Monthly Report: October 2012

1
Monthly Report
October 2012
Monthly Report October 2012
Retail Research
Table of Contents
Title
Slide No.
Monthly Equity Commentary

03
Market Statistics
05
Bond yields, commodities and currencies

09
Comparison of Equity Returns in various emerging

markets
15
Outlook Going Forward

21
Technical Commentary
30
Learning Technical Analysis
35
Derivatives Commentary
38
Learning Derivatives
40
Extract of Calls during September 2012
44
FII & Mutual Fund Flow & Indices moves during September 2012 46
Gainers & Losers September 2012
47
Disclosure
48
Retail Research

1-1.BSE SENSITIV.BSE - 01/10/12
Trend7
18900
18850
18800
18750
18700
18650
18600
18550
18500
18450
18400
18350
18300
18250
18200
18150
18100
18050
18 T
17950
17900
17850
17800
17750
17700
17650
17600
17550
17500
17450
17400
17350
17300
17250
04
05
06
07
08
10
11
12
13
14
17
18
20
21
24
25
26
27
28
Daily
The bulls continued to dominate as the Indian Markets registered positive returns for the second straight
month in September. The BSE Sensex & Nifty ended the month with robust gains of 7.6% & 8.5%, driven by
strong FII inflows on the back of bold economic reform initiatives taken by the government like opening up FDI in
retail and aviation sectors, capping up of cooking gas subsidy and a hike in diesel prices. The market gained in all
the four weeks during the month of September. Investors risk appetite strengthened after the positive
announcements in Europe to solve the debt crisis and after US Federal Reserve announced its QE3 program.
The markets ended higher in the first week ended September 08. The rally was in tandem with global stock
markets as investors risk appetite strengthened after the European Central Bank, during the week, unveiled
steps to contain the region's debt crisis. Talks of a possible hike in diesel prices by the Indian Government
lifted the sentiments on the domestic bourses, as this would help the government lower its fiscal deficit.
Amongst the other positive news, India's services sector growth improved in August - registering the fastest pace
in six months. The HSBC's Services Purchasing Managers Index (PMI) for August inched upwards to 55 from
54.2 in July. The BSE Sensex & Nifty gained 1.8% & 1.9% respectively during the week. The markets ignored some
of the negative events like slowdown in the manufacturing activity in August as per the HSBC manufacturing PMI
data, lowering of India growth forecast by Morgan Stanley and disappointing exports data for the month of July,
which reported contraction of 14.8%, the steepest fall in three years.
Retail Research
contd
The market gained for the second straight week as diesel price hike by the Indian government to help
improve country's deteriorating fiscal position, expectations of clearing FDI in retail, US Federal Reserve's QE3
program and Germany's Federal Constitutional Court rejecting calls to block the euro rescue fund increased
investors' appetite for riskier assets. Strong buying of Indian stocks by foreign funds also supported domestic
bourses. The market gained in all five trading sessions in the week ending September 14. BSE Sensex & Nifty
ended higher by 4% & 4.1% respectively in the week. The Government took the most difficult step of raising
diesel prices by Rs 5 a litre (excluding VAT) and capped the number of subsidized LPG cylinder a household can
get at six per year. Further, Advance tax payments by 17 top firms based in Mumbai rose by 20% for the three
months ending September, though corporate profits are moderating and industrial growth is faltering. The
positive events during the week more than offset the negative news flows like moderation in the IIP growth,
which stood at 0.1% in July 2012, acceleration in Inflation (WPI stood at 7.55 in August vs 6.87% in July), decline
in the merchandise exports for the fourth straight month in August, and a cut in Indias growth forecast by HSBC.
The reform implementation led the continued rally in the third week ended September 21 with the BSE
Sensex & Nifty reporting decent gains of 1.6% & 2% respectively. On September 14, Friday evening, Government
of India opened its supermarket sector to foreign chains by clearing 51% FDI for multi-brand retail. The
move allows global firms such as Wal-Mart Stores to set up shop with a local partner and sell directly to
consumers for the first time, which supporters say could transform India's $450 billion retail market and tame
inflation. Further, on Saturday, Sept 15, a full Planning Commission chaired by Prime Minister approved the 12th
Five-Year Plan document that seeks to raise the average annual economic growth during 2012-17 period ending
March 2017 to 8.2% from 7.9% achieved in the 11th Plan. Further, during the start of the week RBI maintained
status quo on short term lending rates in its monetary policy review. However, it cut the CRR by 25 bps, thus
releasing Rs. 17,000 cr into the banking system. Moreover, Federation of Indian Export Organisations (FIEO) said
during the week that Trade deficit in India is likely to contract by nearly a fifth for the first time in over two
years on the back of falling imports of gold into the country. Towards the end of the week, the government
pressed on with another set of reform to revive the economic growth by slashing the tax on overseas borrowings
by local companies from 20% earlier to 5%, giving them access to cheaper funds and cheering investors. Finance
Minister P. Chidambaram said that withholding tax of 20% added roughly 70 to 100 bps to the cost of an overseas
loan, so cutting that to 5% lowers the cost of borrowing by 50 to 80 bps. This improved the sentiments further.
Retail Research
HOME
contd
The markets managed to end the volatile fourth week again on a positive note. Most of the gains were
recorded in the last trading session of the week on Friday, 28 September 2012, when the market rose on the back
of a global rally that was triggered by Spain announcing a crisis budget for 2013 on Thursday, 27 September
2012, based mostly on spending cuts. During the week, the BSE Sensex & Nifty rose marginally by 0.1% & 0.2%
respectively. Rise in FDI in July, the narrowing of Indias current account deficit during the period April-June
2012 from a record high deficit in Jan-March 2012, positive statement from Finance minister Chidambaram about
the recent pro-business measures to bridge the fiscal deficit gap, Moodys retaining of stable outlook on India
and confidence expressed by the government of raising Rs. 25000-30000 cr from disinvestment and of being close
to fiscal deficit target of 5.1% in FY13 were some of the positive indicators that kept the positive sentiments
alive on the domestic bourses.
Given below is an overview of global markets performance during September 2012:

Indic es
A ug-12
Sep-12
US - Dow Jones
13,102.50
13,437.10
2.6
US - Nasdaq
3,067.00
3,116.20
1.6
UK - FTSE
5,711.50
5,742.10
0.5
Japan - Nikkei
8,839.90
8,870.20
0.3
Germany - DAX
6,790.80
7,216.20
6.3
57,061.50
59,175.90
3.7
3,025.50
3,060.30
1.2
Brazil - Bovespa
Singapore - Strait Times
% Change
Hong Kong Hang Seng
19,482.60
20,840.40
India - Sensex
17,429.60
18,762.70
7.6
8.5
India - Nifty
5,258.50
5,703.30
Indonesia - Jakarta Composite
4,060.30
4,262.60
Chinese - Shanghai composite
2,047.50
2,086.20
1.9
The world markets ended the month of September 2012 on a

