Weekly Market Wrap

Weekly Statistics
Outlook for Week Ahead October 04, 2010
The Indian markets may extend gains this week with foreign investors pouring in money into Key Indices Oct 02 % Chg
Indian stocks, tempted by the country's rapid economic growth and a balanced judgement in the Sensex 20445 +1.99
Ayodhya case. The widely tracked BSE Sensex galloped past 20,000 points and is a few points Nifty 6143 +2.08
away from an all-time peak of 21,206.8. FII inflow in September 2010 totaled Rs. 23612.4 cr. DJIA 10830 -0.28
Globally, the US is trying to ward off a double-dip recession, while Europe is hoping that the
Nasdaq 2371 -0.44
overstretched banking system does not go bust. The outlook for world trade is subdued &
FTSE 5593 -0.10
economies that depend on exports to drive growth could face pain. India's $1.3-trillion economy
thrives on vast domestic consumption. As per the recent IMF forecast, Indian economy will DAX 6211 -1.38
expand 9.4% in 2010. It is this growth potential that is attracting foreign investors. India's low Hang Seng 22358 +1.62
reliance on exports & widening savings investment gap also makes it attractive for foreign Shanghai 2656 +2.47
investors. Nikkei 9404 -2.06
Bovespa 70229 +2.98
While the Foreign funds continue to aggressively mop up Indian shares, the domestic financial Indonesia – Jakarta 3547 +4.40
institutions have been taking money off the table. Retail investors are not participating in this Singapore – Strait 3131 +1.24
rally in a big way because the bitter memory of the 2008 slump is still fresh in their mind. For the
MSCI Emerging Markets* 1086 +3.12
near term, a section of the market is concerned that the large IPO of state-run Coal India in mid-
October 2010 would soak liquidity from the secondary equity markets. The government plans to MSCI World* 1184 +0.10
*= Data in US$
raise about Rs 15,000 cr to Rs 16,000 cr from divestment of 10% stake in Coal India. The IPO is
billed as country's largest issue ever. The next major trigger for the market is Q2 September
2010 results of India Inc. Software bellwether Infosys Technologies will kick start Q2 result Metals (USD) Oct 01 % Chg
season on 15 October 2010. Aluminum 2373 +2.95
Copper 8131 +2.86
Zinc 2223 -1.96
The Week Gone By October 04, 2010 Tin 25045 +5.56
Lead 2301 +0.61
Indian Markets
Gold 1318 +1.68
Robust foreign fund buying helped the market clock gains for the fifth consecutive week ending
% Chg calculated from Friday to Friday
October 01, 2010. The key benchmark indices attained their highest closing levels in more that
32 months as firm global stocks also underpinned sentiment. A High Court ruling that the site of Interest Rates Chg bps
a demolished mosque in Ayodhya would be split between the Hindus and the Muslims, dousing MIBOR 7.45 +3.00
immediate fears of a violent backlash, aided the rally. The BSE Sensex jumped 399.9 points or 10 yr bond yield 7.90 +3.00
2% in the week to settle at 20,445. The Nifty jumped 125.1 points or 2.1% to 6,143.4. Both the LIBOR – UK 0.73 0.00
BSE Mid-Cap & Small-Cap index underperformed the Sensex, rising 1.2% & 1.3% respectively. LIBOR – USA 0.29 0.00
LIBOR – Europe 0.82 -1.00
Key Events during the week:
Asian Development Bank (ADB) revised upwards its growth projection for the Indian economy in Exchange Rates Value % Chg
2010-11 to 8.5% from 8.2% estimated in April. The GDP growth projection for 2011-12 has been USD/INR 44.98 -0.62
retained at 8.7%. The ADB has also raised the forecast for annual average inflation in 2010-11 USD/EURO 0.73 -2.20
to 7.5%, up from 5% projected in April. The ADB update said that the inflation and the rupee's
USD/YEN 83.22 -1.16
sharp appreciation threaten to erode India's export competitiveness and its plans to further
USD/POUND 0.63 +0.05
expand economic growth to 9-10% in coming years.
.DXY 78.20 +4.40
Growth of core infrastructure industries slowed to 3.7% in August, as compared to 6.4% in the Other Value % Chg
same month last year. Expansion of the six core industries, crude oil, petroleum refinery
RJ/CRB Index 285.69 +0.73
products, coal, electricity, cement and finished steel, aggregated 4.1% during the first five
Crude Oil ($ / Barrel) 81.58 +6.65
months of this fiscal as against 4.8% in April-August 2009-10. These six segments account for
Baltic Dry Index 2452.00 +0.33
26.7% of the country's total industrial output.

