JANUARY 2011
Dear Investor,
The Sensex grew by about 17.4% in 2010. Markets are rising due to expectations of Sensex
earnings growth. If earnings are delivered, the markets are unlikely to fall much from
current levels.
The
The
time
time
From the desk of
to get
to get
Raamdeo Agrawal
Growth in earnings is influenced by three or four trends, which we are seeing:
1. Prices of global commodities are strengthening relentlessly. Companies with resources
such as Sterlite and Tisco are extremely well positioned to benefit from this trend.
2. A strong global recovery is leading to demand for high tech services, which fires up
India's tech industry.
3. Domestic rural prosperity is widespread and is leading to demand for consumer goods
and services. Sectors such as textiles, automobiles, FMCG, telecom and rural credit should
benefit from this.
4. On the back of good business conditions, banks are doing exceptionally well in terms
of volume and lower credit costs. We expect well managed banks to deliver solid profit
in the years to come.
There are two big concerns impacting market sentiment:
1. Overall governance of India, implying issues such as corruption, implementation issues,
licensing issues and lack of political determination.
2. High inflation, leading to tight liquidity and high cost of credit stifling the growth
momentum.
Looking at it in totality, the world is recovering from the 2008 crisis and Indian corporates
are likely to post 15-20% earnings growth in the next 12 months. This gives us confidence
to say that the market has the potential to give us returns of about 15-20% in the next
12 months-broadly reasonable grounds for investing.
Happy investing
Sincerely yours,
interested
interested
in stock is
in aastock is
‘‘ The
whenno one
when no one
time to
is
else
else is
get interested,
in a stock
is when no one
else is’’
Index
Raamdeo Agrawal
MOSt Value
MOSt Momentum
MOSt Mutual
MOSt Insurance
MOSt PMS
MOSt Commodities
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7-9
10-13
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17-18
www.motilaloswal.com
1504 Business Locations
591 Cities

Research Update
Snapshot on Value Investing
Tata Steel
3rd January 11 / CMP:
Rs703
Y/E
MARCH
NET SALES
(Rs BN)
Rs
EBITDA
(Rs BN)
Rs
NP
(Rs
BN
Rs BN)
EPS
(Rs)
Rs
EPS
GR. (%)
%
BV/SHARE
(Rs)
Rs)
P/E
(X)
P/BV
(X)
EV/
EBITDA(X)
EV/
SALES(X)
ROE
(%)
%
ROCE
(%)
%
3/10
3/11E
3/12E
1,024
1,129
1,166
80
159
156
-8
67
69
-9.3
74.4
75.1
-109.1
-900.2
0.9
95.7
173.4
240.3
-NA-
9.4
9.4
7.3
4.1
2.9
13.3
6.7
6.5
1.0
0.9
0.9
-9.7
42.9
31.2
4.5
13.5
12.3
Embarking on new earnings growth path; upgrade to Buy
Tata Steel will embark on a new earnings growth path, with its
expansion of capacity from 6.8mtpa to 10mtpa at Jamshedpur,
the start of coking coal production at its Benga project,
Mozambique, and the start of iron ore production at DSO, Canada
over 12-15 months.
The sale of Teesside Cast Products (TCP) slab plant for nearly
US$500mn will help to de-leverage the balance sheet and reduce
earnings volatility for Tata Steel's Europe operations.
After the acquisition of Corus and the financial crisis, Tata Steel
made long-term strategic investments (US$3bn capex at
Jamshedpur, Riversdale (RIV), New Millennium Capital (NML),
Dhamra port, JV with Bluescope, JV with NYK) over the past 3 to
4 years. Over the next 12-15 months, some of the investments
will start generating cash flows. The Jamshedpur expansion to
10mtpa will be completed by December 2011, and coking coal
and iron ore production will start in 2HCY11.
Tata Steel Europe's (TSE) earnings volatility is likely to fall on
completion of the TCP sale and cost-cutting initiatives over the
past 2 to 3 years. TSE margins will be under pressure until full
economic recovery in Europe. Though TSE is the largest contributor
to group's crude steel production, its share in consolidated EBITDA
and the group's enterprise value is getting diluted. TSE contributes
just a quarter of our target EV of
Rs929bn.
Although the earnings contribution from RIV and NML will be
marginal in FY13, Rio Tinto group's keen interest in RIV with a firm
bid of A$3.9bn and a possible counter-bid is likely to get reflected
in Tata Steel's valuations sooner than expected.
Tata Steel's focus is shifting to high RoE projects instead of pure
strategic investment. It sold ~Rs12bn of its investments in group
companies like TCS, Tata Power and Tata Motor to unlock value in
FY10 and FY11, and there is potential to unlock value to the tune of
US$873mn over 2 to 3 years.
Steel prices recovered by 10-15% across the world over the past
1 month due to the end of de-stocking, supply correction and raw
material cost pressures. HRC prices have risen to US$670/tonne.
Demand is likely to pick up over the next couple of months, as
buyers return to the market after the winter vacations in the western
world. A strong steel price scenario is expected for 4-5 months.
We are introducing FY13 estimates and moving our target price to
SOTP value of
Rs1,017
(upside of 43%) to better reflect the value of
its diverse assets across the globe. We expect Tata Steel to post EPS
of 16 % CAGR to
Rs100.2
over FY11-13. We have valued the Indian
operations at EV/EBITDA of 6.5x, TSE at EV/EBITDA of 5x and
investments at current market value. We believe the value of
investments will grow as iron ore and coking coal production ramp
up. At our target price, the stock will trade at 10.1x FY13E EPS and
an EV of 6.7x FY13E EBITDA. We upgrade the stock to Buy.
Stock Performance (1 Year)
Tata Steel
MOSt
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India Strategy
Snapshot on Value Investing
An Extract
January 2011
2000-2010: India’s Dazzling Decade:
The 2000-2010 decade was a dazzling one for India. During this
decade, India’s nominal GDP nearly trebled from less than US$0.5bn
to US$1.3tn, and per capita GDP rose 2.5x from US$427 to
US$1,058. Robust economic growth created a huge opportunity
for the Indian corporate sector, and the decade saw the emergence
of several Indian global-size companies and mid-size challengers
across sectors. The stock markets too responded well, delivering
18% CAGR returns, the second best performing emerging market.
Market cap expanded 14x over the decade, improving India’s global
rank from 17 to 8.
2011: Hurdles to cross:
Fresh from a dazzling decade, the Indian economy and in turn the
stock markets face key challenges in 2011: (1) Sustained rise in oil
prices will fuel inflation and also worsen current account deficit,
(2) Industrial growth is facing headwinds by way of environmental
issues, resource crunch, infrastructure deficit, and political/corporate
governance, and (3) Stressed liquidity caused by lagging deposit
growth is pushing up rates.
Introducing FY13 estimates: FY10-13 Sensex EPS CAGR
of 22%
Based on a bottom-up PAT aggregation of Sensex constituents, we
arrive at FY13E Sensex EPS of
Rs1,492,
up 18% YoY. FY10-13E EPS
CAGR at 22% is marginally lower than the FY10-12E EPS CAGR of
24%, but does not materially alter our hypothesis that Indian
corporate sector earnings have entered into a new growth cycle
following a 2 year growth holiday.
