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Editor :Review Coordinator

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Vijaya PoduvalSammit Joshi, Sanjay Shah

: Surojit Sen

The views expressed in the Review are of individual authors and The Stock Exchange, Mumbai and the respective institutions do not hold any responsibility.

Registered as a Newspaper in India Registration No. RN 47070/88 dated 2-1-1989.Edited, printed and published by DR.BANDI RAM PRASAD on behalf of and at The Stock Exchange,PhirozeJeejeebhoy Towers, Dalal Street, Fort, Mumbai

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The Stock Exchange, Mumbai

Review This Month 3Portfolio 5

BSE Knowledge Center 6Notes and News 7Cover Feature : Global Comeback Of The Ipos 8Recent IPO Boom 9The Primary Market 10

11Increasing Operational Efficiency Of IPO ApplicationProcess -an Investor Perspective

Market Focus : A Retrospective Of The Global Market 12BSE News 14BSE Indices 15Key Statistics of The Stock Exchange, Mumbai 16

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Movement of SENSEX - Feb. 2004

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THE STOCK EXCHANGE REVIEWINVITES ARTICLES ON CAPITAL MARKETS

AND FINANCIAL MARKETSThe Stock Exchange Review invites articles on capital markets and financial markets coveringmajor market segments such as securities industry, banking, money markets, debt, derivatives,mutual funds, insurance and infrastructure finance. Articles should be original and in therealm of relevant areas such as conceptual framework, regulation and practice. Articles basedon research are particularly encouraged and those which are crisp and concise merit fasterconsideration. Articles accepted for publication will be paid honorarium and authors will beprovided five copies of the Review. The size of the article could be around 2000 words andfocus more on operational aspects rather than lengthy introductions and narrations. It wouldbe preferable if the articles are submitted through email ([email protected]) butmanuscripts sent by post will also be accepted for consideration. Each article should beaccompanied by a certificate from the author stating that it is original and not sent for anyother publication considered. For any information/assistance in this regard, please send yourrequest to the above referred email.Articles may be sent to the following address:The Stock Exchange Review2nd Floor, P.J. Tower, Dalal StreetMumbai: 400 001, IndiaTel: 9122 2272 1233-34 (Ext.8045/8570)Fax: 9122 2272 3250 Email:[email protected]

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ReviewTThe surge in emerging market equity prices since April hastriggered a sharp pickup in primary market activity, withthe fourth quarter of 2003 far surpassing levels recordedprior to the bursting of the high-tech bubble. Thedistribution of issuance across regions exhibited a noticeabledifference. After lying dormant for the better part of theyear, Asia’s equity market erupted with new stock issuesfrom a wide array of companies in the final months of theyear. Firms in China and Hong Kong SAR were particularlyactive, issuing $8 billion in the fourth quarter. The ChinaLife IPO was noteworthy. At $3.46 billion, it was the largestIPO worldwide for 2003 and was 25 times oversubscribed.In Southeast Asia, Indonesian issuers were active, with stakessold in Bank Mandiri, Bank Rakyat Indonesia, and PGN.Thailand’s government successfully divested stakes in KrungThai Bank and Thai Airways. By contrast, issuance in LatinAmerica remained low, notwithstanding $540 million in

issuance by Mexico’s Cemex. New equity issuance was also limited in EMEA, where activity was dominated by the Central Europeantelecom sector and a $300 million American Depository Receipt (ADR) issue by Russia’s Norilsk Nickel. Amid ongoing inflows byinternational equity investors, there is no sign of the deal flow drying up. In particular, issuance by Asian companies continued at a fastpace in the first few weeks of the year, and several large deals are in the pipeline for the remainder of the year. In India, the primarymarket is no different from the global trend. And the major chunk of the primary issuance had come from the PSUs. The current issuehighlights the recent surge in the primary market on the global level as well as of India in particular. Different issues about the primarymarket got reflected through the articles. At the same time the article talking about the operational efficiency in the application processof the primary market, gives an added flavour to the issue.

Cumulative Gross Annual Issuance of Equity(In billions of U.S. dollars)

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Statement about the ownership and other particulars about the newspaper entitled The Stock Exchange Review. As required to bepublished in the first issue of every year after the last day of February.

FORM IV (See Rule 8)

1. Place of Publication : Mumbai

2. Periodicity : Monthly

3. Printer’s Name : Capital Arts

Nationality : Indian

Address : Ghandinagar, Worli, Mumbai

4. Publisher’s Name : The Stock Exchange, Mumbai


Address : P.J.Towers, Dalal Street, Fort, Mumbai

5. Editor’s Name : Dr. Bandi Ram Prasad


Address : P.J.Towers, 24th floor, The Stock Exchange, Mumbai,

6. Name : The Stock Exchange, Mumbai

And Address of Owners : Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai

I, Dr.Bandi Ram Prasad hereby declare that the Particulars given above are true the best of my knowledge and belief.

Date: 28th February 2004 Signature of Publisher

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Domestic Economy 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 (proj.)Gross Domestic Product (% change yoy) 6.5 6.1 4.4 5.6 4.3 8.2Value added in Agriculture (% change yoy) 6.2 0.3 -0.4 5.7 -5.2 10.7Industry 3.7 4.8 6.6 3.3 6.4 6.1Services 8.3 10.1 5.6 6.8 7.1 8.3Exports $ mn 33211 36760 44147 43708 52370 58900Imports $mn 42379 49799 50056 51261 61445 75000Money supply (M3) % change yoy 19.4 14.6 16.8 14.2 15.0 14.0WPI (% change yoy) 5.9 3.3 7.1 3.7 3.4 5.0Capital Issues (Rs. bn) 437 663 492 458 408.1 -Equity (Rs. bn) 117 249 142 62 73.9 -Debt (Rs. bn) 320 410 348 395 334 -GDRs/ADRs $mn a70 822 480 495 131 -FDI $mn 2480 2167 4029 6131 4660 -Portfolio flows $mn -68 3024 2760 2020 979 -NRI deposits $mn 960 1540 2317 2754 2808 -ECB $mn 4367 333 3737 -1576 -1698 -Total Foreign Capital Flows $mn (net) 8042 10184 9992 10573 12638 -Aggregate deposits (SCBs) (% change yoy) 19.3 19.3 16.2 11.5 16.1 -Non-food credit (% change yoy) 13.0 21.9 14.1 13.3 26.9 -Gross Fiscal Deficit (% of GDP) 6.5 5.4 5.6 6.1 5.9 4.8

Feb-03 Mar-03 Apr-03 May-03 June 03 July 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 03Govt. borrowings (Rs. bn) 124.43 28.9 84.9 154.4 300.2 154.4 261.4 -310 60 45.1 2.5 153.2Agg. deposits (% change yoy) 17.76 16.06 16.22 11.48 12.17 11.82 11.51 11.81 11.78 11.60 12.63 13.73 14.17Bank credit (% change yoy) 23.32 23.0 22.62 13.32 12.95 11.70 11.49 10.70 12.91 12.14 12.76 13.87 14.14Public Issues (Rs. cr) 424.59 350.00 0.00 0.00 993.34 388.00 394.16 531.99 665.50 192.0 537.7 834.44 3782.01Rights Issues (Rs. cr) 79.66 29.52 1.96 0.00 0.00 0.00 0.00 164.86 80.89 7.71 98.02 110.86 34.43Private Placements (Rs. cr) 2161.63 3299.56 586.53 1232.29 2008.07 3770.9 2845 2253.2 1037.79 421.3 1066.3 3593.10 4203.69Overseas Floatations (Rs. cr) 0.00 72.50 0.00 0.00 75.00 0.00 0.00 0.00 1426.6 362.3 27.31 61.33 0.0Assets under management MFs. (Rs. cr) 87190 79464 89238 98124 104762 112841 121040 121778 126726 132366 140093 145372 145657Corporate Debt Floatations (Rs.cr) 2122 3630 565 1225 1933 3664 3063 2147 1415 415 1328 4063 4166

Monthly IndicatorsJan03 Feb03 Mar03

IIP 6.7 6.9 5.8 4.3 6.0 5.7 5.9 5.2 7.1 5.4 7.4 6.2Exports (% change yoy) 8.7 12.9 14.6 8.1 12.8 10.9 5.7 4.1 16.0 5.0 13.8 42.7 8.7Imports (% change yoy) 23.9 17.8 24.5 38.7 7.9 38.6 17.0 15.4 16.3 23.4 26.5 45.0 18.1Forex reserves $bn 69.9 69.1 71.1 74.3 77.9 78.2 81.2 82.6 85.6 88.7 92.1 96.5 100.8Non-food credit 27.2 27.8 26.2 26.3 16.4 16.2 15.5 15.2 14.1 16.9 16.0 16.2 16.6WPI 4.1 5.4 6.0 6.6 6.5 5.3 4.6 3.9 4.6 5.1 5.4 5.6 6.2Trade Balance $mn -638 -441 -776 -1527 -1106 -1613 -1016 -1055 -932 -2025 -1924 -1722 -1464

