“Global Economical Crisis-Impact on Indian Stock Markets”

1.1 INTRODUCTION
Global Financial Crisis of 2008 The global financial crisis of 2008 is a major ongoing financial crisis, the worst of its kind since the Great Depression. – It became prominently visible in September 2008 with the failure, merger or conservator ship of several large United States-based financial firms. The underlying causes leading to the crisis had been reported in business journals for many months before September, with commentary about the financial stability of leading US and European investment banks, insurance firms and mortgage banks consequent to the sub-prime mortgage crisis. Beginning with failures of large financial institutions in the United States, it rapidly evolved into a global crisis resulting in a number of European banks' failures and declines in various stock indexes, and significant reductions in the market-value of equities (stock) and commodities worldwide. The crisis has led to a liquidity problem and the deleveraging of financial institutions especially in the United States and Europe, which further accelerated the liquidity crisis. World political leaders and national ministers of finance and central bank directors have coordinated their efforts to reduce fears, but the crisis is ongoing and continues to change, evolving at the close of October 2008 into a currency crisis with investors transferring vast capital resources into stronger currencies such as the Yen, the Dollar and the Swiss Franc, leading many emergent economies to seek aid from the International Monetary Fund. The crisis has roots in the sub-prime mortgage crisis and is an acute phase of the financial crisis of 2007-2008.

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“Global Economical Crisis-Impact on Indian Stock Markets” Sub-Prime Mortgage Crisis Sub-prime, as the word suggests, is anything that is not prime. In the sub-prime crisis context, it simply means lending money to sub-prime borrowers, i.e., lending to people with low or poor credit worthiness. Much thought and energy has already been spent in the literature in understanding the causes of the sub-prime crisis. To put it very simply, the sub-prime crisis was caused because the lending norms in the USA were very lax. It is joked about in the academic circles that any man who was not on a respirator was given a loan without any regard to his or her credit-worthiness. This was brought about by the "spend yourself out of the post dotcom bust recession" policy of the American government at that time. The question is whether the American crisis has seen its worst, or will it deepen? The US Federal Reserve Board has cut the interest rates by a steep 0.75 percent on January 22, 2009. There is an expectation that the US economy will stabilize as a –result. Will such measures succeed? It is unlikely. They still do not remove the basic weakness of the American economy. The first weakness is in the service sector. Previously the US was leading in software production and new designs, etc. This supremacy is now being challenged by Indian companies like TCS, Infosys and Wipro. Many leading companies are transferring their research departments to India because wages are low here. Similar trends can be seen in many areas like clinical trials, translation, architectural designing, tele-marketing, and publishing and printing. This weakness can only marginally be managed from devaluation of the dollar. It is rooted more in the moribund nature of the US education system. The second source of weakness is in the auto-loans and credit cards. Another crisis, like that in the sub-prime housing sector, is in the making. The present troubles started here. The US Federal Reserve Board encouraged people to take loans to buy houses. The consequent demand from the housing sector kept the US economy chugging for about three years. But the borrowers could not repay their housing loans because of decline in 8 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” salaries and wages due to international competition. The loans went into default. Banks seized the houses, but had to sell them at much lower prices, and had to book huge losses. A similar crisis is in the making in the auto-loans sector. Car majors are extending loans to borrowers. The loans backed by security of an automobile are considered 'safe', much like the sub-prime housing was considered safe. The borrowers are likely to default on these auto-loans and also credit cards just as they did on housing loans. The third source of weakness is high oil prices. Americans love big and fast cars. They have to import huge quantities of oil to keep them running. This is a big drain on the American economy especially in view of the rising oil prices. The American economy is more energy intensive than, say, India. They consume more oil per dollar of income generated. Consequently, high oil prices have a greater negative impact on that economy. The adverse impact on India is reduced for another reason. The oil-rich Arab countries are making grand projects like hotels on artificial islands. The manpower for these projects is supplied in large measure by India. These workers send remittances back home. Thus, part of the money spent by the world in buying Arab oil flows to India. The negative impact of high oil prices is partly cancelled by remittances for India but not for America. The fourth source of weakness is the expenditure that country has taken upon itself by acting as the global policeman. The US is incurring huge expenditures in wars in Iraq and Afghanistan. There seems to be no end to these in sight. Global Responses On September 15, 2008, China cut its interest rate for the first time since 2002. Indonesia reduced its overnight repo rate, by two percentage points to 10.25 percent. The Reserve Bank of Australia injected nearly $ 1.5 Billion into the banking system, nearly three times as much as the market's estimated requirement. The Reserve Bank of India added almost $ 1.32 Billion, through a re-finance operation, its biggest in at least a month. In Taiwan, the Central Bank on September 16, 2008, said it would cut its required reserve ratios for the first time in eight years. The Central Bank added $ 3.59 Billion into the 9 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” foreign-currency interbank market the same day. Bank of Japan pumped $ 29.3 Billion into the financial system on September 17, 2008, and the Reserve Bank of Australia added $ 3.45 Billion the same day. The European Central Bank injected $ 99.8 Billion in a one-day money-market auction. The Bank of England pumped in $ 36 Billion. Altogether, central banks throughout the world added more than $ 200 Billion from the beginning of the week to September 17, 2008. US Responses The Federal Reserve, Treasury, and Securities and Exchange Commission took several steps on September 19 to intervene in the crisis. To stop the potential run on money market mutual funds, the Treasury also announced on September 19 a new $ 50 Billion program to insure the investments, similar to the Federal Deposit Insurance Corporation (FDIC) program. Part of the announcements included temporary exceptions to Section 23A and 23B (Regulation W), allowing financial groups to more easily share funds within their group. The exceptions would expire on January 30, 2009, unless extended by the Federal Reserve Board. The Securities and Exchange Commission announced termination of short-selling of 799 financial stocks, as well as action against naked short selling, as part of its reaction to the mortgage crisis. American Crisis and India The basic reason for the decline is crisis in the US economy. Indian and American economies are interlinked in two ways - through trade in goods and flow of capital. The demand for Indian exports declines as the American economy sinks. But India certainly gains from cheaper imports in the same measure. Garment exporter suffers because his orders are cancelled but software engineer makes merry because he gets Windows software cheap. The combined effect of exports and imports on the economy is nearly zero. However, share markets respond to the woes of exporters who are listed on the bourses and not to the gains of consumers. Thus, there is a negative impact on Indian share markets although there is little impact on the economy.

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“Global Economical Crisis-Impact on Indian Stock Markets” The interlinkage through capital flows is tricky. There is an outflow of capital from India in the short run as the American economy sinks, but there is greater inflow towards India in the long term. Global Banks incur losses as troubles of the American economy deepen. Loans given by them to American home-owners are not repaid. They have to resort to sale of shares in the Indian markets to raise money to meet these losses in the US. The decline in –Indian share markets in the last two weeks started with such a sell off by foreign banks. The Government of India is concerned that global black money is being invested in Indian share markets. The recent clamp-down on Promissory Notes was made to prevent such inflows. The Impact of the Crisis on India While the overall policy approach has been able to mitigate the potential impact of the turmoil on domestic financial markets and the economy, with the increasing integration of the Indian economy and its financial markets with rest of the world, there is recognition that the country does face some downside risks from these international developments. The risks arise mainly from the potential reversal of capital flows on a sustained medium-term basis from the projected slow-down of the global economy, particularly in advanced economies, and from some elements of potential financial contagion. In India, the adverse effects have so far been mainly in the equity markets because of reversal of portfolio equity flows, and the concomitant effects on the domestic forex market and liquidity conditions. The macro effects have so far been muted due to the overall strength of domestic demand, the healthy balance sheets of the Indian corporate sector, and the predominant domestic financing of investment. As might be expected, the main impact of the global financial turmoil in India has emanated from the significant change experienced in the capital account in 2008-09 so far, relative to the previous year (Table 1). Total net capital flows fell from US $ 17.3 Billion in April-June 2007 to US $ 13.2 Billion in April-June 2008. Nonetheless, capital

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“Global Economical Crisis-Impact on Indian Stock Markets” flows are expected to be more than sufficient to cover the current account deficit this year as well. While Foreign Direct Investment (FDI) inflows have continued to exhibit accelerated growth (US $ 16.7 Billion during April-August 2008 as compared with US $ 8.5 Billion in the corresponding period of 2007), portfolio investments by Foreign –Institutional Investors (FIIs) witnessed a net outflow of about US $ 6.4 Billion in April-September 2008 as compared with a net inflow of US $ 15.5 Billion in the corresponding period last year. Similarly, external commercial borrowings of the corporate sector declined from US $ 7.0 Billion in April-June 2007 to US $ 1.6 Billion in April-June 2008, partially in response to policy measures in the face of excess flows in 2007-08, but also due to the current turmoil in advanced economies. With the existence of a merchandise trade deficit of 7.7 per cent of GDP in 2007-08, and a current account deficit of 1.5 per cent, and change in perceptions with respect to capital flows, there has been significant pressure on the Indian exchange rate in recent months. Whereas the real exchange rate appreciated from an index of 104.9 (Base 1993-94=100) (US $ 1 = Rs. 46.12) in September 2006 to 115.0 (US $ 1 = Rs. 40.34) in September 2007, it has now depreciated to a level of 101.5 (US $ 1 = Rs. 48.74) as on October 8, 2008. decline of the dollar has forced global investors to look for another place to invest their capital. The Saudi Royal Family, for example, is earning huge amounts from the sale of oil due to high prices that are prevailing. Till recently, they were investing this income in New York. But this will now flow to Mumbai, and Indian share markets will glow. Remember the Indian share markets have been scaling new heights as the US economy has been sinking in the last two years. Surely, Indian share markets jitter every time bad news comes from America.

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Trends in Capital Flows Component Foreign Direct Investment to India FIIs (Net) * External Commercial Borrowings (Net) Short-Term Trade Credits (Net) Memo ECB Approvals Foreign Exchange Reserves (Variation) Foreign Exchange Reserves (End-Period) Period April - August April - September 26 April - June April - June April - August April - September 26 September 26, 2008 US $ Million 2007-08 2008-09 8,536 16,733 15,508 -6,421 6,990 1,559 1,804 2,173 13,375 48,583 247,762 8,127 -17,904 291,819

* Data on FIIS presented in this table represent inflows into the country and, thus, may differ from data relating to net investment in stock exchanges by FIIs.

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1.2 RESEARCH METHODOLOGY
Sample Size :
 Three sectors  Three in each Sector

Sampling Technique:
 Simple Random Sampling

Analysis:
 Technical analysis: Through the Tables and Graphs

Data:
 Secondary data from 01-01-2009 to 01-02-2009

Interpretation:
 Percentage of change of each company and represents the Average of change to the whole sector movement of sector.  Sectorial movement shows whether the sector is positive or negative .And the sector show impact on Indian Stock Market.

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1.3 Limitations
 Sample Size is three sectors hich may not be able to show that exact picture of the market.  We took three company’s in each which may not be able show that exact picture of the sector

 Time period of sector is for thirty days which is to find out the market movement  The fundamental news and company results may shows the impact on the study during the study period.

 Sub prime crisis in still showing its impact on the market on few sector majority

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2.1 COMPANY PROFILE

A world of intelligent investing

Ever since its inception in 1993, Networth Stock Broking Limited (NSBL) has sought to provide premium financial services and information, so that the power of investment is vested with the client. We equip those who invest with us to make intelligent investment decisions, providing them with the flexibility to either tap into our extensive knowledge and expertise, or make their own decisions. NSBL made its debut into the financial world by servicing Institutional clients, and proved its high scalability of operations by growing exponentially over a short period of time. Now, powered by a top-notch research team and a network of experts, we provide an array of retail broking services across the globe - spanning India, Middle East, Europe and America. Currently, we are a Depository participant at Central Depository Services India (CDSL) and aim to become one at National Securities Depository (NSDL) by the end of this quarter. Our strong support, technology-driven operations and business units of research, distribution and advisory coalesce to provide you with a one-stop solution to cater to all your broking and investment needs. Our customers have been participating in the booming commodities markets with our membership at the Multi Commodity Exchange of India (MCX) and National Commodity & Derivatives Exchange (NCDEX) through Networth Stock.Com Ltd.

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NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the Bombay Stock Exchange Ltd (BSE) on the Capital Market and Derivatives (Futures & Options) segment . It is also a listed company at the BSE. Corporate overview • Networth is a listed entity on the BSE since 1994 • The company is professionally managed with experience of over a decade in broking and advisory services • Networth is a member of BSE, NSE, MCX, NCDEX, AMFI, CDSL

Current network in India with 256 branches and franchise. Presence in major metros and cities

• Empanelled with prominent domestic Mutual Funds, Insurance Companies, Banks, Financial Institutions and Foreign Financial Institutions. • Strong experienced professional team
• • •

50000+ strong and growing client base Average daily broking turnover of around INR 5 billion AUM with Investment Advisory Services of around INR 6 billion

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2.2INFRASTRUCTURE • A corporate office and 3 divisional offices in CBD of Mumbai which houses state-of-the-art dealing room, research wing & management and back offices.

All of 256 branches and franchisees are fully wired and connected to hub at Corporate office at Mumbai. Add on branches also will be wired and connected to central hub

• Web enabled connectivity and software in place for net trading.

200 operative ID’s for dealing room management system in place with 100% redundancy back up.

• State of the Art accounting and billing system, on line risk • In house technology back up team to ensure un-interrupted connectivity.

