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The IMF, in its World 

Economic Outlook, has 

lowered its forecast for 

world growth and cited 

significant risks to 

the economic outlook 

For Private Circulation Volume 1 Issue 56 10th Oct ’11

Volume 1 Issue: 56, 10th Oct ’11 

Editor-in-Chief & Publisher: Rakesh Bhandari 

Editor: Tushita Nigam 

Senior Sub-Editor: Kiran V Uchil 

Art Director: Sachin Kamble 

Junior Designer: Sagar Padwal 

Marketing & Operations: 

Savio Pashana 

Research Team: 

Sunil Jain, Kunal Shah, Michael Pillai, 

Sunit Mehta, Vikash Bairoliya, 

Silky Jain 

HEAD OFFICE 

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Fort, Mumbai - 400001 

Tel. 022-3926 7500/7501 

CORPORATE OFFICE 

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Lower Parel (W), Mumbai - 400 013 

Tel: 022 - 3926 8000/8001 

We, at Beyond Market welcome your views, 

comments and feedback. Do help us to grow 

better as per your liking. This is our attempt to 

reach you better while crossing horizons... 

Web: www.nirmalbang.com 

beyondmarket@nirmalbang.com 

Tel No: 022 - 3926 8047 

DB Corner – Page 5 

Satanic Verses 

The IMF in its World Economic Outlook has lowered its forecast for world growth and 

cited significant risks to the economic outlook – Page 6 

Rate Hikes: No End In Sight 

In the current scenario where inflation refuses to be tamed and global concerns 

continue to worsen with each passing day, rate hikes seem to be an inevitable option 

for the RBI – Page 9 

Sharp Foresight 

Although certain rules for the setting up of new banks seem a bit unfair, it is not 

without reason that the RBI is treading cautiously – Page 12 

Vibrant Gujarat Gets Future Progressive 

Investor-friendly policies, uninterrupted power supply, road connectivity and 

availability of trained workforce are reasons enough for corporates to flock to the 

western state of Gujarat – Page 16 

Hoping For A Festive Revival 

Vehicle companies are expecting sales to rise during the festive season, but hike in 

interest rates and fuel prices could halt their upward journey – Page 20 

Government’s Co(a)ld Shoulder 

Despite the immense potential of the coal sector, key challenges and issues are 

stopping this industry from growing to the hilt – Page 23 

For Memory’s Sake 

The growing number of patients suffering from Alzheimer’s is indicative of the 

tremendous opportunity offered by this segment to pharma companies – Page 26 

Dena Bank: In A Favourable Position 

A large number of factors seem to be favouring the growth trajectory of the Gujaratbased 

public sector bank – Page 28 

Fortnightly Outlook For Commodities – Page 32 

Fortnightly Outlook For Currencies – Page 33 

Wooing Foreign Investors 

The announcement to permit QFIs to invest in mutual fund schemes will enable them 

to have direct access to the Indian mutual fund industry, thus widening the class of 

investors in the Indian capital market and also help in reducing the volatility in the 

markets – Page 34 

Advising The Advisors 

The concept note on the regulation of investment advisors proposes certain positive 

practices for advisors and distributors, thus aiding investors in choosing the right 

products for their investment portfolios – Page 38 

Important Statistics for the Fortnight Gone By – Page 40 

A Mind of Its Own 

The knowledge of behavioural finance can help market participants to recognize and 

avoid bias and errors in their decisions – Page 44 

Beyond Market 10th Oct ’11 It’s simplified... 3

4 

PROPHECY OF DOOM 

The repercussions of the financial crisis of 2008 can be felt even today. Despite the revival in growth due to the huge bailouts by 

western banks, fiscal stimulus and easy monetary policies, the threat of economic imbalances, debt defaults by countries and 

burgeoning inflation persist. The financial mayhem, evident from the growing debt numbers, coupled with slow growth, is affecting 

large economies like the US and Europe. The irony, however, is that the economies that were actually trendsetters are now being 

looked at rather suspiciously. 

The recent report on the outlook for the world economy by the IMF is testimony to these issues. In its report, the IMF has lowered 

its forecast for world growth and also mentioned the various reasons that could play spoilsport. According to the chief economist at 

the IMF, the world economy has entered into a “dangerous new phase”. 

Since the IMF is looked upon by nations around the world due to the role it plays in fostering global monetary cooperation, securing 

financial stability, facilitating international trade, promoting employment and sustainable economic growth and reducing poverty 

around the world, this report by the organization is very significant. We have tried to decipher this report in our cover story. 

In this issue, we have also shed light on the recent rate hike announced by the RBI with the aim to control rising inflation and other 

issues that continue to be impediments to economic growth of India. 

There is also an interesting article on how Gujarat, also known as the ‘land of the legends’, has attracted investments not only from 

within the county but also from international investors on the back of factors like strategic location, business-friendly policies, 

robust infrastructure, superior manpower and abundant natural resources, to name a few. Through the Vibrant Gujarat Summit, the 

state government has managed to garner investments from all over the world and facilitate expansion of local companies overseas. 

Further, focused initiatives have helped Gujarat achieve tremendous growth, leaving behind all the other states in the country as far 

as development is concerned. 

Sectorally speaking, there are articles on banking, automobile and coal industries, among others. The piece on the banking sector 

elaborates on the cautious approach undertaken by the RBI in doling out new banking licenses. As far as the auto industry goes, 

companies are going all out to woo customers during the festive season to revive sales. And despite the immense opportunities 

offered by the coal sector, several challenges still weigh heavily on the industry. 

Apart from these, there is an article on the investor-friendly initiative undertaken by the market regulator, the Securities and 

Exchange Board of India (SEBI). It recently proposed a concept note on regulating investment advisors. This concept paper is also 

aimed at clarifying the role of the middlemen involved in the process, thus helping investors make the right investment decisionS. 

Beyond Market 10th Oct ’11 

Tushita Nigam 

Editor 

It’s simplified...

T 

Overall, the markets 

look weak at the moment. 

he previous fortnight saw 

two key announcements 

that will have a bearing 

on the Indian economy. 

In the first one, the Reserve Bank of 

India (RBI) hiked key interest rates in 

line with expectations with the aim to 

control inflation, which continues to 

worry policymakers. 

Secondly, the government announced 

a 32% increase in its borrowing plan 

for the second half of the current 

fiscal year ending March ’12 and 

cited the lower-than-expected cash 

surplus at the start of the financial 

year and revenue shortfall under the 

small savings scheme for the move. 

However, this increase in borrowing 

costs is likely to negatively impact 

banking stocks. 

Overall, the markets look weak at the 

moment. The Nifty has strong support 

at the 4,680 level. If this level breaks, 

then market participants are advised 

to avoid buying. 

Instead, they should sell at every rise 

in the next fortnight until there is any 

positive news at both the global and 

domestic levels. 

Fresh buying should be considered 

only after the quarterly results are 

announced. The street expects the 

quarterly results of India Inc to be 

volatile, especially due to foreign 

exchange movement and the 

depreciation of the Indian rupee. 

Companies with higher exposure to 

foreign exchange debt and imports 

will have a negative impact, while 

those into exports are likely to benefit 

from the rupee depreciation. 

The sharp correction in metal and 

crude oil prices too may add to the 

volatility, because of which 

companies will be forced to book 

inventory losses. 

Traders and investors also need to 

watch out for the developments in the 

Euro zone as the debt crisis remains a 

cause of concern. 

The European government is looking 

at lending support to the banks and 

leveraging its bailout fund - the 

European Financial Stability Facility 

(EFSF) - to prevent them as well as 

other nations from being affected, in 

case Greece defaultS. 

Nifty: 4,752.35 

Sensex: 15,792.41 

(As on 5th Oct ’11) 

Disclaimer 

It is safe to assume that my clients and I may have 

an investment interest in the stocks/sectors 

discussed. Investors are required to take an 

independent decision before investing. 

Investment in equity is subject to market risk. Our 

research should not be considered as an advertisement 

or advice, professional or otherwise. The 

investor is requested to take into consideration all 

the risk factors including their financial condition, 

suitability to risk return profile and the like and 

take professional advice before investing. 


6 

The IMF, in its World 

Economic Outlook, has 

lowered its forecast for 

world growth and cited 

significant risks to 

the economic outlook 


The global economic 

uncertainty is getting 

murkier and murkier with 

each passing day. Recently 

the US Fed talked about significant 

risks to the US economic growth in 

the back drop of the global 

environment and its internal issues. 

Few days back Washington-based 

international financial institution, the 

International Monetary Fund (IMF) in 

its report on the world economic 

outlook started with the theme of 

“slowing growth, rising risk”. In its 

opening remarks, it says relative to 

the previous world economic outlook 

presented in April, the economic 

recovery has become more uncertain. 

The world economy suffers from the 

confluence of two adverse 

developments. The first is the slower 

recovery in advanced economies 

since the beginning of the year, a 

development largely failed to be 

perceived as it was happening. The 

second is the large increase in fiscal 

and financial uncertainty, which has 

been particularly pronounced since 

August. And each of these 

developments is worrisome. 


It says with accumulating signs of 

weaknesses in key advanced 

economies, including the bad news 

about the US economy over the past 

couple of months, equity markets 

have fallen sharply and equity price 

volatility has jumped up too and 

prices for strong sovereign bonds and 

gold have risen - all signs that 

investors have become more cautious 

about the prospects for the major 

advanced economies. 

The US economy has been in the 

news over the past couple of months. 

The US government passed the debt 

ceiling bill raising the debt limit to 

$14.3 trillion or (equal to its size of 

GDP) in July ’11. The move allowed 

the US government to borrow more 

and thus accommodate monetary 

easing. This came along with the 

downgrade of the US sovereign debt 

rating from AAA to AA+. 

GROWTH & DOWNSIDE RISKS 

The IMF has cut the world economic 

growth forecast by 30 basis points for 

the current calendar year to 4% and 

50 basis points for the next year to 4% 

as compared to its estimates in June 

this year. 

However, more than economic 

growth, which is more or less coming 

down, the IMF draws attention 

towards the uncertainty and the 

downside risk to the global economy. 

The IMF said that the global economy 

is in a dangerous new phase. Global 

activity has weakened and become 

more uneven, confidence has fallen 

sharply recently and downside risks 

are also growing. 

It projects that the real GDP growth in 

the advanced economies, which 

includes the US, Europe, Japan and 

others could expand at an anaemic 

pace of about 1.6% in calendar year 

2011. This is almost 150 basis point 

lower than the GDP growth of 3.1% 

in the year 2010. 

More importantly, this is the base case 

scenario that there are downside risk 

to these estimates, which means if 

some of the concerns or risks 

mentioned in the report come true, 

growth could even be lower. 

Economic Growth (%) 

World 

US 

Euro 

Japan 

China 

India 

Source - IMF 

2009 

-0.7 

–3.5 

–4.3 

–6.3 

9.2 

6.8 

2010 

5.1 

3 

1.8 

4 

10.3 

10.1 

2011 

4 

1.5 

1.6 

–0.5 

9.5 

7.8 

2012 

4 

1.8 

1.1 

2.3 

9 

7.5 

It said that risks to the outlook remain 

large and downside risks dominate 

upside risks. The probability of global 

economic growth-now pegged at 4%- 

below 2% is appreciably higher than 

April ’11 when the world economic 

outlook was presented. 

FEAR OF THE UNKNOWN 

The report highlights that the markets 

have clearly become more sceptical 

about the ability of many countries to 

stabilize their public debt. The 

worries, which were till some time 

lilted towards the few small countries 

on the periphery of Europe, have 

spilled over to other regions like 

Japan and the US, among others in the 

developing world on the back of fresh 

concerns over economic growth. 

Further, the evolving sovereign crisis 

in the developing world has translated 

into worries about the impact on the 

banks, which holds these sovereign 

bonds, mainly in Europe. With the 

uncertainty about the debt, the 

concerns over the flow of liquidity 

and tight lending have surfaced. 

The IMF in its report has prepared a 

downside scenario where different 

factors have been analyzed to present 

the magnitude of the impact. Broadly, 

the scenario includes the kinds of 

shocks that could arise mainly in 

three regions including the European 

countries, the US as well as emerging 

Asian economies. 

First is the ongoing crisis in the Euro 

zone, which already seems to be 

running beyond the control of 

policymakers. The shock is to bank 

capital, reflecting primarily 

recognition of losses on holdings of 

public debt but also of other losses on 

loans arising from the 

macroeconomic fallout. 

The report also says that vulnerable 

sovereigns are prone to a sudden loss 

of investor confidence in their debt 

sustainability if fundamentals 

deteriorate sharply. European banks 

have a large exposure to the sovereign 

debts of countries, which are in the 

news for the wrong reasons, including 

the risk of default. 

With this background the chances of 

recapitalization is low considering 

that the investors will become 

risk-averse. Further, the IMF report 

says that these banks rely on 

wholesale funding, which is prone to 

freezing during financial turmoil. 

This is also the reason why trouble in 

a few sovereigns could quickly spread 

across Europe. And from there it 

could move to the United States by 

way of US institutional investors’ 

holdings of European assets – and to 

the rest of the world. 

In the US, according to the report, the 

shock scenario has two components. 

Of this, first is slower potential output 

growth, which could be lower than 

the expected growth in the economic 

activity. The economic activities in 

the US have already softened and 

pressure is seen in the housing 

markets and employment generation. 


8 

There could be further pressure as a 

result of fiscal consolidation. This 

could be accompanied by accelerated 

de-leveraging and savings resulting 

into lower spending. Second is the 

resulting increase in loan losses, 

which could be the mortgage 

portfolio of banks. 

According to the report, the reasons 

for the shock in emerging Asia could 

probably be loan losses on account of 

poor lending decisions in the past. 

Furthermore, the corporate risk 

premium attached to emerging Asian 

economies is closely correlated with 

the rise in the risk premiums in the 

Euro zone and the United States, 

which was also seen during the 

collapse of the Lehman Brothers. 

In such a scenario, the IMF report 

says that global risk aversion would 

rise sharply and funding rates for 

banks and non-financial corporations 

would shoot up to varying degrees. 

Further, emerging market economies 

would suffer from the slump in 

commodity prices and a sudden 

reversal in capital flows. 

FALLING BACK IN RECESSION 

Under the aforesaid scenario, given 

the limited room for monetary and 

fiscal policy in advanced economies 

to respond vigorously, a serious 

global slowdown would ensue, which 

would undo much of the progress 

since the end of the Great Recession. 

Commodity prices and global trade 

and capital flows are likely to decline 

abruptly, dragging down growth in 

the emerging and developing 

economies. The US and the Euro zone 

would fall back into recession. 

As it happened in the 2008 crisis, the 

cascading impact of lower economic 

activities and falling confidence could 

lead to further correction in the global 

trade, commodity prices and the 


equity markets could globally correct, 

which essentially means the countries 

with higher exposure to commodities 

as a per cent of their overall economy 

could suffer and drag the economic 

growth down further. 

BANKING: THE ROOT CAUSE 

During 2008-09, the financial crisis 

was due to the falling housing prices 

and in turn increase in non 

performing assets (NPAs) or erosion 

in the bond portfolio led to banks and 

financial institutions to default or ask 

for support one after the other. The 

latest IMF outlook report again 

emphasizes on banks and the need for 

adequate capitalization. 

The IMF report said that stock prices 

have fallen. These will adversely 

affect spending in the months to 

come. Indeed, the numbers for the 

month of August indicate that this is 

already being witnessed. 

Low underlying growth and fiscal and 

financial linkages may well feed on 

each other and this is where the risks 

are. Low growth makes it more 

difficult to achieve debt sustainability 

and leads markets to worry even more 

about fiscal stability. Low growth also 

leads to more non-performing loans 

and weakens banks. 

Downside risks are very real. Under 

the most optimistic assumptions, 

growth in advanced economies will 

remain low for some time. During 

that time, banks have to be 

strengthened, not only to increase 

bank lending and baseline growth, but 

also to reduce risks. 

EMERGING MARKETS 

As seen in the recent months, the IMF 

report says that the emerging markets 

will have to deal with volatile capital 

flows. Indeed, some are close to 

overheating, although prospects are 

more uncertain again for many others. 

In its different risk scenarios, it feels 

emerging markets may suffer more 

adverse export conditions. 

The IMF expects the world trade 

growth in volumes to drop from 

almost 13% in 2010 to 7.5% in the 

current year and 5.8% next year. In 

fact, exports growth from emerging 

and developing economies will come 

down drastically from 13.6% last year 

to 7.8% next year. 

Growth (%) 

2009 

2010 

Exports 

Advanced 

Economies 

–11.9 12.3 

Emerging And 

Developing 

Economies 

–7.7 13.6 

World Trade 

Volume 

–10.7 12.8 

Source - IMF 

2011 

6.2 

9.4 

7.5 

2012 

5.2 

7.8 

5.8 

Low exports, coupled with lower 

commodity prices could create 

challenges for low income countries. 

