MOSt Wealth– Detailed Report

JULY 2010

Dear Investor,

As I write this column, India is on a bandh, in protest against the hike in fuel prices. It

seems the only people happy with it are shareholders of Oil Marketing Companies (OMCs).

But after the news of the price hike the markets have been broadly flat.

It feels as if something is amiss. The decontrol of the oil sector is the biggest unshackling

“

The

time

to get

interested

of the Indian economy since the Budget of 1991-92.

The decontrol releases the shackles on OMCs, but it also relieves the government of its

fiscal burden. When oil was US$80, the fiscal burden on the government would be Rs.875bn

for FY11. The number last year was Rs.462bn. In one move this fiscal overhang has been

removed—if, of course, the hike is not rolled back.

With the removal of the oil burden, government finances will improve, which in turn will

reduce the need for huge borrowings and reduce pressure on interest rates. Obviously all

this will play out over time. Hence though there will be inflationary pressure due to an

increase in prices, over time, a reduction in interest rates will make good cost increases.

Besides, with market driven prices, consumption will be controlled if local prices rise with

international prices. With the move to decontrol oil and receipts from the telecom auction

of over Rs.1tn government finances are, if not in the pink of health, definitely not in the

dire straits they were in at the time of the Budget. Hence, one would not be surprised

in a stock is

when no one

else is

”

INDEX

MOSt Value

MOSt Momentum

MOSt Mutual

MOSt Insurance

MOSt PMS

MOSt Commodities

1-7

8-10

11-14

15-16

18-20

if there is a re-rating of the markets. The quarterly results season, starting soon, will be

keenly watched as well.

Had oil not been decontrolled, it is not as if people would not have to pay more for fuel.

To cover its rising oil bill the government would have raised mainly indirect taxes, and the

burden would have fallen on the whole population, whether you used petrol, diesel or

not, whereas now, only a user pays. Ironies, however, still remain. Mukesh Ambani still

gets his cooking gas subsidy for want of a better system. But once the Unique ID project

is complete, even the cooking gas and kerosene subsidies will be better targeted.

All this will reduce the downward pressure on markets due to the global news flow and

every dip will become an opportunity. Even a 5% dip can be used to enter. But now just

buy OMCs – IOC, BPCL & HPCL. This is only the beginning of the story of this sector.

Happy investing

Sincerely yours,

Manish Shah

Associate Director

Retail Equities and Derivatives

1397 Business Locations

584 cities

www.motilaloswal.com

MOSt 3x3

Top picks of the month

BPCL

We believe the government's move to deregulate petrol prices now and diesel subsequently is a key reform for the sector and could drive

significant changes in the dynamics of the sector. We had a meeting with BPCL's management, which reiterated that the government's stance

on the deregulation policy on petrol and diesel was firm. The company also confirmed that the LPG and kerosene subsidy would not be borne

by refining companies. We expect the ROE’s of refining companies to revert to over 20% of yesteryear and believe there is a significant upside

in these stocks.

BHEL

BHEL reported robust 4QFY10 financial performance, ahead of estimates. BHEL reported order intake of Rs.590bn in FY10, down 3.7% YoY

This is higher than the estimate of Rs.523bn and the management's guidance of Rs.550bn. The order book is Rs.1,438bn, BTB is 4.4x TTM

revenue. BHEL is our top pick in the engineering space. We have marginally upgraded our earnings estimates and now expect FY11 and FY12

EPS of Rs.119 and Rs.158 respectively.

ICICI Bank

ICICI Bank trades at attractive valuations after the acquisition of Bank of Rajasthan. With the merger, ICICI Bank has increased its branch network

by 23%. Over 60% of BoR’s 463 branches are in Rajasthan and ~70% in North India. While the deal at 5.6x trailing book value appears

expensive, the book may also see further adjustment for the re-assessment of BoR’s NPAs by ICICI Bank. Adjusted for FY12, the subsidiary value

at Rs.232/share (after a 20% holding company discount), the stock trades at 1.6x FY12E ABV (adjusted for investment in subsidiaries) and

11x FY12E EPS.

HPCL

The government's 33% hike in kerosene prices and 11% hike in LPG prices have been unprecedented in terms of the quantum. We believe full

clarity on the subsidy sharing will provide higher earnings predictability for oil PSUs. That, in turn, will be critical for re-rating of oil PSU stocks.

IOC

We expect IOC to be a major beneficiary among oil marketing companies (OMCs) after the government's partial deregulation of oil prices and

the current fall in global oil prices. We are positively surprised by EGoMs decision on the fuel price hike. This has raised the breakeven oil price

(overall underrecovery remains zero) from US$60.7/bbl to US$64/bbl. We estimate an EPS increase of 4-8% in FY11 and 5-13% in FY12 for

OMCs like IOC. With stability in earnings and a definite disinvestment potential, IOC remains our preferred bet among the OMCs.

M&M

M&M's volumes in June 2010 grew by 7.1% YoY (down 3.5% MoM) to 44,152 units (v/s our estimate of 50,050 units), driven by strong

growth in three-wheelers. M&M trades at attractive valuations compared with its peers. Our estimates factor in 21.8% volume growth in FY11

implying a residual monthly run rate of 44,081 units and 60bp decline in EBITDA margins to 15.6%. On a consolidated basis, the stock trades

at 10.6x FY11E of consolidated EPS of Rs.58.4 and 8.8x and FY12E of consolidated EPS of Rs.70.2.

SBI

SBI has declined significantly in the past few sessions. The bank expects credit growth of 21-22% in this fiscal year against 17% last year. The

RBI has mandated a provision coverage ratio of 70% for all the banks by 30 September 2010 but SBI has got an extension of the deadline by

two quarters. SBI would command a valuation premium for its size and for being proxy to the Indian economy. Considering a consolidated

RoE of 16-18% over FY09-12, we value SBI at 1.4x FY12E consolidated ABV.

MOSt

Wealth

Research Update

ITC

28th June 10 / CMP: Rs.298

Y/E

MARCH

NET SALES

(RS. MN)

PAT

(RS. MN)

EPS

(RS.)

EPS

GR.(%)

P/E

(X)

P/BV

(X)

ROE

( %)

ROCE

( %)

EV/

SALES

EV/

EBITDA

3/09A

3/10A

3/11E

3/12E

158,065

183,810

208,254

237,636

32,636

40,610

47,327

55,652

8.6

10.6

12.4

14.6

4.6

24.4

16.5

17.6

34.9

28.3

24.3

20.7

8.3

8.1

6.9

5.8

23.8

28.9

28.5

32.9

40.7

40.4

40.8

7.1

5.9

5.2

4.5

21.7

16.9

14.7

12.4

Annual report reinforces positive stance

ITC’s FY10 annual report reinforced our positive stance on the long

term growth drivers, of sales and margins. We present the key

takeaways:

•

Cigarettes:

FY10 volumes were up 7.3% but the FY11 operating

environment will be challenging due to an increase in excise duty

and rising competition (the huge potential is attracting global

majors).

•

Processed foods:

Strong economic environment to provide 15%

growth, ITC to benefit from a decline in sugar and wheat prices.

•

Hotels:

Since December 2009 there has been a recovery in

occupancy rates though the average revenue per room is yet

to recover fully.

•

Paper and paperboard:

ITC will be able to counter strong

input cost inflation through its forward linkage with the

stationery business, its own pulp facility and focus on value

added paperboard.

•

Agri:

Tobacco leaf prices are unlikely to increase; margins have

peaked.

Key balance sheet/profit & loss highlights

ITC incurred capex of Rs.12bn in FY10, with cigarette capex of

Rs.4.4bn, hotels capex of Rs.4.2bn, paper capex of Rs.2bn and

FMCG. Others capex of Rs.1.7bn. Investments in mutual funds and

other instruments increased from Rs.19.5bn to Rs.40.8bn. ITC

transferred investments in VST Industries, Agrotech Foods, Hotel

Leela Venture and EIH from Russell Credit to its own balance sheet

at a book value of Rs.3.85bn. The company added 18m shares of

Hotel Leela during the year. FY10 net cash generation from operating

activities increased to Rs.46.3bn from Rs.32.4bn in FY09. Share

premium increased by Rs.6.7bn (44m shares) due to exercise of

ESOPS. Loans and advances declined by Rs.3.4bn; it recovered

Rs.1.8bn of advances from its subsidiaries. ITC’s finished goods

MOSt

Wealth

STOCK PERFORMANCE (1 YEAR)

inventory declined by Rs.4.5bn mainly due to a decline in cigarette

inventories by Rs.4.2bn. Other income increased 12.9% to Rs.6bn

and forex gain of Rs.467mn accounted for 68% of this growth.

