MARKET
u p d a t e

• Inflation : The annual rate of inflation based on the wholesale price index (WPI) fell by 0.22% to 4.69% for the week ended March 1, 2003 from previous week's level of 4.91%. The WPI rose by 0.4% to 169.6 during the latest reported week from the previous week's figure of 168.9 due to a sharp increase in domestic fuel prices and marginal hike in primary articles, even as manufactured products prices stood firm. The index was 162 in the year-ago period.
• Industrial Growth : Following a strong growth in manufacturing, India's industrial production rose by 6.4% in January 2003 over the same period of the previous year. As per the quick estimates of the Index of Industrial Production (IIP) released by the CSO, during January this year, the manufacturing sector recorded highest growth at 6.9% followed by electricity at 4% and mining at 2.7%. The cumulative growth in mining, manufacturing and electricity sectors during April 2002 to January 2003 has been estimated at 5.4%, 5.8% and 3.8% respectively, with the overall growth in the General Index during the first 10 months of this fiscal pegged at 5.55%. As per user-based classification, the growth in January 2003 over the same month in 2002 is 4.8% in basic goods, 11.6% in capital goods and 7.3% in intermediate goods. However, even as consumer non-durables grew by an impressive 7.2%, consumer durables registered a growth of only 0.5% during the first month of this year. The overall growth in consumer goods was pegged at 5.6%.
• Exports : Exports dropped 9.19% in January 2003 to $4.64 bn (in value terms) from $4.25 bn in the same month a year ago. But cumulative growth for the period April-January clocked a healthy 17.38%. Export growth in January 2003 slumped from a high of over 34% registered in December. January 2003 imports surged 24.45%, increasing the trade deficit to $ 636.49 mn as against a trade surplus of $10.20 mn in January 2002.
• Forex Reserves : Foreign exchange reserves touched $73.74 bn. in the week to March 7, 2003 boosted by foreign investment and trade. At the same time last year, forex reserves stood at $51.4 bn. The central bank has also been absorbing surplus dollars from the market to temper the rupee's rise and protect India's trade competitiveness, resulting in growing reserves. Reserves have also risen in the past year partly because of the appreciation of the euro, sterling and yen, in which undisclosed reserves are held.

OUTLOOK
Fiscal 2002-03 has seen strong revival of some segments of the manufacturing sector. The situation on the external front, as far as foreign exchange reserves are concerned, is very comfortable. The outlook on inflation front is at a manageable level of 4%, barring a hitch like rise in oil prices due to Iraq tension. But India has already built sufficient oil reserves and with a healthy forex reserve, India is in position to meet any stretched import bill.

• Call Money : Liquidity conditions remained marginally tightened amid heightened geopolitical risks (fears of imminent US-Iraq war) and players adopted a cautious stance. On-tap sale of state government loans and advanced tax outflows also attributed to this tightening of liquidity. Call rates ruled firm above repo rate of 5%. This tightness is reflected in low amounts received by RBI under its daily LAF auctions, averaging less than Rs.1,000 cr.
• Govt. Securities : In the govt securities market, the sentiments continued to remain cautious on account of tightening of liquidity, rising inflation and uncertainty in middle-east. The 10-year benchmark (9.81%, 2013) yield touched a high of 6.51%, but later eased to 6.36% as some nationalized banks initiated buying. News of government contemplating a 100 bps cut in the EPF schemes rate also aided sentiments. There were mild-bouts of profit-sales on account of the lower cut-off price set at a 91-day T-Bills auction. Overall, market remained range-bound barring uneven hiccups with a cautious note amid heightened geopolitical risks.
• Rupee : On the currency front, the rupee mostly remained range-bound against the dollar. Concerns were there about higher dollar demand from oil companies amid high crude oil prices. Towards the end of the second week, the rupee was settled at around 47.65/dollar. Forward premia tracked the sopt.
  