For the Indian economy it says that 

real GDP growth could fall from 

10.1% in calendar year 2010 to 7.8% 

in the current year and 7.5% next 

year. More importantly, it also 

expects consumer prices to cool down 

from the 2010 levels but will remain 

at elevated levels around 8.6% till 

next year. 

In India, the IMF expects activities to 

be supported by private consumption. 

However, it feels that investments are 

expected to remain sluggish, 

reflecting, in part, recent corporate 

sector governance issues and a drag 

from the renewed global uncertainty 

and less favourable external financing 

environment. It also highlights that 

the key challenge for policymakers is 

to bring down inflation, which is 

running close to double digitS. 


RATE HIKES: 

NO END IN SIGHT 

Another rate hike at the 

mid-quarter review of 

the monetary policy on 

16th September was 

anyone’s guess. Provided, they had 

kept track of the economic numbers 

which flowed after 26th July, when 

the Reserve Bank of India (RBI) 

conducted its first quarter monetary 

policy review this year. 

From 7.8% in the quarter ended 

In the current scenario where ination refuses to be tamed and 

global concerns continue to worsen with each passing day, rate hikes 

seem to be an inevitable option for the RBI 

March ’11, the GDP growth 

decelerated to 7.7% in the quarter 

ended June ’11, a stark 1% decline 

from 8.8% in the corresponding 

quarter a year ago. 

Next, the index of industrial 

production (IIP) slowed down to 

around 3.3% in July from 8.8% 

year-on-year (y-o-y) in June. On a 

cumulative basis, during April-July 

’11, the IIP numbers increased by 

5.8% compared with an increase of 

9.7% in the corresponding period of 

the previous year. 

The inflation that is measured in the 

form of wholesale price index (WPI) 

was on a roll with a year-on-year rise 

from 9.2% in the month of July to 

9.8% in August ’11. 

While experts believed that the RBI 

would pause after hiking interest rates 


10 

Movements In Key Policy Rates In India 

Effective Since Reverse Repo Rate Repo Rate 

19 Mar'10 

20 Apr'10 

24 Apr'10 

02 Jul'10 

27 Jul'10 

16 Sep'10 

02 Nov'10 

25 Jan'11 

17 Mar'11 

03 May'11 

16 Jun'11 

26 Jul'11 

16 Sep'11 

11 times since March ’10, the 

macroeconomic numbers proved 

those predictions wrong. With 

inflation continuing to be a 

burgeoning worry, the RBI delivered 

25 basis points (hundred basis points 

make a per cent) hike in the repo rate 

– the rate at which banks borrow from 

the central bank. 

Thus, the 12th interest rate hike led 

the repo rate to increase by a 

cumulative 350 basis points since 

March ’10; it now stands at 8.25% 

and the reverse repo rate – the rate at 

which banks park their excess 

liquidity with the central bank - now 

stands at 7.25%. 

After announcing the monetary 

measure, the RBI said that since its 

policy review of 26th July, the global 

macroeconomic outlook has 

worsened. “There is a growing 

consensus that sluggishness will 

persist longer than expected,” said the 

Reserve Bank of the country in its 

policy release. 

“Domestically, even as many 

indicators point to moderating 

growth, both headline and non-food 


3.50 (+0.25) 

3.75 (+0.25) 

3.75 

4.00 (+0.25) 

4.50 (+0.50) 

5.00 (+0.50) 

5.25 (+0.25) 

5.50 (+0.25) 

5.75 (+0.25) 

6.25 (+0.50) 

6.50 (+0.25) 

7.00 (+0.50) 

7.25 (+0.25) 

5.00 (+0.25) 

5.25 (+0.25) 

5.25 

5.50 (+0.25) 

5.75 (+0.25) 

6.00 (+0.25) 

6.25 (+0.25) 

6.50 (+0.25) 

6.75 (+0.25) 

7.25 (+0.50) 

7.50 (+0.25) 

8.00 (+0.50) 

8.25 (+0.25) 

Cash Reserve 

Ratio (CRR) 

5.75 

5.75 

6.00 (+0.25) 

6 

6 

6 

6 

6 

6 

6 

6 

6 

6 

Source: Reserve Bank of India 

Note: Figures outside the parentheses are in percentage and those in parentheses indicate 

change in policy rates in percentage points. 

manufactured products inflation are at 

uncomfortably high levels. Crude oil 

prices remain high. Food price 

inflation persists, notwithstanding a 

normal monsoon,” the RBI’s policy 

release added. 

The RBI is hoping that stabilization 

of energy prices and moderating 

domestic demand would ease 

inflationary pressures towards the 

later part of 2011-12. 

However, in the current scenario, with 

the likelihood of inflation remaining 

high for the next few months, rising 

inflationary expectations continue to 

be a key risk. “This makes it 

imperative to persevere with the 

current anti-inflationary stance,” said 

the RBI, justifying the ongoing 

hawkishness it has been maintaining. 

In the readings for the month of 

August, inflation with respect to 

primary articles and fuel groups 

edged up significantly. The y-o-y 

non-food manufactured products’ 

inflation rose to around 7.7% in 

August ’11 from 7.5% in the month of 

July ’11, suggesting the prevalence of 

persistent demand pressures. 

Oil marketing companies raised the 

price of petrol by `3.14/ litre with 

effect from 16th September. This, 

according to the RBI, will have a 

direct impact of 7 basis points on the 

WPI, in addition to the indirect 

impact with a lag. 

In the RBI’s view, the latest repo rate 

hike is expected to reinforce the 

impact of past monetary policy 

actions to contain inflation and 

anchor inflationary expectations. In 

its guidance, the RBI has said that the 

monetary tightening carried out so far 

has helped in containing inflation as 

well as anchoring inflationary 

expectations to a certain extent, 

though currently both remain at levels 

that are beyond the Reserve Bank’s 

comfort zone. 

The central bank reiterated that as the 

monetary policy operates with a lag, 

the cumulative impact of the policy 

actions should now be increasingly 

felt in further moderation in demand 

as well as the reversal of the inflation 

trajectory towards the later part of 

2011-12. 

“As such, a premature change in the 

policy stance could harden 

inflationary expectations, thereby 

diluting the impact of past policy 

actions. It is, therefore, imperative to 

persist with the current 

anti-inflationary stance,” said the 

central bank. 

And the global developments are no 

less crucial. Less than two weeks 

from the RBI’s quarterly review in 

July, ratings major Standard & Poor’s 

downgraded the United States to AA+ 

from its prized AAA rating it held 

earlier. And then the concerns over 

the sovereign debt problem in the 

Euro zone have added further 

uncertainty to the prospects of an 

economic recovery. 

In the second quarter (April to June) 


of 2011, the global economy has 

slowed down considerably. On 20th 

Sept ’11, the International Monetary 

Fund (IMF) unveiled the World 

Economic Outlook (WEO) where it 

said that growth, which had been 

strong in the year 2010, decreased in 

the year 2011. 

The IMF forecasted world growth to 

be about 4% in 2011 and also 4% in 

2012. This is down from 4.5% for 

both years that the IMF had predicted 

in April. 

“Now, 4% may not sound too bad, 

but, again, the recovery is very 

unbalanced,” Olivier Blanchard, 

International Monetary Fund’s 

Economic Counsellor and Director of 

Research Department said at the 

WEO briefing. 

“For the year 2011, we see growth of 

6.4% for emerging market countries, 

which is a good number. But only 

1.6% for advanced economies,” 

Blanchard added. 

With uncertainty being the name of 

the game across the global markets 

the sharp increase in financial 

volatility has been prevalent for some 

time now. 

“What has happened is that the 

markets have become more sceptical 

about the ability of policymakers to 

stabilize the government’s public 

debt,” explained IMF’s Economic 

Counsellor Blanchard. 

Worries have spread from countries at 

the periphery of Europe, to countries 

in the core of Europe, and then to 

other nations. Even economies like 

Japan and the United States of 

America have not been spared. 

Worries about sovereigns have 

translated into worries about the 

banks that are holding these sovereign 

bonds, mainly in Europe. And these 

worries have resulted in a partial 

freeze of financial relations with 

banks that are keeping high levels of 

liquidity as well as tightening 

monetary lending. 

A day after the WEO, the IMF issued 

its Global Financial Stability Report, 

where José Viñals, IMF’s Financial 

Counsellor and Director of the 

Monetary and Capital Markets 

department said that since IMF’s 

previous report, financial stability 

risks have increased substantially, 

reversing the progress that had been 

made over the previous three years. 

“So we are back in the danger zone,” 

said Viñals. 

As we have moved into a new 

political phase of the crisis, several 

shocks have recently buffeted the 

global financial system, including 

unequivocal signs of a broader global 

economic slowdown, the French 

market turbulence in the Euro zone 

and not to forget the credit downgrade 

in the US. 

“This has thrown us into a crisis of 

confidence, which is being driven by 

three main factors: weak growth, 

weak balance sheets and weak 

politics,” maintained Viñals. 

“Developments in the global 

economy over the past few weeks are 

a matter of serious concern,” said the 

RBI. Growth momentum is 

weakening in the advanced 

economies amidst heightened 

concerns that recovery may take 

longer than expected. 

“Although India’s exports have 

performed extremely well in the 

recent period, this trend is unlikely to 

be sustained in the face of weakening 

global demand,” the Reserve Bank of 

India warned. 

“This, combined with the slowing 

down of domestic demand, to which 

the monetary policy stance is also 

contributing, suggests that risks to the 

growth projection for the year 

2011-12 made in the July review are 

on the downside now,” said the RBI. 

But global factors have already 

pushed the Indian rupee to a 

28-month low at 49.90 a dollar and 

also drawn the RBI to step in and 

intervene in order to stem the rupee’s 

free-fall, which shed nearly 5% 

against the US dollar in just 10 

trading sessions. 

The gravity of the situation is justified 

by the fact that the RBI did not 

intervene in the foreign exchange 

markets for nine successive months 

until July. 

Subir Gokarn, Deputy Governor of 

the RBI, during his visit to the US, 

informed a television channel that 

volatility in the currency exchange 

rate had become ‘a part of the game’ 

and the central bank would intervene 

to the excessive volatility in the 

currency under control. 

But in the middle of moderating 

growth, higher interest rates and 

stubborn inflation, a volatile Indian 

rupee would simply augment the 

woes of the RBI as much as to that of 

India Inc. 

And for the monetary policy in the 

ensuing quarters, the central bank’s 

action will depend heavily upon a 

host of ‘known unknowns’ like 

further developments in domestic 

growth and inflation dynamics, 

developments in the global financial 

situation as well as movement of 

commodity prices at the international 

level, to mention a few. 

In all probabilities, the wider market 

expectation of aggressive monetary 

policy easing, beginning this year, 

appears to be thoroughly misplaced 

for the momenT. 


The Reserve Bank of India 

has been treading 

cautiously with regards to 

banking licences. The 

numbers speak for themselves. In the 

past two decades, only 12 new 

banking licences have been granted to 

the existing players. 

However, it is now a well established 

fact that a number of corporate 

players are seeking to make a 

footprint in the banking industry. 

With the Finance Minister’s 2010 

budgetary announcement of granting 

new banking licences, hopes have 

only built up further. Conglomerates 

such as the Tatas, Birlas, Ambanis, 

and Mahindras are all in the fray. 

The Non Banking Financial 

Companies (NBFCs) such as L&T 

Finance Holdings, Srei Finance, 

Sundaram and Bajaj Finserv are also 

believed to be in the race. 

RBI, however, is still holding the 

cards close to its chest. It was only at 

the fag end of August that it came out 

with draft guidelines with regards to 

new banking licences. Even then it 

was a measured move. 

The RBI Governor D Subbarao made 

no bones about the fact that in the 

current framework of rules and 

regulations, corporate entities, if 

allowed to open banks, would have a 

ready source of funds. 

Nevertheless, it has put out the draft 

guidelines that are stringent to say the 

least. Is the RBI justified in making 

such cautious moves? We take a 

closer look at some of the major 

suggestions made by the RBI. 

OWNERSHIP ISSUES 

Firstly, the RBI said that any existing 

financial company will be allowed to 

transform into a bank or an 

independent promoter can start from 

scratch as long as they have the 

minimum initial capital of `500 crore, 

a minimum capital adequacy ratio of 

12% and the ownership and 

management is different for the 

promoter company and the bank. 

Besides, the promoter seeking to set 

up a bank is required to have an 

impeccable track record of 10 years, 

sound credentials and must have run 

the business with integrity. 

However, those entities that have 

more than 10% income from real 

estate, construction or broking will 

not be considered eligible for the 

opening of a new bank. 

While the RBI is obviously thinking 

about the risk factors involved in 

businesses such as these, there seems 

to be a strong objection to the same. 

Brokers especially have strong views 

against this. They say that they are in 

fact the most regulated entities in the 

country and are under strict vigil of 

the Securities and Exchange Board of 

India (SEBI). 

Besides, those in the broking business 

have a keen sense of finance and 

economy and are perfect candidates 

for opening up of new banks, some 

experts argue. 

In addition to this, the fact that the 

bank is not only going to be removed 

by a separate holding company and 

will be directly under the jurisdiction 

of the central bank, seems to be quite 

an unfair clause. 

HOLDING FORT 

The RBI further stipulates that the 

promoters have to set up a 

wholly-owned non co-operative 

holding company (NOHC). This 

NOHC will, in turn, be the holding 

company for the new bank as well as 

other financial subsidiaries of the 

promoter such as life insurance, 

general insurance or the asset 

management company. 

According to legal experts, this is a 

smart move by the RBI as it not only 

gets direct supervision of the bank but 

also strengthens its holds on the 

financial sector. 

The RBI also says that the NOHC 

shall hold at least 40% stake in the 

banks and this has to be locked in for 

a period of five years. If the 

shareholding is beyond 40%, it has to 

be brought down to 40% within a 

maximum period of two years from 

the date of licensing of the bank. 

The shareholding of the NOHC 

should further be brought down to 

20% of the paid up capital within ten 

years and 15% in 12 years and 

maintained at this level, thereafter. 

Although it is not clear why the RBI 

is insisting on maximum shareholding 

now and also minimum shareholding 

over a period of 15 years, it may be 

deduced that the maximum 

shareholding clause has been 

introduced since the RBI wants to 

ensure accountability from the 

promoter’s end in the initial years. 

The other salient clause that the RBI 

has suggested is with regards to 

foreign holding. Any non resident 

shareholding from FDI, FII or NRI 

shall not exceed more than 49% for 

the first five years from licensing the 

new bank. 

The RBI further stipulated that no non 

resident shareholder would be 

allowed to hold more than 5% of the 

total paid up capital of the bank. This, 

however, does not seem to provide a 

level-playing field for the new banks 

that will be set up as the existing 

banks have a foreign shareholder 

ceiling of 74%. 


14 

The foreign shareholder policy should 

be uniform across all banks, 

according to the legal experts. 

INDEPENDENT PERSPECTIVE 

On corporate governance, the RBI 

lays down a stringent policy with 

regards to independent directors. It 

says that at least 50% of the NOHC 

should be independent directors. 

The RBI mentions that these directors 

ought to be totally independent of the 

promoter, promoter group and all 

their customers and suppliers. 

Further, the RBI specifies that no 

other financial entity that is functional 

under the NOHC will be allowed to 

undertake any activity that the new 

bank has under its ambit. 

If there are any overlapping activities 

they have to be moved to the bank 

with proper notification to the RBI. 

The central bank will also specify 

terms and conditions if the situation 

so arises. 

While the RBI lays a lot of emphasis 

on the independent director clause, 

experts say that this covers a 

miniscule portion of corporate 

governance required for banks. 

While it is definitely not an easy task 

on hand, the RBI has to ensure quality 


when it allows people to enter the 

banking system, which can be called 

the backbone of the economy. 

It cannot be a decision based on size 

or shareholding pattern and 

independent directors. Having said 

that, there is the crying need to open 

up the banking sector. This will 

encourage competition and result in 

customers getting better loans and 

deposits that can be customised to 

their needs. 

PROS AND CONS 

an apple a day keeps the doctor away 

regular investments keep worries away 

Your financial health is our concern. 

At Nirmal Bang, it’s a relationship beyond broking... 

With new players in the field, 

innovation in product design will 

come to the fore and customers will 

stand to benefit. 

We have seen innovations such as 

gold loans, the brainchild of a few 

NBFCs and innovation on home 

loans, such as 0% prepayment 

charges on home loans that has been 

introduced by Axis Bank. 

Many such innovations may come up 

thanks to the entry of new players 

and, thus competition. The other 

benefit the borrower might have is 

that of lower interest rates. 

With more players in the field, banks 

may offer better financial deals or 

offer valuable partnerships on auto 

loans and mortgages. Overall, it will 

be beneficial for customers. 

The RBI has been of the opinion that 

if new banking licences have to be 

granted, they have to encourage 

financial inclusion. There is some 

truth to this. 