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2.3 PRODUCTS AND SERVICES AND PROTFOLIO • Retail and institutional broking • Research for institutional and retail clients • Distribution of financial products • Corporate finance • Net trading • Depository services • Commodities Broking

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Resea rch R ne & O nl i O ffl i

fline broking in comm & of odi ine tie l as value chain - in s On ding offi t ra ng et l N sitory as va ue chai o n Dep n o Manageme t Sch foli em rt e Po te ora Finance Corp visory Se or Ad rvi est ces nv I Company, on Se ts cto or ep broking in Eq ui ne
my ono Ec r, Derivatie s & ty

Services

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1

0

7

b

r a

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c h

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The Networth connectivity with 256 branches and growing

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Networth Research Products
• • • • •

India Daily Notes – Market Musing Economy Pulse – – Bullion Tracker –

Market Insight for the day What’s Hot and What’s not !!! Analysis of trends in Gold & Silver Monthly overview of macro factors – Detailed fundamental report

Company-Specific Reports

subsequent to plant visit & management meet

Pre-Quarter Result Previews – Result preview of companies under coverage
• • •

Result Update Stock Stance

– Post result review of companies under coverage Management Visit Note

Theme-Based Reports –Budget Analysis, Dividend

NSBL - Objectives of the Company:  To increase its investors all over the country  To provide better services to their clients  To maintain good relation with the clients  Increasing the profits of the company  To lead their transactions under the control Act of Securities Exchange Board of India 1992

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NSBL - Product / Service produced: Here the product means service relate to the company the company Brokerage Services. Its has spreaded across over the country with experienced and expertized in the Brokerage services rendered by the Brokers in their Branches to their Investors.

NSBL – Market Research: Market research is one of important Methodology for finding the problem and make analyze and interpret and solve the problem. In every area it has sharing the contribution towards successing the projects / problems. In the NSBL company has also adopted this technique by Research analysts to these brokers utilizes and understands their researches then they will moving in a right path. The research analysts analyses the company performance and what are the company’s stocks are moving why the company’s scrips prices are fluctuating and what are the effects for this situations under the circumstances. Then the company successfully operating their activities produce of good operating Results. NSBL – Operating Results: The Operating Results of the NSBL company is satisfactory compare to its competitors are India Bulls, Networth Stock Broking ltd, India info line etc., They are giving quality services to their clients and improving their retained gains. Through this they are creating new clients through adopting different strategies for attracting the clients towards its business then its future glorious.

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NSBL – Future Outlook: Its future will be Glorious because it has recently launches new service to expand its business i.e., NSBL - INSURANCE it tie ups with other insurance companies like Reliance insurance and Bajaj life insurance to gather the customers towards their company to other insurance companies they will gain the profit like the company NSBL planned for the future make its fruitful

.

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Indian scenario:
The seventh largest and second most popular country in the world, India has long been considered a country of unrealized potential. A new spirit of economic freedom is now stirring in the country, bringing sweeping changes in its wake. A series of ambitious economic reforms aimed at deregulating the country and stimulating foreign investment has moved India firmly into the front ranks of the rapidly growing Asia Pacific region and unleashed the latent strengths of a complex and rapidly changing nation. India's process of economic reform is firmly rooted in a political consensus that spans her diverse political parties. India's democracy is a known and stable factor, which has taken deep roots over nearly half a century. Importantly, India has no fundamental conflict between its political and economic systems. Its political institutions have fostered an open society with strong collective and individual rights and an environment supportive of free economic enterprise. India's time tested institutions offer foreign investors a transparent environment that guarantees the security of their long term investments. These include a free and vibrant press, a judiciary which can and does overrule the government, a sophisticated legal and accounting system and a user friendly intellectual infrastructure. India's dynamic and highly competitive private sector has long been the backbone of its economic activity. It accounts for over 75% of its Gross Domestic Product and offers considerable scope for joint ventures and collaborations. Today, India is one of the most exciting emerging markets in the world. Skilled managerial and technical manpower that match the best available in the world and a middle class whose size exceeds the population of the USA or the European Union, provide India with a distinct cutting edge in global competition. A firm faces several types of risks. Its profitability fluctuates due to unanticipated changes in demand, cost, price, taxes, interest rates, exchange rates, etc. managers may not be able to fully control these risks, but to some extent, can decide the risk that a firm can bear. They adopt many strategies to reduce the risk by keeping several options open,

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“Global Economical Crisis-Impact on Indian Stock Markets” which ultimately creates flexibility that might bail them out in difficulties. One major way of reducing the exposure to risk is by entering into financial derivatives. Risk management is an integral part of the financial service industry: and due to globalization the Indian financial market will see an increase in the products in this category. The changing scenario has forged a change in the Indian security market. Also certain market imperfections operative in the market called for change. A majority of organizations and individuals face financial risk due to changes in the stock market, prices, interest rates and exchange rates having great significance on the financial soundness. Risk taking is the core competence of entrepreneurial spirit: without embracing risks a business can not reap rewards. Risk and return are the two sides of a coin: while risk taking is known for ages, the emergence of risk management as a specialized field is a fairly recent phenomenon. Risk management is an integral part of the financial service industry. Fund managers, merchant bankers, brokers and portfolio managers, are all exposed to various types of risks. One of the most important risks is price risk. In today’s era investor invest their funds after basic analysis. The basic function of financial market is to facilitate the transfer of funds from surplus sectors that is from (lenders) to deficit sectors (borrowers). If we look at the financial cycle then we can say that households make their savings, which is provided to industrial sectors, which earn profit and finally this profit will go to the households in the form of interest and dividend. Indian Financial System is made-up of 2 types of markets i.e. Capital Market & Money market.

CAPITAL MARKET HISTORY
The history of the Indian capital markets and the stock market, in particular can be traced back to 1861 when the American Civil War began. The opening of the Suez Canal during the 1860s led to a tremendous increase in exports to the United Kingdom and United States. Several companies were formed during this period and many banks came to the 26 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” fore to handle the finances relating to these trades. With many of these registered under the British Companies Act, the Stock Exchange, Mumbai, came into existence in 1875. It was an unincorporated body of stockbrokers, which started doing business in the city under a banyan tree. Business was essentially confined to company owners and brokers, with very little interest evinced by the general public. There had been much fluctuation in the stock market on account of the American war and the battles in Europe. Sir Premchand Roychand remained a kingpin for many years. Sir Phiroze Jeejeebhoy was another who dominated the stock market scene from 1946 to 1980. His word was law and he had a great deal of influence over both brokers and the government. He was a good regulator and many crises were averted due to his wisdom and practicality. The BSE building, icon of the Indian capital markets, is called P.J. Tower in his memory. The planning process started in India in 1951, with importance being given to the formation of institutions and markets The Securities Contract Regulation Act 1956 became the parent regulation after the Indian Contract Act 1872, a basic law to be followed by security markets in India. To regulate the issue of share prices, the Controller of Capital Issues Act (CCI) was passed in 1947. The stock markets have had many turbulent times in the last 140 years of their existence. The imposition of wealth and expenditure tax in 1957 by Mr. T.T. Krishnamachari, the then finance minister, led to a huge fall in the markets. The dividend freeze and tax on bonus issues in 1958-59 also had a negative impact. War with China in 1962 was another memorably bad year, with the resultant shortages increasing prices all round. This led to a ban on forward trading in commodity markets in 1966, which was again a very bad period, together with the introduction of the Gold Control Act in 1963. The markets have witnessed several golden times too. Retail investors began participating in the stock markets in a small way with the dilution of the FERA in 1978. Multinational companies, with operations in India, were forced to reduce foreign share holding to below a certain percentage, which led to a compulsory sale of shares or issuance of fresh

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“Global Economical Crisis-Impact on Indian Stock Markets” stock. Indian investors, who applied for these shares, encountered a real lottery because those were the days when the CCI decided the price at which the shares could be issued. There was no free pricing and their formula was very conservative. The next big boom and mass participation by retail investors happened in 1980, with the entry of Mr. Dhirubhai Ambani. Dhirubhai can be said to be the father of modern capital markets. The Reliance public issue and subsequent issues on various Reliance companies generated huge interest. The general public was so unfamiliar with share certificates that Dhirubhai is rumoured to have distributed them to educate people. Mr. V.P. Singh’s fiscal budget in 1984 was pathbreaking for it started the era of liberalization. The removal of estate duty and reduction of taxes led to a swell in the new issue market and there was a deluge of companies in 1985. Mr. Manmohan Singh as Finance Minister came with a reform agenda in 1991 and this led to a resurgence of interest in the capital markets, only to be punctured by the Harshad Mehta scam in 1992. The mid-1990s saw a rise in leasing company shares, and hundreds of companies, mainly listed in Gujarat, and got listed in the BSE. The end- 1990s saw the emergence of Ketan Parekh and the information, communication and entertainment companies came into the limelight. This period also coincided with the dotcom bubble in the US, with software companies being the most favoured stocks. There was a melt down in software stock in early 2000. Mr. P Chidambaram continued the liberalization and reform process, opening up of the companies, lifting taxes on long-term gains and introducing short-term turnover tax. The markets have recovered since then and we have witnessed a sustained rally that has taken the index over 13000. Several systemic changes have taken place during the short history of modern capital markets. The setting up 5of the Securities and Exchange Board (SEBI) in 1992 was a landmark development. It got its act together, obtained the requisite powers and became effective in early 2000. The setting up of the National Stock Exchange in 1984, the introduction of online trading in 1995, the establishment of the depository in 1996, trade guarantee funds and derivatives trading in 2000, have made the markets safer. The introduction of the Fraudulent Trade Practices Act, Prevention of Insider Trading Act, Takeover Code and Corporate Governance Norms, are major developments in the capital

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“Global Economical Crisis-Impact on Indian Stock Markets” markets over the last few years that has made the markets attractive to foreign institutional investors. This history shows us that retail investors are yet to play a substantial role in the market as long-term investors. Retail participation in India is very limited considering the overall savings of households. Investors who hold shares in limited companies and mutual fund units are about 20-30 million. Those who participated in secondary markets are 2-3 million. Capital markets will change completely if they grow beyond the cities and stock exchange centers reach the Indian villages. Both SEBI and retail participants should be active in spreading market wisdom and empowering investors in planning their finances and understanding the markets.

3.2 CAPITAL MARKET

Securities market may be classified is by the types of securities bought and sold there. The broadest classification is based upon whether the securities are new issues or are already outstanding and owned by investors. Now we see following chart for understanding market types.

Capital Market

Primary Market 29

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Organized Exchanges

Over The Counter

Primary market: Securities available for the first time are offered through the primary securities markets. The issuer may be a brand-new company or one that has been in business for many years. The securities offered may be a new type for the issuer of additional amounts of a securities used frequently in the past. In primary market funds are mobilized in the primary market through prospectus, rights issues, and private placement. Secondary market: Once new issues have been purchased by investors, they change hands in the secondary markets. This market also known as stock market. In India the secondary market consist of recognized stock exchanges operating under rules, by-laws and regulations duly approved by the government. There are actually two broad segments of the secondary markets:

A. Organized market: Organized exchange are physical marketplaces where the agents of buyers and sellers operate thorough the auction process. There are number of organized exchanges in India. NSE (National Stock Exchange) and BSE (Stock Exchange Mumbai) are main stock exchange. Other than this there are more then 19 stock exchanges. B. Over The Counter (OTC): The OTC market is not a central physical marketplace but a collection of broker-dealer scattered across the country. This market is more a way of doing business than a place.

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“Global Economical Crisis-Impact on Indian Stock Markets” Buying and selling inters in unlisted stocks are matched not through the auction process on the floor of an exchange but through negotiated bidding, over a massive network of telephone and teletype wires that link thousand of securities firms here and abroad. MONEY MARKET: The money market has 2 components-The organized & unorganized. The organized market is dominated by commercial banks. The other major participants are RBI, LIC, GIC, and UTI. The main function of it is that of borrowing & lending of short term funds. On the other hand unorganized money market consists of indigenous bankers & money lenders. This sector is continuously providing finance for trade as well as personal consumption.

DERIVATIVES:Derivatives are contracts that are based on or derived from some underlying asset, reference rate, or index. Most common financial derivatives are forwards, futures, options and swaps. Derivatives trading commenced in India in June 2000 after SEBI granted the final approval to this effect in May 2000 for trading in index futures. Currently, the Indian markets provide equity derivatives of the following types:
• • • •

Index Futures Stock Futures Index Options Stock Options

Derivatives help to improve market efficiencies because risks can be isolated and sold to those who are willing to accept them at the least cost. Using derivatives breaks risk into pieces that can be managed independently. Corporations can keep the risks they are most comfortable managing and transfer those they do not want to other companies that are

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“Global Economical Crisis-Impact on Indian Stock Markets” more willing to accept them. From a market-oriented perspective, derivatives offer the free trading of financial risks.

NEED FOR DERIVATIVES: The derivatives market caters to the following needs of prospective investors:
• • • •

Moving the risk from the risk averse to risk taker. Discovering the current as well as future prices. Catalyzing entrepreneurial activities. Increase the volume of savings and investments.

