Monthly Report: December 2012

1
Monthly Report
December 2012
Monthly Report December 2012
Retail Research
Table of Contents
Title
Slide No.
Monthly Equity Commentary
Market Statistics
Bond yields, commodities and currencies
Comparison of Equity Returns in various emerging

markets
Outlook Going Forward

Technical Commentary
Learning Technical Analysis
Derivatives Commentary
Learning Derivatives
Extract of Calls during November 2012
Gainers & Losers November 2012
Disclosure
Retail Research
03
04
07
12
17
26
29
31
33
35
37
38

1-1.BS E S ENS ITIV .BS E - 02/11/12
27
28
03
Tre nd7
04
05
08
09
10
11
12
15
16
17
18
19
22
23
25
26
29
30
31
02
19140
19120
19100
19080
19060
19040
19020
19 T
18980
18960
18940
18920
18900
18880
18860
18840
18820
18800
18780
18760
18740
18720
18700
18680
18660
18640
18620
18600
18580
18560
18540
18520
18500
18480
18460
18440
18420
18400
18380
D aily
After correcting in the month of October the Indian markets bounced back smartly in November.The rally was led
by global liquidity and hopes of reform implementation Though the start to the month was positive the second
and third week were dull were in the market corrected.The positive momentum picked up again from the fourth
week with the gains accelerating towards the end of the month on the back of positive cues from Europe.
% Chg
Week No Sensex Nifty
Key Positives
Key Negatives
Optimism over the reshuffle of Union Cabinet.
India's fiscal defic it during the Apr-Sept period rose to 65.6% of the full fisc al year 2012/13
target.
India's manufacturing sector inc hed up in Oct, driven by new orders The RBI left interest rates on hold.
(The HSBC India M anufacturing Purchasing M anagers' Index (PM I) - a
measure of fac tory production - stood at 52.9 in Oct slightly up from
1
1.4
1.4
Sept, when it was 52.8).

Cut in the cash reserve ratio for banks by RBI.
The central bank raised the M arch-end inflation estimate to 7.5%, from 7%.
Foreign direct investment (FDI) in India declined by about 20% in August compared to same
month in the previous year.
Reserve Bank sharply lowered this fiscal's ec onomic growth projec tion to 5.8%, from 6.5%
earlier.
Car sales increased by 23.09% to 172,459 units in Oct.
Indices edged lower as investors were worried about the US "fisc al cliff" & the euro-zone
ec onomy.
-0.4
-0.2
The HSBC PM I for the services sector fell to 53.8 in Oct from Sept seven-month high of 55.8.
Indias foreign tourist arrivals for Oct 2012 saw a sluggish growth of 2.8%.
Gross direct tax collec tion registered a growth at a mere 6.59% during the April-Oct period.
Retail Research
HOME
contd
% Chg
Week No Sensex Nifty
Key Positives
Key Negatives
India's headline inflation unexpectedly eased to its slowest pace in Weakness in global stocks and weak economic data in the domestic market hit investor
3
-2.0
-2.0
eight months in October.
sentiment adversely.
Industrial production contracted by 0.4 % in September on account of dismal performance of
manufacturing and capital goods sectors.
Strong buying by foreign institutional investors (FIIs) in November 2012. Indirect tax collection has shown only a moderate growth of 17% in April-October period as
4
1.1
0.9
against the annual growth target of 27%

Finance M inistry permitted Life Insurance Corporation to invest up to
30% in a Company as against the earlier ceiling of 10%.
ICRA has cut the estimate for Indias economic growth for FY13 to 5.4% from 5.7%.
M oodys retains Indias stable outlook.

Expectations that Greece will get bailout fund from the troika of
international lenders comprising the European Union, the European
5
4.5
4.5
Central Bank and the IMF.

The Indian economy grew by 5.3% in the July-September period.
Fiscal deficit in the first seven months of 2012-13 stood at 71.6 % of the
Budget Estimates (BE), slightly better than 74.4 per cent in the same
period a year ago,
Given below is an overview of global markets performance during November 2012:

Indic es
US - Dow Jones
Oc t-12
Nov-12
% Change
13096.5
13025.6
-0.5
US - Nasdaq
2977.2
3010.2
1.1
UK - FTSE
5782.7
5866.8
1.5
Japan - Nikkei
8928.3
9446.0
5.8
Germany - DAX
7260.6
7405.5
2.0
57068.0
57475.0
0.7
Brazil - Bovespa
Singapore - Strait Times
3038.4
3070.0
1.0
Hong Kong Hang Seng
21641.8
22030.4
1.8
I ndia - Sensex
18505.4
19339.9
4.5
5619.7
5879.9
4.6
I ndia - Nifty
I ndonesia - Jakarta Composite
4350.3
4276.1
-1.7
Chinese - Shanghai composite
2068.9
1980.1
-4.3
The world markets ended the month of November 2012 on a

mixed note Japan & India (Nifty and Sensex) were the top
performers, which ended the month with decent gains of 5.8%,
4.6% & 4.5% respectively. Germany, Hong Kong, UK & US
(Nasdaq) also managed to close in the green by 2.0%, 1.8%,
1.5% & 1.1% respectively. Among the losers, Chinese, Indonesia
and US (Dow Jones) fell the most by 4.3%, 1.7% & 0.5%
respectively.
Retail Research
contd
All sectoral indices ended on a positive note last month except Oil & Gas. Consumer Durable, Realty, Bankex, FMCG
and Auto were the top five gainers, which rose by 15.8%, 12.8%, 7.8%, 6.2%, and 4.9% respectively. The loser was
Oil & Gas, which fell by 1.2%.
BSE Indices
Sensex
30-Nov-12 31-Oct-12 % Chg

19339.9
18505.4
Remarks
4.5
Smallc ap
7275.7
6989.2
4.1
M idc ap
6902.0
6566.0
5.1
BSE 500
7472.5
7118.8
5.0
BSE 200
2389.5
2276.2
5.0
BSE 100
5909.0
5621.0
5.1
Index rose after reports stating Financ e M inister P. Chidambaram has asked
banks to bail out builders, espec ially those involved in in the c onstruc tion of
Realty
1998.4
1771.6
12.8
residential projec ts, to jump start growth.
Unitec h, DB Realty and Anant Raj Industries were the top performers, whic h
rose 37.2%, 34.9% and 21.4% respec tively.
Best sec tor performer of the month.
Videoc on industries, Gitanjali Gems, and Titan Industries, whic h c ontributes
74.4%
Consumer Durables
8031.2
6937.7
15.8
to
the
overall
weightage
of
the
index,
rose
25.3%,
22.3%
&
20.2%
respec tively.
Domestic and foreign brokerages are very optimistic on Titan Inds (largest
weight in the index) performanc e in the medium term, whic h helped the index
to gain further.
M etal
10355.2
10149.1
2.0
Index rose on hopes that banking laws (amendment) bill will be passed in the
winter session. HDFC Bank gained on build up of long positions ahead of the
Bankex
13951.9
12947.3
7.8
event.
Union Bank, IDBI Bank, Canara Bank, Indusind Bank, Axis Bank & HDFC Bank
were the top gainers whic h rose by 24.0%, 16.4%, 15.7%, 14.8%, 11.2% & 10.9%
respec tively.
Power
1980.3
1952.1
1.4
Capital Goods
11080.2
10864.0
2.0
Auto
10814.5
10307.3
4.9
Automakers rose on hopes of rising sales during the festival season.
Top gainers were Ashok Lelyand, Tata M otors, M &M and Bajaj Auto gaining
20.9%, 7.7%, 6.9% and 6.4% respec tively.
Retail Research
HOME

BSE Indices
contd
30-Nov-12 31-Oct-12 % Chg
Oil & Gas
8252.1
8355.0
-1.2
PSU
7177.7
7104.7
1.0
IT
5888.4
5718.7
3.0
Remarks
Heavy selling pressure has dragged down the index.
O il India, HPCL & Petronet LNG were the top losers followed by Gujarat State
Petronet, Cairn India, Relianc e Industries and O NGC.
A sharp surge in subsidy sharing burden adversely impac ted O NGC's
United Spirits (ahead of and post Diageo deal), Colgate Palmolive, Tata Global &
ITC were the top gainers, whic h rose by 69.4%, 12.2%, 10.3% and 5.5 respec tively.
FM CG
6037.9
5687.3
6.2
Stoc ks gained after positive signs that the government might push through its
ec onomic reforms to boost ec onomic growth.
Healthc are
7946.5
7620.5
4.3
Fund Activity:
Particulars
Net Buy /
Net Buy /
Open
Open
Sell
Sell
Interest
Interest
Nov-12
Oct-12
Nov-12
Oct-12
Remarks
FII Activity (Rs. in Cr)

Equities (Cash)
9718
9578
FIIs were reported as strong net buyers in Nov.