positive note. India, Hong Kong & Germany were the top three
performers, which gained 7.6% (Sensex), 7% & 6.3% respectively
during the month. Indonesia, Brazil and US (Dow Jones) also did
well, rising 5%, 3.7% & 2.6% respectively. The rest of the equity
markets like China, UK, Japan & Strait Times reported marginal
gains in the range of 0.3-2%.
Average daily volumes on BSE during the month of Sept 2012 rose 11.8% M-o-M (NSE daily average volumes
were higher by 18.4% - M-o-M). The average daily derivatives volumes on NSE gained 11.9% to Rs. 1,29,597 cr in
Sept (In Aug: Rs. 1,15,818 cr). Mutual funds were net sellers for Rs.3199 cr during the month of Sept 2012
after being net sellers of Rs. 1600 cr in Aug 2012. Strong FII buying was witnessed during the month of Sept
2012. FIIs were reported as net buyers to the tune of Rs. 19978 cr in cash markets after being net buyers of
Rs. 9,274 cr in Aug 2012. The FIIs were net buyers in 16 out of 19 trading sessions in the month.
Retail Research
contd
All the sectoral indices ended on a positive note in the month of Sept 2012. Realty, Capital Goods and Banks
were the top three performers, which reported strong double-digit gain of 22.2%, 16% and 14.1% respectively
during the month. Auto & Consumer Durables also outperformed, rising in double digits by 12.7% & 11.2%
respectively. The other indices like Power, Metals, PSUs and Oil & Gas reported decent gains in the range of 5.59.5%. However, IT, FMCG & Healthcare underperformed, reporting positive, but marginal gains of 3.2%, 2.8% &
0.4% respectively.
After being reported as the top loser in the month of August, the Realty index was the top performer during the
month of September. Realty stocks rose even though the RBI didnt cut the repo rate. This was on the thinking
that the government's move to allow foreign direct investment in multi-brand retail chains would boost
demand for commercial property. HDIL, Unitech & DLF, which contribute 60% to the overall weightage of the
Realty index, rose 43%, 31.4% & 19.3% respectively during the month. DLF rose, following the reports that it is
planning to kick start the largest mall in India, with 4 million sq ft of space in Gurgaon and is hoping that by the
time the mall opens in 2015-16, quite a few new retailers and brands would have entered the country by then
with the easing of FDI in single and multi-brand retail. HDIL rose as Citigroup Global Markets (Mauritius) acquired
more than 42 lakh shares in realty player for over Rs 33 crore through open market transaction during the month.
The Capital Goods index outperformed due to strong performance by index heavyweights, L&T and BHEL,
which reported robust gains of 19% & 15% respectively during the month. The two companies have 74% weightage
to the overall Capital Goods index. L&T surged and hit a 52 week high during the month after the company
announced a restructure in its IT and L&T Integrated Engineering Services businesses with a view to accelerate
growth in the technology space. L&T also won new contracts worth over Rs 1,065 crore across various segments
including water supply schemes in Gujarat. BHEL gained sharply, as the companys order book to be executed
this fiscal and beyond swelled to Rs. 1,35,300 crore.
Bank stocks rose across the board during the month on speculation that as a part of the renewed push to big
bang economic reforms, the Manmohan Singh government is likely to clear a proposal to restructure the
debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing
sector. According to Reserve Bank of India data, the power sector has a total outstanding debt of Rs 344980
crore, or 7.94% of the banking sector's non-food credit as on 27 July 2012. The Banking stocks rose despite RBI
keeping the interest rates unchanged in its monetary policy review, since it cut CRR by 25 bps, thus releasing Rs.
17000 crs into the system. The surge in the overall index was partly on the back of value buying as well, since
the stocks had corrected in August. The top three heavyweights, ICICI Bank, HDFC Bank & SBI, which together
contribute nearly 69% to the overall Bankex weightage, reported gains of 16.3%, 5.7% & 21.3% respectively.
Retail Research
contd
Auto stocks shrugged off government's move to hike diesel prices by Rs 5 per liter and reported decent gains
during the month. The index gains were on the back of outperformance from top three heavyweights Tata
Motors, M&M and Bajaj Auto, which reported robust double digit gains of 14.4%, 13% & 13.4% respectively. The
three contribute 63% to the overall Auto index weightage. Tata Motors announced its entry into Indonesia
through a wholly owned subsidiary based in Jakarta, PT Tata Motors Indonesia. Indonesia is the largest
automobile market in the Association of Southeast Asian Nations (ASEAN) region and the company would enter
passenger cars and commercial vehicles segments. Hero Moto Corp (which gained 5% during the month)
announced yet another global partnership in keeping with its ongoing endeavor to fast augment its in-house
technological and designing capabilities. The company has roped in the renowned Italian two-wheeler design firm
Engines Engineering to partner with it in bringing Hero Moto's next-generation product line-up. The Bolognabased firm will impart technological know-how in terms of superior designing for the future products to be
launched by Hero Moto.
The Consumer Durables index reported robust gains during the month mainly on the back of outperformance
by stocks like VIP, TTK Prestige, Titan and Bajaj Electrical, which rose 25.2%, 18.2%, 18% & 16.6% respectively
during the month. These four companies have nearly 65% weightage to the overall index. Titan Ind hit a new
high during the month. The optical retail chain of Titan Ind, Titan Eye Plus, is looking to double its store network
from the current 210 to 420 in the next five years.
Power sector also ended with decent gains during the month, as shares of most power generation,
transmission and distribution companies and power equipment makers rose on renewed buying after the
Cabinet Committee on Economic Affairs approved the scheme for financial restructuring of state
distribution companies (Discoms). BHEL rose significantly even in the previous week on account of order
bookings. The heavyweights, Reliance Infra, BHEL and Tata Power gained 19.8%, 15.2% & 7.4% respectively during
the month. The index top gainers were Lanco Infra, GMR Infra, Adani Power, JSW Energy & GVK Power, which
gained 37.3%, 35.6%, 35.2%, 32.9% & 30.4% respectively.
IT index ended with marginal gains largely on the back of significant outperformance in the previous month,
when it was reported as the top gainer. Significant rupee appreciation of nearly 5% in September post the Fed
announcement of QE3 also restricted the index gains. Indian IT companies earn a major portion of their revenue
in USD and depreciation of the USD leads to lower growth.
Retail Research
HOME
contd
Oil & Gas index rose on the back of outperformance from RIL, GAIL & ONGC, which together contribute 83%
to the overall index weight. These stocks gained 8.4%, 8.9% & 1.5% respectively during the month. RIL has
bought back 3.9 crore shares for about of Rs 2793.51 crore till 4 September 2012 under its ongoing share buyback
program. RIL has set maximum buyback price of Rs 870 per share. GAIL signed an LNG supply agreement with Gas
Natural Fenosa, Spain, under which GNF shall ensure a supply of about 3 billion cubic metres of LNG to GAIL over
the next three years. GAIL is also eyeing a stake in Canaport liquefied natural gas (LNG) project in Canada, put
on the block by energy giant Repsol. ONGC's wholly owned subsidiary ONGC Videsh (OVL) has signed definitive
agreements for the acquisition of Hess Corporation's 2.7213% participating interest in the Azeri, Chirag and the
Deep Water Portion of Guneshli Fields in the Azerbaijan sector of the Caspian Sea (ACG) and 2.36% interest in the
Baku-Tbilisi-Ceyhan Pipeline (BTC), for $1 billion.
FMCG & Healthcare indices ended with marginal gains during the month as investors started moving their
funds from the defensive pharma & FMCG stocks to more aggressive, cyclical stocks.
Top gainers amongst the F&O stocks included Pantaloon, (up 54.5%), HDIL (up 45.7%), NCC (up 41.1%) & J P
Power (up 38%). Even Onmobile, GMR Infra, Lanco Infra, Canara Bank, Reliance Capital & Oriental Bank also did
well, rising in the range of 34-36%. Major losers from the F&O space included MTNL (down 12.8%), Ruchi Soya
(down 10.8%), Glaxo (down 5.7%) & Divis Lab (down 5%). Ranbaxy, TCS, Piramal Healthcare, Cairn India, BEL and
Videocon Ind were some of the other underperformers, which fell in the range of 2-4%.
Fund Activity:
In the equity space, the FIIs were reported as strong net buyers
FII Activity (Rs. in Cr) Net Buy / Sell Net Buy / Sell Open Interest Open Interest
Sep-12
Aug-12
Equities (Cash)
19978
9274
Sep-12
Aug-12
Index Futures
3009
Index Options
2798
3412
14246
10854
7399
39569
34336
Stock Futures
-4052
-4574
28821
23464
Stock Options
-258
-224
757
610
of Rs. 19,978 cr in Sept 2012 (In Aug, they were net buyers of Rs.
9274 cr). In the F&O space, the FIIs were net buyers in the Index
Futures segment along with an increase in open interest over
Aug. This indicates long positions taken by them in these
segments. In the Index options segments, FIIs were net buyers with
an increase in the open interest, which indicated more buying of
options. In the stock futures segment, FIIs were net sellers, while
the open interest increased. This indicated hedging strategy
undertaken by them to protect their losses if the market falls or
entering into Cash-Futures arbitrage. The Stock Options segment
witnessed very low participation during the month.
Retail Research
contd
Bond Yields:
Indian G-Sec bond yields ended lower by 9 bps at 8.15% at the end of September 2012 over August. Yields
closed at the lowest level on a closing basis on the last day of the month. G-Sec prices ended August on a high
note. The Reserve Bank of India (RBI) left interest rates unchanged but cut the cash reserve ratio for banks,
disappointing market hopes that it would follow up the government's unexpected spate of bold reform
measures by reducing borrowing costs. The rationale behind RBIs move was to get inflation under control.
The cut in CRR will inject about 170 billion rupees into the banking system.
10 Year Government Bond Yield - Trend
10.00
8.00
6.00
8-Sep-12
10-Jun-12
12-Mar-12
13-Dec-11
14-Sep-11
16-Jun-11
18-Mar-11
18-Dec-10
19-Sep-10
21-Jun-10
23-Mar-10
23-Dec-09
24-Sep-09
26-Jun-09
28-Mar-09
28-Dec-08
29-Sep-08
1-Jul-08
4.00
Period
Commodities:
In September 2012, the Reuters/Jefferies CRB Index ended lower by 0.1% to close at 309.30. However, the
RJ/CRB rocketed 8.8% in the quarter. Corn (which makes up 3% of the index) prices surged the most in three
months after the U.S. reported an unexpected plunge in domestic inventories to an eight-year low, signaling
stronger demand for the grain amidst drought like conditions in cropped areas. Wheat futures contract
advanced 19% in the quarter. Soybean futures rose in the quarter despite the 8.9% fall in September.
Retail Research
10
contd
Behaviour of Metal prices (LME 3 month buyer prices) during the month of September 2012
Metals
28-Sep-12 31-Aug-12 % Chg 29-Jun-12 % Chg
Aluminium
2126
1869 13.72%
1867 13.85%
Copper
8246
7590
7585
Zinc
8.64%
8.71%
2113
1829 15.50%
1839 14.87%
Nickel
18540
15960 16.17%
16450 12.71%
Tin
21700
19625 10.57%
18775 15.58%
2300
1961 17.29%
1811 27.00%
Lead
All metals ended in the positive in September 2012, led by Lead, Nickel and Zinc rising 17.3%, 16.2% and
15.5% respectively. For the quarter too, all metals were gainers, led by Lead, Tin and Zinc rising 27.0%,
15.6% and 14.9% respectively. Metals rose amid stimulus measures announced by leading nations of the world.
In addition to the USA, Europe and Japan, China was expected to announce stimulus measures. A news-busy
month boosted both macro economic sentiment and metals prices. During the first half of the month, base
metals took considerable strength from news that China will undertake sizeable investment into domestic
infrastructure initiatives, such as large-scale construction projects, in order to stimulate the economy. The
metal rally was supported by news that the German Federal Constitutional Court ruled in favour of the
legality of the European Stability Mechanism (ESM), brought about after the Greek crisis. Later in the month,
weak reading on manufacturing activity in China pushed metals lower. HSBC's preliminary reading on Chinese
manufacturing activity showed the sector remained in contraction in September, the 11th consecutive month
of shrinking activity in the world's No. 2 economy. HSBC's China Manufacturing Purchasing Managers Index stood
at 47.8 in September, compared with 47.6 in August. Additionally, poor Japanese export data added to the
correction in metal prices. Even though poor global economic data in the latter half of the month pulled metal
prices lower, the month ended on a good note for all metals.
Copper reached a four-month high Sept. 19 after the Federal Reserve and European Central Bank said they
would buy more debt and China, the biggest copper user, approved a $158 billion subways-to-roads
construction plan. Inventories in warehouses monitored by the LME, the largest industrial metals bourse,
slumped 41% this year and fell to the lowest since October 2008 on Sept. 19. Hedge funds are betting on
higher prices for the first time since May.
Retail Research
11
contd
Gold prices surged in the month on the back of poor economic data from most countries. Poor manufacturing
in China, tepid job reports in the US and stimulus measures by several countries increased demand for the
bullion. However, Spains austerity budget announced toward the end of the month gave the world some
relief. Gold traders extended their bullish streak as analysts from Bank of America Corp. to Deutsche Bank AG
forecast record prices by next year after central banks pledged more action to bolster economic growth. Gold
rose 70% as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008
through June 2011. Hence, the latest quantitative easing announcement by the Fed made investors rush to buy
gold. Gold extended the best quarterly gains since 2010, rising 10.6%. ETP Holdings reached a record 2,523.7
tons. Investors looking to gold as a traditional inflation hedge in times of accommodative monetary policy put
bullion on the run. Gold ended the month 5.1% higher at $1775.6.
Crude prices were lower in the month on the back of a global slowdown indicated by sub-par economic news
from several countries. However, for the quarter, Crude and Brent rose 8.5% and 14.9% respectively. US fuel
demand in August dropped to the lowest level in 15 years as weakness in the economy curbed consumption of
diesel and gasoline. Oil fell after U.S. stockpiles climbed the most since March, Chinese manufacturing shrank
and Japanese exports fell, signalling fuel demand may be slowing among the worlds biggest crude users.
However, oil capped the biggest quarterly increase this year on concern that escalating Middle East tension
will disrupt supplies and as gasoline surged to a five- month high. Oil rebounded toward the end of the month
from the lowest close in almost two months and extended gains on speculation that China will take measures to
stimulate its economy. US oil production surged to the highest level since January 1997 after output
rebounded from August shutdowns in the Gulf of Mexico because of Hurricane Isaac. Output rose by 3.7% to
6.509 million barrels a day in the week ended Sept. 21. For the month, crude and brent fell 4.4% and 1.9%
respectively.
The Baltic Dry Index (BDI) gained 9.0% in the month to close at 766, however, for the quarter, the BDI fell
23.7%. The index started the month on a poor note as the Atlantic market collapsed with transatlantic trips
down 30% week over week to $3,700. Capesize and Panamax rates have been constantly under pressure. The
Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell as panamax vessel
rates continued a losing streak. Concerns about a slowdown in China, as manufacturing continued to contract,
resulted in the index sliding. The BDI fell to its lowest level since February before rates started improving in
the latter half of the month. Rates improved after stimulus announcements by the US, Europe and Japan
boosted investor confidence in a global recovery as liquidity increases.
Retail Research
12
contd
Currencies
The USD depreciated vs most global currencies in September 2012. The USD remained weak against most
peers during the month as Fed announced its quantitative easing program. The biggest gainers in the month
were the Indian Rupee and the Malaysian Ringgit while the Argentine Peso was the only loser in the month.
Given below is a table that shows the depreciation (-)/appreciation (+) of the dollar against various
currencies for the month of September 2012:
USD to:
30-Sep-12 31-Aug-12
% Chg
30-Jun-12
% Chg
-1.6%
94.25
0.3%
7.76
0.0%
7.76
0.0%
6.34
-0.3%
6.31
0.2%
52.50
55.67
-5.7%
56.05
-6.3%
29.17
29.97
-2.7%
29.91
-2.5%
Singapore dollar
1.23
1.25
-2.1%
1.27
-3.5%
Argentine peso
4.67
4.63
0.8%
4.52
3.4%
Euro
0.78
0.80
-2.6%
0.80
-2.2%
30.59
31.49
-2.9%
31.61
-3.2%
3.04
3.13
-3.0%
3.19
-4.9%
9541.98
9578.54
-0.4%
9407.34
1.4%
77.90
78.63
-0.9%
79.53
-2.0%
2.02
2.05
-1.5%
2.08
-2.6%
1105.58
1135.85
-2.7%
1156.74
-4.4%
Pakistani rupee
94.51
96.06
Hong Kong dollar
7.75
Chinese yuan
6.32
Indian rupee
Taiwan dollar
Thai baht
Malaysian ringgit
Indonesian rupiah
Japanese yen
Brazilian real
Korean won
The dollar touched its lowest level in seven months against the
Yen before Japanese officials signalled they are ready to
intervene to stem the currencys strength. The Bank of Japan,
which conducts currency intervention on behalf of the finance
ministry, followed the Federal Reserve and the ECB in expanding
its balance sheet by 10 trillion yen to 55 trillion yen ($700
billion). The yen advanced against all major currencies as
weaker-than-forecast data from China and rising tensions
between Japan and China spurred demand for haven assets. The
USD/JPY depreciated 0.9% in the month & 2.0% in the quarter.
The USD fell against most of its global counterparts in September after QE3 announcements by the US Fed.
The Fed said it would embark on another phase of quantitative easing, buying $40 billion of mortgage-backed
debt per month until the outlook for U.S. jobs improved substantially. It also expects benchmark U.S.
interest rates to stay near zero until at least mid-2015. U.S. employers added fewer jobs in August than
forecast. Towards the latter half of the month the USD regained some of its drop after reports showed
Chinese manufacturing may contract for 11th month and the Institute for Supply Management-Chicago Inc.
said its business barometer fell for the first time in three years, signalling contraction. The Dollar Index
(DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trade
partners, fell by the most since the first quarter of 2011 after the European Central Bank pledged to protect
the euro from unravelling and the Federal Reserve committed to reduce unemployment via open-ended debt
buying. The DXY fell 1.7% in the month and 2.1% in the quarter.
Retail Research
13
contd
The dollar fell against the euro after the Federal Reserve said it would start a third round of asset purchases
to boost the economy. Under the program, known as quantitative easing, the Fed prints money to buy bonds,
which depresses Treasury yields and encourages investors to seek higher returns elsewhere. An increase in
the money supply erodes the value of the dollar. The ECBs move of unlimited bond buying backed the Euro as
well. The ECB may buy bonds with maturities as long as three years. Europes central bank plans to sterilize its
bonds purchases, taking out as much liquidity as it injects. The euro also strengthened against the dollar after
German reports showed exports and industrial production increased in July, boosting demand for the regions
currency. The Dollar fell to a four month low against the Euro during the month. However, the USD recovered a
little as services and manufacturing in Europe shrank to a three-year low, adding to evidence the central bank
will need to do more to spur growth. Spains cabinet produced its fifth austerity budget on Sept. 27 amid
speculation the nation will join Ireland, Greece and Portugal in requiring a financial bailout. The euro fell
against the dollar after U.S. purchasing managers data and consumer sentiment trailed forecasts, crimping
demand for riskier assets. The USD/EUR depreciated 2.6% in the month and 2.2% in the quarter.
Asian currencies had the best quarter in two years after global policy makers announced plans to pump money
into financial markets to support growth, spurring capital flows into higher-yielding assets. The BloombergJPMorgan Asia Dollar Index, which tracks the regions most-active currencies, rose 1.8% since June 30 as the
Federal Reserve, the ECB and the Bank of Japan expanded bond-purchases programs to lower borrowing
costs. China will use pre-emptive policy to bolster growth in Asias biggest economy. Indias rupee led gains,
reaching a five-month high, and Chinas Yuan surged to the highest since 1993. Investors pumped $9 billion
into the stock markets of India, Indonesia, South Korea and Taiwan in September 2012. Asian currencies
gained after Spain approved its austerity budget, boosting optimism Europe is moving toward resolving its debt
crisis. Standard & Poors in September raised South Koreas long-term foreign-currency debt rating by one
step to A+. Moodys Investors Service and Fitch Ratings also raised their rankings for Korea this quarter.
The GB pound rose to the strongest level in more than a year against the dollar on speculation the U.K.
economy is poised to recover from recession. Sterling extended a seventh week of gains versus the greenback,
the longest run since December 2004, after a government report showed the U.K. budget deficit was less
than economists forecast in August. Reports showed the U.K. trade deficit shrank in July as exports soared &
unemployment fell the most in more than two years. However, toward the month end, the GBP fell after Fitch
Ratings said the government debt would peak at a higher level and later than it previously predicted,
increasing its risk of a downgrade. The USD/GBP depreciated 2.1% in the month & 3.4% in the quarter.
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The INR appreciated on account of large foreign fund inflow, interference of the Fed, ECB and Bank of Japan,
positive IIP numbers and economic reform by the Indian government. The Indian government has finally
pushed the long-disputed FDI in aviation, multibrand retail and broadcasting. Additionally, a tax on interest
earned by overseas investors on foreign-currency bonds issued by Indian companies, and on interest payments
for overseas loans, was reduced to 5% from 20%. Reduction in withholding tax will lower costs for companies,
especially infrastructure borrowers, by up to 70 bps. The government wants to lure foreign capital in order to
bridge the current-account shortfall. These moves by the government are expected to increase investments in
India, thereby increasing demand of the Rupee. Bullish bets on the rupee hit a near eight-month high. Long
positions in the rupee climbed to their largest level since early February. The RBI sold dollars worth $21
billion in the foreign exchange spot market from September 2011 to July 2012 to curtail volatility and
industry experts expect the RBI to maintain a check on the current volatility. The USD/INR depreciated 5.7% in
the month and 6.3% in the quarter.
Canadas dollar gained the most in two years against its U.S. peer this quarter after stimulus measures by
governments worldwide fuelled the advance of stocks & oil, spurring investor demand for higher-yielding
assets.
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Comparison of Equity Returns in various markets - MSCI Indices in US$ terms

