Vol 1 Issue 1 January 2012

For private circulation

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Sandesh
A Monthly Financial News Letter from RBG Commodities

From the Desk of the CEO

Dear Client, Seasons Greetings on behalf of the RBG Family. At the outset I wish to place on record our sincere thanks for choosing us to execute your transactions in the Commodity / Capital market Segments. Starting off in 2004 with the Membership with NCDEX, we now have Memberships in the 3 Major Commodity Exchanges, NSE, BSE & MCX-SX. We also offer Demat Account Services under CDSL for both Capital Market as well as Commodity market segments. We have formed an NBFC and have applied to RBI for the necessary permissions. With that, we will be able to offer funding against your Commodity / Capital Market holdings. We hope to roll this product by Q1 of FY 2012-2013. Through this News Letter we intend to share with you the developments that take place in the market as well as other information which may be of interest to you. To that end, your comments & inputs are solicited. On behalf of the RBG Family I once again thank you for being part of our growth & look forward to your continued support in our future endeavors. With warm personal Regards/Param

Shrinking Economy and Losing Confidence

Warm New Year Greetings to All. Most of the participants across globe in Capital market have ended their trading in loss. In 2010, Indian equity markets earned Rs. 4.5 Cr in every 20 seconds of trading in terms of total market capitalization. But, in 2011 situation became very pathetic (I cannot find a better word than this), losing around Rs. 3180 Cr in every 10 seconds of trading. Benchmark Nifty alone lost 25%. The total market capitalization in the end of 2010 was Rupees 73 lakhs crores. Towards the end of 2011 it has declined to 54 lakhs crores. Main reason behind this was financial crisis, which emerged in US two years back. Initially it started with nonpayment of US home mortgage, but the situation became very bad with the fall of Lehman Brothers. This year, there was a great protest from the public against ruling parties in many countries like Egypt, Libya, Bahrain etc., the main reason of such protest being the wrong polices of Government that fueled the economic crisis. Last year ended with concerns over the European debt. The European crisis gained media attraction after the downgrading of the US by S&P. Dark clouds which accumulated over the countries like Italy, Germany, Greece, France etc., acted as a catalyst to the falling markets. In such crisis, most people believed that Bears may take advantage of falling market. Honestly speaking, they did not expect such a big fall, considering the lows of market some of them entered to market as Bulls and ended up making losses. We cannot blame anybody for this situation, as these are all part of a financial cycle. According to some economists, excessive competition between the Banks and financial institutions is the main reason for the crisis. Whatever may be the reasons, we, the common people are affected by such slowdowns. In India, independent regulatory bodies like RBI and SEBI played a crucial role in reducing bad effects of such crisis to some extent. I think it will take few more months for India to recover from present financial struggles. High Trade deficit and falling of Rupee may take more time to return back to the stable levels. The confidence level of the participants will increase with recovery in the economy. Some signs of recovery are already visible in the market. The Investors with long term horizons can enter premium instruments at present valuations. It will be highly advisable to invest 25% of the Investment in the beginning of 2012. I personally believe that, if the investors examine past 10 years performance of the market, they may regain their confidence. Most of the Investors ended in losses as they were not able to separate their investments into short, medium and long term investments. Moreover, the Investors have an attitude to invest all their money in one trade and do not concentrate on diversification. This adds more depth to their losses. We have good expectations about the market in the years to come. Investors who lost money last year can re-enter the market with small investments with marginal risk. As the Investment Guru, Mr. Warren Buffet said, while investing in stock markets, think 10 years rather than 10 minutes; take this as a guideline for long term Investment.

General Financial News Common market KYC for Commodities

FMC has come up with a common KYC for clients who want to trade on multiple Commodity Exchanges. This will be applicable to all clients registering after 1st April, 2012. Ref: FMC Circular: FMC/4/2011/G/30 Commodities Exchanges to operate IPF Trusts In order to protect the Investors the FMC has directed all the Commodity Exchanges to start the IPF Trust (Investor Protection Fund) by 31st March, 2012. Ref: FMC Circular: FMC/4/2011/G/0012 KYC Registration Authority (KRA) for Stock exchanges For avoiding the duplication of KYC Process for clients opening accounts with different intermediaries, SEBI has formulated KYC Registration Authority (KRA) Regulations. Clients will have to register only once with an intermediary who will upload the details on the system of the KRA which any other intermediary can download when that client approaches them. Ref: SEBI Circular MIRSD/Cir-23/2011 Switching banks without changing A/c Number Customers may soon be allowed to switch Banks without changing Account Numbers. After similar moves in mobile telephony and health insurance in 2011, the Government plans to introduce portability of Bank Account Number. The idea is to save Customers the inconvenience of opening and closing Bank Accounts or keeping multiple Accounts if they have to shift to a new location or find their Banks services unsatisfactory. (SourceBusiness Standard 03/01/2012)