FIIs
were net
buyers along
open interest over

positions
Index Futures
2228
406
10870
9348
FIIs
dec line
5395
7340
37800
46103
by
them
apart
inc rease in
indic ates long
from
the
value
along
with
impac t.
Index O ptions
taken
with an
O c tober, whic h
were
in
net
the
buyers,
open
whic h
was
interest.
This
indic ates
squaring up of earlier options.
FIIs
were
net
buyers
while
the
open
interest
inc reased over O c tober, whic h indic ates building of

long positions in this segment apart from the value
Stoc k Futures
218
-3333
29938
27838
Stoc k O ptions
-455
-466
879
1516
effec t.
The
Stoc k
O ptions
segment
witnessed
poor
partic ipation.
M F Activity
Equities (Cash)
-2397
-2520
M F c ontinued to be the net seller for the last 5
c onsec utive months.
Retail Research
contd
Bond Yields:
Indian G-Sec bond yields ended lower by 4 bps at 8.17% at the end of November 2012 over October. Yields
closed at the lowest level on a closing basis on the last day of the month. G-Sec yield had ended October on a
high note. The Reserve Bank of India (RBI), at its last meeting on Oct 30, left interest rates unchanged but cut
the cash reserve ratio by 25 bps for banks, disappointing market hopes that it would cut the repo rate. The
rationale behind RBIs move was to get inflation under control. In November the yields after remaining firm
throughout the month dropped towards the end spurred by the RBIs decision to inject Rs.12,000 cr of liquidity
by way of open market operations purchase of G-sec through an auction on Dec 04. The RBI is scheduled to
announce its mid quarter review of the monetary policy on December 18.
10 Ye ar Gove rnm e nt Bond Yie ld - Tre nd
10.00
8.00
6.00
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jul-08
4.00
Period
Commodities:
In November 2012, the Reuters/Jefferies CRB Index of 19 raw materials ended higher by 1.2% to close at 298.98.
Early in the month, raw sugar futures fell to the lowest in more than two years, as dry weather helped speed up
harvest in top grower Brazil, while cocoa took a tumble on heavy spread trade and long liquidation. However,
both regained their losses later in the month on short covering by investors.
Retail Research
contd
Behaviour of commodity prices (including LME 3 month buyer prices for base metals) during the month ended
November 2012 is given below. Analysts largely agreed that it was technical buying that was supporting the base
metals rather than news of the release of the next tranche of aid to Greece. A revival in demand from Indian and
American industries, along with stabilizing growth conditions in China, is expected to push up consumption of
base metals in the coming months. However, analysts are cautious about the uncertainties on European
economic conditions and the US fiscal cliff, which would influence trends.
Commodity
30-Nov-12
31-Oct-12 % Chg Reasons
Conc ern
that
settlement
in
U.S.
talks
lawmakers
aimed
at
may
fail
avoiding
to
reac h
self-imposed
tax
inc reases and budget c uts known as the fisc al c liff. If the
Gold
1712.7
1719.1 -0.37% parties fail to reac h an agreement, $600 billion in tax hikes
and spending c uts will auto
Early in the month gold rallied on demand asr a safe haven
during a global ec onomic meltdown
First
monthly
inc rease
sinc e
August
on
signals
that
ec onomic expansion in the U.S. is ac c elerating
O ptimism
that
agreement in
U.S.
time to
lawmakers
will
avoid massive
budget
spending c uts
reac h
and tax
hikes that c ould derail an ec onomic rec overy in the world's

largest oil c onsumer
Crude O il
88.9
86.2
3.10%
Supply
from
the
O rganization
of
Petroleum
Exporting
Countries dropped by 0.2% to 30.95 million a day in O c tober,

the
lowest
sinc e
last
Dec ember,
bec ause
of
dec lines
inNigeria,Iran andSaudi Arabia
Conc ern
that
the
c lash
between
Israel and
Hamas
will
esc alate into a wider c onflic t that would endanger M iddle

East c rude shipments
Chinas
state
stoc kpiler
started
stoc king,
giving
the
impression pric es c ould have hit a bottom

Aluminium
2079
1911
8.79%
Demand
Inc rease
in
inc reasing
auto
demand.
Retail Research
sales
with
rec overy
(espec ially
in
in
manufac turing.
China) led
to
higher

Commodity
30-Nov-12
contd
31-Oct-12 % Chg Reasons
Copper
7954
7823
1.67%
Signs
thatChinas
expec tations that
ec onomy
c onsumption in
is
rebounding
raised
the worlds largest user
will inc rease next year. Chinas fac tory output expanded for
the first time in 13 months in November.
Zinc
2044
1875
9.01%
Nic kel
17225
16270
5.87%
Tin
21700
20050
8.23%
Chinas
state
stoc kpiler
started
stoc king,
giving
the
impression pric es c ould have hit a bottom
Heavy demand from alloy industries

Spec ulators
c reated
positions amid
a firm spot
market
trend on pic k up in demand from battery makers

Lead
2253
2080
8.32%
Analysts
are
predic ting
shortfall
next
year
with
the
supply glut shrinking to 13,000 tons this year, from 156,000

tons in 2011, before flipping into
a 154,000-ton
shortfall in
2013.
The Baltic Dry Index (BDI) gained 5.8% in the month to close at 1086. The index started the month on a poor note
on poor global economic data and concerns from China. However, the BDI soon recovered as capesize rates
increased and iron ore prices stabilized as Chinas $158 bn stimulus plan kicks off. Improvement in Chinas PMI
led to anticipation of higher iron ore and coal demand, which led to a rise in rates and consequently the BDI.
Currencies
The USD was mixed vs other currencies in November 2012, however with a negative bias. The USD remained weak
against most peers during the month as the fiscal cliff in the USA and possible developments in the Euro zone
boosted other currencies while depreciating the USD. The Dollar Index (DXY), which Intercontinental Exchange
Inc. uses to track the greenback against the currencies of six U.S. trade partners, rose by 0.4% in the month
(mainly helped by yen depreciating vs the US$). The biggest gainers in the month were the Korean Won, Pakistan
Rupee and Indonesia Rupiah while the biggest losers in the month were Japanese Yen, Brazilian Real and Indian
Rupee.
Retail Research
10
contd
Given below is a table that shows the depreciation (-)/appreciation (+) of the dollar against various
currencies for the month of November 2012:
USD to:
Pakistani rupee
Hong Kong dollar
Chinese yuan
30-Nov-12 31-Oct-12 % Chg Reasons

96.21
7.75
97.052 -0.90%
7.75
0.00%
6.274
Pegged to the USD

A
preliminary
Chinese
manufac turing
index
indic ated
output
6.295 -0.30% expanded for the first time in 13 months. PM I was 50.6 in November.
Lower than expec ted IIP and higher than expec ted inflation
Indian rupee
55.006
54.103
1.70%
Shift from risky assets due to poor global ec onomic sc enario

Post November end, INR gained trac tion after M oodys maintained a
stable rating on India
Taiwan dollar
29.068
29.272 -0.70% Taiwanese export orders c limbed more than estimated in O c tober.
Singapore dollar
1.221
1.221
0.00%
Argentine peso
4.826
4.76
1.40%
German business c onfidenc e unexpec tedly rose in November to
101.4 from 100 in O c tober, its first gain in eight months
US lawmakers engaged in a budget showdown that may push the
c ountry into rec ession
Euro
0.771
Drop (of 2.7% vs an estimated drop of 1%) in
0.773 -0.20% produc tion
added
to
spec ulation
Europes
Frenc h industrial
ec onomic
outlook
is
worsening. Business c onfidenc e in the euro areas sec ond- largest

ec onomy held near a three-year low last month.
The
euro
zone
debt c risis
dragged the
bloc
into
its sec ond
rec ession sinc e 2009 in the third quarter despite modest growth in
Germany and Franc e (0.2% eac h)
Thai baht
30.671
30.771 -0.30%
M alaysiareported a 5.2% rise in gross domestic produc t in the third
M alaysian ringgit
3.044
3.057 -0.40% quarter, c ompared with the 4.8% inc rease forec ast in a Bloomberg
survey.
Retail Research
HOME

USD to:
Indonesian rupiah
contd
30-Nov-12 31-Oct-12 % Chg Reasons

9578.54
9643.2 -0.70%
Spec ulation that Japanese elec tions next month will hand power to
an
opposition
stimulus.
Japanese yen
82.1
79.647
party
Opposition
that
advoc ates
leader, Shinzo
more
aggressive
Abe, inc reased
monetary
pressure on
3.10% theBank of Japan to add to stimulus measures that tend to weak
Japans c onsumer pric es (exc luding fresh food) stagnated, adding
to politic al c alls for the c entral bank to add to monetary easing at

the Dec . 20 meeting.
Brazilian ec onomy grew (0.9%) only half what ec onomists expec ted
Brazilian real
2.094
2.034
2.90%
(2.3%) in the third quarter, suggesting the government may resort to

a weaker c urrenc y and low interest rates to prop up ec onomic
ac tivity
Korean won
1082.95
1094.21 -1.00%
Retail Research
11
12
contd
Comparison of Equity Returns in various markets - MSCI Indices in US$ terms