Monthly 3 Month
MSCI Index
Y TD
1 Y ear
Emerging Mark ets

BRIC
EM (EMERGING MARKETS)
Monthly
Last Returns Returns Returns Returns MSCI Index
3 Month
Y TD
1 Y ear
Last Returns Returns
Returns
Returns
Developed Markets
279.9
6.2%
6.4%
4.5%
8.7% EUROPE
1,266.9
1.0%
-5.4%
0.9%
-15.6%
1,002.7
5.8%
7.0%
9.4%
13.9% G7 INDEX
1,094.2
0.8%
-3.4%
6.1%
-2.5%
EM ASIA
422.7
7.1%
7.7%
11.6%
15.2% WORLD
1,250.6
1.2%
-3.4%
5.8%
-4.3%
EM EUROPE
446.1
4.6%
8.8%
12.9%
13.3%
379.2
4.6%
8.8%
12.9%
13.3% HONG KONG
8,418.1
7.5%
11.8%
18.2%
25.0%
3,674.7
3.8%
4.4%
2.0%
972.6
6.2%
6.8%
3.6%
-1.7%
84.0
5.9%
12.9%
-9.8%
-19.0%
EM EUROPE & MIDDLE EAST

EM LATIN AMERICA
10.0% AUSTRIA
PORTUGAL
INDIA
428.8
14.6%
14.9%
23.6%
EGYPT
713.2
9.1%
22.6%
62.0%
41.6% GERMANY
POLAND
809.1
8.5%
8.3%
18.2%
HUNGARY
521.5
8.5%
9.6%
TAIWAN
267.8
7.2%
7.8%
1,519.3
7.0%
2.7%
9.8%
PERU
KOREA
MEXICO
CHINA
372.0
5.7%
9.7%
-10.8%
-14.2%
1,603.3
5.6%
13.9%
17.2%
21.9%
11.0% IRELAND
119.5
5.2%
-2.1%
0.9%
23.4%
20.5%
17.6% NEW ZEALAND
118.6
4.9%
12.8%
18.0%
15.0%
11.7%
11.3% ISRAEL
192.6
3.9%
5.3%
-2.7%
1.3%
6,402.2
3.9%
10.6%
13.1%
23.0%
409.6
7.0%
9.8%
14.7%
21.4% FINLAND
316.2
3.8%
10.6%
-2.5%
-4.4%
6.8%
6.5%
20.6%
31.5% CANADA
1,698.5
3.4%
9.8%
6.6%
11.4%
55.7
6.0%
4.0%
5.4%
13.9% GREECE
63.3
-7.9%
-1.4%
-22.6%
-43.9%
13.9%
469.3
0.5%
-3.8%
0.5%
-21.8%
219.6
17.5%
24.9%
7.4%
-12.0%
791.1
5.3%
9.0%
7.4%
INDONESIA
880.6
5.3%
7.2%
1.7%
PHILIPPINES
438.3
4.8%
4.0%
29.2%
CHILE
22.6% SWEDEN
6,755.5
RUSSIA
SOUTH AFRICA
5.9% SPAIN
7.2% Frontier Markets

