MAKE MORE-WEEKLY 09.06.

08
(A Weekly Stock Market Newsletter BY MANSUKH SECURITIES & FINANCE
LIMITED)

Markets crumbles on fuel price hike,inflation

The S&P CNX Nifty fell 242.3 points or 4.97% to 4627.80 in the week. The market
declined sharply as a hike in fuel prices by about 10% announced by the Union
government on Wednesday, 4 June 2008, triggered possibility of a surge in inflation to
double digit level. The BSE Sensex declined 843.39 points or 5.14% to 15,572.18 in the
week ended 6 June 2008. The BSE Mid-Cap index fell 410.39 points or 6.07% to
6,350.15. The BSE Small-Cap index slumped 436.99 points or 5.37% to 7,696.05.

The government on Wednesday, 4 June 2008, raised petrol by Rs 5 a litre and diesel
price by Rs 3 a litre in an attempt to curb mounting losses of state-owned refiners
thereby stoking inflation. The wholesale price index rose 8.24% in the 12 months to 24
May 2008, above the previous week's annual rise of 8.1%, government data released on
6 June 2008 showed. The reading was the highest since 28 August 2004, when it stood
at 8.74%. Inflation for the week ended 29 March 2008 was revised upwards to 7.75%
from 7.41%.

India's largest state-run oil exploration firm in terms of revenue Oil and Natural Gas
Corporation (ONGC) jumped 8.58% to Rs 938.50 in the week. The stock spiraled higher
after Union government on Wednesday, 4 June 2008, halved the state-owned upstream
company’s subsidy burden in fiscal 2009.

India's largest private sector firm by market capitalization and oil refiner Reliance
Industries slipped 6.76% to Rs 2239.35. India's largest private sector bank by assets
ICICI Bank fell 2.21% to 770.85.

India's largest wind turbine maker by sales Suzlon Energy rose 1.06% to Rs 280.20.
The firm said it signed a share purchase agreement with Areva for acquisition of latter's
total stake of approximately 30% in REpower Systems AG, Germany. This acquisition
will consolidate Suzlon's total holding in REpower to around 66%, the company said in
a statement to the Bombay Stock Exchange on Friday, 6 June 2008. 2007.

Mumbai-based large-cap natural gas and oil exploration firm Cairn India rose 0.21% to
Rs 286.25. The firm was awarded a licence by Sri Lanka to explore for oil & gas in the
Mannar basin. Spicejet surged 10.62% to Rs 35.95. Anil Dhirubhai Ambani Group is
reportedly in talks to acquire the Gurgaon-based small-cap low-fare carrier.

Back-office firm HOV Services soared 18.05% to Rs 100.40. The firm received an offer of
$202 million for sale of its HOV Services LLC subsidiary and its Honk Kong unit. The
payment will be made in a mix of cash and stock.
o Editorial
o News round up
o Foreign institutional investors (FIIs) sold shares worth Rs 3291.20 crore so far in the
Technical picks
o Fundamentalmonth
picks.of June 2008. They sold shares worth Rs 18660.60 crore in calendar year 2008,
o Mutual fundstill 5 June 2008. Domestic funds sold shares worth Rs 144.20 crore in the month of
o June 2008, till 4 June 2008.
Global Snapshot
o Personal Finance
o SENSEX constituent’s
fundamentals.
o Classroom .
 NEWS ROUND UP

BSE ANNOUNCEMENT:
Sensex

 Oil & Natural Gas Corporation to announce financial results Board meeting on 25 June
2008 The board meeting of Oil & Natural Gas Corporation will be held on 25 June 2008
to approve the audited financial results for the quarter and year ended 31 March 2008
and to recommend final dividend, if any
 Pidilite Industries appoints additional director On the board The board of Pidilite
Industries has appointed Bharat Puri as additional director of the company with effect
from 28 May 2008.This was decided at the board meeting held on 28 May 2008
 Rajshree Sugars & Chemicals to anounce financial results Board meeting on 19 June
2008 The board meeting of Rajshree Sugars & Chemicals will be held on 19 June 2008
to consider the audited financial results of the company for the year ended 31 March
2008 and final dividend, if any.