Monthly 3 Month
MSCI Index
Last
Y TD
1 Y ear
Emerging Markets
EM ASIA
Monthly 3 Month
Returns Returns Returns Returns MSCI Index
Y TD
1 Y ear
Last Returns Returns Returns
Returns
Developed Markets
432.5
2.8%
9.5%
14.2%
1,407.3
2.4%
6.7%
12.1%
10.3%
1,007.0
1.2%
6.3%
9.9%
8.5% G7 INDEX
1,142.6
0.9%
2.0%
10.8%
10.7%
BRIC
283.5
0.5%
7.6%
5.9%
3.4% WORLD
1,315.5
1.1%
2.8%
11.2%
11.1%
EM EUROPE
444.9
0.2%
4.3%
12.6%
EM EUROPE & MIDDLE EAST
378.2
0.2%
4.3%
12.6%
1.6% GREECE
79.0
7.0%
15.1%
-3.3%
-7.3%
3,580.3
-1.8%
1.1%
-0.6%
-2.5% AUSTRIA
1,088.4
5.5%
18.8%
15.9%
15.5%
FINLAND
341.4
5.4%
12.1%
5.3%
-3.4%
CHINA
60.0
1.9%
14.2%
13.5%
16.3% BELGIUM
1,227.1
4.8%
7.3%
33.6%
32.8%
INDIA
430.2
4.4%
14.9%
24.0%
16.6% FRANCE
1,369.8
4.1%
7.9%
13.8%
9.9%
INDONESIA
873.1
-3.4%
4.4%
0.8%
4,123.7
3.9%
10.0%
15.8%
17.8%
KOREA
408.2
2.7%
6.6%
14.3%
12.3% SWEDEN
6,449.6
3.2%
4.7%
13.9%
12.7%
MALAYSIA
469.0
-3.1%
0.2%
6.7%
10.7% NETHERLANDS
1,951.2
3.0%
7.6%
14.0%
14.1%
PHILIPPINES
475.0
5.4%
13.6%
40.0%
44.9% HONG KONG
8,784.6
2.9%
12.2%
23.4%
25.5%
TAIWAN
269.6
7.2%
7.9%
12.4%
15.8% CANADA
1,678.7
-0.6%
2.2%
5.4%
2.7%
EM (EMERGING MARKETS)
EM LATIN AMERICA
14.9% EUROPE
1.6%
4.1% SWITZERLAND
396.7
1.5%
7.1%
23.4%
26.3% IRELAND
116.2
-2.1%
2.3%
-1.9%
5.0%
BRAZIL
2,548.1
-3.1%
-1.9%
-9.9%
-12.0% PORTUGAL
84.6
-2.5%
6.8%
-9.1%
-13.7%
CHILE
2,300.8
-3.3%
-2.1%
1.5%
COLOMBIA
1,263.8
-1.5%
7.3%
22.2%
26.1% Frontier Markets
MEXICO
6,839.1
1.6%
8.1%
22.1%
19.6% FM (FRONTIER MARKETS)
480.1
1.6%
4.9%
2.8%
1.6%
PERU
1,506.8
-0.8%
6.1%
8.9%
CZECH REPUBLIC
414.0
-7.9%
-11.0%
-7.5%
220.5
9.4%
21.9%
1.5%
-2.5%
HUNGARY
530.0
-3.8%
10.3%
22.4%
9.9% ESTONIA
658.6
8.5%
6.7%
27.3%
14.7%
POLAND
833.4
5.5%
11.8%
21.7%
11.5% BOTSWANA
752.7
7.6%
16.6%
12.6%
13.0%
RUSSIA
760.7
-0.5%
1.3%
3.3%
-7.7% KUWAIT
586.3
6.6%
10.6%
-0.3%
-2.2%
TURKEY
593.2
0.3%
10.6%
50.1%
36.7% LITHUANIA
807.8
6.1%
1.9%
12.1%
8.7%
EGYPT
588.1
-14.7%
-10.0%
33.5%
20.1% KAZAKHSTAN
568.6
6.0%
5.5%
28.8%
17.8%
MOROCCO
324.7
3.7%
-1.3%
-13.4%
-18.3% BANGLADESH
636.8
-6.9%
-8.6%
-17.7%
-24.1%
SOUTH AFRICA
528.5
-1.0%
-0.5%
4.5%
87.1
-9.4%
-19.7%
-50.9%
-59.9%
THAILAND
1.6%
6.9%
-7.8% SERBIA
2.2% UKRAINE
Retail Research
13
contd
Comparison of Equity Returns in various markets - MSCI Indices in US$ terms
Most equity markets across the globe ended the month of November 2012 on a positive note. Europe was the
best performer amongst the global equity markets with Greece, Austria and Finland being the top gainers
during the month, while Portugal, Ireland and Canada ended in the red. However, Latin America witnessed
selling pressure and ended the month lower by 1.8%.
Among the Emerging Markets, Asia gained the most (2.8%) while BRIC rose by 0.5%. Europe and Europe & Middle
East rose 0.2% each while Latin America ended in the negative (1.8%).
Among the developed markets, Greece gained the most (7%) during November 2012. Global lenders agreed last
month to reduce Greek debt and release loans to keep the economy afloat. After 12 hours of talks, they decided
steps to cut Greek debt to 124% of gross domestic product by 2020, and promised further measures to lower
it below 110% in 2022. Following months of jockeying, the deal was broadly expected by markets and clears the
way for Greece's euro zone neighbours and the International Monetary Fund (IMF) to disburse almost 35 billion
euros of aid in December 2012. Overall, the latest Greek rescue deal will buy the country a bit more time. But
unless the economy stages a miraculous recovery, the rest of the euro zone will soon be forced to make much
more difficult decisions over just how far it is prepared to go to keep Greece inside the euro.
The Finland stock market ended in the green (up 5.4%) on some positive economic data and on hopes that
Greece would get bailout soon. The Finnish economy is estimated to have expanded modestly in the third
quarter, after shrinking in the previous quarter. Gross domestic product increased a seasonally adjusted 0.3
percent sequentially in the third quarter, recovering from second quarter's 1.1 percent decline. On an annual
basis, the economy contracted a working-day adjusted 0.8 percent during the three-month period. Apart from
Finland other European markets too rose in November on optimism that Greece revealed plans to spend up
to (euro) 10 bn (US$13 bn) in a bond buyback program will help stabilize its mountainous debt.
Portuguese stock market witnessed fall of 2.5% in November 2012. In Lisbon, thousands of demonstrators
marched to the parliament building, where deputies were debating the budget. Riot police charged in after at
least five people were injured by stones and bottles thrown by protesters and several arrests were made.
Portugal's Parliament on November 27, 2012 approved unprecedented tax increases despite a broad public
outcry and concerns that the latest austerity package will prolong the bailed-out country's recession. The
center-right coalition government used its parliamentary majority to pass its 2013 budget. Marches and protests
were held in another 38 cities and towns across the country. Union leaders called for 10% surtax on share
dividends, a 0.25% tax on stock market transactions and a crackdown on tax evasion as alternatives to what they
described as the brutal income tax increases planned by the government.
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Frontier markets gained 1.6% during the month. Serbia and Estonia were the top gainers, rising 9.4% and 8.5%
respectively while Botswana and Kuwait rose by 7.6% and 6.6% respectively. Lithuania and Kazhakstan ended
higher by 6% each. However, Ukraine was the top underperformer losing 9.4% and Bangladesh fell by 6.9%.
Serbian stock exchange witnessed highest growth in November among all the Frontier markets. The Serbian
government has provided regular state funding for the first half of 2013, by selling Eurobonds of USD 750mn
at the international financial market. This is the second time in a month and a half that Serbia sold Eurobonds.
On September 28, the country sold USD 1bn worth of the security, with the yield of 6.625 percent
annually. Another successful issuance of Eurobonds belonging to the Republic of Serbia was carried out on
November 14, when all USD 750mn of five-year Eurobonds with the yield of 5.45 percent and interest rate
(coupon) were sold. This is a clear indication that the international market considers seriously the new
government's program of fiscal consolidation and draft budget for 2013, which will halve the budget deficit.
The Serbian government also adopted the fiscal strategy for 2013 with projections for 2014 and 2015, which
defines the basic goals and guidelines in the implementation of economic and fiscal policy for the next three
years. This strategy provides a moderate GDP growth of 2% in 2013, 3.5% in 2014 and 4% in 2015. Also, the goal of
fiscal policy is to strongly reduce the fiscal deficit next year from 6.1% to 3.6% and to 1% in 2015. These goals
can be met through tax policy measures (which was mostly implemented in the first three months of the new
government), through the reduction of public expenditure and the implementation of structural reforms.
Ukraine was the top loser among the frontier markets (down 9.4%). Ukraines finance ministry revealed that
the countrys state budget gap widened almost threefold in the first 10 months of the year, reaching US$4.1 bn
due to falling revenues and a 16% pre-election spending spree by the government of President Viktor Yanukovich.
Ukrainian citizens have rushed to trade soft hryvnias for hard dollars, bringing down the National Bank of
Ukraines international reserves by US$2.4 bn in October alone. At the end of last month, these reserves stood
at US$26.8 bn, the lowest level since December 2009. Ukraine, with its economy sliding into recession and
budget deficit widening, has appealed to the IMF to initiate negotiations on a fresh, multibillion-dollar bailout
loan program. A mission from the IMF headed by Christopher Jarvis is scheduled to arrive in Kiev on December 7
to initiate negotiations for a new standby agreement. Ukraines economic growth and hard currency
earnings from exports are highly vulnerable to global shocks, particularly demand and prices for steel, the
countrys top export.
The Emerging Markets ended the month of November on a positive note, up by 1.2%. EM-Asia index was the
top gainer, up 2.8%. BRIC rose by 0.5% while EM-Europe & EM-Europe & Middle East rose by 0.2% each. However,
EM-Latin America fell by 1.8%.
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Rise in EM-Asia was led by Taiwan, which rose by 7.2%. Other countries like Philippines, India and Korea rose by
5.4%, 4.4% and 2.7% respectively. However, Indonesia and Malaysia ended the month in the red.
The IMF has predicted Taiwan's economic growth at 3.9 percent next year and this aided in boosting the stock
exchange Taiex last month. That would be a big improvement on 2012. Taiwan's economy is weathering the
economic storm, outperforming some of its regional counterparts on the back of reviving exports. The value
of Taiwan's export orders in October increased by 3.2% compared with the same period last year due to launches
of new technology products. Export orders amounted to $38.38 billion in October, a 1.9-percent increase month
on month. The value of export orders in the first 10 months stood at $360.9 billion, showing a year-on-year
decrease of 0.6 percent. Taiwan has made a massive leap to become the 16th-best country for business,
according to the results of a survey conducted by U.S.-based Forbes Magazine. Taiwan, which ranked 26th in
a similar poll last year, only trails third-ranking Hong Kong and fourth-ranking Singapore among the Asian
economies on the Forbes' 2012 "Best Countries for Business" list.
The Jakarta stock exchange ended last month in the negative. Indonesia's economy grew at its slowest pace in
more than two years in the third quarter as the global slowdown hurt demand for commodities, but strong
investment and healthy domestic spending still kept it among the world's best performers. Gross domestic
product grew 6.17% year-on-year in the quarter ending Sept. 30, slower than the previous quarter's 6.37%
expansion. It was the slowest growth rate for Southeast Asia's largest economy since the first quarter of 2010,
the Central Statistics Agency said. Crucially, exports were down 2.78% on-year. Businesses have warned that
the government could opt for more populist policies ahead of 2014 presidential and parliamentarian
elections, which also could deter investment. In addition, inflationary pressures are fueling labor protests for
higher wages. Last month laborers from the greater Jakarta area demanded raises of nearly 70%, to 2.7
million rupiah ($280) per month.
EM-Europe and EM-Europe & Middle East rose by 0.2% each. The countries that rose the most include Poland and
Morocco (up 5.5% and 3.7% respectively). The major losers were Egypt and Czech Republic, which fell by 14.7%
and 7.9% respectively.
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Morocco stock exchange ended the month in green following affirmation of investment grade accompanied
by stable outlook by Fitch. Fitch has affirmed Morocco's Country Ceiling at 'BBB'. Morocco's 'BBB-' rating which
is supported by a strong macroeconomic performance, as evidenced by low inflation, sustained GDP growth and
general government debt (39% of GDP) in line with rating peers. Recent success in managing the political
transition has underlined Morocco's political stability. Economic dependence on Europe (60% of current account
receipts, 80% of foreign tourists and remittances and 50% of exports in 2011) and on oil imports contributed to
higher fiscal and current account deficits in 2011 and represent significant downside risks. However, Fitch
expects these 'twin deficits' to begin narrowing this year, supported by recent and prospective measures to
reduce fuel subsidies, and supporting the Stable Outlook.
BRIC gained 0.5%. Amongst the BRIC countries, China rose by 1.9% while Brazil and Russia lost 3.1% and 0.5%
respectively.
Chinese stocks rose in November led by some improving economic data. Chinas factory output and retail
sales exceeded forecasts and inflation unexpectedly cooled to the slowest pace in 33 months, signaling the
government is boosting growth without driving a rebound in prices. Industrial production rose 9.6% in Oct from a
year earlier. Retail sales growth of 14.5% picked up from Sept 14.2%. Chinas exports rose more than
estimated in October, adding to signs that the economy will rebound this quarter after industrial output climbed
at the fastest pace in five months. Overseas shipments increased 11.6% from a year earlier. Imports
increased 2.4%, the same pace as the previous month. The trade surplus was $32 bn. The HSBC China
Manufacturing Purchasing Managers Index rose to 50.5 in November a 13 month high.
EM-Latin America was the only emerging market to end in the negative. The top losers were Chile and Brazil,
which fell by 3.3% and 3.1% respectively.
Brazilian stock exchange Bovespa ended in the negative as Brazil reported much slower economic growth in
the third quarter than forecasters expected, piling pressure on President Dilma Rousseff to make deeper
structural reforms and adding to fears that the global slowdown is hurting big emerging markets. HSBC's
Purchasing Managers Index (PMI) for the Brazilian services sector fell to 50.4 in October from 52.8 in September
on a seasonally adjusted basis, but remained above the 50 mark that divides expansion from contraction. The
slowdown in economic activity at services companies during October was unexpected, as analysts were expecting
the economy to gain further momentum in the fourth quarter. Analysts covering Brazils economy lowered their
2012 and 2013 growth forecasts for the second straight week, as a lack of investment and the weak global
economy outweigh the effects of stimulus measures in the worlds second- biggest emerging market.
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Outlook going forward

