The Fortune Cookie September 2013

It’s all about the CAD these days
When Albert Einstein died, he met three New Zealanders in the queue outside the Pearly Gates. To pass the time, he asked
what their IQs were. The first replied 190. “Wonderful,” exclaimed Einstein. “We can discuss the contribution made by
Ernest Rutherford to atomic physics and my theory of general relativity”. The second answered 150. “Good,” said Einstein.
“I look forward to discussing the role of New Zealand’s nuclear-free legislation in the quest for world peace”. The third
New Zealander mumbled 50. Einstein paused, and then asked, “So what is your forecast for the budget deficit next year?”
Of course, we are not even remotely suggesting the IQ level of all those who have been taking informed guesses on India’s
budget deficit. Although, it’s not the budget deficit that’s the most talked about in the media these days but the Current
Account Deficit (CAD).
And correlation of the Rupee with the Indices
Fortuna Public Relations Pvt. Ltd.
15th September - 2013
Source: Yahoo finance

No Sweat, the Docs here
Dr. Raghuram Rajan – the new poster boy of India is here to rein in
the Rupee. Ranbir Kapoor, please hand over your towel. Our fixation
with idolization has already put Mr. Rajan on the expectations
treadmill. But will Dr. Rajan wave a magic wand that will make all
our currency woes disappear, juice up the economy and bring the
country back on the 8%+ GDP growth path? Well, he might have
predicted the US housing bubble by sounding the early alarm on
the risks of financial innovation. But this isn’t about predicting – it’s
about calibrating.
And peace prevails.
A leading financial daily carried a story on how the finance ministry
and the RBI have resolved their differences and vowed to usher in
a more peaceful and constructive working relationship. Don’t know
what that means but there is definitely something eerie about this…
Check the market reaction to Dr. Raghuram Rajan
taking charge as RBI Governor with its reaction
post Mr. Chidambaram taking charge as the FM
July last year...
Consider this:
Nifty returns in the 12 months prior to PC being
announced as FM - Down 7% (reflecting slowing
economy)
Dow returns in the comparable time - Up 2%
Nifty returns in the 3 months post PC taking
charge as FM - UP 13% (reflecting expectation
buildup)
Nifty returns in the 9 months of the current year -
Down 7% (reflecting deflating expectations???)
Nifty returns in the last couple of days post
Mr. Rajan taking charge as governor - Up 7%
(expectation buildup yet again???)
But we still have to climb the Wall of Worry
A recent study by a leading FII broking house in India pointed out that our currency woes would spill over onto the balance sheets of
leading Indian conglomerates. These conglomerates, already reeling under falling revenues, borrowed heavily in dollars and now will
face a daunting task of repayment with a depreciated rupee. Well, let’s hope Dr. Rajan wields some influence over the rupee and the
CAD. After all, he is on the Bloomberg Markets’ annual 50 Most Influential list!!!
2 Fortuna Public Relations Pvt. Ltd.
september - 2013

Key Economic Developments
Sep 12 - July factory output rebounds, Aug retail inflation decelerates
Industrial production in July grew by 2.6% while retail inflation slowed for the second month to 9.52% in August. India’s factory output
rebounded in July and retail inflation decelerated in August, data released on Thursday showed.
http://t.in.com/aCMH
Sep 10 - India August Trade Deficit Narrows
India’s trade deficit narrowed to a five-month low in August. The deficit narrowed to $10.9 billion from $14.17 billion a year earlier, Director
General of Foreign Trade Anup Pujari told reporters while releasing the data Tuesday. The gap was $12.27 billion in July.
http://t.in.com/6CJu
Sep 10 -RBI further eases norms to encourage capital flows
Under the new norms, RBI has allowed swap facility for term deposits in dollar denomination ranging from 1—3 years at a concessional
rate of 1 per cent below the market rate, RBI said in a notification.
http://t.in.com/eCIZ
Sep 9 - India’s continuing manufacturing drought
Last week, the HSBC manufacturing purchasing managers’ index (PMI), a gauge of factory activity in the country, slipped to a low of 48.5
(for August). A reading below 50 indicates contraction.
http://t.in.com/0CIh
Sep 5 - Direct tax collection up 14% in April-Aug
Gross direct tax collections rose to Rs 1.88 lakh crore against Rs 1.64 lakh crore in the same period last year. The Government has fixed
a direct tax collection target of over Rs 6.68 lakh crore for the current fiscal, up 19% YoY.
http://t.in.com/1CCE
Sep 4 - Lok Sabha passes PFRDA Bill 2011
The bill seeks to establish, develop and regulate pension funds to protect the interests of subscribers to schemes of pension funds and
assures minimum returns to subscribers. The government said the bill was based on the principle “you save while you earn”.
http://t.in.com/eCOZ
Sep 3 - RBI tightens home loans norm
The Reserve Bank of India on Tuesday asked banks to link the disbursal of home loans to stages of construction to protect the interests
of buyers and contain the fallout of “innovative” housing financing schemes.
http://t.in.com/9CLL
What rating agencies say
Sep 6 - India warned on sovereign rating: Moodys
Like Standard and Poor’s a couple of days ago, another global rating agency Moody’s Investor Service today warned India to be watchful
of external macro-economic implications as they may ultimately decide the country’s sovereign credit rating. (Last month, they had
talked about India’s rating not getting impacted in account of the sharp currency depreciation.)
http://t.in.com/7CWX
Fortuna Public Relations Pvt. Ltd. 3
september - 2013