Rates, Ratios, ReturnsJan 04 Feb 03 Jan 04 Feb 03 Jan 04 Feb 03

Bank Rate 6.0 6.0 CRR 4.50 4.50 PE Ratio : SENSEX 19.39 18.71Savings bank rate 3.5 3.5 SLR 25 25 Price to Book Value 3.65 3.52Term deposit rate 5.00-6.00 5.00-6.00 Credit Deposit Ratio 55.23 55.39 Dividend Yield 1.73 1.79PLR 10.50-11.00 10.50-11.00 Re/US$ 45.37 45.17Call Money rate 4.50 4.40 Re/Euro 57.21 57.08 PE Ratio : NIFTY 21.04 20.3291 day T-Bills 4.33 Re/Yen 0.4260 0.4236 Price to Book Value 4.10 3.99CDs 3.75-6.00 3.92-5.06 Premium on Forward Markets(3mUS$) 1.28 0.39 Dividend Yield 1.45 1.49CPs 4.70-5.75 4.60-7.50 Avg. Yield on Govt. securities (10 yrs) 6.14 6.12

Sources: Center for Monitoring Indian Economy, The Stock Exchange, Mumbai, Reserve Bank of India, Financial Times, The Asian Wall Street Journal, The Economist, London. 1. Closing rates; 2. Last auction ratesof 91 TBs.; 3. Forecasts of GDP Growth by The Economist; 4. Short term interest rates; 5. Stock market indices ; Australia: All Ordinaries; Brazil: Bovespa; China: Shanghai B: France: CAC40; Germany: XETRA Dax;Italy: Mibtel General; Japan: Nikkie 225; Britain: FTSE.100; United States: Dow Jones Industrials; Malaysia: KLSE Comp; Mexico: IPC; Russia: RTS; South Africa: JSE All Share; South Korea: KoreaCmpEx; Taiwan:WeightedPr. Latest data available for the month; 6. Year 2003.

Particulars

Particulars

Particulars

Domestic Economy

Apr03

Austrl UK France Germany Italy Japan US Euro China Malay Korea Taiwan Mexico Brazil S.Africa RussiaG D P 4.0 2.8 0.6 0.2 0.1 3.4 4.3 0.6 9.9 6.4 2.3 5.2 2.0 -0.1 1.5 5.7Interest Rates 5.48 4.22 - - - 0.03 0.99 2.05 - 3.03 3.94 1.05 6.59 16.27 8.15 14.00Consumer Prices 2.4 1.3 1.8 0.9 2.3 -0.3 1.7 1.6 2.1 0.9 3.3 0.6 4.2 6.7 0.2 10.8PLR (%) - 3.75 - 2.5 - 1.375 4.25 - - - - - - - - -Forex reserves ($bn) - - - - - - - - 403 43.5 162.1 224.8 59.2 53.3 6.4 80.2Currency Units/$ 1.29 0.55 0.79 0.79 0.79 106 - 0.79 8.28 3.80 1172 33.3 10.9 2.88 6.93 28.5Year ago 1.69 0.61 0.92 0.92 0.92 118 - 0.92 8.28 3.80 1166 34.6 11.0 3.64 8.60 31.8Stock Index current 3372.5 4492.2 3725.4 4018.16 20778.0 11041.9 10583.9 4116.7 879.2 883.42 6750.5 9991.8 21755.0 10895.8 670.1A month ago 3283.6 4390.7 3638.4 4058.6 20561.0 10783.6 10488.1 929.41 3923.7 818.94 848.50 6375.38 9428.77 21851.4 10849.3 611.1Year high 3398.2 4540.1 3785.4 4151.83 20989.0 11361.5 10737.7 930.79 4225.2 894.45 899.21 6975.3 10157.1 24349.8 11155.9 688.7Year Low 2673.3 3287.0 2403.04 2202.96 15125.0 7607.88 7524.06 580.84 3118.5 619.22 515.24 4139.50 5745.66 9994.89 7361.15 336.08Record high 3440.0 6930.2 6922.3 8064.97 - 38915.9 11722.9 - - 1314.16 1138.75 5451.80 8319.67 18951.5 - -PE ratio 17.8 16.5 16.9 12.7 16.5 40.5 22.4 - 17.8 16.9 19.2 22.5 15.9 9.1 12.2 8.8

May03 Jun03 Jul03 Aug03 Sep03

International Economy February

Markets

Oct03 Nov 03 Dec 03 Jan 03

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CURRENT NEWS

BSE NEWS

COMMENT

PORTFOLIONew Issuance Market as a percentage of GDP

Mr Sulaiman Moh’d Al-Rashidi, Dy. Director General, Muscat Securities Market (left), in conversation with Shri Rajnikant Patel (centre),Chief Operating Officer and Shri S. B. Patankar (right), Chief Technology Officer, The Stock Exchange, Mumbai, during his visit.

China’s rules governing voluntary pension funds will allow some of the fundsto be directly invested in the stock market. Under the rules, companies andemployees can set aside upto one-sixth of an employee’s annual salary fromthe previous year in a voluntary pension fund.

The World Trade Organisation has estimated a growth in the world trade ofgoods by 7.5 percent as compared to 4.5 percent last year.

SEBI has decided to accept bank guarantees of banks having credit ratingfrom a RBI recognised credit rating agency or a reputed foreign credit ratingagency, towards the liquid assets of a member.

The Reserve Bank of India said that foreign institutional investors were allowedto purchase equity shares and convertible debentures of SSI up to 49% of thecompany’s paid-up capital.

The New Issuance Market (NIM) expressed asa percentage of GDP shows a steep rise in the

initial years of the post liberisation. The growth

observed during the first half of the 90s mostlyattributed to the financial liberisation of the

economy. Capital market reforms like abolition

of the office of Controller of Capital Issues (CCI),constitution of SEBI under the new Security

and Regulation Act and relaxation in pricing of

capital issues played an important role in suchan upsurge. Higher investments in New Issuance

Markets occurred during this phase due to

inability of the commercial banks to meet privatecorporate needs. Capital formation by private

corporate firms increased from Rs. 2800 cr. in

1989-90 to Rs. 22,750 cr. in 1993-94.

These alleged cures of the protectionistswould make matters worse rather thanbetter. They would do little to create jobs,and if foreigners were to retaliate wewould surely lose jobs. Beside enhancingeducation, we need to further openmarkets here and abroad to allow ourworkers to compete effectively in the globalmarket place.

Remarks by Alan Greenspan,Chairman, Federal Reserve,

on outsourcing at the BostonCollege Finance Conference, 2004

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London Stock Exchange steps up activity in China with regionaloffice

The London Stock Exchange will open a regional office in Chinaas part of its strategy for attracting listings from this country, whichis one of the international exchange’s key target markets. The newoffice, the Exchange’s first in the Asia- Pacific region, will be basedin Hong Kong. The Exchange is building its ties with the Shanghaiand Shenzhen Stock Exchanges, two increasingly importantbourses in the region. The London Stock Exchange will targetlarge privatization deals and other medium to large companies inChina. The Exchange will also continue to promote dual listingsin London and Hong Kong through a single prospectus.

Australian Stock Exchange implements new regulatory regimeand introduces new group structure

The Australian Stock Exchange completed its transition to theFinancial Services Reform Act (FSRA) regime with the grant ofvarious market operator licences for the Exchange, and otherdifferent clearing and settlement facility licences for the AustralianClearing House (ACH) and the ASX Settlement and TransferCorporation (ASTC). As well as ensuring the compliance with thenew regulatory regime, the Exchange has used the opportunitypresented by the Financial Services Reform Act (FSRA) tostreamline and improve its group structure from which trading,clearing and settlement services are offered. With this change, theAustralian Stock Exchange is moving from a product-basedstructure to a functionally based structure.

Colombo Stock Exchange signs MOU with 3 other regionalbourses

The Colombo Stock Exchange (CSE) entered into a Memorandumof Understanding (MOU) with the Karachi, Lahore and IslamabadStock Exchanges. The Colombo Stock Exchange has alreadysigned a MOU with the Mumbai Stock Exchange. The MOU isexpected to promote mutual assistance between the parties involvedto enhance cooperation for development of the securities marketand to encourage cooperation between the Exchanges in areas ofinformation sharing, training & education, technologicaldevelopment, new product development and cross border listings.

SEBI asks depositories to halt transfer-cum-demat scheme

SEBI has asked both the depositories NSDL & CDSL todiscontinue the facility of transfer cum demat. In a communicationto the depositories the capital market regulator said that this facilityis no longer relevant and can be withdrawn without causing anyundue inconvenience or delays to the investors.