Types of derivatives: Forwards: it is a customized contract between two parties, where the settlement takes place on a specific date in the future at the contract price. Futures: it is an agreement between two parties to exchange commodity or financial asset for a certain consideration after a specified period. Thee\se types of contracts are exchange-traded. Options: it is a type of contract which provides the buyer the right but not the obligation, to buy or sell a specific asset or commodity at a specific price.\, on or before any time prior to the specific date. Warrants: options with longer maturity are refereed to as warrants. Baskets: these are options on portfolio of underlying assets. Swaps: it is a contract whereby the parties agree to exchange a predetermined series of payments, or exchange interest payments or one set of interest payment with another, for a specified time.

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INFORMATION FLOW IN DERIVATIVE MARKET:-

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One of the important functions of the futures market is to provide hedging facilities to hedge price risk. This market also provides scope to speculators due to low transaction cost and leverage. This paper tests whether futures’ trading is going towards hedging price risk or towards fulfilling the speculative desires of sophisticated traders. Being traded in the US for over 100 years commodity futures are still unidentified long term assets. This may be due to the inflict difference of commodity futures with that of corporate securities such as stocks, bonds and other conventional assets where, investors bear the risk during recession period where as investors in commodity futures are compensated for bearing short-term price fluctuations. The research paper “Facts and Fantasies about Commodity Futures” tries to address some commonly raised questions like future risk and return on investments. The questions are being addressed with respect to the asset class as a whole, rather than individual commodity futures.

4.1 GLOBAL ECONOMY:

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“Global Economical Crisis-Impact on Indian Stock Markets” We should consider that we are in a recession and we need to wait for the National Board of Economic Research (NBER) to opine on whether we have two consecutive quarters of decline in the Gross Domestic Product (GDP), but that will not happen for up to a year after the fact. Here are some of the economic factors that lead me to this conclusion: 1. The jobs outlook is detracting. For February the government reported that the economy lost 63,000 jobs. Actually, the private sector lost 101,000, meaning that government hiring continues to increase. Due to the way the government counts the impact of births and deaths, this factor supposedly added 135,000 new jobs. This bit of statistical chicanery probably means that the real loss in jobs was probably much larger. Moreover, the unemployment rate fell slightly to 4.8% from 4.9% due to a sharp contraction in the total number of people looking for work. This is not a good sign. Generally, employment is a lagging indicator and is is highly unusual to see two months in a row of job losses and not experience a recession. Yes, that is right; jobs fell in January as well. 2. The U.S. dollar hit new lows against the basket of nineteen currencies, trading as low as 72.46. The dollar's weakness is one of the reasons we are seeing the price of most commodities climb higher, since it takes more dollars to buy such commodities as oil. A falling dollar is considered good for any companies that exports from the U.S. as their goods and services are less expensive each time the U.S. Dollar falls. On the other hand, a falling U.S. dollar depreciates the value of the U.S. government, so investors and countries that are holding this debt may sell part of their holdings to find higher returns. If this happens it tends to raise interest rates on this debt, which can cause the U.S. to experience higher inflation and raises the cost of our own debt. The best scenario is stability in the U.S. dollar which allows investors to have more confidence in their holdings. 3. Oil is trading around $105 a barrel. As mentioned part of this high price is due to the falling U.S. Dollar, as oil is priced in that currency. Part is due to concern that Veneuzela, Ecuador and Columbia will escalate the current saber rattling and actually go to war. It

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“Global Economical Crisis-Impact on Indian Stock Markets” looks like this risk is now over as the presidents of the countries involved have backed away from their threats and now seem to want to avoid further confrontation. But such is the story of oil. There seems to be new problems poking its head up all over the world when there are large reservoirs of oil. There are 99 of companies that comprise this group. And as Tom said, “In the casino business, they would be known as whales.” The whales can and do move the market. Then they move on to the next thing that interests them and the market gets back to normal. 4. The index of Leading Economic Indicators (LEI) continues to plunge, and is not far away from levels last seen in 2001. Such a drop by the LEI has always been accompanied by a recession. U.S. leading index decreased 0.1 percent which is the fourth straight month of declines. 5. Personal income for the average U.S. consumer rose by the same amount as inflation, around 0.4%, and with rising energy and food costs, it is no wonder that retail sales are down and falling. The savings rate is still negative, which means consumers are using savings to maintain their consumption. The world's richest man, Warren Buffett recently said that any reasonable person believes the U.S. is in a recession. Going Down from Here The Federal Reserve has some of the best economists, so it pays to listen to what they have to say. The table below is from the minutes of the Federal Open Market Committee (FOMC) held January 30-31, 2008. As you can see the average Fed member is more bearish now than they were in October. For those of you inclined to read the minutes they are available at this link. The Fed's Central Tendency forecast indicates that the U.S. GDP will be 1.3 to 2.0 % for 2008 down from their forecast of 1.8 to 2.5 in October. It looks like their forecasts are trending down which is not a good sign, especially given the further weakness we are 36 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” now seeing. I suspect we will see an even lower forecast in the release of the minutes from their next meeting in March. Of further concern is the upward trend in inflation as measured by the Core PCE now projected to be 2.0 to 2.2 up from 1.7 to 1.9. First, this is now above the Fed's own target for inflation which is believed to be below 2.0. Second, with the January Consumer Price Index reports in at 4.3% tells us that inflation is rising not falling. However, the Fed expects inflation to fall further later in 2008. Perhaps this is because the economy will be much weaker than it is now, which will cause downward pressure on prices, helping to reduce inflation. This is usually what happens during a recession. If so, then that means they really expect much slower growth. An interesting conflict in their forecasts. If we see further rate cuts, and many analysts believe there will be, then it is a sign the Fed is even more worried about economic growth and not as worried about inflation. Moreover, do not expect the Fed to predict we are in or about to enter a recession. First, the markets are likely to react much more negatively to such an announcement and the Fed would not want to take the blame. Second, even though the Fed is an independent agency it still must report to the Congress. The Fed needs to keep its independence, so it is very unlikely to forecast the economy is going into a recession. If they did so, many in congress would want to take away some of their power, thinking the elected representatives could do better. Talk about out of the frying pan and into the fire, or how to make a bad situation worse.

Looking for the Bottom The bear market started with the problems in the mortgage industry that are spilling over into other parts of the credit arena. Banks and investment firms must have the necessary liquidity to meet their margins calls and provide sufficient capital to remain a going business. As a result, investors keep trying to determine if the problems in the mortgage business will end any time soon.

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“Global Economical Crisis-Impact on Indian Stock Markets” As of November, housing was down 8.4%. It is certainly worse now, but that is a place to start for this discussion. The question is, how much further down can it go? Goldman was the firm that saw the problems in the mortgage business coming and managed to short some of the market, thus avoiding the hit to earnings that other financial firms encountered. According to Goldman if there is no recession, the housing market will fall by 15%. On the other hand, if there is a recession, then housing prices could fall by 30%. Ouch! That is substantially more than the 8.4% experienced up through last November. Along comes First American (FAF), who has calculated how many homeowners will be experiencing negative equity in their homes if the prices fall 15% and then 30%. It is not a good picture as the table below shows. TOTAL % DECLINE IN HOUSING PRICES 8.4% (today) 15% (No Recession) 30 % (Recession) PERCENT MORTGAGES WITH NEGATIVE EQUITY 13.5% 21% 39%

If this forecast from Goldman and the analysis from First American is correct, then by the end of November 13.5% of the mortgages outstanding are backed by homes with negative equity. This not much of surprises, since many of the mortgages that have been written in the last few years were with little or no money down. All parties counted on the appreciation in homes to continue. When the value of the house falls, the borrower is paying for an asset that is worth less than the outstanding loan(s). This causes people to walk away from their commitments and the house goes into foreclosure. If Goldman's prediction of a 15% decline in the value of housing , then 21% of the outstanding mortgages will be backed by negative equity. Moreover, this is without a recession. However, we are in a recession, so, according to Goldman, we will see a 30% decline in the value of homes; and with it, 39% of the mortgages will be backed by negative equity. This means the financial crisis we are now experiencing has more to go. There are going too be more unhappy surprises coming from the financial sector as this problem works

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“Global Economical Crisis-Impact on Indian Stock Markets” through the system. Keep in mind that more defaults on these loans cause the banks and other owners of these credits to experience losses that must be written off. These write offs cause the institutions to either sell off their good loans or sell additional equity to meet the minimal capital requirements. But no one wants to buy these loans, since they are having the same problem. It creates a vicious cycle that brings down the good firms along with the bad. It also makes borrowing more difficult as rates climb even for the firms with the best of credit. The recent implosion by Bear Stearns is just one example. The Fed sees this, which is why they are providing $200 billion in emergency credit and backing the bail out of the Bear Stearns investors. But so far that hasn't fixed the problem. I suspect that we will see more failures that will then cause them to buy more of these securities to get them off the books of these firms. In the mean time the economy will suffer even more.

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4.2 INDIAN ECONOMY: STOCK MARKETS IN INDIA
Evolution and structure India is one of the oldest stock markets in the world with a strong presence of domestic and local intermediation. It was the extent of the indigenous equity broking industry in India that led to the formation of the Native Share Brokers Association in 1875 which later came to be known as Bombay Stock Exchange (BSE). As early as in 1864, there were more than 1,000 brokers in Mumbai trading in stocks. High premiums were also not something new. At the height of the stock market boom in the 1860s, following the American Civil War which led to the formation of a large number of joint stock cotton/ginning mills that stirred the equity culture later booming into what was then called share mania, share prices reached stratospheric levels. Bombay at that time enjoyed the distinction of being known as a major financial centre in the Asia region having headquarters of 31 banks, 20 insurance companies and 62 joint stock companies. Stock markets in India surged once again following the introduction of a wide range of economic reforms, with liberalisation of financial markets as one of the central themes. Buoyed by greater freedom and flexibility, stock markets in India showed growth in the last one and half decades. Despite major setbacks in the early 1990s and 2000s that led to extensive investigations into the stock markets by the Joint Parliamentary Committees, stock markets in India continued to show robust growth. Some of the fundamental changes that fuelled rapid pace of market growth and at the same time brought in orderliness in the manner and the conduct of the operations are a large number of reforms that equipped Indian markets with the best of the processes and practices that included abolition of open outcry and introduction of electronic trading (secondary markets), allowing foreign ownership (foreign institutional investment) of shares, permitting Indian companies to raise capital from abroad (ADRs/GDRs), expansion in the product range (equities/derivatives/debt), book building process and transparency in IPO issuance (primary markets), T+2 settlement cycle (payments and

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“Global Economical Crisis-Impact on Indian Stock Markets” settlements), depositories for share custody (dematerialization of shares) governance of the stock exchanges (demutualization and corporatisation of stock exchanges) and internet trading (e-broking). These changes resulted in dramatic growth of the stock markets in India as well as the equity broking firms. The broking industry is emerging as a rapidly growing segment in Indian finance, in terms of business growth, distribution and network and enterprise value. Indian stocks markets have an extensive market infrastructure in terms of a large number of institutions and intermediaries.

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India in Global Markets The stature and significance of India is growing in the world capital markets. India is not only attracting greater interest from world markets, but is also assuming increasing importance in global finance. a. India is a major recipient of foreign institutional flows amongst the emerging markets. Since the opening up of domestic stock markets to foreign investors, cumulative net FII investments reached US$ 67 bn by Nov 07 b. Indian companies are regularly covered by global and regional investment banking research c. India is major destination of private equity flows into the emerging markets d. India was host to the annual meetings/conference of the World Federation of Exchanges (2005) and International Organization of Securities Commission (IOSCO) (2007) e. India emerged a trillion dollar market capitalization market in 2007, and was among the top 10 stock exchanges in the world in terms of market capitalisation f. India is amongst the top fifteen stock exchanges in the world in respect of equity turnover g. India emerged as a leading player in commodities futures market h. India is amongst the top five in the number of transactions i. India is among the top five in respect of volume traded in Stock Index Futures and Stock Futures j. India is one of the few markets with extensive dematerialization of shares k. India’s T+2 securities settlement cycle is on par with the global standards l. Indian stock markets have largest number of listings. Trading takes place in about 2500-3000 stocks m. India’s most popular stock index (Sensex) is constructed on the basis of full float methodology, one of the firsts in the Asia region and a global standard n. Indian market indices such as Sensex and CNX Nifty are listed in foreign exchanges for trading as ETFs.