Global Market Outlook
US fiscal cliff if unresolved, could quickly reverse the sentiments
The recent sharp rally in most of the developed and emerging markets was largely on the optimism that the US
leaders will reach deal to avoid "fiscal cliff". The fiscal cliff refers to the possibility of more than $600 bn of
automatic tax hikes & spending cuts kicking in from Jan 2013, if the US Congress fails to act. However, it is to be
noted that till now, there has been little progress in U.S. "fiscal cliff" talks. With barely a month left before the
"fiscal cliff", Republicans and Democrats remained far apart in talks to avoid across-the-board tax hikes &
spending cuts that threaten to throw the country back into recession.
In the U.S., the confidence level in the politicians (including the President) to solve the so-called fiscal cliff
before the end of the year does not seem to be very high. Both sides (Republicans & Democrats) have sort of
blinked indicating that they might compromise on a solution involving both tax increases and spending cuts. This
uncertainty along with the uncertainty coming from social programs like the implementation of Obamacare are
keeping many companies on the hiring sidelines and thus the lingering unemployment situation does not look like
it will be solved anytime soon. Net result is that the US economy is also faltering as evidenced by the
macroeconomic data.
We are still of the view that the fiscal cliff will be avoided and President Obama and the Congress will settle
down to a deal over the next several weeks. President would definitely want to start his next and last term in
office on a positive note. A solution to the fiscal cliff would definitely be positive for the equity markets in the
US and likely have a positive impact on most global equity markets. It could also move the attention of market
participants back to the many stimulus or quantitative easing programs around the world. However, the failure
to reach a deal could result in massive uncertainties for the US economy and the consequent sharp sell off in the
equity markets across the globe.
Latest economic data in China points towards an improvement; approaching low but sustainable GDP growth
The latest data out of the world's second-largest economy shows that China could be past the worst of the
economic slowdown that's concerned policy makers. Given below are some of the economic data released in
November, which gives evidence that the economy is improving gradually:
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Chinas factory output and retail sales exceeded forecasts and inflation unexpectedly cooled to the slowest pace
in 33 months, signaling the government is boosting growth without driving a rebound in prices. Industrial
production rose 9.6% in Oct from a year earlier. That exceeded the 9.4% median estimate of analysts surveyed
by Bloomberg News. Retail sales growth of 14.5% picked up from Sept 14.2%. The consumer- price index
increased 1.7%.
The economys exports rose more than estimated in Oct. Overseas shipments rose 11.6% from a year earlier.
Imports increased 2.4%, the same pace as the previous month. The trade surplus was $32 bn.
The pace of activity in China's vast manufacturing sector quickened for the first time in 13 months in Nov, a
survey of private factory managers found, adding to evidence that the economy is reviving after seven quarters
of slowing growth. The final reading for the HSBC Purchasing Managers' Survey (PMI) rose to 50.5 in November
from 49.5 in October, in line with a preliminary survey. It was the first time since October 2011 that the survey
crossed above 50 points, the line that demarcates accelerating from slowing growth. An official PMI survey of
China's non-manufacturing sectors also ticked up, to 55.6 in November from 55.5 in October, led by expanded
activity in construction services.
China's economic health has improved since September, with an array of indicators from factory output to retail
sales and investment showing Beijing's pro-growth policies are starting to gain traction. Given the recent signs of
recovery, many analysts expect the economy to snap out of its longest downward cycle since the global financial
crisis, and start to trend upwards in the fourth quarter.
While the economic data points towards the improvement, the GDP data has been disappointing. China's annual
economic growth has dipped to 7.4% in the third quarter, slowing for seven quarters in a row and leaving the
economy on course for its weakest showing since 1999. We feel that the days of 10% growth are probably over
and that China is transforming to slower growth. However, this in our view is likely to be more sustainable &
quality growth. China is transforming its economic growth toward a more balanced direction, from export- and
investment-driven growth toward a more domestically centered model based on internal consumption, rising
incomes, and environmental sustainability. This transformation would not be easy. The Chinese need more
confidence to raise consumption and a stronger support mechanism in terms of healthcare and pensions and less
corruption. The policymakers will have to realize all of these and keep trying to improve things. The end of a
de-stocking cycle and a greater pace of investment are expected to keep driving up domestic demand.
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Near-term, we feel that China will avoid a "hard landing". Growth of 7% to 7.5% is more likely. That is good,
though not great, by China's standards, but investors need to adjust to China expanding at a slower clip than
over the past three decades. Even so, China will remain a global powerhouse, directly accounting for about a
third of global growth in 2013-17. In 2013, investment spending in China will probably exceed investment in the
US and euro area combined.
European debt issues unlikely to be resolved anytime soon
Europe, China's number one export market, does not seem to be any closer to putting their four-year old
sovereign debt issues into the background permanently. Spanish and Portuguese workers are holding their first
joint general strike while unions in Greece, Italy, France and Belgium are also holding work stoppages as part of
a "European Day of Action and Solidarity" (as reported by Reuters). It certainly does not look like stability
between the populace and the governments in the EU is coming anytime soon. This has been festering for about
four years with the governments trying to solve their debt issues with spending cuts in a region where
government spending has hardly been challenged in the past. Austerity in Europe is helping the debt problems
but it is not doing much for the faltering economy nor for the protesting populace who have been accustomed to
a plethora of social programs in Europe.
The agreement between Eurozone finance ministers and the IMF to save Greece from defaulting and to help the
nation to cut the debt to target levels of 124% of GDP by 2020 and lower than 110% in 2022 are some of the
positive steps. However, plans to forgive Greek debt, a step negotiators think is necessary to restore fiscal
balance in Greece, have been shelved. Whether Greece would be able to live upto its promises or would it ask
for another round of bailout in future is a big question. That only time will tell. The countrys crisis has seen
many false dawns, and there are several open questions even about the latest plan. But the hope is that it will
help restore a degree of confidence in Greece's future and make the euro zone look less fragile. Besides Greece,
there are many other nations like Spain, Portugal & Italy, who could need support like Greece to survive.
Eurozone debt issue is a major problem that does not look like it will go away anytime soon and thus there is a
likelihood that the EU economy will continue to falter and have a negative impact on sentiments globally,
though in spurts.
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Indian Market Outlook