RBI terms for NBFCs insurance agency business

The Reserve Bank of India announced that non-banking financecompanies (NBFCs) registered with it might take up insuranceagency business on a fee basis and without risk participation,without its approval. (i) The NBFCs should obtain requisitepermission from the Insurance Regulatory Development Authority(IRDA) and comply with the IRDA regulations for acting as‘composite corporate agent’ with insurance companies. (ii) Theyshould not adopt any restrictive practice of forcing its customersto go in only for a particular insurance company in respect of assetsfinanced by them. (iii) As the participation by a NBFC customerin insurance products is purely on a voluntary basis, it should bestated in all publicity material distributed by it in a prominent

way. (iv) The premium should be paid by the insured directly tothe insurance company without routing through the NBFC. (v)The risks, if any, involved in insurance agency should not gettransferred to the business of NBFC.

Easier norms on banks ESOP, IPO funding

In a significant move, the Reserve Bank of India (RBI) said banksare free to use their discretion while extending bank finance toemployees for purchasing shares of their own company eitherunder employee stock options (Esop) or initial public offerings(IPO). All such loans should be treated as banks’ exposure tocapital market within the overall ceiling of five per cent of banks’total outstanding advances as on March 31, of the previous year.As per the extant instructions, bank finance to assist employees tobuy shares of their own company under the employees quota isrestricted to Rs.50,000 or six months salary of the employee,whichever is less. The assistance is also limited to 90% of thepurchase price of the shares.

FIIs can issue PNs to entities supervised by regulatory bodies

The Securities and Exchange Board of India clarified that foreigninstitutional investors (FIIs) can issue Participatory Notes (PNs) toentities that are regulated by either a central bank, securitiescommission or a stock exchange. According to the circular issued bySEBI, offshore derivatives instruments (or PNs) can be issued to anentity that is regulated, authorised or supervised by a central bankor any other similar body provided that the entity must not only beauthorised but also be regulated by these regulatory bodies. PNscan also be issued to an entity regulated, authorised or supervisedby a securities or futures commission, securities or futures authority.Any entity that is a member of securities or futures exchanges orother similar self-regulatory securities or futures authority orcommission within any country, state or territory provided thatthese organisations are ultimately accountable to the respectivesecurities or financial market regulators can also invest in the Indianequity market through PNs. PNs can also be issued to individuals orentities like fund, trust, collective investment schemes, investmentcompany or limited partnership whose investment advisory functionis managed by any of the regulated entities.

SEBI revises norms for derivative contracts

SEBI has said stock exchanges can reduce the lot size of derivativecontracts exceeding Rs.0.2 million. The market regulator said forderivative contracts having a contract size or value of Rs.0.4 millionand above, the lot size/multiplier should be reduced to half theexisting lot size/multiplier. For derivative contracts that have acontract size/value of Rs.0.8 million and above, the lot size shouldbe reduced to a fourth of the existing lot size. Similarly, where thecontract size of the derivative contracts is less than Rs.0.2 million,for the sake of standardization, the existing lot size should beincreased to bring the contract size to Rs.0.2 million, SEBI said ina release. The increase shall be carried out by increasing the lot sizeby multiples of 2. To facilitate these measures, the stipulation thatthe lot size should be in multiples of 100 stands revoked. SEBIhas also decided that the lot size of contracts that have fallen belowRs.0.2 million should be brought back to the stipulated amount.It also specified that for stock-based derivative contracts, the lotsize shall be in multiples of 100 and the fractions, if any, shall berounded off to the next higher multiple of 100. SER

8

The IPO boom is part of a global phenomenon. Demand forequities, backed by a surge of new mutual-fund money in Americain January alone, has been rising in part because investors can findfew other attractive bets. The demand for new shares is easilymatched by supply from venture capitalists and private-equityfirms, sitting on a hoard of investments made in the previous waveof optimism that they have been waiting for years to unload.Governments are also keen to sell stakes and raise money. At thepresent pace, perhaps $75billion worth of IPOs couldbe launched this year. In theUS, for instance, 21 IPOshave raised $ 5.1 billionduring the period 1 January-21 February 2004 as againstjust three that raised $ 209million during thecomparable period last year.Last year, only $45 billion wasraised in IPOs worldwide, theleast in over a decade. InAmerica 29 companies haveraised a total of over $6 billionthis year, compared with threedeals producing less than$300m by the same point in2003. Japan has already seen40 new issues in 2004. Theboom extends to emergingeconomies, especially in Asia.In China, Semiconductor Manufacturing InternationaCorporation came to market and raised around $1.8 billion.Investors in China seem remarkably unworried about questions ofproperty rights and whether they will be able to get their moneyout.

It is yet to see, whether big deals by fairly established firms inspirea string of new companies to offer shares to the public. Possibly,but in the United States at least, it is harder than in 1999 for afirm to make its stockmarket debut. New auditing requirementsinspired by the Sarbanes-Oxley Act have doubled the cost ofpreparing a firm’s books for the public, premiums for directors,and officers insurance, which companies buy to protect their topstaff from shareholder lawsuits, have soared. By one estimate, anew firm in America needs around $100m in sales to make anIPO worhtwhile, compared with $50 m a few years ago. UntilEuropean regulations are also tightened, Europe, alongsideemerging markets may be a more fertile place for offerings. In thewake of the dotcom bust, one might expect investors to scrutiniseIPOs much more closely than before. Yet many recent issues havebeen handsomely oversubscribed, and the first-day “pops” in shareprices are high. This suggests that even today fund managers arebuying on the basis of faith as much as analysis.

As Jay Ritter, a professor at the University of Florida, points out,enthusiasm for IPOs has always been strongly correlated withmarket peaks, measured by the ratio of capitalisation to the bookvalues of companies and by price-earnings ratios. More over, forthe past two decades long-turm returns from IPOs bought ontheir first day of trading have been persistently lower than those

on other shares. Recently stockmarkets have faded a little fromtheir recent highs.

The Indian Primary Market

It was early-mid 1990s when sector-specific IPOs dominated.Cement and steel in 1991-93, floriculture, aquaculture and financialservices between 1993 and 1995 and the ICE (IT, Communicationand Entertainment) boom of 1999-2000. But the present primary

market has entirely changed.On the regulatory context, themarket has become moreefficient and safer. In theprocess side, book-building,where investors bid for shareshas replaced the fixed priceregime. And as for the qualityof the issues, PSUs and well-known companies across theindustries has replaced the fly-by-night operators. The firstten months of the last fiscalwitnessed 15 public issues,raising only Rs.2516 crores.Significantly, most of thisamount has been raised byestablished PSUs, whichbrought in a sense of safety andencouraged investorparticipation. But the presentfiscal gave a healthy start with

big PSU issues followed by sufficiently large issues of establishedcompanies. At the same time, SEBI has made the entry norms morestringent to maintain the quality of the issues.

Offering shares in public sector companies at a discount to citizenry isnot a unique idea. In the OECD countries, the first tranche of publicsector shares were often sold at an attractive discount to the public tofacilitate price discovery and improve prospects for subsequent tranches.IPOs are considered the most transparent mode of governmentdivestment. Besides privatisation, public issues help in developing theequities markets by creating broad share owning class. They also improvecorporate governance in companies that are listed for the first time. Theproblem in using this method in emerging markets is that retail investorsdo not have the deep pockets to subscribe. In Eastern Europe andRussia the government has used Vouchers. Under the communist system,the workers effectively owned the assets via the state and this imposednotions of “fairness” in the privatisation process. Under a voucher scheme,individuals are given rights to acquire assets by using vouchers, whichare distributed freely. One example of privatisation gone badly was inthe former Czechoslovakia, which decided to privatise all state-ownedcompanies at once. Citizens were issued vouchers, which could beexchanged for shares of public sector companies. Baffled by the choicesmost residents ended up selling their entitlements to fund managerswith private investors cornering most of the public sector companies.

GGGGGLOBALLOBALLOBALLOBALLOBAL C C C C COMEBACKOMEBACKOMEBACKOMEBACKOMEBACK OFOFOFOFOF

TTTTTHEHEHEHEHE IPO IPO IPO IPO IPOSSSSSCovereatureF

Year Number of Issues Amount (Rs. Cr.)

1989-90 186 2522

1990-91 140 1450

1991-92 195 1400

1992-93 526 5651

1993-94 765 10824

1994-95 1350 13312

1995-96 1423 8882

1996-97 740 4671

1997-98 58 1132

1998-99 22 504

1999-00 56 2975

2000-01 115 2479

2001-02 6 1082

2002-03 6 1039

2003-04 23 20000

SER

9

It’s spring time and still it’s raining. Surprised by the paradox!!Well it’s spring time at the stock markets and it’s raining IPOs incapital market. In a span of just under two months we have morethan ten high profile issues hitting the market. The collectiveamount to be raised by them is expected to be staggering Rs.20,000 crores. Since it’s probably for the first time in the historyof Indian capital markets that such huge sum of money is beingraised in such a short span of time, the issue warrants detailedreview. Before going to the core issue of IPO boom let’s analyse thereasons for sudden spurt in IPO activity in Indian capital markets.