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Recent policy Initiatives Several policy innovations were evident in the year 2007. A few of the important ones pertaining to primary and secondary markets, foreign investors, mutual funds and stock exchanges are summarized below. 1. An Integrated Market Surveillance System (IMSS) that monitors across stock exchanges (NSE/BSE) and market segments (cash and derivatives) aimed to enhance efficacy of surveillance function became operational with effect from Dec 1, 2006 2. Listed companies are now required to maintain a minimum level of public share holding at 25% of the total shares issues with some exceptions 3. Grading of IPOs was made optional. In case an issuer opts for the grading, then these grades including the unaccepted ones should be disclosed in the detailed and abridged prospectus 4. Guidelines on issue of Indian Depository Receipts (IDRs) were issued 5. Qualified Institutional Placement (QIP) was facilitated to enable companies raise funds by way of private placement from Qualified Institutional Buyers. In case of QIP, the issuer is not required to file a draft offer document with SEBI. Resources raised under QIP showed a quantum jump in the first eight months of the year 6. BSE and NSE began maintaining a reporting platform for corporate bonds, though volumes in corporate debt trading remain sluggish. At the instance of SEBI, BSE and NSE jointly launched a common portal at www.corpfiling.co.in which will disseminate filings made by companies listed in both the exchanges. In future, when the system becomes streamlined, a company would be required to file the information only once, irrespective of the exchange where it is listed

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“Global Economical Crisis-Impact on Indian Stock Markets” 7. Stock exchanges were advised to update the applicable VAR margin rates at least five times in a day; by taking the closing price of the previous day, at the start of trading and the prices at 11.00 am, 12.30 am, 2.00 pm, and at the end of the trading session 8. As a part of strengthening KYC (Know Your Client), Permanent Account Number (PAN) was made mandatory for all the entities/persons having transactions in cash market. PAN was made mandatory for all categories of Demat account holders 9. Depository Participants were advised to submit tariff/charge structure to the respective depositories every year 10. SEBI approved and notified the Corporatisation and Demutualisation Schemes of 19 stock exchanges 11. SEBI communicated the policy of the Government of India in regard to foreign investments in stock exchanges, depositories and clearing corporations where by: (a) Foreign investment up to 49% will be allowed in these companies with a separate FDI cap of 26% and FII cap of 23% (b) FDI will be allowed with specific prior approval of Foreign Investment Promotion Board (c) FIIs will be allowed only through purchases in the secondary markets; (d) FII shall not seek and will not get representation in the Board of Directors (e) No foreign investor, including persons in acting in concert, will hold more than five percent of the equity in these companies 12. Mutual fund trustees are required to certify that the scheme approved by them is a new product and is not a minor modification of an existing scheme/product 13. SEBI Mutual Fund regulations were amended so as to permit the launch of Capital Protection Oriented schemes

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“Global Economical Crisis-Impact on Indian Stock Markets” 14. SEBI directed mutual funds to dispatch statement of accounts to the unit holders under SIP/STP/SWP on every quarter 15. SEBI allowed the launch of Gold Exchange Traded Funds (GEFTs) 16. SEBI permitted listed companies to send abridged annual report to the shareholders 17. Limits for overseas investments by mutual funds enhanced 18. SEBI approved new derivative products which included; mini-contracts on equity indices, options with longer life/tenure, volatility index and F&O contracts, Options on Futures, Bond Indices and F&O contracts, Exchange-Traded Currency (ForeignExchange)Futures and Options and Exchange Traded products to cater to different investment Strategies 19. SEBI made some important decisions regarding the Participatory Notes (PNs) in Oct 2007, among which is about not allowing FIIs and their sub-accounts to issue/renew ODIs with underlying as derivatives with immediate effect. It requires them to wind up the current positions over 18 months, during which period SEBI will review the position from time to time. SEBI has clarified that there is no proposed bar to ODI contracts, expiring in Oct 2007 or in the following months, or being renewed, provided the renewal does not go beyond 18 months. This decision unsettled the foreign institutional investors resulting in a sharp drop in the markets, but normalcy was back soon after the clarifications were issued. Business in stock Exchanges Business has been exceptionally good in primary and secondary markets, in the equities and derivatives segments across both the national level stock exchanges. Average daily turnover in equities segment in NSE rose from Rs 88 bn in Jan 2007 to Rs 198 bn in Dec 2007, and in BSE from Rs 44 bn to Rs 86 bn during this period. Cash market turnover in

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“Global Economical Crisis-Impact on Indian Stock Markets” NSE during the first eight months of FY08 reached Rs 25,707 bn showing a y-o-y rise of 33%. Similarly, cash market turnover in BSE rose to Rs 11,602 bn during Apr-Dec 07, showing a growth of 21% during the first eight months of the year. Turnover in Derivatives segment in NSE rose to Rs 99,162 bn during Apr-Dec 2007 signifying a growth of 35 % in the first eight months of the FY08. Average Daily Turnover in the Derivatives segment in NSE rose from Rs 314 bn in Jan 2007 to Rs 671 bn in Dec 2007. Net cumulative investments by the Foreign Institutional Investors reached US$ 67 bn by Nov 2007, and during the first eight months the gross purchases and sales by the FIIs amounted to Rs 5,972 bn and Rs 5,321 bn respectively. BSE Sensex closed at 20286 in Dec 07 from a level of 13,827.77 in Jan 2007, showing a rise of 46.7 % during the year. During this period, it touched a low of 12316 and a high of 20498. S&P CNX Nifty rose from 4007.4 on Jan 2, 2007 to 6138.6 on Dec 31, 2007 and showing a growth of 54.8% (local currency) based on monthly averages of index movement. Except some parts of the information technology, most of the sectors witnessed sizeable spurt in the stock prices. Primary markets too were very robust. During the period Apr-Nov 2007, capital mobilized through public issues, rights issues, qualified institutional placements, and preferential allotments reached Rs 927 bn in 300 issues as compared to Rs 339 bn in 334 issues showing a growth of 173% during the same period last year. During this period, amount raised from IPOs increased from Rs 151 bn to Rs 246 bn. In the first eight months of FY08, 19 issues were offered under Qualified Institutions Placement that raised Rs 127 bn, as compared to the 10 issues that raised Rs 20 bn in the first eight months of FY07. Preferential allotments too showed high growth; from Rs 145 bn in 257 issues in Apr-Nov 2006 to Rs 339 bn during Apr-Nov 2007 (133%) in 231 issues. The NSE and BSE reported private placement of corporate debt to the tune of Rs 776 bn during Apr-Nov 2007. Trading in corporate debt at the exchanges for the first eight months of FY08 amounted to Rs 325 bn in BSE and Rs 214 bn in NSE. During the same period, mutual funds mobilised Rs 1,351 bn as against Rs 1,008 bn during the same period last year.

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“Global Economical Crisis-Impact on Indian Stock Markets” By Jan 2008, 235 bn shares were under dematerialized form with the National Securities Depository Ltd and 42 bn shares with Central Depository Services Ltd. Shares of about 7,000 companies are under dematerialization. The market capitalization of shares under dematerialization rose from Rs 38,769 bn in Apr 2007 to Rs 64,691 bn in Nov 2007. There are about 7,000 DP locations in the country. NSDL holds 9 million depository accounts with a geographical coverage of 792 cities and towns. Market Intermediaries The number of stock brokers registered with Securities and Exchange Board of India showed a net increase of 108 from 9,335 in FY06 to 9,443 in FY07. There were 263 additions and 155 cancellations during the year. National Stock Exchange of India has the highest number of brokers (1077) followed by Calcutta Stock Exchange (960), InterConnected Stock Exchange (925) and BSE (901). The proportion of corporate members at NSE was at 92% and at BSE at 76%. The number of sub brokers registered during FY07 rose from 23,479 in FY06 to 27,541. NSE and BSE account for 95% of all sub brokers. This segment showed a growth of 17.3% during the year. As on Jan 25, 2007, 1,269 Foreign Institutional Investors and 3,760 Sub Accounts were registered with SEBI. As on Mar 31, 2007, 40 mutual funds were registered with SEBI of which 33 were in the private sector and seven in the public sector. The number of domestic venture capital funds rose to 90 during FY07 from 80 in the previous year. Number of foreign venture funds doubled from 39 to 78 during the period. The fees charged of market intermediaries by the regulator rose from Rs 580 mn to Rs 2,010 mn. Major heads that generated fees included take over fees (Rs 520 mn), stock brokers and sub-brokers (Rs 450 mn), offer documents/prospects (Rs 340 mn), mutual funds (Rs 210 mn), derivative members (Rs 110 mn) and FIIs (Rs 90 mn). As a part of investigations, SEBI suspended 52 market intermediaries, issued warning to 27 intermediaries and prohibitive directions issued to 345 intermediaries and non intermediaries during FY07. An important feature of the Indian stock markets as compared to other emerging markets as also developed markets is the large number of listed companies and also a good

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“Global Economical Crisis-Impact on Indian Stock Markets” number of member brokers. While the share of top securities in the total turnover is declining over the years, the share of top brokers in trading volumes is increasing. For instance in FY01, the top 10 securities accounted for 70% of the turnover in BSE which gradually fell to 24% in FY07. Similarly in NSE, the top 10 securities accounted for 73% of the volume in FY01, which came down to 28% in FY07. The top 100 securities now account for 71% of the trading volume in BSE and 84% in NSE. The top 10 members of BSE, who accounted for 14% of the turnover in cash segment in FY01, saw their share climbing to 24% in FY07. In NSE, the share of top members rose from 13% to 25% during FY01-07. The top 100 members now account for 73% and 75% of the cash market turnover of BSE and NSE respectively. Commodities futures markets, which began in India in the early 2000s, are showing rapid growth and progress. Total value of trading at all commodities exchanges for the period Apr 2, 2007 - Jan 31, 2008 stood at Rs 31,610 bn as against Rs 30,313 bn during the corresponding period in FY07. Commodities futures markets in India have taken off in a big way; but concerns arising from sharp spurt in prices of certain essential commodities and limits imposed on trading of a few agricultural commodities dampened the growth in their volumes, though trading in other commodities continues to grow. Though a large number of equity broking houses offer commodities trading also, exclusive commodity brokerages are emerging as a separate class. IMPACT OF FDI ON INDIAN ECONOMY: LATELY INDIA has emerged as the latest and the most sort after destination for FDI, reasons for this are many. Being the 10th largest economy in the world and the 4th in terms of PPP India has emerged as a potential player for FDI and NRI investment. India has a large reservoir of skilled laborer at internationally competitive cost and a large entrepreneurial base and a diversified manufacturing structure makes it easy to find partners for collaborations. The country has a vast scientific and technical manpower of over 20 million whose size exceeds the population of Taiwan .The number of literates in India is more than the combined population of France and Japan.

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“Global Economical Crisis-Impact on Indian Stock Markets” India has a vast domestic market of 300 million strong middle class population having a substantial purchasing power and another 700 million people whose capacity to purchase is gradually increasing. Being a vibrant democracy with a large democratic setup together with a broad based legal framework including arbitration and an independent judicial system coupled with a vast network of bank branches, financial institutions and wellorganized capital and money markets makes India a favorable destination for FDI and NRI investments. The country also has a huge network of technical and management institutions of highest international standards for development of excellent human resources. India has a record of meeting its international financial obligations as per schedule and has never been a defaulter. The country has a strong English language base for business purposes .The strong and vibrant small-scale sector is again good for establishing strategic alliances with the foreign counterparts. Strategic location of the country for the third world markets particularly for the rapidly growing South and South East Asian countries together with a supportive infra structure base helps in generating a healthy environment for FDI inflow into the country. A recent international agency report has predicted that the Indian economy will become one of the world’s largest by 2050 A.D. What became as a drizzle in the 1980’s the boom time of the Indian economy is now pouring in torrents like the Indian monsoonal rains. With a GDP growth rate of 8 per cent since 2003 starting with a rebound in the Indian agriculture initially but now followed with a boom in manufacturing and service industries similar to that of China. In the last couple of months there has been a series of announcements of big investments by big foreign and NRI companies. Bill Gates in his recent visit to India has announced that the Microsoft will invest around $ 1.7 billion over the next four years in India. Intel the largest computer chips company of the world has decided to invest over $ 1 billion in India. CISCO has announced plans to spend $ 1.1 billion over the next 3- 4 years in India. For Microsoft India is emerging as a big market to exploit as Microsoft doesn’t have much in stake in China. Buying of shares to the tune of $ 1.5 Billion in Bharti-Tele ventures by Vodaphone is another big FDI inflow into the country. To be a genuine competitor of China in FDI, India should aim to an annual growth rate of 10 percent

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“Global Economical Crisis-Impact on Indian Stock Markets” which the Indian Prime Minister Dr Manmohan Singh has also rightly pointed out recently. So far India has not attracted more then $ 3-4 Billion annually when compared to FDI inflows of $ 55- 60 Billion for China. The number of foreign and NRI equities which have invested in India between August 1991 – November 2002 is 15761 with a total foreign investment of Rupees 283447 Crores. However things are improving in India too. FDI investment in India has nearly doubled to $2.9 billion during April –July 2006 from $ 1.5 billion for the same period last year representing a growth rate of 259 %. According to the RBI India has received $50.1 billion since 1991 of which $16 billion or 32% of it came since April 2004. The negative side of this bouncing FDI and NRI inflow is the constraints of Indian economic growth which are not external but internal .Ups and downs in Indian agriculture plays a major role in constraining Indian growth rate coupled with unhealthy infrastructure like pot holed roads, incomplete flyovers, undeveloped airport facilities etc are the main bottlenecks in the growth of the Indian economy. Again lopsided regional variation in the economic growth of the country is another major impediment in the growth of Indian economy. Truant Left Parties whose support is crucial for the survival of the UPA government at the center is another major hindrance in the inflow to FDI investment in India. However a very reassuring development has been the tremendous boost up which the recent budget has given to industrial infrastructure and FDI investment in India. Positive side of the story is the tremendous resilience of the Indian economy, rapid growth of Indian agriculture, boost up to infrastructure, the tremendous global outsourcing boom in India and a well-regulated and deep capital market. Looking at the current rate of FDI inflow India can attract a record of $ 12 billion FDI inflow this fiscal year. The commerce minister feels it is possible though he has a note of caution, “There is competition not only just from China but also from others like Thailand, Malaysia and so on. We can’t lose focus on attracting investments since we can’t get inflows by giving lectures but work on ways to get investors.”