Advertising spend increased by 2.5% to Rs5.1bn, a 50bp decline

YoY to 2.8% of sales.

Long term growth story intact, maintain Buy:

We are positive on ITC’s long term growth potential in key product

categories and its initiatives to fuel growth. Despite near term growth

challenges in cigarettes and the agri business, long term outlook is

intact. Capacity expansion and cuts in losses in FMCG others is

positive. ITC expects breakeven in the business over 3 yrs. The paper

and paperboard business is well poised due to the high potential in

the education segment, which calls for writing paper and packaging

demand for paperboard. ITC is best placed to capitalize on the

growth potential in hotels due to strong cash flows in this long

gestation period industry. We estimate 17% PAT CAGR over FY10-

12. The stock trades at 24.3x FY11E EPS of Rs.12.4 and

20.7x FY12E EPS of Rs.14.6. Maintain Buy.

ITC

Research Update

Oil & Gas

Bold steps in retail fuel pricing; Analyzing precedents & best case scenario for OMC’s

We believe the government step to de-regulate petrol now and diesel (over coming period) is a key reform for the sector and could drive

significant changes in the sector dynamics. Price hikes by the government have been unprecedented in terms of the quantum, reflected

in a 33% hike in kerosene and 11% hike in LPG prices. As expected, there were dissenting noises from allies as well as the opposition

parties. However, with further assertion by the Prime Minister in ‘The G20’ summit, it seems unlikely that there would be any rollback

in the decision. Post de-regulation of the petrol and diesel (over coming period), there still remains under recovery on LPG and kerosene

to be shared. Though, the government has not yet devised the mechanism to share the LPG and kerosene losses, we expect to get the

clarity on the same soon. We do not rule out a scenario where government could compensate OMC’s for 100% of all the under

recoveries. Government has seen substantial cash inflows from spectrum auction (3G and BWA) to the tune of Rs.1.06tn in FY11. Our

base case scenario assumes 11% sharing by the OMC’s in FY11 and FY12.

FY09 under recoveries reached unprecedented levels; forcing govt to seek a sustainable solution

In FY09, crude price as well as under recoveries reached unprecedented levels of Rs.1 trillion. This also resulted in government doling out

the highest ever oil bond compensation of ~Rs.700b. Fiscal deficit climbed to a decade-high of 6.6% in FY10. Till FY09, the government

used to share the subsidy through oil bonds, reducing the impact on reported fiscal deficit. From FY10, it had decided to make cash

payments for subsidies and include in fiscal deficit – this paved way for the thought of de-regulation.

FY11 - Year for de-regulation

After a roller coaster ride in FY09 and FY10, crude prices seem to be stabilizing in FY11, albeit in a higher price band. From the

government’s point of view, this was the best time to de-regulate fuel prices given (1) largely stable oil price; (2) increased ability to

withstand opposition from political rivals; and (3) continued pressure to improve country’s energy security (and hence can not allow oil

PSU financials to suffer). Government had setup the Expert Group to recommend viable strategy for the sector and the recent EGoM

decision was based on the recommendations of the Expert Group headed by Kirit Parikh. FY11 is also a year where the government had

windfall gains from the spectrum auction of 3G and BWA (cash inflow of Rs.1.06tn).

Benign oil price would be positive for OMC’s

We believe that OMC’s profits would be benefitted if (1) oil prices remain benign i.e. below US$75/bbl; and (2) once diesel prices are

fully deregulated, diesel de-regulation would provide a huge relief for the system. Higher oil prices result in increase of the under

recoveries and also the sharing mechanism of the losses gets complicated and delayed. We estimate gross under recoveries (diesel,

kerosene and LPG) of Rs.433bn at an oil price of US$75/bbl. However, once diesel prices are freed, under recoveries would reduce to

~Rs.347bn. Impact of diesel price deregulation is significant at higher oil prices (refer exhibit below). A US$1/bbl change in crude price

would increase the gross under recoveries by Rs.42bn. If we exclude diesel, a change of US$1/bbl in crude price would impact under

recoveries by Rs.11bn (only LPG and kerosene). Impact of de-regulation on retail fuel prices, in a free price scenario, we estimate an

impact of Rs.4 for petrol and Rs.3.8 for diesel price for a crude price increase of US$10/bbl.

Valuation and View

We believe that full clarity on the subsidy sharing would provide higher earnings predictability for the oil PSU’s. That, in turn, would be

critical to re-rating of the PSU oil stocks. We have Buy ratings on ONGC, GAIL and OMC’s.

Our Base Case Estimates And Valuation

EPS(RS.)

COMPANY

BPCL

GAIL

HPCL

IOC

ONGC

RECO

BUY

FY10

45.2

24.8

38.4

44.5

30.7

FY11

60.6

30.6

34.6

34.3

122.5

FY12

64.6

34.5

37.1

43.1

141.2

FY10 (X)

14.7

18.9

12.2

9.0

14.6

P/E

FY11 (X)

10.9

15.3

13.6

11.7

10.8

FY12 (X)

10.2

13.5

12.6

9.4

FY10 (X)

1.7

3.5

1.4

1.8

2.7

P/BV

FY11 (X)

1.5

3.1

1.3

1.7

2.4

FY12 (X)

1.4

2.7

1.2

1.5

2.0

MOSt

Wealth

Model Portfolios

Select the portfolio that best suits your risk profile

Scrip

AGGRESSIVE - High Risk, High Returns

MBP*

Wtg.*

SBI

BHEL

M&M

ICICI Bank

Bajaj Auto

HPCL

BPCL

IOC

Bombay Rayon

Idea

JSW Steel

Lupin

Nagarjuna Construction

Prakash Industries

Sterlite Industries

Total Investment%

2,300

2,200

650

920

2,000

500

700

430

260

1,100

1,800

176

225

172

100

TOP PICK

The Sensex surged 756 points or 4.5% in June. Despite global

weakness, India was among the emerging markets that gained

most. In June, FIIs were net buyers of equity worth over Rs.77bn.

Most of the global markets were weak due to concerns of a debt

crisis in Europe and Chinese growth. We feel that the government's

oil deregulation is a bold step to reduce the fiscal deficit on top of

the Rs.1tn it received from the 3G auction.

We believe the government's step to deregulate petrol now and

diesel over time is a key reform for the sector and could drive

significant changes in the sector dynamics. The government's 33%

hike in kerosene prices and 11% hike in LPG prices are

unprecedented in terms of quantum. Our top picks among OMCs

are HPCL, IOC and BPCL.

We believe OMC profits would benefit if (1) oil prices remain

benign or below US$75/bbl; and (2) once diesel prices are fully

deregulated. Diesel deregulation would provide a huge relief to

the system.

We add HPCL and IOC on a defensive portfolio and remove Anant

Raj and India Cement. We also remove India Cement from the

moderate portfolio and add BPCL. We expect the addition of

cement capacity and a price slowdown may have a negative impact

on cement stocks.

We remove Axis Bank from the aggressive portfolio and add ICICI

Bank. Axis Bank has gained significantly and ICICI Bank trades at

more attractive valuations than Axis Bank after ICICI Bank acquired

Bank of Rajasthan. We expect ICICI Bank to post EPS of Rs.46 in

FY11 and Rs.58 in FY12. ABV (adjusted for investment in

subsidiaries) will be Rs.378 in FY11E and Rs.415 in FY12E.

With these changes, we will be 100% invested in all our portfolios.

Sector

Allocation (%)

Agg. Mod.

Def.

Our Aggressive Portfolio works on the principle of ‘no pain no gain’. The target returns are

high at 30%+. Portfolio includes commodity, cyclical and small-cap stocks.

Scrip

MODERATE - Medium Risk, Medium Returns

MBP*

Wtg.*

SBI

BHEL

M&M

Hero Honda

Bank of Baroda

Cipla

GSK Consumer

GSK Pharma

Idea

HPCL

BPCL

IOC

JSW Steel

Nagarjuna Construction

Prakash Industries

Sterlite Industries

Total Investment%

2,300

2,200

650

1,900

700

330

1,500

1,800

500

700

430

1,100

176

225

172

100

TOP PICK

Some moderation is achieved in this portfolio by investing in large and growth stocks

available at value. The aim is to generate 20%+ annualized returns with less risk.