The Indian stock market had never had it so good. The benchmarkBSE Sensex has gained almost 100% from its lows in just under ayear’s time. What are the factors that contributed to such a sharprise in the stock prices in India?

• The turnaround in sales and profitability reported bycorporates across industry spectrum making the valuationsvery attractive

• Very well distributed monsoon across the country• Accelerated reforms and infrastructure development in the

country• Sharp fall in interest rates leading people to shift some part of

their assets from debt to equity• Under ownership of stocks as an asset class in India; household

savings in equities was only about 2% in 2002• Spurt in stock markets across the globe• Huge inflow of FII money in Indian stocks• Opening of global opportunities for Indian companies

The economy itself has shown tremendous buoyancy in last oneyear. The so-called hindu rate of growth of 4-5% is behind us andwe are witnessing GDP growing at more than 7%. The businessconfidence index is at its highest in last decade. All these factorsindicate enormous growth potential that exists in India.Opportunities in large infrastructure projects and new businesses,hitherto unknown to Indians are now visible. For all this tomaterialize will require huge amount of money to be invested inthese businesses. While part of it will come through debt fundinga substantial part will also be raised through equity route. Andthat’s where the IPO boom is coming from.

Now let’s look at the companies that have lined up equity issues.Of the total number of issues lined up few are offer for sale andnot IPOs. An offer for sale is sale of equity stake by an existingstakeholder to the public. The Government of India in its interimbudget has set a target of containing fiscal deficit below 4.8% ofGDP. They have also reiterated their target of disinvestments

RRRRRECENTECENTECENTECENTECENT IPO B IPO B IPO B IPO B IPO BOOMOOMOOMOOMOOM

receipts at Rs. 14,000 crores. And thus to achieve this targets it haslined up offer for sale of ONGC, Gail, IPCL, IBP, CMC andDredging Corporation.

Normally Rs. 20,000 odd crores to be raised under two monthswould have generated lot of skepticism about success of many ofthe issues. However, this time around the companies may find iteasier to sail through. There are two main reasons for such a belief;first – all the offer for sale lined up are existing listed companiesand second - the recent history of successful IPOs over past 12months. Investors have made handsome gains in some of the recentIPOs.

While the past experience of profiteering from an equity issue isimpressive if one goes back little further in history, the record isnot so impressive. Investors have got stuck with paper that is nolonger saleable in the market.

With limited resources and so many companies up for grabs whatshould investor be looking for? The first thing that an investorwants is an offer that is priced cheap. But unlike a bear marketmost companies in a bull market will not offer their stocks cheap.They will try to price it as near to its fair value as possible. Soamongst host of equity offerings how will you select the companiesfor investment?

First – Think Long term. Invest in companies where you thinkthe business can profitably sustain over a long period oftime.

Second – Look for companies / sectors where businessenvironment is undergoing a major transition and thecompany is set to ride the wave of transition

Third – Invest in sound management

This list can go much longer but what I’m trying to emphasis isthat these are the basic rules; it’s like pain management for equityinvestment.

India as an economy is at an inflexion point of growth. Over thenext few years we are going to witness a massive change in demandand consumption pattern in India. This will lead to emergence ofnew industries, products and services and in turn open plethoraof opportunities within the economy in general and stock marketin particular. With such vibrancy in stock markets, the IPO marketwill also explode. There will be genuine companies offering equityand there will be fly by night companies. In such a situation,investors should look for sound investment principles, amongstquality and price always chase quality and buy businesses thatlook exciting and valuations will follow.

Jayesh ShroffFund Manager, BoB AMC

SER

10

After having run up 73% in 2003, the year 2004 may create arecord of sorts in the history of the Indian primary market. TheGovernment’s decision to divest itself of its residual stake in sixalready privatized companies; the corporate sector’s need for fundsto expand; and private investors looking for exit options have ledto hectic activity in the primary market.

The market then turned nervous. Earlier too, the Governmenthad divested its stake in PSUs, but such nervousness had not beenseen. What could be the reason? Simple. The size of these issuesis significant – the supply of paper is on the higher side, comparedto appetite for it. With GDP as of March 2003 at Rs.24,696bn,at 8% growth the FY2004 addition is likely to be aboutRs.2,000bn. Compared to that, IPOs and divestments are aboutRs.300bn, nearly 15% of the addition to GDP. The Rs.300bn infunds will be mobilized to a large extent from the home market,not from overseas. Had the funds come through ADRs and GDRs,they’d have boosted the economy, bringing in fresh liquidity.

Because of the unexciting secondary market in the last three years,the Indian capital market has not seen so many IPOs. In the pastsix years, only Rs.102bn were mobilized through public issues ofstock. Specifically, in 2001, fifteen issues raised Rs.3.92bn; in2002, six drew in Rs.19.8bn and, in 2003, fifteen issues raked inRs.21.7bn.

As over-subscription in recent IPOs by a few times occurred andthey were listed at a robust premium, institutions and retail investorsjumped onto the bandwagon. The response of small investors toIPO has increased as a follow up to the gains they made as can beseen in following examples:

PRIMARY MARKET REVIEW

In the year 2004, besides the divestment by the Government ofIndia in already listed companies, a large number of companieswill come to the capital market for the first time. A few such largecorporations and sectors which aren’t yet listed are: NTPC - thelargest government-owned power-generation corporation, TCS(Tata Consultancy Services)- the largest private-sector softwaredevelopment company, the aviation sector – the internationalAirIndia and the domestic Indian Airlines; Jet Airways - the largestprivate-sector airlines, Sony TV and NDTV - televisionbroadcasters; Daksh e-services - BPO company; Reliance Infocomm- telecom company, etc. Positively, investor interest in differentsectors will also be sparked. This will pull in institutionalparticipation in Indian markets. With these IPOs, these and otherslike them will enormously raise market capitalization.

In the short term, supply is probably higher compared to appetitefor paper. In the long term, though, price will reflect the

Name of company I P O Listing % Gain CMP - (Rs.) % GainPrice (Rs.) Price (Rs.) (30 Jan 2004)

Maruti Udyog 125 158.40 26.7 432.60 246Bharati Telecom 45 55 22.2 134.85 200Indraprastha Gas 48 120 150 99.45 107TV Today 95 210 121 147.20 55

underlying fundamentals and valuations. In 1977 when the thenGovernment compelled MNCs to divest their holdings and liston the bourses a few (IBM, Cocoa Cola) quit India; others (Levers,Colgate, P&G) listed. Investors made big money in subscribingto these fundamentally strong companies. The same will happenthis time too – investors in India will make money, if the Indianeconomy continues at its scorching pace.

Generally, a good run in secondary markets leads to an IPO craze.For, when demand for new paper rises speedily, promoters (inorder to expand capacity, build a market, put in new systems)rush to raise equity from the public (Raising equity is apparentlyless expensive; in reality it is not.) This eventually leads to manyinefficient companies entering the primary market – and investorsburning their fingers. As happened in the technology bull-run of2000.

This time, good money has been poured into emerging markets,specifically China. This led to the boom in China’s IPO market inthe second half of last year. Giants like PICC Property & CasualtyCo. (China’s largest non-life insurer, which raised $696mn, wasoversubscribed 50 times and listed at a 50% premium to the IPOprice), AviChina Industry & Technology Co. (a mini-car andhelicopter maker, $248mn), China Resources Power HoldingsCo. (an electric power company, $350mn), China Life InsuranceCo. (the country’s largest life insurer, $3bn), Great WallAutomobile Holding Co. (Chinese truck and sport utility vehiclemaker, $196mn). Since the 50% premium listing of PICCProperty, sentiment towards IPOs changed. So much so thatChina Life, the next IPO, had to print 2.2 million applicationforms for retail buyers and another 400,000 for brokerages, orenough for one in three residents of the southern Chinese territory.In Asia in general, and in China particularly, the rapid turnaroundin investor attitude toward IPOs stems from the surging liquiditybrought about by record-low interest rates, rising optimism aboutthe economic growth and a healthier appetite for emerging-marketrisk.