The banking penetration in India is 

abysmally low with mortgage at 7% 

of the total GDP as compared to 23% 

in other developing countries and 

over 80% in the US. But the onus 

should be as much on the existing 

players as it should be on the new 

bank. It is evident that very few will 

qualify on this ground. 

Going by the track record of the RBI, 

banking experts say that although 

there are many who want to be in the 

banking industry, it does not look like 

the RBI will grant more than four to 

five licences at the most. A lot of 

filtering will be applied to pick those 

who are serious about their venture. 

Although some clauses do seem a tad 

unfair at this point in time, it is not 

without reason that the RBI is 

treading cautiously now. 

The Banking Act needs to be 

amended before these licences are 

granted in the first place and there 

seems to be no hurry to do that. 

Signals indicate - the floodgates will 

not open anytime sooN. 

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16 

Vibrant Gujarat Gets 

Future Progressive 

Investor-friendly policies, uninterrupted power supply, road 

connectivity and availability of trained workforce are reasons 

enough for corporates to flock to the western state of Gujarat 

Gujarat government’s 

promotional tag line 

‘Destination Gujarat’ 

seems to be true at least 

in the case of corporate investments. 

Be it the Tatas or the Ambanis, all big 


corporate names are making a beeline 

to the state, citing the state’s 

reputation of being India’s most 

business-friendly destination. 

Here is a look at the recent 

investments announced by large 

corporates in Gujarat. In January ’11, 

when Gujarat chief minister Narendra 

Modi inaugurated the fifth chapter of 

the Vibrant Gujarat Global Investors 

Summit, heads of top companies, 


made it clear that Gujarat is the state 

where they want to be. Consider this: 

the inaugural session of the investor 

summit alone saw investment 

announcements of around `1.96 lakh 

crore by India Inc. 

The largest investment was 

announced by Ahmedabad-based 

billionaire Gautam Adani, chairman 

of the Adani Group, who said the 

group would invest `80,000 crore in 

the power, petroleum and port sectors. 

Adani Group is planning to construct 

two new ports at Hazira and Dholera 

in Gujarat. 

Anil Ambani, chairman of the 

Reliance-Anil Dhirubhai Ambani 

Group or R-ADAG, has committed to 

investing `50,000 crore in the next 

five years for setting up gas and 

coal-based power projects and cement 

plants at Kutch, Porbandar and 

Junagadh in Gujarat. 

Prashant Ruia, group chief executive 

of the Essar Group of companies said 

his group is looking to invest `30,000 

crore in power, ports, water 

infrastructure and for expansion of its 

oil refinery at Vadinar. Gujarat. 

AM Naik, chairman of Larsen & 

Toubro Ltd, announced an investment 

of `15,000 crore in infrastructure 

projects. Ajit Gulabchand, chairman 

of HCC Group, said HCC would 

invest `12,000 crore to set up a 

renewable energy park at its proposed 

waterfront city at Dholera Special 

Investment Region, being developed 

on the lines of Lavasa. 

Automobile manufacturer General 

Motors also said it was investing 

$100 million (`450 crore) to enhance 

production capacity at its Halol plant 

to 1,05,000 units annually from 

85,000 units per year at present. 

So, what is it that attracts domestic 

and global investors to Gujarat? 

Corporates say that speedy approvals 

is one of the reasons why they are 

investing in Gujarat. 

“States usually take 90 days to 180 

days to give clearances for land and 

other issues. When we were in the 

process of moving our Nano project 

to Gujarat, the state government gave 

us the clearances in just three days. It 

has never happened before,” Ratan 

Tata said in 2009 at the Vibrant 

Gujarat Global Investors’ Summit 

that is held every two years. 

The Tata Group has already invested 

`30,000 crore in the state and has said 

it will continue to invest there. 

Chanda Kochhar, the Managing 

Director and Chief Executive Officer 

of ICICI Bank agrees with Tata. 

“What makes Gujarat so attractive is 

that the state has reached double digit 

growth rate for many years on a 

sustainable basis,” she said at the 

summit in January this year. 

Companies say the investor-friendly 

policy of the Gujarat government, 

24/7 power supply, road connectivity, 

availability of trained workforce, 

large consumer base and a simple and 

transparent procedure have lured 

them to the state. 

Through the state-owned Gujarat 

Investment Corporation Ltd, the 

government has in fact taken 

initiatives to attract investors by 

offering beneficial services such as 

providing financial assistance to the 

investors for diversifying, expanding 

their business establishments and 

offering different financial packages. 

Interestingly, Jamnagar, Surat, 

Bharuch, Kutch and Vadodara 

districts in the state of Gujarat 

account for more than 80% of the 

large projects commissioned in the 

state from 1st Sept ’07, according to a 

state government study, which points 

to a skewed development, where a 

few districts corner a large share of 

the investments. 

Jamnagar accounts for 26% of the 

large projects commissioned in the 

state, Surat (20%), Bharuch (17%), 

Kutch (9%) and Vadodara (8%). Each 

of the districts has a different reason 

for being popular investment 

destinations in Gujarat. 

Surat has always been an industrial 

hub, Baruch is part of the golden 

corridor for industry, Baroda is well 

connected, Jamnagar is the refining 

capital of India and Kutch has a lot of 

free land available. This is, however, 

typical of development patterns in 

most states, where a few districts 

attract maximum investment. 

A 2009 report by Deutsche Bank said 

Gujarat offers the best investment 

potential among all the states and 

union territories in the country, 

measured on socio-economic and 

infrastructure factors. 

“It seems that economic development 

and geographical proximity belong 

together, possibly also as a result of 

connecting infrastructure links,” 

Deutsche Bank said. 

The proof of Gujarat’s aggressive 

wooing of investments is the fact that 

it has toppled Maharashtra as the 

leading state as far as domestic 

investments are concerned. 

According to data released by the 

Centre’s Secretariat for Industrial 

Assistance, Gujarat has emerged as 

the preferred destination for domestic 

investors who invested `9,44,417 

crore in the state between August ’91 

and March ’11. 

On the other hand, states like 

Maharashtra attracted `8,10,864 

crore worth of investments, Andhra 

Pradesh- `7,84,066 crore, Karnataka - 


18 

`7,03,798 crore and Tamil Nadu - 

`3,93,477 crore. 

In fact, even FDIs may now go to 

Gujarat, with global investors 

choosing Gujarat over other states 

thanks to the proactive approach 

adopted by their government. 

Regular investment conclaves 

conducted by the Gujarat government 

is attracting both domestic and 

foreign investors. According to 

Gujarat government data, four 

Vibrant Gujarat Investor Summits 

have attracted investments of over 

$400 billion. 

Modi has been meeting with 

international investors to convince 

them to invest in the state. For 

instance, in March, this year, Modi, 

met top CEOs from European 

companies in New Delhi. The 

meeting was part of an interactive 

session held between the Gujarat 

government and the European 

Business Group India. 

The session was attended by leading 

companies including BAe Systems, 

Veolia Water India Pvt Ltd, Vodafone, 

BP, Dassault, EDF, IKEA, Rio Tinto 

and Halcrow India, Shell Hazira and 

Alstom. The whole point of the 

meeting was to get European 

companies to invest in the state. 

Modi has partially succeeded in 

bringing FDI to the state since it 

already has investments from few 

European companies such as 

Heubach, BASF, Bayer, Siemens, 

Linde AG, Lanxess, Duravit, 

Pharmacia, Perstorp, Cheminova, and 

Sanofi Aventis. 

The US is also not far behind. 

Recently, on 22nd September, 

billionaire investor Warren Buffett 

said US-based specialty chemicals 

maker Lubrizol Corporation, a 

wholly-owned subsidiary of Buffett’s 


investment company, Berkshire 

Hathaway Inc, will set up a 

chlorinated polyvinyl chloride 

industrial unit, in partnership with 

Ahmedabad-based Astral Poly 

Technik, at the Gujarat Industrial 

Development Corporation (GIDC) 

complex in Dahej. 

Lubrizol will initially invest about 

$245 million (`1,177 crore) in 

Gujarat. “Considering the 

investor-friendly environment, 

transparent policies and best 

infrastructure facilities in Gujarat, we 

have chosen the state for setting up of 

the first unit,” Tom Frubus, chief of 

Lubrizol Corporation (USA), said 

while announcing the investment. 

Dahej is already a major chemical 

hub, with India’s largest petroleum, 

chemicals and petrochemicals 

investment region being developed in 

this area. 

Gujarat has particularly been 

successful in attracting investments 

from automobile companies. On 1st 

September, French carmaker, PSA 

Peugeot Citroen SA, signed a 

Memorandum Of Understanding, 

with the Gujarat government to set up 

an integrated manufacturing facility 

at an investment of `4,000 crore at 

Sanand, Gujarat. 

The firm had been scouting for land 

for its India entry for the past few 

months in Tamil Nadu, Andhra 

Pradesh and Gujarat. “The 

availability of greenfield land and 

ready infrastructure are a couple of 

reasons for us to choose Sanand for 

the plant. Moreover, it is the 

enterprising nature of Gujarat that 

attracted us to the state,” Philippe 

Varin, chairman of the managing 

board, PSA Peugeot Citroen, said. 

Earlier, in July Ford India, the local 

unit of the Michigan-based Ford 

Motor Co had said it will set up its 

second manufacturing facility in India 

at Sanand for a total investment of 

`4,000 crore. 

In fact, Sanand, a small town 40 km 

away from Ahmedabad, is now 

counted among India’s prominent 

auto hubs such as Pune in 

Maharashtra and Sriperumbudur in 

Tamil Nadu. The Gujarat government 

has been focusing on Sanand to 

develop the region as an 

auto-engineering hub because of its 

proximity to Ahmedabad. 

According to media reports, Gujarat 

Industrial Development Corporation 

(GIDC) has acquired 5,000 acres of 

land from farmers in villages around 

Sanand to give to automobile 

companies interested in setting up a 

plant there. 

The other advantage is that Sanand is 

part of a special investment region, 

which allows companies that invest 

there to benefit from tax incentives 

and a fast-track approval process. 

Gujarat government statistics reveal 

that by 2014, Sanand is likely to have 

an installed capacity of 6,55,000 cars 

annually after the two plants become 

functional (Peugeot and Ford). 

It is expected that in all Gujarat would 

have a manufacturing capacity of 

7,65,000 cars per annum by 2014, 

going by the estimates by 

automakers. This compares 

favourably to Tamil Nadu’s annual 

installed capacity of 1.28 million cars 

and Maharashtra’s capacity of 

6,10,000 units. 

Very recently, Maruti Suzuki, India’s 

largest carmaker said it will invest 

$1.3 billion to set up a one million 

capacity per annum plant, in Gujarat. 

The carmaker has not yet finalized its 

plans but if it does, then Gujarat 

might just pip Tamil Nadu as the auto 

hub of IndiA. 


Contact: Sushmita Desai: +91 77380 68262 

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20 

HOPING FOR 

A FESTIVE REVIVAL 

Vehicle companies are 

expecting sales to rise 

during the festive 

season, but hike in 

interest rates and fuel 

prices could halt their 

upward journey 


T 

he automobile industry had been 

reeling under falling sales since quite 

some time. And to make matters 

worse, the Reserve Bank of India 

(RBI) in its monetary policy review hiked repo 

rates for the 12th time in the past 18 months and 

the oil marketing companies too hiked fuel prices 

in September. 

However, auto companies are planning to turn the 

tide in their favour by launching a slew of car 

models during the festive season of Navrati and 

Diwali. Indian original equipment manufacturers 

(OEMs) Maruti Suzuki, Tata Motors, Toyota and 

Hyundai, among others, are leaving no stone 

unturned to push sales. 

In August and September, the Indian markets have 

been flooded with cars from automobile 

manufacturers like Toyota Kirloskar Motor India, 


Honda Siel Cars India Ltd (HSCIL), 

Hyundai Motor Company, Nissan 

Motor India Pvt Ltd, Tata Motors Ltd, 

Mahindra & Mahindra Ltd and 

Renault India Pvt Ltd, to name a few. 

Interestingly, in the first half of this 

year there are more new launches in 

the passenger cars and two-wheeler 

segments, as compared to the same 

period in the previous year. 

According to SIAM (Society of 

Indian Automobile Manufacturers), 

in the first half of this fiscal, there 

were over 13 new launches in the 

passenger cars and two-wheeler 

segments, respectively as well as 

three refreshed variants in both the 

segments, whereas last year there 

were more refreshed variants of 

passenger cars. 

At the same time, there were more 

refreshed variants than new models. 

Companies launched seven new 

passenger car models and 15 

two-wheeler models in the first six 

months of the previous fiscal. 

Some of these companies have 

already launched their passenger cars 

in the domestic market. Not to be left 

behind, Tata Motors also launched the 

refreshed fuel efficient and power 

variants of the Indica as well as 

Indigo cars. 

The top three manufacturers – Maruti 

Suzuki India Ltd, Tata Motors and 

Hyundai Motor India – reported over 

20% decline in their sales. Maruti’s 

sales slumped by around 19% as 

labour problems bogged operations at 

its Manesar plant, where the new 

Swift cars are manufactured. 

The general slowdown in demand 

also affected sales of its existing small 

car models Alto and Wagon R. 

Increased stocks of Tata’s Nano with 

dealers resulted in a fall of 1,202 units 

in the sales of the model, which is 

one-fifth of its average monthly sales 

in 2010-11. 

Industry analysts are expecting the 

two events – hike in repo rates and 

fuel price rise – to hit mini car and 

sub-four metre car segments in 

particular owing to deferment or 

cancellation of purchases by 

first-time buyers. Automakers on the 

other hand are likely to provide more 

incentives to boost sales. But, it is not 

going to be easy. 

Car sales in the country fell by about 

10% in August ’11 compared to a 

growth of 33% in the corresponding 

period last year. With rising interest 

rates and high fuel prices, buyers are 

deferring their decision to purchase 

cars. Despite increased discounts and 

incentives from car manufacturers 

(OEMs), sales of existing models 

remain tepid. 

Car sales of OEMs, other than the top 

three, however, grew 31% on the 

strength of new models and price 

reduction. While new models such as 

Volkswagen Vento, Toyota Etios and 

Liva continued to garner consumer 

interest, sales of Honda City rose by 

37% in August, after an 8% reduction 

in its price in June ’11. 

According to analysts, rising interest 

Some Of The Passenger Car Launches In H1 2011-12 

Passenger Car 

Manufacturer 

rates and high fuel prices dampened 

the demand in August, despite the fact 

that it marks the beginning of the 

festive season. Any delay in model 

launches in the second half of 

2011-12 will further dent car demand 

in the months to come. 

Around eight new models are 

expected to be launched in the 

remaining part of the fiscal, including 

few concepts at the upcoming Auto 

Expo in January ’12. 

The year-on-year (y-o-y) growth of 

the passenger car industry is expected 

to be lower at around 8% to 9% as 

compared to around 13% to 14% in 

the same period in the previous year, 

as these are months when the sales 

peaked in the country. 

Maruti Suzuki India Ltd (MSIL), the 

leader in the passenger car segment, is 

expected to be severely hit due to the 

impasse between the company’s 

management and the workers at the 

Manesar plant. 

The sales of models like the new 

Swift, A-Star and SX4 have been 

impacted due to the strike. However, 

the company had said that it has 

enough stock of SX4 and A-Star. 

“The SX4 diesel has a waiting period 

of around 2-3 weeks. But we at 

New Model Refreshed Variant 

Maruti Suzuki New Swift 

- 

Hyundai 

Eon (to be launched) 

Verna Fluidic 

Honda 

Brio 

Honda City, New Jazz 

Toyota 

Etios Diesel and Liva Diesel - 

GM (Chevrolet) Beat Diesel 

- 

Mahindra and Mahindra XUV500 

New Bolero 

Renault 

Fluence Sedan, Koleos SUV - 

Nissan 

Sunny 

- 

Ford India 

New Ford Fiesta 

- 

Tata Motors 

New Tata Vista, New Tata Sumo Tata Indigo e-CS VX, Tata Aria 4X2 

Skoda Auto 

Laura RS, Rapid (yet to be launched) Fabia Active 

Force Motors 

Force One SUV 

- 

Volkswagen 

- 

New Jetta, Polo Breeze & Vento Breeze 

Source: Company Data 


22 

present have enough stocks for the 

petrol SX4 and the A-Star,” Maruti 

Suzuki India Ltd had said. 

Maruti Suzuki has received over one 

lakh bookings for the Swift model, 

which is a good sign. But Maruti has 

managed to improve production to a 

little over 700 cars a day across its 

two plants in Manesar. But even at 

this rate, customers will have to wait 

for about five months for the petrol 

version and more than six months for 

the diesel version. 

Company officials say the Swift 

customer is loyal and would not 

switch to other models. But, with the 

waiting period extending to six 

months, some switchover to rival 

brands cannot be ruled out. 

Further there will be more challenge 

for Maruti Suzuki India Ltd in the 

hatchback segment, where it is the 

market leader in India. 