Scrip

DEFENSIVE - Low Risk, Low Returns

MBP*

Wtg.*

SBI

BHEL

M&M

Gail

Hero Honda

HPCL

BPCL

IOC

Bank of Baroda

Blue Star

Cipla

GSK Consumer

GSK Pharma

Idea

Shriram Transport

Total Investment%

2,300

2,200

650

480

1,900

500

700

430

700

400

330

1,500

1,800

550

100

TOP PICK

MBP* :Maximum Buying Price. One should not buy the stock if Price is above MBP

W t g . * :Weightage refers to the size of the position recommended. H-10%, M-5%

Our Defensive portfolio works on the principle of balanced growth to outperform the

market. The aim is to get annualized returns in excess of 15% taking minimal risks.

Automobiles

Banking

Pharma

Telecom

Cement

Others

FMCG

Metals

Real Estate

Infrastructure

Oil & Gas

Textile

Engineering

Cash

Total

100

Additions or deletions of stocks are being communicated through our morning conference

calls, Most Market Action emails or on AWACS during market hours.

MOSt

Wealth

India Strategy

Extract

•

Steady 1QFY11 for the Indian corporate sector; Sensex PAT up 19% YoY

We expect MOSL Universe (excluding oil marketing companies) to report 1QFY11 earnings growth of 17% YoY This growth is a moderation

compared to 31% YoY in 2HFY10, when earnings were largely driven by low base. Telecom sector and ONGC are the two key reasons for

lower growth. Apart from these, growth for rest of Universe would be 31%. 1QFY11 will also be a quarter, where absolute PAT will be lower

QoQ (first time in last 4 years). This is driven by flat growth QoQ in Oil & Gas and drop in earnings in Metals and Telecom sector. Sensex

performance is marginally better than aggregate with PAT growth of 19% YoY

•

India 2010: Watch out for the second half

Indian markets had a lacklustre first half 2010, rising just 1-2%. However, just like the ongoing football World Cup, Indian equities could throw

up a few surprises in the second half of the year. How the second half plays out for India depends on the interplay of 11different forces that

we have identified and lined up like a typical football team.

•

Markets to remain range-bound; stock-picking to drive portfolio performance

Accelerating economic and corporate profit growth will limit downside in the markets. At the same time, above-average valuations cap the

upside. Expect benchmark indices to remain with a range of 10% from current levels. Thus, 2010 will be a year of stockpicking, with market

contribution to aggregate performance being the lowest in three years. We believe stocks in our model portfolio offer growth at reasonable

valuations. We are overweight on domestic plays - Financials (SBI, ICICI Bank), Infrastructure & allied sectors (BHEL, ACC, Unitech) and Oil &

Gas (BPCL, GAIL). Amongst the global plays, we prefer IT and Pharma over cyclicals.

•

Striker #10: Reforms - gathering momentum

The Congress-led UPA (United Progressive Alliance) government is in its second year of office following its re-election in 2009. The market had

cheered the election of the government in May 2009 with a big gain on hopes of several reforms. We believe the stage is set for policy reforms

to gather significant momentum with impact on both corporate earnings and stock valuations.

•

Oil Sector Reforms: LONG AWAITED!

The first set of reforms have come in the Oil sector, with hike in GAIL’s pipeline tariff in April 2010, followed by a hike in APM gas price in May,

and rounding up the quarter with a move towards deregulation of major oil products in June 2010.

The scope and further hopes of these reforms have already driven PSU Oil & Gas stocks to significantly outperform the market indices in

1QFY11. India’s outperformance over the global markets has been driven by a rising confidence in the government reforms post the fuel price

de-regulation.

•

Key announcements

Petrol:

Retail prices to be market-determined. As per the latest fortnight data, price hike is ~Rs.3.5/litre.

Diesel:

Though the Empowered Group of Ministers (EGoM) has decided to eventually deregulate diesel prices, currently it has decided to

increase price by just Rs.2/litre.

LPG:

Domestic LPG cylinder price to be hiked by Rs.35/cylinder (current loss is Rs.262/cylinder).

Kerosene:

PDS kerosene price to be hiked by Rs.3/litre from Rs.9/litre to Rs.12/litre (current loss is Rs.17.9/litre). Previous hike was in March

2002.

•

Valuation and view

We believe that full clarity on subsidy sharing would provide higher earnings predictability for the state-owned oil companies. That, in turn,

would be critical to the re-rating of state owned oil stocks. The process has begun and we expect clarity to improve in the days to come. We

have Buy ratings on ONGC, GAIL and the OMCs.

MOSt

Wealth

Perspective

ETF (Exchange Traded Fund) - The Way Forward...

Lokesh Nathany, Sr. Vice President & Head of sales and distribution, MOAMC

In the investment universe, the wind of change called ETF has started and is ready to blow all those who will ignore it. With the demand for greater

transparency especially post 2008 crisis, ETF are becoming popular across the globe .

What is an Exchange Traded Fund (ETF)?

An exchange traded fund or ETF as it is popularly called is a fund comprising of a basket of securities that provides exposure to the

market. As the name suggests, an ETF basically combines the best of Mutual funds and shares. Unlike a traditional Mutual fund which

is basket of securities (Equity or Debt) and can be bought or sold through the fund house, ETF are also basket of securities (Equity or

Debt) but can be bought or sold through the stock exchange.

What are the advantages of ETFs?

ETFs are modern day Mutual funds which have several advantages over traditional funds.

Low cost:

Both traditional funds and ETFs charge fund management charges and operating expenses to the Scheme. However, due to

the very nature of ETFs, both the expenses are streamlined and much lower as compared to open ended mutual funds. ETFs protect the

interest of the long term investor from the inflows and outflows of short-term investors.

Portfolio Diversification:

ETFs provide exposure to the market through a basket of securities which results in portfolio diversification

and better risk management. They provide wide variety of sector, style, industry and country specific funds thereby giving a wide choice

of diversification to the investor.

Convenience of Investing:

ETFs provide you the convenience of investing as it makes purchase and redemption possible at any point

of time during market hours (current timings: 9 am and 3.30 pm). If you have brokerage account, all you have to do is either go online

or call your broker and place an order. It is as simple as buying any share/stock of a Company. The procedure is same if you want to

redeem your investments partially or fully.

Transparency:

ETFs are as transparent as clear glass. The indicative NAVs are available real time to an investor and so is the basket of

securities that consists the portfolio. This will help investor to understand what he is investing into and at what price, thereby make on

informed investment decision.

How are ETFs different from Mutual Fund?

The key differences between ETFs and Mutual Funds are the following:

Feature

Liquidity

ETFs

Mutual Fund

Purchase or Redemption has to be lodged with the fund house

which is processed at the end of the day

The NAV at the end of the day is applicable and hence not

known at the time of execution of the transaction

The portfolio is disclosed on a periodic basis as per the

regulatory requirement

Large purchase or redemptions impacts the NAV of the fund

The charges are relatively higher with a maximum limit of 1.25%,

as prescribed under SEBI (Mutual Funds) Regulations, 1996

Relatively higher

Not Possible

Does not provide any such opportunities

Can be traded on the exchange during trading hours

and hence making them very liquid

The price is available live and one knows the price at

NAV or Price

which one is buying/ selling

Portfolio

The portfolio is disclosed daily thereby making it very

Transparency

transparent

Impact of large Purchase or sale of units on the exchange will have

clients

no impact on the NAV of the ETF

The charges are much lower with a maximum limit of

Investment

0.75%, as prescribed under SEBI (Mutual Funds)

Management Fees

Regulations, 1996

Operating expenses Lower due to the very nature of the product

Intraday Liquidity

Arbitrage

opportunity

Margin Money

Possible

Provides arbitrage opportunities

Can be bought and sold on margin money thereby No such facility is available

allowing investors to take a larger exposure

MOSt

Wealth

Market Outlook

Bullish trend continued…

The Nifty continued its northbound journey but after reaching 5,147

points on 4 June, it fell sharply. On 8th June, it took support at

4,967 and recovered smartly, on 21st June it made a high of 5,366,

which was very close to our first short term target of 5,399 points.

After that it moved in a 5,350-5,250 range, and finally closed at

5,312 points, a gain of 4.44% MoM. Among the sector indices,

the BSE FMCG, BSE Auto and BSE Capital Goods were major gainers

MoM. But the BSE Metal Index underperformed the broader markets

and closed down MoM.

Going forward…

Short term -

On the daily chart, the Nifty made an Inverse Head

& Shoulders pattern and broke the neckline on 14th June. Now,

after a sharp move from 4,967 to 5,399 points, it is making a

Flag pattern. We maintain our bullish view with the a target of

5,518, which is the target of the Inverse Head & Shoulders pattern,

though it has some resistance in the range of 5,366 to 5,399. On

the downside, if it breaks 5,210, it can test 5,167, which is a

50% retracement level of the recent rally from 4,967 to 5,366.