In all, IPO price is crucial. The 2003 bull-run in India was led byFIIs, which invested around Rs.304.6bn ($6.6bn) in equity. Thisrun had then been utilised by retail investors to move out of thosestocks in which they had been stuck for the past so many years. Inthe current IPO mania, if stocks are offered at a steep discount tocore value, there are sufficient chances that investors will makemoney – and the equity cult among retail investors, which haswithered, might once again surge. Since most IPOs floated in therecent past have returned phenomenal gains, investors are temptedto invest in IPOs with a view to selling off their stocks immediatelyon listing.But then, this comes with an inherent risk. Between anissue closing and its listing, market sentiment could change – andstock might not always list at a premium. In fact, if the marketturns unfavorable, the listing price could even be lower than theissue price. Needless to say, IPO or no IPO, the quality of a company,its management prowess, business potential and valuation willremain driving factors for eventual shareholder reward.

Jignesh ShahStrategist, Ask Raymond James Securities

SER

11

Last three months, the Indian Capital Market witnessed a slew ofIPOs. As a retail investor one had to spend a lot of time and energyin filling up the mammoth forms every third day. This trend isbound to continue with more IPO’s planned in the Financial Year2004-2005.At this juncture it is difficult to say whether StockMarket is shining or not but definitely the printing industry relatedto IPO’s are shining.

In the present days when a depository account is mandatory forapplying for an IPO account, one is at a loss to understand as towhy there is huge data redundancy in the entire systems this oneway of creating employment generation and more business toregistrar?

The printed matter for IPO comes in two parts. One is the disclosuredata as is mandated by SEBI and the second one is the applicationform. The focus of this article is to how the drudgery of filling theapplication form be obviated.

Some websites like ICICI direct gives the investor the facility toapply online. Even if one uses this route the BackOffice of the saidbrokerage firm has to fill up the application form on behalf of thecustomer, sign the form as a power of attorney holder attach acopy of the customer’s power of attorney and submit the same tothe syndicate member. The famous law of Physics that energy canneither be created nor destroyed holds good for the Indian IPOsas well.

The whole system can be made very efficient by reducing theentire paperwork, which can be brought down by ninety percent.The unique identification of the investor, in the age of depository,is the Depository Participant ID (DPID) and the Client ID of theinvestor. The IPO application form will contain the bare minimumdata in addition to the two key fields mentioned above viz. Broker/code /sub broker code, investor name, quantity, price and chequedetails. This form need not be more than half the size of A4 paperand should look like a DP Account transfer instruction.

This proposal was mooted to some NSDL /CDSL officials whohad expressed the apprehension that if the client id is mentionedwrongly the registrars will find it difficult to mail back the originalcheque or the refund order.at this juncture five different solutionscome to one’s mind.

The first solution is to write the address of the investor on thereverse of the form, which is optional, and not mandatory. Thisobviously not the best solution

The second solution is the real time solution. The Collecting bank

INCREASING OPERATIONALEFFICIENCY OF IPO APPLICATIONPROCESS -AN INVESTOR PERSPECTIVE

will punch in the two key fields DP id and client id and the DP id& client ID will be validated with the NSDL/CDSL data base.However for this to happen one needs to be linked to NSDL/CDSL on a real time basis. With the browser based technologyand services similar to Sped E.NSDL/CDSL and think of givinglogin id & passwords to the collecting bankers

The third solution is the batch mode with NSDL/CDSL beforedepositing the cheque for clearing. The data captured will be sentin a batch mode to NSDL/CDSL, which will validate the dataand send a response file to the registrar. Currently such offlinemode is happening in the MAPIN project as well as TIN (Taxinformation Network) for TDS (Tax deducted at source.).In caseof TIN database NSDL gives a report for TDS wherein it clearlystates the accounts where the PAN is missing. In addition theaddress of the proposed investor can be mentioned on the reverseof the cheque. The cheque should be deposited only onconfirmation from the NSDL file.

The fourth solution is similar to the existing account transferinstruction. The Depository participant should issue specialbooklets to investor pre stamped with the client id and DP id.This IPO instruction booklet will be used by the proposed investorand will be common across all the issues. This will be the simplestof solutions. However the broking fraternity will not agree, asthere is every chance the customer will forget to mention thebroker/sub broker code on the instruction. The prerequisite forthe same is the allotment of ISIN as a part of the IPO process bythe SEBI as well as NSDL/CDSL

The fifth solution is too early a solution. With the MAPIN databasebeing used for UIN. The bid capturing process in NSE/BSE systemalso should capture the UIN of the customer .At EOD of theexchange the IPO file can be downloaded and the cheque and thereport along with simplified client instructions can flow to theregistrar. The pre requisite for the same is the availability of theMAPIN data base by the exchange and its inter linkage to theNEAT/BOLT system.

The second phase of refund order is also a paper intensive one. Oneis at a loss to understand as to why the ECS route cannot be adoptedin lines with the dividend warrant route. This will also reduce theinvestor’s time of going to the bank and depositing the cheques.

To conclude one needs to gear up all the machinery to improvethe efficiency of IPO processing from the investor as well as theback office perspective.

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Nandamohan ShenoyHead - Investment Advisory Services OperationsBNP Paribas

SER

12

US Asia ex JapanJapan Europe

Ind

ex

ed

Pri

ce

90

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110

120

130

140

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170

Daily From 11-Mar-2003 to 19-Mar 2004

GLOBAL• Global markets began 2003 on a bearish note, amidst the Iraqi

War, SARS outbreak in Asia, terrorism threats, poor earningsvisibility and discouraging economic data. March 11 2003saw most global markets reach new lows before recovery set in.

• Since May there was considerable rally in the global marketsand many of the negatives that had held back equities in thepast couple of years were beginning to fade, e.g. the economicdownturn, the stock market crash, corporate balance sheetadjustments, oil price hikes, international tension, SARS.

• Liquidity improved significantly in the equity markets, withclear signs of bond-to-equity shifts occurring for both foreignand local investors through the second half of 2003

• Global and regional equities had produced a strong start to2004 with most indices showing positive returns till January.However equity markets have pulled back more recentlyprimarily on concerns that global growth momentum ispeaking.

• The economic recovery is gathering pace and seems likely to bethe first synchronized recovery since the early 1980s. The AsiaPacific region offers great upside potential on the back ofsustainable earnings growth coupled with attractive valuations

US• In early 2003, investors expressed intense worries on many

issues ranging from the Iraq conflict to deflation. These concernsbegan to lift before June 2003, as did risk aversion in bothequities and corporate bonds.

• In combination with this and with clear evidence of economicand profit recovery, the Dow Jones Industrial Average has

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S&P 500 DOW JonesNASDAQ

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FTSE 100

CAC 40

DAX


increased by 33% over the past 1 year from the lows in March2003

• Since the beginning of 2003, there have been dramatic gainsin the economy, corporate profits and the prices of corporatesecurities. For example, in the third quarter, real GDP grew8.2%, S&P operating profits rose about 35% and share pricesmoved higher

• The second phase of the equity bull market will likely be drivenby the performance of the underlying corporations. Most UScompanies currently enjoy strong balance sheets and large cashpositions as corporate borrowing costs have fallen.

EUROPE• The Euroland economy contracted in the second quarter of

2003. Inspite of this, between March and May 2003, broadbased EU indices increased by 20% due to a significantreduction in risk aversion, rather than expectation of a strongeconomic rebound

• The second phase of growth in equity indices was characterizedby early signs of economic recovery - a steeper yield curve,improved confidence surveys, a pick-up in industrialproduction and corporate outlook

• During February – March 2004, there has been notablesoftening of economic data – bond markets have rallied andequities have weakened

• The recent setback in investors’ risk appetite and growthexpectations has triggered a rotation from cyclicals and growthsectors towards defensives

• The most obvious risk for the European market is a sharp risein the Euro that caps economic growth. Another notable risk isa weaker than expected economic growth

SOUTH AFRICA• The FTSE / JSE All Share Index has increased by 10% year-

to-date, with the 52-week high at 10,310 and the 52-weeklow at 7,361.

• After three years of falling values and given the optimismsurrounding the global economic recovery and improvingcorporate profitability, the FTSE-JSE all share index gained49% in dollar terms driven by an appreciating rand ascompared to MSCI world index which was up only 34%.

• There were 426 companies listed on the JSE in 2003 comparedwith more than 668 at the end of 1999. However, the marketcapitalization of US$236 billion has not changed as the top

A RETROSPECTIVE OFTHE GLOBAL MARKET MarketocusFS. RameshCo-Head, Advisory GroupKotak Mahindra Capital Compnay

13

160 stocks accounted for 99% of the exchange’s capitalization,and the JSE remains the 17th-largest bourse in the world

• The exchange rate of the Rand appreciated by 19% in the last12 months

• In the recent budget announcement, the Government hasallowed foreign companies to list on the JSE

ARGENTINA• After four years of recession, Argentina’s economy grew 8.4

percent in 2003, according to preliminary governmentstatistics. Forecasts call for growth of 6.9 percent in 2004

• The stock market index moved within the range of 561 and1275 during the year to date

• Argentina is facing its second economic progress report as partof a review of a three-year $13.3 billion loan package arrangedwith the IMF in the wake of its 2001-2002 economic collapse

ASIA• Since April 2003, there has been an upturn in the global

markets fuelled by diminishing concerns over SARS, aweakening dollar, improving economic data and liquidity

• After a strong start in 2004, Asian equity markets have pulledback primarily on concerns that global growth momentum ispeaking. The five key reasons for recent weak performance incalendar 2004 are global risk reversion, concerns over global growthprospects, political shocks, seasonality and new equity supply.