Honda has launched its first small car 

Honda Brio, while Hyundai is 

expected to launch Hyundai Eon in 

the second week of this month. The 

company has started bookings for the 

car and is targeting first-time buyers 

who want to buy a spacious and 

stylish car with good fuel economy. 

The new launches will further spell 

worries for Tata Motors, whose sales 

of passenger cars have been falling 

since the last four months. The 

cumulative sales of Tata Motors for 

the fiscal are at 1,10,148 units, lower 

by 21%. The company is now 

banking on the new Indica and new 

Indigo eCS to rev up sales during the 

festive season. 

The only positive for Tata Motors is 

growth in the sales of commercial 

vehicles, where it has over 62% 

market share. Cumulative sales of 

commercial vehicles in the domestic 

market for the fiscal are 1,96,887 


Some Of The Two-Wheeler Launches In H1 2011-12 

Motorcycle New Model Refreshed Variant 

Yamaha 

Hero MotoCorp 

TVS 

Royal Enfield 

Source: Company Data 

units, a growth of 17% over last year. 

YZF-R15 

Impulse, Maestro (both yet to launched) 

Max4R, TVS Star City 

Classic Chrome, Desert Storm 

Cumulative light commercial 

vehicles sales are 1,18,808 units, a 

growth of 23% over last year, while 

medium and heavy commercial 

vehicles sales stood at 78,079 units, a 

growth of 8% over last year. 

Meanwhile, Tata Motors is planning 

to raise US $500 million as external 

commercial borrowings to fund 

working capital requirements and 

offset high interest debt with a 

long-term low interest rate. 

Similarly, the board of Suzuki Motor 

Corporation, the majority shareholder 

in Maruti Suzuki is looking at options 

other than the state of Haryana and 

Delhi NCR for its new plant, 

including states like Gujarat. 

Mahindra & Mahindra also aims to 

break into the league of global OEMs 

with the launch of its global sports 

utility vehicle, the XUV 500, which 

has been developed by the company’s 

research and development centre 

situated in Chennai. 

The SUV expected to be priced 

between `12 lakh to `14 lakh will be 

simultaneously launched in South 

Africa, Western Europe, Australia and 

South America. 

The only silver lining in the domestic 

automobile industry at present is the 

growth in commercial vehicles as 

well as the two-wheelers segment, 

which is expected to continue with 

the growth in infrastructure and 

increase in focus on rural penetration 

by two-wheeler manufacturers. 

FZ, FZ-S & Fazer 

- 

- 

- 

The two-wheeler industry grew by 

around 16% with sales of over 5.35 

million for the April-August ’11 

period. The sales are expected to 

grow, but with some caution. 

An independent automobile industry 

expert said, “The repo rate hike that 

would lead to higher interest rates 

will predominantly affect the urban 

two-wheeler market, as sales of a 

majority of two-wheelers are 

dependent on credit. 

The sales of high-end motorcycles - 

150cc and above and cars will see 

double impact in the urban market, as 

compared to the rural market where 

the vehicles are purchased in cash. 

Good monsoon across the country 

will drive vehicles sales in the rural 

market this festive season.” 

The expert further said that with the 

fuel price hike, people from the urban 

market would start chasing 

fuel-efficient motorcycles and 

scooters instead of two-wheelers with 

powerful engines. 

Further, it will be interesting to see 

how Hero MotoCorp Ltd, formerly 

Hero Honda, will launch the 

country’s first dirt bike and a gearless 

scooter model called the Maestro in 

this month. 

The models, the first after the 26-year 

partnership between the 

Munjals-owned Hero and Japan’s 

Honda came to an end, will sport 

Hero’s new brand identity. With an 

engine displacement of 180cc, the dirt 

bike will be Hero MotoCorp’s first in 

the niche segmenT. 


Despite the immense 

potential of the Coal 

sector, key challenges 

and issues are stopping 

this industry from 

growing to the hilt 

One of the basic natural 

resources needed to 

sustain India’s growth 

story is coal. Its 

significance as an input for generation 

of power is immense. And its 

availability has become scarce and 

price dear. Hence, conservation and 

judicious use of coal is becoming an 

important task for corporations and 

government bodies. 

As Indian companies grow in leaps 

and bounds and penetrate deep into 

unheard pockets of the country, the 

requirement of coal for generation of 

power would increase considerably. 

Of all the natural resources such as 

oil, natural gas, hydro and nuclear, 

coal is highly used as the primary 

source of energy. 

According to an estimate, coal is the 

dominant source of energy in India 

and meets 52.4% of energy 

requirements, followed by oil and 

natural gas, which meet 41.6% of the 

total primary energy requirement of 

the country. However, the present 

’ 

GOVERNMENT S 

CO(A)LD 

SHOULDER 

situation of coal availability is not 

very uplifting. Even though India has 

one of the largest coal reserves, it is 

not able to emerge as a very strong 

energy producer. Instead, it is 

struggling to meet its increasing 

domestic demand. 

A study conducted by the Indian 

Planning Commission and the Coal 

Ministry revealed that India’s total 

coal consumption was expected to 

increase from around 510 metric 

tonnes in 2007-08 to 550 metric 

tonnes by 2008-09. India is yet to 

reach this consumption limit. Huge 

amount of investment is needed for 

such consumption. 

The existing regulatory framework 

restricts private sector players from 

coal mining and other activities 

related to the production of coal. 

More than 90% production of coal is 

with the central and state 

governments. Hence, regulatory 

hurdles are one of the chief reasons 

for the inadequate coal policy that has 

failed to address the country’s strong 

coal consumption needs. 

Through a low-down on India’s coal 

industry, we would be discussing 

about the key challenges and issues 

that mar the growth of this industry at 

a time when requirement of power for 

consumption is becoming necessary 

and crucial. 

COAL: AN ESSENTIAL INPUT 

India ranks third among the world’s 


24 

leading coal-producing countries. In 

India, around 70% of the total 

production is used for the generation 

of power, while the remaining is used 

by the steel, cement, chemicals and 

heavy industries, to name a few. 

It is estimated that India produces 310 

million tonnes of coal annually and 

imports around 25 million tonnes. In 

the last five years, commercial energy 

consumption in India has increased to 

around 68%. This, however, when 

seen in terms of per capita 

consumption, is very low, especially 

when one compares this with 

developed countries. 

At present, the per capita primary 

energy consumption in India is about 

243 Kilograms Oil Equivalent 

(kgoe)/year. Experts believe that this 

consumption is very low in 

comparison with the per capita 

primary energy consumption in 

developed countries. 

One argument that strengthens this 

belief is the fact that energy 

consumption has a strong correlation 

with economic growth. In addition to 

this, limited reserves of petroleum 

and natural gas also grant validity to 

the argument that coal would emerge 

as a crucial natural resource in the 

coming years. Not to mention that it is 

cheap and relatively abundant than 

other natural resources. 

Despite such reigning importance of 

coal, there are many irregularities in 

terms of lack of clarity of policies of 

governments and local mafia (some 

with Marxist leanings), which have 

squeezed out substantial unaccounted 

coal from the system. 

ISSUES AND CHALLENGES 

One of the serious concerns for 

India’s coal industry is strong 

government control. This results in 

taxes and duties that continue to be 


levied on imports and distribution of 

coal. Besides this, there is also limited 

private investment in the buying of 

coal mines as well as supplying coal 

to customers. 

Experts believe that the privatization 

of the sector is important and the 

easiest way of providing access to this 

natural resource to companies and 

other consumers alike. Such has been 

irregularities in the government 

policies that foreign investment in the 

sector is permitted only on a 

case-to-case basis. 

Hence, the industry needs pointed and 

clear reforms. Reforms that address 

issues related to large-scale 

investment in increasing mining 

capacity and improve the quality of 

coal. Also it is believed that in order 

to thin the gap between demand and 

supply of domestic coal, the 

government should facilitate smooth 

import of coal. 

The government’s eleventh plan had a 

whole range of coal sector reforms 

such as setting up of a coal regulator, 

ramping up captive production, 

commercializing, auctioning of 

blocks and increasing the share of 

e-auction, among others. 

Hardly any of these reforms have 

been implemented into the system. 

This has given weight to the 

oft-repeated assertion that powerful 

coal lobby is preventing India from 

emerging as the largest energy 

producer in the world. 

Besides these issues, the one 

indigenous problem that has 

obstructed the natural production of 

coal and its equivalents is stiff 

opposition of Maoists. In India, the 

Southern and Eastern regions are 

coal-rich. 

In these regions in India, there are 

several pockets where people 

propagate Marxist ideology. These 

groups have differences over use of 

land ownerships, corruption and 

illegal mining. 

Due to stiff opposition from these 

groups, many coal mining projects - 

both government and private sector 

companies - have got derailed and 

stopped midway. The government has 

been unable to weed out these 

elements and, hence, these elements 

pop up abruptly and jeopardize many 

coal projects in these areas even after 

most governmental clearances have 

been acquired by the companies. 

Recently, a new concern that is 

serving as a huge obstacle in coal 

projects is from the government’s side 

itself. The environment ministry has 

identified ‘Go’ and ‘No-Go’ areas 

arguing that forests are being cut at a 

rapid pace, wildlife corridors are 

being destroyed and one should be 

more sensitive towards this. 

The environment ministry has found 

many captive blocks under the 

‘No-Go’ category. Though 

corporations promise afforestation for 

occupying space of dense forest of a 

region, most of their projects just 

don’t take off. 

Industry experts believe that only 

special recommendations and the 

passing of a cogent coal bill in the 

parliament could remove these 

loopholes in the system. 

Special recommendations on price 

reforms for coal and electricity, 

freeing-up of commercial relations 

between buyers and sellers, 

rationalizing quality standards, 

increasing productivity as well as 

profitability, attracting investment for 

the coal industry, enhancing 

environmental performance and 

intensifying competition, are pointers 

that are gaining prominence among 

industry expertS. 


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26 

W 

ith nearly 30 million 

people worldwide 

diagnosed with 

Alzheimer’s 

disease, it is a scourge of the modern 

day health care and is projected to 

quadruple to 120 million people by 

2050, which is incidentally the 

population of Japan. 

The elderly population is growing at 

the fastest pace in China, India, south 

Asia and western Pacific regions. 

Already 58% of people with dementia 

live in developing countries. But this 

number is likely to rise to 71% by 


2050 due to the addition of more 

number of patients owing to better 

disease detection, rise in income 

levels to detect and treat the disease 

and better social support by 

government and health agencies. 

France, Germany, Italy, Japan, Spain, 

the UK and the US have a high 

number of patients suffering from 

Alzheimer’s disease. Usually, people 

over sixty are at the risk of 

Alzheimer’s disease. But few cases of 

the early onset of the disease among 

people in their forties or fifties are 

being reported. 

The growing number of patients 

suering from Alzheimer’s is 

indicative of the tremendous 

opportunity oered by this 

segment to pharma companies 

In India, nearly three million people 

suffer from Alzheimer’s disease and 

the number is predicted to double by 

2030, clearly demonstrating the 

immense opportunity this segment 

holds for the pharma sector. Presently, 

30-35 branded and generic drugs are 

available to treat dementia. 

Some drugs have even proven 

symptomatic benefits. However, there 

are mainly four drugs - donepezil 

hydrochloride (aricept), rivastigmine 

(exelon), galantamine (reminyl), 

memantine (ebixa) made by 

Eisai/Pfizer, Novartis, Shire Pharma 


(Janssen) and Lundbeck - that can 

help control Alzheimer’s disease. 

Earlier, only branded drugs were 

available in the market. Following the 

expiry of patents, some of the drugs 

are being manufactured and sold in 

India by companies like Aurobindo, 

Dr Reddy’s Laboratories, Sun 

Pharmaceuticals, Ranbaxy, Alkem, 

Torrent, Glenmark, etc. 

Indian companies are manufacturing 

and selling generic drugs globally 

only after they receive ANDA 

approvals. There are no innovative 

drugs by Indian companies. Suven is 

the only company that is developing 

innovative drugs. It has milestones 

(phase II and III clinical trials) to 

cross and get NDA approvals, which 

is a long way to go (2015-16). 

As the Indian population continues to 

grey, life expectancy increases and 

awareness about the disease 

increases, the projected growth would 

likely continue in double digits (18% 

to 20%) on a higher patient base. As 

per ORG IMS-MAT, the accounted 

market in India has a size of about 

`140 crore and a CAGR of 25%. 

To keep pace with this growth, Suven 

has undertaken research for a drug for 

Alzheimer’s to an advanced stage, but 

needs funding to continue doing the 

same. If the proof of concept of the 

drug is strong, the company might 

succeed, thus catapulting it to the 

global market. 

As per industry reports, more than 35 

million people are expected to suffer 

from Alzheimer’s disease by 2015 

worldwide. By 2050, 59% of the 

world’s Alzheimer’s cases will live in 

Asia. The global Alzheimer’s disease 

market is expected to cross the US 

$19 billion-mark by 2015. 

Aricept sales are expected to fall after 

losing its patent in November ’10. 

Ebixa, Excelon and Namenda may 

become the next blockbuster drugs 

after Aricept. Till last year, Aricept 

was the world’s best selling drug but 

lost patent protection in November 

’10, a milestone which will be 

followed by a rapid loss in sales. 

But there are other drugs which have 

the potential to become blockbuster 

drugs. Namenda, Exelon have shown 

tremendous growth in the market and 

become blockbusters in 2010. Ebixa, 

a drug by the Memantine Group, is 

expected to have a billion-dollar 

market by 2014. Given the growth in 

Alzheimer’s patients, the outlook for 

this segment is excellent. 

TREATMENT OF THE 

ALZHEIMER’S IN INDIA 

At present, there are no specific tests 

to positively confirm the diagnosis of 

Alzheimer’s or dementia. There are 

hardly any standard practice 

guidelines and treatment centres in 

India. Several new treatments are 

being initiated, while some are 

nearing the late stages of clinical 

trials. Within 2 - 3 years, pharma 

companies will know if one or more 

of these treatments can help slow the 

progression of Alzheimer’s. There are 

currently 934 clinical trials recruiting, 

underway or recently completed 

related to the Alzheimer’s disease. 

A lot of herbal preparations are 

available for diagnosing Alzheimer’s 

disease. Turmeric in curry may 

explain Alzheimer’s low occurrence. 

Indian scientists in UK and India are 

examining the ancient Indian 

ayurvedic medicine for possible use 

in drugs to treat Alzheimer’s disease. 

Researchers say ayurveda works in 

the same way as conventional drugs 

for boosting mental agility in the 

disease. They found that the plants 

used in ayurveda acted to improve 

memory and concentration in patients 

suffering from Alzheimer’s. 

Researchers from King’s College, 

London and Jadavpur University, 

Calcutta studied five plants 

commonly used in ayurvedic 

medicine and found that the plants 

acted to prevent the breakdown of 

neurotransmitters, improving 

memory and concentration in people 

with Alzheimer’s disease. Scientists 

are now trying to identify the 

chemical compounds responsible for 

the same so that they can be used to 

develop more effective drugs. 

Suven and Aurobindo are also getting 

approvals for molecules for this 

disease. This would help the market 

to grow and Indian patients would get 

these drugs at affordable prices. As 

more players enter the market with 

generics, the noise level would 

increase and more awareness and 

detection camps would help tap this 

segment, resulting in a large number 

of psychiatrists taking up Alzheimer’s 

disease as a focused specialty 

practice. Ultimately, the patient, 

especially those from low income 

groups and rural areas would benefit. 

WAY AHEAD 

Nearly 4% of the population of India 

suffers from Alzheimer’s or dementia 

as against 10%-15% of those in the 

60-plus age group in the US. 

However, this figure may touch 21% 

by 2050. India is home to more than 

70 million people over the age of 60 

years according to the 2001 census. 

In 2010, nearly 3.7 million Indians 

were reported to be suffering from 

dementia and the total cost of 

treatment was `14,700 crore. This is 

expected to double by 2030 and the 

cost may rise three-fold. By 2015, the 

Alzheimer’s market is expected to be 

close to `300 crore. Hence, Indian 

pharma companies can make the most 

of this opportunitY. 


28 


Dena Bank: 

In A Favourable 

Position 

A large number of factors seem to be favouring 

the growth trajectory of the Gujarat-based 

public sector bank 

Public sector lender Dena Bank is a prominent 

name in the industry, with a network of 1,297 

branches, 507 ATMs and 12 extension counters 

as on 30th Jun ’11. On the said date, it had a 

total business of `1,03,973 crore. The bank is mainly 

concentrated in the state of Gujarat. It has a major presence 

in rural areas. In fact, nearly 56% of its branches are 

situated in rural and semi-urban areas. Its head office is 

situated in Mumbai. 

