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The comparative market movement, volatility, movement of key indices and

investments by FIIs and Domestic Institutional Investors are discussed below.

The Sensex fell by 5.91% from 20,045.18 on September 24, 2010 to 18,860.44
on January 14, 2011. Nifty fell by 6.04% from 6,018.3 on September 24, 2010
to 5,654.55 on January 14, 2011.

The broad based S&P CNX 500 index fell by 7.45% from 4934.2 on September
24, 2010 to 4,567.75 on January 14, 2011.

The annualised volatility for Sensex, Nifty and S&P CNX 500 was 17.86, 18.01
and 17.86 respectively.

1.2.1 Volatility and Returns

The movement of global markets and corresponding returns/volatility are as

follows:

Daily Annualised
September January 14, Return
Index Volatility Volatility
24, 2010 2011 (%)
(%) * (%) **
India (Sensex) 20,045 18,860 -5.91 1.13 17.86
India (Nifty) 6,018 5,655 -6.04 1.14 18.01
India (S&P CNX
500) 4,934 4,568 -7.45 1.13 17.86
U.S.A. (Dow) 10,860 11,787 8.54 0.68 10.74
Nasdaq (CCMP) 2,381 2,755 15.71 0.81 12.86
U.K. (FTSE) 5,598 5,808 7.21 0.86 13.59
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France (CAC) 3,782 3,983 5.31 1.07 16.96

Japan (NIKKEI) 9,603 10,499 9.33 1.03 16.22
Hong Kong (HSI) 22,341 24,283 8.69 1.06 16.78
S Korea (KOSPI) 1,861 2,108 13.29 0.75 11.79
Taiwan (TWSE) 8,167 8,973 9.87 0.69 10.96
Indonesia (JCI) 3,398 3,569 5.05 1.21 19.21
Malaysia (KLCI) 1,451 1,570 8.18 0.48 7.56
Philippines
(PCOMP) 4,079 4,132 1.30 1.09 17.21
Singapore (FSSTI) 3,093 3,246 4.96 0.69 10.84
Thailand (SET) 952 1,032 8.44 0.96 15.13
China (SHCOMP) 2,611 2,791 6.89 1.48 23.43

* The data is only for the days when trading has taken place in the above
mentioned indices. Daily Volatility is computed as Standard deviation of log of
daily returns over the period.
**Annualised Volatility is calculated by multiplying the daily volatility with the
square root of no. of trading days in a year

From the above table, a rising trend has been observed among all the global
markets except Indian markets, during the period. Nasdaq has been the best
performer among its peers with a gain of 15.71%. S&P CNX 500 (India) has
been the worst performers with a fall of 7.45%. Indian markets have overall
been worst performers during the period with fall of around 6% in both NSE and
BSE.
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1.2.2 Sector-wise Performance

The moyTt and return of BSE Sectoral Indices are given in the table below:
Daily Annualised
September January Return
BSE Index Volatility (%) Volatility
24, 2010 14, 2010 (%)
* (%) **
Health Care 5,976 6,483 8.50% 0.93 14.74
IT Index 5,973 6,439 7.80% 1.21 19.12
BSE Teck 3,737 3,814 2.07% 1.08 17.08
FMCG 3,752 3,586 -4.43% 1.09 17.28
Capital Goods 15,842 13,818 -12.78% 1.21 19.08
BSE Realty 3,696 2,524 -31.70% 2.29 36.15
*The data is only for the day when trading has taken place in the above
mentioned indices. Daily Volatility is computed as Standard deviation of
daily log of returns over the period.
** Annualised Volatility is calculated by multiplying the daily volatility with
the square root of no. of trading days in a year

From the above table it can be observed that Health Care sector, with an
increase of 8.50% has been the best performer among all sectoral indices
during the period. BSE Realty has been the worst performer during the same
period with a fall of 31.70%. Capital Goods sector has also underperformed the
Sensex and registered a fall of 12.78%.