Stronger INR improves corporate profitability in Sept 2012 quarter, however, slower sales growth is a concern
An ETIG analysis of 2,300 companies, excluding banks, financial firms and oil marketing companies, based on
data for 13 quarters, shows a turnaround in corporate profitability and operating profit margins. India Inc's
operating profit margins improved to 14.5%, which was the highest in the past five quarters. Net profit for the
quarter rose 25% year-on-year the highest in the past two years and a welcome break after four consecutive
quarters of a slide. The second-quarter earnings have beaten estimates marginally on tempered expectations.
However, it may be too early to cheer considering that the earnings were boosted because of a strong rupee
during the past quarter. The Indian rupee rallied strongly to 52 against the US dollar at the end of the
September 2012 quarter - up from 56 at the start of the quarter, helping local companies to cut their forex
losses. This took a chunk off other expenditure, boosting operating profits. Since then the rupee has started
sliding.
The latest earnings figures confirm a few worrying trends from the recent past. The growth in net sales, at
10.4%, was the slowest in the past three years, while other income - income from non-core business activities still constitutes over one-fourth of pre-tax profits. And India Inc's leveraging has risen during this period.
Adjusted for inflation, it indicates virtually no volume growth for mainline companies. The upside in profitability
has come from lower input cost such as raw materials and power & fuel, lower interest rates and an absence of
forex losses in this quarter. Sensex companies (excluding financials) reported their worst quarter in the last
three years with operating margins coming in at a 10-quarter low of 16.9%, while net sales growth at 12.1% was
the lowest in the last 12 quarters.
The quarter's revival in earning numbers was led by sectors such as tyres, steel, metals, mining and minerals,
cement and cement products, FMCG, Infotech and power generation. Similarly, the aggregate numbers of
smaller industries, such as hospitality, laminates and plywood, agrochemicals, petrochemicals and tyres were
also better than the past few quarters. Sectors such as paper, sugar, solvent extraction and ferro-alloys
reported a return to profitability, compared to a loss in the September 2011 quarter. However, the troubles for
sectors such as capital goods, real estate and construction, automobiles and telecom continue, given their
under-performance. Smaller sectors such as chemicals, auto ancillaries and plastic products also had their own
set of problems, impacting profitability.
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Sustaining growth shown in the July-Sept quarter appears difficult
The capex cycle in India continues to be dragged by several issues, such as high interest rates, coal linkages,
land acquisition issues, environmental clearances, etc. Given the weak macro economic numbers, high inflation
(though moderating, still above the RBI comfort zone) and the challenges in the form of a twin current account
and trade deficit, sustaining growth shown in the July-Sept quarter appears difficult for Indian companies
especially with the weakening of the rupee. The extent and nature of reforms is open to debate but we highlight
that composition of Indias earnings precludes any meaningful increase in earnings of the broad market on
domestic factors alone. This is because global-linked, government-controlled companies and regulated sectors
account for 57% of fiscal 2013 net profits of the Sensex companies. The earnings of several sectors depend on
(1) global factors (private sector energy, metals, IT) or (2) Government regulations (coal and public sector
energy). Demand growth would become even more challenging in the forthcoming quarters once the
government starts cutting back on expenditure in its bid to bring down fiscal deficit. At around 30% of Indias
gross domestic product, the government is the biggest consumer and investor in the economy. Its effect is likely
to felt the most in rural demand where government pumps in money through various schemes such as rural
employment guarantee schemes, food & fertilizer subsidy and rural development schemes.
Analysts dont expect any quick turnaround in the corporate investment cycle given the poor earning visibility in
most capex heavy sectors such as metals, auto, oil & gas and capital goods. The much-sought-after earnings
upgrade cycle is some time away. However the market performance may not be as bleak as the expected macro
and corporate performance. Equity markets could still perform well based on technical factors (that include
flows from foreign and local players, lack of alternative asset class with promising returns, falling interest rates
that could divert fresh money into equities etc).
Fiscal Consolidation measures a key for sovereign rating
Fiscal deficit in the first seven months of 2012-13 stood at 71.6% per cent of the Budget Estimates (BE), slightly
better than 74.4% per cent in the same period a year ago, according to Controller General of Accounts (CGA)
data. The slight improvement in fiscal deficit position is mainly on account of some tightening on the
expenditure front. Meanwhile, the government has raised the fiscal deficit target for the current fiscal to 5.3%
from the Budget Estimates of 5.1% of the GDP.
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Mr. Chidambaram has said that the government has imposed measures like rationalization of expenditure and
optimization of available resources with a view to improve fiscal deficit condition in the current year. This
includes 10% mandatory cut on non-plan expenditure in the current year, ban on holding of meetings and
conferences at five star hotels, ban on creation of plan and non-plan posts and restrictions on foreign travel.
The government also endeavours to restrict the expenditure on central subsidies. Despite all this, considering
the GDP growth reported in H1FY13, we feel that the Government could find it difficult to achieve this revised
target also.
Going forward, for FY14, the government has taken initiatives toward fiscal consolidation which include (1)
Setting up a platform for cash transfers and (2) Focusing on implementing GST. If implemented, this could
possibly offset market fears of "yet another easy budget" in FY14, ahead of the next general elections. This
would be one of the key factors that could help India avert a sovereign rating downgrade and help the
government peg a deficit of less than 5.5% in FY14.
Rupee likely to remain volatile Reforms could aid the capital inflows, but high CAD poses a threat
Rupee depreciated 0.8% for the month to close at 54.53 vs USD on Nov 30. Global uncertainty and month-end
dollar demand related to oil purchases led to the fall of Indian Rupee (INR) against the dollar. The INR could
have depreciated more in the month, but it recovered sharply from the lows of 55.7 (closing basis) since Nov 27.
The rupees slide was halted after Moodys maintained its stable outlook on the nations Baa3 sovereign rating
which is the lowest investment-grade rating, though fiscal deficit remains a hindrance for an upgrade. Finance
Minister P. Chidambarams comment that the Government will be able to manage the fiscal deficit at 5.3% for
the year through March compared to 5.8% last year also helped rupee to recover sharply towards the end of the
month. INR rise was also supported by fiscal cliff concerns and agreement by European finance ministers to ease
the terms on emergency aid for Greece, which weighed on the dollar.
Going forward, domestic political environment will determine the movement of INR. This month, the
Government is going to consider and pass about 25 legislative Bills in Parliament including, key reforms such as
approval of 51% FDI in multi-brand retail, fuel subsidy and liberalization of the insurance and pension sectors.
49% FDI in airlines is also one of the biggest and toughest reform initiatives like FDI in retail that the UPA
Government has taken in its tenure of eight years. SEB debt restructuring also appears to aim at plugging the
gaps.
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Clearing FDI in multi-brand retail has been very difficult. The entire BJP-led NDA is united in opposing the FDI
decision. The Left parties, AIADMK, BJD, AGP and some other parties are also against the decision. With voting
on FDI in retail becoming a crucial issue in Parliament, BJP and Congress are leaving no stone unturned to
muster their numbers and block the passage of the bill. If the Government is able to pass FDI in retail, it could
be a major booster for the equity markets, which could further strengthen the rupee, as it would give a hint of
some more reform implementation in the coming months.
While the reforms could aid the capital flows, the relatively high CAD is likely to limit any reserve build-up.
India's inelastic oil demand and gold is likely to keep the current account deficit elevated at 3.7% of GDP in FY13
and 2.8% in FY14. This coupled with the declining forex import cover and rating agencies on the vigil, is likely to
result in the INR remaining very volatile over the next few months. Standard and Poors has signaled a one in
three likelihood of a rating downgrade and Fitch will also review Indias rating in December. A possible
sovereign rating downgrade may result in further depreciation.
Limited scope of monetary easing
A combination of cyclical and structural factors has resulted in inflation remaining well above the RBI's comfort
zone of 4%-5% over the last three years. The latest readings of the WPI and CPI stand at 7.5% and 9.7%
respectively. While the commodity prices have softened, rupee is likely to stay volatile. Hence it is difficult to
say whether the inflation would moderate significantly from hereon.
During 2012, the RBI has (1) cut the repo rate by 50bps from 8.5% to 8% (2) Lowered the SLR by 100bps from 24%
to 23% and (3) Reduced the CRR by 175bps from 5.5% to 4.25%. Assuming that the inflation moderates to ~7%
levels, it still would continue to remain above RBIs comfort zone. Hence, despite growth coming off sharply
from ~8% levels to 5.4% in FY13E, sticky inflation leaves little room for much monetary easing.
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Market currently gaining on renewed confidence on positive global & domestic policy actions, however macro
indicators still not encouraging
The market rally over the last few months has mainly been on renewed confidence on positive global and
domestic policy actions. The optimism in the markets could be attributed to factors such as ample global
liquidity, policy actions taken in developed economies, initiation of policy reform measures taken by Indian
government and assumption that the growth would improve in FY14. FIIs confidence in the Indian Markets has
once again increased. FIIs have been net buyers of Rs. 1000 bn since Jan 01, 2012. At the current levels, the
Sensex trades at 14.5-15xFY14E EPS. The valuations are still not stretched and equities could continue
attracting buoyant capital inflows. Reform implementation could help markets extend its gains.
While the valuations still look reasonable on a PE basis, the question is why market deserves to go up further
especially when the macroeconomic indicators are still weak and awaiting improvements. GDP growth has
fallen to 5.5% in Q1FY13 and to 5.3% in Q2FY13. In FY12, the GDP growth stood at 6.5% in FY12. There is a
consensus that the growth has bottomed out and improvement is expected in H2FY13. Inflation and the twin
deficits - current account deficit (CAD) and fiscal deficit are likely to remain an overhang in the near-term.
A sustainable improvement in growth would depend on positive catalysts like reversal in the investment cycle
and capex activity, a pick-up in the weak global demand and corrective policy action by the government through
fiscal consolidation measures, reforms in power, mining and land acquisition to stimulate economic growth.
M&A (is coming to life), capital raising (the government and some private sector) and rising corporate
profitability (higher margins and lower sales) could lend vibrancy and volatility to the markets going forward.
Disinvestment a key to contain fiscal deficit
Disinvestment would be the key to contain the fiscal deficit. The government should kick-start its disinvestment
program to generate capital receipts in view of the buoyancy in equity markets. The budgeted disinvestment
target for FY13 stands at Rs. 30,000cr and the government has indicated that it intends to divest about
Rs.12,000cr-Rs.13,000cr by December-end. Current positive sentiments in the markets, supportive global cues
and permitting LIC to invest upto 30% equity in a company from 10% earlier have given some rays of hope.
However, any change in the market sentiments could make this years disinvestments target impossible to
achieve. Government could find it difficult to garner the budgeted level of tax receipts due to the general
slowdown in the economy and it could even exceed its budgeted market borrowing programme.
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Global Liquidity & Optimism of fast turnaround in fundamentals could help the markets extend gains in the
month of December
The market participants seem to have digested the weak macro indicators. Now there is a consensus that the
fundamentals of the Indian economy could start improving quickly from H2FY13, though there are no significant
visible signs of improvement in fundamentals. We feel that this rally has more to do with the global liquidity &
hopes of reform implementation in India rather than the being fundamentally driven. There is optimism that US
would avoid fiscal cliff and Eurozone ministers would bailout other countries if necessary like Greece. These
positive sentiments could continue to support the Indian markets, which could extent its gains in the month of
December before the investors actually start focusing back on the fundamentals.
A decline in oil prices in real terms over the next few years, a more favorable external demand outlook and
domestic structural reforms which can ease some supply-side constraints are some of the fundamental kickers
that India needs at this point in time.
Going back 32 years to 1980, December has produced a 4.6% median return with an 80% probability the best for
any month in the calendar. Over the past 20 years, 1994, 2000, 2001 and 2011 are the only four occasions when
December generated negative returns.
We expect the Sensex to trade in the range of 18500-20000 in the month of December. The ongoing optimism
could even result in Sensex testing its all time highs of 21200 in the next one-two months. However, one needs
to be cautious at higher levels and take some profits out of the table.
The key concerns include rise in geo political tensions, spike in Oil prices, rollback (or no implementation) of
recently announced policy measures, pre mature elections in India, political gridlock in the US resulting in fiscal
cliff, re-emergence of European risks Greece exit, etc.
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We are assuming that from the level of 15,749, the Sensex is forming an impulse pattern as it is a wave c of
an a-b-c Flat pattern. And it has got structure label of 3-3-5. In this label 5 stands for an impulse pattern.
Whenever any impulse pattern is unfolding there are certain rules which must be followed and they are given
below.
There are 3 waves in a sequence which are moving in the direction of the trend which in the present case is in
upward direction. Out of this 3 waves one wave must be longer than the remaining two waves and it must be
longer than 161.8% of any of these 2 waves. This rule is known as Extension Rule in Neo Wave theory.
In the present case neither wave 1 nor wave 3 are 161.8% of each other. Hence the chances that wave 5 (which
is currently going on) will become 161.8% of wave 1 or wave 3 are high. The 161.8% target for wave 5 is shown
in the graph below.
Retail Research
27
contd
There is another rule which is known rule of similarity and which states that the unextended waves will be
similar in price. And in the present case wave 1 and wave 3 are almost exact in the price which is marked on
the chart above.
Now there is a rule which states that the wave 3 cannot be the shortest when wave 1,3 and 5 are taken in
consideration. In this case wave 3 is bigger than wave 1 (by just 3 points), and thus satisfies both the
conditions of being larger than wave 1 and at the same time similar in the price.
Now as discussed above there are bright chances that wave 5 will be an extended wave whose future
projections are given in the chart above.
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HOME
Technical Commentary - Month Gone By
contd
For the month of November the Sensex opened at 18,488, made an intraday low at 18,445 and finally closed
at 18,562. On the next day it opened with a Western Gap Up and continued its upward march for next 3
trading sessions. It formed an intermediate top at 18,973 and from there onwards the downward correction
began.
There onwards the Sensex came down for 8 trading sessions and for 3 trading sessions the level of 18,256 was
not breached which is marked on the chart above with red horizontal trend line.
After forming the intermediate bottom at 18,256 for next 4 trading sessions it is forming Up Day on the daily
charts with one exception.
Finally the bulls took the charge of the situation and in next 3 trading sessions 2 Western Gap Up patterns
were formed and the Sensex breached the previous top which was the top formed by wave 3 at 19,137.
The new yearly high so far was made at 19,373 and finally the Sensex closed at 19,340.
The significant Faster Retracement of the last move suggests that a new wave has begun and it will be
labeled as wave 5.
Retail Research
28
29

