1. 1 Eastern Financiers Limited Kolkata

2. 2 INDIAN CAPITAL MARKETS PAST, PRESENT & FUTURE

3. 3 AT TIMES OF WAR WE PREPARE FOR PEACE AT TIMES OF PEACE WE PREPARE FOR WAR - The Art of War

4. 4 In markets, the conditions are the same as in war. During bull markets we should be alert for any signals which could derail the upside rally

5. 5 BULL MARKETS The secular trend in the market where it rises a minimum of 20 % in price within a period of atleast 3 months, which is buoyed by good corporate earnings and positive sentiments

6. 6 High Input Prices Inability of the company to pass on price rise to consumers High interest rate scenario Low Growth In Earnings and High P/E Ratio High retail participation ignoring front cap and mid-cap stocks and preference to small cap stocks, this happens when greed is at its highest pinnacle Factors that could affect Markets

7. 7 INDIAN BULL MARKETS The best bull market seen in India was from 2003-2007, where the benchmark S&P CNX NIFTY rose from 1000 levels to 6000 levels. A rise of 5000 points, as the economy which was in depression in 2003 recovered to peak in 2008 This period saw Government reforms which included PSU disinvestment, Infrastructure spending in roads, ports and power projects This period saw a reduction in interest rates, which led to capacity expansions by corporates Stable monsoons helped decent Agricultural growth Increase in FII investment along with domestic Mutual Fund growth. FII have invested US$ 250 billion till date, since 1990’s

8. 8 NIFTY Weekly

9. 9 Weekly chart of NIFTY shows strong NIFTY at 3551-3800 levels. The secular run from 2003 to 2007 has shown that we were in a extreme depression, and, in between, we have moved to a boom period of 6000 levels!

10. 10 Valuation of Indian Markets There has been a P/E multiple expansion from 2003 where the P/E was 10 to 2008, where the multiples increased to 25. On an average, the P/E multiples have ranged between 13-25 from 2004 onwards. The GDP growth on an average from the year 2004-2007 (4 years) has grown 8% y.o.y. So, this translates into an earnings growth of 18-24% for the NIFTY stocks (thumb rule: earnings growth of NIFTY stocks is about 2.3-2.7 times of GDP growth) The NIFTY earnings have been on an average growing by 20-25% in the last 4 years. At 20-25% growth, the markets should double in 3 ½ years (Thumb Rule of 72). So, on 1 st January 2004, assuming fair value of 2000 for NIFTY by 1 st January 2008, the fair value of NIFTY would be around 4100-4400 levels, while in actual it was at 6200, i.e. about 40% higher than the fair value!

11. 11 Future Growth Estimates We expect the GDP to grow by 7-7.5% for the year 2008-09 & 2009-10. This will translate into an earnings growth of 15-18% for NIFTY stocks for the next 2 years We assume a P/E band of 15-20, so we get a range of 4050- 5400 (Assuming that we get a growth of 15% on Rs.235 which was the EPS of 2007-08 for NIFTY stocks) For 2009-10 we expect an EPS of Rs.300, so taking a P/E of 15-20, we get a price range of 4500-6000. This discounting takes place in the 4 th quarter of 2008-09.

12. 12 Our Concerns Elections in the country states & central:we expect the elections to take place within the next 9 Months which might effect the sentiments of the markets Inflation: At a 13 year high. A high inflation means higher interest rates which is bad for the capital markets. Our view: We believe that prices on a month-to-month basis are coming down and inflation will be moderated by the next quarter (thumb rule: we invest in interest rates sensitive stocks like banking & real estate when inflation makes a 15 weeks low) High crude prices: Crude prices are still higher at US$ 125 a barrel and a lower crude price will help the Government in curtailing fiscal account as well as current account deficit Our view: We believe a large part of the crude price has speculation and a reasonable target of us$ 100 a barrel for december 31 st 2008 Poor corporate earnings: The 1 st two quarters are expected to show poor numbers by Indian corporates but the earnings are expected to improve from Q3 onwards

13. 13 Our Estimates We believe that the most of the negatives have been discounted in the markets and the GDP of 7% + for the next 2 years holds good During these 18 months the markets can go down below the fair value for considerable period of time which will be an opportunity for a long term investor to invest in value stocks

14. 14 Positives of the Indian markets Indian markets are one of the fastest growing markets in the world and has a huge middle class base which has great purchasing power The working population below 35 years of age is about 50% of the total Indian population and is growing. A young population consumes goods and services far more than an ageing population Nuclear deal going through will bring in investments of Rs. One lakh crore in the next 3 years which will substantially increase the GDP post-2011 onwards 2010 Commonwealth Games in New Delhi will throw-up opportunities for tourism industries as few lakhs tourist are expected to visit India in 2010 and biggest beneficiary will be the hospitality sector and hotels like Indian Hotels, EIH, Hotel Leela and Royal Orchid hotels.

15. 15 Strategies For A Long Term Investor History has shown that a long-term investor investing in stocks has done better than any other asset class like housing, gold, interest rates An investor who buys and holds on an average gets 20% returns (time period: last 15 years) An investor on average gets 2% dividend yield on his stocks and if he re-invests this dividend back into the same stock his returns can increase to 25% p.a. Stocks with High Dividend Yield: ICICI Bank, Infosys, ONGC

16. 16 Stocks Selection It is our assumption that the EPS of NIFTY 50 stocks are expected to grow by 15%. Hence, we assume that 35 of these stocks will grow below 15% and 15 stocks will out perform in the present scenario In those 15 stocks, we feel the Out-performers will be : –RIL –RPL –CAIRN ENERGY INDIA –RANBAXY –SBI –ICICI BANK –DLF

17. 17 NIFTY QUARTELY NIFTY Quarterly

18. 18

19. 19 The quarterly data shows that when market rises by 50 % on a quarterly closing (2 or more consecutive quarters) we see a fall of 20% and above on a closing-basis. Historically, October, November and December have been the Best period for the Indian Stock market.

20. 20 T H A N K Y O U !