1.2.3 Trading Volume

Average daily turnover

The average daily combined turnover of BSE and NSE in the cash market along
with daily delivery percentage and turnover in the F&O segment is tabulated
below:
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Month Average Daily Average Average Daily Average

Turnover Cash Daily Delivery F&O Turnover Daily F&O
Market BSE and % at NSE (No. of Turnover
NSE( Rs. for BSE and Contracts) (Rs. Crores)
Crores) NSE
Apr-10 18,523 27.54% 2,911,528 83,581
May-10 17,519 25.86% 3,855,263 101,166
Jun-10 17,209 25.28% 3,503,549 92,527
Jul-10 16,887 28.36% 3,079,855 83,178
Aug-10 19,313 28.21% 3,350,547 93,351
Sep-10 20,891 29.97% 4,432,840 130,304
Oct-10 22,808 28.51% 4,323,858 134,500
Nov-10 22,336 28.35% 4,704,726 141,231
Dec-10 17,122 26.21% 3,647,378 107,141
Jan-11* 17,273 27.18% 4,775,830 140,759
*Data till Jan 14, 2011

From the above table, it is observed that the average daily turnover in cash
markets on BSE and NSE showed an increasing trend from July 2010 till
October 2010. However, it has showed a declining trend from October, 2010
onwards. The average daily turnover in cash segment is Rs. 17,273 Crores in
Jan 2011(till 14th), which is lowest in last Ten months. The average daily
turnover in derivatives segment of NSE has shown an increasing trend in the
financial year 2010-11 since July 2010, except December 2010. In January,
2011 average daily turnover in derivatives segment is Rs. 140,759 Crores. The
graphical representation of average daily turnover in cash market across BSE
and NSE vis-à-vis Sensex and Nifty is as follows:-
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Avg Daily Turnover across BSE and NSE vs Nifty and Sensex
*The corresponding Sensex/Nifty values for the month are of the last day of
that month
** Till January 14, 2011

1.2.4 Institutional Investments

The investment trends by FIIs and Domestic Institutional Investors (DIIs) during
the period and a comparison with the previous months is shown in the table
below:

FII Investment in Equity ( Rs. crore)

Net
Gross
Months Gross Sales Purchase /
Purchases
Sales
Apr-10 57,377 48,015 9,361
May-10 52,192 61,629 (9,437)
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FII Investment in Equity ( Rs. crore)

Net
Gross
Months Gross Sales Purchase /
Purchases
Sales
Jun-10 52,640 42,131 10,508
July-10 64,082 46,424 17,658
Aug-10 61,973 50,788 11,186
Sep-10 78,498 54,885 23,612
Oct-10 77,706 63,318 14,388
Nov-10 80,141 74,623 5,518
Dec-10 58,802 59,444 (641)
Jan-11* 27,934 32,213 (4,279)
Total 774,221 675,701 98,519
*Data till Jan 14, 2011 Source: NSE
Website

From the above table, it is observed that the FIIs have been net buyers in most of
the months of financial year 2010-11. However they have turned into net sellers in
the months of December 2010 and January 2011 (till 14th). In the month of January
2011 (till 14th), FII have been net sellers to the tune of Rs. 4,279 Crores. The
graphical representation of Net FII Investment vis-à-vis Sensex and Nifty is as
follows:-
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Net FII Purchase/Sale vs. Sensex & Nifty

*The corresponding Sensex/Nifty values for the month are of the last day of that month
** Till jan 14, 2011

DII Investment in equity at BSE and NSE ( Rs. crore)

Gross Gross Net
Month Purchase Sales Purchase/Sale
Apr-10 26,283 24,093 2,191
May-10 29,972 23,611 6,361
Jun-10 23,549 28,326 (4,777)
July-10 25,349 31,672 (6,323)
Aug-10 26,294 30,808 (4,514)
Sep-10 25,010 37,931 (12,920)
Oct-10 28,069 39,881 (11,812)
Nov-10 32,752 30,259 2,492
Dec-10 26,871 27,353 (481)
Jan-11* 21,408 17,072 4,336
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DII Investment in equity at BSE and NSE ( Rs. crore)

Gross Gross Net
Month Purchase Sales Purchase/Sale
Total 265,557 291,006 (25,447)
*Data till Jan 14, 2011 Source: NSE
Website