3QFY11 results: Sensex PAT growth of 23% YoY despite no
low-base effect:
We expect 3QFY11 aggregate PAT to grow 24% YoY for Motilal
Oswal Securities Ltd. (MOSL) Universe (excluding RMs-refining
and marketing companies) and 23% YoY for Sensex. This is on the
back of sales growth of 19% YoY for MOSL Universe and 17%
YoY for Sensex. The key highlights of this quarter’s results
would be:
•
Healthy growth despite break-out of low-base effect
•
Broadbasing of earnings growth
•
Low impact of profit swings in Tata Steel and Tata Motors
•
Commodities, Autos and Private financials drive Sensex PAT growth
•
Telecom and Cement the only 2 sectors with PAT de-growth YoY
MOSt
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Stock markets: Among best performing global markets with
18% return CAGR:
•
The Sensex delivered a return CAGR of 18%; India was among the
best performing global markets during the decade. Indian market cap
clocked 27% CAGR to US$1.6tn, improving its global rank to 8 from
17 in December 2003.
•
FII holding in Sensex companies increased by 5pp to 19% while DII
holdings have dropped by ~4pp to 13%. The total value of FII holding
in Indian markets (excluding GDRs/ADRs) is US$231bn against
cumulative nominal net inflows of US$102bn.
•
The number of companies with market cap exceeding US$1bn
increased from 28 to 207, while the number of companies with market
cap exceeding US$25bn increased from none as late as 2003 to 13
by 2010.
•
The 10th largest market cap company in December 2010 (ICICI
Bank at US$29bn) is almost 2.5x the largest market cap company in
December 2000 (Wipro at US$12bn). 6 of the top 10 market cap
companies in December 2000 were not among the top 10 in 2010.
•
In 2010, market cap of the largest company (Reliance Industries)
was higher than the market cap of the entire Sensex in 2000.
•
In 2000, the Consumer sector had the biggest weight in Sensex at
26%, which has dropped to 7% in 2010. The weight of Financials, in
contrast, has increased from 6% in 2000 to 17% in 2010.
•
Currently, Sensex one-year forward P/E at 17x is at 17% premium
to the decadal average of ~14.5x.
Investment Strategy: Export-oriented sectors better placed
in near term:
We believe near-term challenges will impact performance of several
sectors, particularly those dependent on domestic markets. We expect
rising input costs, fuel prices and interest rates to impact discretionary
consumption spends including Autos. Utilities will be impacted by
resource crunch, environmental issues and tight liquidity, as will
Infrastructure projects. Financials will get impacted by tight liquidity,
hurting margins, especially for those without a low-cost deposit
franchise. In this backdrop, global commodities and export-oriented
sectors like Technology and Pharma would continue to outperform.
Our top picks are Tata Steel, Bharti Airtel, ICICI Bank, M&M
and Powergrid.

Midcap Research
Snapshot on Value Investing
An Extract
Bajaj Finance Ltd
We recommend Buy on Bajaj Finance Limited (BFL) with a
12-month target price of
Rs918.
BFL is a play on the rising consumer spending in India, which is
expected to grow multifold due to rising disposable income.
BFL has expanded its presence from mainly two-wheeler financing
to consumer durables, SME loans and other secured loans. It plans
also to enter infrastructure financing. Diversification into other
secured asset businesses is likely to enhance the quality of its loan
book. We believe BFL is the best bet in the NBFC space in the
wake of high disbursal growth, foray into new business areas,
improving asset quality and resulting RoE expansion. Our earnings
estimates are fairly conservative compared with the consensus view
by ~20% in FY12. A favourable interest rate scenario and business
mix improvement provide an upside risk to our estimates.
Engineers India
We recommend a Buy on Engineers India with a 1 year price
target of
Rs405
- 22x FY12E earnings.
Order backlog of
Rs7,000
crore (3.5x FY10 revenue) provides good
revenue visibility. Further order inflows will provide upsides and
triggers. Potential overseas consultancy orders can boost margins.
Revenues are likely to post 37% CAGR over FY10-12 and earnings
are likely to post 18% CAGR. Higher contribution of turnkey projects
will depress margins. Even with lower margins, we estimate
Engineers India will have RoE of 37-39% over FY11-12. With
expected RoE of over 35%, revenue visibility of over 3 years and
cash balance of
Rs53
per share rising to
Rs85
per share in FY12, the
stock seems undervalued at 18.3x FY12E P/E compared with a
22x average historically.
Great Offshore
We recommend a Buy on Great Offshore with a 1 year price
target of
Rs525
7.4x FY12E earnings.
Four operational rigs in FY12 are estimated to add
Rs300cr
to
revenue. Offshore vessels and engineering businesses stand to gain
from higher offshore activity in India. Strong positive free cash
flow generation could be used for inorganic growth opportunities.
Revenues are likely to rise over FY10-12 by 11% CAGR with
earnings growth of 18% CAGR. Earnings in FY11 will dip due to
MOSt
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lower utilization of rigs. Conversion of US$4 cr FCCBs outstanding
at
Rs565
per share is not considered in our EPS. Fully diluted EPS for
FY11 and FY12 will be
Rs47
and
Rs68
respectively.
At 5.1x FY12E earnings the stock is extremely cheap compared
with average P/E multiples of 7.4x historical earnings.
Godrej Industries Ltd
We initiate coverage on GIL with a Buy rating and a 12 month
target price of
Rs252.
Godrej Industries Ltd (GIL) is India's leading manufacturer of oleo
chemicals and makes more than a hundred chemicals for use in
various industries. Besides GIL is the holding company of Godrej
Properties (with ~69% stake) and associate of Godrej Consumer
Products Ltd.(GCPL) (~22% stake). The company is also into the
business of oil palm plantation, manufacturing of agricultural inputs
and trading of vegetable oil. GIL will be the biggest beneficiary of
growth opportunities in Godrej Properties through its 69% holding
in it. We expect this to be a key trigger for GIL's growth. GIL and
GCPL form ~56% of our SOTP valuation.
Nucleus Software Exports Ltd.
We recommend Accumulate on Nucleus Software Exports
Ltd. with a 1 year price target of
Rs150
or 13x FY12E earnings.
Nucleus 2QFY11 margins increased by 400bp QoQ and its order
bookings for the product business in 1HFY11 are more than those
in the whole of FY10. The company is available at 11x/9x of its
FY11E/FY12E earnings, which is less than that of the companies in
the IT mid-cap universe. The company has a debt free and liquid
balance sheet, where cash and investments constitute almost
2/3rd of the balance sheet size, which is about
Rs57
per share
(~50% of the CMP). We believe undemanding valuation and high
cash per share limit the downside risk of the stock.
Midcap Research Stocks
Stocks Intitiated
Partial/Booked Profit
Open Positions
Total
23
6
20
We have booked profit in
Eclerx, Unichem
and
CMC
with a average
return of 30%. Partial profit booked in Deepak Fertilsers, GEShipping
& Page Industries.