NSE ANNOUNCEMENT:

 Acc Limited has informed the Exchange regarding a media release dated June 04, 2008,
titled Cement Production and Despatches in May 2008
 Advani Hotels & Resorts (India) Limited has informed the Exchange that the appeal filed
by the Company and the Promoters before the Securities Appellate Tribunal, has been
scheduled for hearing on June 10, 2008.
 Abb Limited has submitted to the Exchange a copy of the proceedings of the Annual
General Meeting of the Company held on June 03, 2008.
 Advani Hotels & Resorts (India) Limited has informed the Exchange that the appeal filed
by the Company and the Promoters before the Securities Appellate Tribunal, has been
scheduled for hearing on June 10, 2008.

CORPORATE ANNOUNCEMENT:

 Pursuant to Regulation 13(6) of the SEBI (Prohibition of Insider Trading ) Regulations,

1992, the company has informed that Dr.Richard Helmut Rupp an Additional Director is
holding NIL equity shares of the company as on 27.05.2008 (i.e. date of assuming office
as Director).

 With reference to the earlier announcement dated April 03, 2008, SRF Ltd has informed
BSE that the remaining 3 Wind turbine Generators for a capacity of 4.65 MW have been
commissioned. With this the entire project of 13.95 Mw of wind power has been
commissioned in Tamil Nadu. The project will generate wind energy to be used for
captive purpose.

 Wipro Ltd has informed BSE that Administrative Committee of the Company's Board of
Directors vide their resolution dated June 04, 2008 resolved to issue and allot 20280
equity shares of Rs 2/- each pursuant to exercise of the stock options by the eligible
employees under the Wipro Employee Stock Options Plan i.e. WESOP 2000 and
Restricted Stock Unit Plan 2004.

 Jai Corp Ltd has informed BSE that the Board has accepted the resignation of Shri.
Virendra Jain as the Managing Director of the Company with effect from June 04, 2008.
However, Shri. Virendra Jain will continue to remain on the Board as a Non-executive
Director and has been appointed as the Vice Chairman of the Board of Directors. The
Board of Directors in their meeting held on June 04, 2008, have appointed Shri. Gaurav
 Jain, as the Managing Director of the Company with effect from June 04, 2008, subject to
the approval of the shareholders.

TECHNICAL PICKS
BSE-SENSEX:

MANSUKH’s VIEW: SENSEX is looking to weaken further under immense bear

pressure which can push it to 15000 level. Below this level 14700 level wont be
surprising at all.RSI and MACD with negative crossovers lend support to our bearish
prognosis of the index.

ADITYA_BIRLA_NUVO:

