CLIA Meet4th July 2009

HOTEL SAI PALACENASHIK

Some Basics

Capital Market

•Capital Market is the market which is used by the corporate, banks, Financial Institutes to raise capital that is required to fund various projects

Capital Market

•Primary Market▫IPO, FPO, QIP▫Issuance of bonds, debentures, commercial

papers•Secondary Market

▫Purchase and sale of instruments issued in primary market

▫Takes place on stock exchanges like NSE, BSE

Capital Market

•Equity Market▫Primary▫Secondary

•Debt Market▫Primary▫Secondary

Equity Market

•Equity Shares/Preferred Equity Shares•Stock Exchange•Equity Mutual Funds

Debt Market

•Bonds / Debentures•T-Bills/ Commercial Papers•Certificates of Deposits•Call Money Market•Debt Mutual Funds

Open Market Operations

•Open market operations are the means of implementing monetary policy by which a RBI controls national money supply by buying and selling government securities, or other financial instruments. Monetary targets, such as interest rates or exchange rates, are used to guide this implementation.

InflationInflation is defined as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are less Goods and more buyers, this will result in increase in the price of Goods, since there is more demand and less supply of the goods.

Current Rate(WPI):- -1.14%(For week ended 13th June 2009)

Open Market Operations-Tools

•Repo Rate•CRR•SLR•Purchase and sell of Bonds/T-Bills

Repo Rate

Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.

Current Rate- 4.75%

CRR- Cash Reserve Ratio

Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

Current Rate- 5%

SLR- Statutory Liquidity Ratio

SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit.

Equity Market Related Concepts

Sensex and NiftySensex could be construed as sensitive index and nifty as national fifty. Sensex is the index of BSE while NIFTY is the index of NSE. Sensex consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. whereas nifty consists of 50 stocks

Sensex- 14645.47Nifty- 4340.90As on 1st July 2009

EPS

The most widely used ratio, it tells how much profit was generated on a per share basis.

P/E Ratio

The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share.

Market Capitalization

market capitalization is the share price multiplied by the number of shares in issue, providing a total value for the company's shares and thus for the company as a whole.

Market Capitalization=

Market Value of One Share X Total No Of Shares

Risk Adjusted Performance

There are five main indicators of investment risk that apply to the analysis of stocks, bonds and mutual fund portfolio.

•Alpha•Beta,•R-squared, •Standard deviation•Sharpe ratio.

Alpha

The excess return of the investment relative to the return of the benchmark index is its "alpha".

Beta

Beta, also known as the "beta coefficient," is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is calculated using regression analysis, and you can think of it as the tendency of an investment's return to respond to swings in the market.

R-Squared

R-Squared is a statistical measure that represents the percentage of a fund portfolio's or security's movements that can be explained by movements in a benchmark index. R-squared values range from 0 to 100.

Standard Deviation

Standard deviation measures the dispersion of data from its mean.

A volatile stock would have a high standard deviation. With mutual funds, the standard deviation tells us how much the return on a fund is deviating from the expected returns based on its historical performance

Sharpe Ratio

It is calculated by subtracting the risk-free rate of return from the rate of return for an investment and dividing the result by the investment's standard deviation of its return.

Be A Financial Planner

What you should Know about client•His Monthly Income, Expenses, Savings•Important Targets of His Life•How Inflation/Tax Is Likely To Affect His

Future Targets, Income, Expenses•What Should Be The Emergency Fund•How Is Current Asset Allocation

Where Can You Allocate Assets

•Insurance•Bank FDs•Gold•Real Estate•Equity Shares/Equity Mutual Funds /

ULIPs•Debt Instruments / Debt Mutual Funds /

ULIPs

What Should Be strategy

•Long Term Targets Through Investment Products Having Equity Components

•Medium Term Targets Through Debt Instruments

•Emergency Fund and Very Short Term Target Through Money Market Instruments

See The Real Returns

FD Interest 9%

Inflation 6%-

Returns 3%Tax 3%-

Real Returns 0%

How Much Risky IS Equity Investment?

Sensex- Rolling Returns

Sensex- Rolling Returns

Sensex Rolling Returns Observation

Is It Good Time To Invest?

Short Term View

• Recovery in global markets seems to be on the way• There is enough liquidity in the market• Investors are returning to the market

after 16th May 2009• Election results• FIIs are buying• We are not in recession- GDP Growth

rate- 5.4%

Gross Domestic ProductThe gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total Rupee value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year.

FY 08-09- 5.8 %RBI Projection for FY 09-10- 5.7%

Forex Reserves

•Foreign exchange reserves (also called Forex reserves) is the foreign currency deposits and bonds held by central RBI

Current Reserves: 263.65 ($bln)

Recent FII ActivityDate Purchase Sales Net

29-06-2009 2,801.90 5,678.30 -2,876.4012-06-2009 3,591.80 2,588.70 1,003.1008-06-2009 4,646.30 3,143.50 1,502.8003-06-2009 6,187.30 4,211.90 1,975.4029-05-2009 5,870.90 3,741.80 2,129.1026-05-2009 5,092.60 2,046.50 3,046.1020-05-2009 12,579.00 7,534.10 5,044.9018-05-2009 2,673.00 1,672.80 1,000.2014-05-2009 6,033.10 1,947.90 4,085.2011-05-2009 3,164.60 1,924.00 1,240.6005-05-2009 3,852.80 2,361.60 1,491.20

Fig. In Cr. Rs.

Total Net Investment after 1st May 2009- 25000 Cr. Of which 15000 Cr After 16th May

Long Term View

• Internal Consumption Driven economy• Best Outsourcing Destination• Indian Companies Are Going Global• Largest Middle Class In The World• High Gross Domestic Savings (37 % ) and

Investment Rates• Youngest Population In The World• Healthy Financial System

THANKSTHANKS

fromfrom

SHEKHAR SHEKHAR BUWABUWA

AREA AREA

MANAGERMANAGER LICMF LICMF

NASHIK NASHIK

(9922996155)(9922996155)