Exports rose for tenth straight month in August 2010, growing an annual 22.5% to $16.64 bn. Turnover Week Week % Chg
Imports for the month rose 32.2% to $29.7 billion, widening the country's trade deficit to $13.04 (Rs. Bn) Oct 01 Sept 24
bn. BSE 246.0 260.3 -5.49
NSE 842.4 816.6 +3.16
Aided by increased tax receipts & near three fold jump in non-tax revenues, the Centre's fiscal Futures 3049.2 2410.5 +26.50
deficit in April-Aug 2010 fell 16.93 % to Rs 1.51 lakh crore on a Y-o-Y basis. This deficit level Index Options 4581.8 4458.5 +2.77
represents 39.7% of the budgeted fiscal deficit of Rs 3.81 lakh crore for the entire 2010-11. At
Stock Options 260.2 270.4 -3.77
the same stage last year, the Centre's fiscal deficit as a percentage of the budget estimate stood
at 45.5%.
Net Flows (Cr) FII MF
The HSBC Markit Purchasing Managers' Index, based on a survey of 500 companies, slid to Sept 24 - Sept 30 *7354.6 -3108.2
55.1 in September 2010, which marks the lowest reading since November last year, from 57.2 in Previous Week 7462.0 -2032.5
the August 2010 survey. Though the index has slipped, this was the 18th consecutive month it * Doesn’t include data for Sept 29
has remained above the 50 mark that divides growth from contraction.
Volatility Index (ViX) Nifty CBOE
The food price index rose 16.44% while the fuel price index climbed 10.73% in the year to 18 Oct 01 21.43 22.50
September 2010. In the prior week, annual food and fuel inflation stood at 15.46% and 11.48% % Chg w-o-w -1.29 +3.64
respectively. The wholesale price index, the most widely watched gauge of prices in India, rose
8.5% in August 2010.

The Lucknow bench of Allahabad high court on Thursday ruled that the disputed land in
Ayodhya where the Babri Masjid stood for 500 years until it was demolished in 1992 shall be
divided into three parts. A two-thirds portion is to be shared by two Hindu plaintiffs and one-third
will be given to the Sunni Muslim Waqf Board.

Retail Research 1
India’s Forex reserves were up by $3.861 bn to $291.595 bn for the week ended September 24,
on account of currency revaluation. This is the second week in a row that reserves have risen. Sensex

US Markets
The U.S. markets slipped for the week ending Oct 01, 2010, halting the longest streak of weekly
gains since April. Lingering concern that Europe’s government debt crisis may threaten the
economic recovery trimmed the market’s biggest September rally in 71 years. While Dow ended
lower by 0.3%, Nasdaq & S&P fell by 0.4% each.

Key Highlights for the week:

The Consumer Confidence Index dropped to 48.5 in September from a downwardly revised 53.2
in August. Economists had been expecting the number to edge to 53. The index is a far cry from
90, a level that typically indicates a stable economy.

The number of Americans filing for unemployment insurance edged down to 453,000 in the
week ended Sept. 25. The figure was slightly better than 457,000 jobless claims economists had
expected.