The 3 most reliable technical indicators
There are thousands of indicators that are used to find opportunities in the market and profit from them.
However, most of them do not give good signals and will get you in the market late. In this article we will
present 3 indicators which can give you a trading edge.
Indicator #1: The Bollinger Bands
The Bollinger Bands were developed 20 years ago by John Bollinger, and were designed to show the volatility of
the market on the screen in an easy-to-comprehend manner.
They give very good signals and can be used as support\resistance indicators, telling us - before the move occurs
- that a reversal is prone to happen. When price touches the lower band it is oversold, and when price touches
the upper band it is overbought.
The trading method for the Bollinger Bands is basically to look for price-action support and resistance levels,
and confirm them with bounces on the Bollinger Bands themselves. This results in very high win rate and
consistent profits.
Indicator #2: The Relative Strength Index (RSI)
The Relative Strength Index was developed 30 years ago by J. Welles Wilder, and is considered a powerful
trading indicator that also has a predictive edge in the markets. It tells us when the price is overbought\oversold
before the trends begin, so we can enter early and have great reward with little risk. The signals it gives are
usually very accurate, and if confirmed using the Thomas DeMark mild bounce system it can even reach 70-80%
win rate (depending on the timeframe). It is a very accurate indicator.
Indicator #3: Simple Moving Average
The Simple Moving Average, or the SMA, is an interesting indicator. Most traders use it as a trend-following
indicator to enter trades after a trend has been established. However, it can be used in an entirely different
way by using the bounce method.
Retail Research
HOME
contd
In this method, we wait for trend to establish, but instead of randomly entering, we wait for price to retrace
to the moving average and bounce off it. Once a reversal signal is given we enter a trade in the direction of the
trend with stop loss right below the moving average, thus entering at a tactical point with small stop loss and
huge reward.
Retail Research
30
31
The month of Nov 2012 saw the Nifty trading in a tight range between the 5548-5777 levels. The index broke out
of this range towards the end of the month thereby confirming a continuation of the intermediate uptrend. M-oM, the Nifty gained 4.63%.
In the cash market, FIIs were reported as net buyers of Rs. 9718 cr in Nov 2012 (In October, they were net
buyers of Rs. 9578 cr). In the F&O space, the FIIs were net buyers in the Index Futures segment of Rs.2228 cr.
The increase in the open interest in that segment reflects additional long positions taken and value effect. In
the index Options segment, the FIIs were net buyers of Rs.5395 cr, which was accompanied with an increase in
the open interest. In the Stock Futures segment, FIIs were small net buyers, while open interest rose mainly due
to value effect.
The Nov series has started on a heavier note compared to the previous series. In terms of value, the
Dec 2012 series has begun with market wide OI at Rs.1,03,801crs. Vs. Rs.96,625crs. at the beginning of the Nov
2012 series. It was Rs.1,04,572crs. at the beginning of the Oct 2012 series. The higher participation levels in the
Dec series (compared to the previous series) indicates that traders are willing to take more risk.
Retail Research
HOME
contd
Rollovers to the Dec series were higher compared to the previous series. Nifty rollovers were at 72% Vs. 63%
during the same time in the previous series. Market wide rollovers were at 84% Vs. 83% the same time in the
previous series. The fact that the Dec Futures closed at a hefty premium of 46.4pts suggests rollover of long
positions. The higher rollovers to the Dec series suggests that bull conviction levels have increased.
Coming to stock specific rollovers, highest rollovers were seen in Suzlon, Welcorp, Aditya Birla, Guj Flouro and
Tata Comm. The lowest rollovers were seen in Andhra Bank, Canara Bank, Wipro, Asian Paints and Exide Ind.
Reflecting the bullish trend in the markets, especially towards the end of the Nov series, the Nifty OI PCR
climbed to 1.31 from 1.26 at the start of the previous series. Reflecting increasing volatility expectations, the
Nifty IV climbed to 14.07% from 13.92% the same time in the previous series.
Technically, the Nifty is in a firm uptrend after finding support around the 5550 levels and convincingly crossing
the previous intermediate highs of 5777. Nifty is likely to test the 6000 levels in the Dec series.
Index option activity suggests that traders are expecting the Nifty to trade within the 5800-6000 levels in the
coming month. We say this because the maximum call writing and build up of OI is currently being seen in the
5900-6000 call strikes. Maximum put writing and build up is being seen in the 5800 put strikes.
So, it seems that market participants have a bullish bias with the 5800 level acting as a key support to watch.
Retail Research
32
33
Learning Derivatives Analysis

