stock market diary

Copyright © 2008 Boston Analytics

INDIA WATCH STOCK MARKET DIARIES—INDIA

April 2009

Copyright © 2008 Boston Analytics 1

Overview of the Indian Stock Market

Exhibit 1.1: The Boston Analytics India Market Index (BA IMI) with and without Dividends (Log Scale)

Performance Review of the Boston Analytics India Market Index

The Boston Analytics India Market Index (BA IMI)(1)

rose 16.41% during April 2009 to close at 1038 compared

to 892 in March 2009.

Exports fell by 33.30% in March 2009 to $11.50B compared to March 2008. Exports for the fiscal year

2008-09 touched $168.70B, recording a 3.40% growth in dollar terms.

Imports in March 2009 declined by 34.00% to $15.60B. In fiscal year 2008-09, imports grew 14.30% to

touch $287.70B. Non-oil imports in March 2009 contracted 18.90% to $11.70B and oil imports declined

58.10% to $3.80B.

Inflation rose to 0.26% for the week ended April 11, 2009 from 0.18% in the previous week. Inflation was at

7.90% in the corresponding week in 2008.

During April 2009, the RBI slashed the repo and reverse repo rates by 25 basis points each to 4.75% and

3.25%, respectively.

Foreign Direct Investment (FDI) to India declined to $1.50B in February 2009 from $5.70B in February

2009. The FDI for the 11-month period (i.e. April 2008 – February 2009) of fiscal 2008-09 has aggregated

to $25.40B against $24.60B in the previous fiscal year.

Index of Industrial Production (IIP) contracted by 1.20% in February 2009 to 272.8, compared to 9.50%

growth in February 2008. Negative industrial growth at 0.50% estimated provisionally for January 2009

was revised upwards to a positive 0.4% during April 2009.

India’s balance of payments for the third quarter registered an overall deficit of $17.90B. The current

account posted quarterly deficit at $14.60B led by a merchandise trade deficit of ~$36.00B for the quarter.

1 Boston Analytics’ suite of indices are total return indices (i.e., dividends are included in the index computation) unless otherwise stated.

100

1000

Ju

n-9

1

De

c-9

1

Ju

n-9

2

De

c-9

2

Ju

n-9

3

De

c-9

3

Ju

n-9

4

De

c-9

4

Ju

n-9

5

De

c-9

5

Ju

n-9

6

De

c-9

6

Ju

n-9

7

De

c-9

7

Ju

n-9

8

De

c-9

8

Ju

n-9

9

De

c-9

9

Ju

n-0

0

De

c-0

0

Ju

n-0

1

De

c-0

1

Ju

n-0

2

De

c-0

2

Ju

n-0

3

De

c-0

3

Ju

n-0

4

De

c-0

4

Ju

n-0

5

De

c-0

5

Ju

n-0

6

De

c-0

6

Ju

n-0

7

De

c-0

7

Ju

n-0

8

De

c-0

8

BA India Market Index (with Dividends) BA India Market Index (without Dividends)

Stock Market Diaries—April 2009

1. Executive Summary


Exhibit 1.3: Performance of the Boston Analytics India Market Indices as of April 30, 2009

Index Index Levels

Recent Performance Long Term Annualized Performance

1 Month 3 Months YTD 1-Year 3-Year 5-Year 10-Year

BA India Market Index 1,038 16.41% 19.59% 14.03% -39.09% -3.29% 14.95% 18.70%

BA India Mega Cap Index 981 15.75% 19.03% 15.58% -30.31% 1.00% 14.48% 16.45%

BA India Large Cap Index 1,911 17.26% 25.12% 17.79% -43.88% -4.33% 14.47% 19.81%

BA India Mid Cap Index 897 16.24% 14.94% 6.08% -46.75% -8.66% 12.21% 22.22%

BA India Small Cap Index 857 18.68% 17.42% 8.61% -52.56% -14.17% 17.95% 21.66%

BA India Micro Cap Index 1,048 17.17% 13.55% 6.16% -47.16% -10.03% 32.51% 28.30%

All market capitalization disaggregated indices had positive returns, with the BA India Small Cap Index leading the rise with 18.68% returns.

The BA India Mega Cap Index rose the least among the indices with a return of 15.75%.

Exhibit 1.5: Performance of Boston Analytics India Style Indices as of April 30, 2009

Index Index Levels

Recent Performance Long Term Annualized Performance

1 Month 3 Months YTD 1-Year 3-Year 5-Year 10-Year

BA India Market Index 1,038 16.41% 19.59% 14.03% -39.09% -3.29% 14.95% 18.70%

BA India Growth Index 856 17.75% 20.47% 13.72% -42.71% -4.37% 14.72% 14.02%

BA India Core Index 1,174 14.78% 20.00% 15.35% -34.72% -1.38% 16.10% 25.89%

BA India Value Index 1,857 14.42% 3.38% 4.53% -22.53% -0.62% 16.26% 35.19%

All valuation based style indices had positive returns. BA India Growth Index gave the highest returns of 17.75%.