38.0% FM (FRONTIER MARKETS)
550.6
3.7%
5.6%
8.8%
15.5%
2,418.2
2.9%
1.1%
6.6%
14.8% SRI LANKA

19.0% SLOVENIA
COLOMBIA
1,211.2
2.9%
2.0%
17.1%
BRAZIL
2,668.4
2.7%
4.3%
-5.6%
MALAYSIA
472.5
1.0%
4.5%
7.5%
TURKEY
536.0
-0.1%
8.2%
35.6%
CZECH REPUBLIC
450.8
-3.1%
8.9%
0.8%
MOROCCO
309.1
-6.0%
-4.0%
-17.5%
271.5
17.1%
16.2%
-8.1%
-10.2%
900.4
13.6%
20.8%
5.3%
-14.4%
19.1% NIGERIA
446.6
9.2%
31.8%
39.8%
47.1%
14.3% UKRAINE
104.4
-3.7%
-0.7%
-41.1%
-49.0%
92.9
-4.3%
-1.7%
-32.0%
-43.1%
103.1
-4.9%
2.3%
-5.8%
-5.4%
1.6% BOSNIA AND HERZEGOVINA
-1.2% BULGARIA
-25.7% JORDAN
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Comparison of Equity Returns in various markets - MSCI Indices in US$ terms
Most equity markets across the globe ended the month of September 2012 on a positive note. Emerging Markets
were the best performers amongst the global equity markets with Asia, Far East and BRIC being the top
gainers during the month, while Latin America rose the least (3.8%). Among all markets, the Frontier markets
rose the least during the month (0.5%).
Most of the countries in the Developed Markets index ended in the green except Greece, which fell by 7.9%.
Hong Kong gained the most (7.5%). Austria, Portugal, Spain and Germany were the other top gainers, which
rose by 6.2%, 5.9%, 5.7% and 5.6% respectively. Other developed markets like Sweden, Israel, Ireland, New
Zealand and Ireland rose in the range of 3.9-5.2%.
Hong Kong stock market ended 7.5% higher in September 2012. Hong Kong shares soared to their highest since
early May during the month, with the riskier resources-related sectors leading gains after the US Federal
Reserve announced a daring new stimulus plan to foster investment and job creation. Hong Kong shares also
surged after the European Central Bank unveiled plans to buy sovereign bonds of under-pressure nations in a
bid to tackle the eurozone debt crisis.
Portugals hopes of returning to government bond markets next year and avoiding the need for a second bailout
have been boosted by a firm endorsement of the countrys financing plans by the International Monetary Fund.
This led to a rise in the regions stock market during September. The IMF has approved the Portuguese
governments latest package of austerity measures. The IMF is also expecting the European Central Bank to
play a very helpful role in Portugals return to the markets after announcing plans to assist struggling eurozone
economies by buying government bonds. Portugal, under a EU-IMF bailout, raised 1.291 billion euros for 18
months at 2.967 percent compared with 4.537 percent at the last such issue on April 4. It raised 709 million
euros for six months at 1.7 percent, from 2.292 percent on July 18. The country managed to raise a sum that was
above its target of 1.75 billion euros, with demand 2.4 times over the 18-month bond offer and 3.1 times for the
6-month offer. The bond issue came after Portugal obtained a grace period of one year from its international
lenders, the European Union and International Monetary Fund, to reduce its public deficits. The prime minister
said his country is moving in the way of becoming better and the risks the country is facing have been
reduced significantly with the new austerity measures. He said the pace of reduction of foreign debt is quicker
than expected and the country is marching toward the goal of returning to the world financial markets.
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The Spanish stock market rose as the Madrid government unveiled its austerity budget after an extensive
delay caused by a Cabinet meeting running into extra time. Spain's deputy Prime Minister Soraya Saenz de
Santamaria said revenue targets for 2012 will be met as the government announced plans to set up an
independent fiscal authority that will monitor deficit reduction and spending. The Spanish government said it
would siphon off 3bn from the pension reserve fund to cover its liquidity requirements.
Germany rose by 5.6% in September 2012. Equity sentiment was lifted following comments by German Finance
Minister Wolfgang Schauble, who said European policymakers should do everything in their power to protect
the single currency, adding that defending the euro was "worth any effort". Germans are turning to equities for
appreciation and income as policy makers take steps to tackle the euro-area debt crisis. Germans traditionally
loved government bonds, but now inflation is rising and there is less security and stability in bonds because of
the concerns surrounding Portugal, Italy, Greece and Spain. Germanys economy is expected to grow 0.5
percent this quarter and 0.9 percent in the final three months of 2012, according to the median of 17
economist forecasts compiled by Bloomberg. Despite the uncertainty in the euro, Germans have generally not
lost wealth in the real estate market, and employment is still strong compared to the periphery. The confidence
in Germans personal finances has created an opportunity to take greater risk in stocks to earn returns.
The Athens stock market was the only loser in the developed markets, which fell by 7.9%. Markets were
spooked by scenes of violent protests on the streets of Athens and Madrid, which reignited concerns over
Europes ability to implement the measures needed to deal with its big debts. Despite two international
bailouts and a debt restructuring, the country is adrift on its fiscal targets and stuck deep in recession.
Negotiations over 11.5 billion ($14.9 billion) in budget cuts for 2013 and 2014, needed to unlock 31 billion in
fresh loans, have been under way for weeks. But if the new Greek government led by Antonis Samaras can
deliver more cuts, then it is in Europe's own interest to find compromises. The deep recession has blown
Greece off track.
Frontier markets gained marginally (0.5%) during the month. Sri Lanka and Slovenia were the top gainers,
rising by 17.5% and 17.1% respectively while Bosnia & Herzegovina and Nigeria rose by 13.6% and 9.2%
respectively. Nigeria and Zimbabwe ended higher by 9.2% and 8.5% respectively. However, Jordan was the top
underperformer losing 4.9%. Bulgaria and Ukraine fell by 4.3% and 3.7% respectively.
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Sri Lankan stock market rose by 17.5% during September on healthy volumes to the highest level in eight
months, with institutional and foreign investors buying banks and diversified shares. Continuous foreign interest
and institutional participation are keeping the market rising and a healthy correction after the index hits
6,000 points is expected. Sri Lankas market capitalization is expected to rise in another four years time
with new entrants and new companies to be listed in the stock market. The Central Bank is taking necessary
steps to ensure that the debt to GDP ratio and macro fundamentals could be even more flexible than what they
are right now. Policies adopted by the Central Bank and the government earlier in the year have led to a
significant deceleration in expenditure on imports by July 2012, thereby helping contain the deficit in the
trade balance of the balance of payments. The deficit in the trade balance declined by 33.8 per cent, yearon-year, to US dollars 535 million in July 2012, the lowest level recorded in 17 months.
The Amman Stock Exchange (Jordan) fell by 4.9% during the month of September 2012. The market
capitalisation of the Amman Stock Exchange has dropped steadily from a high of about $40bn in 2007 to $25bn
currently. More telling is the decline in average daily volume from a respectable $55m in 2009 to less than $10m
now. Jordanian corporate and macro-economic numbers are mixed, but certainly do not explain by themselves
the moribund state of the market. Jordanian GDP is set to grow about 3 per cent this year. Total public debt has
increased by $2.6bn this year, but at 68 per cent of GDP is still within acceptable levels at least by
southern European standards. The banking sector in general is healthy with more-than-adequate capital ratios
and a loan/deposit ratio of only 73 per cent. The austerity measures have merely fed the frustrations of ordinary
people. The allegations of corruption have added to the market malaise, as several high ranking business
people are under investigation. Some are accused of essentially looting their companies and gambling in the
market.
The Emerging Markets ended the month of September on a positive note, up by 5.8%. EM-Asia index was the top
gainer, up 7%. BRIC and EM-Europe & EM-Europe & Middle East rose by 6.2% and 4.6% respectively. EM-Latin
America rose the least (3.8%).
Rise in EM-Asia was led by India, which rose by 14.6%. However, other countries like Taiwan, Korea and China
rose by 7.2%, 7% and 6.2% respectively.
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Kospi, the South Korean stock exchange was one of the top gainers among the Asian countries. South
Korea unveiled a $5.2 billion stimulus package, including tax breaks worth $2 billion, as the government tries
to shore up Asia's fourth-largest economy in the face of Europe's protracted debt crisis. The steps would save
taxpayers some 2.3 trillion won ($2.0 billion) in personal income tax, home transaction tax and domestic sales
tax on automobiles and large electronics appliances. The ministry said the package, which also includes a plan to
make sure provincial governments spend their full budget allocations, would amount to 4.6 trillion won this year
and 1.3 trillion won for next year, worth about $5.2 billion in total. Bank of Korea lowered its 2012 growth
forecast to 3.0 percent in July from 3.5 percent previously but is widely expected to lower the view again when
it releases revised forecasts in October. The rally was also sparked by the European Central Bank's longawaited announcement on Thursday of an "unlimited" bond-buying plan to contain the euro zone debt
crisis. It also hit a five-month high in September on the back of the U.S. Federal Reserves monetary stimulus
action and S&Ps upgrades of the countrys credit ratings.
EM-Europe and EM-Europe & Middle East rose by 4.6% each. The countries that rose the most include Poland
and Hungary (8.5% up each). Russia rose by 5.3%. The losers were Czech Republic and Turkey, which fell by
3.1% and 0.1% respectively.
Russia raised $5.1 billion on Tuesday by selling shares in Sberbank to investors keen to tap into the bank's
dominant position in the country and prospects for growth further. Russian stock valuations are expected to
climb 40 percent in a years time as the government pushes energy companies to increase dividends.
Russian equities have the cheapest valuations among emerging markets. The benchmark Micex Index trades at
5.5 times estimated earnings, compared with 10 times for the MSCI Emerging Markets Index, data compiled by
Bloomberg show. A government push to lift the minimum payout at state companies and a 21 percent drop on
MSCI Incs Russia gauge in May has sent equity yields surging as dividends increase faster than stock prices. The
30-stock Micex gauge has rallied 5 percent so far this year compared with a 5.7 percent gain for the MSCI
Emerging Markets Index. Russia, the worlds largest energy exporter, will consider easing extraction tax
charges for hard-to-recover and depleted oil fields. The nation could also continue reduced tax rates for
some fields in eastern Siberia until 2022. Taxes are one of the major factors and if the government is really
going to lower taxes paid by oil producers, its very positive for them and for Russian equity markets overall.
BRIC gained 6.2%. Amongst the BRIC countries, China and Brazil rose by 6% and 2.75 respectively.
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contd
Chinese stocks rose in September on the back of announcement of Rmb1tn ($158bn) of infrastructure
spending. The money will be rolled out over several years and the government has not described the investments
as a stimulus package, but the announcements nevertheless fuelled renewed optimism about Chinas prospects.
The National Development and Reform Commission, a top central planning agency, has approved 25 urban
rail projects, 13 highway construction projects, seven waterway projects and nine waste water treatment
plants. The total cost of the projects is estimated to be about Rmb1tn, or 2 per cent of gross domestic product.
The Shanghai index also rose as an unexpected increase in Japans asset- purchase program boosted commodities
and fueled speculation that central banks will revive the global economy.
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Outlook going forward