Model Portfolios
Snapshot on Value Investing
Select the portfolio that best suits your risk profile
AGGRESSIVE - High Risk, High Returns
Scrip
MBP*
Wtg.*
In December the Sensex gained by 988 points (5%) over last month
to close at 20,509 points. Better than expected industrial production
data and RBI's SLR cut by 100bp boosted market sentiment. Besides,
global markets had upward momentum. However, FIIs and DIIs were
net sellers of equity worth
Rs6.42bn
and
Rs4.82bn
respectively.
We have made changes in the Aggressive, Moderate and Defensive
portfolios, with a view to make them simpler, by reducing the number
of scrips. Our top picks are Bharti Airtel, SBI and Sterlite Industries,
which are common for all the portfolios. SBI declined nearly 30%
from its recent peak. We expect sequential loan growth in line with
the industry's growth.We expect the govt to consider diesel
deregulation due to rising crude prices. Oil marketing companies
like IOC will benefit most from this.
M&M is our top pick in the automobile sector, led by impressive
December monthly sales. M&M's December volumes grew 38% YoY
(13% MoM) to 50,396 units, driven by better than expected UV
Bharti Airtel
SBI
Sterlite Industries
Tata Steel
M&M
Yes Bank
(#)
BGR Energy
(#)
MRF Tyres
Apollo Tyre
Sintex Industries
(#)
Nagarjuna Constructions
Cash
Total
370
3000
200
750
800
325
700
7800
70
200
150
H
H
H
H
M
M
M
M
M
M
M
25
100
TOP PICK
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.
MODERATE - Medium Risk, Medium Returns
Scrip
MBP*
Wtg.*
Bharti Airtel
SBI
Sterlite Industries
Tata Steel
M&M
Power Grid
(#)
Yes bank
(#)
Siemens India
(#)
Coal India
(#)
IOC
BHEL
Cash
Total
370
3000
200
750
800
105
325
825
320
365
2400
H
H
H
H
H
H
M
M
M
M
M
15
100
TOP PICK
volumes due to easing of capacity constraints The stock trades
attractive and we remain bullish on the stock.
We suggest including Yes Bank and Tata Steel in the Aggressive and
Moderate portfolios. We expect strong growth momentum in Yes
Bank's business (an increase of over 80%YoY). Our reason to include
Tata Steel in the portfolio is backed by Tata Steel's rating upgrade to
Buy. The company will embark on a new earnings growth path, with
expansion of capacity from 6.8mtpa to 10mtpa at Jamshedpur, the
start of coking coal production at its Bengal project and Mozambique
and the start of iron ore production at DSO, Canada over 12-15
months. We expect Tata Steel's EPS to post 16% CAGR to
Rs100.2
over
FY11-13.
With these changes, we will be invested to the tune of 75%, 85%
and 100% in the Aggressive, Moderate & Defensive
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.
DEFENSIVE - Low Risk, Low Returns
Scrip
MBP*
Wtg.*
Bharti Airtel
SBI
Sterlite Industries
M&M
Power Grid
(#)
ICICI Bank
BHEL
GAIL
Coal India
(#)
Siemens India
(#)
IOC
GSK Pharma
Cash
Total
370
3000
200
800
105
1100
2400
570
320
825
365
2450
H
H
H
H
H
H
H
H
M
M
M
M
0
100
TOP PICK
portfolios respectively.
Allocation (%)
Sector
Agg.
Mod.
Def.
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.
MBP* :Maximum Buying Price. One should not buy the stock if Price is above MBP
.
Wtg.* :Weightage refers to the size of the position recommended. H-10%, M-5%
Automobiles
Banking
Cap Goods
Construction
Metals
Telecom
Tyre
Oil & Gas
Utility
Pharma
Others / Midcap
Cash
Total
5
15
5
5
20
10
10
-
-
-
5
25
100
10
15
10
-
20
10
5
15
-
-
15
100
10
20
15
-
10
10
15
15
5
-
0
100
Additions or deletions of stocks are being communicated through our morning conference
calls, Most Market Action emails or on AWACS during market hours.
(#)
New Entries
MOSt
Wealth
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MOSt 3x3
Snapshot on Value Investing
Top picks of the month
Bharti Airtel
Bharti Airtel is a leading global telecommunications company with
operations in 19 countries in Asia and Africa. The pricing
environment for Bharti remains stable, with no headline tariff cuts
for more than a year. 2QFY11 was the first quarter of flat QoQ
RPM for most wireless operators in 2 years. We expect RPM decline
to be arrested at ~4% in 2HFY11. Pricing is likely to remain rational,
given weak balance sheets and regulatory uncertainty. We expect
3G to contribute 2.5% of incremental mobile revenue from India
in FY12. We believe a potential policy revamp will be positive for
Bharti. We expect revenue and EBITDA growth to rebound in Indian
operations driven by: (1) normalization of traffic growth, (2) abating
tariff pressure and (3) launch of 3G services. We reiterate Buy with
a price target of
Rs410
(8.5x EV/EBITDA for the India business and
7x EV/EBITDA for the Africa business).
BHEL
BHEL, India's dominant producer of power and industrial machinery
and a leading EPC company, has an annual installed capacity of
6,000MW. After capacity expansion to 20GW by 2012, BHEL's
capacity and ability to deliver in time will be at par with its Chinese
and Korean counterparts. BHEL is the front runner for receiving a
significant share of the bulk tendering order of 11 sets of 660MW
worth
Rs250bn
for complete turnkey in FY11. 2QFY11 intake was
Rs135bn
(up 68% YoY) and in 1HFY11 it was
Rs243bn,
up 17%
YoY. FY10 order intake was
Rs590bn,
down 4%. Our price target
on BHEL is
Rs2,934,
an upside of 19% from current levels.
Maintain Buy.
Sterlite Industries
Sterlite is a diversified play on 3 base metals. It is ramping up
capacities to 1mtpa of refined zinc and lead, which will fuel
significant volume growth. The company is setting up a 2,400MW
power project in Orissa. Sterlite's earnings are likely to be driven by
volume growth in the metals and energy businesses. Zinc and
lead will post 10% CAGR to 636,000 tons over the next few years.
Balco will have ~800MW of surplus power from its CPP for
merchant sale, which is likely to boost FY12 EPS. We value the
stock at
Rs221,
based on SOTP valuation. The stock trades at attractive
valuations of 5x FY12E EV/EBITDA. Maintain Buy.
Mahindra & Mahindra (M&M)
M&M is the market leader in UV and tractors, with a share of 50%
and 40% respectively. The tractor business stands to benefit from
the govt’s thrust on development of the rural economy, and the
UV business is expected to maintain its market share even in the
face of competition. The management expects growth of 14-15%
in the automobile and tractor industries. M&M is expected to post
overall volume growth of 26.2% YoY in 3QFY11, driven by 33%
YoY growth in tractor volumes, 23.6% YoY growth in UV volumes
and 14.5% YoY growth (down 21.3% QoQ) in 3-wheelers. We
maintain our FY11 consolidated EPS estimates at
Rs59.7
and for
FY12 at
Rs68.7,
backed by strong volume growth in the auto and
tractor divisions, and improvement in subsidiary performance. On
a consolidated basis, the stock trades attractively. Maintain Buy.