On a YTD basis, BA India Value Index has been the worst performer amongst valuation indices with returns of 4.53%.

Exhibit 1.2: Disaggregation of the BA India Market Index on Log Scale (Base Index = 100 on July 1, 1991)

Exhibit 1.4: Comparison of the Boston Analytics India Style Indices (Base Index = 100 on July 1, 1991)

70

700

7,000Ju

n-9

1

De

c-9

1

Ju

n-9

2

De

c-9

2

Ju

n-9

3

De

c-9

3

Ju

n-9

4

De

c-9

4

Ju

n-9

5

De

c-9

5

Ju

n-9

6

De

c-9

6

Ju

n-9

7

De

c-9

7

Ju

n-9

8

De

c-9

8

Ju

n-9

9

De

c-9

9

Ju

n-0

0

De

c-0

0

Ju

n-0

1

De

c-0

1

Ju

n-0

2

De

c-0

2

Ju

n-0

3

De

c-0

3

Ju

n-0

4

De

c-0

4

Ju

n-0

5

De

c-0

5

Ju

n-0

6

De

c-0

6

Ju

n-0

7

De

c-0

7

Ju

n-0

8

De

c-0

8

BA India Market Index Mega Cap Index Large Cap Index

Mid Cap Index Small Cap Index Micro Cap Index

90

900

9,000

Ju

n-9

1

Dec-9

1

Ju

n-9

2

Dec-9

2

Ju

n-9

3

Dec-9

3

Ju

n-9

4

Dec-9

4

Ju

n-9

5

De

c-9

5

Ju

n-9

6

Dec-9

6

Ju

n-9

7

Dec-9

7

Ju

n-9

8

Dec-9

8

Ju

n-9

9

Dec-9

9

Ju

n-0

0

Dec-0

0

Ju

n-0

1

Dec-0

1

Ju

n-0

2

De

c-0

2

Ju

n-0

3

Dec-0

3

Ju

n-0

4

Dec-0

4

Ju

n-0

5

Dec-0

5

Ju

n-0

6

Dec-0

6

Ju

n-0

7

Dec-0

7

Ju

n-0

8

Dec-0

8

BA India Market Index Growth Index Core Index Value Index


Historical Performance Review of the Boston Analytics India Style Matrix

Exhibit 2.1: Long Term Annualized Performance

GROWTH CORE VALUE GROWTH CORE VALUE

10 YEARS RETURN 5 YEARS RETURN

MEGA 12.69% 26.00% 2.65% 13.37% 12.81% -4.99%

LARGE 16.53% 23.42% 3.20% 16.60% 14.18% -3.34%

MID 12.42% 26.98% 28.69% 9.63% 13.69% 14.18%

SMALL 8.74% 23.92% 37.96% 14.86% 18.19% 26.37%

MICRO 8.08% 27.02% 37.40% 13.94% 31.99% 39.33%

3 YEARS RETURN 1 YEAR RETURN

MEGA -4.27% 9.37% -9.22% -32.14% -24.19% -2.12%

LARGE -4.32% -3.45% -14.83% -52.76% -27.31% -42.54%

MID -11.60% -9.35% 9.21% -55.83% -42.65% -3.37%

SMALL. -15.38% -14.68% -8.11% -52.77% -52.89% -49.38%

MICRO -14.27% -10.61% -7.33% -56.08% -45.83% -45.31%

< -20 -10 0 10 20 >

On a ten year basis, value stocks in mid, small and micro capitalization have outperformed the corresponding growth stocks in mid, small and micro capitalization by significant margins.

In comparison, mega and large capitalization core stocks have outperformed the corresponding mega and large capitalization value and growth stocks on a ten year basis.

Micro value have been the best performers on a ten year and five year basis with high annualized returns of 37.40% and 39.33%, respectively.

On a ten year basis, all the core styles have provided annualized returns in excess of 20.00%.

Mid value and mega core style have been the only styles to post positive returns over a three year period.