But corrections should be used as an opportunity to buy with

stop-loss of 5,100.

Long term -

The long term bullish trend is intact as on the weekly

chart Nifty is still making higher tops and higher bottoms and

continuously trading in the rising channel. Now the bull trend will

reverse only if Nifty closes below 4,786 points. On the upside, the

5,366-5,399 point range will play as a resistance. If it crosses this

resistance, it can test 5,945 points.

ACTIONABLES:

In the current scenario, the strategy for the Nifty would be to:

1. Hold existing long positions or add fresh longs with a stop-

loss of 5,100 for a target of 5,518.

2. If it sustains above 5,518 then long positions can be continued

for a target of 5,650 and a stop-loss can be revised to 5,400.

3. Short positions can be created only if the Nifty breaks 4,967,

in which case it can test 4,786 points. In this case stop-loss

should be 5,050.

4. If it breaks 4,786, then trading short positions can be

continued for a target of 4,538 and stop-loss can be revised

to 4,900.

Weekly Chart

The above views are based on Technical analysis and could differ from our fundamental views.

For further ideas on Technicals contact:Tel.: +91 22 30896833

MOSt

Wealth

MOSt on Dot

Derivatives & options trading

In June series stock rollovers stood at 85.1% (6-m avg. 84.7%), while Nifty rollovers stood at 68.9% (6-m avg. 68.1%). Stock futures had steady

increments throughout the expiry having daily increments to the Open Interest except only for two sessions of contraction. This coupled with better

rollovers has resulted in an augmentation of over 4mn shares on MoM basis to total stock futures participation. This time even Nifty rolled at par

with the average, rolling most of the incremental participation in last sessions. As a result, we will now be starting the July expiry with over 30mn

shares in Nifty.

On the option front, June series started with humble OIPCR of a bit over 1.2, while the participants started building a consensus over a major hurdle

around 5200. This level was held good one but the rise in the second half tore apart the level scaring off majority of the writers. The Puts written on

the down side remained unwound, while fresh additions in Puts in the second half brought Nifty June OIPCR to beyond the historical levels of 2.

Nifty futures had majority of fresh build up in last few sessions, where Nifty traded in decent premium to spot. Even the average rollover cost in

the expiry week suggests more longs have rolled forward looking for additional gains. Among stocks sectors like Auto, Metal & Technology

witnessed exits, while Banking & Pharma stocks expect gains going forward. This is indicated by the MoM increments led by better rollovers

supported by positive rollover cost. Interestingly, This time around the aggression of long rollovers could be seen more in Mid-Cap stocks than the

Large-Caps. Even in the sectors like Technology where large caps saw exits, Patni & HCL Tech saw incremental long rollovers similar was the case

with GMR Infra & Syndicate Bank.

At this juncture significant Put writers in 5200 thru 5000 strikes indicate consensus over the same to be held for time to come. However, there is

also heavy build up in higher calls in 5400 & 5500, indicating a slowdown in Nifty approaching those levels. Hence expect this range of 5200-

5400 to be held with higher possibility of an upward breakout supported by the lower IVs and Moderately bullish Nifty July OIPCR.

We recommend strategy viz. Nifty Long Combo.

INDEX: NIFTY

View

Rationale

Bullish

1. Bullish OIPCR of 1.4 and IVs (Implied Volatility) below 20% supports the Uptrend

LOT SIZE: 50

2. The rise may be moderate up to 5400 hence sensible to be financed using Premium from short lower

Put.

3. Congested strikes of 5200 & 5100 indicate halt for Correction, if any.

Premium Outflow:

Span Margin:

Rs.500.00 (per spread)

Rs.16,000.00 (Approx)

Strategy: Nifty Long Combo.

Buy/Sell

BUY

SELL

Scrip

NIFTY

Series

JUL

Option Type

Strike Price

5400

5100

Pay off Profile

15000

10000

5000

-5000

-10000

-15000

-20000

Nifty at e xp r ir y

Reco Price

Rs.48

Rs.58

Pay off Profile On Expiry

Break Even

Point

N.A.

Maximum

Profit

Unlimited - Above

5,400

Maximum

Loss

Unlimited

Below 5,090

MOSt

Wealth

MOSt 3x3

Summary

1st week (5th June, 2010)

2nd week (12th June, 2010)

3rd week (19th June, 2010)

4th week (26th June, 2010)

Large Cap

Maruti

ONGC

SBI

CMP(Rs.)

1,331

1,190

2,342

Large Cap

Cipla

ICICI Bank

Hindalco

CMP(Rs.)

336

845

140

232

183

Large Cap

Cipla

ICICI Bank

Hindalco

CMP(Rs.)

337

867

145

229

125

Large Cap

GAIL

M&M

SBI

CMP(Rs.)

483

615

2,301

223

291

Mid Cap

Anant Raj Industries

Birla Corp

Dewan Housing

103

367

225

Mid Cap

Dewan Housing

GVK Power

United Phosphorus

Mid Cap

Dewan Housing

GVK Power

Deccan Chronicle

Mid Cap

Dewan Housing

GVK Power

Zee Entertainment

CMP: current market price

Blue Colour:

New entry in MOSt 3x3

Red Colour:

Re - entry in MOSt 3x3

MOSt

Wealth

NFO Focus

Motilal Oswal Mutual Fund MOSt Shares M50 Exchange Traded Fund

NFO Opens: 30th June 2010, Closes: 19th July 2010

India's first fundamentally weighted ETF based on the S&P CNX Nifty Index.

Seeks investment returns that generally correspond to the performance of the MOSt Shares M50 (MOSt 50) basket.

•

The MOSt 50 basket is essentially Nifty remixed and consists of all 50 stocks of the Nifty but not in the same proportion as the Nifty 50.

•

Weightsage of stocks in the MOSt 50 basket is determined by using Motilal Oswal AMC's proprietary pre-defined methodology that assigns

weights based on a stocks fundamentals (ROE, net worth retained earnings & price) against market cap based weights used in the Nifty.

•

Companies with good financial performance and reasonable valuation get higher weightage.

Fund Manager:

Mr.Rajnish Rastogi, who has 14 years' experience in fund management & equity research.

Investment Features - Market Cap Based Index & MOSt 50

Market Cap Index

Weightage to stocks

Based on stock’s Market Capitalization.

Higher allocation to stocks with bigger market

capitalization irrespective of their underlying fundamentals.

Implication

Weightage of stock is not reduced even if it becomes

expensive or has poor financial performance.

MOSt 50 Basket

Based on stock’s fundamentals (ROE, Net Worth, Retained

Earnings & Price).

Higher allocation to stocks with better financial performance

and reasonable valuations.

Periodic rebalancing of MOSt 50 basket linked to change in Nifty

constituents ensures higher capital remains allocated to stocks

with good financial performance and reasonable

valuations.

Benefits of MOSt Shares M50

•

A mutual fund scheme with the convenience of share trading at real time liquidity and prices.

•

Owning a diversified portfolio of bluechip Top 50 Nifty stocks.

•

Higher allocation to stocks with superior fundamentals and valuations. Lower allocation to stocks with inferior fundamentals and valuations.

•

Combines the benefit of active allocation and passive execution.

•

Lower cost structure (about 1% against >2%) compared with a traditional investment product.

•

No entry or exit load.

•

Tax efficient exposure to the market.

•

Complete transparency with daily portfolio disclosures.

•

Available at low denominations of less than Rs.100.

Minimum Investment amount during NFO

•

Rs. 10,000/- & in multiple of Re.1 thereafter

M50 ETF Investment Process

During NFO, application for MOSt Shares M50 can be made through the following

•

Online:

Place your order through BSE STAR MF Terminal or Call your advisor

•

Physical Application:

Investment cheque in the name of

"Motilal Oswal Most Shares M50 ETF"

For more information :

Call : 1800- 200 - 6626 I SMS : M50 to 575753

E-mail: mfservice@motilaloswal.com

Website: www.mostshares.com

MOSt

Wealth

Mutual Fund Overview

Debt market overview

In June 2010, the 10-year benchmark 7.80%, 2020 bond settled at

Rs.101.70 or 7.5497% yield compared with Rs.101.62 or 7.5636%

as on 30th May 2010. In the first week of the month the bond

market was poised for a second rally due to improved government

finance and renewed weakness in the global asset market. The

benchmark 10-year bond yield closed down 4bp at 7.51%. As

expected, payment for the 3G spectrum had a severe impact on

liquidity, which drove banks to the repo window for short-term

funding. The tight cash condition was also visible in the inter-bank

call money market with the overnight rate quoting at a premium of

100-150bp over the reverse repo rate. Tighter liquidity also continued

to affect sentiment. At the end of the month bond yields moved in

a tight range, followed by the government's decision to reduce the

number of bonds for auction. The benchmark 10-year bond yield

nearly touched a two-week low on the announcement of reduced

action. The government said it would sell bonds worth Rs.100bn

on 25th June 2010, against Rs.130bn, as stated on its indicative

borrowing calendar. Government finances are set for a big boost

with the Wimax and broadband spectrum auction, which will fetch

about Rs.300bn. The proceeds together with the 3G spectrum

auction proceeds will put about Rs.1tn in the government kitty.

