Sensex Weekly FII Flows by xzv69079

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									      wealth management




                                                                                                                      October 17, 2005

Equities Market Overview                                                         Sensex & Weekly FII Flows

l        The indices, having sprinted at a scorching pace for                       40                                                 8,600
         a better half of the year witnessed bouts of volatility                                                                       8,550
         in the past two weeks. Given the sharp run up in the                       20
                                                                                                                                       8,500
         past 3 months, the correction was not entirely
         unforeseen; apprehensions seem to have got                                   0                                              8,450
         further heightened by the negative sentiment                                      07-Oct      11-Oct-05 13-Oct-05 14-Oct-05 8,400
                                                                                    -20
         across global markets. The Sensex lost 3.4% to
                                                                                                                                       8,350
         close the week at 8202 and the Nifty ended at 2484,                        -40
         weaker by 3.5% for the week.                                                                                                  8,300
                                                                                    -60                                                8,250
l        However, unlike last week, the selling was broad                                                                              8,200
         based, as the mid-cap and small-cap segments of                            -80
                                                                                                FII flows(in $Mln)       Sensex        8,150
         the market also witnessed profit booking, which is
         evident from the 4% and 6% weekly losses                                 -100                                                 8,100
         registered by the respective indices (on the BSE).                      Source: SEBI & BSE

l        While our markets may have corrected a good deal
                                                                                 Sensex & Nifty Performance (YTD)
         over the last fortnight, this time around, it wouldn't
         be justified to single out the Indian stock markets.
                                                                                   9,000                                         2,700
         This is because profit booking has been witnessed
         across markets, with most of the developed and                            8,500          Sensex(LHS)  Nifty (RHS)       2,600
         emerging world stock markets having lost 2% to                                                                          2,500
                                                                                   8,000
         10% from their peaks in the last fortnight.                                                                             2,400
                                                                                   7,500                                         2,300
l        The Indian economy has blazed its way to the top of                                                                     2,200
                                                                                   7,000
         the growth charts once again. Last week, it was                                                                         2,100
         reported that the economy grew by an estimated                            6,500
                                                                                                                                 2,000
         8.1% in the first quarter of FY06. Only China is                          6,000
         growing at a faster clip. India and Japan are,                                                                          1,900
         perhaps, the only two major economies doing                               5,500                                         1,800
         better than what was expected of them earlier in the                          Jan-05    Mar-05 May-05 Jul-05      Oct-05
         year. The recent growth spurt has ensured that
         India's share of world output has increased - from                      Source: BSE & NSE
         4.3% in 1990 to 5.8% in 2004. Over the past two
         years, according to the IMF, India has accounted
         for 20% of Asian growth and 10% of world growth.                                  Annualized Returns (in %) as on
                                                                                                13th October, 2005
l        Equities have outperformed other asset classes                            Index Name            1Yr         2 Yrs   3 Yrs   5 Yrs
         over a longer period of time. Over the last few years,
         mid-cap funds have performed better than large-                           BSE Sensex           47.41        31.38   40.76   17.50
         cap funds. Mid-cap stocks however are volatile
         over the shorter term. Investors should have a                            S&P CNX Nifty        41.86        28.04   37.67   16.60
         blend of large & mid-cap funds in their total equity
         portfolio. Conservative investors who have never                          CNX 500              47.96        34.43   46.60   21.50
         invested in equity markets should start their
         investment with funds having large-cap bias.                              BSE 200              43.28        31.27   43.56   21.80
                                                                                 Source: Crisil MFPT

Source: Citigroup Investment Research and Citigroup Economic & Market Analysis
Bond Market Overview:                                                            Trends in GOI Yield Curve

l       After ruling weak for the past few weeks, the bond                       7.60%
        markets recovered towards the end of the week and                                                07-Oct-05            14-Oct-05
        the yields eased by 2-5 bps across the yield curve.
                                                                                 7.10%
l       The market received yet another surprise on
        Thursday with the announcement that the Rs. 40 bn
        auction due between 18th and 25th October had                            6.60%
        been cancelled. This comes on the heels of the RBI
        rejecting all bids under the Rs. 60 bn 2014 bond
        auction held recently. However, factors like the                         6.10%
        impending RBI policy, the Fed and the spot rupee
        weighed the overall sentiment and consequently
                                                                                 5.60%
        the rise in the bond prices due to auction
        cancellation was curbed.                                                         1Y        2Y        3Y         5Y          10Y      15Y


l       The wholesale price index (WPI) rose in the week                         Source: Reuters
        ending October 1st, mainly due to a rise in prices of
        ATF fuel, fruits and vegetables and manufactured
        products. The annual rate of inflation, stood at
        4.24% as against previous week's 3.97%.                                  Trends in Liquidity (Reverse Repos)

l       The yield on the 10-year benchmark, 7.38% 2015                           200                                                         5.12
        bond eased by 5 bps to 7.13%. The yield on the 15-                       180                                                         5.11
        year paper eased by 2 bps to 7.47% levels.                               160                                                         5.1
                                                                                 140
l       The call rates remained soft on account of easy                                                                                      5.09
        liquidity conditions. The average amount placed                          120
                                                                                                                                             5.08
        under RBI's reverse repo fell from Rs 244 bn in the                      100
                                                                                                                                             5.07
        previous week to Rs 160 bn. The call rates closed at                      80
        5.10-5.25% on Friday                                                                                                                 5.06
                                                                                  60
                                                                                  40                                                         5.05
l       The comments from RBI officials indicate that
                                                                                  20                                                         5.04
        domestic factors will be the prime drivers of interest
        rates. Over the near term, the market players would                        0                                                         5.03
        keenly watch the RBI's mid-term Credit Policy for                                 10-Oct        11-Oct       13-Oct        14-Oct
        taking fresh cues on the interest rates.                                              Reverse Repos( INR BLN)             MIBOR(%)