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Sandeep Chandran, RBG Research

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COMMODITY MIRROR
At the moment, most of the Commodity Market movements are guided by the Economic news rather than any Fundamental news or Technical Movements. News from European countries played major role in deciding the direction of the market. This is a tough time for the Analysts across the globe to judge the market. Precious metals like Gold and Silver witnessed huge volatility in the Initial weeks of December. The majority of the Movements in Crude Oil are guided by Geopolitical Issues. Rubber: There were some reports in the beginning of the month that the Chinese Buyers are delaying their purchase due to the fluctuations in Rubber prices. The Strengthening Crude oil prices prevent Rubber prices from a sharp decrease. In spot market the activity was much reduced. We are expecting a range bound market for the Rubber in the month to come. Expected to trade within range of 193 /KG 209 / KG range. Pepper: December month Pepper witnessed a tug war between Bears and Bulls. Pepper reached a high of around 38900 levels in January series. But after with the liquidation of positions by some strong players, Pepper prices touched a low of around 32400 levels. Technically 32100 levels seem to be good support for the Pepper and resistance seen around 35500 levels for the months to come. The Currency factor is also playing an important role in influencing the market. In fact, the weak rupee has been keeping the Indian parity at lower levels and competitive and not because of any significant changes in the market, as some of the overseas buyers were thinking. According to some media reports, Pepper harvesting season expected to begin in the month of January. Precious Metals: This month, Precious metals witnessed some downward rally due to the stronger US Dollar and better news about the economy. US $ 1761 per ounce was the highest rate for Gold this month. And in the last week of December it touched around 1550 levels. In the coming months, improvement in the Italian Bond selling is going to get participants attraction. In addition, news from Europe, especially from the part of European Central Bank will create reflections in the prices of Precious metal. Energy: Like other Commodities, Crude did not witness such selling in the month of December. This was mainly due to the Geopolitical issues in the Iran. Iran threatened US that they will choke off traffic through the Strait of Hormuz, through which nearly 30% of the world Crude oil transport takes place. WTI Crude oil prices trade in range of 99.30 to 101.30 in the month. This Month also, the news flows from Iran is going to have an impact on Crude oil prices. The US petroleum Inventories have shown an increase in the last week, which may also be considered by the participants for taking positions in Crude oil. The Data from the Exchanges are showing an increased participation from the retail segment from last few years. Next year also, we can expect such increase in the retail levels due to wide reach of terminals and availability of the Information sources. We, RBG Research will try our level best to deliver such information, data, opinions and other details to our customers as soon as it arrives.

EQUITY MIRROR
Last year if we asked anyone about equity market, everyone in common would have said very bad. Last month alone, Nifty lost around 2.5 -3%. But towards the end of last year, some positive impulses were seen across the globe. The Data flow from US, like Consumer confidence, Jobless claims etc., showing improvement for last few weeks. From the Euro Zone also, progress in Bond selling by Italy and some other countries are slightly easing the global worries over Euro Debt. Some of the economic figures from Japan and China are also showing Improvement. Nifty seems to be have a good support around 4280 levels and resistance seen around 5200 5300 levels. The long term investors can enter into the Market around these levels by investing in Companies that are fundamentally strong. One of the most important factors we should keep in mind is the Growing trade deficit and weakness in Rupee. Rupee weakened around Rs. 3 last month. The heavy outflows by FIIs and Purchase of dollar by Oil marketing companies also led the Rupee to lower levels. In the beginning of December, Market participants keenly watched the quarterly policy review by RBI. As they suggested in their earlier meeting they did not reverse any key ratios, but their comments about the present economic conditions of India reflected in the market and ended up selling. More precisely, the comments from many parts of India made Indian participants more cautious. Companies like SBI, Reliance Industries, Tata Power, SBI, and BHEL can be considered for the long term investments at present levels. In the month to come, the Quarterly results from the Corporates are going to dictate short term trends of the market. Considering present economic conditions we are not expecting bright results from the Corporates. We may get clear fundamental picture about the market after the announcement of the financial year results. In 2012, RBG Research is pledging its continued commitment to our Clients to reap gains from the ups and downs of the market.

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RBG Research Team

RBG Research Team

RBG Commodities Ltd

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Disclaimer: This electronic news letter is only an information service. Informations are collected from different sources which are believed to be reliable, but are not guaranteed by RBG Commodities about the accuracy. RBG Commodities does not assume any responsibility or liability resulting from the use of the information given.

Editorial Board: Shijo Jose, Sandeep Chandran, Vishal Dand. RBG Commodities Limited, VI/93, Jew Town, Cochin 682002. Tel: 0484-2588841/44/09