Business Growth 

R` in Crs 

200000 

150000 

100000 

50000 

0 

24% 

26% 

21% 

26% 

Source: Company Data, Nirmal Bang Research 

19% 

21% 

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012E FY 2013E 

Business Growth 

INVESTMENT RATIONALE 

Sustained Growth Above Industry Average 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

Dena Bank has been able to sustain growth in advances 

above industry average. The bank’s advances have grown 

at a CAGR of 25% over FY07‐11 compared to a CAGR of 

20% in the industry. Going forward, we expect advances to 

grow at a CAGR of 20.5% for FY11‐FY13E. 


Dena Bank Advances V/s Industry Advances 

30% 

25% 

20% 

15% 

10% 

5% 

0% 


Major Exposure In The State Of Gujarat 

The state of Gujarat has grown at a rate of 11% in 2011 as 

compared to the all-India average growth of 9%. Between 

2005 and 2010, the real GDP growth in Gujarat has been 

11.3%, highest among all the states in India. 

Dena Bank has a major presence in Gujarat. 

Approximately 41% of the total branches are located in 

Gujarat. We believe that higher exposure in the state will 

help the bank to garner higher CASA and enjoy better 

advances growth. 

Change In Mix: Focus On High Yielding Assets 

Historically, Dena Bank’s loan portfolio has inclined 

towards corporate lending contributing above 50% of the 

total advances. However, the bank has now shifted its 

focus more on the small and medium enterprise (SME) and 

retail segment to exploit the potential in these 

high-yielding segments. 

Currently, agriculture, SME and retail segments contribute 

approximately 43% of the total current loan book. We 

believe the bank’s advances will be achieved through 

high-yielding SMEs and the retail portfolio. The bank is 

targeting a growth of around 25% in its retail portfolio for 

FY12E. 

Strong CASA 

26% 25% 

26% 

22% 

23% 

22% 

21% 

19% 

17% 17% 

18% 20% 

2008 2009 2010 2011 2012E 2013E 

Dena Bank Advances Industry Advances 

Dena Bank’s strength lies in having a very strong 

concentration of its branches in CASA-rich regions of 

western India. 

Approximately 65% of the Bank’s branches are located in 

western India and the bank also has a strong presence in 

rural and semi‐urban areas, which gives the bank access to 

low‐cost deposits, thus helping the bank in garnering 

higher current and saving account (CASA) ratio. Dena 

Bank has been able to register one of the highest CASA 

ratios among PSU banks. 

CASA Of PSU Banks (FY11) 

45.3% 38.5% 35.4% 35.0% 33.5% 28.7% 24.5% 28.3% 


Protection Of NIMs 

With increasing interest rates and cost of deposits, the 

NIMs (net interest margins) of the bank are expected to 

remain under pressure. 

However, a recent equity infusion of `600 crore will help 

the bank to maintain margins in FY12E. The management 

is confident that the bank will be able to maintain NIMs at 

around 3% for FY12E. Nevertheless, we factor in a 20 bps 

decline in margins for FY12E. 

Net Interest Margins 


Beyond Market 10th Oct ’11 It’s simplified... 29 

50% 

40% 

30% 

20% 

10% 

0% 

` in Crs 

3000 

2500 

2000 

1500 

1000 

500 

0 

SBI 

PNB 

2.9% 

Dena Bank 

2.4% 

Central Bank 

3.1% 2.9% 2.9% 

FY 2009 FY 2010 FY 2011 FY 2012E FY 2013E 

NII NIMs 

3.50% 

3.00% 

2.50% 

2.00% 

1.50% 

1.00% 

0.50% 

0.00% 

Asset Quality To Remain A Cause Of Concern In The 

Near Term 

Asset quality has been a cause of concern for the public 

sector bank, Dena Bank. But with increasing efforts taken 

by the bank to recover and minimize new slippages, the 

bank has been able to maintain its NPA levels in a 

comfortable zone. 

The bank has set up recovery teams and specialized 

monitoring systems to take care of the asset quality. This 

has started showing good results as recoveries have 

increased. The bank further expects higher recoveries in 

FY12E. 

However, there are some near-term concerns that the bank 

is facing currently. Dena Bank has an extremely high 

exposure of approximately `9,000 crore in the power 

industry. Of this huge amount, around `6,000 crore (March 

’11) are to State Electricity Boards (SEBs) on a short‐term 

working capital basis. 

Allahabad Bank 

Bank Of Baroda 

Bank Of India 

Canara Bank

30 

The current outlook for SEBs is not very positive. The 

bank management has become cautious due to this and is 

focusing on reducing its exposure to SEBs. This is evident 

from the fact that the bank has been successful in reducing 

its exposure to SEBs from `6,000 crore in March ’11 to 

`5,180 crore in June ’11. 

Moreover, the bank has not yet shifted to a 100% 

system-based NPA recognition. The bank still has to 

migrate its ‘`50-lakh and below’ portfolio to system-based 

NPA recognition. This constitutes around 18% of the total 

advance portfolio of the bank. 

As observed by the performance of other banks, we believe 

that migrating to a system-based NPA recognition can lead 

to higher slippages. However, the management of the bank 

is confident that the slippages will not be higher and it aims 

to reduce its gross NPAs from around 1.8% in FY11 to 

1.6% in FY12. 

Going forward, we expect gross NPAs and net NPAs of the 

bank to remain higher in FY12 owing to the reasons 

mentioned here. 

However, we are of the opinion that Dena Bank will 

witness a substantial improvement in the quality of its 

assets on the back of recoveries, the right steps taken to 

NPA Movement 

1400 

1200 

1000 

800 

2.13% 1.80% 

1.21% 

1.87% 

1.24% 

1.90% 

1.16% 

1.85% 

1.09% 

1.80% 

600 

400 

200 

1.08% 

0.90% 

0 

0.00% 

FY 2009 FY 2010 FY 2011 FY 2012E FY 2013E 

Gross NPA Net NPA GNPA (%) NNPA (%) 


` in Crs 

contain fresh slippages by way of constant monitoring as 

well as adequate provisions that would be provided by the 

bank itself. 

Financials 

Year 

FY 10A 

FY 11A 

FY 12E 

FY 13E 


Focus On Non-Interest Income 

The bank’s non-interest income has shown dismal growth 

and had been a point of concern for the bank. However, the 

management is confident of a revival in its non-interest 

income in the coming quarters. 

The bank is leveraging its relationship with its current 

customer base to increase the non-fund based business, 

which will, in turn, increase the fee-based income of the 

bank. The bank has tied up with all the top mutual fund 

houses in the industry to distribute their products through 

the bank’s branches. 

The bank is also focusing on core banking solution (CBS) 

to enable its customer’s branch banking. Moreover, the 

bank is focusing on recoveries, which will further boost the 

bank’s bottom line performance. 

RISKS AND CONCERNS 

o In the event of the macro‐economic scenario worsening 

again, there is a strong possibility of higher‐than‐expected 

NPA provisions. 

o A change in the management of the bank could impact 

the bank’s strategic target leading to a phase of uncertainty 

for the bank. 

VALUATIONS 

We expect Dena Bank to improve its core operating 

metrics, going forward, driven by focus on its liability 

franchise along with operating efficiency. Dena Bank is 

currently trading at a very attractive valuation in the 

banking space. 

Dena Bank has been able to sustain growth in advances 

above industry average and has a major presence in the 

state of Gujarat, which has the highest GDP among all the 

states in India. 

NII (`crs) Growth % Op. profit (`crs) Margin % PAT (`crs) EPS (`) P/E (x) Adj BVPS (`) P/ABV (x) ROE % 

1,100 

1,763 

2,017 

2,390 

3.10% 

60.30% 

14.40% 

18.50% 

841 

1,224 

1,480 

1,768 


49.80% 

53.30% 

56.00% 

56.50% 

511 

612 

679 

816 

17.82 

18.34 

20.37 

24.48 

4.79 

4.66 

4.19 

3.49 

73 

92 

108 

126.2 

1.17 

0.93 

0.8 

0.68 

21.40% 

19.50% 

17.20% 

17.80% 

Higher exposure in Gujarat, increasing focus on high-yield retail credit, strengthening of its balance sheet, coupled with 

lower operating costs would improve efficiency and drive earnings of Dena Bank, going forwarD. 


COMMODITY 

FUTURES 

Nickel 

$28,000/tonne 

Crude Oil $98/barrel 

Copper $8,500/tonne 

Pepper 

`25,000/quintal 

Guar Seed `3,200/quintal 

Silver $32/troy ounce 

Gold $1,500/troy ounce 

Zinc $2,100/tonne 

Chana 

`2,500/ 

quintal 

Aluminium $2,450/tonne 

Jeera 

`14,000/quintal 

Cardamom `1,000/kg 

Predicting Accurate Results. 

Consistently. 

Our research goes beyond numbers to identify the forces that affect the kundali of commodities - global events, 

domestic issues, and everything in between. Which is why, our predictions have invariably come true on 

several occasions, proving that we are among the best in the industry when it comes to commodity trading. 

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Prepared by Research Analyst of Nirmal Bang Commodities Pvt. Ltd. 


32 

FORTNIGHTLY OUTLOOK FOR COMMODITIES 

Most international 

commodities reacted 

rather sharply to 

growing debt 

concerns in the Euro zone, led by 

Greece, tumbling Asian currencies 

and the strength in the US dollar 

index. Despite recent positive US 

jobs data and US ISM manufacturing 

data, we haven’t seen any kind of 

buying in several commodities. 

Gold prices too tumbled losing its 

safe-haven stature. Silver prices 

followed the broad base metals 

complex, which witnessed their worst 

quarterly performance since 2008. 

Crude oil prices, though relatively 

strong, saw a weak trading fortnight 

as tumbling equities and easing 

tensions in the middle-east nations 

reduced issues related to supply, in 

turn, leading to a selloff in crude oil. 

PRECIOUS METALS 

After a volatile trading session in 

mid-September, we saw a huge crash 

in both gold and silver prices this 

fortnight. After reaching an all-time 

high of $1,920 per ounce on the 

COMEX, gold prices corrected by 

more than 16.5% to trade at $1,600 

per ounce. Silver prices were worst 

hit with prices trading at $26 per 

ounce from a recent high of $44 per 

ounce on the COMEX, accounting for 

a 40% correction in the previous 

fortnight. However, because of the 

strength in the US dollar against the 

Indian rupee, the fall was not as steep 

as was seen in the international 

markets. The strength in the US dollar 

against major international currencies 

can be majorly attributed to the 

massive correction in bullion prices. 

The Greek government said it passed 

a new budget backed by its international 

creditors, including larger 


deficits than previously forecasted, as 

the country moves closer to securing 

an 8 billion euro ($10.7 billion) aid 

payout needed to avoid default. Prime 

Minister George Papandreou’s 

Cabinet also passed 6.6 billion euros 

of austerity measures recently to cut 

the 2012 deficit to 6.8% of the GDP, 

missing the 6.5% goal previously set 

with the EU, International Monetary 

Fund and the European Central Bank, 

known as the troika . 

Going forward, we expect gold prices 

to remain buoyant as we have not 

seen any major liquidation in the ETF 

holdings. Strong ETF holdings 

suggest that the investment interest is 

still strong in the yellow metal. We 

recommend going long in gold at 

$1,600-$1,620 per ounce on the 

COMEX for a target of above $1,720 

per ounce on the COMEX until the 

next fortnight. 

INDUSTRIAL METALS 

Prices of industrial metals once again 

had a very weak session. Copper 

prices tumbled to trade below $6,800 

per tonne on the London Metal 

Exchange. This is a 35% correction 

from its all-time high level in February 

this year. Most industrial metals 

are set to display their worst quarterly 

performance since the crisis of 2008. 

Despite labour unrest in major 

copper-producing mines, prices failed 

to sustain upper levels. 

South African miner Metorex, the 

takeover target of Chinese metals 

group Jinchuan said its copper output 

for the three months to 

end-September rose 15% from the 

previous quarter. 

Global aluminium prices cannot fall 

much further, with as much as 

two-fifths of the global production 

already unprofitable and demand 

likely to hold up, a senior executive at 

RUSAL, the world’s largest producer 

of the metal, said. 

Aluminium tops the list among base 

metals in terms of consumption 

growth prospects, followed by nickel, 

zinc, copper, lead and lastly tin, 

according to CRU, an independent 

research agency. 

Going forward, we do not expect any 

respite for base metals. They still look 

weak based on bleak manufacturing 

PMI numbers from across the globe. 

Looking at the price levels and the 

quantum of demand, we still do not 

feel that base metals are cheap. We 

expect copper prices to test $6,500 

per tonne to $6,400 per tonne on the 

LME until the next fortnight. 

CRUDE OIL 

Crude oil prices fell sharply from $90 

per barrel to $77 per barrel in the last 

fortnight. The downside was majorly 

supported by the slowdown in the 

global economic growth, increasing 

threats that Greece would default and 

expectations of low oil demand from 

the world’s top oil consumer. 

Meanwhile, Libya too restarted oil 

production and will start exporting 

half of its total oil production by the 

end of November. The projected pace 

for oil demand is lower this month 

due to a less optimistic outlook for 

global economic growth. 

We expect more weakness to continue 

in oil prices due to macroeconomic 

indicators showing weakness around 

the globe, raising concerns for lower 

oil demand and improvement in the 

situation in Libya. Any major upside 

should be used as a good selling 

opportunity for the coming fortnighT. 


FORTNIGHTLY OUTLOOK FOR CURRENCIES 

IInvestors continued to shelter 

themselves in safe havens like 

the US dollar and US treasuries 

in the wake of persistent 

global growth concerns and the 

European debt crisis. The US dollar 

index, a broad measure of the dollar’s 

performance against six major currencies, 

rallied to 79.75 from 77. 

The IMF forecasted the world economies 

will grow at a much slower pace 

for another one-and-a-half year. 

Moreover, no concrete words came 

from the European Union, causing 

more pain to risky assets. 

Macro-economic indicators are showing 

weakness around the globe. PMI 

numbers of developed markets are 

indicating slower growth in all the 

industries. Unemployment rates in the 

US and Europe are high at around 

9.1% and 10%, respectively. The 

housing sector weakness continued in 

the US and UK leading to poor 

consumer spending. Also, inter-bank 

lending rates continue to reflect lack 

of confidence in the money markets. 

All concerns, coupled with the 

ongoing dollar squeeze make the 

dollar a good bet. The dollar index is 

likely to test the mark of 81 in the 

coming fortnight. 

The euro made a nine-month low 

against the US dollar, the worst hit 

among all the major currencies. The 

single currency is under immense 

pressure on account of contagion 

fears in the European economies. 

Investors went short on every rally on 

the euro, which led to a sharp fall 

from $1.38 to $1.3160 within two 

weeks. Though the German parliament 

passed the enhanced EFSF 

(European Financial Stability 

Facility) with a vast majority, the 

investors remained sceptical about the 

long-term solutions for European 

peripheral countries. 

Higher CPI numbers too did not 

support the currency and expectations 

of a rate cut was largely ruled out. The 

coming fortnight is very crucial for 

the Euro zone as the markets await the 

final contours of an enhanced EFSF. 

On the other hand, troika (IMF, EU 

and ECB) will decide upon the next 

tranche of aid to Greece. 

Currently, investors are very sceptical 

about the Euro zone and with every 

disappointment, investors are going 

short on the EUR/USD pair. With a 

bearish outlook on the pair, we expect 

the EUR/USD pair to trade in the 

range of $1.2850 to $1.3350. 

The sterling was broadly under 

pressure in line with the euro. It fell to 

$1.54 from $1.57 against the US 

dollar in the last fortnight. Rising 

expectations of additional quantitative 

easing weighed on the exchange 

rate as the Bank of England showed 

willingness to expand its monetary 

policy further. 

The central bank looks set to increase 

its efforts to stimulate the ailing 

economy in order to avoid falling 

back into a recession. Going forward, 

we may see a sustained downward 

pressure on GBP/USD against the 

backdrop of broad strength in the US 

dollar, coupled with deteriorating 

outlook for the UK economy. 

The fundamentals are weak for UK 

and any rally should be considered as 

a selling opportunity. The likely range 

for the pound for the fortnight is 

$1.55 to $1.52 with a downside bias. 

The Japanese yen broke the usual 

appreciation trend towards the end of 

the fortnight. The US GDP came in 

better-than-expected at 1.3% for the 

June quarter. This development gave 

the US dollar some positive ground 

against the Japanese yen and the 

JPYINR pair surged to 77.25. 

However, quarter-end exporters’ 

dollar selling came in at these levels. 

On the economy front, the newest 

Tankan economic survey for major 

Japanese industries in Q3 showed 

welcome improvement in the manufacturing 

sectors. In the coming 

fortnight, we expect the Japanese yen 

to be in the range of 76 to 78. 

The Indian rupee remained under 

tremendous pressure, depreciating by 

almost 8% to 10% in the last month. 

Capital outflows, coupled with the 

dollar squeeze in the Asian markets 

led to a sharp decline in the rupee. 

The RBI reiterated that it won’t 

intervene to protect any particular 

level. However, it will intervene in 

the Forex market only to control the 

intraday volatility of the rupee. 