Exhibit 2.2: Recent Performance

GROWTH CORE VALUE GROWTH CORE VALUE

6 MONTHS RETURN 3 MONTH RETURN

MEGA 19.79% 27.26% 31.05% 21.30% 16.31% -0.63%

LARGE 15.29% 32.56% - 26.38% 23.73% -

MID -1.46% 17.77% 30.01% 5.39% 23.74% -0.61%

SMALL 0.42% 8.30% 4.80% 11.29% 19.86% 17.26%

MICRO -2.96% 6.15% 5.84% 11.82% 12.03% 16.42%

1 MONTH RETURN YTD RETURN

MEGA 16.74% 13.67% 14.51% 16.57% 14.58% 4.06%

LARGE 24.78% 9.82% - 13.55% 22.95% -

MID 10.47% 20.92% 8.45% -1.40% 11.64% 0.65%

SMALL 15.01% 19.62% 22.66% 3.14% 10.48% 11.03%

MICRO 17.40% 16.58% 17.95% 0.51% 7.11% 6.85%

< -20 -10 0 10 20 >

In April 2009, large growth, mid core and small value had returns in excess of 20.00%. All the styles gave positive returns in April.

Mid value and large core were the underperforming styels with returns of 8.45% and 9.82% respectively in April 2009.

On a three month basis, large growth has outperformed other styles with returns of 26.38%.

Since the turn of the year, only mid growth has given negative returns of - 1.40%.

On a six month basis, large core, mega value and mid value have performed exceptionally with returns in excess of 30.00%.

Note that there are no stocks in Large Value.

2. Boston Analytics India Market Monitoring


Highlights

All 20 portfolios have given good positive returns in April 2009, there by stopping the trend of continuing dismal performance since January 2009. The average return per portfolio was 21.65% in April 2009 compared to 3.31% in March 2009.

Since the portfolio reconstitution in July 2008, on an average 34.95% of market capitalization across all stocks has been wiped off. This figure was at 44.48%, at the end of March 2009.

Portfolio 7 was the best performing portfolio with returns of 26.82% and Portfolio 14 was the worst performer with returns of 17.29%.

Most portfolios now have positive YTD returns except portfolio 10 which is at -0.16%.

Exhibit 3.1: Performance of Market Capitalization Sorted Portfolios as of April 30, 2009

Portfolio April

Return March Return

YTD Return

Ten Months Return

Avg. Closing Market Cap

(INR M)

Avg. Closing

P/B

Avg. Closing

P/E

Mean of Daily

Return

Standard Deviation of Daily Return

Avg. Daily Traded Volume

(M Shares)

1 18.77% 10.26% 18.17% -15.71% 304,780.73 5.07 9.96 1.06% 2.43% 2.09

2 21.39% 4.83% 8.31% -29.33% 34,101.02 3.67 8.20 1.64% 2.43% 1.01

3 21.30% 11.54% 8.70% -40.89% 13,913.79 1.91 6.50 1.21% 2.87% 0.64

4 19.78% 7.27% 9.54% -32.18% 10,464.32 2.98 6.64 1.08% 2.39% 0.28

5 23.86% 6.56% 8.37% -43.01% 5,499.86 1.98 4.65 1.36% 2.95% 0.29

6 20.02% 5.35% 6.20% -35.56% 3,951.50 2.14 4.69 1.13% 2.43% 0.18

7 26.82% 4.83% 12.34% -43.73% 2,306.05 1.55 4.22 1.45% 2.88% 0.08

8 23.80% 4.96% 7.72% -42.49% 1,672.78 1.37 4.25 1.31% 2.68% 0.07

9 26.66% 0.84% 1.30% -46.56% 1,145.15 1.25 4.54 1.47% 2.81% 0.07

10 20.87% 1.21% -0.16% -42.99% 945.50 1.18 5.97 1.16% 2.37% 0.03

11 23.29% 0.66% 7.68% -33.25% 883.82 1.41 4.25 1.26% 2.28% 0.09

12 23.54% 0.58% 2.22% -43.11% 618.42 0.99 3.54 1.35% 2.40% 0.06

13 24.10% -2.24% 1.51% -38.88% 544.60 1.15 6.16 1.32% 2.28% 0.03

14 17.29% 2.49% 6.26% -35.87% 417.09 1.00 11.99 1.04% 2.22% 0.02

15 23.01% 0.48% 8.22% -35.27% 355.76 0.94 5.79 1.30% 1.91% 0.04

16 17.91% 2.54% 8.64% -30.82% 291.60 0.87 6.30 0.96% 2.02% 0.01

17 21.59% 1.78% 10.90% -27.73% 255.20 1.50 5.81 1.18% 1.80% 0.01

18 19.11% -0.24% 5.34% -15.11% 179.28 0.80 3.67 1.08% 1.88% 0.01

19 18.43% 2.91% 11.92% -32.44% 148.17 0.99 7.51 0.96% 1.65% 0.01

20 21.36% -3.07% 4.69% -34.05% 117.45 0.81 6.00 1.17% 1.54% 0.01

BA India

Market

Index

16.41% 9.30% 15.73% -20.45% 19,057.09 1.68 5.47 1.14% 2.41% 0.25

Exhibit 3.2: Portfolio Return vs. Standard Deviation (for April 30, 2009)

12

34 5678 9

101112131415

1617181920

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Ave

rage

Dai

ly R

etu

rn

Standard Deviation (Daily Returns)

Portfolio

Mar

ket

Cap

ital

izat

ion

3. Market Capitalization Sorted Portfolios


Highlights

In April 2009, all of the twenty portfolios gave positive returns when compared to 17 of 20 giving positive returns in March 2009. Average return per portfolio in April 2009 was 20.39% when compare with 7.74% in March 2009.