MANSUKH’s VIEW: ADITYA BIRLA NUVO is looking to test lower levels in not so conducive
economic environment characterized by high inflation,fears of CRR hike and hiked petroleum
prices. MACD and RSI are looking highly bearish.1200 level can be seen. Remain short.
 FUNDAMENTAL ANALYSIS
SINTEX INDUSTRIES LTD.
Sintex Industries Ltd
Financial Performance (Rs Cr) Latest Results (Rs Cr)
Year End 20070 20060 20050 2004 2003 Period-Ended 200803 200703 Var. (%)
3 3 3 03 03
Equity 22.19 19.73 18.48 14.56 14.56 Sales 647.38 364.88 77.42
Networth 650.87 449.46 507.19 351.9 349.7 Other Income 17.5 7.98 119.30
8 9
Enterprise Value 2643.4 2442.5 1047.1 439.4 281.8 PBIDT 147.54 84.62 74.36
1 5 3 2
Capital Employed 1329.1 1032.1 845.6 650.5 615.1 PBDT 134.19 71.94 86.53
3 2 5 2
Gross Block 881.85 677.18 669.42 629.5 492.1 PBIT 134.47 73.76 82.31
1 2
Sales 1212.8 913.98 715.16 580.7 491.1 PBT 121.12 61.08 98.30
8 5
Other Income 26.69 29.79 10.53 13.84 7.04 RPAT 88.4 53.7 64.62
PBIDT 243.99 174.51 123.71 103.1 86.94 EPAT 0 0 NA
7
PBDT 203 145.42 98.86 71.85 56.51 APAT 88.4 53.7 64.62
PBIT 202.52 143.38 95.46 80.54 64.87 CP 101.47 64.56 57.17
PBT 161.53 114.29 70.61 49.22 34.44 Shareholding Pattern
RPAT 130.58 92.01 53.91 33.82 23.95 (AS ON 31 Mar 2008) Shares (%)
APAT 129.38 79.21 53.95 33.7 23.03 Foreign 57341605 42.01
CP 172.05 123.14 82.16 56.45 46.02 Institutions 21105061 15.46
Rev. Earnings in 35.89 30.02 27.29 48.67 9.84 Govt Holding 0 0
FE
Rev. Expenses in 11.76 15.41 17.81 14 14.87 Non Promoter Corp. Hold. 9087366 6.66
FE
Book Value (Rs) 58.66 45.56 274.45 241.7 240.2 Promoters 39787195 29.15
4 4
EPS (Rs.) 11.61 9.2 28.65 21.86 14.77 Public & Others 9174206 6.72
Dividend (%) 48 44 40 30 20 Totals 136495433 100
Payout (%) 8.35 9.76 13.96 13.73 13.53 Share Price Graph
Ratio Analysis
Debt-Equity 1.15 0.96 0.74 0.77 0.66
Current Ratio 1.7 1.52 1.14 1.12 1.32
Invtry Turnover 10.46 9.46 7.85 7.47 6.95
Debtors Turnover 6.67 6.12 5.42 5.03 5.09
Interest Cover 4.94 4.39 3.84 2.57 2.13
PBIDTM (%) 20.12 17.37 17.3 17.76 17.7
PBDTM (%) 16.74 14.19 13.82 12.37 11.51
MANSUKH’s APATM VIEW:
(%) SINTEX10.77 INDUSTRIES
8.67 7.54 5.82LTD. is one of the leading providers of plastic products and niche structured yarn
4.88
dyed textiles-related
ROCE (%) products in India.
17.19Sintex
13.67manufactures
12.84 12.79a range
11.08 of plastic products at its eight manufacturing facilities across India, which
includes prefabricated structures, industrial custom molding products, monolithic construction, and water storage tanks. Inaddition, through its
various subsidiaries, Sintex controls 22 manufacturing plants around the world and has access to worldwide clients. Sintex’s textile division
focuses on niche products andcaters to premium fashion industry selling directly to top design houses of Europe. The textiles division is located
in Kalol.
Sintex has a dominant position in the fast-growing processed plastics (composites) segment in India. It has also built a significant presence in
the US and Europe by leveraging its core knowledge of materials and plastic composites. This segment has witnessed a sales CAGR of
61%over the past three years (48% underlying growth) and accounts for 85% of sales (FY2008). We estimate that the segment will grow at
~50% for the next two years and will account for 90% of revenues (FY2010E). India is underpenetrated in terms of plastics usage with current
plastic usage at 5 kg per capita compared with the global average of about 120 kg (Asian average of 25 kg), clearly indicating further room for
penetration as innovative products are introduced locally.
Sintex has also exhibited a strong ability to identify and execute on acquisition targets in the plastic segment (custom molding) in the recent past
– US$121 mn spent to acquire US$263 mn of sales . These acquisitions have enabled the company to leverage its core competency in materials
production to foray into other higher-margin products and geographies as well as helped add manufacturing capacity located closer to
customers.Sintex’s textile business (11% of FY2009E sales) focuses on manufacturing high-end men’s structured shirting fabrics. The complex
nature of the manufacturing know-how for these fabrics has enabled Sintex to maintain its robust growth in the segment and protected it from
any margin squeeze despite the rupee appreciation. Sintex manufactures fabrics for both foreign design houses (Canclini in Italy sources about
7 mn meters annually from Sintex) and for top garment sellers in India (such as Zodiac, Wills, Arrow, etc.).
Sintex will fund the high growth that the company is currently witnessing. It has raised US$150 mn through a qualified institutional placement
(QIP) issue and another US$150 mn through promoter warrants (US$30 mn already subscribed). A majority of these funds are being invested
into the high growth monolithic construction business (Rs400 mn into equipment, and the rest into working capital) and prefabs (doubling the
capacity of 3 existing plants). Sintex trades at a one-year forward P/E of 16.9X and EV/EBITDA of 9.5X. Goldman Sachs believes that stock has
potential to become 1.8X-2.2X (80%-120% return) on a two-year horizon and has set price target of Rs664.Long term investors can buy into this
counter.
 “MUTUAL FUND” ---BEST FUNDS TO BUY

