in the job market amid steady up tick in interest rates are expected to drive the private consumption to pick up as the FY 2010-11 progress Despite ease in Food inflation (largely statistical) pick up in demand, limited capacity in short term, firm commodity prices globally expected to keep the inflation higher in the current cycleContagion of European crisis and untimely policy/inability to balance inflation/growth momentum are the key risk to the above outlook

2008-092009-102010-11 FReal GDP6.707.408.30IIP2.7510.310.8WPI8.463.176.50CPI8.9311.910.0PLR12.811.813.091-181 TB Yield7.09 - 7.153.53 - 4.334.5 - 5.510 Yr G Sec Yield7.67.28Source: RBI, W2W Estimates

Thank you

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