• Key investment themes arising from current performance aswell as structural, demand and cyclical factors are in banking,steel, autos and the travel sectors.

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar2003 2004

11178.60010061.16010761.15010561.15010361.15010161.1509961.1509761.1509561.1509361.1509161.1509961.1508701.1500561.1508361.1508161.1507961.1507761.1507561.1507361.150

ALSI (DAILY)

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Hang SengTWSEKOSPI

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• The principal risks to the anticipate upside, apart from eventrisks, are :(1) economic growth in the US and China; (2) USmonetary policy; and (3) the US dollar

INDIA• Till end-April, Indian markets had under performed most global

markets; however, the Sensex has risen by close to 90% sincethen, thus outperforming all the major global indices. The Sensexclosed above 6,000 for the first time in history in Jan-04.

• Turnover has picked up in the last 6 months, and the averagedaily turnover currently stands at US$ 1.5 bn in the cashmarket and US$ 2.0 bn in the derivatives market

• Valuations are still compelling, with the Sensex forward P/Ecurrently at 15x, having only recently recovered from a 10-year low

• Improved corporate profitability, a weakness in the dollar andgood monsoons have driven the positive sentiment amongboth retail and institutional investors

• The robust growth in the economy is expected to continue,with GDP growth of over 8% expected in FY04 and close to6% in FY05

• This strong up trend is being led by significant FII inflowsand increased appetite for equities in retail investors

— The net FII inflow in 2003, at US$ 6.6 bn, is the highest inthe last 10 years and second only to Korea and Taiwan in ex-Japan Asia

• Institutional participation as a proportion of total marketturnover has increased to 15% for 2003 compared to less than9% in 2000.

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BSE Sensex MSCI EMF S&P 500

Nikkei 225 Hang Seng

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698527

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(37)

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(63) (43)

42187 206

(118)

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(84) (42)

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Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04

(US

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FIIs Mutual Funds

SER

14

Index Based market wide circuit breaker for the Quarter 1st April 2004 to 30th June 2004

The BSE implements on a quarterly basis the index based market wide circuit breaker system. The system is applicable at three stagesof the index movement either way at 10%, 15% and 20%. These circuit breakers will bring about a coordinated trading halt in allequity and equity derivatives markets nationwide. The market wide circuit breakers would be triggered by movement of either SENSEXor the NSE S&P, Nifty whichever is breached earlier.

BSE to Shift BSE 100 index to Free Float methodology

BSE in continuation of its policy to gradually shift to the free float methodology , has shifted the BSE 100 index to the free floatmethodology. The free float factor for ONGC has been revised from 0.05 to 0.15 (W.E.F. 5th April) after the successful completion ofthe ONGC IPO. In order to make indices more qualitative and inline with world standards, the BSE has pioneered the concept ofglobally accepted “Free Float Methodology” in index construction in India by launching the TMT benchmark “BSE Tech Index” inJuly 2001 and Bankex in June 2003.

BSE and FISE ( Federation of Indian Stock Exchanges ) jointly submit a proposal for formation of BSE IndoNext for shares of smalland medium capital companies

Shares of small and medium capital companies which are listed only on various Regional Stock Exchanges ( RSE ) do not have aliquidity as many RSE’s have either nil or negligible turnover , hence investors are unable to find exit route and companies are unableto raise fresh capital from the capital markets for expansion , working capital requirements etc . BSE has taken steps to solve theseproblems jointly with FISE by submitting a proposal to SEBI for formation of IndoNext for shares of small and medium capitalcompanies .This major capital market initative would enable members of RSE and participating RSE’s to trade the shares of companieswith paid up capital upto 20 crores listed and traded on BSE and participating RSE’s to be traded in a national market through a singlebook order system on the BSE BOLT system in BSE.

NEW RELEASE

DIRECTORY OF

MEMBERS

2004

SER

15

Beta, R2,Volatility and Returns of SENSEX scrips for one year period (March 2003 - February 2004 )

Name BetaValues

Code Returns(1 year)

(%)

Co-efficient ofdetermination

(R2)

BSEIDaily

Volatility(%)

Weights ason 31/01/2004 (%)

Free Float Adj.Factor

30/01/2004500410 A.C.C. 1.29 0.94 2.51 68.65 1.30 0.90500490 BAJAJ AUTO 0.66 0.95 2.06 75.58 2.09 0.70532454 BHARTI TELE 0.71 0.91 3.39 429.07 1.72 0.20500103 BHEL 1.07 0.96 2.44 176.55 1.62 0.35500087 CIPLA LTD. 0.52 0.95 2.15 55.43 1.40 0.60500124 DR.REDDY’S 0.63 0.85 2.34 41.41 2.31 0.75500300 GRASIM IND. 0.97 0.98 2.40 206.38 2.55 0.80500425 GUJ.AMB.CEM 0.98 0.95 2.19 91.50 1.09 0.70500010 HDFC 0.41 0.98 2.32 62.64 3.89 0.80500180 HDFC BANK 0.47 0.94 1.87 49.91 2.77 0.80500182 HERO HONDA 1.03 0.95 2.75 120.95 1.60 0.50500696 HIND.LEVER 0.91 0.76 1.94 2.90 6.23 0.50500104 HIND.PETRO 0.75 0.75 2.40 45.06 2.51 0.50500440 HINDALCO 0.80 0.96 2.13 112.80 3.00 0.80532174 ICICI BANK 0.89 0.97 2.54 81.93 5.44 1.00500209 INFOSYS TECH 1.39 0.81 3.23 18.39 8.21 0.75500875 ITC LTD. 0.61 0.94 1.69 69.30 6.19 0.70500510 LARSEN & TOU 0.99 0.97 2.25 181.32 4.10 0.90500108 MAHA.TELE 0.81 0.76 2.41 35.57 1.26 0.45500312 ONGC CORPN 1.14 0.91 2.69 91.01 1.66 0.05500359 RANBAXY LAB. 0.68 0.83 1.74 53.23 3.97 0.70500325 RELIANCE 1.14 0.99 1.94 88.69 13.84 0.55500390 RELIANCE ENERGY 1.17 0.93 2.72 224.10 1.66 0.50500376 SATYAM COM 1.83 0.91 3.49 37.29 2.86 0.90500112 STATE BANK 1.11 0.92 2.13 104.83 4.50 0.45500570 TATA MOTORS 1.37 0.97 2.58 212.98 3.56 0.65500400 TATA POWER 1.21 0.93 2.50 185.39 1.61 0.70500470 TATA STEEL 1.39 0.99 2.57 186.28 3.86 0.75507685 WIPRO LTD. 1.59 0.69 3.05 -0.73 2.20 0.20505537 ZEE TELE. 1.38 0.90 3.56 58.45 0.98 0.55Beta = Co-variance(SENSEX, Stock)/ Variance(SENSEX)R2 = (Correlation)2

Avg. Daily Volatility = One standard deviation of daily returns of individual stock price for last one yearReturns = % variation in the stock price over last one year

Correlation of SENSEX withINDEX 1 Month 3 Months 6 Months 1 Year

(Feb 04) (Dec 03-Feb 04) (Sep 03-Feb 04) (Mar 03-Feb 04)

BSE-100 0.987 0.979 0.993 0.998

BSE-TECk 0.941 0.851 0.977 0.976

MSCI INDIA INDEX 0.994 0.992 0.999 0.999

NIFTY 0.996 0.991 0.999 0.999

NASDAQ 0.683 0.789 0.900 0.935

DOW JONES 0.660 0.852 0.955 0.942

S&P500 0.570 0.797 0.940 0.919

FTSE 100 -0.380 0.605 0.877 0.865

NIKKEI -0.394 0.674 0.137 0.858

TransportEquipments

7%

Capital Goods2% Diversified

7%

Finance17%

Power3%

Telecom3%

Oil & Gas18%

FMCG12%

Healthcare8%

HousingRelated 2%

I.T13%

Media &Publishing

1%

Metal Products& Mining

7%

Sectoral Weights in SENSEX as on Feb. 27, 2004

16

of The Stock Exchange, MumbaiParticular Nov-03 Dec-03 Jan-04 Feb-04 Feb-03 Feb-02