Sep 3 -See downgrade risk rising for India (report): S&P
Standard & Poor’s considers chances of a credit ratings downgrade for India higher than for Indonesia, Bloomberg News reported
on Tuesday, citing comments made by an analyst of the credit rating agency at a briefing in Seoul. (Last month had maintained their
negative outlook.)
http://t.in.com/cCQH
Influencer Speak
Sep 13 - India’s weightage cut in Asia Pacific portfolio: CLSA
Chris Wood of CLSA says that the weighting in India in the Asia Pacific ex-Japan relative-return portfolio will be reduced by 2 percentage
points with 1 percentage point each added to China and Korea.
Sep 12 - EM currencies’ recovery brief; INR undervalued: Julius Baer
Mark Matthews, Head of Research, Bank Julius Baer feels that the speculation about US tapering its QE programme has whacked
most emerging markets currencies out of shape. He feels that the Indian currency is undervalued at current levels. He says, the Federal
Reserve tapering program will not be more than USD 10 billion this month
Sep 11 - March 2014 Sensex target of 20,000 maintained: Nomura
Prabhat Awasthi of Nomura says that in IT services, the firm added Infosys to bolster its overweight call on the sector. “In pharma, we are
replacing Jubilant Life with Lupin. In autos, we are adding Bharat Forge,” he adds.
Sep 10 - Expect 5800 on Nifty; Fed to go slow on tapering: Geosphere
Arvind Sanger, Founder and Managing Partner of Geosphere Capital Management is of the opinion that the Fed will go slow on tapering
because the US non-farm payroll was disappointing in terms of showing strong improvement in the labour market.
Sep 07 - Another global economic slowdown nears: Jim Rogers
Rogers, co-founder of Quantum Fund, said the simultaneous monetary easing and currency debasing in all major western economies
was “the first time in history” for this to happen. “Quantitative easing and money printing is going to end in one way or the other. It is
going to cause problems in the world economy. Sometime in the next year or two, we are going to have another economic slowdown,”
investment guru Jim Rogers said.
Sep 05 -Nifty may see relief rally in short-term: Eastspring Investments
Nicholas Ferres, Investment Director, Eastspring Investments expects the Indian equity market to see a relief rally in the short-term as
the market is not cheap in the global context. Ferres says that his main concern right now, however, is the structural follow-up on the
positivity set by the RBI measures.
Sep 04 - India unimpressive: Finaport
Hans Goetti, chief investment officer, Finaport says India ranks low in its emerging market (EMs) list. “What should happen is that a
possible change in the political environment. At the moment we are in no man’s land because the election is taking place next year. So,
there is a still long way to go and in terms of structural reforms and whatever foreign investors want to see, it is still a long way to go and
that is probably what holds back India right now,” explains Goetti.
september - 2013

Fund Activity From Around the Globe
Sep 10 - Investors pull out $6 billion from emerging market funds: EPFR
Investors have pulled out nearly $ 6 billion from bonds and equity funds focused on emerging markets in a week amid concerns over
the US Federal Reserve’s plan of curtailing its stimulus drive starting later this year as well as tensions in Syria, says a report. According
to funds tracking company EPFR Global, nearly $ 6 billion has flown out of emerging markets bonds and equities funds during the week
ending September 4.
http://t.in.com/cCQq
Sep 6 - US investors prop up emerging equity flows
U.S. mutual fund investors are ploughing on with bets on emerging market equities, according to the latest net flows numbers from fund
research firm Lipper. August was the 30th straight month the sector has seen net inflows, and the 9th straight month of net inflows above
$1 billion. Sure, there’s a downward trend from the February peak, but the resilience of demand is notable given doom-laden headlines
about how EM markets will fare once the Fed feels its generosity is no longer required.
http://t.in.com/3CHg
Sep 2 – European stock funds see longest inflow streak for seven years
European equity funds extended their run of inflows with $1.3 billion (€983.4 million) invested in them last week, the longest streak of
inflows for the fund sector since the fourth quarter 2006. Meanwhile, outflows from emerging market equities and bond funds continued,
hitting a nine-week high. Overall, the week ending August 28 saw a net $4.8 billion pulled out of all equity funds tracked by EPFR and
another $7.1 billion redeemed from bond funds. Outflows from equity funds investing in India – a country that has received negative
headlines in recent weeks - and Indonesia were moderate.
http://t.in.com/7CWJ
Chart Art
Source: Equity master
september - 2013