Top Performers for the Quarter Ended 6th June 2008

Qrtly Return Annual Return
Category Scheme
% %
Open-Ended
FOF DSP Merrill Lynch World Gold Fund -8.96 NA
ETF Quantum Gold Fund -4.80 NA
Arbitrage Fund HDFC Arbitrage Fund - Wholesale 1.60 NA
ETF KOTAK PSU BANK ETF -19.47 NA
Equity-Derivative JM Arbitrage Advantage Fund 1.62 8.64
Equity-Diversified Principal Global Opportunities Fund 10.95 19.35
Equity-ELSS Libra Taxshield 96 0.28 34.99
Equity-Index LICMF Index Fund - Sensex Plan 0.30 8.00
FOF ING Global Real Estate Fund 16.36 NA
Sectoral-Auto UTI Transportation and Logistics Fund -7.94 -17.76
Sectoral-Bank Reliance Banking Fund -10.33 15.09
Sectoral-Basic UTI Petro Fund -8.62 -11.24
SBI Magnum Sector Funds Umbrella -
Sectoral-FMCG 6.14 13.34
FMCG Fund
Sectoral-Healthcare J M Healthcare Sector Fund 11.34 3.41
ICICI Prudential Infrastructure Fund -
Sectoral-Infrastructure -4.68 NA
Institutional Option - I
Sectoral-Media and
Reliance Media and Entertainment Fund -11.94 -8.51
Entertainment
Sectoral-Pharma UTI Pharma and Healthcare Fund 10.87 1.90
Sectoral-Power Reliance Diversified Power Sector Fund -5.50 45.96
Sectoral-Services Tata Service Industries Fund -4.57 -8.61
Sectoral-TMT Franklin Infotech Fund 22.08 -13.06
FOF DWS Global Thematic Offshore Fund 14.38 NA
Gilt Canara Robeco Gilt PGS 2.19 10.95
Income Franklin India International Fund 5.48 10.79
DBS Chola Liquid Fund - Super
Liquid 13.13 13.52
Institutional
DWS Money Plus Advantage Fund -
Liquid - Plus 1.68 NA
Institutional
MIP DBS Chola Monthly Income Plan - Regular 3.02 26.88
Balanced ICICI Prudential Blended Plan A 1.67 8.84
FOF FT India Dynamic PE Ratio Fund of Funds -0.42 14.64
MANSUKH BEST MF PICKS – METHODOLOGY
Mansukh mutual fund Best Picks is based on the corpus of the scheme and relative performance of the
scheme within its peer group weighted by:
 The performance over 5 time horizons, with the maximum weightage given to its one-year
performance.
 The consistency of its performance.
 Relative age of the scheme.
 MANSUKH RESEARCH
CRUDE RALLIES TO US$138 ON WEAK DOLLAR,POOR DATA

Crude oil surged more than $10 a barrel to a record as the dollar weakened after the U.S. unemployment
rate grew the most in two decades and Morgan Stanley said prices may reach $150 within a month. Oil
may ``spike'' because ``Asia is taking an unprecedented share'' of Middle East exports, Morgan Stanley
analyst Ole Slorer wrote. The dollar weakened against the euro after unemployment rose to 5.5 percent,
signaling the Federal Reserve may be reluctant to increase interest rates. Oil also rose after an Israeli
minister said an attack on Iran may be necessary. Oil is ``being used as a hedge by speculative buyers for
the weakened dollar,'' said Gary Adams, vice chairman of oil and gas consulting at Deloitte & Touche LLP
in Houston. ``We are seeing that the price will continue to go up as investors look for alternatives.''