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“Global Economical Crisis-Impact on Indian Stock Markets” If a comparative analysis of the Indian and Chinese economy is done some interesting comparison emerges through India lags behind China in many areas a lot needs to be done if India has to catch up with China. India’s total population is 1033 billion; China’s is 1272 billion. India’s labor force is 451 billion; China’s labor force is 757 billion. India’s annual GDP is 478 US $ billion, China’s is US $ 1159 billion. 27 per cent is the share of Indian agriculture in its GDP in China it is only 15 per cent .27 per cent is the share of industry in Indian GDP in China it is 52 per cent. 48 per cent of GDP in India comes from services in China it is only 33 percent. Rail routes in India are 62.5 thousand sq kms in China it is only 56.7 thousand sq kms. Motor vehicles per 1000 people in India are 7 in China it is 8. R& D expenditure in India is 0.6 % of GNP in China it is 0.1 %. Internet host in India is 0.8 per 10000 people in China it is 0.6 per 10000. Education expenditure in India is 3.2 per cent of GNP and in China it is 2.3 per cent. Undernourished people in India are 23 per cent of the total population in China it is only 9 per cent. Thus if we look into the overall scene of Indian economy with a booming stock touching almost the 14000 mark, a buoyant Rupee of Rs 43.44 /Dollar and a healthy growth trend of the major sectors of the Indian economy the environment is very positive for FDI and NRI inflows. However compared to China it is still behind even though it is marching ahead. A lot more needs to be done. The Indian bull is no doubt energetic now however it has to run fast to overtake the Chinese dragon which is not impossible if friendly ground is created.

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“Global Economical Crisis-Impact on Indian Stock Markets” Dealing with the Impact of the Global Financial Crisis Eleven Point Agenda for Indian Economy: Key Issues • Domestic liquidity shortage • Exchange rate volatility and reduction in access to foreign currency funds•– Inadequate credit availability and slowdown in demand • Decline in business and investor confidence and optimism Highlights of Recommendations• Credit Flow & Impetus to Growth • Establishment of a corpus for lending to SMEs • Speedy release of government funds for various projects to ensure timely implementation and generation of economic activity • Fast tracking of all infrastructure projects to spur investments and growth through intersectoral linkages Domestic Liquidity & Interest Rates • Further reduction in repo rate by at least 50 bps and in CRR by 150 bps to ensure adequate liquidity and reasonable cost of funding • Provision of liquidity to mutual fund and NBFC sectors, to enable orderly operation of financial markets • Guarantee for all bank deposits for a two year period, to maintain depositor confidence in the banking sector

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“Global Economical Crisis-Impact on Indian Stock Markets” Foreign Exchange Management • Focused exchange rate management to prevent volatility without reducing rupee liquidity • Permitting higher levels of FDI in order to attract foreign capital • Utilization of foreign exchange reserves for meeting critical foreign currency needs • Removal of the cap on NRE and FCNR (B) deposits Communication • Comprehensive communication exercise by Government and regulators in consultation with industry to articulate the approach to –mitigate risks arising out of the global financial crisis and strengthen confidence in the economy

Investment Boom: The Role of Fiscal Reforms The unprecedented economic growth of last four years has been the result of the interplay between both demand and supply side factors. Amongst the demand side factors, robust investment growth has been one of the major ones. Gross capital formation (GCF) has been growing twice as fast as the gross domestic product (GDP) in recent years, thereby increasing its share in the GDP pie. As a percentage of GDP, the share of gross capital formation has increased from 22 per cent in 2001-02 to over 36 per cent in 2007- 08 (as per the CSO advance estimates).

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The growth momentum has clearly changed gears from consumption-led growth to being an Investment-led growth since 2001-02. The growth rate of investment peaked in 200405 and has slowed down in recent years. It however, continues to be much above the growth of consumption. Unlike the consumption slowdown, which has been hit by the tight monetary policy of the RBI, there were little signs until recently that investment has been dented significantly. The increase in the deployment of incremental credit to capital goods in 2007-08 also points towards the continuation of strong investment trends in the economy. In recent months tentative signs of slowdown in investment activity have emerged. In January 2008, the capital goods sector clocked a disappointing 2.1 per cent growth - the lowest for nearly six years. While a blip in growth of capital goods sector for one month is too early to represent a downturn in investment, it is a cause of worry - more so, if consumption side is already reeling under a downturn due to high interest rates prevailing in the economy. Further analysis done on the trend growth rate of GDP and gross fixed capital formation (GFCF) also throws up some interesting insights first, both GDP and GFCF have been growing at the rate which is below their respective trend values at 8.5 and 16.8 percent. Second, the business cycles of GDP and investment had been pro-cyclical until 2003-04 however, since then the pattern of growth has been different. Investment grew rapidly and much above its long run trend for couple of years when GDP was in fact growing below its trend. Why has investment turned counter-cyclical in recent years? The improvement in investment has been driven by a significant increase in the private corporate sector's investment which has doubled as a share of GDP in a matter of four years - from 6.6 per cent in 2003-04 to 14.5 per cent in 2006-07. Over the same period, government investment increased from 6.3 per cent of GDP to 7.8 percent. What did private investment grow rapidly compared to GDP after 2001-02 and experience a relative slowdown in its growth in recent years when the GDP growth was at all time

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“Global Economical Crisis-Impact on Indian Stock Markets” high? To find answers to the discerning questions raised above regarding the investment growth overriding the GDP growth, one needs to probe the fiscal side of the story. At the beginning of the reform process in 1991, fiscal imbalance was identified as the root cause of the balance of payments crisis and domestic inflation. The fiscal consolidation, which followed in response, however failed to sustain itself as it lacked a statutory mandate and the required institutional support. The enactment of the Fiscal Responsibility and Budget Management Act (FRBMA), 2003, however, provided the required mandate and lent credibility to the fiscal reforms process of the government. The fiscal deficit of the centre as a proportion of GDP has come down from 5.9 per cent in 2002-03 to 3.1 per cent in 2007-08 and is further estimated to decline to 2.5 per cent in 2008-08. Similarly, the revenue deficit also declined from 4.4 per cent in 2002-03 to 1.4 per cent in 2007-08 and is estimated to decline to 1.0 per cent by the next year. The fiscal performance of the state governments has also shown considerable improvement, post FRBMA. Private sector savings and investment decisions are affected by the fiscal consolidation steps undertaken by the government both in response to specific revenue and outlays measures and also as a result of the improved economic outlook that results from the improved fiscal consolidation. The gradual reduction in both the fiscal and revenue deficit mandated under the FRBM by the central government has improved its credibility in the regard that it is serious enough to curtail non-developmental expenditure and instead spend in sectors like infrastructure and industrial sector which are thought to be growth stimulating sectors. Even mere expectations about future fiscal consolidation can lead to increased confidence of the private sector. There may also be positive wealth effects associated with actual or expected lower interest rates and perceptions as to reduced future tax liabilities. Fiscal consolidation will enhance growth prospects by reducing risk premia as the government balance sheet improves, and thereby freeing more resources for private investment at relatively lower market interest rates. Also, it is known that where the fiscal consolidation is large and part of a broader adjustment and reform agenda, as in the case

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“Global Economical Crisis-Impact on Indian Stock Markets” of India, it is more likely to be perceived by the private sector as a credible government commitment and revive private sector confidence. One more trend which has been quite clear and resulted out of the fiscal consolidation efforts of the government has been the improvement in the public savings. The savings rate of the overall public sector has improved from -2.0 per cent of GDP in 2001-02 to 3.2 per cent of GDP in 2006-07, the turnaround of 5.2 percentage points of GDP has been a key factor that has enhanced not only overall domestic savings, but also boosted private sector's confidence in the government. The trend of increase in public savings is a clear indicator of better control on public sector expenditure and improvement in efficiency of the government finances. As has been pointed out earlier as well, private investment as a proportion of GDP had started to rise only after the surge in public sector savings in 2003-04, even though the GDP growth rate was stabilizing. In fact, for three years since 2003-04 the gross fixed capital formation was growing much above its long run trend as shown in figure 2, even when GDP growth moderated. The reason behind this could be that the private sector essentially viewed the slowdown in economic growth as a temporary phase and expected a long run momentum to continue given the strong fiscal position of the government. How would investment perform going forward? What happens to private investment going forward depends much on the level and mode of financing of public investment as economic growth slows. As long as the g o v e r n m e n t demonstrates the sustainability of public finances and avoids any negative impulse that poses a threat to the fiscal and revenue deficit targets, private investment should remain resilient, though it is likely to witness some further slowdown in immediate future as the demand for their products slows down. Also, corporate profits, i.e.; private corporate savings are expected to slow down and hence more of private investment would have to be funded from the external sources. It is therefore, important that more and more public investment is funded via public sector

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“Global Economical Crisis-Impact on Indian Stock Markets” savings which would leave more household savings to be transferred to the private corporate sector for investment. In the immediate future, however, we could see a period of relatively weak investment demand with firms concentrating on improving efficiency and optimally utilizing existing capacity. Conclusion The ongoing fiscal consolidation effort has reassured the private sector about the government’s commitment to improve the health of the economy. Since 2003-04, an increase in public savings and a subsequent drop in public sector financing needs from private savings increased the quantity of resources and lowered the cost of investment for the corporate sector. It has contributed to improving overall business confidence. Sustained fiscal consolidation, especially via reduction in revenue expenditure, would help maintain business confidence as economic growth slows down. In this scenario any slowdown in investment activity could be relatively short-lived. Industrial Production This is the third consecutive month in which industrial production data has been disappointing. This is clearly a sign of growth slowdown. The overall industrial production slipped to 5.3 per cent in January 2008 as against 11.6 per cent in last January. All the three major components namely manufacturing, mining and electricity recorded slower growth in January 2008 as compared to January 2007. The severity of the slowdown can be gauged from the fact that both the overall industrial growth as also the

growth f its major components in January 2008 are less than half of that recorded in January 2007. However, the cumulative industrial growth for the period April-January 2007-08 looks marginally better at 8.7 per cent, as compared to 11.2 per cent for the same period last fiscal. Manufacturing for the period April-January 2007-08 clocked a 9.2 per cent growth as compared to 12.1 per cent for the same period a year ago. Mining showing a marginal downturn clocked a growth of 4.6 per cent for the period April-January 2007- 08 as 59 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” against 4.8 per cent for the same period last year. Growth in electricity also declined to 6.3 per cent in April-January 2007-08 from 7.6 per cent in April-January 2006-07. A glance at the use-based classification suggests that deceleration in industrial growth is most pronounced in the consumer durable sector as it recorded a negative growth of 3.1 per cent in January 2008. However, what is more distressing and disappointing is the 2.1 per cent growth clocked by the capital goods sector. It may be worthwhile to point out that despite the dismal performance of rate sensitive consumer durable sector; it is the sustained double-digit growth of capital goods sector that was keeping the sentiments positive about the future prospect of industrial growth. While a blip in the growth of capital goods sector for one month is too early to represent a downturn in investment, it is definitely a cause for concern- more so, if consumption side is already reeling under a downturn. At 2-digit classification, out of 17 industries only two industries namely wood & wood products and machinery & equipment recorded negative growth in January 2008 as compared to just one industry - jute & fibre textiles in January 2007. However, what is more striking about the growth pattern of industries at 2-digit level is wide variation in growth across industries in January 2008. Some of the industry categories that recorded very high growth in January 2008 are - jute & fibre textiles, leather & leather products basic chemicals & chemical products and metal products and parts. As noted above, the main disappointment of January 2008 has been the capital goods sector and therfore it is not a surprise to see that while machinery & equipment clocked negative growth, transport equipments and parts clocked a paltry 1.5 per cent growth- the two key constituents of the capital goods sector.

Inflation
The tight monetary policy by the RBI has managed to contain the headline inflation (measured in terms of the WPI) to 2.97 per cent for the week ended October 27, 2007 but mainly on account of a larger base. For the first time in five years, a level of below 3 per cent was attained. Inflation has been ruling below 4 per cent since August 18, 2007 after 60 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” touching 6.69 per cent earlier in 2007. It was ruling at 3.50 per cent for three consecutive weeks and rose to 3.79 per cent as on January 5, 2008. The rise was mainly on account of rise in prices of some manufactured products including metals and alloys. It further rose to 3.83 per cent as on January 12, 2008 on account of rise in food prices. The point-topoint rate of inflation based on the All India Consumer Price Index – Industrial Workers (CPI-IW) Index (base year: 2001) remained at 5.51 per cent in November 2007. Even global commodity and food prices are causing price pressures. The Food & Agriculture Organisation (FAO) of the United Nations has predicted that food prices would be rising at a higher rate in the next 5-10 years than in the past, adversely impacting those economies that have accorded higher weights to the food index in the inflation basket. In India, food items account for 57 per cent in consumer index (CPI) and 26.94 per cent (primary and manufactured products) in the wholesale index (WPI) that is used to measure inflation. Global outlook for edible oils is also tight for the year 2008. Crude oil had touched $98.62 per barrel mark in the U.S in the first week of November 2007. It crossed the $99 per barrel mark by peaking at $99.29 per barrel on November 21, 2007. On January 2, 2008, crude oil futures touched the psychological mark of $100 per barrel on apprehensions that inventories might have fallen in the U.S for a seventh week in a row. On the demand side, the Energy Information Administration (EIA) has estimated that crude consumption in the U.S would increase by 1.4 per cent in 2008 thereby putting an upward pressure on prices. Also, the report by EAC states, “crude oil prices are likely to stay firm. However, the main lesson of the past months has been that the world can live with $80-90 per barrel. Cartelised oil producers are thus likely to be emboldened to use production quotas, if necessary, to keep oil prices close to their present highs, and higher still, if market conditions permit.” The government has announced a relief package for the domestic oil marketing and refining companies. These companies are now being permitted to hedge crude oil price risk to the extent of 50 per cent of their inventory, based on the volumes in the quarter preceding the previous quarter.