1 Turnoveri) Specified Shares (A Group) (Cr. Rs.) 39889.90 44343.39 57937.14 47752.22 21399.34 24632.52ii) B1 Group Securities (Cr. Rs.) 4614.14 9093.37 6810.49 3317.68 1921.87 3585.98iii) B2 Group Securities (Cr. Rs.) 426.01 722.06 576.41 271.00 133.02 346.38iv) F - Group Securities (Debt) (Cr. Rs.) 28.87 13.49 26.91 9.57 4.73 3.76v) G - Group Securities (Cr. Rs.) 0.00 0.00 0.02 0.01 0.31vi) T Group Securities (Cr. Rs.) 0.00 570.80 238.77 99.14 - -vii) Z- Group Securities (Cr. Rs.) 70.27 72.43 30.63 13.90 1.67 2.922 Total Turnover (i - vi) (Cr. Rs.) 45029.19 54815.54 65620.37 51463.52 23460.94 28571.56

(Bn. Rs.) 450.29 548.16 656.20 514.64 234.61 285.72(USD Bn.) 9.89 12.02 14.44 11.37 4.92 5.87

Cumulative from Jan (Cr. Rs.) 45029.19 99844.73 65620.37 117083.89 54359.06 67740.56(Bn. Rs.) 450.29 998.45 656.20 1170.84 543.59 677.41(USD Bn.) 9.89 21.90 14.44 25.80 11.39 13.91

3 Average Daily Turnover (Cr. Rs.)i) Specified Shares (A Group) 1994.50 2015.61 2758.91 2513.27 1126.28 1231.63ii) B1 Group Securities 230.71 413.34 324.31 174.61 101.15 179.30iii) B2 Group Securities 21.30 32.82 27.45 14.26 7.00 17.32iv) F - Group Securities 1.44 0.61 1.28 0.50 0.25 0.19v) G - Group Securities 0.00 0.00 0.00 0.00 0.02vi) T- Group Securities - 25.95 11.37 5.22 - -vii) Z- Group Securities 3.51 3.29 1.46 0.73 0.09 0.154 Total Average Daily Turnover (i to vi) (Cr. Rs.) 2251.46 2491.62 3124.78 2708.61 1234.79 1428.58

(Bn. Rs.) 22.51 24.92 31.25 27.09 12.35 14.29(USD Bn.) 0.49 0.55 0.69 0.60 0.26 0.29

Cumulative from Jan (Cr. Rs.) 2251.46 4538.40 3124.78 5833.39 1294.26 1575.365 Turnover for the month (Cr. Rs.)

High 3206.84 3219.55 4134.61 3176.52 2018.51 2126.83Low **722.09 2078.22 2124.46 2265.70 968.72 1056.00

6 No. of Shares Traded (in Crs)i) A Group (Total) 182.25 196.16 221.26 160.94 101.77 124.90ii) B1 Group (Total) 116.36 187.02 149.09 59.72 31.20 35.27iii) B2 Group (Total) 19.68 38.04 36.05 14.57 10.22 22.62iv) T- Group Securities - 37.38 17.51 5.10 -v) Z- Group Securities 10.40 14.78 6.80 3.06 0.14 0.37

Total Shares Traded (i to v) 328.69 473.38 430.71 243.39 143.33 183.16vi) No. of Debentures traded (in Crs) 3.22 0.17 2.73 0.08 0.0200 0.0024vii) G Group 0.00 0.00 0.00 0.00 0.00007 V-SAT Turnover (incl. in item no 2) (Cr. Rs.) 19790.12 22984.58 25610.12 22907.56 9214.73 16524.008 No. of Trades (in ‘000s) 17564.00 23286.00 22346.00 15793.00 9533.26 12146.85

Cumulative from Jan 17564.00 40850.00 22346.00 38139.00 22552.65 26528.579 Deliveries (Monthly)a) No. of Sharesi) Specified Shares (A Group) 41.90 56.37 54.18 33.44 25.46 32.06ii) B1 Group Securities 48.28 86.51 62.74 27.40 12.18 14.26iii) B2 Group Securities 9.86 22.81 24.59 10.44 6.84 13.16iv) G Group Securities 0.00 0.00 0.00 0.00 0.00v) T Group Securities 0.00 48.87 19.24 5.39vi) Z Group Securities 0.00 11.74 7.47 3.17

Total No. of Shares (in Crs) 100.04 226.30 168.22 79.84 44.48 59.48Cumulative from Jan 100.04 326.34 168.22 248.06 105.26 111.81

b) Valuei) Specified Shares (A Group) 8812.43 11293.11 13934.84 9493.35 4364.10 5608.10ii) B1 Group Securities 2032.80 4169.39 2730.86 1325.65 443.37 921.66iii) B2 Group Securities 207.20 418.85 364.68 176.40 63.55 119.34iv) G Group Securities 0.00 0.00 0.02 0.01 0.29v) T Group Securities 0.00 771.67 258.33 110.00vi) Z Group Securities 0.00 44.33 36.45 15.09

b) Value (Cr. Rs.) 11052.43 16697.35 17325.18 11120.50 4871.31 6649.10Cumulative from Jan 11052.43 27749.78 17325.18 28445.68 10707.60 13341.54

10 Debenture Deliveries (Monthly)a) No. of Debentures (in Crs) 0.00 0.00 0.00 0.00 0.00 0.00Cumulative from Jan 0.00 0.00 0.00 0.00 0.00 0.01b) Value (Cr. Rs.) 0.00 0.01 0.00 0.00 0.00 0.00Cumulative from Jan 0.00 0.01 0.00 0.00 0.00 3.36

11 Market Capitalisation (Estimated)i) A Group (Cr. Rs.) 911386.00 1076265.70 1029361.88 1024620.93 520966 448638ii) B1 Group (Cr. Rs.) 114346.00 141101.19 125974.27 123086.92 69872 117293iii) B2 Group (Cr. Rs.) 15618.17 20890.86 18741.50 17648.10 12639 24212iv) T Group (Cr. Rs.) 0.00 12652.28 10796.38 10625.35v) Z Group (Cr. Rs.) 24503.00 22450.99 21980.39 20240.15 16396 6574

BSE (i-v) (Cr. Rs.) 1065853.17 1273361.02 1206854.42 1196221.45 619873 596716

KeytatisticsS

17

Particular Nov-03 Dec-03 Jan-04 Feb-04 Feb-03 Feb-02(Bn. Rs.) 10658.53 12733.61 12068.54 11962.21 6198.73 5967.16(USD Bn.) 234.15 279.32 265.50 264.24 129.87 122.55

12 No. of Trading Days 20 22 21 19 19 20Cumulative from Jan 20 42 21 40 42 43

13 No. of Companies ListedNewly Listed 2 4 2 11 0 2Delisted 0 1 93 43 4 0Total 2 5 -86 -118 5647 5798

14 Newly listed securities of existing companies 41 40 65 73 36 41Cumulative from Jan 41 81 65 138 85 103

15 Capital Listed During the Month- Existing Companies (Cr. Rs.) 578.47 988.64 1770.53 51166.36 689.39 784.96- Newly Listed Companies (Cr. Rs.) 18.98 197.17 39.47 134.97 0 2043.37Total (Cr. Rs.) 597.45 1185.81 1810.00 51301.33 689.39 2828.33

(Bn. Rs.) 5.97 11.86 18.10 513.01 6.8939 28.2833(USD Bn.) 0.13 0.26 0.40 11.33 0.14443537 0.580885

16 Amount offered thro’ equity (prospectus)a) Total No. of Issues 1 2 2 2 1 0b) Par Amount (Cr. Rs.) 40.00 10.00 4.85 103.98 3.2 0c) No. of Issues (premium) 1 2 1 2 1 0d) Premium Amount (Cr. Rs.) 152.00 141.00 426.91 145.90 38.46 0e) Total amount (b+d) 192.00 151.00 431.76 249.88 41.66 017 Amount offered thro’ other instruments

(Prospectus)f) Total No. of Issues 0 0 0 0 1 2g) Amount (Cr. Rs.) 0.00 0.00 0.00 0.00 400 85018 Total amount offered thro’ prospectus

Total No. of Issues (a+f) 1 2 2 2 2 2Amount (e+g) (Cr. Rs.) 192.00 151.00 431.76 249.88 441.66 850

19 Amount offered thro’ equity by existinglisted companies

a) Total No. of Issues 2 0 0 3 1 1b) Par amount (Cr. Rs.) 11.97 0.00 0.00 69.02 15.60 3.12c) No. of Issues (premium) 1 0 0 3 0 0d) Premium Amount (Cr. Rs.) 73.58 0.00 0.00 1512.50 0 0e) Total amount (b+d) 85.55 0.00 0.00 1581.51 15.6 3.1220 Amount offered thro’ other instruments

by existing listed companiesf) Total No. of Issues 0 2 1 0 0 1g) Amount (Cr.Rs.) (Cr. Rs.) 0.00 400.00 400.00 0.00 0 46.821 Total amt offered by existing listed companies