Crude oil for July delivery rose $10.75, or 8.4 percent, to settle at $138.54 a barrel at 2:48 p.m. on the
New York Mercantile Exchange. Today's increase was the biggest gain in dollar terms ever and the largest
on a percentage basis since June 1996. Oil rose $11.33 to an all-time high $139.12 a barrel during
trading.

Friday’s rise was bigger than the entire price of oil on Dec. 10, 1998, when crude traded at $10.72 a
barrel. Oil has more than doubled in the past year. Gasoline for July delivery rose 21.35 cents, or 6.4
percent, to $3.548 a gallon in New York after reaching a record $3.565. Regular gasoline at the pump fell
0.3 cent to an average $3.986 a gallon after touching a record yesterday, AAA, the biggest U.S. motoring
organization, said today on its Web site.

Shaul Mofaz, Israel's transportation minister and a contender for the post of prime minister, told the
Yediot Ahronot daily newspaper that Israel will have to attack Iran if it doesn't abandon its nuclear-
development program. The Iranian risk premium, which had left the market for some time, is likely to
return and hover over the market in the next few weeks.

Brent crude oil for July settlement rose $10.15, or 8 percent, to $137.69 a barrel on London's ICE Futures
Europe exchange, a record close, after reaching an all-time high of $138.12 a barrel.With Asia taking an
``unprecedented'' share of Middle East oil, U.S. benchmark West Texas Intermediate crude oil may reach
$150 a barrel by July 4, Morgan Stanley's Slorer said in his report.
BNP Paribas SA, France's biggest bank, boosted its 2008 oil outlook by 19 percent to $124 on climbing
Asian demand for diesel fuel and kerosene. Last month, Goldman Sachs Group Inc. raised its New York
crude-oil price forecast for the second half of this year by 32 percent.

A decline in oil prices earlier in the week came after Congress held hearings on possible energy price
manipulation, and billionaire investor George Soros said an oil price ``bubble'' is working with
fundamentals in the market that may lead to a recession. Prices rose yesterday after European Central
Bank President Jean-Claude Trichet's comment that the bank may raise interest rates next month caused
the dollar to fall against the euro.

Oil has surged to records this year partly because investors have turned to commodities as a hedge
against the falling dollar. The dollar weakened further after the Labor Department said the U.S. jobless
rate increased by half a point to 5.5 percent, the biggest increase since 1986 and higher than every
forecast in a Bloomberg News survey.

Rising unemployment ``is going to lead to a drop in the dollar and higher commodity prices,'' said Phil
Flynn, a commodities trader for Chicago-based Alaron Trading. The Fed will be ``less aggressive in raising
interest rates.''
Workers at Chevron Corp. in Nigeria may strike, a union official said. Chevron has yet to respond to
worker demands that the head of the Nigerian unit be replaced, said Ethelbert Uka, treasurer of the
Petroleum and Natural Gas Senior Staff Association of Nigeria. Daily production of about 450,000 barrels
of crude oil may be threatened, the Lagos-based newspaper Vanguard reported earlier.
 PERSONAL FINANCE

HOW TO SAVE TAXES THROUGH EQUITY?

Three friends met at Naresh`s office to discuss the most popular and interesting of all avenues –
`Equity Avenues`. Most popular are `Equity Linked Savings Scheme` (ELSS) – Tax saving Mutual
Fund and Unit Linked Insurance Plans (ULIP).

Naresh suggested that they start with the Tax saving Mutual Fund (ELSS Fund).Srini insisted,
``Start with the basics, then we will get into intricate details of the avenues``. Raju nodded, he
was an ardent Equity fan and a good part of his investments were into equities, he never went
overboard though.

Naresh started off, ``ELSS have a lock-in of 3 years, they are invariably linked to the performance
of the capital market, hence the risk is inherent. Returns have been very good in the past,
however, lately there has been volatility in the market, which has made investors a little skeptical
about investing in Equities``.

