WEEKLY MARKET OUTLOOK

Markets underwent a smart recovery on easing inflation , sliding crude oil

WEEK prices. The market moved higher shrugging off rate hike by the Reserve
28 July 08 - 04 Aug' 08 Bank of India on Tuesday, 29 July 2008. Strong bounce back in global
markets and further decline in oil prices were the key factors that
Weekly Markets revitalized the investor sentiments during the week.
USA-DJ 11378 0.1
The 30-shares BSE Sensex rose 381.75 points or 2.67% to 14,656.69 in the
UK-FTSE 5411 1.1
week ended 1 August 2008. The CNX S&P Nifty rose 101.7 points or 2.35%
Japan-Nikkei 13313 (0.3)
to 4413.55.
Brazil-Bovespa 59505 4.0
S Korea-Kospi 1582 (1.0) The BSE Mid-Cap index rose 70.15 points or 1.26% to 5,642.74 and the BSE
India-Sensex 14656 2.7 Small-Cap index rose 201.32 points or 2.96% to 6,980.10.
The wholesale price index rose 11.98% in 12 months to 19 July 2008, above
FII / MF Activity (Rs Cr)
the previous week's annual rise of 11.89%. Inflation for the week ended 24
(upto 17th July) FII MF
Total July (1,013.00) 1,223
May 2008 was revised upwards to 8.9% from 8.24%.
Total 2008 (28,202.00) 10,445 Foreign institutional investors (FIIs) sold shares worth Rs 1836.80 crore in
the month of July 2008. FIIs sold shares worth Rs 26705.10 crore in the
Weekly Sector Movement calendar year 2008. Mutual funds have bought shares worth Rs 1223.50
Sectors Close %
crore in the month of July 2008, till 30 July 2008.
IT 3,800.00 5
FMCG 2,121.00 0 India's second largest listed telecom service provider by sales Reliance
CG 12,132.00 3 Communications tanked 13.18% to Rs 436.80 in the week after the reported
CD 3,712.00 2.4 the slowest profit growth in nine quarters.
Healthcare 4,190.00 0.1
RCom reported 23.9% growth in consolidated net profit to Rs 1512 crore on
PSU 6,925.00 3
23.7% growth in revenue to Rs 5322 crore in Q1 June 2008 over Q1 June 2007.
Bankex 6,728.00 (0)
Auto 3,656.00 (2)
Metal 13,250.00 6

India's largest tractor maker by sales Mahindra & Mahindra fell 3.06% to Rs 523.70. The company's net profit fell
16.66% to Rs 159.3 crore on 25.99% rise in total income to Rs 3331.8 crore in Q1 June 2008 over Q1 June 2007. The
company's board approved acquisition of all the business assets of Kinetic Motor Company (KMCL), a two-
wheeler company for Rs 110 crore.

In a move to curtail surging inflation and inflationary pressures, the Reserve Bank of India (RBI) on 29 July 2008
tightened the liquidity in the system by raising the Cash Reserve Ratio (CRR) of banks by 25 basis points to 9%
and the short-term indicative rate viz. the repo rate by 50 basis points to 9%. The increase in CRR - the portion of
deposits banks must keep aside - with effect from 30 August 2008 is expected to suck out another Rs 9,000 crore
from the banking system. Repo rate is the rate at which the RBI lends money to banks. The RBI also revised the
GDP growth projection for 2008-09 to around 8%, from earlier 8% to 8.5%.

Exports rose 23.5% in June 2008 from a year earlier to $14.66 billion. That helped narrow the trade deficit from
May 2008 to $9.79 billion. Imports were up by 25.9% to $24.45 billion in June 2008 from a year earlier. Oil imports
rose 53.4% to $9.03 billion.
Telecom minister A Raja on 1 August 2008 said the government will hold a global auction for high-speed third-
generation (3G) mobile services and have five operators initially. India has 60 MHz of 3G spectrum available, and
will allow both GSM and CDMA 3G services, he said.

Please refer to important disclosures at the end of this report For Private circulation Only For Our Clients Only

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WEEKLY MARKET OUTLOOK
Inflation:Is the worse yet to come?
Oil has touched a 12-week low and optimists have already announced that inflation has peaked. Credit rating
agency Moody's on Monday said inflation may have peaked in India as is reflected by the latest moderation, even
though global investment banker Goldman Sachs raised projection for the rate of price rise by 1.5 per cent to 11.5
per cent for the current fiscal.

Inflation remains at a 13-year high of 11.98 per cent for the week ended July 19. Falling crude prices and slowing
down of commodity boom cycle, recovery of US dollar are the other reasons which support the optimists.Global
inflationary pressure could undoubtedly subside but the domestic situation may continue to remain bleak. This
was reflected in the hawkish instance of the RBI(Reserve Bank of India) at the recent monetary policy review
where it raised Repo Rate by 50bps and CRR by 25bps to 9% each.Some might criticise it as a regressive step but
the fact remains that inflation fears remain intact.