Portfolio 11 gave the highest returns of 32.19% in April 2009 while Portfolio 10 gave the lowest return of 11.64%.

Since the portfolio reconstitution in July 2008, Portfolio 15, 16, 17 and 18 have performed better than other portfolios with ten month returns of 4.88%, 2.94%, 3.09% and 2.61% respectively and Portfolio 13 gave the least returns of -47.35% (this figure was at -58.04% in March 2009).

Portfolio 2, 4, 6, 7, 8, 16 and 17 have been the best performers on a YTD basis with Portfolio 4 giving the highest YTD returns of 31.30%.

Exhibit 4.1: Returns of Price/Book Sorted Portfolios as of April 30, 2009

Portfolio April

Return March Return

YTD Return

Ten Months Return

Avg. Closing

Market Cap (INR M)

Avg. Closing

P/B

Avg. Closing

P/E

Mean of Daily

Return



(M Shares)

1 18.11% 5.68% 8.00% -22.13% 61649.08 10.64 36.04 1.02% 2.02% 6.01

2 21.17% 7.73% 14.90% -21.35% 65863.40 4.00 9.83 1.15% 2.22% 4.96

3 27.57% 10.19% 11.81% -30.58% 22853.09 2.83 8.96 1.48% 2.82% 7.75

4 20.13% 17.88% 31.30% -28.55% 47928.89 2.04 5.73 1.14% 2.84% 2.94

5 17.21% 8.29% 8.01% -27.55% 14359.33 1.79 6.95 1.00% 2.53% 3.45

6 17.72% 12.56% 22.40% -19.86% 26110.83 1.56 5.07 1.00% 2.99% 4.08

7 12.16% 9.67% 18.37% -5.84% 55380.43 1.56 6.67 0.72% 2.41% 3.69

8 17.22% 18.52% 29.23% -21.08% 11751.18 1.34 5.56 1.00% 2.87% 1.45

9 20.79% 6.70% 10.25% -36.87% 3575.54 1.12 7.81 1.18% 2.73% 0.98

10 11.64% 9.63% 10.99% -24.18% 10167.22 0.99 4.61 0.69% 2.93% 1.46

11 32.19% 4.93% 7.25% -23.26% 10705.63 1.01 4.24 1.70% 3.42% 1.39

12 17.65% 8.30% 4.56% -1.11% 14293.62 0.86 3.75 1.01% 2.76% 1.83

13 29.55% 6.80% 5.79% -47.35% 3093.99 0.64 3.44 1.57% 3.31% 2.16

14 17.39% 10.38% 0.06% -2.26% 4110.84 0.68 4.11 1.00% 2.50% 0.87

15 20.33% -5.27% 5.10% 4.88% 8458.49 0.55 3.62 1.12% 1.71% 0.59

16 25.96% 5.52% 14.96% 2.94% 4668.89 0.56 4.69 1.43% 2.63% 1.13

17 19.65% -11.31% 14.26% 3.09% 4533.43 0.48 4.61 6.26% 2.71% 0.51

18 16.31% -0.84% 7.12% 2.61% 1934.75 0.42 6.06 0.93% 1.79% 0.70

19 24.95% 3.47% 14.91% -28.88% 10290.14 0.32 5.39 1.49% 5.81% 3.98

20 20.20% 0.62% -0.34% -36.68% 306.73 0.20 7.69 1.15% 2.63% 0.68

BA India Market Index

16.41% 9.30% 15.73% -20.45% 19,057.09 1.68 5.47 1.14% 2.41% 0.25

Exhibit 4.2: Portfolio Return vs. Standard Deviation (for March 31, 2009)

1 2345 6

78910

11

1213

141516

17

1819

20

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Ave

rage

Dai

ly R

etu

rn


Portfolio

4. Valuation (Price/Book) Sorted Portfolios


Highlights

All the twenty portfolios returns were positive in April 2009 as compared to nineteen out of twenty in March 2009.

Portfolio 13 was the best performing portfolio with returns of 39.15% and Portfolio 15 came in second with returns of 30.68%.

Portfolio was also the most volatile portfolio with respect to standard deviation of daily returns.