Raju defended his investment pattern, ``I felt the same way, but now I am quite convinced that
equities perform best in the medium term, 3 Yr lock-in is more like a savior, it helps ironing out all
volatility`` he concluded.Naresh mentioned, ``Raju uses Systematic investment Plan (SIP) route
for investment in equities. Rupee cost averaging where you buy more units during a downward
run and lesser units when the markets are charging upwards, actually reduces your risk. SIP is
also easier on your pocket, you can commit as minimum as Rs. 500 p.m``

Srini asked, ``What are the other options within this space?``Raju mentioned, ``There`s Unit
Linked Insurance Plans (ULIP), as interesting as the ELSS fund.``Naresh added, ``it is a heady
mix of Mutual Funds and Insurance, here again you can invest by SIP, you can choose between
Equity/Balanced/Debt based on your risk profile, can also choose a combination of Equity & Debt.
There are 2 distinct features of ULIPs, cumulative withdrawal facility and switching facility``

``Lets say you have invested in ELSS/NSC in 3 consecutive years`, to withdraw each such
installment you need to wait for 3/6 Yrs respectively. Each installment has a block lock-in. Incase
of ULIPs, you can pull out cumulative fund value after the lock in period. Well there is another
interesting aspect of switching. This is a unique opportunity which will help achieve supernormal
returns if you are able to work according to market trends.``

Naresh took it from there. ``You have the opportunity to invest in Debt/Equity/Balanced funds
within ULIP, let`s say markets are moving down and you have put all your funds into equity, now
you can move it across to Debt or Balanced, thereby restricting your downside, and do vice versa
if the market starts moving up.``

Raju queried, ``What should one look for while choosing ELSS or ULIPs?``Naresh answered,
``Both are different asset classes, hence, let us start with ELSS – Choosing right funds is key,
look at various parameters like Fund house, Size of Fund, past performance, fund manager
expertise, load structure etc.,. While choosing a ULIP, you can go for a plan which has staggered
front end charges, the past performance and expertise is key. Broadly, a ULIP will out-perform an
ELSS in about 5 – 7 Yrs. So if you are looking for a shorter period, 3 years, then ELSS would
work out better, but if you are planning for medium-long term financial goal, then ULIP is ideal.
Also, Life cover is an important aspect of financial/tax planning``

Srini drew out his IT projection and declaration to finalize on the investments he wanted to do for
his taxes. Raju thought it was appropriate to leave the two to do the number crunching.(myiris.com)
 SENSEX CONSTITUENTS’ FUNDAMENTALS

COMPANY INDUSTRY CURRENT COMPANY IND EPS BOOK Div% 52 WEEK 52 WEEK
MARKET P/E RATIO P/E VALUE HIGH LOW
PRICE
ACC CEMENT 628 9.27 17.66 67.72 221.3 200 1315 615
Ambuja Cem. CEMENT 85 11.57 15.09 7.39 30.6 175 161 84
BHEL ENGG. 1421 24.34 55.06 58.4 220.1 153 2925 1301
Bajaj Auto AUTO 802 24.38 22.55 32.9 106.6 0 1149 700
Bharti Airtel TELCOM 207 23.01 42.43 9 48.5 0 234 160
Cipla PHARMA 520 34.43 20.22 15.1 66.1 200 1225 506
DLF Ltd PHARMA 2263 10.01 8.81 226 887.1 300 4074 2152
Grasim Inds. CEMENT 2347 33.75 23.34 65.3 420.6 250 3257 1724
HDFC NBFC 1237 27.59 46.89 43.4 324.3 85 1825 1050
HDFC Bank BANKING 236 29.25 54.47 8.06 6.5 900 256 170
Hind Unilever FMCG 176 7.53 28 23.3 132.7 0 223 135
Hindalco Inds METAL 771 20.63 9.09 37.4 417.5 110 1465 720
ICICI Bank BANKING 1993 25.5 48.92 72.5 235.8 665 2140 1212
Infosys Tech. IT 213 25.75 28.86 8.3 31.8 350 239 150
ITC FMCG 201 38.64 24.49 5.2 33.3 50 510 128
L&T ENGG. 2682 37.14 92.37 72.2 325.9 850 4670 1863
M&M AUTO 582 14.69 19.03 39.6 176.8 115 872 543
Maruti Suzuki AUTO 753 12.57 19.22 59.9 291.3 100 1252 700
NTPC POWER 166 18.42 28.17 9 63.8 35 291 149
ONGC OIL & GAS 939 12.21 19.06 76.87 289.5 310 1387 770
Ranbaxy PHARMA 507 37.74 43.18 13.43 68 170 541 300
Rel Comm. TELECOM 547 43.64 66.74 12.5 116.1 15 844 467
Rel Energy POWER 2239 21.21 52.45 103.7 542.7 130 3252 1640
Reliance Ind. PETROLEUM 1101 24 33.01 45.9 433.8 63 2632 508
Satyam Comp IT 509 19.91 21.7 25 109.5 175 544 305
St Bk of India BANKING 1335 12.61 26.14 103.3 772.4 215 2397 1206
Tata Motors AUTO 540 10.85 15.51 49.8 202.8 150 840 523
Tata Steel STEEL 823 13.82 15.17 59.56 259.8 155 970 471
TCS IT 960 20.86 27.06 43.6 111.4 1400 1244 730
Wipro IT 505 24.51 25.27 20.6 78.7 300 556 325
SENSEX NIFTY