From the above table, it is observed that in the during most of the months of the
financial year 2010-11, Domestic Institutional Investors (DIIs) viz. Banks,
Insurance Companies, Mutual Funds etc. have been net sellers. From June
2010 till October 2010 DIIs are net sellers to the tune of Rs. 40,346 Crores as
compared to the period from April 2010 to May 2010, wherein DIIs have been
net buyers to the tune of Rs. 8,552 Crores. In January 2011, DIIs have been net
buyers to the tune of Rs. 4,336 Crores. The trend clearly indicates that the
trading pattern of DIIs is opposite to that of FIIs. The graphical representation of
Net DII Investment vis-à-vis Sensex and Nifty is as follows:-

Net DII Purchase/Sale vs. Sensex & Nifty

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*The corresponding Sensex/Nifty values for the month are of the last day of that month
** Till Jan 14, 2011

1.3 Currency Futures:

As on date three Exchanges viz. NSE, MCX and USE are offering trading
platform in Currency Futures (for all currency pairs). The Average Daily
Currency Futures Turnover data for NSE, MCX and USE are given below:

Period NSE MCX USE**

Average Average Average Average Average Average
Daily Daily Daily Daily Daily Daily
Currency Currency Currency Currency Currency Currency
Futures Futures Futures Future Futures Future
(No. of Turnover (No. of Turnover (No. of Turnover
Contracts) (Rs. Crore) Contracts) (Rs. Crore) Contracts) (Rs. Crore)
Apr-10 4,057,114 18,207 4,295,124 19,651 NA NA
May-10 3,887,244 17,984 4,487,588 21,154 NA NA
Jun-10 3,174,433 14,881 4,037,023 19,322 NA NA
Jul-10 2,042,038 9,698 3,018,872 14,546 NA NA
Aug-10 2,030,458 9,583 2,903,200 13,858 NA NA
Sep-10 3.079,323 14,235 3,940,384 18,309 5,910,089 27,203
Oct-10 3,228,279 14,486 3,810,805 17,068 2,573,671 11,514
Nov-10 2,637,938 12,052 3,474,438 15,821 829,264 3,733
Dec-10 2,221,428 10,161 2,744,945 12,546 300,567 1,362
Jan-11* 2,576,326 11,846 3,662,835 16,812 362,964 1,646
*Data till January 14, 2011 **Trading on USE
commenced on Sep 20, 2010

The above table shows that both NSE and MCX have witnessed decline in the
average daily turnover in currency futures market in the financial year 2010-11.
The average daily turnover has declined from Rs. 18,207 Crores and Rs. 19,651
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Crores in April 2010 to Rs. 11,846 Crores and Rs. 16,812 Crores in January
2011 for NSE and MCX respectively.

USE has also started its operations from September 20, 2010. The average
daily turnover on USE for September 2010 was Rs. 27,203 Crore. USE has
been witnessing steep decline in the average daily turnover after September
2010. In January 2011, the average daily turnover at USE has been only Rs.
1,646 Crores.

1.4 Significant Surveillance actions

1.4.1 Order in the matter of Sanjay Dangi

SEBI had received a reference from Income Tax Department, containing certain
findings in the matter of Murli Industries Limited. A plain reading of the certified
true copy of documents, which IT Department had found during their survey at
the offices of the company, prima facie indicated a well laid down strategy
planned by promoters of the company who had floated 10 dummy entities, who
along with Mr. Sanjay Dangi to manipulate the share price of the company
before the issuance of the FCCBs.

Examination revealed that that the aforesaid entities and the persons connected
with them have prima facie violated Section 12A of the SEBI Act, 1992,
Regulations 3 and 4 of the SEBI (Prohibition of the Fraudulent and Unfair Trade
Practices Relating to Securities Market) Regulations 2003, Regulation 3 of the
SEBI (Prohibition of Insider Trading) Regulations, 1992 and Regulations 10 and
11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
1997.

In view of the above, SEBI passed an ex-parte ad-interim order dated December
02, 2010 inter-alia directing
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1. Entities connected to Sanjay Dangi and promoter/promoter related

entities of Murli Industries Limited, Ackruti City Limited, Welspun Corp.
Limited and Brushman India Limited not to buy, sell or deal in the
securities in any manner till further directions in this regard, and
2. Stock brokers namely, Sanchay Fincom Limited, Sanchay Finvest Limited
and Ashika Stock Broking Limited not to buy, sell or deal in the securities
in their own/proprietary account in any manner till further directions in this
regard.

(This portion has been excised for reasons of confidentiality)

This Memorandum is submitted for information of the Board.