State Bank of India (SBI)
SBI is India's largest commercial bank, with a balance sheet size of
over
Rs7tn,
14,000 branches and 18% share of the Indian banking
business. SBI's 2QFY11 PAT was flat YoY at
Rs25bn
despite NII growth
of 45% YoY due to higher opex and provisions. Margins improved
by 25bp QoQ and 88bp YoY to 3.43% led by an improved yield on
loans and stable cost of deposits. CASA ratio was up 28bp QoQ at
47.8%. 2QFY11 fee income grew 40% YoY. GNPA increased 11%
QoQ to
Rs232bn
and NNPA increased 5% QoQ. The bank took a hit
of
Rs9.7bn
on account for higher pension costs and higher NPA
provisions to improve coverage ratio to 70%. We are bullish on
core operating profitability. Maintain Buy.
MOSt
Wealth
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Market Outlook
Snapshot on Technicals and Derivatives
Range - bound markets likely ...
The Nifty started December with a weak rally that saw a short-term
top at 6,070 points around the 50dma resistance on 6th December.
The Nifty's failure to cross the 50dma resistance led to a sharp
sell-off, resulting in a panic low of 5,721 points on 10th December.
The December low of 5,721 points was marginally higher than the
November low of 5,690 points. This double bottom formation
around the 5,700 mark resulted in a slow recovery for the Nifty for
the rest of December. The intermediate trend
turned up on
29th December with a bullish crossover of the 50dma. The Nifty
closed December on a strong note ending the month at 6,134
points, a gain of 272 points. The Nifty ended 2010 with a gain of
950 points, which was the second year of gains in this bull market.
The Nifty has gained for 8 consecutive quarters since March 2009.
The outperforming sectors in December were Metals, IT and
Pharmaceuticals and the underperforming sectors were Realty, Banks
and Capital Goods.
Going forward…
Intermediate term -
The intermediate trend of the Nifty has turned
down at the time of writing after a short-lived intermediate uptrend
which reversed at a high of 6181 points. The resistance will now
be at the level of the falling 50dma at 6,017. The intermediate
long positions should be exited and the intermediate short trading
positions should be held with the rolling stop loss of the 50dma,
about which we will intimate to you regularly. The double bottom
3
2
at about 5,700 points is strong intermediate support while the
historic high at about 6,350 points is formidable resistance.
Long Term -
The long term bullish trend with sequence of higher
tops and bottoms is being maintained though the last quarter of
2010 has just seen gains of about 100 points as the Nifty saw a
medium-term consolidation. The monthly charts have bullish
implications after positive monthly closing reverses the previous
two monthly negative closings. The long term trend will reverse
only if the Nifty closes below the November and December 2010
lows of about 5,700 points. The rising 200dma at about 5,600
points will provide long term support. Only a decisive move above
6,350 will take the market to a new zone or else the Nifty will
remain in the range of 5,700-6,350.
Actionables:
In the current scenario actionables are:
1. Exit intermediate shorts if the Nifty breaks above 6,017 points
(50dma) on a closing basis. The 50dma rolling level will be
updated regularly.
Intermediate longs are not recommended as the Nifty has
just broken the 50dma and we recommend a Sell on rallies
approach until we do cross upwards the 50dma on a closing
basis.
Short-term buy and sell signals will be communicated
separately as usual through Idea Dashboard, SMSs and Emails.
Nifty Monthly Chart
Resistance at 6,350
Support at 5,700
The above views are based on Technical analysis and could differ from our fundamental views.
For further ideas on Technicals contact:Tel.: +91 22 30896815
MOSt
Wealth
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MOSt on Dot
Snapshot on Technicals and Derivatives
Derivatives & Options Trading
The December expiry opened on a rising note, posting a 4% rise in the
first week. The index then stalled at about the same level for rest of the
expiry before rising a couple of percent in the final week of expiry. The
series ended with stock rollovers of 84% (6 month average 85%) and
Nifty rollovers of 59% (6 month average 70%). Due to lack of activity,
the stock futures participation was about 2bn shares for the entire
expiry with minor alterations in between. This, coupled with slightly
lower than average rollovers led to more than 10% decline in stock
futures participation expiry over expiry. As far as the Nifty is concerned
the futures added over 4 mn shares in the second half of the expiry,
but disappointing rollovers led to over 25% drop in the open interest
expiry over expiry.
Nifty Options in the December series was composed with almost
equal participation on either side of Call and Put. This was indicated by
the Open Interest Put Call ratio of close to 1 for most part of the expiry.
The Implied Volatility (IV), which can be inferred as the risk premium of
the market, was also subdued and as anticipated, the Nifty remained
quiet for the month. As we enter January the IVs remain low but with
Puts written in 6,000-5,900 and lower strikes indicating expectation of
markets to sustain those levels on the downside.
For January Nifty futures rollovers indicate most of the longs were
rolled, and the shorts were being terminated. Among stock futures,
over 85% of the stocks rolled with more than 70bp rollover cost
indicating more aggression of long positions to roll forward. Among
sectors long rollovers with expiry over expiry long increments were
seen in smaller automobile, private banks and select engineering and
infrastructure stocks. Even the Nifty January series is composed with
Open Interest Put Call Ratio of 1.55 indicating a moderately bullish
outlook for the next series.
Hence, we recommend a bullish strategy, the
Nifty Bull Call Spread.
INDEX: NIFTY
View
Rationale
Premium outflow:
Span Margin:
:
:
:
:
Moderately Bullish
1. Aggressive Long Rollovers from the December series.
2. Open Interest Put Call Ratio of over 1.5 indicates a moderately bullish outlook.
Rs3,000 (per spread)
Rs18,000 (approximately)
LOT SIZE: 50
Strategy: Nifty Bull Call Spread
Buy/Sell
BUY
SELL
Scrip
NIFTY
NIFTY
Series
JAN
JAN
Option Type
CE
CE
Strike Price
Rs6,200
Rs6,400
Reco Price
Rs79
Rs19
Pay off Profile On Expiry
Break Even
Point
6260
Maximum
Profit
Rs7,000
above
Rs6,400
Maximum
Loss
Rs3,000
below
Rs6,200
MOSt
Wealth
-8-

MOSt 3x3
Snapshot on Technicals and Derivatives
Summary
1st week (4th Dec. 2010)
2nd week (11th Dec . 2010)
3rd week (16th Dec. 2010)
4th week (25th Dec. 2010)
Large Cap
Bharti Airtel
BHEL
JSW Steel
CMP(Rs)
Rs
346
2,210
1,120
Large Cap
M&M
ONGC
SBI
CMP(Rs)
Rs
778
1,321
2,737
692
413
294
Large Cap
M&M
Reliance Industries
Sterlite Inds.