Portfolio 2 was the worst performing portfolio with returns of 8.77%.

Fourteen out of twenty portfolios have outperformed the BA India Market Index in March 2009. The average returns across portfolios in April 2009 was 20.83% up from 10.58% in March 2009.

Exhibit 5.1: Performance of Momentum Sorted Portfolios as of April 30, 2009

Portfolio April

Return March Return

YTD Return

Ten Months Return

Avg. Closing

Market Cap (INR M)

Avg. Closing

P/B

Avg. Closing

P/E

Mean of Daily

Return



(M Shares)

1 17.51% -0.72% 14.45% -31.50% 28,342.77 4.29 18.86 1.31% 2.32% 0.08

2 8.77% 3.05% 7.21% -28.18% 16,938.04 2.23 7.70 0.51% 2.15% 0.17

3 15.48% 6.89% 19.25% -17.70% 45,814.15 1.81 6.77 0.91% 2.98% 0.75

4 17.42% 10.94% 29.20% -14.61% 46,832.22 1.77 6.81 1.00% 2.79% 0.33

5 20.56% 9.32% 19.82% -23.48% 15,557.80 2.41 5.53 1.17% 2.74% 0.39

6 9.09% 1.72% -26.84% -43.89% 26,951.73 2.47 20.05 0.52% 1.33% 0.14

7 14.71% 14.28% 14.85% -14.92% 14,474.08 2.19 7.55 0.86% 2.65% 0.14

8 18.63% 16.59% 9.73% -31.88% 17,842.87 1.72 9.44 1.03% 2.64% 0.43

9 14.04% 15.38% 24.58% -13.22% 37,963.31 1.40 5.36 0.82% 2.44% 0.11

10 22.49% 10.97% 9.49% -26.00% 12,087.65 0.93 4.24 2.02% 3.07% 0.33

11 25.84% 14.59% 35.57% -28.64% 39,147.87 1.22 5.52 1.38% 2.31% 0.32

12 18.77% 12.37% 24.86% -32.25% 3,634.36 1.01 4.42 1.07% 2.66% 0.12

13 39.15% 9.57% 36.91% -13.70% 8,869.67 1.19 4.33 2.03% 4.64% 0.21

14 18.35% 9.54% 13.71% -33.01% 17,728.84 1.10 8.28 1.04% 2.25% 0.09

15 30.68% 7.73% -11.96% -47.28% 18,452.18 1.16 5.46 1.65% 2.70% 0.16

16 26.00% 20.14% 43.71% -24.60% 9,145.09 1.58 3.80 1.45% 3.97% 0.10

17 29.38% 15.30% 15.40% -43.79% 10,962.16 0.98 3.16 1.60% 4.24% 0.24

18 15.30% 8.41% 1.98% -54.35% 8,343.30 1.45 4.43 0.88% 2.66% 0.18

19 29.61% 12.55% 14.18% -40.36% 2,310.03 1.27 4.11 1.55% 2.36% 0.08

20 24.90% 12.95% 6.80% -52.20% 3,824.43 1.14 3.46 1.41% 3.27% 0.75

BA India

Market

Index

16.41% 9.30% 15.73% -20.45% 19,057.09 1.68 5.47 1.14% 2.41% 0.25

Exhibit 5.2: Portfolio Return vs. Standard Deviation (for April 30, 2009)

1

2345

6789

1011

12

13

1415 16 17

1819 20

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Ave

rage

Dai

ly R

etu

rn


Portfolio

5. Momentum (Three Months) Sorted Portfolios


Highlights

Real Estate/Construction sector, which had posted huge losses in the past year, was the best performing portfolio in April 2009 with returns of 33.79%.

Household and Personal Products sector gave the least returns for two consecutive months (March and April 2009), however it still remains the best performing sector since the portfolion inception.

Since portfolio inception, the Houshold and Personal Products sector has posted the highest return of 14.89%. Utilities has followed it with a return of 8.74% over the same period.

Exhibit 6.1: Performance of Economic Sectors Sorted Portfolios as of April 30, 2009

Portfolio Economic Sector April

Return March Return

YTD Return

Ten Months Return

Avg. Closing

Market Cap (INR M)

Avg. Closing

P/B

Avg. Closing

P/E

Mean of Daily

Return



(M Shares)