The Commerce Department released its final reading on Q2 GDP, raising it slightly to a gain of
1.7% from the previously reported 1.6%. The Department also stated during the week that
personal income increased 0.5% in August, while spending rose 0.4%. Weekly Gainers CMP (Rs) % Rise
Orchid Chemicals 267.20 28.25
The ISM said its index of manufacturing activity slipped to 54.4 in September, from 56.3 in Motilal 213.65 26.08
August. Any reading above 50 indicates growth in the sector. The ISM report also showed that Supreme Inds 796.00 21.54
new orders for manufactured goods slowed significantly in August, and that production has also Tanla Solutions 29.15 20.95
declined.
VIP Inds 627.75 17.00
Week Ahead
The market shook off the summer doldrums last month, breaking out of a stubborn trading range Weekly Losers CMP (Rs) % Fall
and giving investors the second-best September on record with a gain of 8.8% on the S&P 500. Koutons Retail 155.45 46.92
It also racked up its best quarter in a year. The strength of that momentum will be tested this Pipavav Shipyard 86.20 15.28
week by a round of economic data, including the much-watched non-farm payrolls report, as well Himachal Futuristic 11.26 8.97
as the start of third-quarter earnings season. The S&P has also been bumping up against a Lakshmi Overseas 79.80 8.01
technical resistance level that could spark further gains if the index breaks through it. Nagarjuna Const 158.4 6.49
Other Markets
Asian stocks rose for a fifth straight week as government and industry reports from the U.S. and
China fueled confidence in a global economic recovery. The MSCI Asia Pacific Index rose 1.2%
percent this week to 127.06. The index gained 8.4% in September 2010, the largest monthly
advance since July 2009. Japan’s Nikkei lost 0.7%, while China’s Shanghai Index rose 2.5%.
Hang Seng & Kospi gained 1.1% & 1.6% respectively during the week.

Key Events during the week:

China’s manufacturing expanded at the fastest pace in four months in September, adding to
signs that economic growth is stabilizing even as the government curbs energy use and tries to
cool the property market. The purchasing managers’ index rose to 53.8 from 51.7 in August. The
data reinforce evidence that China’s industries are gearing up again after the economy slowed in
the second quarter.

Taiwan increased its benchmark interest rate for the second time this year and said it will try to
prevent real-estate speculation after a jump in home prices fueled concern the economic
recovery may stoke a property bubble. Central bank Governor & his board raised the rate by
0.125 percentage point to 1.5%. The economy expanded at the fastest pace in more than 30
years in the first half, cutting unemployment and boosting wages.

Retail sales in Germany unexpectedly declined for a second month in August by 0.2% M-o-M.

Japan’s consumer prices fell for the 18th straight month by 1% in August Y-o-Y as the yen ’s
strength makes imports cheaper, adding to evidence that will likely prompt the central bank to
ease policy next week.

Retail Research 2
Commodities
The Baltic dry index, which is a global index tracking the movement of cargo by the sea route Global Indices Charts
ST
has registered a smallest rise in the past five months of 0.3% for the week ending 1 October
2010. The index is more influenced by the movement of goods from/to China primarily that of Dow
iron ore imports. The BDI witnessed a rise in hire rates for the capsize vessels and fall for
Panamax vessels. The capsize vessels are used to ferry the iron ore while the panamax are
used for other cargo. Rents increased 12 percent for the week for capesizes, the largest ships in
the index, and dropped 11 percent for smaller panamaxs. China’s National Day holiday is likely
to keep rates from strengthening for capesizes, typical carriers of iron ore, while panamaxs need
more cargoes to gain. The National Day break lasts up to Oct. 7. Iron ore is a raw material for
steel production and China is the world’s largest maker of the metal so a slow production rate up
th
to Oct 7 would translate into a lower demand for iron ore, which is likely to restrict any major
upward move in freight rates.