Bull Calendar Spread
Using calls, a bull calendar spread strategy can be setup by buying long term slightly out-of-the-money calls
and simultaneously writing an equal number of near month calls of the same underlying security with the same
strike price. The options trader applying this strategy is bullish for the long term and is selling the near month
calls with the intention to ride the long term calls for free.
Bull Calendar Spread Construction
Sell 1 Near-Term OTM Call Buy 1 Long-Term OTM Call

Unlimited Upside Profit Potential
Once the near month options expire worthless, this strategy turns into a discounted long call strategy and so
the upside profit potential for the bull calendar spread becomes unlimited.
Limited Downside Risk
The maximum possible loss for the bull calendar spread is limited to the initial debit taken to put on the
spread. This happens when the stock price goes down and stays down until expiration of the longer term call.
This strategy is used when a trader wants to make profit from a steady increase in the stock price over a short
period of time.
Example:
Suppose NIFTY is trading at 5300 levels, Mr. X is bullish on

the market and expects it to rise in the near future say 2
months or so. He will sell one 5400 NIFTY April (near-month)
OTM Call Option for a premium of Rs. 25 and buy one 5400
NIFTY May (next-month) OTM Call Option at a premium of Rs.
110. The lot size of NIFTY is 50. Hence, his net investment
will be Rs. 4250. [(110-25)*50]
Retail Research
HOME
Learning Derivatives Analysis
contd
Case 1: At Near-Month (April) expiry if NIFTY closes at 5000, then Mr. X will get to keep the premium amount
i.e. Rs. 1250. (25*50)
At Mid-Month (May) expiry if NIFTY closes at 4800, then Mr. X will make a loss of premium amount i.e. Rs. 5500.
(110*50).
His net payoff will result in a loss of Rs. 4250. (5500-1250)

Case 2: At Near-Month (April) expiry if NIFTY closes at 5100, then Mr. X will get to keep the premium amount
i.e. Rs. 1250. (25*50)
At Mid-Month (May) expiry if NIFTY closes at 5300, then Mr. X will make a loss on premium amount i.e. Rs. 5500.
(110*250).
His net payoff will result in a loss of Rs. 4250. (5500-1250)

Case 3: At Near-Month (April) expiry if NIFTY closes at 5500, then Mr. X will incur a loss of Rs. 3750. [(10025)*50]
At Mid-Month (May) expiry if NIFTY closes at 5700, then Mr. X will make a profit of Rs. 9500. [(300-110)*250]
His net payoff will result in a profit of Rs. 5750. (9500-3750)
Reverse calendar spread:
If the trader, instead, buys a nearby month's options in some underlying market and sells that same underlying
market's further-out options of the same strike price, this is known as a reverse calendar spread/bear calendar
spread. This strategy will tend strongly to benefit from a decline in the overall implied volatility of that market's
options over time.
Buy 1 Near-Term OTM Call

Sell 1 Long-Term OTM Call
Retail Research
34
35
contd
Index Futures Calls

Date
Entry at
Sloss
Targets Exit Pric e / CMP
Exit Date
2-Nov-12
B/S
S
Bank Nifty Nov Fut
Trading Call
1470-11520
11530.0
11360.0
11530.0
2-Nov-12
% G/L Comments
Time Horizon A vg. Entry A bs. Gain/Loss

3-5 days
11495.0
-35.0
9-Nov-12
Bank Nifty Fut
1705-11760
11765.0
11625.0
11656.0
9-Nov-12
0.5 Premature Profit Booked
2-3 days
11709.0
53.0
22-Nov-12
Bank Nifty Future
490 - 11535
11480.0
11610.0
11589.0
22-Nov-12
2-3 days
11525.0
64.0
23-Nov-12
Bank Nifty Future
1400-11455
11390.0
11550.0
11549.0
27-Nov-12
2-3 days
11447.0
102.0
Targets Ex it Pric e / CMP
Ex it Date
-0.3 Stop Loss Triggered
Stock and Nifty Options Calls