According to data from SEBI, FII 

outflows since 20th September is 

$1,706 million from equity and debt 

markets. The weakness in rupee is 

likely to continue in the coming 

fortnight as the run on the US dollar 

may lead to further weakness in 

overall Asian currencies. 

On the economic front, the current 

account deficit for June quarter came 

in at $14 billion against $12 billion in 

the corresponding period last year. 

Additionally, fiscal numbers point to 

a higher-than-estimated fiscal deficit 

for the current financial year. Both the 

external and internal factors indicate a 

weaker rupee in the short-term. The 

USDINR pair may test the levels of 

49.90-50.00 in spoT. 


34 

Wooing Foreign Investors 

The announcement to permit QFIs to invest in mutual fund schemes will enable them to have direct access to 

the Indian mutual fund industry, thus widening the class of investors in the Indian capital market and also 

help in reducing the volatility in the markets 



In accordance with the 

announcement made by 

Finance Minister Pranab 

Mukherjee in his 2011-12 

budget speech, the finance ministry 

has decided to permit Qualified 

Foreign Investors (QFIs) to invest up 

to $10 billion in equity and debt 

schemes of mutual funds through the 

direct route – holding mutual fund 

units in a demat account through a 

depository participant (DP) that is 

registered with the SEBI and the 

indirect route – holding mutual fund 

units via the Unit Confirmation 

Receipt (UCR) issued by an overseas 

UCR issuer. 

An additional amount of $3 billion 

can be invested in debt funds in the 

infrastructure sector. Investment by 

QFIs will propel the markets, 

decrease volatility and boost 

infrastructure spending. 

“To liberalize the portfolio investment 

route, it has been decided to permit 

mutual funds that have been 

registered with SEBI to accept 

subscriptions from foreign investors 

who meet the KYC (know your 

customer) requirements for equity 

mutual fund schemes,” Mukherjee 

had said in his budget speech. 

He said, “This would enable mutual 

funds in India to have direct access to 

foreign investors as well as widen the 

class of foreign investors who would 

invest in the Indian equity market.” 

THE DIRECT ROUTE: 

DEPOSITORY PARTICIPANT 

(DP) ROUTE 

This route will be operated through a 

separate single rupee pool bank 

account to be maintained by the 

depository participant (DP). Dividend 

payments will be directly remitted to 

the overseas accounts of the QFIs. 

QFIs can open a single demat account 

with a DP in India. However, they are 

not allowed to open a bank account in 

the country. 

Process Flow When QFIs Come For 

Subscription Through The Direct 

Route 

Step 1: 

The Qualified Foreign Investors shall 

place a purchase/ subscription order 

mentioning the name of the mutual 

fund scheme with its depository 

participant and remit foreign inward 

remittances in any permitted currency 

directly to the single rupee pool bank 

account of the DP. 

Step 2: 

The DP, in turn, shall forward the 

purchase order to the concerned MF 

and remit the money to the MF’s 

scheme account on the same day as 

the receipt of funds from QFIs. In 

case of receipt of money after 

business hours, DP shall remit the 

funds to MF scheme account by the 

next business day. 

Step 3: 

The mutual fund house shall process 

the order and credit units of the 

mutual fund scheme into the demat 

account of the QFIs. If for any reason 

the units are not allotted, the mutual 

fund house/ depository participant 

shall ensure that the money is 

remitted back to the QFI’s designated 

overseas bank account within three 

working days from the date of receipt 

of subscription of money in the single 

rupee pool bank account of the 

depository participant. 

How Redemptions Take Place In 

The Direct Route Method 

Step 1: 

QFIs can redeem through delivery 

instruction on the receipt of 

instruction from QFIs. The DP shall 

process the same and forward the 

redemption instructions to the MF. 

Upon receipt of instruction from DP, 

the MF shall process the same and 

credit the single rupee pool bank 

account of the depository participant 

with redemption proceeds. 

Step 2: 

In case no fresh purchases are made, 

the money shall be remitted by the 

DPs to the designated bank’s overseas 

account of the QFIs within two 

working days from the date of the 

receipt of money from the MF in the 

pooled bank account. 

However, the DP can make fresh 

purchase of units of equity and debt 

schemes of the mututal fund (if so 

instructed by the QFIs) out of the 

redemption proceeds received, 

provided that payment is made 

towards such purchase within two 

working days of the receipt of money 

from the mutual fund house in the 

pooled bank account. 

THE INDIRECT ROUTE: 

UNIT CONFIRMATION RECEIPT 

(UCR) ROUTE 

Domestic mutual funds can open 

foreign currency accounts outside 

India for the purpose of receiving 

subscriptions from QFIs as well as for 

redeeming UCRs. The UCR will be 

issued against units of domestic MF 

equity schemes and would be 

non-tradable and non-transferable. 

There are four parties under this route 

- QFIs, UCR issuer (based overseas), 

SEBI registered custodian (based in 

India) and mutual fund house. QFIs 

can subscribe/redeem only through 

the UCR Issuer. 

The mutual fund house shall appoint 

one or more UCR issuing agents 

overseas and one SEBI-registered 

custodian in India. UCR issuer 

appointed by the fund house shall act 

as an agent of the mutual fund. 

The rupee denominated units of the 


36 

MF would be held as underlying by 

the custodian in India in demat mode 

against which the UCR issuer would 

issue UCR to be held by QFIs. Units 

purchased and redeemed through 

UCR issuer shall be settled on gross 

basis and under no circumstances 

shall be netted against other investors 

of UCR issuer. 

Process Flow When QFIs Come 

Through The UCR Route 

Step 1: 

In case of a mutual fund house 

opening a bank account overseas, the 

UCR issuer shall forward the order of 

QFIs to the MF/ custodian. Upon 

receipt and transfer of funds to India, 

the mutual fund shall issue units to the 

custodian and the custodian in turn 

intimate the UCR issuer to issue UCR 

to the QFIs. 

In case of redemption, the UCR issuer 

shall confirm the receipt of 

redemption request to the MF and 

custodian. On receipt of the 

instruction, the MF shall process the 

same and transfer the redemption 

proceeds to the MF overseas bank 

account for making payments to the 

designated overseas bank account of 

the QFIs. 

Step 2: 

In case the MF receives money in 

India from the UCR issuer, the UCR 

issuer shall forward the purchase 

order to the mutual fund and 

custodian and remit the funds into the 

MF scheme account (in rupee terms). 

Upon the receipt of funds, the mutual 

fund shall issue units to the custodian 


a stitch in time saves nine 

plan your finances in time 

Your financial security is our concern. 

At Nirmal Bang, it’s a relationship beyond broking... 

Who Is A Qualified Foreign Investor (QFI)? 

QFI means a person resident in a country that is compliant with 

Financial Action Task Force (FATF) standards and that is a signatory 

to the International Organization of Securities Commission’s 

(IOSCO’s) Multilateral Memorandum of Understanding. That 

person should also be non-resident of India and currently is not 

registered with the SEBI as a Foreign Institutional Investor or a 

sub-account. 

and the custodian shall, in turn, 

confirm to the UCR issuer to issue 

UCR to the QFIs. 

In case of redemption, the UCR issuer 

shall confirm the receipt of 

redemption request to the mutual fund 

and the custodian. 

Upon the receipt of instruction, the 

mutual fund house shall process and 

remit redemption proceeds to the 

UCR issuer, which in turn, shall remit 

the redemption proceeds to the 

designated bank account of the QFIs. 

Investments under both the routes 

will be monitored on a daily basis. 

The investment under both the routes 

will be in units which are directly 

issued by domestic mutual funds and 

no secondary market purchases would 

be allowed. 

Further, SEBI, the regulator has also 

allowed QFIs to invest an additional 

amount of up to $3 billion under both 

the routes in domestic mutual fund 

debt schemes which invest in 

infrastructure debt of minimum 

residual maturity of five years within 

the existing ceiling of $25 billion for 

FII investment in corporate bonds that 

have been issued by the infrastructure 

companies in the country. 

The Secutiries Exchange Board of 

India has also said that a mutual fund 

can accept subscriptions from QFIs 

till investments under both the routes 

reach $8 billion in equity mutual fund 

schemes and $2.5 billion in debt 

mutual fund schemes. 

The remaining limit of $2 billion in 

equity schemes and $0.5 billion in 

debt schemes would be auctioned by 

the capital markets regulator through 

a bidding process. 

The move may act as a further boost 

to MFs as it might get more inflows 

and will be managing funds for global 

investors. Some industry players also 

believe that this move might ease the 

pressure on the mutual fund industry 

which came about after the SEBI 

scrapped entry loads in 2009. 

However in order to get inflows from 

foreign players, Indian fund houses 

should be able to convince and 

market themselves outside the 

country to attract such investorS. 

EQUITIES | DERIVATIVES | COMMODITIES | CURRENCY | MUTUAL FUNDS | IPOs | INSURANCE | DP 

SMS ‘BANG’ to 54646 | e-mail: contact@nirmalbang.com | www.nirmalbang.com 


38 


Advising The Advisors 

The concept note on the regulation of investment advisors proposes certain positive 

practices for advisors and distributors, thus aiding investors in choosing the right 

products for their investment portfolios 

R 

etail investors, who 

sometimes used to get 

unwarranted financial 

advice resulting in huge 

losses on their investments, is set to 

change as markets regulator, 

Securities and Exchange Board of 

India (SEBI) is planning to regulate 

financial advisors and distributors 

selling financial products. 

The concept paper on the regulation 

of investment advisors released by the 

SEBI recently proposed some 

positive practices for the advisors and 

distributors, which might help 

investors chose right products for 

their portfolios. The regulator has 

invited public comments on the draft 

guidelines before 31st October. 

The markets regulator plans to 

regulate investment advisors through 

a Self-Regulatory Organization 

(SRO) which will look into issues 

relating to financial products 

mis-selling, violation of code of 

conduct, conflict of interest, etc. The 

SRO set up for the regulation of 

investment advisors shall follow the 

rules laid down by the respective 

regulators for products falling under 

their purview. 

Individuals in the advisory business 

would have to register themselves 

with the SRO and have to comply 

with its rules and regulations. Besides 

individuals, even portfolio managers 


who only provide investment advice 

would have to register with the SRO. 

It is always seen that selecting 

between an agent and an advisor may 

be problematic for investors since no 

proper guidelines regarding their 

qualification or eligibility are in place 

yet. However, several investors have 

begun running a proper background 

check on the distributor or advisor 

before seeking any financial advice. 

The SEBI, in its concept paper, has 

proposed a minimum qualification 

without which an individual cannot 

work as a financial advisor. It has 

proposed that an individual needs to 

be either a chartered accountant, an 

MBA in finance or needs to hold a 

similar qualification or should have at 

least 10 years of relevant experience 

in the field. 

The regulatory order also states that 

in addition, individuals would be 

required to have a certification from 

SEBI-approved organizations such as 

the National Institute of Securities 

Markets (NISM). In case of advisory 

services from banks, at least two key 

personnel from the bank would be 

required to have relevant experience 

and suggested certification. 

The person who interfaces with the 

customer should declare upfront 

whether he is a financial advisor or an 

agent of the product manufacturer. If 

he is an advisor, he would be subject 

to the Investment Advisors 

Regulations and would require a 

much higher level of qualification. He 

would act as an advisor to the investor 

on all financial products. He would 

receive all payments from the 

investor and there would be no limits 

on these payments. 

On the other hand, there will be 

agents who will be associated with 

the manufacturer and would receive 

remuneration from them. However, 

they will be prevented from styling 

themselves as financial advisors and 

will have to call themselves as agents 

only. The SEBI’s decision to regulate 

the advisors is being done mainly to 

protect the conflict of interest among 

financial distributors. 

Investment advisors or their 

representatives would be required to 

do adequate risk profiling of the client 

before any investment service is 

provided to them. Based upon the risk 

profiling performed by the investment 

advisor or their representative, 

suitable investment advice should be 

provided to the client. 

The records of such risk profiling and 

investment advice should be 

maintained by the investment advisor. 

Currently with no proper availability 

of records, investors are, therefore, 

not in a position to produce proof of 

any false practices. 

The concept paper is intended to clear 

the confusion among investors about 

wealth managers, private bankers, 

and portfolio managers. It also states 

that advisors should be strictly 

identified as ‘investment advisors’ 

and not by names like wealth 

managers or private bankers. Besides, 

they should be highly qualified. 

“This causes much confusion as to 

their role and responsibility. Hence 

the (proposed) regulations will 

provide that no person can carry on 

the activity of offering investment 

advice unless he is registered as an 

investment advisor under the 

regulations,” said SEBI. 

According to the paper, currently 

distributors play a dual role as agents 

of both the investor and the financial 

product manufacturer, getting paid 

from both ends. Such divided loyalty 

is not in the best interest of 

stakeholders and results in a situation 

where the distributor is loyal only to 

himself, churning investors' 

portfolios and squeezing more 

commission from the manufacturer. 

Investment advisors cannot receive 

any money from anyone other than 

clients and must clearly indicate fees 

and charges payable along with 

detailed information about their 

businesses, history and terms and 

conditions for advisory. They cannot 

outsource any activity except research 

reports and shall not be liable for civil 

and criminal liability for their advice 

unless negligence or mala-fide 

intention is established. 

Also advocates and chartered 

accountants who provide advice in 

their respective professions are out of 

the domain. It also leaves out 

newspapers and the broadcast media. 

Additionally, stock brokers and 

sub-brokers, who provide investment 

advice without charging any fees and 

any person offering only insurance 

broking under the regulations of the 

Insurance Regulatory and 

Development Authority (IRDA), will 

not be covered under the proposed 

investment advisor regulation. 

The concept paper has proposed that 

all investment advisors will act only 

in the best interest of their clients 

(fiduciary responsibility). In case they 

provide other services such as 

broking, dematerialization of shares, 

etc, they should maintain a Chinese 

wall between advisory and other 

services and must disclose them to the 

client, said SEBI. 

However, a final decision will be 

taken only after looking into the 

public comments. But the path chosen 

by the regulator will lead to advisors 

selling right products to the investors 

and not feed them with unwanted 

products which might hurt their 

pockets and prevent them from 

achieving their financial goalS. 


CHANGE IN PRICE AND OPEN INTEREST 

40 

Company Name Price 

(`) 

Nifty Futures 

Bank Nifty 

ACC Ltd 

Ambuja Cements Ltd 

Axis Bank Ltd 

Bajaj Auto Ltd 

Bharti Airtel Ltd 

Bharat Heavy Electricals Ltd# 

Bharat Petroleum Corporation Ltd 

Cairn India Ltd 

Cipla Ltd 

DLF Ltd 

Dr Reddy's Laboratories Ltd 

GAIL (India) Ltd 

Grasim Industries Ltd 

HCL Technologies Ltd 

HDFC Ltd 

HDFC Bank Ltd 

Hero MotoCorp Ltd 

Hindalco Industries Ltd 

Hindustan Unilever Ltd 

ICICI Bank Ltd 

IDFC Ltd 

Infosys Ltd 

I T C Ltd 

Jindal Steel & Power Ltd 

Jaiprakash Associates Ltd 

Kotak Mahindra Bank Ltd 

Larsen & Toubro Ltd 

Mahindra & Mahindra Ltd 

Maruti Suzuki India Ltd 

NTPC Ltd 

Oil & Natural Gas Corporation Ltd 

Punjab National Bank 

Power Grid Corporation of India Ltd 

Ranbaxy Laboratories Ltd 

Reliance Communications Ltd 

Reliance Capital Ltd 

Reliance Industries Ltd 

Reliance Infrastructure Ltd 

Reliance Power Ltd 

Steel Authority of India Ltd 

State Bank of India 

Sesa Goa Ltd 

Siemens Ltd 

Sterlite Industries (India) Ltd 

Sun Pharmaceutical Industries Ltd 

Tata Motors Ltd 

Tata Power Co Ltd* 

Tata Steel Ltd 

Tata Consultancy Services Ltd 

Wipro Ltd 


CHANGE IN PRICE AND OPEN INTEREST OF THE NIFTY 50 COMPANIES 

12 Sept'11 03 Oct'11 

4942.45 

9385.60 

1031.95 

142.65 

1052.15 

1577.75 

386.20 

340.28 

660.05 

274.00 

291.20 

192.60 

1457.00 

409.75 

2157.40 

378.55 

654.45 

468.35 

2210.05 

141.65 

347.20 

864.05 

108.40 

2197.25 

196.55 

521.30 

64.70 

452.25 

1631.20 

783.10 

1072.50 

162.00 

262.05 

930.30 

94.40 

489.60 

79.95 

388.35 

807.85 

436.30 

77.45 

108.00 

1866.30 

222.15 

839.30 

125.75 

489.10 

145.20 

99.35 

449.75 

984.25 

324.85 

Open 

Interest 

28693300 

2075925 

1056750 

13768000 

5491750 

1190750 

8777000 

12937500 

915000 

15002000 

3827000 

22942000 

626750 

1308000 

459500 

2220500 

5459500 

17097500 

1873750 

17832000 

12913000 

8710000 

22048000 

2854000 

15884000 

3763500 

40424000 

3968500 

5538750 

3588500 

2990000 

21526000 

22869000 

3637000 

7880000 

2383500 

22102000 

3493000 

12893250 

4408000 

24282000 

8646000 

5639125 

7434000 

487000 

21368000 

2424500 

35105000 

9217500 

19617500 

5396000 

3953500 

#BHEL goes ex-split in the ratio of 5:1, *Tata Power goes ex-split in the ratio of 10:1 

