th

Weekly Market Update as on 10 December, 2010

The Week That Was:

As on 3rd Dec. Difference

Indices As on 10th Dec. 2010
2010
Points % Terms
SENSEX 19966.93 19508.89 (458.04) (2.3%)
NIFTY 5992.80 5857.35 (135.45) (2.3%)
NIFTY JUNIOR 12500.15 11763.1 (737.05) (5.9%)
CNX MIDCAP 9011.25 8511.55 (499.70) (5.5%)
BSE SMALLCAP 9858.98 8951.3 (907.68) (9.21%)

Net Inflow / Outflow

Rs. Crore
FIIs – Cash (2915)
FIIs – F&O (952.03)
MFs (264)
FII Cash, F&O & MF figures are for only for 3 days

Market Slips again on local news

Domestic markets commenced the week on a positive note but investors cashed out of the banking stocks on
worries that the deposit rate hikes announced by various banks may adversely impact their NIM. Sell off on
Realty sector stocks also added momentum to the fall in indices. News of price manipulation by certain brokers
and also margin calls led to panic selling in Midcap and small cap stocks. Towards the close of the week markets
rose primarily on the back of short covering in banking sector stocks. The better than expected industrial output
growth of 10.8% for the month of October brought some relief to the market and revived the investor
sentiment. This gain had marginal impact on the weekly movement and market ended at a net loss over last
week’s close. Sensex closed down 2.3% and Nifty also was down by 2.3%. The CNX Midcap index was down
5%, BSE Small cap index was down by 9.25% at the close of the week. BSE Oil & Gas was up 0.8%, BSE Realty
was down 7.15%, BSE Consumer Good was down 2.4%, BSE Bankex was down 7.5%.

India’s IIP rebounds in October

India’s Industrial production (IIP) growth rose above expectations to 10.8% y-o-y in October from 4.4% y-o-y in
September. Excluding volatile capital goods, industrial output rose to 8.9% from 6.2% in September. The
rebound in IIP has been driven by both capital and consumer goods production. Capital goods output growth
rebounded to 22% y-o-y in October from -4.1% in September. Consumer durables output growth rose to 31%
from 10.9%, while non-durables surprisingly moderated to 0.1% from 1.9% in September. Basic goods growth
was robust at 7.7%, in line with strong growth in core infrastructure industries, while intermediate goods
production remained strong at 9.5%.

Trade deficit narrows in November

Exports rose at a faster pace in November (26.8%yoy, USD18.9bn), compared to 21.3% growth reported in
October and was stronger than expectation of 20.0%. Imports growth also improved in November (11.2%yoy,
USD27.8bn), up from 6.8%yoy in October. As a result of stronger exports growth, trade deficit narrowed to
USD8.9bn in November, from USD9.7bn in October.

Manganese Ore India Ltd. (MOIL) Issue oversubscribed 56.43 times

MOIL Limited which had tapped the capital markets with its IPO for 3.36Cr shares was overall subscribed a
staggering 56.43 times. Retail investor’s portion was subscribed 32.86 times. HNI portion was subscribed a
whooping 143.30 times. This segment garnered bids worth Rs 26,542Crs. QIB was oversubscribed by 49.16
times. The overall issue garnered bids worth Rs 71,100Crs. The stock would be listed in exchanges on December
15th 2010.
FIIs remained sellers

FIIs remained sellers for last week to the tune of Rs.2915Cr in the cash segment and were also sellers for
Rs.952.03Cr in the F&O segment for three days of trading respectively. Domestic MFs were sellers of Rs.264Cr.
for three days of trading.

Going Forward

Most of the mid & small cap stocks last week were under pressure as news flow on price manipulation by certain
brokers hit the markets. Margin calls also led to unwinding in stocks. Markets would look forward to central
bank action on the interest rates as inflation remains a concern.

We believe after this correction in recent times markets have become healthy and we believe any correction may
be opportunity to increase exposure with a 2-3 years horizon.

The Week That Was:

Major Economic indicators

Current Week* Last Week Change
Inflation (October 2010 - Monthly) 8.58%
10 YR IGB (Yield) (10/12/2010) 8.08% 8.16% -0.08%
10 YR UST (Yield) (10/12/2010) 3.32% 3.00% +0.32%
Avg. LAF Surplus / Deficit (Rs. Cr) -119526 -72078 -47448
Currency (Rs/$) (10/12/2010) 45.05 45.10 -0.05
India's Forex Reserve (Billion $) (03/12/2010) 296.4 294.00 +2.40
*Current reported week

WPI – Inflation

India's food price index rose 8.69%, while the fuel price index climbed 9.99% in the year to November 27,
government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 8.60% and 9.99%,
respectively. The primary articles price index was up 12.66% in the latest week compared with an annual rise of 12.72
% a week earlier. The rise in food inflation was due to an increase in prices of products such as onions, fruits and
milk.

IIP

IIP for the moth on October came in at 10.8% as compared to 4.4% in the previous month. The rebound is primarily
on the back of an increase in manufacturing, particularly of consumer durables, thanks to increased demand during
the festival season. Manufacturing grew at the highest rate among sectors at 11.3% in October, compared with
10.8% last year. Mining and electricity production grew at 6.5% and 8.8%, respectively, compared with 9.1% and
4%. Capital goods grew at a robust 22% in October after registering a contraction of 4.1% in the previous month.

US treasuries

The US 10yr treasury traded in the band of 2.92%-3.32%. The US 10yr prices fell as bid cover ratio for the auction
was lower than expected, retail sales came in better than expected. The government also announced tax cut for 2
years which will spur the economy. The US 10yr closed at 3.32%.

Outlook

Liquidity was tight during the previous week on account of first week of reporting. Banks borrowed on an average of
Rs. 120000 crs from the RBI. The RBI has announced T-Bill auction worth Rs.3000Crs. The 10yr GSEC yield fell to
 8.08% as Government reduce the auction size to Rs. 6000crs. The RBI also announced OMO worth Rs. 12000crs of
which it accepted Rs. 10120crs. The 10yr GSEC is expected to trade in the band of 8.05%-8.20%.

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guarantee that the objectives of the Schemes will be achieved. As with any securities investment, the NAV of the Units
issued under the Schemes can go up or down depending on the factors and forces affecting the capital and money
markets. Statutory: Kotak Mahindra Mutual Fund has been established as a trust under the Indian Trusts Act, 1882, by
Kotak Mahindra Bank Limited (liability Rs. NIL) with Kotak Mahindra Trustee Company Limited as the Trustee and with
Kotak Mahindra Asset Management Company Limited as the Investment Manager. Before investing, please read the
Offer Documents.