CMP(Rs)
Rs
733
1,056
172
113
368
299
Large Cap
M&M
SBI
Sesa Goa
CMP(Rs)
Rs
761
2,755
316
427
364
308
Mid Cap
Anant Raj Industries
Tulip Telecom
Yes Bank
114
178
330
Mid Cap
BGR Energy
Strides Arcolab
Yes Bank
Mid Cap
Anant Raj Industries
Great Offshore
Yes Bank
Mid Cap
Strides Arcolab
Great Offshore
Yes Bank
CMP: current market price
Blue Colour:
New entry in MOSt 3x3
Red Colour:
Re - entry in MOSt 3x3
MOSt
Wealth
-9-

Mutual Fund Returns
Snapshot on Mutual Funds
Performance of recommended debt schemes as on 31st December 2010
Returns (P2P %)
Scheme Name
2 Weeks
1 Mth
3 Mths
6 Mths
1 Yr
2 Yrs
MIP AGGRESSIVE (EQUITY > 15%)
HDFC MIP - LTP - Growth
Reliance MIP - Growth
MIP CONSERVATIVE (EQUITY < 15%)
Birla Sun Life MIP - Savings 5 - Growth
HSBC MIP - Regular Plan - Growth
INCOME FUND
Birla Sun Life Dynamic Bond Fund - Ret - Growth
IDFC SSIF - MTP - Plan A - Growth
GILT FUND
Birla Sun Life G Sec Fund - LT - Growth
DSP BlackRock Government Securities Fund - Growth
SHORT TERM FUND
Templeton India STIP - Growth
UTI Short Term Income Fund - Ret - Growth
ULTRA SHORT TERM FUND
HDFC Cash Mgmt Fund - Treasury Advantage - Ret - G.
IDFC Money Manager - Invest Plan - Plan A - Growth
LIQUID FUND
HDFC Cash Mgmt Fund - Savings Plan - Growth
Reliance Liquidity Fund - Growth
LIQUID IP FUND
Birla Sun Life Cash Manager - I P - Growth
HDFC Liquid Fund - Premium Plan - Growth
FLOATING RATE
Reliance FRF - ST - Growth
UTI Floating Rate Fund - STP - Growth
Note : All Returns as on 31st December 2010 , All Retuns are in Percentage
MIP Aggressive,Income Fund ,Gilt Fund, Short Term < 1 year Absolute,> 1 Year CAGR
Liquid Fund,Liquid plus Fund,Floating Rate < 1 year Simple Annualised,> 1 Year CAGR
0.73
0.62
0.28
0.68
0.70
0.30
5.81
4.94
10.66
8.66
19.56
14.21
0.52
0.59
0.72
0.35
1.21
0.49
3.33
3.33
6.06
4.90
2.90
9.23
0.39
0.19
0.61
0.51
0.97
0.95
2.12
1.70
5.55
6.68
6.11
5.77
0.13
0.26
1.14
1.15
1.20
1.28
2.29
1.08
9.35
4.94
13.35
-0.21
0.24
0.15
0.39
0.50
0.91
1.25
1.92
2.68
5.41
5.22
8.69
7.36
0.28
0.22
0.59
0.50
1.65
1.49
3.06
2.78
5.40
5.27
5.42
5.41
0.29
0.29
0.61
0.61
1.72
1.74
3.17
3.20
5.44
5.47
5.46
5.46
0.30
0.29
0.63
0.61
1.75
1.74
3.28
3.20
5.59
5.45
5.56
5.48
0.24
0.30
0.51
0.62
1.44
1.71
2.98
3.11
5.44
5.43
5.64
5.69
• Source: MFI Explorer
MOSt
Wealth
-10-

Mutual Fund Returns
Snapshot on Mutual Funds
Performance of recommended equity schemes as on 31st December 2010
Returns (P2P %)
Scheme Name
EQUITY DIVERSIFIED - LARGE CAP
Fidelity Equity Fund - Growth
Fidelity India Growth Fund - Growth
HDFC Top 200 - Growth
ICICI Pru Focused Bluechip Equity Fund - Ret - G
SBI Magnum Equity Fund - Growth
EQUITY DIVERSIFY FUND
HDFC Equity Fund - Growth
ICICI Prudential Discovery Fund - Growth
IDFC Small & Midcap Equity Fund - Growth
Reliance Equity Opportunities Fund - Growth
Reliance RSF - Equity - Growth
EQUITY DIVERSIFY -SMALL & MID CAP FUND
Birla Sun Life Dividend Yield Plus - Growth
Birla Sun Life Mid Cap Fund - Plan A - Growth
HDFC Mid-Cap Opportunities Fund - Growth
Sundaram Select Midcap - Growth
THEMETIC - INFRASTRUCTURE FUNDS
Birla Sun Life Infrastructure Fund - Plan A - Growth 8.12
DSP BlackRock India Tiger Fund - Growth
ICICI Prudential Infrastructure Fund - Growth
ELSS
Fidelity Tax Advantage Fund - Growth
HDFC Taxsaver - Growth
Reliance Tax Saver (ELSS) Fund - Growth
INDEX FUND
HDFC Index Fund - Sensex Plan
SBI Magnum Index Fund - Growth
BALANCED FUND
HDFC Prudence Fund - Growth
Reliance RSF - Balanced - Growth
13.15
12.49
26.39
21.93
51.24
44.28
9.99
10.65
20.77
18.51
21.93
16.74
Source: MFI Explorer
6
Mths
1 Yr
2 yrs
3 Yrs
5 Yrs
Since
Inception
3 Yrs SIP
Yield (%)
15.71
16.69
17.71
19.61
11.97
26.59
27.02
24.89
26.58
18.14
51.83
53.89
54.08
54.10
47.35
5.46
6.51
9.69
--
-1.30
21.02
--
22.82
--
20.11
26.74
9.20
26.16
23.52
13.91
31.22
32.06
33.29
--
25.73
19.51
13.36
12.11
17.46
13.72
28.93
26.54
25.73
30.68
18.85
60.75
69.67
61.74
62.48
53.21
10.03
9.76
--
5.94
2.46
22.54
19.15
--
21.47
27.19
23.65
29.30
26.59
26.37
24.11
38.45
42.65
--
39.91
30.55
14.00
11.29
14.92
15.59
29.35
12.82
28.71
31.98
19.67
55.88
56.12
66.92
58.03
57.44
10.04
0.26
5.02
7.13
2.06
18.51
19.59
--
--
22.60
32.39
35.07
17.18
15.08
39.36
37.37
31.14
39.88
37.28
35.08
DSP BlackRock Small and Midcap Fund - Growth 15.25
9.60
13.64
10.50
44.94
39.81
34.42
-5.41
-6.40
-3.74
--
18.07
22.05
13.51
27.97
24.45
22.61
19.70
17.63
7.98
12.08
16.12
15.35
13.46
28.99
25.94
22.23
53.45
56.40
47.88
6.34
6.54
1.89
--
17.72
14.89
19.40
32.38
16.62
32.69
34.33
29.42
18.14
17.45
17.22
17.69
41.35
41.70
-1.76
-1.20
13.97
15.08
21.88
20.29
22.19
22.62
33.36
30.23
For All Equity Schemes : Return Caculated on < 1 year Absolute,> 1 Year CAGR
MOSt
Wealth
-11-

Overview
Snapshot on Mutual Funds
Debt Overview
In December 2010, the benchmark 10-year paper settled at
7.80 %, the GOI 2020 closed at
Rs99.25
or a 7.91% yield (Rs98.59
or 8.01% yield on 30th November 2010). The corporate bonds
yields were range-bound in December. The 5-year AAA and the
10-year AAA closed the month at 8.95% (8.73% in November)
and 8.99% (8.89% in November) respectively. In T-bill auction, the
RBI auctioned the 91-day T-bill (Rs2,000 cr) and the 364-day
T-bill (Rs1,000 cr) with a cut-off yield of 7.19% and 7.49%. Liquidity
in the system was tight due to the quarter-end requirement of banks.