This, coupled with advance tax inflows of Rs.350bn, will swell the

government's cash balances to Rs.1.35tn, leaving the government

enough elbow room to manage its fiscal deficit. Corporate bond

yields rose on liquidity fears. Five benchmark AAA bond yields closed

up 4bp at 8.20% (previous month closing:8.16%). Corporate bond

yields are likely to be pressured due to tight money conditions.

India's WPI-based primary articles inflation for the week to 22nd

May 2010 increased to 16.89% YoY against 15.9% a week earlier

due to a rise in food and non-food article prices. The fuel index also

increased to 14.14% YoY against 12.08% a week earlier due to

higher electricity prices. The deregulation of petrol prices and hikes

in diesel, LPG and kerosene prices prompted the bond market to

price-in an earlier-than-expected policy rate hike by the RBI (Reserve

Bank of India). The fuel price hike is expected to push June 2010

inflation to double-digit levels, the third consecutive month of

double-digit inflation. The high trending inflation expectations is

expected to push RBI into raising policy rates before its Q1 policy

review meeting on 27 July 2010.

The Indian economy grew by 8.6% in the three months to March

2010. It grew 6.5% over October-December 2009 and 5.8% a year

earlier. The Central Statistical Organization revised its growth estimate

for 2009-10 to 7.4% from an earlier 7.2%.

Overview of funds

Equity Funds

In June 2010, FIIs were net buyers of equity worth Rs.7.4bn and

domestic mutual funds bought equity worth Rs.105bn. In the month

the Sensex was up from 16,944.63 points to 17700.90 over 756.27

points (4.46%) & Nifty up from 5086.30 to 5312.50 over 226.20

points (4.45%).

In the Equity Diversified category, DSP BlackRock Small and Midcap

Fund - Growth topped the charts with 1-yr absolute returns of

63.53% and the ING Dividend Yield Fund was second with 1-yr

absolute returns of 63.44%. Among Index funds, ING Nifty Plus

Fund - Growth and Benchmark S&P CNX 500 Fund were first and

second respectively, generating 1-yr absolute returns of 25.20%

and 24.42% respectively. Among Sector Funds Reliance Pharma

Fund topped the charts with 1-yr absolute returns of 110.58%. In

the ELSS category, L&T Tax Advantage Fund - Series I topped the

charts with 1yr absolute returns of 55.83%.

Category

Liquid

Liquid Plus

Income Funds

Debt MIP

Debt - Short Term

Gilt - Long Term

1 Mth(%)

4.68

4.80

6.53

12.22

4.75

4.61

6 Mths(%)

3.88

4.46

5.57

5.99

4.86

5.64

1 Yr(%)

3.73

4.38

5.49

9.24

5.06

3.33

MOSt

Wealth

Mutual Fund Returns

PERFORMANCE OF REC0MMENDED EQUITY SCHEMES AS ON 3OTH JUNE 2010

Returns (P2P %)

Scheme Name

Mths

1 Yr

2 yrs

3 Yrs

5 Yrs

Daily Rolling

returns (1 Yr)

3Yrs SIP

Returns (%)

EQUITY DIVERSIFIED - LARGE CAP

DSP BlackRock Top 100 Equity Fund - Growth

Fidelity Equity Fund - Growth

Franklin India Bluechip - Growth

HDFC Top 200 - Growth

ICICI Prudential Growth Plan - Cumulative

SBI Magnum Sector Umbrella - Contra - Growth

EQUITY DIVERSIFIED FUNDS

Birla Sun Life Dividend Yield Plus - Growth

HDFC Core & Satellite Fund - Growth

HDFC Equity Fund - Growth

ICICI Prudential Discovery Fund - Growth

Reliance RSF - Equity - Growth

Religare Contra Fund - Growth

THEMATIC-INFRASTRUCTURE

DSP BlackRock India Tiger Fund - Growth

ICICI Prudential Infrastructure Fund - Growth

Tata Infrastructure Fund - Growth

ELSS

Fidelity Tax Advantage Fund - Growth

HDFC Taxsaver - Growth

ICICI Prudential Taxplan - Growth

INDEX FUND

HDFC Index Fund - Sensex Plus Plan

SBI Magnum Index Fund - Growth

Tata Index Fund - Sensex Plan - Option A

BALANCED

HDFC Balanced Fund - Growth

Reliance RSF - Balanced - Growth

Tata Balanced Fund - Growth

ARBITRAGE DERIVATIVE EQUITY FUND

Kotak Equity Arbitrage Fund - Growth

SBI Arbitrage Opportunities Fund - Growth

<1 yr Absolute, >1 CAGR •

Source: MFI Explorer

3.54

11.04

5.79

7.84

1.79

2.42

28.56

40.67

28.35

34.06

26.29

29.14

23.46

28.32

27.37

31.97

19.52

23.99

13.10

11.20

11.29

17.34

7.79

10.74

26.67

24.70

23.71

27.62

21.10

26.07

0.0967

0.1287

0.0935

0.1111

0.0833

0.0916

19.75

24.30

21.13

26.72

15.73

19.37

15.16

9.39

9.64

12.84

6.40

5.24

54.23

62.62

48.01

45.01

65.97

37.06

41.67

42.78

34.93

33.14

35.33

41.01

29.11

33.43

19.18

12.93

11.29

15.25

16.33

19.52

13.17

21.61

22.47

27.79

24.57

24.14

0.1614

0.1806

0.1435

0.1455

0.1797

0.1271

0.1394

33.77

33.12

26.96

30.16

37.94

27.04

27.96

DSP BlackRock Small and Midcap Fund - Growth 13.21

6.76

-0.17

2.69

23.21

18.96

21.38

21.30

16.19

14.31

7.17

10.88

7.64

26.08

24.56

0.0921

0.0683

0.0861

16.39

12.88

13.98

12.68

10.78

8.59

44.49

47.37

53.37

29.61

33.51

27.92

12.81

11.70

12.25

22.47

19.53

0.1373

0.1451

0.1541

25.86

27.43

28.25

3.29

2.24

1.38

26.84

23.67

20.50

23.13

15.93

16.17

9.77

5.03

5.15

21.83

17.43

17.89

0.0957

0.0665

0.0762

18.70

13.44

13.47

12.70

9.72

5.80

39.81

31.97

32.98

28.49

31.53

24.74

16.18

20.25

12.18

19.44

16.15

20.64

0.1164

0.1109

0.1076

26.30

27.55

20.97

2.13

1.91

4.27

3.70

5.60

5.02

6.53

6.09

0.0121

0.0115

5.55

5.03

“ – “ means no history

MOSt

Wealth

Mutual Fund Returns

PERFORMANCE OF REC0MMENDED DEBT SCHEMES AS ON 3OTH JUNE 2010

Returns (P2P %)

Scheme Name

2 Wks

1 Mth

3 Mths

6 Mths

1 Yr

Daily Rolling

Return (1 Yr)

MIP AGGRESSIVE

DSP BlackRock Savings Manager Fund - Aggressive - G.