India Doubles Silver Imports - Bullion Coin, Bar and ETF Demand Surging
Import restrictions and the war on gold in India, once the largest buyer of gold soon to be surpassed by China, has led to a surge in
Indian silver imports which have doubled.
Thomson Reuters GFMS analyst Sudheesh Nambiath, estimates that India’s total silver imports have more than doubled from last year,
reaching nearly 3,000 tonnes in the first half of 2013 compared with 1,900 tonnes in the whole of 2012, according to the Financial Times.
EU trade data show silver exports to India from the UK – traditionally the country’s top supplier – were 1,415 tonnes in the quarter to June,
more than triple the previous year’s level and the highest quarterly total since 2008.
“Because of the restrictions on gold, traders shifted towards silver,” Mr Nambiath told the Financial Times, adding that demand for silver
jewellery was likely to rise 20% year-on-year and that manufacturers already had full order books through to December.
http://t.in.com/2C0q
Read You May Find Interesting
Confessions of a Former Analyst
I’ve spent 6 months on the other side of the fence as a CFO of a fast-growth tech company, and I’ve seen mounting evidence of where I
went wrong as an investor. Not only has the company where I now work taught me a lot, but also so have CFO mentors at the companies
that I used to invest in.
http://t.in.com/3CHn
Three Steps to a More Productive Earnings Call
As every earnings season comes to an end, it is striking how often executives and investors alike complain that earnings calls are a
colossal waste of time. It’s no wonder. Even a determined listener would be tested by an executive reading highly scripted texts of
revenue, margin, and earnings data that would be better presented in tables. Short of eliminating them entirely—a step many managers
are unwilling to contemplate—what’s a CFO to do? There’s plenty of room for experimentation with more insightful formats.
Read on for three ideas could greatly improve the dialogue.
http://t.in.com/0CIq
september - 2013