International Gold prices rose 1.6% for the week to end at USD 1317 per ounce. The recent
spate of weaker economic data releases from the US has again led to fears of a double dip
recession in the US and the rest of the developed world economies. This is leading investors
towards the safety of gold as an alternative currency to the dollar and euro. The investment
demand for gold is currently pretty high as can be gauged from the SPDR Gold Trust holdings
the world’s largest gold backed exchange traded fund based in New York. The fund currently
holds more than 1300 tonnes of gold for investors. This confirms the buoyancy in the
international gold prices.
FTSE
The international crude oil prices rose by 6.6% for the week to end at USD 81.5 per barrel. Oil is
expected to rise to the second-highest annual level on record next year on demand from China,
India and Brazil, upsetting OPEC and threatening the nascent recovery in developed countries.
China, India and Brazil need fuel to feed their growing economies, while OPEC has raised
production by 5 percent from a five-year low in March 2009, and now exceeds its own targets by
1.9 million barrels a day. China’s GDP is expected to grow at 8.9% for the week while that of
India and Brazil are expected to grow at 8.8% and 4.5% respectively for the next financial year.
This translates into higher demand for fuel from these countries, which could push up the crude
oil rates. The same is confirmed in a report by the International Energy Agency which stated that
the world oil demand will rise by 1.3 million barrels a day, or 1.5 percent, to an average 87.9
million by the next year.

International copper prices were up 2.8% for the week. The rise in the prices of copper can be
attributable to the rise in the manufacturing activities by China, who is the world’s largest
consumer of metals. According to a report by International Copper study group, the refined
copper output is expected to lag behind the demand by 435,000 metric tons by next year. This
could lead to buoyancy in the copper prices in the future.
Shanghai
Currencies
The USD depreciated against the EURO by 2.2% for the week. One of the most divergent
factors seen were despite the negative vibes coming from the EU front, euro rallied
overshadowing the negative pointers, as market players were seen cutting US dollar holdings.
The Greenback got a hard hit again extending declines against the Euro, with much of the price
action attributed to elevated expectations for a second round of quantitative easing from the Fed,
after a softer US consumer confidence data reported during the week.

The USD depreciated against the Yen by 1.16% for the week. This is despite the Finance
Minister getting vocal several times about the intervention in the currency markets. While the
broad trend confirms a direct linkage between Yen and risky assets, quintessential bursts of risk
aversion are still shaping up the short-term momentum in the currency. Also a weak economic
data in the US led to the dollar dropping against the Yen. The bank of Japan is expected to
come up with an announcement during the next week, which would decide the movement in the
currency pair in the future.

The USD depreciated against the INR by 0.62% for the week ended 1st October 2010. The
rupee posted its best weekly gain in nearly nine months last week, boosted by robust portfolio
investments and tracking broad losses in the dollar versus major currencies overseas. The
rupee is expected to rise in the coming week due to likely strong capital inflows coupled with
gains in regional stocks and currencies.