Price 

(`) 

4857.75 

9182.60 

1098.90 

148.10 

990.05 

1524.35 

382.65 

319.40 

679.85 

271.70 

285.45 

196.05 

1467.10 

418.65 

2281.75 

399.75 

632.95 

456.45 

1964.95 

124.40 

335.50 

841.00 

109.60 

2471.80 

195.55 

475.80 

70.45 

447.00 

1324.10 

811.50 

1082.95 

165.15 

269.10 

924.00 

97.35 

511.85 

72.45 

321.55 

791.95 

379.70 

77.95 

100.20 

1857.75 

193.35 

832.40 

109.40 

465.35 

152.85 

97.00 

392.90 

1042.40 

332.10 

Open 

Interest 

20814900 

1987725 

892750 

11070000 

6230000 

1000500 

8945000 

10050625 

823500 

16578000 

2959000 

23871000 

574500 

993000 

395750 

1640000 

5844000 

15893750 

1036250 

20179000 

9400000 

8869750 

17398000 

2337125 

13750000 

3613000 

28492000 

3223500 

6977750 

2937500 

2344250 

15074000 

14724000 

3623500 

4568000 

2455000 

22472000 

6346000 

11217000 

5612000 

17554000 

7836000 

5335625 

7532000 

374500 

23618000 

2559500 

39951250 

7867500 

20810000 

4142250 

3236000 

Change 

in Price 

(`) 

-84.70 

-203.00 

66.95 

5.45 

-62.10 

-53.40 

-3.55 

-20.88 

19.80 

-2.30 

-5.75 

3.45 

10.10 

8.90 

124.35 

21.20 

-21.50 

-11.90 

-245.10 

-17.25 

-11.70 

-23.05 

1.20 

274.55 

-1.00 

-45.50 

5.75 

-5.25 

-307.10 

28.40 

10.45 

3.15 

7.05 

-6.30 

2.95 

22.25 

-7.50 

-66.80 

-15.90 

-56.60 

0.50 

-7.80 

-8.55 

-28.80 

-6.90 

-16.35 

-23.75 

7.65 

-2.35 

-56.85 

58.15 

7.25 

Change 

in Open 

Interest 

-7878400 

-88200 

-164000 

-2698000 

738250 

-190250 

168000 

-2886875 

-91500 

1576000 

-868000 

929000 

-52250 

-315000 

-63750 

-580500 

384500 

-1203750 

-837500 

2347000 

-3513000 

159750 

-4650000 

-516875 

-2134000 

-150500 

-11932000 

-745000 

1439000 

-651000 

-645750 

-6452000 

-8145000 

-13500 

-3312000 

71500 

370000 

2853000 

-1676250 

1204000 

-6728000 

-810000 

-303500 

98000 

-112500 

2250000 

135000 

4846250 

-1350000 

1192500 

-1253750 

-717500 

Change 

in Price 

(%) 

-1.71 

-2.16 

6.49 

3.82 

-5.90 

-3.38 

-0.92 

-6.14 

3.00 

-0.84 

-1.97 

1.79 

0.69 

2.17 

5.76 

5.60 

-3.29 

-2.54 

-11.09 

-12.18 

-3.37 

-2.67 

1.11 

12.50 

-0.51 

-8.73 

8.89 

-1.16 

-18.83 

3.63 

0.97 

1.94 

2.69 

-0.68 

3.12 

4.54 

-9.38 

-17.20 

-1.97 

-12.97 

0.65 

-7.22 

-0.46 

-12.96 

-0.82 

-13.00 

-4.86 

5.27 

-2.37 

-12.64 

5.91 

2.23 

Change 

in Open 

Interest 

(%) 

-27.46 

-4.25 

-15.52 

-19.60 

13.44 

-15.98 

1.91 

-22.31 

-10.00 

10.51 

-22.68 

4.05 

-8.34 

-24.08 

-13.87 

-26.14 

7.04 

-7.04 

-44.70 

13.16 

-27.21 

1.83 

-21.09 

-18.11 

-13.43 

-4.00 

-29.52 

-18.77 

25.98 

-18.14 

-21.60 

-29.97 

-35.62 

-0.37 

-42.03 

3.00 

1.67 

81.68 

-13.00 

27.31 

-27.71 

-9.37 

-5.38 

1.32 

-23.10 

10.53 

5.57 

13.81 

-14.65 

6.08 

-23.23 

-18.15 

Source: NB Research 


BULK DEALS 

Bulk deals take place from normal trading windows that brokers provide and can be done 

any time during trading hours. In a bulk deal, the total traded quantity exceeds 0.5% 

of the number of equity shares of a company. 

MAJOR BULK DEALS WHERE OVER 1% OF EQUITY WAS TRADED FROM 12th Sept ’11 TO 3rd Oct ’11 

Ex Date Company Client 

Trade Quantity % of Eq 

BSE 13 Sept'11 Gloster Ltd 

Joonktollee Tea & Industries Ltd 

Sell 154232 5.89 

BSE 14 Sept'11 India Securities Ltd 

Essar Teleholdings Ltd 

Sell 48000000 5.48 

BSE 14 Sept'11 Nandan Exim Ltd 

Chiripal Industries Ltd 

Buy 4554907 1.00 

BSE 15 Sept'11 Chandni Textiles Ltd 

Monaecum Properties Pvt Ltd 

Sell 2500000 1.55 

BSE 16 Sept'11 Le Waterina Resorts & Hotels Ltd Sangam Agro Agencies Pvt Ltd 

Buy 4100000 6.15 

BSE 16 Sept'11 Thambbi Modern Spinning Mills Ltd Asset Reconstruction Co I Ltd 

Sell 73141 1.27 

BSE 19 Sept'11 India Securities Ltd 

Essar Teleholdings Ltd 

Sell 47500000 5.42 

BSE 21 Sept'11 Entegra Ltd 

MW Infra Developers Pvt Ltd 

Sell 6000000 5.61 

BSE 26 Sept'11 Futura Polyesters Ltd 

R Raheja Properties Pvt Ltd 

Buy 5307311 9.67 

BSE 26 Sept'11 Bloom Dekor Ltd 

Shalibhadra Steel Pvt Ltd 

Sell 260390 4.34 

BSE 26 Sept'11 Beryl Drugs Ltd 

Addo Constructions Pvt Ltd 

Sell 133547 2.60 

BSE 26 Sept'11 Bloom Dekor Ltd 

Darshit Hydro Power Project Pvt Ltd 

Sell 100000 1.67 

BSE 26 Sept'11 Excel Infoways Ltd 

Satyaprabhu Infrastructure Pvt Ltd 

Sell 500000 1.59 

BSE 27 Sept'11 Futura Polyesters Ltd 

R Raheja Properties Pvt Ltd 

Buy 4435106 8.08 

BSE 27 Sept'11 Shekhawati Poly-Yarn Ltd 

Nayan Impex Pvt Ltd 

Buy 500000 2.27 

BSE 27 Sept'11 Godrej Properties Ltd 

Godrej Industries Ltd 

Sell 790000 1.13 

BSE 27 Sept'11 Pasupati Fincap Ltd 

Pasupati Olefin Ltd 

Sell 52623 1.12 

BSE 28 Sept'11 LKP Finance Ltd 

KBS Realtors Pvt Ltd 

Sell 300000 2.29 

BSE 28 Sept'11 LKP Finance Ltd 

Evans Fraser And Company (India) Ltd Buy 300000 2.29 

BSE 28 Sept'11 Claris Lifesciences Ltd 

WF Asia Fund Ltd 

Sell 934106 1.46 

BSE 30 Sept'11 UT Ltd 

Progressive Star Finance Pvt Ltd 

Sell 275000 3.00 

BSE 30 Sept'11 UT Ltd 

Lend Lease Company India Ltd 

Buy 275000 3.00 

BSE 30 Sept'11 BGIL Films & Technologies Ltd 

Felex Enterprises Pvt Ltd 

Sell 150000 2.34 

BSE 30 Sept'11 Emco Ltd 

Purna Properties And Investments Pvt Ltd Buy 780000 1.20 

Source: NSE and BSE 

MUTUAL FUND, FII ACTIVITY AND NIFTY 

This graph and data represent the Mutual Fund and FII activity that took place in the last fortnight, 

whether the Fund Houses were buyers or sellers. 

Date MF Net* FII Net * 

12 Sep'11 -94.00 -219.80 

600 

400 

200 

0 

-200 

-400 

-600 

-800 

12 Sep'11 

-1000 

-1200 

-1400 

MF Net , FII Net & Nifty 

20 Sep'11 

15 Sep'11 

23 Sep'11 

28 Sep'11 

5200 

5150 

5100 

5050 

5000 

4950 

4900 

4850 

4800 

4750 

4700 

4650 

13 Sep'11 

14 Sep'11 

15 Sep'11 

16 Sep'11 

19 Sep'11 

20 Sep'11 

21 Sep'11 

22 Sep'11 

23 Sep'11 

26 Sep'11 

27 Sep'11 

-62.00 

-147.20 

107.00 

149.80 

-78.60 

-109.20 

216.10 

-41.00 

8.60 

37.10 

194.60 

-779.60 

-369.60 

-9.20 

166.80 

394.60 

-4.00 

378.70 

333.70 

-1234.60 

-1189.80 

-1006.80 

MF FII NIFTY (RHS) 

28 Sep'11 -156.90 88.70 

29 Sep'11 

-- 251.90 


Traded 

274.10 

61.95 

2.63 

1.94 

5.39 

11.47 

61.00 

25.00 

5.01 

15.75 

12.76 

15.75 

11.80 

5.59 

22.60 

630.00 

15.41 

75.01 

75.01 

110.01 

9.97 

9.97 

6.90 

55.90 

Price (`) 

Nifty 

4946.80 

4940.95 

5012.55 

5075.70 

5084.25 

5031.95 

5140.20 

5133.25 

4923.65 

4867.75 

4835.40 

4971.25 

4945.90 

5015.45 

*Net activity in Equity 

Beyond Market 10th Oct ’11 It’s simplified... 41 

Close 

310.70 

60.00 

2.60 

1.94 

5.89 

11.47 

57.45 

27.15 

5.60 

15.75 

14.05 

15.75 

11.79 

5.65 

22.60 

639.20 

15.49 

79.95 

79.95 

119.45 

10.10 

10.10 

6.63 

54.20

42 

MOVERS AND LAGGARDS IN MUTUAL FUND SCHEMES 

Equity Schemes 


Scheme Name 

Movers 

Franklin Infotech(G) 

ICICI Pru Technology(G) 

DSPBR Technology.com(G) 

Birla SL New Millennium(G) 

ING OptiMix Asset Allocator Multi FoF(G) 

Laggards 

Birla SL CEF-Global Agri-Ret(G) 

Birla SL CEF-Global Multi Commo-Ret(G) 

Mirae Asset China Advantage-Reg(G) 

DSPBR World Mining-Reg(G) 

Birla SL CEF-Global Prec Metal-Ret(G) 

Debt Schemes 

Movers 

Escorts Income Plan(G) 

Birla SL Medium Term-Reg(G) 

Taurus Dynamic Income Fund(G) 

Escorts ST Debt(G) 

Tata FIPF B3-Reg(G) 

Laggards 

ICICI Pru Advisor-Moderate(G) 

ICICI Pru Advisor-Cautious(G) 

Canara Robeco InDiGo(G) 

Escorts Income Bond(G) 

IDFC Asset Alloc-Mod(G) 

Balance Schemes 

Movers 

Kotak Equity Arbitrage(G) 

IDFC Arbitrage Plus-Reg(G) 

Reliance Arbitrage Advantage(G) 

JM Arbitrage Adv(G) 

Religare Arbitrage(G) 

Laggards 

Escorts Balanced(G) 

Kotak Balance 

LIC Nomura MF Children(G) 

Escorts Opp(G) 

UTI CCP Advantage(G) 


NAV 

(3rd Oct'11) 

55.4568 

15.2700 

27.8440 

16.6200 

14.8479 

13.0393 

11.1373 

8.0580 

9.1344 

13.2972 

33.0050 

11.8528 

10.6666 

15.2345 

13.8819 

24.4757 

18.9217 

11.7036 

29.9043 

11.2043 

15.3070 

12.1437 

10.8233 

14.3102 

13.3757 

54.7820 

19.9250 

9.1444 

26.6479 

14.9970 

Absolute % 

(Point to Point) 

2 Weeks 

2.6052 

1.9359 

1.2730 

1.0334 

0.2606 

-17.8415 

-15.2677 

-15.1879 

-14.1907 

-12.4764 

0.7672 

0.7471 

0.5420 

0.4755 

0.4181 

-2.6319 

-1.5833 

-1.2254 

-1.1556 

-1.1138 

0.9270 

0.4109 

0.3830 

0.3563 

0.3346 

-5.5818 

-4.8245 

-3.7999 

-3.6998 

-3.6071 

Disclaimer 

The information provided here has been obtained from various sources and is considered to be authentic and reliable. However, 

Nirmal Bang Securities Private Limited is not responsible for any error or inaccuracy in the same. 


SMS ‘BANG NRI’ to 54646 | nri@nir malbang.com | www.nir malbang.com 

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44 


A MIND 

OF ITS 

OWNThe 

knowledge of 

behavioural nance 

can help market 

participants to 

recognize and avoid 

bias and errors in 

their decisions 


Do you know who the 

biggest enemy of a 

trader or an investor is? 

No, it is not inflation or 

high interest rates, or global factors 

and not even market operators. The 

biggest enemy of a trader or an 

investor is his or her own mind. 

It is a known fact that the markets 

thrive on two major human emotions 

– fear and greed. However, human 

emotions like hope, despair, regret, 

pride and optimism, among others too 

play a major role in affecting the 

psyche of an investor. 

Till few decades back, emphasis was 

laid on studying the stock markets 

from a fundamental or a technical 

point of view instead of emotional 

factors. It was only recently that a 

relatively new concept of looking into 

these human emotions and studying 

the effects of human psychology on 

the overall outcome of profit or loss in 

the markets in an investor’s life was 

put forth. This concept is known as 

behavioural finance. 

BEHAVIOURAL FINANCE 

The study of behavioural and 

cognitive psychology that affects the 

financial decision-making process is 

known as behavioural finance. There 

are numerous concepts under 

behavioural finance and it would be 

almost impossible to cover all of them 

in one or two articles. So what we 

have done is handpicked some of the 

key concepts that an investor comes 

across in everyday trading, to help 

him understand the causes and effects 

of each and how we can control them 

to emerge winners in the markets. 

PROSPECT THEORY 

Imagine a scenario wherein you give 

a child four chocolates and tell him 

that he has to give two chocolates to 

his younger sister. Now imagine a 

second scenario wherein you give the 

child two chocolates and tell him he 

can keep both of them for himself. 

Which scenario, in your view, would 

be considered more favourably by the 

child? Rational thinking says that 

there should be no difference in his 

emotions as the end result is that the 

child is left with a net of two 

chocolates. But it is not so. Research 

shows that the child reacts more 

favourably to the second scenario. 

In the same manner, a straight `1,000 

profit is viewed differently from a 

`2,000 profit followed by a `1,000 

loss in the stock market. In the second 

scenario, even though the net profit is 

still `1,000, it is not viewed positively 

as the effect of the loss is much more 

than the profit on the trader’s mind. 

This effect is popularly known as 

Loss Aversion. 

The theory states that humans 

perceive gains and losses differently. 

The pain of loss is much more than 

the pleasure of a gain. In fact, it is said 

that the pain of a loss is almost three 

times more than the pleasure of a gain 

of the same value. This is why we see 

that we are quick to lock-in our 

profits, however small. But we let our 

losses run for long. This is because we 

cannot bear the pain of a loss. 

This is also the reason why in a 

panicky situation, investors shift their 

funds to bank fixed deposits where 

they are assured of 8% to 10% 

guaranteed returns and avoid 

investing in the stock markets where 

even though the returns can be as high 

as 30% to 50%, the risk of capital 

erosion is equally high, which can 

cause pain. 

Remedy 

The best piece of advice is to look at 

the net figure of profit minus loss and 

not focus on each entity in its 

singularity. Also, remember that the 

stock market is a risky place and that 

loss is an integral part of trading. And 

if you do not take risks, you will not 

reap rich rewards. Finally, set a time 

frame for your investments and do not 

exit before that time. 