The government's April-November 2011 fiscal deficit fell 39.1%
YoY to
Rs1.865
lakh cr, accounting for 48.9 % of the Budget estimate.
The govt's receipts over April-Nov rose 59.8% to
Rs5.042
lakh cr,
driven by a 142.5% rise in non-tax revenue to
Rs1.801
lakh cr. Total
spending in April-Nov rose 11.1% YoY to
Rs6.907
lakh cr.
The govt's April-Nov tax collections rose 26.8% YoY to
Rs4.18
1lakh cr, accounting for 56% of the Budget target.
The weekly primary articles, for the week ending 18th December
2011 moved up 0.96% WoW, driven by a sharp increase in food
articles (up 1.08% WoW) and non-food articles (up 0.82% WoW).
Primary articles inflation was up 13.87% Y0Y. India's food articles
inflation rose to a 10-week high of 14.44 per cent in the week to
18th December from 12.13% a week earlier, with primary articles
inflation rate for the week racing to 17.24% from 15.35% in the
previous week. India's annual inflation rate based on the Consumer
Price Index for Industrial Workers fell to a 20-month low of 8.33%
in November from 9.70 %a month earlier. The Finance Minister
expressed over food inflation rising to a 10-week high of 14.44%,
indicating that the govt will take more steps to check rising prices.
India will have another gauge of price changes, the Producer Price
Index. The ministry of industry will set up an internal committee to
prepare the framework for the new index. The Prime Minister's
economic panel Chairman said price stability must be the prime
objective of central banks in developing countries. Chief Economic
Adviser said inflation was not at a level where more rate hikes were
needed, and said he saw January WPI inflation easing to 7%.
He also said the time was not right to hike diesel prices.
Overview of funds
Equity Funds
The Indian equity market has had a dream run over the past 2 years
since the credit crisis when yield-chasing global investors poured in
record funds. That made the benchmark Sensex one of the best
performers in the past 2 years and the most expensive among its
peers. FIIs were the net investors in the domestic market with total
equity investment of
Rs2,050cr.
Domestic mutual funds were the
net buyers in equity with total inflow of
Rs1,460cr.
In December,
among large cap funds, Quantum Long-Term Equity Fund- G was
at the top with a 1year absolute return of 28.82% and in the multi-
cap category, SBI Magnum Sector Umbrella - Emerging Businesses-
G settled at 33.03% in the 1-year category. In the ELSS category
Axis Tax Saver Fund was 1st, delivering returns of 29.99% in a year.
Category
Equity Diversified
Equity Large Cap
Index Funds
Sector Funds
ELSS Funds
<1 Year, Absolute and >1 year, CAGR
6 Mths(%)
11.74
13.71
16.31
10.06
13.12
1 Yr(%)
19.04
17.15
17.63
19.21
18.32
3 Yrs(%)
-3.74
-0.98
-0.87
1.59
-2.29
• Source: MFI Explorer
Debt Funds
In the Month of December 2010, the G-sec yields were range-
bound during the month on account of G-Sec auction and better
cut-offs in OMO auction. The yield in the benchmark 10 yr security
7.80% GOI 2020 closed at
Rs99.25
or 7.91% Yield (previous month
close:
Rs98.59
or 8.01% yield as on 30th Nov 2010 ). As on
31st December 2010 under Gilt Long term category, Baroda Pioneer
Gilt Fund-G topped the chart with 1 Year returns of 18.17%.
Whereas in case of Income category the topper was Baroda Pioneer
Income Fund- G generating returns of 7.85%. In the Debt MIP
category, HDFC MIP - LTP - G Fund topped the chart with 1 Year
return of 10.78%. In Liquid Category Escorts Liquid Plan-G topped
with 1Year returns of 6.19%. In the Short-Term Income category,
Birla Sun Life Short Term Opportunities Fund - Ret scheme topped
the chart with 1 Year return of 6.01%.
Category
3 Mths(%)
6 Mths(%)
1 Yr(%)
Liquid
Liquid Plus
Income Funds
Debt MIP
Debt - Short Term
Gilt - Long Term
6.89
6.91
6.32
2.62
7.73
11.71
5.96
5.80
4.65
7.40
4.41
4.03
5.02
5.20
5.09
6.70
4.79
4.80
MOSt
Wealth
-12-
<1 Year, Absolute and >1 year, CAGR
• Source: MFI Explorer

Fund of the Month
Snapshot on Mutual Funds
Templeton India Short Term Income Plan
Short Term Funds: A good alternative to Fixed Maturity Plans(FMPs).
Although FMPs might offer the best opportunity to lock up
investments in a burgeoning interest rate environment, they do not
generally churn their portfolio or buy and sell securities as per market
conditions. FMPs generate money by investing in debt securities of
companies and holding on to their paper until maturity. They also
downplay the risk duration in a portfolio.
Short-term funds invest in bonds and other fixed income instruments
that have a tenure of 1 to 2 years. The fund manager builds a
diversified portfolio, which contains Certificates of Deposit, Treasury
Bills, Commercial Paper, Securitized Debt and advances in the call
money market. The 3 month to 1 year instruments with highest
rating are trading at 9-9.50%.
Templeton India Short Term Income Plan (TISTIP) focuses on short-
term corporate bonds and is ideal for investors with an investment
horizon of 6 to 18 months. With a low maturity profile and higher
allocation to corporate bonds including pass-through certificates
As on 31st Dec 2010
Scheme Name
Templeton India STIP - Growth
CRISIL Short-Term Bond Fund Index
NAV
1918.26
—
Inception
Date
31-Jan-02
Fund Size
(RsCr)
6169.38
6 Months
3.72
4.05
1 Year
5.53
4.70
2 Years
8.70
5.72
5 Years
7.58
6.84
(PTCs) (top-rated papers), the fund delivered good returns consistently
since inception.
Portfolio Characteristics of TISTIP
Unlike FMPs and other funds, TISTIP declares portfolios twice a
month, which shows transparency in investment. It has an average
maturity of 1.07 years against 1.09 years on 30th November 2010.
The fund maintains an active PTC deployment without compromising
quality. It has allocation of 32.71% in PTC (with 14.97% in Pool
PTC, 17.07% in Single Loan PTC and the rest in other PTCs). The
fund has 38.67% portfolio in corporate debt with most of the papers
rated above AA-. To tap the ongoing high yield opportunity in CDs/
CPs, the fund invested 26.44% in them. The exposure to any company
has not exceeded 10% except in TTSL where it reached 12.53%. It
has a current YTM of 9.55% (pre-expenses). This means that if the
fund is held for 0.98 years (modified duration) without any churning,
it will post returns of 9.55%minus expenses.