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“Global Economical Crisis-Impact on Indian Stock Markets” So far the government has been keeping the fuel prices in India artificially lower than the prices world over, in a bid to help the “aam aadmi”. The government is considering a combination of measures to contain the impact of rising crude oil prices. They are namely; reduction in the excise duty, enhanced oil bonds and a marginal hike in retail prices of petrol and diesel.

Inflation in India in 2008 will depend much on how the food prices behave globally and how much of the increase in oil prices will be passed on to the consumers. Also, rising subsidies in food, fertilizers and petroleum are a major concern and needs to be addressed. Thirdly, India imports 70 per cent of its crude oil requirements. There are yet concerns on the demand-supply mismatch pertaining to agriculture-based items. It is also expected that the government might go in for imports of some of the 62 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets” agricultural commodities in case there is a shortfall especially in the case of wheat. The London-based International Grains Council has made a preliminary forecast for global wheat output at 645 million tonnes for 2008-09, up over 40 million tonnes from 2007-08. Only if this happens would there be a respite from high prices. Similarly, the World Agricultural Supply and Demand Estimates (WASDE) report released by the U.S Department of Agriculture (USDA) states that the inventory of wheat for 2007-08 are projected lower by 32 million bushels in December 2007, reflecting higher expected domestic offtake and exports. This implies higher demand and hence hardening prices. Global oilseeds stocks are also expected to decline by almost 25 per cent during 2007-08 to 53.2 million tonnes. Global vegetable oil stocks are also expected to decline further by about 7 per cent during 2007-08 to 8.1 million tonnes. According to USDA, rice stocks are expected to decline by about 4 per cent in 2007-08.

FINANCIAL MARKETS:
i Foreign Exchange The past few months has witnessed quite a few landmark highs of the rupee against the dollar. The rupee breached the 40 levels for the first time in September 2007 when it touched 39.90. On November 7, 2007, the rupee touched a 10-year high of 39.16 and then moved back down at the end of the trading session. The stock market fallout on January 17-18, 2008 on account of FIIs drawing out dollars has caused the rupee to depreciate, and settle at 39.38 versus the greenback as on January 21, 2008. The rupee sustained at 39.39 on January 31, 2008, mainly on account of continued inflows, despite some downward pressure of refunds for Reliance Power IPO. The forward premia has remained positive throughout not nearing the 0 level implying that the sentiments are towards a weakening rupee and consequently a strengthening dollar. On January 17-18, 2008, the RBI intervened in the forex market through swap transactions, with the first leg being a spot transaction (buy) and the other being a

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“Global Economical Crisis-Impact on Indian Stock Markets” forward transaction (sell). The reason for carrying swap trades was to postpone infusion of rupee liquidity into the system. This pushed up the 6-month and 1-year forward premia above 2 per cent. The rapid growth in turnover in the foreign exchange market was sustained by large surplus conditions in the spot market as average daily turnover increased to $50.1 billion for the quarter ended December 2007 from $27.6 billion in the corresponding quarter of the previous year. On the forex reserves front, after a decline from December 14, 2007 – December 21, 2007, the country’s forex reserves increased by $232 million. It was standing at $284.90 billion for the week ended January 18, 2008. The reason for decline was on account of RBI’s intervention in the forex market. The latest figures available for October 2007 shows that RBI’s net purchase of dollars was $12.54 billion. ii Fixed Income The debt market in India comprises mainly of the G-sec market and the corporate debt market, with the size of the latter being only around 14 per cent of the total debt market. The FIIs are allowed to invest in the Indian debt markets subject to quantitative limits that are reviewed on an ongoing basis. On January 31, 2008, SEBI raised the limit of FIIs investment in government securities from $2.6 billion to $3.2 billion. The limit of FIIs in corporate debt market is $1.5 billion. The access provided to the FIIs in the debt market is to facilitate liquidity management arising from their operations in the equity market since they have liberal access to the latter in India. The second Tarapore Committee on Fuller Capital Account Convertibility and the High-Powered Committee report on making Mumbai an international financial center, have recommended scrapping of caps on FII investment in rupee-denominated debt. Also, following the announcement of disclosure norms in P-Notes, FIIs have pepped up investments in the debt markets. ii (a) Corporate Debt

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“Global Economical Crisis-Impact on Indian Stock Markets” The development of a corporate bond market in India has lagged behind as compared to other financial market segments owing to many structural factors (Annexure V). While primary issuances have been significant, most of these were accounted for by public sector financial institutions and were issued on a private placement basis to institutional investors. The total private placements amounted for the period January– December 2007 amounted to Rs. 1,172.90 billion. The secondary market lacks market liquidity. The total volumes for January 2007 - January 2008 was Rs. 1,002.69 billion. RBI is also considering allowing market repos in corporate bonds as one of the steps to deepen the market (in accordance with recommendations by the Deepak Parekh Committee). Public Sector banks are expected to swamp the domestic financial markets with bonds over the next four months in order to build up their Tier II Capital, as part of the Basel II compliance. Some of the banks that have queued up are State Bank of India, Bank of India, Union Bank of India, Vijaya Bank, UCO Bank and Dena Bank. One of the first in the queue is Bank of Baroda which raised Rs. 5,000 million through upper Tier-II bonds to fund business growth. Among private banks, Yes Bank is planning to raise Rs. 5,0007,500 million via Tier II. (Annexure VI). This is expected to deepen the debt market. (b) Government Securities The Indian yield curve (diagram), which was rising at the long-end till December-end, started to flatten. There have been many studies that have proven that the yield curve is a predictor of the future interest rates and inflation. But, the yields have flattened out, especially on account of the economy entering the surplus liquidity mode from the deficit mode and narrowing of the short and long-term spreads. There is also much expectation that interest rates would slightly come off before the end of fiscal 2007-08. The gross borrowings of the Central Government through dated securities was at Rs. 1,470 billion during 2007-08 upto January 25, 2008. This constituted 94.6 per cent of the budget estimates. On January 11, 2008, the government auctioned two dated securities of

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“Global Economical Crisis-Impact on Indian Stock Markets” 7.99% 2017 of Rs. 60 billion and 8.33% 2036 of Rs. 40 billion for the first time in the New Year.

Heavy volumes were witnessed on January 18, 2008 to the tune of Rs. 29.85 billion, which resulted in a massive fall in yields. The yield on the 10-year benchmark bond was 7.55 per cent. Concurrently, it was the day of closing for the Reliance Power IPO coupled with failure in the RTGS system, which drained out liquidity from the system, causing call rates to break-out the interest rate corridor to touch 60 per cent. On January 21, yields rose 2 basis points up at 7.57 per cent on expectations of inflationary pressures and issuance of MSS bonds worth Rs. 60,000 million on January 23, 2008. Fed’s 75 basis point emergency rate cut on January 22, 2008 led to the 10-year benchmark yield touch a 2-year low of 7.29 per cent (on January 23, 2008). But, on January 28, 2008, the yields bounced back to 7.45 per cent on expectations that the RBI would cut rates in its quarterly Monetary Review Policy announcement. On January 29, 2008, the yields jumped to 7.52 per cent, the week’s high, on similar expectations. However, in the absence of a rate cut, the yields closed at 7.56 per cent on

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“Global Economical Crisis-Impact on Indian Stock Markets” January 30, 2008, with total volumes being Rs.8.95 billion. Markets opened with yields hovering around 7.55 per cent on January 31, 2008 after the Federal Reserve cut interest rates by 50 basis points. iii Equity The market has been reining on global cues and continuous FII inflows. On October 29, 2007, the Sensex breached the 20,000 mark. On November 14, 2007, it registered its biggest one-day gain of 893.58 points. It was moving in the range of 18,300 – 19,900 since the third week of October and touched 20,333.06 points on Dec 11, 2007. The Nifty also touched 6,097.25 points for the first time. On December 13, the Sensex touched 20,498.11 points and the Nifty touched 6185.40 points. Again on January 4, 2008, the Sensex and the Nifty hit a new record of 20,686.89 and 6,274.30 points, respectively. The Sensex made a new record on Jan 10, 2008 by touching 21,206.77 points. But it lost 750 points on January 18, 2008 and continued to do so till January 21, 2008 to the extent of 1,400 points, as a result of global pressures and subsequent pull-out by FIIs. . By January 29, 2008, both the Sensex and Nifty somewhat regained their positions at 18,091.94 points and 5,280.80 points, respectively. But, they bled again on January 30, 2008. The Sensex and Nifty closed at 17,758.64 and 5,167.6 points, respectively. On January 31, 2008, the markets displayed mixed sentiments as it opened weak but bounced back on the upside in the latter part of the trading session. The correlation between FIIs turnover (sales + purchases) and Gross turnover of the Sensex for the period Apr 3, 2006 – Dec 31, 2007 was 0.56. Usually domestic MFs and FIIs have contrary views on the market. Over the last five years, FIIs have been found buying in December while MFs were net sellers. But, this December has been different with both being net buyers. Domestic institutions were active in the market towards the end of CY2007 and beginning January 2008 and continue to remain bullish on the equity markets. The net position of Mutual Funds in equity was Rs. 55,442 million from January 1-30, 2008, whereas their net position in the debt market was Rs. -44,454 million for the same period. Interestingly, Mutual Funds were seen active in the debt markets on January 30, 2008.

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Apart from bank credit, the corporate sector continued to meet its funding requirements from non-bank sources especially the capital markets. Resources raised through domestic equity issuances from April – December 2008 was Rs.318,970 million, which was 40 per cent higher than the corresponding period of the previous year. Mobilisation in the form of equity issuances through American depository receipts (ADRs) and global depository receipts (GDRs) for the same period was Rs.114,390 million, which was 43 per cent higher than the previous year. In a move to deepen the secondary market, the government has allowed all trusts to invest in the stock market as well as the debt market. SEBI has permitted short-selling to all classes of investors including sub-accounts of FIIs. Short selling occurs when investors sell stocks that they do not own at the time of transaction. SEBI proposes to introduce the Securities Lending & Borrowing (SLB) scheme along with short selling. Borrowing of equity shares by FIIs will only be for the purpose of delivery into short sale.

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SUB PRIME THEORY…
 Banks in the US provided loans to people for purchasing homes.  Between 1980 and 2000 the US economy witnessed a prolonged bull market which saw an appreciation of housing assets. Hence in this king of a situation the banks were not too worried about the loans handed out as the appreciation of the mortgaged property was good enough to hedge them against any default.  As the loans increased, the banks bundled them as securities in order to spread the loans and mitigate their risks.  The banks managed to get AAA certification from rating agencies for these securities. Rating agencies based on the growth potential fo the underlying assets went along with the banks without a thorough credit check of the constituents of the securities.  Thus these high rated papers got distributed to various investors in the market.  Investment banks themselves were one set of active investors in these papers.  Since the underlying assets were appreciating year on year, they were lured into making more investments in these papers.  They even borrowed to fund these investments since it was looking very hunky dory all the way. After all inflation was under check, interest rates wre attractive and hence loans were cheap. Leveraging made immense sense to the participants.

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 The sub-prime securities were used as collateral for the funds borrowed.  The price of the securities soared on the back of increasing demand aided by the liquidity glut.  The appreciating securities attracted more buyers causing further price appreciation.  Every thing looked fine till the growth in housing started to slow down and the sub prime nature of the loans got exposed. Once borrowers saw the house prices declining defaults on these loans started.  By the time sanity dawned, it was too late. The mess stared at the lenders of housing loan. A large number of borrowers were of sub-prime nature incapable of paying back their loans. This coupled with falling asset value spelt problems for the financial system.  The securities which essentially mirrored these assets likewise lost value.  The highly leveraged investment banks holding on the large quantities of sub prime securities tried to redeem themselves by liquidating them in order settle their debt outstanding.  This unwinding triggered a further price collapse of the securities making it difficult for the investment banks to realize enough from their sale of securities to enable them to meet their debt obligations.

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NEXT STRATEGIES… On January 29, 2008, the IMF has downgraded its global growth projections at 4.1 per cent in 2008 from 4.9 per cent in 2007, mainly on account of lower growth projections of the advanced economies. While the Indian economy has begun its journey on the growth path, there are questions being raised on the pace of this journey? If GDP growth would moderate to 8.5-8.9 per cent as is being ascertained by different quarters, this indicates that growth in the remaining two quarters would decline to 8-8.6 per cent. This is substantially lower than performance of the first two quarters. This may be attributed to decline in exports, decline in domestic demand, which is interestingly coupled with a resilient growth in investment demand. While economic theory (Annexure I) endorses the view that investment demand creates domestic demand, its practical implication remains to be seen. But, currently the picture is lull as the latest manufacturing data has just been released. Domestic liquidity remains strong but there are few takers at the current interest rates. On January 30, 2008, Federal Reserve once again cut the federal funds rate by 50 basis points to 3 per cent from 3.50 per cent. On January 22, 2008, it had cut the rate by 75 basis points from 4.25 per cent. This is the third time that the Federal Reserve has cut rates in the last two months. On January 29, RBI left its key interest rates unchanged at the Q3 Monetary Policy Review. Postfacto, concerns have been raised on the increasing interest rate differential between the two countries. But, there is not enough evidence to state that the interest differential between India and the U.S. is the sole driver of inflows. Therefore, quite contrary to Fed’s decision, RBI’s decision of not going in for a rate cut in this review was quite expected. The reason being that there are persisting inflationary

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“Global Economical Crisis-Impact on Indian Stock Markets” pressures in the economy despite the pressures of global softening of rates. At the same time, it has not ruled out the ‘readiness to act if turbulence in global markets threatened growth and financial stability’.