DWS Twin Advantage Fund - Growth

HDFC MIP - LTP - Growth

Reliance MIP - Growth

MIP CONSERVATIVE

Birla Sun Life MIP - Savings 5 - Growth

DWS Money Plus Advantage Fund - Reg - Growth

INCOME FUND

DSP BlackRock Bond Fund - Retail Plan - Growth

IDFC SSIF - MTP - Plan A - Growth

Templeton India Income Fund - Growth

GILT FUND

Birla Sun Life GPRP - Growth

DSP BlackRock Government Securities Fund - Growth

ICICI Prudential GFIP - Growth

SHORT TERM

Birla Sun Life Ultra Short Term Fund - Growth

DSP BlackRock Short Term Fund - Growth

Templeton India STIP - Growth

ULTRA SHORT TERM

Reliance Money Manager Fund - Retail - Growth

Tata Floater Fund - Growth

LIQUID FUND

HDFC Liquid Fund - Growth

Reliance Liquid Fund - TP - Retail - Growth

FLOATING RATE

Reliance FRF - ST - Growth

Templeton FRIF - Short Term - Growth

6.34

4.40

6.13

4.11

5.29

4.00

4.82

3.85

4.82

3.77

0.0129

0.0101

4.83

4.52

4.75

4.48

4.51

4.47

4.15

4.16

4.27

4.34

0.0115

0.0116

4.71

5.36

4.70

5.24

4.69

5.05

4.53

4.87

4.73

4.86

0.0127

0.0130

0.18

0.19

0.23

0.40

0.48

1.24

1.26

1.59

2.23

2.46

3.31

4.41

4.59

8.62

0.0119

0.0125

0.0244

0.15

0.55

0.65

-0.16

0.30

0.61

0.93

3.45

2.17

1.07

3.76

2.19

0.63

4.32

1.16

0.0042

0.0139

0.0020

0.25

0.36

0.15

0.17

0.53

0.14

2.51

2.73

0.96

3.38

4.85

2.01

4.66

9.44

4.00

0.0160

0.0289

0.0128

0.44

0.10

0.87

0.33

1.55

2.27

2.63

3.46

6.51

5.62

0.0196

0.0161

0.15

0.31

0.78

0.53

0.80

1.11

1.76

1.54

1.08

2.97

3.12

2.65

1.22

4.40

4.86

3.76

10.48

5.95

15.37

15.75

0.0324

0.0160

0.0475

0.0478

MIP Aggressive,MIP Conservative,Income Fund ,Gilt Fund, Short Term < 1 year Absolute,> 1 Year CAGR

Liquid Fund,Ultra Short Term Fund,Floating Rate Fund < 1 year Simple Annualised,> 1 Year CAGR .

Source: MFI Explorer

“ – “ means no history

MOSt

Wealth

Life Stage Pension Advantage

Snapshot on insurance

Life Stage Pension Advantage

Introduction

Retirement is a phase that lets you live your life to the fullest. Retirement can be a relaxed and comfortable lifestyle in the company of loved

ones as you are no longer burdened with routine responsibilities. ICICI Pru LifeStage Pension Advantage offers a retirement plan that will

help you to enjoy the good times even in retirement by building a corpus that can free you from financial worries.

Key benefits of ICICI Pru LifeStage Pension Advantage

• You can redistribute your investment automatically between equity and debt based on your age by opting for a LifeCycle-based portfolio

strategy.

• You have the option to select Pension Dynamic P/E Fund, a fund that uses reference to price-earning multiples of the NIFTY-50 to determine

asset allocation between equity and debt

• Get 2% additional allocation of units from the sixth policy year, on payment of premiums due, which results in more than 100% allocation of

your premium to funds

• Choose your retirement age and get a regular income (pension) after retirement

• Get tax benefits on premiums paid and benefits received under the policy as per the prevailing tax rules at the time1

How does the policy work?

This pension plan works in two phases

• The first phase is the Accumulation Phase, in which you pay regular premiums towards the policy and accumulate savings for your retirement.

In the unfortunate event of death during the term of the policy (before vesting):

If zero sum assured is chosen, your nominee will receive the fund value

If sum assured is chosen, your nominee will receive the sum assured (net of applicable partial withdrawals2) or the fund value, whichever

is higher. Mortality charges will be applicable.

• The second phase is the Annuity or Pension Phase, in which you start receiving pension from the accumulated amount, as per your chosen

pension option.

Eligibility criteria

Min. premium

Modes of premium

Min/max age at vesting

Policy term

Rs15,000 a year

Yearly, half-yearly, monthly

50/80 years**

10 to 60 years in multiples of 5

Min/max age at entry

Min/max sum assured

Max cover ceasing age

18/70 years**

As per the sustainability matrix

80 years**

Age completed birthday

IN THIS POLICY, THE RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER.

Illustration

Age at entry: 30 years

Vesting age: 50 years

Annuity Frequency: Annual

Term: 20 years

Sum Assured: Zero

Annuity Option: Life Annuity

Assumed returns @ 10% a year pre-vesting

Accumulated savings

Rs985,992

Rs2,478,633

Expected yearly Annuity

Rs66,087

Rs170,088

Assumed returns @ 6% a year pre-vesting

Premium

Rs20,000

Rs50,000

Accumulated savings

Rs628,094

Rs1,577,330

Expected yearly annuity

Rs41,142

Rs105,722

MOSt

Wealth

Life Stage Pension Advantage

(Contd….. )

This illustration is for a healthy male with 100% of his investments in LifeCycle based portfolio strategy. These are illustrative values, net of

all charges, service tax and education cess. Since your policy offers variable returns, the illustration shows two different rates (6% and 10%

a year. as per guidelines of Life Insurance Council) of assumed future investment returns4 .

Charges under the policy

Premium allocation charge

There is no premium allocation charge for regular premiums in this policy. However, all top-up premiums are subject to a premium

allocation charge of 1%.

Fund management charge (FMC)

The scheme will have the following fund management charges, which will be adjusted from the NAV on a daily basis.

Fund

Pension Opportunities Fund, Pension Multi Cap Growth Fund, Pension Return Guarantee Pension

Money

Pension Bluechip Fund, Pension Dynamic P/E Fund, Pension Fund^

Market Fund

Multi Cap Balanced Fund, Pension Income Fund

1.35% a year

1.25% a year

0.75% a year

FMC

^There will be an additional chargeof 0.25% a year for the investment guarantee for the Pension Return Guarantee Fund

Policy administration charge

The policy administration charge is a percentage of the annual premium and will be charged regardless of the premium payment status.

This charge will be levied only for the first five policy years. The policy administration charges* are:

Policy year

Annual premium (Rs)

< 50,000

1 to 5

50,000 - 99,999

> = 1,00,000

Policy administration charge (as a percentage of annual premium)

1.1% per month

1.0% per month

0.9% per month

Switching charge

Four free switches are allowed every policy year. Additional switches will be charged* at the rate of Rs100 per switch. Any unutilized free

switch cannot be carried forward to the next policy year.

Miscellaneous charges

If there are policy alterations during the policy term, they will subject to a miscellaneous charge of Rs250* per alteration.

*These charges will be made by cancellation of units.

Terms and conditions

• Tax benefits under the policy are available u/s 80CCC of the Income Tax Act 1961. Commutation of pension on vesting date is tax free u/s

10(10A) of the Income Tax Act 1961. The amount received on surrender or as pension is taxable as income. Service tax and education cess will

be charged extra as per applicable rates and company policy from time to time. Tax laws are subject to amendments from time to time.

• Partial withdrawals will have the following effect on your sum assured:

a. Before the age of 60 yrs, sum assured payable on death is reduced to the extent of partial withdrawals made in the preceding two years;

b. After the age of 60 yrs, sum assured payable on death is reduced to the extent of all partial withdrawals made after attaining the age of 58;

• The annuity amounts have been calculated based on indicative annuity rates and are subject to change from time to time. Please contact us

or visit our website for details.

• The returns shown in the benefit illustration are not guaranteed and they are not the upper or lower limits of what you might get back, as the

value of your policy depends on several factors, including future investment performance.

To know more about Retirement Planning

Email: insurance@motilaloswal.com

Call: 022 39804379 I SMS: MOSL INS to 575753

MOSt

Wealth

Portfolios Overview

Overview

The incremental news flows coming out of US, China, UK and the

Euro zone are all negative. The weaker tone of some of the incoming

data has contributed to sharp falls in equity prices and treasury yields

overseas in the past month.This has added to fears that the US is

heading for a double-dip recession and for the Eurozone a much

lesser growth than what was anticipated earlier. A brief analysis of

a wide range of economic indicators reveals there are very few signs

of an actual Double-dip. And the ominous message from the ECRI's

Weekly Leading Index has more to do with the fall back in equity

prices than a renewed decline in economic activity. Rather than

stalling or going into reverse, it appears that the economic recovery

has simply shifted into a lower gear. Markets are also eagerly

awaiting news on Eurozone banks stress test results to be announced

by the middle of next month.

Monsoons have started weak this year. The Cumulative rainfall was

excess/normal in 20 and deficient/scanty in 19 out of 36 meteorological

sub-divisions with overall rainfall in country below 11% of Long

Period Average (LPA). However, the MET is optimistic of the

Monsoons and has raised their estimate from 98% of LPA to 102%

of LPA.The impact of normal monsoons have yet to play out on

the markets.

The RBI lifted both its reverse repo rate and the repo rate by 25bp

to 4.0% and 5.5%, respectively at the time of this report going to

the press. Liquidity measures were also extended due to the tighter

conditions posed by 3G auction payments and tax bills. The Reserve

Bank of India (RBI) rate hike is a sensible and not unwelcome move.