MOSt
Wealth
-2-
MOSt
Wealth
-13-

ICICI Pru LifeStage Wealth II
Snapshot on Insurance
ICICI Pru LifeStage Wealth II
ICICI Pru LifeStage Wealth II, a unit linked insurance plan, offers
you multiple choices packaged in a single product. Read on to
know more.
Key benefits of ICICI Pru LifeStage Wealth II
•
Choose between
3 Portfolio Strategies and 8 funds
to manage
* The term 'Pay' denotes number of years for which the premium should
be paid in to the policy. For example, 'Regular Pay' requires premium
payment for the entire policy term; 'Limited Pay 7' requires payment of
premium for a period of only 7 years.
Loyalty Additions would be made by allocation of extra units at the
end of the year.
your wealth.
•
Flexible premium payment options:
You can either pay premium
Charges under the Policy
Premium Allocation Charge:
This will be deducted from the
premium amount at the time of premium payment and units will
be allocated in the chosen fund thereafter.
throughout the policy term or for a limited period.
•
Top up:
Invest your surplus money over and above your regular
premiums as and when you like.
•
Avail
life Insurance
cover to ensure protection for your family.
•
Loyalty Additions:
Paid at the end of every policy years, starting
All top-up premiums are subject to an allocation charge of 2%.
from the 10th policy year, on payment of all due premiums.
•
Tax Benefits:
On premiums paid and benefits received, as per
prevailing Tax Laws
1.
How does the policy work?
•
Choose the premium amount, mode of premium payment
Fund Management Charge (FMC):
The following fund
management charges will be applicable and will be adjusted from
the NAV on a daily basis.
(yearly, half-yearly or monthly), premium payment option
(regular pay or limited pay), policy term, portfolio strategy and
Sum Assured for your policy.
•
Your premium amount will be invested in the portfolio strategy of
This charge will be a percentage of the fund value. There will be an
additional charge for the investment guarantee of 0.25% p.a. for
the Return Guarantee Fund. This will be charged by adjustment
to NAV.
Policy Administration Charge:
The policy administration charge
is a percentage of the annual premium and will be charged for the
term of the policy:
your choice.
•
In the unfortunate event of your death during the term of the
policy, your nominee will receive Sum Assured plus Fund Value,
including Top up Fund Value, if any, subject to Minimum
Death Benefit
2
.
•
At maturity, the Fund Value, including Top up Fund Value, if any,
will be paid. Alternatively, settlement options can be chosen
Loyalty Addition
Loyalty Addition shall be allocated at the end of every policy year,
starting from the end of the tenth policy year, if all due premiums
have been paid. Loyalty Addition will be calculated as a percentage
of the average of Fund Values on the last day of 8 policy quarters
preceding the said allocation. The Loyalty Addition for various
Premium Payment Options is as shown below:
This charge will be made by redemption of units.
Mortality Charges:
Mortality charges will be deducted on a monthly
basis on Sum Assured.
Switching Charges:
Four free switches are allowed every policy
year. Subsequent switches would be charged
Rs100
per switch. Any
unutilized free switch cannot be carried forward to the next
policy year*.
Miscellaneous Charges:
If there are any policy alterations during
the policy term, they will be subject to a miscellaneous charge of
Rs250
per alteration*.
*These charges will be deducted through redemption of units.
MOSt
Wealth
-14-

ICICI Pru LifeStage Wealth II
Snapshot on Insurance
ICICI Pru LifeStage Wealth II(Contd...)
Terms and Conditions
1. Tax benefits under the policy are subject to conditions under
section 80C and 10(10D) of the Income Tax Act, 1961. Service tax
and education cess will be charged extra as per applicable rates. The
tax laws are subject to amendments from time to time.
ICICI Pru LifeStage Wealth II at a glance
2. Minimum Death Benefit is 105% of the total premiums
(including top-up premiums) paid less applicable partial withdrawals.
For your policy to continue for the entire policy term, premiums must be paid until the end of the selected premium payment term
To know more about ICICI Pru LifeStage Wealth II
Email: insurance@motilaloswal.com I Call: 022 39804379 I SMS: MOSL INS to 575753
MOSt
Wealth
-2-
MOSt
Wealth
-15-

Portfolios Overview
Snapshot on Portfolios Management
Overview
Santa Claus kept its date with India in 2010, with the Indian markets
returning 7.4% (in US dollar terms on the benchmark Nifty Index)
and 4.64% (in rupee terms) in December, almost exactly in line
with its average returns in the month over the last decade. While
activity was thin and December was uneventful overall given the
holiday season, the markets more than recouped their November
losses to end the year with a healthy return of 22.8% on the Nifty in
US dollar terms and 17.95% in rupee terms. A quick round-up of
key macro events and data is presented below:
1) IIP: Industrial production data was volatile in India, with October
factory output higher, at 10.8%, beating the consensus estimate of
7.5%. We expect growth to moderate in coming months due to
the higher base, and maintain our full year IIP estimate of 9%.
Infrastructure growth disappointed as core infrastructure sectors grew
only 2.3% in November, the slowest in 21 months. This could have
had a moderating impact on IIP growth in November 2010.
2) Inflation: November 2010 inflation dipped to 7.5% from
8.5 % in October 2010, in line with the consensus. While the base
effect caused this deceleration, spiraling food inflation after non-
seasonal rains, a surge in oil and commodity prices led the Finance
Ministry to raise its year to March 2011 Wholesale Price Index (WPI)
inflation forecast to 6.5% from 6%.
3) RBI Policy: In line with market expectations, the RBI kept policy
rates unchanged in its policy meet on 16th December. The central
bank announced special measures to ease liquidity tightness in
money markets in the form of a 1% SLR cut and OMO buybacks of
Rs480bn.
4) Crude Oil: Global oil prices crossed US$90/bbl, increasing
pressure on the current account deficit all over again. The govt
increased petrol prices but deferred a hike in diesel and gas prices to
avoid a backlash on inflation. A harsh winter means oil could spoil
the party for India again.
December was quieter than expected in terms of deals, as sovereign
debt fears killed investment appetite in general, before flows dried
up in the holiday season in the latter half of the month. Offerings of
PSU enterprises were deferred as a result. Manganese Ore was the
biggest listing in December and the stock posted 25% gains on
listing. Foreign Institutional Investors (FIIs) turned buyers only towards
the end of the month, with December net FII inflow (primary and
secondary markets) at US$450mn and cumulative inflow in 2010
at US$29bn. Domestic institutions mostly did the opposite of FIIs
MOSt
Wealth
-16-
and ended December with a US$100mn outflow for the month
and importantly, US$4.6bn outflow for 2010.
Outlook
We expect the markets to be range-bound in the near future with
risks arising from rising global commodity prices, sticky domestic
inflation and lingering concerns due to aftershocks of recent political
controversies. The markets will be guided by the 3QFY11 corporate
earnings season, which will start in the second week of January
2011. This is likely to provide direction to the corporate earnings
growth path for the ensuing quarter and for FY12.
Action taken in various strategies during the
month
Value Strategy
During the month there were no transactions in Value Strategy.
Value Strategy has 2% cash as of December 2010.
Bulls Eye Strategy
During the month, Bulls Eye Strategy reduced weightage to Bajaj
Auto and has increased weightage of BHEL. Bulls Eye Strategy is
fully invested as of December 2010.