GAMBLER’S FALLACY 

How many times have we restrained 

ourselves from buying a stock or have 

sold off our holdings just because it 

has moved up in 5 to 6 consecutive 

trading sessions in a row thinking that 

it cannot go up any further and that 

the next trading day would be a down 

day for the stock? We guess many a 

times. But to your surprise, it goes up 

the next trading day and even the next 

one, as well. 

In a gambler’s fallacy, a trader thinks 

that after an event or a series of events 

has occurred, the likelihood of it 

occurring again is very less, even 

though it is an arbitrary event. A 

gambler’s fallacy is the worst enemy 

of a trader. After a series of losses, an 

investor feels that his streak of bad 

luck is coming to an end and a U-turn 

is just round the corner and he keeps 

on investing and betting more and 

eventually ends up losing everything. 

This normally happens with traders 

who tend to look for stocks that are 

trading at or near their 52-week lows, 

because they feel that the stock 

cannot go down any further and the 

only way is up. But how many times 

have we seen the stock moving 

downwards and forming new 

52-week lows with each passing day? 


Investors should bear in mind that the 

stock market is a game of probability 

and that past events do not change the 

probability that certain events will 

occur in the future and there is always 

a 50:50 chance of it recurring. Rather 

than just blindly predicting that the 

trend will reverse, investors should do 


46 

their homework and wait for clear-cut 

technical and fundamental signals 

that the trend has actually reversed 

before entering any trade. 

ANCHORING 

A very interesting concept in 

behavioural finance states that we 

tend to hold on to certain events or 

figures and use them as anchors or 

reference points on which we base 

our investing decisions. This is quite 

common and almost everybody will 

identify with this example. Suppose 

you have bought a stock at `100 and it 

rises to `140, yet you wait for it to rise 

further. But the stock price starts 

falling instead and reaches `70. You 

then decide to get out of it if it reaches 

`100 again. But when it does really 

reach `100, you do not sell it. Instead, 

you say that you will wait for it to 

reach `140 again. This is because the 

recent high of `140 has been 

anchored in your mind. 

Anchoring is a means for investors to 

justify their decisions. Because the 

price of `140 is anchored in the 

investor’s mind, he feels that it is the 

correct valuation for the stock and the 

market forces are undervaluing it. 

According to him, the stock will 

reach the right price of `140, sooner 

or later. What investors do not realize 

is that the fundamentals of the 

company or some such factors could 

have deteriorated and that is what is 

being shown in the price of the stock. 

Repeated exposure to certain numbers 

or events can also cause anchoring. 

So, if you have heard one or more 

technical analysts on TV say that if 

the Nifty breaks 5,000 on the 

downside it can go as low as 4,700, 

your mind gets fixated on the number. 

Once the Nifty breaks the 

5,000-mark, even though the stock 

you want to buy is available at a very 

cheap rate, you still do not buy it 

because you feel that the markets are 


going to fall to as low as 4,700 and 

you may get the stock even cheaper. 

Eventually you miss your bus. 


a. Forget the highs and lows. 

b. Do your homework properly. Plan 

your entry and exits in advance and 

stick to it. 

c. Keep a sharp eye on any news 

regarding internal changes or those 

revolving around the company or the 

industry on the whole. 

ENDOWMENT EFFECT 

Suppose your friend has gifted you a 

digital camera worth `5,000 for your 

birthday. But since you already have a 

digital camera of your own, you 

decide to sell it off. At what price 

would you sell it for? Obviously, for 

nothing less than `5,000 even though 

you have not spent a single rupee to 

purchase the camera. 

Now consider a second scenario. You 

are in need of a digital camera and 

instead of gifting you the camera, you 

friend offers to sell it to you. You 

know that the price of the camera in 

the market is `5,000. What is the 

price that you are willing to offer to 

your friend to buy the camera? Most 

of us would be willing to offer just 

`4000 or even less. Why then are we 

not ready to sell for less than `5,000 

and want to buy it at a lesser price? 

This is called the Endowment Effect, 

which states that humans believe that 

something that belongs to them is 

much more valuable than something 

that belongs to others. Humans 

experience a lot of pain when parting 

with objects they own. Hence, we 

note that we press the ‘buy’ button 

very easily but pressing the ‘sell’ 

button is very difficult. 

Thus, if you have bought a stock at 

`100, you would ideally not part with 

it if you are not getting `120 or more. 

Endowment is the reason why people 

hold on to their losing stocks. They 

feel that just because they own it and 

have bought it at a certain price, the 

sell price that they are demanding is 

justified and anything less than that 

would be doing injustice to the stock. 

This right price may never come and 

they are stuck with the stock for life. 


Plain and simple. Do not get married 

to your stock. Be prompt to lock-in 

profits and do not hesitate to book 

losses when needed. 

CONFIRMATION BIAS 

People tend to think only in a manner 

that suits their preconceived notions 

or thoughts. Hence, when processing 

information they focus only on 

information that confirms with their 

line of thinking. Any contradiction or 

opposing thoughts are comfortably 

ignored. This is known as 

Confirmation Bias. 

For example, if you have a 

preconceived notion that only low 

P/E and high beta stocks are 

multibaggers in the long run, you will 

search only for those stocks that fulfil 

these two criteria. 

Furthermore, once you have 

identified such stocks, you will 

reaffirm your argument by focussing 

only on the positive news surrounding 

these stocks such as high net profit, 

increased sales, etc. Any negative 

news about the stock is completely 

ignored. This sort of view can prove 

to be very disastrous as it provides 

only a one-sided view and obliterates 

the complete picture. 


Carefully process all the news about a 

stock - positive as well as negative. 

Assess all the pros and cons, weigh 

the risk to reward ratio and only then 

take an informed decisioN. 


Contact: 022-39268088 

e -mail: currencies@nirmalbang.com 


The most intelligent strategy in Chess is to 

be ready with the next move. Similarly, 

currency trading involves moves that are a 

combination of knowledge and skill, 

backed by years of experience. 

Currency Derivatives Trading with us keeps 

you a few steps ahead, always. 

EQUITIES | DERIVATIVES | COMMODITIES* | CURRENCY | MUTUAL FUNDS# | IPOs# | INSURANCE# | DP 

38-B, Khatau Building, 2nd Floor, Alkesh Dinesh Mody Marg, Fort, Mumbai - 400001. Tel: 3926 8600 / 01; Fax: 3926 8610, 

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme related document carefully before investing. Please read the Do’s and Don’ts prescribed by Commodity 

Exchange before trading. Through Nirmal Bang Securities Pvt. Ltd. *Through Nirmal Bang Commodities Pvt. Ltd. # Distributors investment in securities is subject to market risk. investment in securities is subject to market risk

LEARN THE ART OF 

COMMODITY INVESTING 

48 


& 

Beyond 

Present 

Date: 22nd July, 2011. 

Venue: Hotel Centre Point, 

Nagpur. 

Exchange Partner 


BEYOND MANDI 

VISITS NAGPUR 

Nirmal Bang Commodities Pvt Ltd, in association with Zee Business, had organized Beyond 

Mandi, the investor education camp at Hotel Centre Point in Nagpur on 22nd July with the aim 

to educate traders and investors on the art of investing in commodities by bringing market 

participants and industry experts on a common platform and thus helping the former to take right 

investment decisions through sharp insights and guidance. 

At the camp, Anjani Sinha, MD & CEO of the National Spot Exchange and Kunal Shah, Head – 

Commodity Research at Nirmal Bang Commodities Pvt Ltd deliberated about the immense 

opportunities in the commodities complex. Purshottam Kawade, president of the Maharashtra 

Suvarnakar Association was also present on the occasion. 

Amish Devgan started the event by introducing the panelists and explaining the objective behind 

the camp. 

Anjani Sinha, 

MD & CEO of NSEL 

Anjani Sinha is the MD & CEO of National Spot 

Exchange Ltd (NSEL). He has over two decades of 

experience and deep knowledge of commodity derivatives 

and spot markets. His previous stint was with the Ahmedabad 

Stock Exchange. Prior to that, he was associated with 

the Bombay Commodity Exchange Ltd, Interconnected 

Stock Exchange of India Ltd (ISEI) and Magadh Stock 

Exchange. 

Traders and investors can take advantage 

of the opportunities in commodity 

complex by using expert guidance and 

timely advice 

Amish Devgan, 

Commodity Editor and 

Anchor at Zee Business 

The first speaker of the day, Anjani Sinha informed the audience about MCX and 

how it has become one of the premier commodity exchanges in India. He further told 

them about the various products offered by the exchange and also its plans to launch 

new instruments to meet investor needs. 

“MCX-promoted NSEL has also launched certain instruments in the e-series segment 

for small and retail investors. One of them is e-gold, which is gaining popularity since 

it is easily convertible into physical gold and subsequently into jewellery and can be 

stored conveniently,” said Sinha. 

He added that e-gold would benefit those who seek to invest systematically or those 

who want to save money for important events like marriage. Other e-series products 

include e-gold, e-silver, e-copper, e-lead and e-zinc. NSEL plans to take the total 

number of commodities in the e-series segment to 20. 

Sinha also dwelt on the benefits of NSEL, especially the way it has helped the people 

of Vidarbha in trading in cotton. He said commodity traders can also avail of the 

Warehouse Receipt Financing from banks empanelled with NSEL against commodities 

deposited in the warehouses. 


Kunal Shah, 

Head of Commodity 

Research at Nirmal Bang 

Kunal Shah serves as the Head of Commodity 

Research at Nirmal Bang. He closely tracks 

precious metals, base metals, energy and 

agricultural commodities. He addresses 

seminars on the outlook of commodities across 

the country. He appears regularly on business 

channels. He is also sought by the print media 

and wire services, on a regular basis. Prior to 

Nirmal Bang, he was associated with Motilal 

Oswal Commodities Pvt Ltd, where he 

managed the research desk. 

50 


The next speaker to carry forward the event was Kunal Shah. Explaining the reason 

behind conducting the commodity camp in Nagpur, Shah said Nagpur is quite big in 

terms of commodity trading. He further said concentrated orange juice is one of the 

biggest traded agricultural commodities on the NYBOT. 

“Even without the participation of FIIs, MFs and insurance companies, the markets are 

growing at a phenomenal pace,” said Shah. “Internationally, commodities are treated as 

an asset class.” 

According to him, commodity prices cannot reach zero or negligible levels. He said the 

future of commodities is bright because of the growing population of India, which will 

result in the rise in prices as India’s acreage is on the decline. 

He made a presentation on the reasons for the upward movement in commodities between 

2000 and 2010, except the recessionary years of 2001 and 2008. 

In 2010, commodities had beaten all other asset classes, including equities and currencies. 

Even though, a correction was witnessed in the equity markets this year, the commodity 

market has managed to outperform. 

The current scenario is very similar to the one seen after WWI when Germany had printed 

large amounts of currency notes, which resulted in the rise in commodity prices. At 

present, prime economies around the world are increasing their supply of money in the 

markets, which is pushing the prices of commodities, elaborated Shah. 

The ongoing rally in the markets is mainly due to increased liquidity in the commodity 

markets. This rally is not due to supply constraints and is not driven by market forces 

alone, Shah maintained. 

He went on to explain the sovereign debt problem in Greece, Portugal, Ireland, Italy and 

Spain. The bond yield in these countries has been on the rise since these nations do not 

have money, he said. 

Talking about individual commodities, Shah expressed a strong outlook for gold. But he 

said he was not optimistic about silver since industrial activity had subdued. 

As far as base metals are concerned, he said there have been positive data from China. 

However, its biggest markets – USA and Europe – are currently facing a slowdown. 

Fundamentally, lead is the weakest among metals, he said. However, he remained bearish 

on crude. 

According to him, cumin has strong fundamentals due to robust demand from China. He 

cautioned investors against having high exposure in the commodity futures market. 

“People must not try to predict the markets by seeing charts alone. They should study 

fundamentals too,” said Shah, adding that stop loss is an important tool and must be used. 

Most importantly, investors must control their greed and fear, he addeD. 

After Kunal Shah’s talk, the discussion was thrown open to the audience for a 

round of questions and answers. The next Beyond Mandi camp was held in 

Indore on 19th August this year. 


QUAL 

AT NIRMAL BANG, YOU’RE MORE THAN 

JUST A BUSINESS ASSOCIATE, 

YOU’RE AN EQUAL PARTNER. 

We understand and value the equation of our relationships. Which is why, we 

offer our sub-broker/authorized person/remisier equal independence and 

status that our partner merits. 

That apart, we provide unparalleled knowledge and exceptional market 

analysis to keep you ahead of the curve, to the advantage of your customers. 

After all, at NIRMAL BANG, it’s a relationship beyond broking. 

# # # 

EQUITIES | DERIVATIVES | COMMODITIES* | CURRENCY | MUTUAL FUNDS | IPOs | INSURANCE | DP 

Contact Person: Andhra Pradesh - P V Siddhartha: 9849029992; Chandigarh - Yoginder Singh/Gaurav Jolly: 8800396877/9468086545; Chattisgarh - Vidhya 

Bhushan Tiwari: 7898909299; Delhi, NCR - Aparna Kohli/Yogendra Singh: 8800396872/8800396877; UP - Utkarsh Garg / Yoginder Singh: 7607346002/8800396877; 

West Bengal, Bihar, Jharkhand, Orissa, North Eastren Region - Joydeep Mukharjee: 9163671502; Gujarat - Devarshi Bhatt: 7600014125; Surat - Om Prakash Mohata: 

7600021601; Karnataka - Sivaram Ramkrishnan / Sridhar Ustala: Cell9686682492/8861208308; Kerala - Dennu Kuruvilla / Raghavan: 8129823502/8129823500; 

Mumbai - Gaurav Mohta/Nilesh Sonawane: 7738380299/7738380027; Maharashtra - Vikrant Darak: 7738380029; MP - Prafull Jain: 7869960088; Punjab, Himachal 

Pradesh, Jammu & Kashmir - Sukhwinder Singh / Inderpal Singh Madan: 8146666001/8146666006; Rajasthan - Sushil Shrimal: 9414043547; Jodhpur - Shyam 

Mundra: 9461268368; Udaipur - Dinesh Chhajed/Abhishek Pokharna: 9414166060/9414166662; Tamil Nadu - Thirupathy S: 9677128266 

Disclaimer: Insurance is a subject matter of solicitation. Mutual Fund investments are subject to market risk. Please read the scheme-related document carefully before investing. 

Security is subject to market risk. Please read the Do’s and Don’ts prescribed by Commodity Exchange before trading. The PMS Service is not offering for commodity segment. *Through Nirmal Bang Commodities Pvt. Ltd. #Distributors 

Registered Office: 38-B, Khatau Building, 2nd Floor, Alkesh Dinesh Mody Marg, Fort, Mumbai - 400 001. Tel: 39268600 / 8601; Fax: 39268610, Corporate Office: B-2, 301/302, 3rd Floor, Marathon Innova, Off Ganpatrao Kadam Marg, Lower Parel (W), Mumbai - 400 013. Tel.: 39268000 / 8001 Fax: 39268010 

BSE SEBI REGN No. INB011072759, INF011072759 & INE011072759, NSE SEBI REGN No. INB230939139, INF230939139 & INE230939139 DP SEBI REGN. No NSDL: IN-DP-NSDL-136-2000, CDS(I)l: IN-DP-CDSL-37-99, AMFI REGN. No. arn-49454 NCDEX REGN. NO. 00362, FMC Code-0075, MCX REGN. No. 16590, FMC Code-MCX/TCM/CORP/0490, MCX SX-INE260939139, PMS-INP000002981 


DISCLAIMER 

RNI Reg. No. MAHENG/2009/28962 

In the preparation of the content of this magazine, Nirmal Bang Securities Private Limited has used information that is publicly available, including information developed in-house. Such information 

has not been independently verified and we make no representation or warranty as to its accuracy, completeness or correctness. Any opinions or estimates herein reflect the judgement of Nirmal Bang 

Securities Private Limited at the date of this publication/ communication and are subject to change at any point without notice. This is not a solicitation or any offer to buy or sell. This publication/ 

communication is for information purposes only and is not intended to provide professional, investment or any other type of advice or recommendation and does not take into account the particular 

investment objectives, financial situation or needs of individual recipients. For data reference to any third party in this material no such party will assume any liability for the same. Further, all opinion 

included in this magazine are as of date and are subject to change without any notice. All recipients of this magazine should seek appropriate professional advice and carefully read the offer document 

and before dealing and/ or transacting in any of the products referred to in this material make their own investigation. Nirmal Bang Securities Private Limited, its directors, officers, employees and other 

personnel shall not be liable for any loss (financial or otherwise), damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary and consequential, as also any loss of 

profit in any way arising from the use of this material in any manner whatsoever. The recipient alone shall be fully responsible/ are liable for any decision taken on the basis of this material. This magazine 

is prepared for private circulation only. Nirmal Bang Securities Private Limited, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang 

Securities Private Limited or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.

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