India's economic upswing is strong and price pressures are already

uncomfortably high. Further monetary tightening is only a matter

of time. We expect the RBI to lift its two key policy rates by another

25bp at its next scheduled review in late July, and to keep rising

rates over the coming year.

April industrial output growth, published at the end of last week,

picked up MoM in seasonally-adjusted terms while the YoY change

accelerated after slowing in February-March. Capital goods production

led the way and this suggests that investment is finally starting to

rise after lagging behind in the recovery so far. What's more, India's

manufacturing PMI for June was strong and remains consistent with

double-digit YoY gains in manufacturing production in coming

months. The output and new orders components of the PMI are

both still well above their long-run average levels.

In a major decision to bring petroleum products in line with market

rates, the government freed petrol from all pricing controls and hiked

diesel prices by Rs2 per liter. The govt. increased petrol prices by Rs3.7

per liter, cooking gas prices by Rs35 per cylinder and kerosene prices

by Rs3 per liter. This will have a major bearing on profitability of all

oil PSU's including HPCL, BPCL, IOC, ONGC, GAIL and OIL India.

Value Strategy :

Portfolio

During the month, Value Strategy has sold partial quantity of Bharat

Electronics (BEL) to generate cash for buying IOC to the extent of

2%, after this change weight age of IOC has increased to 9% from

7%. Strategy has also increased the MBP for most of the stocks and

Value Strategy remains fully invested as of June 10.

NTDOP Strategy:

During the month, NTDOP Strategy has booked profits by exiting

Cairn India & Union Bank, also sold partial quantity of Bharat

Electronics. Strategy has introduced ING Vysya Bank, IDFC & Vijaya

Bank. TDOP Strategy was on ~2% cash as of June 2010.

Bulls Eye Strategy :

During the month, Bulls Eye Strategy sold stocks to raise some cash

by booking profits in Exide, Union Bank, GE Shipping, and ITC. This

was done keeping in mind the ongoing European crisis and the

impact that would have had on Indian markets. This cash was later

redeployed during the month when the concern somewhat subsided.

Strategy increased exposure to Prakash industries & has introduced

L&T, Reliance Industries, Deepak fertilizers, Nagarjuna Construction

& HCL Tech. Bulls Eye Strategy remains fully invested as of June 10

Optima Strategy:

During the month, there was no transaction in Optima Strategy.

Optima Strategy was on 5% cash as of June 2010.

Focused Series I - Rerating Strategy :

During the month, Focus - I Strategy exited GE Shipping and sold

partial quantity of Bharat Electronics (BEL) & State Bank of India.

Strategy introduced Deepak Fertilizers & Shree Cement. Focus - I

strategy was on ~3.2% cash as of June 2010.

Focused Series III - Target Return Strategy:

During the month, we exited HDFC Bank, ITC, Reliance Infrastructure

and sold partial quantity of Hero Honda& SBI. Strategy has introduced

Cipla, L&T, Reliance Industries, IDFC, HCL tech. Focus - III Strategy was

on ~2% cash as of June 2010.

Focused Series IV - Flexi Cap Strategy:

During the month, Focus - IV Strategy sold partial quantity of SBI and

Bajaj auto and introduced Unichem Labs. Focus - IV Strategy was on

~3.2% cash as of June 2010.

Invest India Strategy

During the month, Invest India Strategy sold partial quantity of all

stocks to raise cash and later this cash was deployed in Glaxo Pharma

& GE Shipping. Invest India Strategy remains fully invested as of June

2010.

MOSt

Wealth

Market Roundup

Review and outlook

Gold:

Related News

•

Commodity prices in June continued to be directed by macro

economic development. Gold was impacted by a highly uncertain

economic outlook as COMEX prices of the yellow metal rallied to a

new high of $1,266 an ounce. On the MCX, gold near month

contract registered an all-time high of Rs.19,198 per 10gm.

Uncertainty about Eurozone deficit problems and its impact on the

global economy continued to trigger safe-heven demand for gold.

•

The World Gold Council's (WGC) quarterly report on central bank

gold holdings also boosted the yellow metal. A WGC report on

central bank reserve holdings said the Russian central bank increased

gold holdings by 26.6 tons in 1QCY10, followed by +4.9 tons in

April. The Philippines also bought 9.6 tons of gold in the first

quarter. The Saudi Arabian Monetary Authority's upward revision

of bullion holdings, fuelled speculation that central banks in Asia

and the Middle East were buying more gold.

•

On the macro economic front, the US ISM index continued to

point towards strong growth in the US whereas an employment

report disappointed the market, triggering sell-offs in stocks and

commodities. Even though the unemployment rate fell to 9.7% in

May, from 9.9% in April 2010, payrolls increased by 43000, whereas

expectations were for a bigger rise of 54000. US retail sales

surprisingly contracted 1.2% MoM in May after gaining 0.4% in

April 2010. US industrial production rose faster than forecast in

May and housing stats fell more than expected.

•

Safe-heven demand amid economic uncertainties supported bullion

prices. Holdings in the world's largest bullion-backed ETF, SPDR

Gold Trust, rose by 4.14% in June, to a record of 1,320.436 tonnes

as investors built up positions due to uncertainty in the global

economy. SPDR Gold Trust added 52.50535 tonnes in June.

Continuous rise in ETF holdings indicates that investors are still

worried about the health of the global economy and are seeking

flight to safety in bullion.

Outlook for this month

•

In the near term downside risk remains in gold as the European

sovereign debt has eased somewhat. But the long-term uptrend

remains intact as the market sentiment is flimsy and any bad

news can cause sell off in the financial market. In times of

financial instability, investment demand for the yellow metal

as a safe heven remains strong which should lift the gold

prices higher.

MOSt

Wealth

Copper:

Related News

•

Copper, which is mainly used in the making of wires and in

construction, continued its downward slide for the third

consecutive month in June. The fall in the counter was mainly

due to concerns over the Eurozone debt crisis and anticipation

of a slowdown in the Chinese economy, which would lower

upcoming demand for the metal, as the economy is the world's

largest copper consumer. Uncertain economic numbers from

the US related to housing and employment supported the

downside in June.

•

Despite an uncertain economic overview the red metal was

supportive of a drop down in inventories on the London Metal

Exchange and a weak dollar index, which limited further

downside. Inventories in June were down by 5.20% or 24,775

tonnes at 451,950 tonnes and cancelled warrants continued

to rise by 37.56% or 8,525 when compared with May. The

drop in inventories and rising cancelled warrants indicate that

there is some physical settlement outside the exchange.

•

The fall in prices was mainly due to weak Chinese imports for

the second consecutive month in May. The custom data

showed that arrivals of refined copper fell by 9.7% in May

from April. On a daily basis, accounting for the longer May

month, imports fell almost 13%. China imported 279,690

tonnes of refined copper, the most popular type of copper in

Chinese and international markets. Inflow in May was down

from 309,772 tonnes in April, a fall of 8.1% from March.

•

In line with Chinese customs data, Japan's refined copper

exports fell 19% in May from a year earlier to 49,248 tonnes.

Copper, used in construction material and computer chips, is

often seen as a gauge of economic activity. Japanese domestic

demand for copper recovered to about 80% of pre-crisis levels,

but continual deflationary pressure in Japan and a slowdown

in the construction sector have clouded the outlook.

Outlook for this month

Recent uncertain economic scenario and concerns of further

slowdown in world's largest consuming country China will

continue to pressurize the counter. Further due to the volatile

financial markets, it is difficult for prices to sustain at higher

levels. The close watch would be currencies and economic

numbers from the major consuming countries like US and

China which will give further direction indication.

Market Roundup

Review and outlook

Crude

Related News

•

Crude oil futures in June fell in the first couple of weeks due to

Pepper

Related News

•

NCDEX pepper futures started June on a negative note with a fall

concerns over the Eurozone's debt crisis, which raised worries that

a spillover effect of the crisis can be seen in other economies,

which will dampen oil demand. But, the relief package by the EU

brought back the risk appetite to the market. The weak dollar

supported crude prices. At the end of the month crude was up

1.08% and closed at $74.77 a barrel on NYMEX.

•

Major forecasting agencies like OPEC and EIA lowered the demand

of almost 6% in the first week. But from the second week pepper

started its upward rally and ended the month with a strong gain

of more than 8%.

•

The initial fall in pepper prices was mainly due to weakness in

other spices and slack overseas demand. Overseas demand for

pepper of Indian origin was weak mainly because of premium

prices compared with other competing countries. Indian output

is not sufficient to fulfill domestic and overseas demand. India is

always outpriced because of lower production and high domestic

demand.