Date Open High Low Close Date Open High Low Close
16,591.4 16,632.7 15,991.2 16,063.1 2-Jun-08 4869.25 4908.8 4713 4739.6
2 June 6 2 1 8 3-Jun-08 4739.3 4739.3 4634 4715.9
15,851.7 15,985.4 15,709.5 15,962.5 4-Jun-08 4718.7 4731.5 4564.5 4585.6
3 June 2 0 1 6 5-Jun-08 4586.95 4690.6 4536.25 4676.95
15,992.9 15,992.9 15,442.3 15,514.7 6-Jun-08 4680.55 4746.3 4614.25 4627.8
4 June 0 0 4 9
15,479.6 15,814.8 15,314.0 15,769.7
5 June 5 0 2 2 FII
15,914.4 15,970.7 15,526.5 15,572.1
6 June 1 0 0 8 ACTIVITY
REPORTING DEBT/EQUIT GROSS GROSS NET
DATE Y PURCHASE SALES INVESTME
S NT
Rs.Cr.
Rs.Cr. Rs.Cr.
Jun 06,2008 Equity 3739.6 5158.5 -1419
Debt 0 30 -30
Jun 05,2008 Equity 3245.7 4070.9 -825.2
Debt 0 15 -15
Jun 04,2008 Equity 2966.8 3919.2 -952.3
Debt 0 25 -25
Jun 03,2008 Equity 2483.2 2832.5 -349.3
Debt 0 0 0
Jun 02,2008 Equity 4215.2 3960.6 254.6
Debt 0 0 0
 Mansukh Classroom
WHY FUTURES TRADING SHOULDN’T BE BANNED?
There has been a sharp rise in worldwide food prices. While this has led to renewed Malthusian fears, it is likely that a big supply response is on
its way. Sharp responses of prices to small changes in supply reflect the insensitivity to price of food consumption of an increasingly wealthy
world. While price volatility is not inherently bad, commodity futures markets and hedge funds operating on these markets will help reduce price
volatility.
With high food prices, we are — yet again — in the midst of memories of Malthus: fears of the inability of the planet to support the ever larger
population. As with each edition of this story that has played out in recent centuries, such fears are misplaced.
The simple fact is the average global yields are far, far below what is possible with contemporary science. Vast tracts of land in the world — e.g.
in India — have extremely poor yields. High prices generate the incentives for increasing yield. This process, of prices sending out signals and
yields then going up, has been going on for centuries.