Global Market Outlook
Quantitative easing in US sparking international tensions over currency values
The US Federal Reserves policy of quantitative easing is sparking international tensions over currency values.
One of the consequences of the Feds actions is to push down the value of the dollar, thus worsening the
competitive position of other major countries in international markets. Following the latest decision, in which
the Fed gave an indefinite commitment to purchase mortgage-backed securities to the tune of $40 billion per
month, the Brazilian finance minister, Guido Mantega, repeated his earlier warnings of a currency war. Mantega
said that the US move was protectionist and could have drastic consequences for the rest of the world. The
move would have only marginal benefits for the US, he said. There was already plenty of liquidity in the
economy but it was not going into production. The real purpose of the measure was to depress the value of the
dollar and boost US exports, he added.
Mantega explained the decision by the Bank of Japan (BoJ) to intervene in financial markets with its own version
of quantitative easing as another sign of global tensions. In a move clearly aimed at pushing down the value of
the yen and lifting Japanese exports, the BoJ decided to add $128 billion to its programme of asset purchases. It
cited the effects of financial and foreign exchange market developments as one of the reasons for its actions.
China is also concerned about the impact of the Feds actions. The head of the countrys central bank, Zhou
Xiaochuan said the continued injections of cheap credit were not working and more targeted measures should be
developed to get money where it was needed. China has two concerns about the fall in the value of the
American dollar. It tends to push up the value of the yuan, which impacts on Chinese export markets, and
reduces the value of the more than $1.2 trillion of US treasury bonds that Beijing holds. The US Feds rationale
for its actions is that the injection of liquidity will lower interest rates and encourage investment, resulting in
the creation of more jobs and a lowering of unemployment. But a recent Duke University survey of the chief
finance officers of 887 large companies found that a lowering of interest rates would have virtually no impact on
their decisions.
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Will the Feds move of quantitative easing be successful or is it just a political ploy?
While the Feds measures could have minimal impact on investment and jobs, they do give a boost to financial
markets. Since the collapse of September 2008, the Fed has followed a clear agenda. The banks and finance
houses, whose speculative activities have triggered the crisis, have been given endless supplies of ultra cheap
money. Profits are being made through the elevation of the price of financial assets resulting from the injection
of more money from the Fed.
Many economists believe that printing money does not create wealth. It may provide a temporary stimulus and
drive the financial markets but it is not adding real value. To protect oneself against the ravages of inflation,
which will surely return, one should look to real assets like land & property. Gold and precious metals will also
give protection against the fall in value of money. Unlimited printing of money could reduce the purchasing
power of paper money.
Each time the Fed undertakes a new program of quantitative easing, questions arise about the possible impact
on its solvency. Under QE3, the Fed is committed to continue increasing the size of its balance sheet until the
employment situation begins to improve. That is unlikely to happen while inflation remains below its 2% target,
as it has recently, and the Fed has left open the possibility that inflation will be allowed to rise above the target
temporarily. At that point, the Fed will begin to execute its exit strategy from its current highly
accommodative policy. The exit strategy could very possibly put strains on its income statement and balance
sheet.
The timing of the QE3 is also questioned by some experts. Mitt Romney has stated several times that he would
replace Bernanke if elected. So the fact the Fed decided to announce QE 3 now (coming just about two months
ahead of the US elections,) as opposed to any time in the last year should be perceived as a very political move.
In plain terms, experts feel this is Bernanke trying to juice the stock market (and perhaps the US economy) for
all its worth to help Obamas re-election chances. There is simply no other way to perceive this move. Bernanke
is doing a Hail Mary pass to try and keep his job.
The consequences of this will be complicated. For one thing, food and energy prices are already high. So the Fed
is running the risk of increasing the cost of living to the point that voters potentially turn on Obama. The
economy is already entering another recession (the recent ISM reading was sub-50 which is recessionary
territory). To pile even inflation of top of this may not be a wise move, say these experts.
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US presidential elections setting worries about US fiscal cliff
Election for a new president in the United States, the world`s biggest economy, is scheduled on 6 November
2012. Investors are worried about the outcome of the elections and its impact on US fiscal cliff. The "cliff" refers
to the year-end deadline for the expiration of hundreds of billions of dollars worth of tax cuts and the triggering
of $109 billion in across-the-board spending cuts. The non-partisan Congressional Budget Office has said the
scenario could throw the country into recession.
Unless the congress and president can reach an agreement by the end of the year to avoid the "fiscal cliff" of tax
increases and sequestration, Moody's and S&P could cut rating of US debt, if a deal is not reached by the end of
2013. While tax increases and spending cuts could lead to onset of recession, lack of action by the political
structure post elections could jeopardize the US debt ratings.
German Court Clears Path For European Rescue Fund, now focus would shift to Spain, who is soon expected
to demand a bailout
Eurocrats breathed a sigh of relief after Germany's Federal Constitutional Court confirmed the legality of the
European Stability Mechanism (ESM) Sept. 12, as the European Union's eurozone rescue package cleared its final
legal hurdle. The members of the 17-strong eurozone now have until the end of the year to deposit the 32 billion
euro initial capital that will underpin the potentially 800 billion euro bailout fund. The ESM wouldn't have been
able to start work without Germany, its No. 1 contributor. Germany is liable for about 27%, about 190 bn euros,
to the overall European bailout program, which includes the ESM and remaining money from the current
temporary fund, the European Financial Stability Facility.
With the favourable German court ruling, Eurozone governments have now received more time to do their
homework, implement reforms and austerity measures. While this has eased worries temporarily, the focus has
now shifted to Spain. Rising expectations of a Spanish bailout will be on the minds of Eurozone finance ministers
at a meeting on October 8 and again for a European Union summit October 18-19.
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contd
The European powers have agreed to act if Spain seeks a sovereign bailout. The Spanish government has
already struck a deal with its Eurozone partners for a rescue loan of up to 100 billion euros for the banks. But
Madrid says it will probably need only about 40 billion euros from the Eurozone loan because the lenders can
find much of the cash elsewhere. Spains cabinet produced its fifth austerity budget on Sept. 27 amid
speculation that the nation will join Ireland, Greece and Portugal in requiring a financial bailout. The stress
test showed Spanish banks have a combined capital shortfall of 59.3 billion euros ($76.3 billion), less than
earlier estimates. Moodys has already issued a report warning that Spain may have underestimated the price
of the banking bailout.
If the final bailout demand is in excess of Euro100 bn or if the final figure is much smaller to be relied upon,
then it would be taken negatively by the financial markets.
Rising anti-Japanese sentiment in China could lead to a diversion of Japanese investment to India.
The recent spurt in the Japan-China conflict over the contested islands, Senkaku to Japan and Diaoyu to China,
was not unexpected. The surge in anti-Japanese sentiment in China is nothing new. The root of the SinoJapanese conflict lies in the history of their ties. Anti-Japanese sentiment flared up in China in 2005 over the
new Japanese textbooks, which seemed to gloss over Japanese war crimes. In contrast, Indo-Japanese ties
have rarely been hindered by political conflict, except when India went for nuclear testing. In fact, Japan has
proved to be Indias true bilateral economic partner over the years.
We feel that the resurgence of anti-Japanese sentiment in China could prove to be a blessing in disguise for
India, as in case of a prolonged tiff between Japan and China, it could divert Japanese investment to India.
Japanese investors have always tended to compare India and China. In the triangular relationship between
India-Japan-China, there are similarities and dissimilarities. The similarities are that both India and Japan have
historical enmity with China. Further, China has become the biggest trading partner of both India and Japan,
despite uneasy political relations with both countries. In 2011-12 (fiscal year), China constituted 9.5% of Indias
total trade with the world. In 2011 (calendar year), Chinas share in Japans global trade was 29.3%. Amongst
the dissimilarities, politically, China is a communist country, whereas both India and Japan are democracies.
Second, both Japan and China are at a demographic disadvantage. The proportion of the working population in
both countries is falling because of an aging society in Japan and the one-child policy in China. Third, Indias
economic growth is less export-based than that of Japan and China.
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Factors that are likely to dampen Chinas attractiveness are: rise in wages; its high rates of economic growth
becoming less sustainable on account of global turmoil; an aging society due to the one-child policy and its
impact on the savings rate; and imbalances between the investment of SOEs (State-Owned Enterprises) and
private sectors. These factors could affect foreign investment in China. Notwithstanding Indias gloomy
economic situation in fiscal 2011-12, global investors are optimistic about India in the long term. The
encouraging rise in overall FDI in the post-Lehman crisis period portrays India as an attractive destination for
Japanese investors. The uncertainty over Chinas faster growth presents both a challenge and an opportunity to
India to attract Japanese investment. Though China continues to be the top competitor to India for foreign
investment, Indias strong fundamentals, that is, strong domestic demand, can strengthen its position vis-a-vis
China. The upsurge in domestic demand and high import tariffs insulate India from global turmoil. During 201112, Japan leapfrogged to becoming fourth biggest foreign investor in India, from ninth position in fiscal 2008-09
and this rise could continue in the near term.
Indian Market Outlook