1 Automobile 12.28% 11.95% 37.90% 6.28% 10,443.90 1.32 5.13 0.73% 1.95% 0.07

2 Banks 26.88% 5.53% 2.66% -2.44% 83,908.85 1.09 5.41 1.46% 3.11% 0.58

3 Capital Goods 22.99% 10.74% 20.55% -23.39% 11,571.93 1.52 4.68 1.29% 3.19% 0.18

4 Chemicals 17.26% 12.44% 30.74% -9.75% 35,067.32 1.31 4.51 0.96% 2.44% 0.18

5 Consumer Durables and Apparel

18.64% 3.42% -5.46% -27.92% 7,289.82 1.97 7.83 1.04% 2.62% 0.31

6 Diversified 26.64% 10.40% -6.70% -52.50% 7,328.10 1.15 3.56 1.50% 3.90% 0.13

7 Diversified Financial 25.31% 8.79% 15.42% -12.76% 12,361.73 2.47 4.33 2.35% 2.78% 0.22

8 Food, Beverages and Tobacco

11.39% 1.42% 4.52% -13.31% 11,616.70 2.00 10.11 0.64% 1.49% 0.11

9 Healthcare 8.53% 9.87% 0.29% -25.49% 12,863.00 2.06 6.08 0.51% 1.66% 0.06

10 Household and Personal Products

0.64% -3.07% -0.48% 14.89% 73,716.85 9.76 26.71 0.06% 1.91% 0.10

11 Materials 19.37% 17.94% 29.23% -36.85% 12,198.80 1.10 5.32 1.13% 3.55% 0.15

12 Media and Entertainment

16.86% 7.62% -1.80% -43.51% 6,879.39 1.79 - 1.01% 3.30% 0.32

13 Real Estate/ Construction

33.79% 12.39% 3.35% -51.06% 16,964.94 1.65 3.56 1.80% 4.13% 0.84

14 Services 24.93% 3.05% 9.09% -33.01% 3,741.66 2.06 6.60 1.40% 3.03% 0.05

15 Technology 21.18% 10.34% 23.43% -32.64% 18,551.78 1.38 4.66 1.19% 2.06% 0.33

16 Telecommunication 19.30% 5.13% 1.76% -17.50% 109,830.65 1.86 12.24 1.10% 2.88% 0.49

17 Transportation 29.76% 17.31% 46.60% -39.48% 29,143.78 1.21 - 1.72% 5.97% 0.59

18 Utilities 10.05% 1.16% 10.00% 8.74% 212,835.78 2.74 15.11 0.58% 2.10% 1.46

BA India Market Index 16.41% 9.30% 15.73% -20.45% 19,057.09 1.68 5.47 1.14% 2.41% 0.25

Exhibit 6.2: Portfolio Return vs. Standard Deviation ( for April 30, 2009)

12 3

4 56

7

8 910

1112

131415 16

17

180.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Ave

rage

Dai

ly R

etu

rn


Portfolio

6. Economic Sectors Sorted Portfolios


Food, Beverages, and Tobacco sector has a tilt towards small cap stocks that are evenly distributed across the Price to Book factor and have relatively high momentum

Stocks in the Healthcare sector are evenly distributed across the market capitalization spectrum. Generally this sector consists of stocks with a tilt towards of higher momentum and Price to Book factor.

Exhibit 7.1: : Distribution of Food, Beverages and Tobacco Companies Across Portfolios