The socialist vision sees humans as inflexible and slightly stupid, who then need to be told what to do by the government. The single great idea
of economics is that people respond to incentives. When prices change, far-reaching changes take place in response. There are reports that in
Afghanistan, farmers have switched from growing opium to wheat owing to higher wheat prices!
Some elements of this response are already visible. The global production of wheat and rice will reach record levels this year. World wheat
production in 2008-09 will be up 8%. Much more will come by way of this response as individuals and firms rethink how to play a world with
higher food prices.
While high food prices are seen as a problem, it is important to emphasise that these very high prices are doing the work of sending out
incentives for higher production and lower consumption. Prices are the messenger. Our attempts at artificially preventing price volatility amount
to shooting this messenger, and thus preventing the adjustments in the real economy, which solve the problem. It is fashionable in India to think
that volatility is bad, that there is a dichotomy between the "real" economy and "financial prices". But volatility — i.e. changing prices — is the
essence of how the market economy works. The people who dislike volatility are perhaps yearning for a socialist paradise where prices do not
change. This is not how the market economy works.

Why did prices go up so sharply in the last three years? Many hypotheses that are getting a lot of press, such as the role of futures markets,
rising demand in India and China and the shift to biofuels, should be viewed with caution. The growth acceleration of India and China dates back
to 1978-79. Futures markets have been around for centuries. The land that has shifted to biofuels is tiny.
One element of an explanation is based on focusing on the imbalance between supply and demand. There were some small supply shocks (the
shift to biofuels; ten consecutive droughts in Australia). How much do prices have to move in response? Prices have to move by as much is
needed to equate supply and demand.

This makes us ask: How much do prices have to rise to crimp off demand? If you are buying a naan, the embedded wheat cost in it is roughly Re
1. A 50% rise in the price of wheat only increases the wheat cost to Rs 1.5. A large change in wheat prices does not substantially change
demand for naan. With growing affluence, the price elasticity of food demand goes down. Hence, when a small imbalance came along, prices
had to move sharply in order to clear the market.
This reasoning links up to demand for meat. Making a kilo of meat requires 2-8 kilos of grain. In a poor country, when food prices go up, people
cut back on meat consumption, thus freeing up a lot of grain. But as the world becomes affluent, price sensitivity goes down; people eat meat
even though prices have gone up. When a supply-demand imbalance appears, large changes in the price are required to eliminate the gap.
This same price inelasticity will operate in the reverse direction. When the supply response comes about in 2008 and 2009, food prices will have
to drop sharply because consumers are so price-insensitive in their demand for food. (See http://tinyurl.com/5evn3s).
It thus seems that as the world gets more prosperous, food price volatility goes up. In the olden days, there would have been calls for more
government commodity stabilisation funds. But we now know that these government interventions in agriculture do not work.

The right way to confront volatility is to emphasise commodity futures markets and hedge funds. Commodity futures markets produce early
warnings about future supply-demand imbalances. Hedge funds have the ability to put capital behind the job of holding buffer stocks. When the
futures markets show a high price at a future date, hedge funds are uniquely able to carry inventories into that future date, thus smoothing out
price fluctuations, and vice versa. The integration between the world of commodities and financial firms is thus a critical element of the response
to this new world of high commodity price volatility. There is a good long-term business potential in the fields of global commodity futures and
global hedge funds focused on commodities.

Recent events have demonstrated that there is only one food market: the world food market. Through imports, exports and smuggling, Indian
food prices are increasingly integrated into the world. Events all around the world are now tightly interlinked. It should be a wake-up call for the
Indian private sector and agricultural bureaucracy, which has tended to view India as an island that is unconnected with the world. What we now
need is an unabashedly international perspective on production, prices and commodity futures trading. We need to position ourselves as an
integral and important part of the world economy when it comes to food. We should be using the world as our buffer stock, exporting when our
harvest comes along and importing at other times of the year.

DISCLAIMER: This Weekly Newsletter is an expression of research team as done

by Mansukh Securities & Finance Ltd. It is neither a market prediction nor an
advisory or suggestion to buy or sell any types of securities or investment. This is an
educational and learning exercise, only to share with investors our method of
analysis. Trading and Investing MUST always be done with prudent money
management and use of stop losses. One bad trade can ruin the trader, so always
keep risk low. For any query, suggestion and feedback write to
Mr. Vishwesh Chandra Shrivastav: vishwesh@moneysukh.com
Mr.Gagan Sharma: gagansharma@moneysukh.com