l       Investors with a short to medium term horizon                            Source: Reuters
        should consider investing into liquid or short term
        floating rate funds, while investors with a slightly
        longer-term perspective may look at investing into
        long term floating rate funds. Given that the slope of
        the yield curve has medium term horizon, one can
        consider investing into short-term income funds.
        During the last 5-6 months, the steepness of the
        yield curve at the short end offered an opportunity
        to investors. Hence, despite a reverse repo rate
        hike over this period, short-term income funds have
        delivered a good performance compared to liquid
        & floating rate funds.


Source: Citigroup Investment Research and Citigroup Economic & Market Analysis
Fx Views for the week ahead
                                                                                          CMN/Close
                                                                                                                                                                                                             45,0000
                                                                                    Last          44.8462

l       USD: Cyclical USD support has strengthened and                              High 10/13/05 44.9487
                                                                                    Average       43.6931
                                                                                    Low 07/21/05 43.1750

        will likely be maintained over coming weeks as the                                                                                                                                                   44,50000

        market prices in higher expected inflation and
        interest rates.                                                                                                                                                                                      44,0000




l       JPY: JPY looks set to weaken further during Q4 as                                                                                                                                                    43,5000


        market rates move higher in the US and Europe.
                                                                                      22    02   09 16 23      01   08 15 22    01     08 15 22          01       08 16 23    01   08 15 22     03 10
                                                                                   2005 Apr       2005 May           2005 Jun           2005 Jul                   2005 Aug         2005 Sep     2005 Oct
l       EUR: ECB hawkishness on inflation should support
        EUR against the crosses in coming months.                                                             USD/ INR Source - Bloomberg

l       GBP: Weak economic data continues to weigh
                                                                                                                                           CMN/Close

               .
        on GBP This week we rolled our short GBP                                                                                     Last          54.1563
                                                                                                                                     High 04/20/05 57.2621
                                                                                                                                     Average       53.8535
                                                                                                                                                                                                              57,0000
                                                                                                                                     Low 07/04/05 51.8272
        exposure to short GBP/USD via options.
                                                                                                                                                                                                              56,0000


                                                                                                                                                                                                              55,0000
l       CHF: EUR/CHF continues to move higher as
        interest rate expectations move in favor of EUR.                                                                                                                                                      54,5000



                                                                                                                                                                                                              53,0000

l       SEK: SEK remains under pressure after inflation
                                                                                                                                                                                                              52,0000
        readings were in line with market expectations and
                                                                                      22    02    09 16 23     01   08 15 22    01      08 15 22             01   08 15 22    01   08 15 22      03 10
        Riksbank Governor Heikensten was less hawkish                              2005 Apr        2005 May          2005 Jun            2005 Jul                  2005 Aug         2005 Sep      2005 Oct


        than expected.
                                                                                                             EUR/ INR Source - Bloomberg
l       NOK: Further oil price losses could weigh upon                                                                           Last
                                                                                                                                       CMN/Close
                                                                                                                                               54.1563

        NOK in the sessions ahead.
                                                                                                                                 High 04/20/05 57.2621                                                       57,0000
                                                                                                                                 Average       53.8535
                                                                                                                                 Low 07/04/05 51.8272


                                                                                                                                                                                                             56,0000


l       CAD: Increasing expectations for higher policy                                                                                                                                                       55,0000


        rates should support CAD going forward, despite a
                                                                                                                                                                                                             54,0000

        moderation in commodity prices.
                                                                                                                                                                                                             53,0000



l       AUD: AUD took a hit from surprisingly                                                                                                                                                                52,0000


        disappointing employment data out this week, but                              22    02   09 16 23      01   08 15 22    01     08 15 22          01       08 15 22    01   08 15 22     03 10
                                                                                   2005 Apr       2005 May           2005 Jun           2005 Jul                   2005 Aug         2005 Sep     2005 Oct
        near term prospects against the crosses remain
        positive.
                                                                                                             GBP/ INR Source - Bloomberg

                            Spot                       1 Month                3 Month                               6 Month                                                        12 Month
Currency                   12-Oct              Forecast     Forward   Forecast   Forward                    Forecast            Forward                                  Forecast Forward

USD / INR                  44.79               44.85        44.95     45.00      45.10                      44.00               45.21                                     43.00                45.43

EUR / INR                  53.62               52.92        53.90     56.25      54.27                      57.64               54.70                                     58.29                55.55

JPY / INR                  0.39                0.39         0.39      0.42       0.40                       0.44                0.40                                      0.46                 0.41

HKD / INR                  5.77                5.78         6.94      5.80       5.81                       5.67                5.82                                      5.61                 5.86

RMB / INR                  5.54                5.54         5.57      5.60       5.61                       5.59                5.67                                      5.67                 5.83


Source : CitiFx Views and Citigroup Asian Economic Weekly
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