The inflation numbers can be expected to remain high owing to the what is called the 'base effect'. Last year the
prices had begun to moderate at this point of time. However this time they continue to remain firm .So year-on-
year percentage rise in prices will be higherthus higher inflation.

Monsoon has been erratic this year. Rainfall has been below average in key areas of Gujarat,Andhra Pradesh and
Maharashtra.As a result the cash crops like oil seed could take severe blow.Groundnut and cotton prices are
expected to remain firm.Soyabean prices are already firm and higher groundnut prices may keep the edible oil
prices on the higher side.

Steel prices ,a major component of WPI (Wholesale price Index)calculation in India ,had been kept artificially
low.Steel producers had imposed a voluntary three month moratorium on prices on behest of the
government.This three month deadline expires in first week of August.As global steel prices remain high
domestic hike in steel prices will prevent inflation from heading south.

Globally crude prices are hovering around their 12-week low. Indeed this is good news but fuel prices were
already kept low in India. So even if crude oil bubble continues to deflate domestic prices will remain
intact.Moreover expecting crude oil prices to slip into double digits and hoping for a subsequent decline in fuel
prices at home will be too optimistic. One more bad news from the financial markets or a fresh war of words
between Israeli and Iranian governments could see the 'black gold' paring with the recent losses.Recent figures
reveal that the demand for oil in developed world has been moderating. This is an encouraging development and
will undoubtedly benefit the inflation-hit emerging economies.

Market is expecting no further cut in interest rates by US Federal Reserve in August.Even a slight hike by 25bps is
possible.If this happens then crude oil will lose its appeal as hedge against the weakening dollar and a further
decline in prices could be seen.
So one should not read too much into this recent stabilization in inflation.This euphoria may turn out to be a
short-lived.Till then pray for a divine intervention in the form a good monsoon. It's a shame on our policymakers
that Indian agriculture is yet to witness a promethean growth. The entire nation's economic and monetary policy
is held ransom to the performance of south-west monsoon. Every one in this emrging superpower, from the
ordinary farmer to the RBI Governor, looks up to the skies for relief!

Please refer to important disclosures at the end of this report For Private circulation Only For Our Clients Only

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WEEKLY MARKET OUTLOOK

August 01,2008
MAX INDIA
KEY SHARE DATA Headquartered in New Delhi, Max India started operations in the
CMP 195.6 1980s as a manufacturer of bulk drugs and has since transformed
itself into a multibusiness corporate. Max's current businesses
52-Week Range 120-290
include life insurance (Max New York Life, 74% stake), healthcare
Market Cap 3733.82cr
(Max Healthcare Institute, 70% stake), clinical research (Neeman
Price / Book Value 3.72
International, 100% stake), and specialty plastics (Max India,100%
Price / Cash EPS 186.88 stake).
EV/EBIDTA 128.7
Mcap / Sales 21.29 Max India became the first Indian life insurer to disclose its
BSE Code 500271 embedded value (EV).As per MNYL, its EV increased by 96% in FY08
Bloomberg MAX IN to Rs13.2bn (US$330mn), in part owing to Rs3bn of capital infusion
Reuters MAXI.BO and NBAP of Rs2.67bn (NBAP margin of 20.4%) and minimal
negative variances.

KEY FINANCIALS
Life Insurance business could drive value for Max India (more than
80%)-a business which has lagged the sector growth due to lack of
(In Rs cr) FY08 FY07 FY06
large scale distribution set-up. Company is, however, now looking
Net Sales 284.3 154.92 124.45 to ramp up distribution very rapidly in 3 yrs. Margins may remain
Other Inc 91.07 45.53 31.6 under pressure owing to high expenses. Driven by impact of both
PBIDT 91.3 31.09 19.15 Phase I (complete) and Phase II (partial) expansion as well as
PBDT 76.7 26.17 9.61 improved occupancy, Merrill Lynch estimates healthcare bed
PAT 61.9 14.22 5.89 capacity to nearly double by FY10.
EPS 2.9 0.79 1.69
Equity 44.35 35.98 34.91 Downside risks are managing the rapid ramp up in distribution
(planning 6-fold jump in agents) and growth. Further, volatile equity
markets pose a risk to valuations as majority of products are unit
PBIDTM(%) 32.11 14.74 10.52
linked.
PBDTM(%) 26.98 11.93 3.78
PATM(%) 21.77 5.97 1.15 The company has managed to come with strong annual as well as
FY2008-09 quarterly performances. Merrill Lynch has put the Sum of the Parts
FY09Q1 Q4 Q3 Q2
(SOTP) valuation of the counter at Rs 256.This is 50% higher than the
previous valuation.
Net Sales 91.52 86.43 77.49 72.12
Other Income 27.34 25 27.15 25.57 Sales in First quarter of FY’09 registered a massive 89 percent as
PBIDT 21.74 29.29 27.71 24.84 against the first quarter of previous fiscal. However even this
PBDT 17.75 25.19 24.19 21.18 performance pales in front of the 257% jump in Profit after Tax(PAT)
PAT 13.61 20.22 20.95 16.92 in FY’09Q1 against Q1 FY’08.EPS too has witnessed a 200% jump in
EPS for the same period.
EPS 0.61 0.91 0.94 0.76
So the company has immense value which remains to be
unlocked.Investors with a long term perspective can expose their
PBIDTM(%) 23.75 33.89 35.76 34.44
portfolio to Max India.
PBDTM(%) 19.39 29.14 31.22 29.37
PATM(%) 14.87 23.39 27.04 23.46