NTDOP Strategy
During the month, there were no transactions in NTDOP
Strategy.NTDOP Strategy is fully invested as of December 2010.
Optima Strategy
During the month, Optima Strategy reduced weightage to Page
Industries and exited Mundra Port. It introduced Reliance Industries.
Optima Strategy has 1.36% cash as of December 2010.
Focused Series - III - Target Return Strategy
During the month, this strategy booked profits in Tata Motors and
Cipla. It introduced Reliance Industries and increased weightage of
ICICI Bank, Reliance Infrastructure and Suzlon Energy. This strategy
has 3.5% cash as of December 2010.
Focused Series - IV - Flexi Cap Strategy
During the month, this strategy reduced weightage of Bajaj Auto
and Unichem and has increased weightage of BHEL. It has
1.26 % cash as of December 2010.
Focused Series V - Contra Strategy
During the month, there were no transactions in this strategy. It is
fully invested as of December 2010.
Invest India Strategy
During the month, there were no transactions in Invest India Strategy.
It is fully invested as of December 2010.

Market Roundup
Snapshot on Commodities
Review and outlook
Gold:
Related News
Copper:
Related News
•
Copper prices added another
Rs2
per kg on the domestic non-
•
India's
gold traders booked deals with the rupee at its highest level in
the past 3 weeks, making the dollar-denominated yellow metal
cheaper, while they bet on the precious metal to take the rally
into 2011.
• International gold edged up on the last trading day of 2010, gearing
towards its strongest annual gain in 3 years, supported by a
languishing dollar and a firm outlook for precious metals into 2011.
• Bullion rallied 30% in 2010, the biggest yearly advance since 2007,
reaching an all-time high of US$1,431.25 an ounce on 7th December
as Europe's debt woes and declining currencies boosted demand.
The Federal Reserve kept US borrowing costs low and bought bonds
to help revive the economy.
• The US Dollar Index, a 6 currency gauge of the greenback's strength,
fell to its lowest level in almost 2 weeks. Gold futures, which typically
move inversely to the dollar, reached a record US$1,432.50 an ounce
on 7th December and climbed to all time highs in euros and
British pounds.
ferrous metals market today largely on a firming global trend.
Sustained buying on a pick-up in industrial demand amid rising
trend in the overseas market mainly led to a rise in prices.
• Copper futures on the Indian commodity bourse ended on a
positive note at
Rs372.45/kg
due to an optimistic demand
outlook in industrial metals. Copper price tracked rising silver
prices and stayed in green territory.
• Copper climbed to a record on the LME after a 2 day holiday
and caught up with a surge in other metals: aluminium and
zinc. Industrial metals, copper in particular, will be strong.
Copper will rise on improved demand outlook from China,
the largest buyer of copper. Supply constraints are expected to
add to the rally.
• Copper has tripled in 2 years on Chinese demand, the largest
buyer of the base metal. Chinese copper consumption may
decrease in the coming years by 8% to 11%, still, its burgeoning
demands in the form of copper wires and appliance
applications and expansion in power grids will keep the
counting machines ticking.
Outlook for this month
• Gold is expected to trade positively due to continuing debt
problems in Europe. India gold futures are likely to hit a record
high in early trade tracking firm overseas markets and
expectations of a weaker rupee.
Outlook for this month
• Due to optimistic global cues, the copper rally looks green. In
coming trading sessions, copper prices are expected to travel
to
Rs450/kg
conditions to strong support at
Rs425.
Technical snapshot
Gold has been trading upwards since the last week. It is expected
to continue this rally for next few weeks too. Support now lies
at 20300/20100, and resistance can be seen at 21240/21260.
Technical snapshot
Copper prices have not been showing a clear trend. But the prices
are expected to trade higher in coming weeks. It has been able to
touch the highest level of 444.90 in December. The prices can still
go up if they break the levels of 450/451 in near future.
MOSt
Wealth
-17-

Market Roundup
Snapshot on Commodities
Review and outlook
Crude Oil
Related News
•
MCX crude oil futures were trading with slight losses after a slightly
Pepper
Related News
•
Pepper futures edged higher reinforcing bullish sentiment in the
sluggish outing. Global prices edged higher in early Asian trade as
a torrent of strong economic releases and concerns about falling
US crude and distillate inventories augur as supportive for
the commodity.
• Crude prices declined during the middle of December mainly due
to predictions of warmer US weather, curbing demand for crude
oil in the world's largest heating oil market. US crude oil inventories
declined much less than expected, which also acted as a negative
factor for oil prices.
• On a weekly basis, crude futures on the Nymex gained about
0.3%, to close at US$88.02/bbl. Factors that supported oil prices
were positive economic data from the US, declining inventory
levels and hopes of further increase in demand for heating oil due
to cold weather in Europe and the northeast region of the US.
However, sharp gains were capped due to the strength in the US
dollar and mixed sentiment in the global equity markets in the last
week of December.
• Oil rose in Asian trade on expectations that an improving US
economy would lead to higher demand for crude. A stronger US
dollar means the US economy is gaining momentum, which
increases the future demand in oil.
Outlook for this month
• Loose monetary conditions and a strong economic outlook
are the two bullish underpinnings of crude. Prices are likely to
gravitate higher as long as news flow stays positive. We will
wait for the inevitable correction, however, before initiating
fresh long positions.
counter. Rains in the growing places also aided sentiment, which
can delay the arrival of black pepper. The spice for delivery in
Janaury declined by
Rs249
or 1.12% to
Rs21,931/quintal,
with a
business turnover of 9,555 lots. December delivery slipped by
Rs231
or 1.06% to
Rs21,575/quintal,
with an open interest
of 3,338 lots.
• Lower global availability and therefore expectation of demand
from overseas buyers in 7-8 days will cushion the fall in pepper
prices. Prices will also take cues from the price parity of major
origins in the international market.
• A rise in pepper futures prices was due to estimates of lower
global production and tight stocks in the domestic markets, but
weak overseas demand restricted gains.
• Pepper futures prices rose by
Rs190
to
Rs22,280/quintal
as
speculators enlarged positions, supported by estimates of squeeze
in supplies amid expectations of late arrivals.
• Limited stocks following tight supplies in the physical markets
against rising consumption mainly pushed up pepper futures prices.
Besides, limited stocks in the global market kept sentiment firm.
• The international price of pepper in New York was unchanged to
US$5.51/kg during the week to 17th December 2010 but was
higher against the US$3.48/kg quoted a year earlier.
Outlook for this month
•
Pepper future prices are expected to show negative movement.
Profit booking is expected soon and it may drag prices down
marginally. Still selling is not advisable at this stage.
Technical snapshot
Crude prices have been showing a mixed tend for quite a few
days now. They took support at 3,880/3,860. If they break the
upper level of 4,260/4,270, they can be bullish in near future.
Technical snapshot
Pepper prices have been in an uptrend since the past 4-5 months.
They are expected to trade lower in coming weeks, due to profit
booking. If they breach 23,380/23,450, they can be strong in
coming weeks.
MOSt
Wealth
-18-


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MOSt
Wealth
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