IMPACT OF BUDGET ON VARIOUS SECTORS 5.1 BANKING SECTOR HISTORICAL DATA OF HDFC BANK
Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09 Prev Close 998.35 1,013.75 1,015.65 1,044.10 1,100.40 1,009.25 1,017.50 1,003.70 988.85 977.55 924.8 937.55 941.1 912.45 889.45 900.5 872.45 889.45 911.75 923.45 Open Price 996 1,020.00 1,030.00 1,044.15 1,115.00 1,000.00 1,012.00 1,000.00 1,044.70 960 938 949 925 906.8 900 892.6 897 898 924.9 892.4 High Price 1,019.80 1,032.00 1,049.50 1,113.00 1,125.25 1,057.00 1,022.00 1,012.00 1,044.70 960 944.55 954.5 925 906.8 917 911.3 903.95 915.8 937.55 935 Low Price 996 1,003.20 1,028.05 1,034.00 996 975 990 975.1 966.9 907.05 922.2 931.5 902 880 882 865.1 880 895.35 910 892.4 Last Price 1,014.15 1,016.00 1,049.50 1,110.30 1,024.25 1,013.00 1,004.20 990 973.9 920.4 939 940 914 883.15 893 873 890 912 921.05 922 Close Price 1,013.75 1,015.65 1,044.10 1,100.40 1,009.25 1,017.50 1,003.70 988.85 977.55 924.8 937.55 941.1 912.45 889.45 900.5 872.45 889.45 911.75 923.45 925.6

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GRAPHICAL REPRESENTATION OF HDFC

Close Price 1200 1000 800 600 400 200 0
2Ja n 6- -09 Ja n9- 09 Ja n 13 -0 -J 9 an 15 -09 -J an 19 -0 -J 9 a 21 n-0 -J 9 an 23 -09 -J a 28 n-0 -J 9 an 30 -09 -J an -0 9

From the above graph and table we can conclude that the HDFC Bank has ended up with negative from 1,013.75to 925.6 , and this shows a negative impact on the overall Fertilzers sectors .

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\

HISTORICAL DATA OF IDBI BANK
Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09 Prev Close 67.7 69.7 72.15 72.55 71.45 66.5 64.65 61.5 61.25 62 59.25 59.9 60.4 58.3 56.3 55.4 53.7 55.45 56.35 56.7 Open Price 69 71 74 72.65 72 64 64 63 62.45 60.5 60 59.95 58.7 58.3 56.8 56.9 55 56.25 57.7 55.2 High Price 70 73.25 74.4 73.95 72.35 68.1 65.3 64.9 63.8 61.75 60.5 60.85 59.5 58.3 58 56.9 56.7 56.9 57.8 57.75 Low Price 67.5 69.35 71 69.2 62 63 60.2 60 60.6 58 58.75 59 58.05 56.05 54.6 50.6 54.1 55.45 55.65 54.05 Last Price 69.55 72.3 72.7 71.75 65.85 65.3 61.6 62 62.4 59.2 60 60 58.4 56.3 55.25 54.05 55.5 56.45 57 56.85 Close Price 69.7 72.15 72.55 71.45 66.5 64.65 61.5 61.25 62 59.25 59.9 60.4 58.3 56.3 55.4 53.7 55.45 56.35 56.7 57.15

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GRAPHICAL REPRESENTATION OF IDBI BANK

80 70 60 50 40 30 20 10 0

C lo s e P ric e

From the above graph and table we can conclude that the IDBI Bank has ended up with negative from 69.7to 57.15 , and this shows a negative impact on the overall Fertilzers sectors .

an 6-J 09 an 9-J 09 an 13 -09 -Ja n 15 -09 -Ja n 19 -09 -Ja n 21 -09 -Ja n 23 -09 -Ja n 28 -09 -Ja n 30 -09 -Ja n-0 9

2-J

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HISTORICAL DATA OF ICICI BANK
Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09 Prev Close 448.1 464.15 471.25 499.9 523.45 467.85 456.6 438 425.45 441.1 408.65 423.75 412.6 396.3 369.35 378.05 363.85 381.1 408.05 410.1 Open Price 450 465 475.5 480 528 458.7 440 435 428.65 429 415 425 403 389.7 381.95 331.55 372.95 386.95 430 402 High Price 466.95 479.8 504 530.7 538.6 483 463.3 448.4 451 429 427.7 444.4 407.8 389.7 385.9 391 389 412.5 433.7 418.9 Low Price 450 462.25 474.15 480 454.05 441 428.2 418.05 428.65 398.3 408.65 408.5 390.25 360 358.75 331.55 359.1 382.45 402.6 395 Last Price 465 472.55 500.9 526 462.5 445.8 442 428.85 443.35 410.55 420.4 412.35 395.8 366.6 380.05 365.9 380 410.9 404 415.25 Close Price 464.15 471.25 499.9 523.45 467.85 456.6 438 425.45 441.1 408.65 423.75 412.6 396.3 369.35 378.05 363.85 381.1 408.05 410.1 416.25

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GRAPHICAL REPRESENTATION OF ICICI

Close Price 600 500 400 300 200 100 0
2Ja n 6- -0 9 Ja n9- 09 Ja n 13 -0 -J 9 an 15 -0 -J 9 an 19 -0 -J 9 a 21 n-0 -J 9 an 23 -0 -J 9 a 28 n-0 -J 9 an 30 -0 -J 9 an -0 9

From the above graph and table we can conclude that the ICICI Bank has ended up with negative from 464.15to 416.25 , and this shows a negative impact on the overall Fertilzers sectors .

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AVEREAGES OF BANKING SECTOR

S.NO 1 2 3

COMPANY NAME HDFC IDBI ICICI

AVERAGE 959.96 61.53 427.79

1000 800 600 400 200 0 HDFC IDBI ICICI AVERAGE

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CHANGE IN % OF THREE COMPANIES

S.NO 1 2 3

COMPANY NAME HDFC IDBI ICICI

CHANGE IN % -9.52 -21.95 -11.5

CHANGE IN %

HDFC IDBI ICICI

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BANKING --- NEGETIVE
Issues and Industry Demand  Re-introduction of tax concession on interest earned on infrastructure loans u/s 10(23G) of Income Tax Act, 1961.  Bank deposits should be brought under section 80 L for income tax deductions.  Relaxation in lock in period for savings u/s 80C from 5years to 3 years, which will increase attractiveness of term deposit.  Increase in ceiling of Rs 15,000 for TDS on interest earned on bank fixed deposits.  Sec 36 (1) (VIIA) and sec 43 (D)- RBI norms allows banks deduction on provision made for all grades of assets but IT department allowed only on bad and doubtful debts.  Simplification of service and fringe benefit tax norms  Perpetual non-cumulative preference shares to be included in Tier-I capital and redeemable cumulative preference shares to be included in Tier-II capital in order to improve CAR.  Increase the FII/ FDI limit in PSU banks from 20% to 49%.  Further liberalization of directed lending norms.  Levy of BCTT (banking cash transaction tax) should be made applicable only in those cases where people buy drafts from banks without quoting their Permanent Account Number (PAN). All other assesses should be outside the purview of this levy.

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“Global Economical Crisis-Impact on Indian Stock Markets”  Allow another round of VRS and more power to attract suitable talent in PSU banks.

Impact Reimbursement by the government for loan waiver of farmers of Rs.60,000 will be in 3 years have a neutral impact on PSU banks as they will be able to write off these loans & show a cleaner balance sheet in 2009. But, PSU banks are expected to face pressure on their net interest margins until the subsidy for waiver of agricultural loans and one time settlement of loans is released from the government. The cost of adding more rural households in their rural branches may increase the operating cost for the PSU banks. Whereas, banks that receive dividend from their subsidiaries will benefit from the set off of dividend distribution tax & the creation of fund in NABARD, SIDBI & NHB and withdrawn of BCTT are the favorable steps. However, no measures were taken to comply with Basel II guidelines as PSU banks need huge cheap capital but stringent restrictions on FII/FDI participation & structural hurdles like restrictions on capital availability (due to high government ownership), restrictions on credit deployment and restrictive labour laws, weak corporate governance have impaired the ability of public sector banks.

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5.2 CEMENT SECTOR 1.HISTORICAL DATA OF AMBUJA CEMENT
Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09 Prev Close 70.05 70.75 69.1 70.1 76.4 72.2 72.65 69.35 70.5 71.95 69.1 70.75 73.3 69.6 70.6 70.05 66.1 69.6 70.75 67.9 Open Price 70.25 71.75 70.5 70.5 78.65 71 72 68.8 71 70 69.9 71.75 73.5 68.1 71 69.85 66.75 70.1 71.5 68.4 High Price 71.7 72 71.6 78.4 79.2 74.5 73.75 71.65 72.45 70.55 71.9 74 73.5 71.75 71.8 69.9 72 72 72.4 71.45 Low Price 69.8 67.85 68.25 69.1 71 69 67.1 68 70.05 68 69 70.1 69 68.1 68.6 65.1 66.75 69.55 67.1 66.5 Last Price 70.55 69.5 70.05 77.3 72.35 72.9 69.5 71.65 71.8 69 71 73.95 69.05 70.9 69.35 67.4 69.3 70.8 67.75 70.6 Close Price 70.75 69.1 70.1 76.4 72.2 72.65 69.35 70.5 71.95 69.1 70.75 73.3 69.6 70.6 70.05 66.1 69.6 70.75 67.9 70.85

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GRAPHICAL REPRESENTATION OF AMBUJA CEMENT

Close Price 78 76 74 72 70 68 66 64 62 60
9 an 13 -0 9 -J an -0 15 9 -J an -0 19 9 -J an -0 21 9 -J an -0 23 9 -J an -0 28 9 -J an -0 30 9 -J an -0 9 9J an -0 2J an -0 9 6J

From the above graph and table we can conclude that the Ambuja Cement has ended up with negative from 70.75to 70.85 , and this shows a negative impact on the overall Fertilzers sectors .

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2. HISTORICAL DATA OF DECCAN CEMENT
Prev Close 126.1 144.95 138.25 140.75 144.45 140 138.5 131.6 132.95 132 131.9 131 130.9 127.5 132 135.95 138.95 140 Open Price 148.8 135 132 139.5 140.25 138.5 131.6 132 131 131.9 131 135.7 125.4 122 130 130.2 132.05 133.05 High Price 148.8 149.9 144.75 147.35 140.25 138.5 131.6 132.95 132 131.9 131 137.55 131 132 135.95 139.9 140 133.05 Low Price 126 131 127.35 137 140 138.5 131.6 126 131 131.9 131 130.5 125.4 122 130 130.2 132.05 133.05 Last Price 146.9 138.1 141.9 142.5 140 138.5 131.6 132.95 132 131.9 131 130.5 127.5 131.9 135.95 138 140 133.05 Close Price 144.95 138.25 140.75 144.45 140 138.5 131.6 132.95 132 131.9 131 130.9 127.5 132 135.95 138.95 140 133.05

Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ

Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09

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GRAPHICAL REPRESENTATION OF DECCAN CEMENT

Close Price 150 145 140 135 130 125 120 115
2Ja n09 6Ja n09 9Ja n 13 -09 -J an 15 -09 -J an 21 -09 -J an 23 -09 -J an 28 -09 -J an 30 -09 -J an -0 9

From the above graph and table we can conclude that the Deccan Cement has ended up with negative from 144.95 to133.05 , and this shows a negative impact on the overall Fertilzers sectors .