Total No. of Issues (a+f) 2 2 1 3 1 2Amount (e+g) (Cr. Rs.) 85.55 400.00 400.00 1581.51 15.6 49.92

22 Total amount offered thro’ all offerdocuments (XVIII+XXI)Total No. of Issues 3 4 3 5 3 4Cumulative from Jan 3 7 3 8 4 7Amount (Cr. Rs.) 277.55 551.00 831.76 1831.39 457.26 899.92Cumulative from Jan (Cr. Rs.) 277.55 828.55 831.76 2663.15 857.26 2366.26

(Bn. Rs.) 2.78 8.29 8.32 26.63 8.5726 23.6626(USD Bn.) 0.06 0.18 0.18 0.59 0.17960612 0.485985

23 BSE Sensitive Index (30 Scrips) (1978-79=100)High 5097.84 5838.96 6194.11 6035.80 3322.17 3712.74Low 4771.23 5131.54 5593.74 5567.12 3223.41 3311.73Average 4951.10 5424.67 5954.15 5826.74 3278.85 3528.58Closing (Month End) 5044.82 5838.96 5695.67 5667.51 3283.66 3562.31

24 BSE TECK Index (2nd April 2001=1000)High 1145.16 1302.89 1416.11 1301.17 861.64 1008.57Low 1063.03 1146.04 1193.32 1150.29 805.51 926.37Average 1100.68 1218.77 1301.23 1234.03 831.649 974.7515Closing (Month End) 1145.16 1302.89 1219.06 1198.72 833.03 926.43

25 BSE 100 Index (1983-84=100)High 2603.65 3074.87 3297.19 3128.32 1641.99 1788.54Low 2454.93 2643.01 2878.90 2855.71 1590.58 1602.61Average 2543.09 2813.58 3142.23 3003.89 1622.58 1711.43Closing (Month End) 2594.34 3074.87 2946.14 2923.99 1628.72 1707.72

26 BSE 200 Index (1989-90 = 100)High 645.01 766.31 818.17 775.10 391.44 404.34Low 610.01 658.54 714.62 707.23 379.38 353.84Average 630.82 702.79 780.30 744.32 387.01 383.67Closing (Month End) 644.99 766.31 731.05 725.66 389.27 384.64

27 The Dollex-200 (1989-90 = 100)High 237.11 279.73 299.11 284.93 136.6 138.03Low 222.18 239.49 262.06 259.93 131.97 121.39Average 230.78 256.65 285.78 273.72 134.98 131.18Closing (Month End) 233.75 279.73 268.62 266.94 135.95 131.2

28 BSE 500 Index (1989-90=100)High 1991.74 2366.36 2517.28 2379.96 1168.97 1191.81Low 1880.02 2033.24 2191.35 2167.36 1131.18 1043.2Average 1939.57 2175.98 2400.75 2283.64 1155.57 1130.96

Conversion Table : 1Billion = 100 Crore �� 1 Crore = 10 Million � 1 Million = 10 Lakh �� 1 Lakh = 100 Thousand+ FII data except those pertaining to BSE sourced from SEBI***MAHURAT TRADING **SATURDAY TRADING

Particular Nov-03 Dec-03 Jan-04 Feb-04 Feb-03 Feb-02

18

Closing (Month End) 1991.74 2366.36 2246.83 2228.41 1161.63 1132.9829 P/E Ratio (Month Averages)

BSE SENSEX based scrips (30) 16.28 17.30 19.39 18.71 14.22 17.28BSE 100 Index based scrips (100) 14.27 15.12 16.90 16.19 12.06 14.67

30 Price to Book Value (Month Averages)BSE SENSEX based scrips (30) 2.99 3.26 3.65 3.52 2.22 2.53BSE 100 Index based scrips (100) 2.69 2.93 3.27 3.13 1.81 1.78

31 Dividend Yield % (Month Averages)BSE SENSEX based scrips (30) 2.05 1.94 1.73 1.79 2.2 1.88BSE 100 Index based scrips (100) 2.52 2.40 2.14 2.25 2.98 2.33

32 No. of Registered FIIs + 515 517 527 534 500 48833 FIIs Purchases in

Secondary market in BSE (Cr. Rs.) 2447 4357 4216 3640 1323 2486.76Cumulative from Jan (Cr. Rs.) 2447 6804 4216 7856 2908 4369.76

(Bn. Rs.) 24.47 68.04 42.16 78.56 29.08 43.6976(USD Bn.) 0.54 1.49 0.93 1.74 0.60926042 0.897466

34 FIIs Sales in Secondary market in BSE (Cr. Rs.) 1695 2774 3784 2926 1122 1729.28Cumulative from Jan (Cr. Rs) 1695 4469 3784 6710 2419 3477.28

(Bn. Rs.) 16.95 44.69 37.84 67.10 24.19 34.7728(USD Bn.) 0.37 0.98 0.83 1.48 0.50680913 0.714167

35 Net FIIs Investments inSecondary market in BSE (Cr. Rs.) 752 1583 432 714 201 757.48Cumulative from Jan (Cr.Rs) 752 2335 432 1146 489 892.48

(Bn. Rs.) 7.52 23.35 4.32 11.46 4.89 8.9248(USD Bn.) 0.17 0.51 0.10 0.25 0.10245129 0.183298

36 FIIs Purchases in Secondary market (Equity) (All-India) + (Cr. Rs.) 9947 14027 16830 14952 3235 5291Cumulative from Jan (Cr. Rs.) 9947 23974 16830 31782 8308.4 10214

(Bn. Rs. ) 99.47 239.74 168.30 317.82 83.084 102.14(USD Bn.) 2.19 5.26 3.70 7.02 1.74070815 2.097761

37 FIIs Sales in Secondary market (Equity)(All-India)+ (Cr. Rs.) 6647 7866 13654 12555 2855 3324Cumulative from Jan (Cr. Rs.) 6647 14513 13654 26209 7041.3 7824.4

(Bn. Rs.) 66.47 145.13 136.54 262.09 70.413 78.244(USD Bn.) 1.46 3.18 3.00 5.79 1.4752357 1.606983

38 Net FIIs Investments in SecondaryMarket (Equity) (All-India)+ (Cr. Rs.) 3300 6161 3177 2397 379.1 1966.3Cumulative from Jan (Cr.Rs.) 3300 9461 3177 5574 1267.1 2389.6

(Bn. Rs.) 33.00 94.61 31.77 55.74 12.671 23.896(USD Bn.) 0.73 2.08 0.70 1.23 0.26547245 0.490778

39 FIIs Purchases in Secondary market (Debt) (All-India)+ (Cr. Rs.) 1177 890 822 1010 236 526Cumulative from Jan (Cr. Rs.) 1177 2066 822 1832 476.8 1048.3

(Bn. Rs. ) 11.77 20.66 8.22 18.32 4.768 10.483(USD Bn.) 0.26 0.45 0.18 0.40 0.09989524 0.215301

40 FIIs Sales in Secondary market (Debt)(All-India)+ (Cr. Rs.) 738 669 129 734 187 155Cumulative from Jan (Cr. Rs.) 738 1407 129 863 330 401.7

(Bn. Rs.) 7.38 14.07 1.29 8.63 3.3 4.017(USD Bn.) 0.16 0.31 0.03 0.19 0.06913891 0.082502

41 Net FIIs Investments in Secondarymarket (Debt) (All-India)+ (Cr. Rs.) 438 221 693 276 49.5 370.5Cumulative from Jan (Cr. Rs.) 438 659 693 969 146.8 646.6

(Bn. Rs.) 4.38 6.59 6.93 9.69 1.468 6.466(USD Bn.) 0.10 0.14 0.15 0.21 0.03075634 0.132799

42 Capital raised through Euro IssuesNo. of Issues * 1 1 1 0 0 0Cumulative from Jan 1 2 1 1 1 0Amount Raised (Cr. Rs.) 362.31 27.31 61.33 0.00 0 0Cumulative from Jan (Cr. Rs.) 362.31 389.62 61.33 61.33 71.65 0

(Bn. Rs.) 3.62 3.90 0.61 0.61 0.7165 0(Source - CMIE) (USD Bn.) 0.08 0.09 0.01 0.01 0.01501152 0

43 Members 712 712 715 720 712 711Individuals 208 207 207 206 212 215Corporate (Unlimited Liability)Clause (4) A 0 0 0 0 2of Securities Contracts (Regulation) Rules, 1957

Indian Companies 484 485 488 494 480 472Foreign Institutional Investors 20 20 20 20 20 22Financial Corporations 0 0 0 0 0 0

44 Dollar Re. Exchange Rate (I USD - Rs.) 45.5200 45.5880 45.4557 45.2700 47.73 48.69

45 Scrips Listed 7353 7368 7305 7185 7355 7296

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