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WEEKLY MARKET OUTLOOK
BSE SENSEX

BSE SENSEX is looking to see some smart recovery in near term. If lower levels of crude oil sustains and
global cues remain supportive then initial resistance level of 15,000 can be seen. If 15000 level is broken then
15700 level cannot be ruled out. Traders can remain long.
TATA STEEL

TATA STEEL is charting a firm recovery. This pull back could see the steel major testing around 750 level in
coming trading sessions. Traders can remain long.

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Mansukh Securities and Finance Ltd SEBI Regn No. BSE: INB010985834 /NSE: INB230781431
Office: 306, Pratap Bhavan, 5, Bahadur Shah Zafar Marg, New Delhi-110002 PMS Regn No. INP000002387
Phone: 011-30123450/1/3/5 Fax: 011-30117710 Email: research@moneysukh.com
Website: www.moneysukh.com
WEEKLY MARKET OUTLOOK
WHAT IS TAX IMPACT ON EQUITY INVESTMENTS?
Equity investments can be in the form of direct investments through equity shares or indirectly through mutual funds.
Balanced funds with equity exposure above 65% in Indian companies traded on a stock exchange are treated as equity from a
taxation standpoint.
Dividend Distributed :Apart from capital appreciation, one can also earn returns by means of dividend declared by the
company/fund. These dividends are tax-free in the hands of the investor, and there is no dividend distribution tax either on
``Equity`` mutual funds as per the definition above. This is so because when companies declare dividends, there is a dividend
distribution tax that is paid by the company. This has no impact on the investor.
Securities Transaction Tax (STT):The point which is often ignored is STT that is applicable on purchase/sale of equity shares,
units of equity oriented mutual fund (delivery based) at 0.125%. For non-delivery based sale, 0.025% is applicable on
transactions, sale of derivatives/options would attract 0.017% STT. Hence, they do not escape from the ambit of taxes
irrespective of the holding period.

Computing Date of Holding Special Scenarios

Shares acquired as a gift

Where one has been gifted equity, the period for which the shares were held by the previous owner (the person who gave the
gift) is to be included in the holding period. The cost of the shares incurred by the donor of the gift is considered to be cost of
benefactor of gift.
Shares acquired as inheritance:Where one has inherited equity, then the period for such shares will be from the date of
transfer (to the one who has inherited the equity). The purchase cost will be the Fair Market Value (FMV) as on the Date of
Transfer.
Rights shares:For right shares, the period of holding will be computed from the date of allotment of the shares. The amount
actually paid for purchase of the rights shares is taken as cost of the shares.
Bonus shares:When one receives bonus shares, the period of holding is computed from the date of allotment of the bonus
shares. Cost of bonus shares is taken as nil.
Shares listed Overseas:Shares listed overseas and mutual funds investing in overseas stock (with Indian traded equity shares
composition < 65%) are treated as non equity investments for the purpose of income tax computation.

Capital Losses:Since long-term capital gains earned on equity investments are tax-free, long-term capital losses incurred on
equity investment cannot be set off to reduce taxable capital gains.Short-term capital losses incurred on equity investment can
be set off against any capital gain (long-term or short-term). If in the current year there is no taxable capital gain to set off the
loss against, one can carry forward this loss for 8 years and set it off against future taxable capital gains.

This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you.
Mansukh Securities and Finance Ltd (hereinafter referred as MSFL) is not soliciting any action based on it. This report is not for public distribution and
has been furnished to you solely for your information and should not be reproduced or redistributed to any person in any form.

The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete. MSFL or any of its affiliates or
employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information
contained in this report. MSFL or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding
any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-
infringement. The recipients of this report should rely on their own investigations.

MSFL and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. This
information is subject to change without any prior notice. MSFL reserves the right to make modifications and alterations to this statement as may be
required from time to time. Nevertheless, MSFL is committed to providing independent and transparent recommendations to its clients, and would be
happy to provide information in response to specific client queries.

For any information or suggestion, plese contact the below mentioned

Equity Analyst: Vishwesh Shrivastav Equity Analyst: Gagan Sharma
E-mail: vishwesh@moneysukh.com E-mail: gagansharma@moneysukh.com

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Mansukh Securities and Finance Ltd SEBI Regn No. BSE: INB010985834 / NSE: INB230781431
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Phone: 011-30123450/1/3/5 Fax: 011-30117710 Email: research@moneysukh.com
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