Top 5 monthly gainers - NSE
Stock
CMP
(Rs.)
Close on
14 Aug
2013
(Rs.)
% chg
MoM
Sesa Goa Ltd. 183.90 139.70 31.64%
Bharat Heavy Electricals Ltd. 142.85 118.55 20.50%
Tata Steel Ltd. 298.30 250.10 19.27%
Jaiprakash Associates Ltd. 39.55 33.35 18.59%
Ranbaxy Laboratories Ltd. 457.20 392.85 16.38%
Top 5 monthly losers - NSE
Stock
CMP
(Rs.)
Close on
14 Aug
2013
(Rs.)
% chg
MoM
IDFC Ltd. 95.10 112.00 -15.09%
ACC Ltd. 1043.70 1189.55 -12.26%
Axis Bank Ltd. 1059.60 1149.60 -7.83%
Maruti Suzuki India Ltd. 1315.90 1391.20 -5.41%
Bharti Airtel Ltd. 325.75 343.30 -5.11%
Source: stockmarketindian
Flows
FII (Rs. Crore) Gross Net
Purchase
/ salesMonth Purchase Sales
Sep-13 31,240 25,423 5,817
Aug-13 70,693 78,163 -7,470
YTD 5,51,560 5,07,792 43,768
DII (Rs. Crore) Gross Net
Purchase
/ salesMonth Purchase Sales
Sep-13 9,504 12,479 -2,975
Aug-13 31,034 24,749 6,285
YTD 1,95,927 2,33,680 -37,753
Source: moneycontrol.com
Summary of current interest rates
Country/region Current rate
Previous
rate
Change
United States 0.250 % 1.000 % 16-Dec-08
Great Britain 0.500 % 1.000 % 3-May-09
China 6.000 % 6.310 % 7-Jun-12
Europe 0.500 % 0.750 % 5-Feb-13
India 7.250 % 7.500 % 5-Mar-13
Source: global-rates.com
Summary of inflation
Country/region Period
Monthly
basis
Yearly
basis
China
1 August
2013
0.500% 2.515 %
France
1 August
2013
0.464 % 0.869 %
Germany 1 July 2013 0.473 % 1.921 %
India 1 July 2013 1.730 % 10.849 %
Japan 1 July 2013 0.200 % 0.705 %
United States 1 July 2013 0.039 % 1.961 %
Europe 1 July 2013 -0.535 % 1.597 %
Source: global-rates.com
Key Currency Value
52-WK
High
52-WK
Low
EUR-USD 1.33 1.37 1.27
USD-JPY 98.91 103.74 77.44
USD-HKD 7.75 7.77 7.75
USD-SGD 1.26 1.29 1.22
USD-INR 62.60 68.85 51.39
Source: Bloomberg
Energy Commodity Futures
Commodity Units Price Contract
Crude Oil (Brent) USD/bbl. 107.48 Oct-13
NYMEX Natural Gas USD/MMBtu 3.67 Oct-13
Gold Spot USD/t oz. 1,317.67 N/A
COMEX Silver USD/t oz. 21.86 Dec-13
Source: Bloomberg
Global Indices
Current
% Change
over
Sep 1 st
1 Year
Shanghai Stock Exchange ... 2230.73 6.44% 5.03%
Nikkei 225 14,404.67 5.97% 57.27%
NASDAQ Composite Index 3,722.18 3.69% 16.90%
FTSE 100 Index 6,583.80 2.66% 11.30%
Hong Kong Hang Seng Inde... 23,200.43 4.78% 12.46%
S&P 500 Index 1,687.99 3.37% 15.16%
Dow Jones Industrial Ave... 15,376.06 3.82% 13.11%
source: Bloomberg
Indian Indices
Current
% Change
over
Sep 1 st
1 Year
CNX DEFTY 3,178.03 11.59% n.a.
CNX SMALLCAP 2,814.55 7.70% -14.44%
CNX NIFTY 5,850.60 6.92% 8.55%
CNX 100 5,708.60 6.73% 8.61%
CNX MIDCAP 6,996.95 6.18% -3.86%
INDIA VIX 28.29 1.73% 83.94%
Source: NSE
Sectoral Indices
Current
% Change
over
Sep 1 st
1 Year
CNX REALTY 169.80 13.54% -17.29%
CNX PSU BANK 2,249.10 13.01% -18.64%
BANK NIFTY 10,180.45 12.50% 0.44%
CNX INFRA 2,169.60 10.84% -4.79%
CNX METAL 2,101.70 8.75% -18.61%
CNX AUTO 4,662.05 7.28% 15.68%
CNX FMCG 17,306.40 6.28% 25.97%
CNX CONSUMPTION 2,424.55 5.14% 21.99%
CNX PHARMA 7,287.90 4.40% 25.61%
CNX IT 8,172.65 -2.50% 27.21%
Source: NSE
september - 2013

Contact
Mumbai: Delhi:
3-D, Sidhivinayak Chambers,
Opp. M.I.G Cricket Club, Gandhi Nagar,
Bandra (East) Mumbai – 400 051
Landlines: +91 22 2640 6866
Komal Iyer I komal@fortunapr.in
Sudhir Padiyar I sudhir@fortunapr.in
910 – 910A – 911, 9th Floor,
Narain Manzil, 23, Barakhamba Road,
Connaught Place, New Delhi - 110001
Landlines: +91 11 4798 8900
Harsh Wardhan I harsh@fortunapr.in
Amit Arora I amit@fortunapr.in
Hyderabad: Ahmedabad:
303A, Nilgiri Block,
Aditya Enclave, Ameerpet,
Hyderabad - 500 038
Srinivas Reddy I srinivas@fortunapr.in
108, Nandan Complex,
Opp Mithakhali Railway Crossing,
Navrangpura, Ahmedabad - 380006
Landline:+91 079 2656 0570
Sachin Jain I sachin@fortunapr.in
Kolkata: Chennai:
Everest House, 1st Floor, Office No. 1A/2A,
46C Chowringhee Road, Kolkata – 700 071
Landline: +91 033 4060 2798
Atridev Misra I atridev@fortunapr.in
Flat No: 17/1, Ground Floor,
Arimuthu Achari Street, Triplicane,
Chennai – 600005, Tamil Nadu
B. Mahadevan I mahadevan@fortunapr.in
Bangalore:
1st Floor, No. 2, 21st Cross,
Lakshmipuram, CMH Road Cross
Bangalore – 560 008
Sangeeta Panna I sangeeta@fortunapr.in
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september - 2013

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The Fortune Cookie September 2013