OUTLOOK
During 2002-03, in view of comfortable liquidity, easy call rates, strong forex reserves, benign inflation and declining global trend, domestic interest rates headed southward. Further, yields on small savings rates have been realigned to the average yields on government securities of similar tenor indicating further softening ahead. The achievement is significant especially in view of the fact that gross borrowings of the government completed so far were higher over the budgeted one. However, in view of the weak sentiments prevailing in the markets, yields on securities started rising due to uncertainties on the US-Iraq war front. This is despite the fact that economic indicators still appear to be comfortable with strong forex reserves and comfortable liquidity. Now with prospects of liquidity easing by the end of financial year, market expects the softer rates to prevail.

• General : The investor-friendly Budget 2003-04 failed to enthuse the markets in March. US-Iraq war have weighed down the market considerably. The BSE Sensex lost more than 1.5% to settle less than 3100 level mid-month. The S&P CNX Nifty breached the 1,000 level too. Bull liquidation in the derivatives segment also led to a decline in the cash markets. FIIs were adopting a wait and watch approach and FII inflows declined considerably.
• Tech Stocks : Technology stocks were the most affected lot. Selling pressure was felt across-the-board for both frontline as well as second rung stocks.
• Pharma Stocks : Most pharma scrip drifted lower. Ranbaxy lost ground on reports that Augmentin is yet to make a dent in the US markets. GlaxoSmithKline ended flat though it announced improved Q4 and 2002 year-end results. Burroughs Wellcome bucked the overall weakness in the market on the back of improved FY 2002 results.
• Bank Stocks : Banking PSUs witnessed some volatility on rumours that the government would hike FII ceiling in these banks from the current 20% level. Barring SBI, the hike in FII ceiling does not mean much for other PSU banks, given that the current FII holding in these banks range from 0.5% to about 4%. However, the FII ceiling of 20% in SBI has already been reached.
• Others : HPCL gained momentum of late as the much expected disinvestments process gained momentum of late. Hero Honda also did well after Honda Motor’s proposal to renew the pact for technology supply. HLL, Reliance Industries etc. lost ground. Among FMCG stocks, P&G Hygiene gained following reports that P&G, USA, has approached the FIPB for increasing its stake in its Indian arm from the present 65% to 70%. Tisco drifted lower as huge outstanding positions in the derivatives segment continue to weigh on the stock.

OUTLOOK
Union Budget 2003-04 has failed to prompt positive sentiments among invetors so far, mainly on account of increasing geopolitical uncertainty on account of US-Iraq war. But, fundamentally, nothing has gone wrong. In India, there is a strong case for equities this year due to the economic stability and growth prospects. Once the war tension is over, the markets are expected to make smart recovery backed by positive investor sentiments on account of Indian economic progress, investor friendly budget, FII flows, lower interest rates in the economy etc.

BSE Sensex	S&P CNX Nifty
SOVEREIGN YIELD CURVE	WHOLESALE PRICE INDEX
	The Wholesale Price Index for the week ending March 1, 2003 stood at 169.6, rising by 0.4% against its previous weeks lebles
IDEAL Portfolio

Debt: Mr Joshi is advised to invest in the debt funds and company deposits as these are the best investment options in the long run. He should put at least 50% of his debt allocation to a debt fund like Grindlays Super Saver, Birla Income Plus, HDFC Income etc. He should also invest in company fixed deposits in companies like Hudco, Birla Home Finance and indal Strips etc.

Equity: Of the total equity exposure not more than 15% should be in sectoral funds like Birla-IT. Another 15% could be in conservative equity funds like Templeton Growth or DSP Merrill Lynch Growth The balance 70% could be in aggressive diversified funds like Alliance Equity, or Zurich Equity.
It is also important for him to plan for his forthcoming retirement. For this he should also start creating a retirement corpus apart from his employer provided benefits. Jeevan Suraksha Plan of LIC or Forever Life of ICICI Prudential Life Insurance will help to do that.

Golden Rules of Financial Planning
• Take care of unpredictable needs first through adequate insurance
• Keep an emergency fund aside in liquid and gilt funds
• Start early and build a long term retirement and investment plan
• The minimum time period for equity investments should be
5 years and the minimum time for investing in debt funds should be 1 year
• Make your financial plan tax efficient — focus on after-tax returns.