Retail Research 3
 Sectoral Analysis October 04, 2010
Weekly Statistics
st
BSE Sensex gained 2% to 20,445 for the week ended 1 October 2010. S&P CNX Nifty also
ended the week gaining 2% to 6,143. BSE Mid-Cap index rose by around 1% to 8,241, while Sectoral Index - BSE Value % Chg
BSE Small-cap index also gained ~1% to close the week at 10,404. Most of the sectoral indices BSE Sensex 20445 +1.99
were up except oil & Gas and FMCG, which were down 0.4% and 0.2% respectively. Amongst BSE Midcap 8214 +1.22
the gainers were metals, realty and capital goods which gained ~5%, 5% and ~4% respectively.
BSE Smallcap 10404 +1.33
Metals BSE 500 8135 +1.80
The BSE metal index was the highest gainer amongst all the sectoral indices for the week. The BSE Auto 9757 +2.62
BSE metal index rose by around 5% for the week to close at 17,517. The overall bullish behavior BSE Bankex 14252 +2.43
across all the commodities could be attributable to expectations of further monetary easing by
BSE Capital Goods 16426 +3.69
the Federal Reserve—America’s central bank and the last leg of buying seen across all the
metal stocks due to the healthy domestic outlook and firming up international demand scenario. BSE Consumer Durable 6435 +1.84
The major gainers in the pack were SAIL, Tata Steel and Naclo with each gaining 8.3%, 6% and BSE FMCG 3744 -0.21
6.8% respectively. The rise in the domestic metal producers could be on account of a BSE Health care 6108 +2.21
expectations of a price rise effective next month. BSE IT 6100 +2.13
Realty BSE Metals 17517 +5.19
The BSE realty index gained ~5% for the week to end at 3,877. The overall buying in the realty BSE Oil and Gas 10603 -0.40
stocks could be attributable to the expectations of pick up in housing sales during the upcoming BSE Power 3300 +3.13
festive season. The major gainers in the space were Unitech, DLF and Parsvanath developers BSE PSU 10471 +1.53
each gaining 10%, 6% and ~ 2% respectively. The rise in the prices of Parsvanath developers is BSE Realty 3877 +4.90
despite one of its the multi crore project being in dispute for more than a year. BSE Teck 3787 +1.34
Capital Goods
st
The BSE Capital Goods index rose by ~4% for the week ended 1 October 2010. The index
closed at 16,426 for the week. The major gainers in the pack were L&T, Siemens and ABB with
each rising 4%, 6% and 5.5% respectively. The rise in the prices of ABB and Siemens is despite Sectoral Index - NSE Value % Chg
a re-bid decision for a PGCIL project. The project involved setting up of a HVDC cub stations S&P CNX Nifty 6143 +2.08
and an 800-Kv transmission line from Biswanath Chariali in Assam to Agra in north India. The CNX Nifty Junior 12846 +1.22
total project cost is estimated to be Rs 12,000 crore, while the sub-station portion is estimated at S&P CNX 500 5019 +1.72
Rs 7,000 crore. On May 14, the ABB-led consortium was publicly declared lowest bidder on this
Bank Nifty 12557 +2.39
project and was awarded the project however a re-bidding has raised concerns about the
project. CNX IT 6759 +1.87

Automobiles:
The BSE auto index was up 2.62% for the week to end at 9,757. The robust monthly sales
reported by the automobile manufacturers for the month of September 2010 led t the rise in the
auto index. The major gainers in the pack were Tata Motors, M&M and Bajaj Auto limited with
each rising by ~5%, 4% and 7% respectively. During the week Tata Motors hit a record high of
Rs 1156. The company has planned to launch Aria, the first cross-over between a multi-utility
and sports utility vehicle of the company on 11th October 2010. It will be made available across
all major cities and towns of the country. Also the company announced to raise prices on some
passenger and all commercial vehicles from Monday, 4 October 2010, due to rise in input costs.
The price increase in passenger cars is on the Tata Indica and the Tata Indigo models in the
range of Rs. 4,500 to Rs. 14,000. The price rise in commercial vehicle is in the range of Rs.
5,000 and Rs. 40,000. Tata Motors' total sales, excluding those of the luxury Jaguar, Land Rover
brands, increased 23% in September 2010. The rise in the Bajaj Auto was because the stock
entered the 50-unit S&P CNX Nifty index starting, 1 October 2010.
FMCG:
The BSE FMCG index almost ended flat by registering a drop of 0.21% for the week ended 1st
October 2010. The index witnessed mixed reactions from stocks as brisk selling was observed.
FMCG major Hindustan Unilever lost 1.6% for the week followed by Colgate Palmolive and
Godrej Consumer each registering a fall of 3.6% and 0.5% respectively. On the other hand
Dabur India was the only company to post a rise of 3.8% for the week. The overall fall in the
FMCG index could be attributable to profit taking by the investors. The rise in the prices of Dabur
India could be attributable to the overseas acquisition plans as the domestic competition
intensifies. Also the company has introduced certain changes in the marketing and the
promotion strategies in Nepal, which is expected to boost the sales in the region.

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Email: hdfcsecretailresearch@hdfcsec.com
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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 Retail Clients
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Retail Research 4