Ventile Portfolios

Sorting Methodology

Market Cap Sorted Price/Book Sorted Momentum Sorted

No. of Firms % of Firms No. of Firms % of Firms No. of Firms % of Firms

1 3 2.5% 6 5.0% 6 5.7%

2 5 4.1% 8 6.6% 8 7.5%

3 4 3.3% 7 5.8% 11 10.4%

4 8 6.6% 7 5.8% 10 9.4%

5 5 4.1% 3 2.5% 9 8.5%

6 5 4.1% 4 3.3% 6 5.7%

7 7 5.8% 9 7.4% 7 6.6%

8 6 5.0% 7 5.8% 3 2.8%

9 8 6.6% 7 5.8% 8 7.5%

10 1 0.8% 6 5.0% 2 1.9%

11 8 6.6% 7 5.8% 1 0.9%

12 6 5.0% 5 4.1% 4 3.8%

13 6 5.0% 5 4.1% 7 6.6%

14 9 7.4% 3 2.5% 3 2.8%

15 7 5.8% 5 4.1% 3 2.8%

16 4 3.3% 12 9.9% 7 6.6%

17 9 7.4% 6 5.0% 0 0.0%

18 8 6.6% 7 5.8% 7 6.6%

19 7 5.8% 5 4.1% 2 1.9%

20 5 4.1% 2 1.7% 2 1.9%

Total 121 100.0% 121 100.0% 106 100.0%

Exhibit 7.2: Distribution of Healthcare Companies Across Portfolios

Ventile Portfolios

Sorting Methodology

Market Cap Sorted Price/Book Sorted Momentum Sorted

No. of Firms % of Firms No. of Firms % of Firms No. of Firms % of Firms

1 7 7.2% 4 4.1% 4 4.4%

2 4 4.1% 5 5.2% 6 6.6%

3 4 4.1% 2 2.1% 5 5.5%

4 9 9.3% 6 6.2% 9 9.9%

5 5 5.2% 8 8.2% 6 6.6%

6 7 7.2% 4 4.1% 12 13.2%

7 7 7.2% 13 13.4% 8 8.8%

8 3 3.1% 5 5.2% 5 5.5%

9 4 4.1% 2 2.1% 2 2.2%

10 2 2.1% 6 6.2% 6 6.6%

11 5 5.2% 3 3.1% 5 5.5%

12 3 3.1% 9 9.3% 3 3.3%

13 6 6.2% 3 3.1% 6 6.6%

14 2 2.1% 3 3.1% 4 4.4%

15 5 5.2% 3 3.1% 2 2.2%

16 6 6.2% 2 2.1% 1 1.1%

17 4 4.1% 6 6.2% 4 4.4%

18 2 2.1% 3 3.1% 1 1.1%

19 5 5.2% 6 6.2% 2 2.2%

20 7 7.2% 4 4.1% 0 0.0%

Total 97 100.0% 97 100.0% 91 100.0%

Note: This report covers the Consumer Durables and Apparels Sector and the Diversified Financials Sector. A comprehensive compilation cross various parameters (i.e. sectors, valuation, and market capitalization) is available for purchase in the form of interesting posters and wall charts for each of the previous 17 years (i.e.

from 1991). To learn more, please e-mail queries to [email protected]

7. Factor Profiling of Economic Sectors in India

mailto:[email protected]


The Boston Analytics India Market Index

Introduction to the BA IMI

In recent years, both the Indian economy and stock market have grown dramatically. Owing to the increased amount of money flowing into the country, new money managers and financial institutions are entering the market. With these developments a true benchmark, monitoring the Indian stock market, is necessary to track the performance of investments. The BA IMI series aims to be representative of the Indian stock universe with returns computation that includes the impact of capital gains and dividends. The market index has been carefully designed by a team led by Dr. Sam Thomas, Ph.D., Director of Research and Devlopment at Boston Analytics. Dr. Thomas is also on the faculty of Banking and Finance at the Weatherhead School of Management of Case Western Reserve University in Cleveland, Ohio. The index comprehensively covers the essential features of the universe of Indian stocks and is designed to be easily disaggregated into style indices based on asset pricing factors such as market capitalization and relative valuation.

Disaggregation of the BA IMI into Style Indices (Based on Market Capitalization)

The BA IMI is disaggregated into five indices based on the distribution of companies in the Indian stock market universe. These broad categories are mega, large, mid, small, and micro capitalization. Classifying stocks according to the market capitalization is done by a proprietary standard deviation rule based methodology. Since inception of the Large Capitalization Index has given annualized returns of 20.18%, higher than other indices. However, since 2003, Micro Capitalization Index has shown a spurt in growth with annualized returns of 56.92%, outperforming other indices. Correspondingly, Small Capitalization Index has shown similar growth pattern in the same period with annualized return of 45.81%.

Introduction to the Boston Analytics India Style Indices (Based on Relative Valuation)

Boston Analytics aims to provide style indices in India to classify stocks based on valuation characteristics for asset allocation and benchmarking purposes. The BA IMI is disaggregated into three valuation based indices—value, core, and growth. The following valuation factors are used to classify stocks: the Price-to-Book Value ratio (P/B ratio), Price-to-Sales ratio (P/S ratio) and Earnings-to-Price ratio (E/P ratio). Back testing shows that the aforementioned valuation factors impact the returns generated by stocks. Sector-specific business characteristics and differences in accounting practices cause variance in valuation factors across sectors. To standardize these ratios across sectors for meaningful comparison, Boston Analytics uses a sophisticated analytical methodology to adjust the valuation factors of individual stocks based on their sectors. The stocks which are in the top 25% for at least two of the valuation factors are classified as growth stocks. The stocks which are in the bottom 25% for at least two of the valuation factors are classified as value stocks. The remaining stocks are classified as core stocks.

Appendix


The Boston Analytics India Style Matrix The Boston Analytics India Style Indices are based on market capitalization and valuation factors to aid asset allocation and portfolio management. The Boston Analytics India Style Matrix, a combination of market capitalization and valuation factors, reflects investment style classification and is designed to form the basis of effective portfolio construction and performance evaluation. The 5 (market cap divisions) x 3 (valuation divisions) grid is a graphical representation of firm characteristics based on size and valuation. Market capitalization, shown on the vertical dimension of the grid, represents the size factor; and the adjusted valuation factors, shown on the horizontal dimension, represents the valuation factor. Each box in the grid represents a particular investment style based on size and value. For example, the top leftmost grid is the intersection of the mega-cap stocks and the value stocks in the stock universe, representing mega value stocks. The methodology is mutually exclusive and avoids overlap of style characteristics.