Economic reforms in India finally take off
A day after it raised the prices of diesel and restricted the supply of subsidized LPG, the United Progressive
Alliance (UPA) government decided to push its political gamble further by opening up multi-brand retailing, civil
aviation and the broadcast sectors. The decisions, especially the one to allow 51% foreign investment in
retailing, has already attracted sharp reactions from the opposition parties as well as allies such as Mamata
Banerjees Trinamool Congress and Mulayam Singh Yadavs Samajwadi Party. The Union Cabinet had first
cleared the proposal last November but left it in the cold after opposition built up both within and outside the
ruling coalition. Separately, in a boost to single brand retailers, the government agreed to do away with a
clause that required them to source 30% of their goods from small and medium enterprises. Swedish retailer
IKEA had objected to these provisions. Now the policy says the goods must preferably be sourced from small
businesses.
Going by the reaction of political parties, the Manmohan Singh government has taken a calculated risk by almost
taunting its belligerent allies to pull it down. In the past few months the opposition had the government
virtually on the mat as a series of corruption scandals eroded its credibility and paralysed decision-making that
had sowed frustration in the Indian industry and foreign investors even as the countrys economic engine
threatened to seize up. This appears to be a last-ditch effort by the Congress Party to wriggle out from the
corner it has been driven to and also divert attention from the slew of corruption scandals, including allegations
of irregularities in allocation of coal mines now infamous as `coalgate.
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contd
The Congress Party has clearly played its most politically risky card. None of the measures it has announced will
be able to arrest the economic slowdown, though they will give investors hope that the government will take
politically tough decisions. We feel that this is just a start taken by the government. In order to strengthen the
investors confidence, this reform implementation process should continue over the next few months. However,
all this is possible and would see results only if this government survives. We feel that there is no real threat of
the government falling in the near term. With outside support from Mulayam Singh Yadavs SP, we expect some
more speedy implementation of reforms in the coming months. Further to ensure that he fiscal targets are being
met the PM and the FM know that the capital markets need to be looked after. Hence whatever measures
appeal to the FIIs would either be taken up or atleast talked about.
Reforms push to keep the bias positive for Rupee
In the local market, the rupee continued to gain against the US dollar. Over the month of September, rupee
appreciated by 5%, making it one of the best-performing currencies in Asia. The appreciation was on the back of
risk sentiment and the government's reforms push. The Indian government sticking to October-March borrowing
of Rs 2 trillion also has been positive for the economy and the rupee.
Any doubts about the government not following through with foreign direct investment (FDI) in multi-brand
retail were assuaged when the government notified the rules for the opening of the sector to foreign retailers.
This was considered a significant step forward especially as it came in despite a key ally withdrawing support
from the UPA coalition in protest against the FDI measures and fuel price hike. Rupee and stocks got a huge
boost when the government slashed taxes on overseas borrowings by local companies, stepping up a policy
revamp to revive capital inflows into the economy. The withholding tax, a levy on interest earned by overseas
investors on foreign loans issued by Indian companies, was cut to 5% from 20% for a period of three years. This
move will have a favourable impact on the corporate sector, as it helps them borrow from overseas markets at
much lower rates and would also allow for greater inflow of dollars into the economy.
The rupee appreciation was also supported by Reserve Bank of India (RBI) providing some monetary stimulus in
the form of CRR cut, injecting Rs. 17000 cr into the system, raising hopes that it would soon consider a rate cut,
as government measures to control fiscal deficit are going to give the central bank some room to cut rates
without stoking inflation. The rupee could continue to trade with an appreciation bias, as global investors look
for higher returns in the backdrop of coordinated monetary loosening by major global central banks.
Announcement of quantitative easing (QE 3) by the US Fed Reserve and Euro gaining strength after Spain
announced tough new austerity measures is also helping the rupee gain against the dollar. The Rupee seems to
be on the way up (atleast till 50.50-51) till a global event or local political crisis pulls it down.
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contd
The fiscal deficit is quite high at present and any fiscal slippage could become worrisome. However, given the
recent spate of reform measures unveiled by the government, we do hope that fiscal deficit target slippages, if
any, are manageable. The government is poised to announce a five-year fiscal consolidation plan that will lay
down clear milestones for steadily narrowing the gap between spending and revenue. The plan comes against
the backdrop of a series of policy initiatives taken by the Congress-led government in the last fortnight to shore
up global investor sentiment. To foreign investors and credit rating agencies, the medium-term fiscal
consolidation plan will signal the intent of the Congress-led UPA to press ahead with politically contentious
decisions to restore fiscal balance. It will help the RBI better plan its monetary policy stance by providing a
clearer picture of the fiscal and economic outlook.
The Congress plans to cement its coalition, uncertainty about the Governments continuity remains
Political-economy experts are of the view that the key reason why the UPA remains stable despite TMCs (19 Lok
Sabha seats) support withdrawal is because there exist three substitutes to this party namely the SP (22 seats),
the BSP (21 seats) and the JD(U) (20 seats). Besides a Cabinet reshuffle that interests these parties, each of
these 3 parties stands to gain financially by the possible grant of a special status to UP and Bihar. In addition,
special status is also being discussed for Orissa (where the Chief Ministers party, BJD, with 14 seats in the Lok
Sabha is currently a member of the Opposition. It is worth noting that 11 Indian states (namely Arunachal
Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
Tripura & Uttarakhand) currently enjoy special status, which makes them eligible for extra financial support
from the Central Government.
Meanwhile, Samajwadi Party chief Mulayam Singh Yadav is busy fuelling speculation of mid-term polls. He has
joined hands with the Telugu Desam Party (TDP), the Janata Dal Secular Party (JDSP) and Left parties to soon
announce the formation of the Third Front and, CPI leader AB Bardhan has gone a step ahead and announced the
proposed Third Fronts prime ministerial candidate, none other than Mulayam himself. Mulayam has also met
Punjabs deputy Chief Minister Sukhbir Singh Badal who agreed with him about the possibility of early elections.
Though Mulayam has given outside support to the UPA-II Government, all parties he is in contact with are
against the Government. With the SP chief extending support to the Government on one hand and courting Third
Front on the other, the question all party leaders are asking is that can Mulayam be relied upon once the Third
Front is formed.
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contd
All eyes on Q2 September 2012 results
The Q2 September 2012 earnings season will begin around mid-October 2012. Investors and analysts would
closely watch the management commentary that would accompany the results, which could cause revision in
their future earnings forecast of the company for the current year or the next year.
This year September quarter earnings trend could differ from last year due to a late festive season this year, as
well as late monsoon rainfall. Therefore a lot of consumer demand could get spilled over to the next quarter
and one could see overall results this quarter being more subdued due to this on a Y-o-Y basis. Apart from this,
other factors such as a slowing economy and high interest rates may also play spoilsport and keep the
profitability under pressure.
While a few corporations may fail to meet expectations, the overall results are unlikely to be very poor as to
prove a dampener. Pharma companies are expected to deliver strong numbers, while Auto companies are
expected to deliver subdued results, as evident from the auto sales numbers. FMCG companies could continue
to report robust earnings, IT companies numbers are expected to be in line with the expectations. Rupee
appreciation during the quarter could impact profitability of IT companies.
However the risk is that by the time the companies come out with results, if the share prices have run up quite
a bit, then there could a scope for disappointment.
Late Monsoon has avoided a widespread drought situation
Four straight weeks of heavier rains than normal from the last week of August have helped India, one of the
world's leading producers and consumers of farm commodities, escape a prolonged large-scale drought. The
overall deficiency has reduced drastically to ~8% of a normal monsoon. This has to a large extent receded fears
of significant increase in the food inflation a few months back. Also the rural spending would remain intact and
hydropower generation could improve in the country.
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contd
Markets has some more steam left, however, profit taking / consolidation before the next upmove cannot be
ruled out
The Indian market has moved up significantly over the past two months, much in line with global peers. The
quantitative easing globally and the reform push by the Indian Government have improved the market
sentiments significantly and has triggered a decent upmove. At current levels, the Sensex is trading at 14.5x to
15x its FY13E EPS. With the uncertainties like high fiscal deficit, high inflation, uncertainty over Governments
continuity post Trinamuls exit still looming around on the domestic bourses, we feel most of the positives (like
quick reform push, expectations of interest rate cuts) are already priced in the upside and the market seems to
be fairly valued on fundamental grounds at current levels.
However, it should be noted that the liquidity has improved significantly globally post the quantitative easing
announced by the central banks. Hence global liquidity coupled with expectations of some more policy reforms
in the coming months in India could continue to keep the Indian markets one of the most preferred destinations
in near term. Hence we could see the markets continue to inch higher gradually, though with intermediate
corrections at higher levels in the next one to two months. Political uncertainty and events unfolding in the
political arena are key risks in coming few days. Further the Q2 September quarter results would also set further
direction. Global geopolitical events could be another concern.
We think that the markets could continue to inch up till the results season begins. Later it could witness profit
taking. Whether the profit taking is deep or in the form of sideways move is not yet clear. The Sensex could
remain in the 17,900-19,500 band during October 2012.
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30
As we have been disussing in all our previous reports, the 2 major technical tools are acting as a resistance at
18,870 and in technical analysis these 2 tools are important.
61.8% of the entire downward move from 21,109 to 15,136 which is marked on the chart above with red
horizontal line.
110% leeway given when Normal Flat is developeing which is at 18,880 and it is not shown on the chart above.
When ever the Sensex will breach this resistance and close above 18,900, then the structure which is
considered as a Normal Flat or Common Flat will get converted into the Elongated Flat which is explained
in the chart below.
One important thing to be noted is that the Sensex had taken support at 18,524 which was the top formed by
wave A. So for the analysis here onwards we will keep 18,524 as a stop loss for buying positions.
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contd
As and when the Sensex is able to breach the 18,900 level, then Elongated Flat will come in the picture.
Please note that we are not changing the basis structure of the wave D as it will remain flat only, what we are
changing is a which type of the flat is unfolding.
Once the 18,900 is breached and the Sensex closes above it, the levels of 19,666 and 20,334 will come into
picture and they are 138.2% and 161.8% of wave A projected from the end of wave B.
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contd
For last 4 years we are assuming that the Sensex is forming a Contracting Triangle. And there 2 technical
observations which are as follows.
The more the Sensex goes above the B-D line (which drawn on the chart above with black color), the better it is
for the uprun of the Sensex as we will have to redraw the B-D line as the Sensex continues its upmove.
The Current structure of the wave D in a Normal Flat will get converted into a Elongated Flat when it moves
above 18,900. This will enhance the view of the Contracting Triangle.
When ever Contracting Triangle is unfolding and one leg of this triangle is an Elongated Flat the assumption of
the contracing triangle is on the right path.
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contd
If we take 8%,13% and 21% of the 21,109 which was the top made by wave B and as we had marked on the chart
above, all the 2 previous levels have worked in the recent past.
The top of wave A is made at 18,523 and 13% is at 18,371. The recent bottom was at 16,598 which is the
bottom of wave 2 and 21% was at 16,682. From this 2 examples it is clear that the Fibonacci % are in effect in the
current wave D.
Now if the Sensex take support at 18,523 which is also 13% of the wave B then according to this technique
19,427 will be the next upward target which is 8% from 21,109.
However once Sensex moves above 18,900, we feel that the next main resistances are at 19,665 and 20,334 (as
depicted in chart 2 above.
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Technical Commentary - Month Gone By
contd
In the month of the September the Sensex opened at 17,466 and for next 3 trading sessions it came down
and finally made an intermediate bottom at 17,251. It was the 9th reccord session and this technique of
record sessions worked well.
After forming the bottom at 17,251 the Sensex was continuously rising for 9 trading sessions and in this
upward journey it made 3 Western Gap Up pattern on the daily chart. And none of this gaps was filled and
the bullishness continued.
After making an intermidiate top at 18,715, it corrected for 2 trading sessions and started rising again.
Once again it went up to 18,867 and for next 4 trading sessions it went sideways. And on the next day once
again an attempt was made to breach 18,900 level, but this time it made an intraday high at 18,870 and
finally the Sensex closed the month at 18,763.
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35

The Daily Routine Of A Swing Trader
Swing trading combines fundamental and technical analysis in order to catch momentous price movements while
avoiding idle times. The benefits of this type of trading are a more efficient use of capital and higher returns,
and the drawbacks are higher commissions and more volatility.
Knowledgeable retail traders can take advantage of these things in order to profit consistently in the
marketplace. In this article, we lay out what a good daily trading routine and strategy looks like, and show you
how you can be similarly successful in your trading activities.
Pre-Market
The retail swing trader will often begin his or her day well before the opening bell. The time before the opening
is crucial for getting an overall feel for the day's market, finding potential trades, creating a daily watch list
and, finally, checking up on existing positions.
Market Overview
The first task of the day is to catch up on the latest news and developments in the markets. The quickest way to
do this is via business television channels or reputed websites. The trader needs to keep an eye on three things
in particular:
9 Overall market sentiment (bullish/bearish, key economic reports, inflation, currency, overseas trading sessions,
etc.)
9 Sector sentiment (hot sectors, growing sectors, etc.)