Date
Entry at
Sloss
1-Nov-12
B/S
B
M&M Nov 900 Call Option
Trading Call
22-24.5
17.1
40.0
31.0
2-Nov-12
2-Nov-12
Adani Ent 230 Call Option
11-7
5.0
17.0
5.0
15-Nov-12
5-Nov-12
Reliance Cap 400 Call Option
17.6-13
11.0
25.0
21.8
7-Nov-12
8-Nov-12
GAI L 360 Put Option
7-4
2.0
14.0
10.0
16-Nov-12
15-Nov-12
M&M 880 Nov Put Option
7.7-6
5.0
15.0
5.0
19-Nov-12
16-Nov-12
ICI CI Bank 1040 Put Option
16-Nov-12
TCS 1300 Put Option
19-Nov-12
Reliance 780 Call Option
20-Nov-12
27-Nov-12
29-Nov-12
29-Nov-12
% G/L Comments
1-3 days
23.3
7.7
7 days
10.0
-5.0
3 days
16.0
5.8
5 days
7.0
3.0
3-5 days
7.4
-2.4
8.9
16-13
10.0
25.0
24.9
16-Nov-12
3 days
16.0
15.15-1
8.0
25.0
20.2
16-Nov-12
5 days
15.0
5.2
6.5-4
2.0
12.0
11.9
29-Nov-12
3 days
6.1
5.8
Bank Nifty 11300 Put Option
113-100
90.0
150.0
90.0
21-Nov-12
3 days
106.5
-16.5
Bank Nifty 11700 Call Option
24-35
20.0
70.0
45.0
27-Nov-12
2-3 days
32.3
12.8
SBI Dec 2150 Call Option
61-54
45.0
90.0
79.3
30-Nov-12
3 days
59.0
20.3
Nifty 5800 Call Option
4-8.5
3.0
20.0
10.5
29-Nov-12
1 day
7.5
3.1
Entry at
Sloss
Trading/BTST/Futures Calls
Date
B/S
Trading Call
Exit Date
% G/L Comments
1-Nov-12
Aptech Training
67-67.8
66
72
66.0
12-Nov-12
-2.4
Stop Loss Triggered
1-3 days 67.6
1-Nov-12
Indo Rama
24.5-26
26.75
30.5
26.9
1-Nov-12
3.9
Premature Profit Booked
2-3 days 25.9
2-Nov-12
Kwality
26-25.5
27
28.5
27.8
2-Nov-12
6.7
3-5 days 26
1.75
2-Nov-12
Renuka Sugar Fut
31.5-32.5
32.7
29
32.5
7-Nov-12
-2.5
Premature Exit
1-3 days 31.65
-0.8
2-Nov-12
Brigade
65-68
70.3
76
71.5
2-Nov-12
5.9
7-Nov-12
Educomp
150-152.3
147
163
147.0
12-Nov-12
-3.4
Stop Loss Triggered
8-Nov-12
HT Media
8-Nov-12
Hind Oil Exp
8-Nov-12
Saregama
12-Nov-12
Madhucon Projects
98.3-97
95
108
100.8
8-Nov-12
2.5
98-99.75
96
108
96.0
20-Nov-12
-3.6
Stop Loss Triggered
91.3
97.5
92.8
8-Nov-12
4.0
34.25
40
34.3
15-Nov-12
-4.3
Stop Loss Triggered
86-89.5
34.5-36.5
2-3 days 67.5

2-4 days 152.15
3-5 days 98.3
1-3 days 99.55
2-3 days 89.25
2-3 days 35.8
-1.6
1
4
-5.15
2.5
-3.55
3.55
-1.55
19-Nov-12
VIP Industries
77.6-75
73
85
82.5
20-Nov-12
7.1
7 days 77
5.5
19-Nov-12
20 Microns
140-135
130
155
146.7
19-Nov-12
5.5
5 days 139
7.7
27-Nov-12
Orbit Corp
55.1-53
52
61
57.7
29-Nov-12
4.8
27-Nov-12
Liberty Shoe
99-104
112
117
113.6
27-Nov-12
10.1
2-3 days 103.15
10.45
29-Nov-12
ICICI Bank
1025
1120
1097.9
30-Nov-12
4.3
2-4 days 1052.25
45.65
1045-1054.5
Retail Research
5 days 55
2.65
HOME
contd
Positional Calls
Date
B/S
Trading Call
2-Nov-12
Torrent Power
6-Nov-12
Hexaware
6-Nov-12
DLF
7-Nov-12
Praj Ind
20-Nov-12
C Mahendra
Entry at
Sloss
161.95-157
153.0

172.0
165.2
Exit Date
7-Nov-12
113.8-112
110.0
124.0
110.0
15-Nov-12
% G/L Comments

3 days
161.5
3.7
1 week
113.8
-3.8
198-205
197.0
225.0
213.5
8-Nov-12
2-3 days
204.4
9.1
46.25-45.25
44.3
50.5
48.5
15-Nov-12
5-7 days
46.3
2.2
85-89.5
83.0
114.0
83.0
26-Nov-12
2 weeks
87.7
-4.7
Retail Research
36
HOME
Gainers & Losers November 2012

Top Gainers From F&O
MCDOWELL-N
Pric e
Pric e
31-Oc t-12
30-Nov-12
Top Losers From F&O

% c hg
1175.8
1996.2
69.8
INDIACEM
UNITECH
23.1
31.7
37.2
RCOM
54.0
71.5
32.4
Pric e
Pric e
31-Oc t-12
30-Nov-12
% c hg
95.6
85.8
-10.3
OPTOCIRCUI
120.2
108.4
-9.8
CROMPGREAV
125.0
114.4
-8.5
176.5
162.8
-7.8
20.1
18.6
-7.2
KTKBANK
135.6
175.3
29.3
NMDC
BHARTIARTL
269.7
337.0
25.0
GMRINFRA
SUNTV
329.3
408.8
24.1
TECHM
948.5
880.1
-7.2
UNIONBANK
195.7
242.7
24.0
BHUSANSTL
492.6
461.8
-6.3
15.8
19.6
23.7
RANBAXY
526.1
504.2
-4.2
SUZLON
ASHOKLEY
TITAN
23.5
28.4
21.1
HINDPETRO
298.7
287.0
-3.9
259.3
311.7
20.2
PETRONET
168.2
162.5
-3.4
Top Losers From CNX 500
Top Gainers From CNX 500
MCDOWELL
Pric e
Pric e
Pric e
31-Oc t-12
30-Nov-12
1175.8
1996.2
% c hg
69.8
KEMROCK
Pric e
% c hg
31-Oc t-12
30-Nov-12
74.4
56.5
-24.1
7.5
6.2
-17.4
JETAIRWAYS
335.6
527.1
57.0
DCHL
SHREE ASHTA
2.2
3.3
53.5
ORISSAMINE
4359.3
3744.2
-14.1
389.5
334.9
-14.0
440.4
381.4
-13.4
56.3
48.8
-13.3
SKS MICRO
112.8
165.4
46.6
AIAENG
FCH
153.5
220.8
43.9
ABAN
SUJANATOW
L&TFH
5.4
7.7
42.6
INDSWFTLAB
54.2
75.0
38.5
SIMPLEXINF
203.6
177.2
-12.9
213.9
186.8
-12.6
4.4
3.9
-12.5
66.6
58.3
-12.5
UNITECH
23.1
31.7
37.2
INDIAGLYCO
DBREALTY
98.1
132.3
34.9
KGL
162.6
215.3
32.4
SHANTIGEAR
EROSMEDIA
Retail Research
37
38
RETAIL RESEARCH TEAM

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

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1

Monthly Report December 2012

Monthly Equity Commentary

Bond yields, commodities and currencies

Comparison of Equity Returns in various emerging

Outlook Going Forward

Monthly Report December 2012

Monthly Equity Commentary

Optimism over the reshuffle of Union Cabinet.

Sept, when it was 52.8).

Car sales increased by 23.09% to 172,459 units in Oct.

Monthly Report December 2012

Monthly Equity Commentary

eight months in October.

against the annual growth target of 27%

M oodys retains Indias stable outlook.

Central Bank and the IMF.

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

Hong Kong Hang Seng

Chinese - Shanghai composite

Monthly Report December 2012

The world markets ended the month of November 2012 on a

Monthly Equity Commentary

30-Nov-12 31-Oct-12 % Chg

residential projec ts, to jump start growth.

rose 37.2%, 34.9% and 21.4% respec tively.

Best sec tor performer of the month.

Videoc on industries, Gitanjali Gems, and Titan Industries, whic h c ontributes

Automakers rose on hopes of rising sales during the festival season.

20.9%, 7.7%, 6.9% and 6.4% respec tively.

Monthly Report December 2012

Monthly Equity Commentary

30-Nov-12 31-Oct-12 % Chg

Oil & Gas

FII Activity (Rs. in Cr)

FIIs were reported as strong net buyers in Nov.

open interest over

indic ates long

squaring up of earlier options.

inc reased over O c tober, whic h indic ates building of

Monthly Report December 2012

M F c ontinued to be the net seller for the last 5

c onsec utive months.

Monthly Equity Commentary

Monthly Report December 2012

Monthly Equity Commentary

31-Oct-12 % Chg Reasons

Early in the month gold rallied on demand asr a safe haven

during a global ec onomic meltdown

ec onomic expansion in the U.S. is ac c elerating

hikes that c ould derail an ec onomic rec overy in the world's

Countries dropped by 0.2% to 30.95 million a day in O c tober,

inNigeria,Iran andSaudi Arabia

esc alate into a wider c onflic t that would endanger M iddle

impression pric es c ould have hit a bottom

Monthly Report December 2012

Monthly Equity Commentary

31-Oct-12 % Chg Reasons

expec tations that

the worlds largest user

impression pric es c ould have hit a bottom

Heavy demand from alloy industries

trend on pic k up in demand from battery makers