•

Both domestic and overseas demand was good as India became

growth forecast in their monthly reports. OPEC stated that world

oil demand would rise by 940,000bpd in 2010, 10,000bpd lower

than its previous forecast. It also reported that total world oil demand

was seen averaging 85.4m bpd in 2010 but demand for crude

would decline by 175,000bpd from a year earlier. On the other

hand, EIA lowered its estimate for oil demand growth this year by

70,000bpd from its previous estimate, saying oil use would rise by

1.5m bpd to 85.51m bpd.

•

The anticipation of a fall in world oil demand is mainly due to

more competitive after it lowered prices. Supply from Vietnam

was tight as it has exported most of its produce (60,000 tonnes)

and was left with very little stock. Vietnam is the largest pepper

producer in the world. Higher pepper prices were also due to weak

arrivals as farmers held back their produce, hoping for higher prices.

•

Nearly stagnant output in the past 3 yrs has seen imports climb

uncertain economic overview in the major oil consuming countries.

The economic numbers from the US suggest some stability in the

economy but there is no consistency in economic data, which

would result in a rise in oil demand. The Chinese economy, which

was a major driver of crude prices in 2009, due to a consistent rise

in its imports, failed to support oil prices in the first quarter of

2010.

•

The hurricane season will be a major market mover going ahead.

and exports decline. In 2009-10 India's estimated pepper imports

jumped 63% to 17,500 tonnes and exports fell 22% to 19,750

tonnes. Industry sources say that this year imports will be much

more. Most often, Indian pepper is $300-400 per tonne higher

than other producers.

•

Sources say domestic pepper consumption is 40,000-45,000

Sources say the 2010 hurricane season will be as intense as in

2005, when damage from Katrina and Rita resulted in oil product

loss of about 142m barrels. Weather Services International, a private

forecaster, predicted 20 named storms, 11 hurricanes and five

intense hurricanes of category 3 or greater. Supply disruptions due

to hurricanes will put a floor on falling oil prices.

Outlook for this month

•

Looking at the expectation from major oil forecasting agency

tonnes and production has stagnated between 45,000-50,000

tonnes in the past 2 to 3 yrs. Lack of an adequate workforce and

better returns from other crops, such as rubber, is pushing farmers

away from pepper cultivation. According to a Reuters poll, India's

2010 pepper output is expected to be about the same as that last

year, but prices are unlikely to fall sharply in the coming months

due to low carry-over stocks. February pepper exports fell 3.22%

YoY to 1,500 tonnes, the Spices Board said.

Outlook for this month

•

Overall trend is bullish in pepper because of good demand

and anticipation of intense hurricane season, crude oil prices

looks to trade in a consolidative range until any major supply

disruption and change in demand outlook is seen. Further the

economic numbers from US and China will be the major focus,

as the economies are the major oil consuming countries.

and limited availability. Prices are once again strengthening in

almost all origins of the international markets mainly due to

good demand. Trend looks firm in the short term on hopes of

lower supplies. Dips towards Rs.17000-16500 can be used as

a good value zone for creating long positions for an upside

target of Rs.18500-19000.

MOSt

Wealth

Market Roundup

Technical snapshot:

Gold

In June, MCX gold registered a new contract high of Rs19,198

per 10gm. But the high prices didn't sustain due to overbought

Crude oil

Crude oil on the MCX has been consolidating in a range of

Rs.3,800-3,200 since 3QCY09. The recent consolidation pattern

levels as indicated by the RSI, which was above 80. The 9 day

MA is above the 18 day MA, indicating that the short-term trend

is up. But the negative divergence, as indicated on the charts,

can create some selling pressure in the counter. We expect prices

to test Rs.18,051 in the near term.

is set to continue until the range is broken. The 9 day MA has

crossed over the 18-day MA, indicating the short-term trend has

turned down. RSI is in the neutral zone, indicating sideways to

down prices are possible in the near term. We expect prices to

trade sideways to down. Resistance is at Rs.3,628-3,742 and

support is at Rs.3,338-3,220.

Copper

After breaking the channel support of Rs.327, MCX copper is trading

with a downside bias. The contract tested our targets of Rs.295-

Pepper

NCDEX pepper prices reached an all-time high of Rs.18,217 in

June. The 9 day MA is trading well above the 18 day MA,

292 in the second week of the month. The 9 day MA is still below

the 18 day MA, indicating the short-term downtrend will continue.

RSI is in the neutral zone, indicating sideways to down prices are

possible in the near term. The next downside target is Rs.280. Strong

resistance is at Rs.322, above which it can be said that the contract

has posted a near-term low.

indicating a short-term uptrend will continue in the coming

sessions. RSI is in the overbought zone, signalling some caution

to bulls. Strong support is at Rs.17,085 and then at Rs.16,730.

Dips towards support levels can be bought for an upside target

of Rs.18,500-19,000.

The above views are based on Technical analysis and could differ from our fundamental views.

For further ideas on Technicals contact: Tel.: +91 22 30896806

MOSt

Wealth

For further details : Call your

Relationship Manager

Regd. Office: Motilal Oswal Securities Ltd.,

Palm Spring Centre, 2nd floor, Palm Court Complex, New Link Road, Malad (W), Mumbai - 64.

Disclaimer:

This report is for the personal information of the authorized recipient and should not be construed as any investment, legal or taxation advice. Motilal Oswal Securities Limited

(hereinafter referred as MOSt) is not soliciting any action based upon this report. This report or any part thereof is not for public distribution and has been furnished to the authorized recipient

solely for its information and should not be reproduced or redistributed to any other person in any form. This report is not intended to be published or made available to any person in any

jurisdiction where doing so would result in contravention of any applicable laws or regulations. Persons into whose possession this report may come are required to observe these restrictions.

The material/ charts contained in this document are based on information that is publicly available, including information developed in-house. The report is based upon information that MOSt

considers reliable, however, MOSt does not represent that it is accurate or complete, and it should not be relied upon as such. Further MOSt does not warrant the accuracy, reasonableness

and/or completeness of any information. For data reference to any third party in this report, no such party will assume any liability for the same. The report / recommendations/ trading calls/

opinions contained in the report are the personal views and opinions of the author and are not to be construed as advice. MOSt takes no responsibility for any loss made in investment in any

product/ instruments, whether or not made pursuant to the opinions / recommendations/ trading calls / information contained in this report. MOSt or any of its affiliates or employees shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees

do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability,

fitness for a particular purpose, and non-infringement. MOSt and any of its officer, directors, personnel, employees and affiliates shall not be liable for any loss, damage of any nature, including

but not limited to direct, indirect, punitive, special, exemplary, as also any loss of profit in any way arising from the use of this report in any manner. The recipient alone shall be responsible

for any decision taken on the basis of this report. The recipients of this report should rely on their own investigations, seek appropriate professional advice, before dealing and or transacting

in any of the products/ instrument referred to in this report. No investors in any product / instrument are being offered any guaranteed or assured returns. Any decision to purchase or sell

as a result of the opinions expressed in his report will be the full responsibility of the person authorizing such transactions. The products/instruments discussed in this report may not be suitable

for all investors. Any person subscribing to or investing in any product/instruments should do so on the basis of and after verifying the terms attached to such product/ instrument. Products/

Instruments are subject to market risks and returns may fluctuate depending on various factors. Past performance of the products/instruments does not indicate the future prospects &

performance thereof. Such past performance may not be sustained in future. The investors understand that the investment in any product/instrument including but not limited to Derivatives,

Commodities, Securities and Mutual Funds are subject to market and other risks, which may not have been covered in the report. The investors shall obtain, read and understand the risk

disclosure documents, offer documents and/or any other relevant documents before making any decision for investment.

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities/commodities and other investment products mentioned in this report.

21 MOSt

Wealth

Disclosure of Interest Statement:

The MOSt group and its Directors own shares in the following companies covered in this report: Bharat Electronics, Bharti Airtel, Birla Corporation, GSK

Pharma, Hero Honda, Hindalco, IOC, Marico, Oriental Bank, Siemens and State Bank.

MOSt has broking relationships with a few of the companies covered in this report.

MOSt is engaged in providing investment-banking services in the following companies covered in this report: Sintex Industries

This information is subject to change without any prior notice. MOSt reserves the right to make modifications and alternations to this statement as may be required from time to time.

Nevertheless, MOSt is committed to providing independent and transparent recommendations to its clients, and would be happy to provide information in response to specific client queries.

MOSt

Wealth