9 Current holdings (news, earnings, SEBI filings, etc.)
Find Potential Trades
Next, the trader will scan for potential trades for the day. Typically, swing traders will enter a position with a
fundamental catalyst and manage or exit the position with the aid of technical analysis. There are two good
ways to find fundamental catalysts:
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contd
1. Special opportunities: These are best found via headline news. Such opportunities may include initial public
offerings (IPOs), bankruptcies, insider buying, buyouts, takeovers, mergers, restructurings, acquisitions and
other similar events.
These types of opportunities often carry a large amount of risk, but they deliver rewards to those who
carefully research each opportunity. These types of plays involve the swing trader buying when most are
selling and selling when everyone else is buying, in an attempt to "fade" over-reactions to news and events.
2. Sector plays: These are best found by analyzing the news or consulting reputable financial information
websites to find out which sectors are performing well. For example, you can tell that the Banking sector is
hot simply by scanning the news for mentions of the Banking sector. These types of plays involve the swing
trader buying into trends at opportune times and riding the trends until there are signs of reversal or
retracement.
3. Chart breaks are a third type of opportunity available to swing traders. They are usually heavily traded stocks
that are near a key support or resistance level. Swing traders will look for several different types of patterns
designed to predict breakouts or breakdowns, such as triangles, channels, Fibonacci levels, Gann levels and
others. Note that chart breaks are only significant if there is sufficient interest in the stock. These types of
plays involve the swing trader buying after a breakout and selling again shortly thereafter at the next
resistance level.
Make a Watch List
The next step is to create a watch list of stocks for the day. These are simply stocks that have a fundamental
catalyst and a shot at being a good trade. Some swing traders like to keep a dry-erase board next to their
trading stations with a categorized list of opportunities, entry prices, target prices and stop-loss prices.
Check Existing Positions
Finally, in the pre-market hours, the trader must check up on his or her existing positions. First, check the
news to make sure that nothing material has happened to the stock overnight. This can be done by simply
typing the stock symbol into a news service. If there is material information, you have to analyze it and
determine whether it affects your current trading plan. You may also have to adjust your stop-loss and takeprofit points as a result.
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contd
Market Hours
The market hours are a time for watching and trading. Many swing traders look at quotes, which will show who
is buying and selling and what amounts they are trading.
As soon as a viable trade has been found and entered, traders begin to look for an exit. This is typically done
using technical analysis. Many swing traders like to use Fibonacci extensions, simple resistance levels or price
by volume. Ideally, this is done before the trade has even been placed, but a lot will often depend on the day's
trading. Moreover, adjustments may need to be made later, depending on future trading. As a general rule,
however, you should never adjust a position to take on more risk (e.g., move a stop-loss down): only adjust
profit-taking levels if trading continues to look bullish, or adjust stop-loss evels upward to lock in profits.
You will often find that entering trades is more of an art than a science, and it tends to depend on the day's
trading activity. Trade management and exiting, on the other hand, should always be an exact science
After-market Hours
The most important component of after-hours trading is performance evaluation.

It is important to carefully record all trades and ideas for both tax purposes and performance evaluation.
Performance evaluation involves looking over all of your trading activity and identifying things that need
improvement. Finally, you should review your open positions one last time, paying particular attention to
after-hours earnings announcements, or other material events that may impact your holdings.
The Bottom Line
Looking at the daily routine of the typical swing trader, it is evident that the pre-market routine is paramount
to successful trading. This is the time when trading opportunities are located and the day is planned. Market
hours are simply a time of entering and exiting positions, not devising any new plans. And finally, after hours is
just a time to review the trades for the day and assess performance.
Adopting a daily trading routine such as this one can help you improve your trading and ultimately beat market
returns. It just takes some good resources and proper planning and preparation.
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38
The month of Sept 2012 saw the Nifty gradually moving higher and taking out the previous highs of 5449 and
5652. It was the second consecutive month of gains for the Nifty, which seems to have come on the back of
economic reform announcements at home and quantitative easing measures abroad. M-o-M, the Nifty gained a
healthy 8.5%.
In the F&O space, the FIIs were net buyers in the Index Futures segment along with an increase in open interest
over Aug. This indicates long positions taken by them in these segments. In the Index options segments, FIIs
were net buyers with an increase in the open interest, which indicated more buying of options. In the stock
futures segment, FIIs were net sellers, while the open interest increased. This indicated hedging strategy
undertaken by them to protect their losses if the market falls or entering into Cash-Futures arbitrage. The Stock
Options segment witnessed very low participation during the month.
The October series has started on a heavier note compared to the previous series. In terms of value, the
Oct 2012 series has begun with market wide OI at Rs.1,04,572crs. Vs. Rs.82,760crs. at the beginning of the Sept
2012 series. It was Rs.86,624crs. at the beginning of the Aug 2012 series. The higher participation levels in the
Oct series (compared to the previous series) indicates that traders want to participate in the current uptrend.
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contd
Rollovers to the Oct series were however in line with the previous series, which indicates that traders probably
think that the rally seen in Sept may not continue into October. While Nifty rollovers were at 64% Vs. 64% during
the same time in the previous series, Market wide rollovers were at 83% Vs. 83% the same time in the previous
series. Bank Nifty rollovers were lower at 54% Vs. 67% the same time in the previous series.
Coming to stock specific rollovers, highest rollovers were seen in JSW energy, Ktk Bank, Welcorp, Aurobindo
Pharma and Tata Global. The lowest rollovers were seen in Shriram Transport, HDIL, Canara Bank and Cairn.
Reflecting the bullish trend in the market in the last one month, the Nifty OI PCR climbed to 1.24 from 1.0 at
the start of the previous series. Nifty IV dipped to 15.64% from 16.27% the same time in the previous series.
Nifty IVs normally decline in uptrending markets.
Technically, Nifty remains in an uptrend as it recently took out its previous highs of 5720 and continues to make
higher bottoms and higher tops in the last few months. The 5740-5802 resistances may however cap the upsides
in October as these are strong resistances. Moreover, as the Nifty has rallied strongly in Sept, markets could
take a breather and consolidate.
Index option activity suggests that traders are expecting the Nifty to trade within the 5300-5800 levels in the
coming month. We say this because the maximum call writing and build up of OI is currently being seen in the
5800 call strikes. Maximum put writing and build up is being seen in the 5400-5300 put strikes.
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40
Learning Derivatives Analysis

Strat1
Contracts
5,750.00
Strat2
Underlying Price
3-Oct-12
Today's Date
17.90%
Historical Volatility
25-Oct-12
Expiry Date
50
50
Type
Call
Put
Strike
5800
5600
9.00%
Risk Free Rate
Calculated Premium
89.46 50.51
1.50%
Dividend Yield
Actual Premium
68
33.6
Premium Used
68
33.6 5,080.00 Total Cost
Delta
23.56 -11.69 11.87
Gamma
0.08
0.06 0.14
Position Delta
Position Gamma
Theta
-146.53
-71 -217.53 Position Theta
Vega
280.85 216.3 497.15
Position Vega
Rho
78.89 -41.54 37.35
Position Rho
OPTION GREEKS
What are Option Greeks?
Option Greeks are mathematical outputs from an Option Valuation Model which help you to understand the
possible future movement in Option Values based on various underlying parameters. Greeks help you in
possible predictions of Option Values and help you to fine tune your buy / sell / hedge decisions much better.
While Greek formulae look heavily mathematical and formidable, they are not as difficult as they appear.
Which are the common Greeks used?
The common Greeks are Delta, Gamma, Vega and Theta.

What does Delta indicate?
Delta stands for the change in the Option Value for a given change in the price of the underlying. For example,
if the Delta of a Call Option is 0.65, the meaning is: If the share price moves up by Re 1.00, the Call Option will
rise up by Rs 0.65. Call Option Deltas are by definition positive indicating that a rise in share price will also
result in a rise in the Option Value. Put Option Deltas are by definition negative, indicating that a rise in share
price will result in a fall in the Put Option Value.
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contd
In the above example if Nifty moves towards 5800 level then the delta value of call option could increase near
to level 1 (as the spot is near the strike price) and Delta value of put option could reduce in proportion.
For in the money call option or put option the delta value is always near to 1.
Delta value may reduce as strike price of Call/Put options moves away from its actual value.
Liquidity in the options always determines a better delta value.
What does Gamma stand for?
Gamma stands for the change in Delta itself for a given change in the underlying. Technically, it is called a
second order derivative. Let us take an example. For a given share price, the Delta of an Option is currently
0.65. The Gamma at the moment is 0.02. This means: If the share price moves up by Re 1.00, the Option Value
will move up by Rs 0.65 (meaning of Delta as discussed above). When this happens, the Delta itself will become
0.67 (i.e. 0.65 as earlier plus 0.02). Thus, the Gamma predicts movements in Delta given changes in the
underlying.
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contd
In the above example Gamma value could be always higher when the spot price is near the strike price.
Gamma value increases as spot price reaches near to it strike price. Thereafter it could start reducing as call or
put enters into in the money.
What does Vega indicate?
Vega indicates impact of Volatility. As we have discussed earlier, Volatility has a positive impact Option Values.
Both Calls and Puts will increase in Value if Volatility rises and fall in Value if Volatility falls. Vega determines
the increase or decrease in Value with precision. For example: if Vega is 0.09, the meaning is that the Option
Value will rise by Rs 0.09 for an increase of 1% in Volatility. If the current Volatility of Nifty is 35% and the Value
of an Option is Rs 11, the implication is that were the Volatility to move up to 36%, the Option Value would rise
to Rs 11.09. Conversely, if Volatility were to fall, the Option Value will correspondingly decrease.
In the above example given the volatility is near 16 level, if volatility increases then the option value also
increases
Vega is directly proportional to change in volatility.

If traders are expecting change in volatility in the market then they can concentrate on the Vega value
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contd
What does Theta stand for?
We have discussed earlier that Option Values will decrease with passage of time. The Time Value component of
the Option will gradually move down to zero on expiry day. Theta determines precisely how much the value of
the Option will decrease by passage of time. For example, if the Theta of an Option is 0.17, this means the
value of this Option will decrease by Rs 0.17 on passage of one day.
In the above example call or put options have 22 days remaining for the expiry. Hence the time value is on the
higher side means Theta is on the higher side.
At the money call/put options have higher Theta value compared with out of the money and in the money
options.
Deep in the money options always has low Theta value.