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3. HISTORICAL DATA OF INDIAN CEMENT
Prev Close 97.7 100.3 102.8 106.25 118.95 117.7 114.95 113.4 106.45 110.8 105.05 105.55 108.05 107.1 103.65 102.1 101.7 99.9 105.9 100.35 Open Price 99 102 105 107 124 110 123.35 113 108.2 101 104.3 100 108 106.45 105.35 101 102 100 105.5 99.5 High Price 101.35 104.9 106.9 121 124.9 123.55 123.35 117.9 112.25 110 110 109.8 108.8 107.95 108.5 104.9 104.8 108.6 108.9 104.3 Low Price 97 99.25 103.6 105.25 110.2 110 110.55 104.45 108.1 99.75 102.1 100 104.05 103.05 101 98.6 99.15 90.65 99.5 99.5 Last Price 100.6 102.9 106.4 121 116.2 113 114.75 106.9 111.2 106.5 105 108.3 107.05 104.1 101.5 101.5 99.95 106.8 100.35 102 Close Price 100.3 102.8 106.25 118.95 117.7 114.95 113.4 106.45 110.8 105.05 105.55 108.05 107.1 103.65 102.1 101.7 99.9 105.9 100.35 102

Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ

Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09

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GRAPHICAL REPRESENTATION OF INDIA CEMENT

Close Price 125 120 115 110 105 100 95 90
2Ja n6- 09 Ja n9- 09 Ja n 13 -0 -J 9 an -0 15 9 -J an -0 19 9 -J an -0 21 9 -J an -0 23 9 -J an -0 28 9 -J an -0 30 9 -J an -0 9

From the above graph and table we can conclude that the India Cement has ended up with negative from 100.3 to102 , and this shows a negative impact on the overall Fertilzers sectors

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AVERAGES OF THREE COMPANIES

S.NO 1 2 3

COMPANY AMBUJA DECCAN INDIA

AVERAGE 70.58 122.23 203.13

250 200 150 100 50 0 AVERAGE

AMBUJA

DECCAN

INDIA

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CHANGE IN % OF THREE COMPANIES

S.NO 1 2 3

COMPANY AMBUJA DECCAN INDIA

CHANGE IN % 0.14 -8.94 1.66

CHANGE IN %

AMBUJA DECCAN INDIA

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CEMENT --- NEGATIVE
Issues and Industry demands  Reduction of Central Levies and Excise Duty, which constitutes over 60% of the ex-factory price of cement.  Abatement of 35%-55% on Excise Duty.  Reduction of VAT on cement and clinker from existing 12.5% to 4%.  Abolition of 5% Import Duty on coal and pet coke.  CVD be re-imposed to the extent of Excise Duty on cement imports.  Reduction in royalty on limestone, currently at Rs 67/tonne.  Supply of fly ash to cement firms at no cost.  Greater emphasis on Housing and Infrastructure. Impact The Union Budget did not meet any of the cement industry-specific demands. The industry had expected some rebates on taxes as cement is one of the heavily taxed items but that did not come in the budget. On the contrary, a Rs 100/MT increase in the Excise Duty on clinker might effect sale of clinker and might squeeze the margins of cement companies. The Excise Duty on bulk cement at Rs 400/MT or 14% whichever is higher, will have a negligible impact as bulk cement does not constitute more than 2% of the overall demand. But an emphasis on power, housing, infrastructure, rural spends and overall economic growth has brought in expectations of a demand boost as the industry is positively co-related with economic growth. 90 “Net Worth Stock Broking Limited”

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5.3 POWER SECTOR
1.HISTORICAL DATA BIRLA SECTOR
Prev Close 11 11.5 12.1 12.75 12.35 11.2 10.35 10.2 10.1 10.6 10.5 10.1 10.2 10.75 10.3 10 9.9 10.6 10.5 10.15 Open Price 11.45 12 12.7 13 12.5 10.5 10.25 10.3 10.25 10.95 10.2 10.1 10.25 10.45 10.3 10 10.55 10.45 10.65 10.05 High Price 11.55 12.1 12.75 13.25 12.8 10.5 10.4 10.5 10.7 10.95 10.65 10.45 11 10.95 10.65 10.2 10.85 11 10.8 10.5 Low Price 11.05 11.65 12.1 12.2 11.15 10.1 10 10.05 10.25 10 9.75 10.1 10 9.85 9.85 9.55 10.3 10.2 10 10 Last Price 11.55 12.1 12.75 12.5 11.15 10.25 10.05 10.1 10.6 10.5 10 10.15 10.8 10.3 10.1 10 10.6 10.7 10 10.25 Close Price 11.5 12.1 12.75 12.35 11.2 10.35 10.2 10.1 10.6 10.5 10.1 10.2 10.75 10.3 10 9.9 10.6 10.5 10.15 10.4

Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ

Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09

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GRAPHICAL REPRESENTATION OF BIRLA POWER

Close Price 14 12 10 8 6 4 2 0
2Ja n 6- -09 Ja n 9- -09 Ja 13 n-09 -J a 15 n-0 -J 9 a 19 n-0 -J 9 a 21 n-0 -J 9 a 23 n-0 -J 9 a 28 n-0 -J 9 a 30 n-0 -J 9 an -0 9

From the above graph and table we can conclude that the Birla Power has ended up with negative from 11.5 to 10.4, and this shows a negative impact on the overall Fertilzers sectors

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2. HISTORICAL DATA OF IMP POWER LTD

Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ

Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09

Prev Close 49.75 51.95 53.15 57.6 54.05 50 47.6 46.6 46.85 49.4 48.5 48.15 47.5 46.2 45.25 42.2 42.6 39.15 39.65 42.6

Open Price 50.9 52.8 53 58.8 55 48 46.7 52.75 47.55 59 47.05 47.2 46.2 48.5 47 40 41.55 38 47 41.75

High Price 51.95 55 58.5 58.8 55.45 49.5 50.95 54 50.8 59 52.4 49 46.2 48.5 49 44.85 43.2 39.65 47 42

Low Price 50.9 52.8 53 53.15 49.4 46.7 46.55 45.8 47.55 48.3 47.05 47 46.2 44 41.6 39.15 37 36 40.2 37

Last Price 51.95 53.15 58 54.05 50 46.7 46.55 46.6 48.6 48.5 48.15 47 46.2 44 42 43.4 37 39.65 42.6 39

Close Price 51.95 53.15 57.6 54.05 50 47.6 46.6 46.85 49.4 48.5 48.15 47.5 46.2 45.25 42.2 42.6 39.15 39.65 42.6 39.35

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GRAPHICAL REPRESENTATION OF IMP POWER LTD

Close Price 70 60 50 40 30 20 10 0
n 6- -09 Ja n9- 09 Ja n 13 -0 -J 9 an 15 -09 -J an 19 -0 -J 9 a 21 n-0 -J 9 an 23 -0 -J 9 a 28 n-0 -J 9 an 30 -0 -J 9 an -0 9 2Ja

From the above graph and table we can conclude that the IMP Power has ended up with negative from 51.95 to 39.35, and this shows a negative impact on the overall Fertilzers sectors

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3. HISTORICAL DATA OF RELIANCE POWER
Series EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Date 1-Jan-09 2-Jan-09 5-Jan-09 6-Jan-09 7-Jan-09 9-Jan-09 12-Jan09 13-Jan09 14-Jan09 15-Jan09 16-Jan09 19-Jan09 20-Jan09 21-Jan09 22-Jan09 23-Jan09 27-Jan09 28-Jan09 29-Jan09 30-Jan09 Prev Close 119.95 123.35 123.5 124.55 123.55 112.8 106.7 102.95 97.8 102.4 98.9 101 101.65 102.5 100.35 98.5 98.05 100.55 102.6 104.5 Open Price 121.5 123.9 125 124.65 124.5 112 106.05 103 98.55 101 98.25 101.5 100 100 101 97.85 101 101.85 104 103 High Price 124.25 125.8 126.25 127.95 125.45 120 107.25 105 108.9 101.35 102.2 103.95 104.9 103.6 102.4 99.9 102.35 103.5 108.65 107.4 Low Price 116.7 123.05 121.1 121 110.75 99 102.05 96.2 95.5 97.15 98.25 100.75 98.05 99.25 98 97.25 99.25 100.2 102.5 101.7 Last Price 123.25 123.25 125 123.95 112.5 106.85 102.95 98.15 107.5 98.35 100.5 101.05 101.6 99.7 98.25 98.15 100.7 102.5 103.9 105.85 Close Price 123.35 123.5 124.55 123.55 112.8 106.7 102.95 97.8 102.4 98.9 101 101.65 102.5 100.35 98.5 98.05 100.55 102.6 104.5 106.4

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GRAPHICAL REPRESENTATION OF RELIANCE

Close Price 140 120 100 80 60 40 20 0
an 6- -09 Ja n 9- -09 Ja 13 n-0 -J 9 a 15 n-0 -J 9 a 19 n-0 -J 9 a 21 n-0 -J 9 a 23 n-0 -J 9 a 28 n-0 -J 9 a 30 n-0 -J 9 an -0 9

From the above graph and table we can conclude that the Reliance Power has ended up with negative from 123.35 to106.4, and this shows a negative impact on the overall Fertilzers sectors

2J

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AVERAGES OF THREE COMPANIES

S.NO 1 2 3

COMPANY BIRLA IMP RELIANCE

AVERAGE 10.72 46.91 106.63

AVERAGE 150 100 50 0

BIRLA

IMP

RELIANCE

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CHANGE IN % OF THREE COMPANIES

S.NO 1 2 3

COMPANY BIRLA IMP RELIANCE

CHANGE IN % -10.57 -32.02 -15.93

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CHA NG E IN %

1 B IRLA 2 IM P 3 RE LIA NCE

POWER --- NEGETIVE
Issues and Industry demands  Custom duty on Fuels Oils like furnace oil, LSHS from 10% to 5%.  Custom duty on Non-coking coke & Petroleum coke from 5% to 2%.  Custom duty on Naphtha & Liquefied propane fro 5% to 2%.  Custom duty on Metallurgical coke with ash content to less than 12%.  Section 80 IA to be extended from FY 11 to FY 17 Impact Government promise on power sector reforms can clearly be seen from the steps taken. The only negative factor is the removal of exemption of additional duty of customs of 4% from power generation projects (other than mega power projects), transmission, subtransmission, distribution projects and goods for high voltage transmission projects that

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“Global Economical Crisis-Impact on Indian Stock Markets” will increase the cost of implementation of such projects. Focus on UMPPs projects will speed up the target capacity expansion programme and higher allocation to APDRP will fastly reduce the losses to State Electricity boards. Setting up of T&D fund, continuance of RGGVY, are other key positives for the industry to take from the Budget 2008-09. The major beneficiaries from the above action are Tata Power, NTPC and Reliance Power

FINDINGS
 We can conclude that the HDFC Bank has ended up with negative from 1,013.75to 925.6 , and this shows a negative impact on the overall Fertilzers sectors .  We can conclude that the IDBI Bank has ended up with negative from 69.7to 57.15 , and this shows a negative impact on the overall Fertilzers sectors .  We can conclude that the ICICI Bank has ended up with negative from 464.15to 416.25 , and this shows a negative impact on the overall Fertilzers sectors .

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 We can conclude that the Ambuja Cement has ended up with negative from 70.75to 70.85 , and this shows a negative impact on the overall Fertilzers sectors .  We can conclude that the Deccan Cement has ended up with negative from 144.95 to133.05 , and this shows a negative impact on the overall Fertilzers sectors .  We can conclude that the India Cement has ended up with negative from 100.3 to102 , and this shows a negative impact on the overall Fertilzers sectors

 We can conclude that the Birla Power has ended up with negative from 31.2 to 29.55 , and this shows a negative impact on the overall Fertilzers sectors

 We can conclude that the Birla Power has ended up with negative from 11.5 to 10.4, and this shows a negative impact on the overall Fertilzers sectors

 We can conclude that the IMP Power has ended up with negative from 51.95 to 39.35, and this shows a negative impact on the overall Fertilzers sectors

 We can conclude that the Reliance Power has ended up with negative from 123.35 to106.4, and this shows a negative impact on the overall Fertilzers sectors

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6.2 SUGGESTIONS AND CONCLUSIONS

 PSU banks and regional rural banks (RRBs) to offer debt waiver on all agricultural loans disbursed upto March 2007 and due until the end of December 2007. The total value of relief to be offered to farmers is estimated at Rs 60,000 crore.  Advise commercial banks including RRBs, to add at least 250 rural household accounts every year at each of their rural and semi-urban branches.  Allow individuals such as retired bank officers, ex-servicemen etc to be appointed as business facilitator or business correspondent or credit counselor.  Encourage banks to embrace concept of Total Financial Inclusion to meet the entire credit requirements of SHG members.  Creation of fund of Rs.5,000 crore in NABARD to enhance its refinance operations to short term cooperative credit institutions. 102 “Net Worth Stock Broking Limited”

“Global Economical Crisis-Impact on Indian Stock Markets”  Creation of two funds of Rs.2,000 crore each in SIDBI - one for risk capital financing and other for enhancing refinance capability to the MSME sector.  Creation of fund of Rs.1,200 crore in NHB to enhance its refinance operations in the rural housing sector.  Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company.  BCTT being withdrawn with effect from April 1, 2009.  PSU banks under the Differential Rate of Interest (DRI) scheme lend up to Rs 20,000 per unit at an interest rate of 4%.  Excise Duty on clinker increased to Rs 450/MT from Rs 350/MT.  Excise Duty on bulk cement at Rs 400/MT or 14% in proportion to the estimated value of the cement, whichever is higher.

.

 Exemption from additional duty of customs of 4% levied under section 3(5) of Customs Tariff Act, 1975 has been withdrawn from power generation projects (other than mega power projects), transmission, sub-transmission, distribution projects and goods for high voltage transmission projects.  Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support.  Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs.28,000 crore; allocation of Rs.5,500 crore for 2008-09.

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“Global Economical Crisis-Impact on Indian Stock Markets”  Accelerated Power Development and Reforms Project: Rs.800 crore to be provided in 2008-09, A National Fund for transmission and distribution reform to be created.  Rs 8 bn to be provided for Accelerated Power Development and Reforms Project (APDRP) in FY09.  Proposal to create of national fund for transmission and distribution reform.  Coal distribution policy and appointment of a coal regulator to bring regularity to the process of coal production and pricing.

6.3 BIBLIOGRAPHY: Web sites:
 www.investopidia.com  www.nseindia.com  www.bseindia.com  www.networthdirect.com

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COMPANY PROFILE:
Collected from the company’s website www.NSBLindia.com

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