Boston Analytics Portfolios—Methodology

The BA IMI Universe

The superset from which the BA IMI is created comprises all stocks listed and traded in India. The superset is then truncated to eliminate very small and thinly traded stocks based on the cross sectional distribution of market capitalization of firms in India. Stocks falling within the top 70% by size are retained while stocks in the bottom 30% are truncated.

Extensive back-testing shows that the retained stocks representing the top 70% by market capitalization in India fall within the top 70% of stocks along the dimensions of daily traded volumes and price levels. The reverse, however, does not hold true. The market capitalization based criterion thus captures the essential features of size and liquidity deemed suitable for the purpose of truncating out the less significant part of the Indian universe of stocks.

Creation of Combed Portfolios Based on Asset Pricing Factors

Market capitalization, Price-to-Book, three months momentum, and economic sector classifications are used as sorting factors to comb the components of the BA IMI into 20 (ventile) portfolios per factor in descending order. The intent here is to reveal the landscape of stock performance differences across subsections of the Indian market. The top 5% of stocks in any of the sorted lists is called Portfolio 1, while the bottom 5% of stocks in any list is called Portfolio 20. Note that in case of economic sector classification based portfolios there are only 18 portfolios. These portfolios are created based on generally accepted definitions of 18 common sectors in the Indian economy.

Investment Horizon and Portfolio Rebalancing Period

The investment horizon in the case of market cap, Price-to-Book, and economic sector classification portfolios is one year long—from July 1, 2008 to June 30, 2009

*. Individual portfolios are reconstituted in

order to minimize operational and transaction costs, to be compatible with common fiscal year definitions in India, and to avoid distortion in analysis due to tax implications of realized gains or losses.

Individual portfolio construction and analysis in the momentum portfolio set is carried out using a 3-1-3 framework: Individual portfolios are constructed based on relative momentum of stocks over three months; a lag of one month is then used to account for information dissemination delays and transaction frictions; and then returns for the next three months are tracked and analyzed to assess portfolio performance from the strategy in a conservative manner. This process is repeated cyclically over the year, resulting in the reconstitution of the momentum portfolios four times a year.

Weights of Portfolio Constituents

All the portfolios in our analysis are market capitalization weighted portfolios, so reported portfolio returns can be viewed as buy-and-hold returns with rebalancing occuring once a year based on factor definitions on July 1.


Disclaimer: This document has been prepared by Boston Analytics and does not constitute an offer or

solicitation for transaction (purchase or sale) on any financial instruments. Furthermore, this document does not constitute a confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable, but Boston Analytics does not in any way guarantee the accuracy, completeness and correctness. The opinions, estimates and projections in this report are subject to change without notice. Boston Analytics has no obligation to update, modify, or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Furthermore, past performance is not necessarily indicative of future results. Boston Analytics shall not in any way be responsible for any losses or damages due to inaccuracy of the information herein or any losses or damages that may arise due to transactions carried out based on information in this report. The entire risk of any use made of this information should be borne by the user alone. No matter contained in this document may be reproduced, copied, distributed or published without the consent of the firm and

acknowledgement of the source.

The current issue of ‘Stock Market Diaries’ is available for download. Customized disaggregated reports can be produced by Boston Analytics to meet clients' specialized requirements. To learn more, or subscription, visit www.bostonanalytics.com, e-mail at [email protected], or contact

In India

In the US

Kapil Vaswani Boston Analytics 3rd Floor, PI# 19A, Godrej & Boyce Complex LBS Marg, Vikhroli (W) Mumbai 400 079, India +91.22.25182092

Ted Thorbjornsen Boston Analytics 175 Federal Street 14th Floor Boston, MA 02110 +1.617.457.7888 ext. 302

Core Team: Dr. Sam Thomas Ph.D., Ted Thorbjornsen, Kapil Vaswani, Milind Tataria, Jayant Dongre, Vivek Sanghi, Lorna Thomas.

http://www.bostonanalytics.com/

mailto:[email protected]


Ted Thorbjornsen [email protected] 175 Federal Street, 14th Floor Boston, Massachusetts 02110 Tel: +1–617-457-7888 (Ext: 302) Fax: +1–617-457-7889 www.bostonanalytics.com

Kapil Vaswani [email protected] 19-A, 3rd Floor, Godrej & Boyce Complex Gate No. 4, LBS Marg Vikhroli (W), Mumbai – 400079 Tel: +91-22-25182902 Fax: +91-22-6714-0101

stock market diary

Documents