Are there other Greeks?
There are other Greeks like Rho and third order derivatives which are not very practical for the Indian scenario
right now. The relevance of such Greeks would be applicable in a highly sophisticated market and for
institutional players. For retail investors, the four Greeks discussed above should suffice.
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contd
Index Futures Calls

Date
B/S
Trading Call
5-Sep-12
Bank Nifty Sept Fut
5-Sep-12
Nifty Fut
11-Sep-12
Bank Nifty Fut
17-Sep-12
Nifty Sept Fut
17-Sep-12
Bank Nifty Sept Fut
Entry at
Sloss
10007-9975
9940.0
10125.0
Targets Exit Pric e / CMP

9940.0
Exit Date
5-Sep-12
5225-5252
5220.0
5290.0
5273.7
6-Sep-12
0060-10100
10120.0
9950.0
10120.0
11-Sep-12
% G/L Comments
-0.5 Stop Loss Triggered
0.5 Premature Profit Booked
Time Horizon A vg. Entry A bs. Gain/Loss

2-3 days
9991.0
2-3 days
5245.0
-51.0
28.6
2-3 days
10080.0
-40.0
5610-5630
5640.0
5550.0
5554.0
20-Sep-12
2-3 days
5620.0
66.0
0900-10950
10965.0
10780.0
10848.9
17-Sep-12
2-3 days
10915.0
66.1
Exit Date
Stock and Nifty Options Calls

Date
Entry at
Sloss
4-Sep-12
B/S
B
L&T 1400 Call Option
Trading Call
28-20
15.0
50.0
15.0
5-Sep-12
6-Sep-12
Nifty 5300 Call Option
60-50
40.0
90.0
90.0
7-Sep-12
7-Sep-12
Pantaloon Retail 140 Call Option
7.95-5
3.0
16.0
14.4
10-Sep-12
7-Sep-12
Yes Bank Sep 340 Call Option
5.6
13.0
5.6
11-Sep-12
13-Sep-12
BHEL 200 Call Option
6.75-3
2.0
12.0
8.7
14-Sep-12
14-Sep-12
Tata Steel 400 Put Option
3-7
2.5
15.0
12.3
20-Sep-12
17-Sep-12
Century Tex 340 Put Option
1.9-1
0.5
6.0
6.0
17-Sep-12
18-Sep-12
Polaris 140 Call Option
20-Sep-12
Bharti Airtel 270 Sep Put option
% G/L Comments
Time Horizon A vg. Entry A bs. Gain/Loss

7 days
28.0
-13.0
50.0 Target Achieved
3 days
60.0
30.0
5 days
8.0
6.4
2-5 days
8.0
-2.4
5 days
6.3
2.5
2-3 days
6.6
5.7
7 days
1.9
4.1
215.8 Target Achieved
3.2-2.3
2.0
7.0
6.0
18-Sep-12
2-3 days
3.2
2.8
4.95-3.5
3.0
10.0
6.5
20-Sep-12
2-3 days
5.0
1.6
20-Sep-12
HDI L 75 Put Option
0.5-1.1
0.5
2.5
0.5
21-Sep-12
2-3 days
0.9
-0.4
21-Sep-12
Balrampur Chini 65 Put Option
1.1-0.7
0.6
2.3
0.6
24-Sep-12
2-3 days
1.1
-0.5
26-Sep-12
Nifty October 5800 Call Option
51-40
30.0
100.0
72.0
28-Sep-12
10 days
50.0
22.0
Entry at
Sloss
Exit Date
Trading/BTST/Futures Calls
Date
B/S
Trading Call
% G/L Comments
Time Horizon A vg. Entry
A bs. Gain/Loss
4-Sep-12
Sandur Manganese
474-463
455
520
518.0
7-Sep-12
15 days
474
44
4-Sep-12
Jain I rrigation
63.75-60
58
73
66.7
18-Sep-12
10 days
63.5
3.15
4-Sep-12
Jubilant Food
1200-1213
1185
1280
1239.0
5-Sep-12
1-3 days
1211
27.95
4-Sep-12
Ballarpur I ndustries
17-18.25
19.5
24
19.6
6-Sep-12
4-5 days
17.95
1.6
7-Sep-12
National Fertilizers
74.7-72
69
82
76.8
10-Sep-12
5 days
74.5
2.25
7-Sep-12
Whirlpool
254
293
254.0
10-Sep-12
2-5 days
265.75
-11.75
10-Sep-12
Prime Focus
49.6-48
47
55
48.1
17-Sep-12
-3.0 Premature Exit
5 days
49.6
-1.5
12-Sep-12
Jet Airways
348-351
335
383
362.2
13-Sep-12
2-5 days
350.5
11.7
264-266.5
12-Sep-12
Nandan Exim
17-Sep-12
Jyoti Structure
25-28.5
18-Sep-12
Cummins
470-474
458
506
486.0
21-Sep-12
1-3 days
474
12
18-Sep-12
BGR Energy
270-278.5
269
291
284.7
24-Sep-12
2-3 days
276
8.7
36.5-38.5
29
34
31.6
12-Sep-12
2-3 days
27.9
3.7
36.25
42.5
40.0
18-Sep-12
2-3 days
37.6
2.4
24-Sep-12
Orbit Corp
46.8-45.75
45
52
46.5
25-Sep-12
2-3 days
46.65
-0.15
25-Sep-12
Prestige
133-138.7
132.5
153
145.0
26-Sep-12
2-3 days
135.65
9.35
26-Sep-12
Mukund Engg
29.5-32.5
29.25
36
33.8
28-Sep-12
2-3 days
31.25
2.5
28-Sep-12
Tata Global
132-134.8
129
147
142.2
28-Sep-12
2-5 days
134.55
7.65
Retail Research
-0.3 Premature Exit
HOME
contd
Positional Calls
Date
7-Sep-12
B/S
B
Trading Call
EKC
Entry at
Sloss
26.25-25.75
25.0

29.5
26.5
Exit Date % G/L Comments

12-Sep-12
Retail Research
Time Horizon Avg. Entry Abs. Gain/Loss

1 Week
26.3
0.3
45
HOME
FII & Mutual Fund Flow and indices moves during September 2012
Total FII Inflow s/Outflow s during the month of September 2012. (A ll figures in Rs.
W eek Ended
Buy
Sold
Net
Cumulative
4/9/2012
3298.8
3043.9
254.9
254.9
11/9/2012
9726.4
8647.2
1079.2
1334.1
18/9/2012
18911.7
11724.3
7187.4
8521.5
25/9/2012
21706.9
13045.7
8661.2
17182.7
28/09/2012
13125.4
10329.8
2795.6
19978.3
Total
66769.2
46790.9
19978.3
Total MF Inflow s/Outflow s during the month of September 2012. (A ll figures in Rs.
W eek Ended
Buy
Sold
Net
Cumulative
4/9/2012
503.6
759.1
-255.5
-255.5
11/9/2012
1956.9
2043.4
-86.5
-342.0
18/9/2012
3077.7
4293.1
-1215.4
-1557.4
BSE Indic es
25/9/2012
2930.1
3776.7
-846.6
-2404.0
28/09/2012
1958.9
2753.6
-794.7
-3198.7
Total
10427.2
13625.9
-3198.7
28-Sep-12
31-Aug-12
18762.7
17429.6
Smallcap
7017.9
6395.1
Midcap
6607.3
6005.0
500
7206.5
6632.3
8.66 Auto
200
2307.6
2124.1
8.64 Oil & Gas
100
5701.4
5251.1
8.58 PSU
Realty
1847.0
1510.9
22.24 IT
6939.8
6241.0
11.20 FMCG
10528.2
9687.5
Sensex
Consumer Durables
Metal
% c hg BSE Indic es
7.65 Bankex
9.74 Power
10.03 Capital Goods
8.68 Healthcare
Retail Research
28-Sep-12 31-Aug-12
% c hg
13138.7
11515.9
14.09
2048.8
1870.8
9.51
10957.5
9447.5
15.98
10413.2
9240.4
12.69
8661.6
8211.5
5.48
7415.8
6939.4
6.87
5922.6
5742.0
3.15
5507.4
5355.6
2.83
7528.4
7495.6
0.44
46
HOME
Gainers & Losers September 2012

Top Gainers From F&O
PANTALOONR
Pric e
Pric e
31-Aug-12
28-Sep-12
Top Losers From F&O

% c hg
Pric e
Pric e
31-Aug-12
28-Sep-12
% c hg
138.6
214.0
54.5
MTNL
37.1
32.4
-12.8
HDIL
66.9
97.4
45.7
RUCHISOYA
83.6
74.6
-10.8
NCC
33.3
46.9
41.1
GLAXO
2100.0
1981.1
-5.7
JPPOWER
25.6
35.3
38.0
DIVISLAB
1140.0
1082.6
-5.0
ONMOBILE
34.9
47.5
36.3
RANBAXY
551.7
529.8
-4.0
GMRINFRA
18.2
24.8
36.3
TCS
1343.8
1295.9
-3.6
LITL
11.1
15.1
36.2
PIRHEALTH
480.1
464.2
-3.3
CANBK
318.1
431.5
35.6
CAIRN
340.1
331.1
-2.6
RELCAPITAL
319.8
431.5
34.9
BEL
1241.0
1208.6
-2.6
ORIENTBANK
224.4
301.9
34.5
VIDEOIND
175.8
171.5
-2.4
Top Losers From CNX 500
Top Gainers From CNX 500

Pric e
Pric e
31-Aug-12
28-Sep-12
% c hg
ARSSINFRA
34.9
60.0
72.2
TULIP
ANANTRAJ
44.8
71.5
59.6
KEMROCK
138.6
214.0
54.5
EKC
24.2
35.6
HDIL
66.9
UBHOLDINGS
MUTHOOTFIN
NCC
JPPOWER
PANTALOONR
BIRLACORPN
Pric e
Pric e
31-Aug-12
28-Sep-12
% c hg
91.0
45.6
-49.9
115.4
87.0
-24.6
MVL
4.4
3.3
-24.1
47.1
DCHL
12.8
10.3
-19.9
97.4
45.7
ORISSAMINE
55327.5
45483.2
-17.8
92.3
134.4
45.6
BLUEDART
1979.3
1720.3
-13.1
125.7
179.2
42.6
MTNL
37.1
32.4
-12.8
33.3
46.9
41.1
ASTRAZEN
1864.7
1663.5
-10.8
25.6
35.3
38.0
RUCHISOYA
83.6
74.6
-10.8
205.7
282.5
37.3
GHCL
41.1
37.3
-9.3
Retail Research
47
48
RETAIL RESEARCH TEAM

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

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Monthly Report October 2012

Monthly Equity Commentary

Bond yields, commodities and currencies

Comparison of Equity Returns in various emerging

Outlook Going Forward

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Given below is an overview of global markets performance during September 2012:

Hong Kong Hang Seng

Indonesia - Jakarta Composite

Chinese - Shanghai composite

The world markets ended the month of September 2012 on a

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

28-Sep-12 31-Aug-12 % Chg 29-Jun-12 % Chg

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Hong Kong dollar

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Comparison of Equity Returns in various markets - MSCI Indices in US$ terms

Emerging Mark ets

Last Returns Returns Returns Returns MSCI Index

Last Returns Returns

13.3% HONG KONG

EM EUROPE & MIDDLE EAST

17.6% NEW ZEALAND

7.2% Frontier Markets

14.8% SRI LANKA

Monthly Report October 2012

1.6% BOSNIA AND HERZEGOVINA

Monthly Equity Commentary

Comparison of Equity Returns in various markets - MSCI Indices in US$ terms

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Monthly Report October 2012

Monthly Equity Commentary

Outlook going forward

Monthly Report October 2012