1. Copyright Aditya Birla Nuvo Limited 2008 Aditya Birla Money Commodities – An Attractive Proposition Aditya Birla Money Limited

2. Copyright Aditya Birla Nuvo Limited 2008  MCX, largest commodity exchange in India (87% market share in FY11), was ranked World No.1 for Silver & No.2 for Gold / Copper / Natural Gas & No.3 for Crude Oil in terms of number of contracts traded in 2010.  MCX is the leader in International Commodities (Precious Metals / Base Metals & Energy) whereas NCDEX is the leader in Agri Commodities.  Major Commodities Traded – (i) Gold (ii) Silver (iii) Crude (iv) Copper (v) Soybean (vi) Soy Oil (vii) Chana (viii) Guarseed (ix) Jeera (x) Pepper.  Commodity exchanges volumes have gone up from Rs.250 crores per day in 2004 to Rs.70000 crores as in 2011, 250 fold increase over past 7 years. (Currently daily volumes average Rs.70,000 crores as of November 2011).  Commodities form 45% of India’s GDP, the physical market in India is pegged at US$350bn – USD$450bn. Further, with India being a dominant producer of key agricultural commodities, trading of agriculture alone is a US$200bn annual market. Commodities – The Great Indian Story

3. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Why Commodities ?  Portfolio Diversification - Commodities don’t move exactly the same way & at the same time as equities do, for example, if equity falls on one day, commodities may not necessarily fall that day as factors affecting both these markets are different. For example, buying Infosys & buying Copper – both are completely unrelated.  Commodities are less related with each other as fundamentals driving each commodity is different. Unlike stocks, which are affected by global & domestic overall sentiments.  Global in Nature – hence there is less risk for manipulation (explained later)  Low Volatility over Equities (explained in later slide)  Leverage Effect (explained in later slide)

4. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Why Commodities – An Example  For example, if you Buy 1 contract of Gold (a 1 kg contract);  Say, current price of Gold for MCX Feb Contract = Rs.29,000/-10 grams  Value of 1 Kg Contract = Rs.29 lacs  Margin Required for Buying 1 Contract = 4% i.e. Rs.1,20,000/-  Gold Prices move up to Rs.29,100/10 grams  You make a profit = Rs.29,100 – Rs.29,000 = Rs.100 * 100 = Rs.10,000/- on an investment of Rs.1,20,000/-; a return of 8% (This return can be in a single day also).  Note: It is advised to trade with strict stop-loss in commodities markets as it is a purely leveraged product. (Allocating 10% - 15% of a securities portfolio to commodities, investor can vastly improve performance in hostile markets.)

5. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 1.Commodities don’t move exactly as per equities markets. Hence risk can be reduced by investing part of your portfolio in commodities. 2.Factors effecting commodity markets may not necessarily affect equity markets. Like strike in copper mine in Chile may lead to price rise but may not at all affect Indian equity markets. 3.Looking at the chart, we see that Gold prices touched a high in October 08 when Sensex marked its low during same period. 4.If an investor had kept a percentage of his portfolio in commodities also, instead of entire investment in equities at that time, his losses would have been reduced. (explained later). Commodities – A Diversification Tool Source: Bloomberg,, Aditya Birla Money Commodities Research

6. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Commodities - Lowering Risk in Portfolio  The above table shows Sensex and gold prices during 2008. After the Sensex hit a high in Jan ’08, it hit a low by the end of the year while gold rose.  The above table clearly indicates that if an investors had invested 100% of his portfolio in equities he would have incurred a loss of 63% on his total investment during 2008. While 20% of portfolio diversified into gold would have reduced his losses by around 33%. Asset Class 2004 Sep 2010% Returns Sensex590019350228 Gold580019000228 Yr. 2008 Sensex21200(Jan)7700(Oct)-63.68 Gold10000(Jan)14300(Oct)43.00 100% investment in Sensex -63.68 80% in Sensex and 20% in Gold -42.34

7. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 1.Commodities are less related not only with other asset classes like stock, real estate, etc but have a lower relation with each other as well. 2.For example a fire in crude refinery unit may lead to increase in crude oil prices, but may not impact other commodities like gold, copper etc. 3.Similarly the arrival of festival season may be bullish for precious metals but not for crude oil or copper or rubber. 4.Hence each commodity has its own unique fundamental price drivers. 5.This allows investors to take positions in various commodities simultaneously as one factor/event will not affect all commodities equally, leading to diversified lower risk trading in commodities. Commodities- Less Related with each other

8. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Gold Seasonal Chart is different from copper as factors affecting both metals are different.  Hence investors get an opportunity to invest any time during the year in various commodities since the price trend of different commodities differs from each other during a particular period.  Like copper is normally bullish during 1 st quarter of a year while gold peaks during last quarter of a year. Seasonal Pattern of Different Commodities Is Different Gold Seasonal Chart Copper Seasonal Chart

9. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Entire world trades in commodities. All industry sectors, Governmental organizations, Central Banks, Commodity funds to the common man, are affected by commodity in their daily lives.  Due to their global nature, manipulation is difficult in commodities unlike equities where a set of investors can move a stock; like KP 10 Stocks during KP heydays.  Commodity movements can be explained unlike equity movements where it is difficult to site a proper reason for a stock movement. For example, if Satyam stock moves by 5% in a day, exact reason would be difficult to find.  But it is easier to give a proper logical reason for most of the international commodities like gold, copper, crude etc. Commodities – A Global Proposition

10. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Historically commodities have been less volatile compared with equity markets.  Hence commodities as a part of portfolio will give a balance affect to the overall risk adjusted returns.  Low volatility means lower margins, hence higher leverage in Commodities. Commodities – Low on Volatility over Equities

11. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Commodities provides investors an option to trade in a contract by paying only low margin amounts. The effect is known as leverage effect.  Commodity provides higher degree of exposure with lower amount as margins are significantly lower as compared to equities. Commodity Price of one lot of Contract at MCX (Rs) % of Money Reqd. as Margin Margin Money required Prices Quoted (Rs) Gold Regular29,00,000/1kg4%1,20,00029,000/10gm Gold Mini2,90,000/100 gm4%12,00029,000/10gm Copper4,00,000/MT5%20,000400/kg Silver Reg17,00,000/30kg5%85,00056,500/kg Silver M2,80,000/5kg5%14,00056,500/Kg Crude5,20,000/100 barrel5%25,0005200/barrel Leverage Effect

12. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Commodities Segment wise (MCX & NCDEX) COMMODITIES Metals Edible Oils Energy Softs Agri. Comm.  Gold  Silver  Steel  Copper  Zinc  Nickel  Lead & Aluminium  Soy Oil  Mustard Oil  Crude Palm Oil  Crude Oil  Brent crude  Furnace oil  Natural gas  Cotton  Gur  Pepper  Guar Seed  Soy Bean  Jeera  Mustard  Chilli  Etc…..

13. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Hedgers, Speculators, Investors, Arbitragers  Producers – Farmers, Manufacturer, Corporate  Consumers – Refiners, Food Processing Companies, Jewelers, Textile Mills, Exporters & Importers, Manufacturing Sector  Institutions, Banks, Mutual Funds (These are currently not permitted in Indian Commodities Exchanges). Market Participants

14. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Pure Trading Speculators in the futures market can use different strategies to take advantage of rising and declining prices. The most common are known as “Going Long,” “Going Short” As an Investment Investors can build and Diversify their Portfolio Calendar Spread trading Spreads involve taking advantage of the price difference between two different contracts of the same commodity Arbitrage Opportunities Inter Exchange (NCDEX & MCX) Spot -to- Futures Alternative Ideas Trading Strategies

15. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Fundamentals Influencing Commodities  Demand & Supply  Seasonal patterns  Global & Indian economic data / policies  Weather conditions  Import / export parity and government policies  Forex / currency movement  Global political / economic events and data  Global Hedge / Commodity Fund Activity  US / Euro-Zone / China / Japan – Key Data Releases & Central Banks Statements

16. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  India is the 2 nd fastest growing economy in the world after China.  We are amongst the top producers in Sugar/Wheat and other agri commodities, and the largest consumer of gold.  We anticipate commodity derivatives business in India to grow at the rate of +30% per annum over the next 3 years – A Rs.150,000 crore per day market by 2015. Untapped Potential

17. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Currency – The Biggest Market Are you taking advantage ?

18. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Avg. Average Daily Turnover : $ 3.98 trillion  World’s Major Financial Markets account for $3.21 trillion  Market Composition of $3.21 trillion : (a) $1.005 trillion – Spot transactions (b) $362 billion – Outright Forwards (c) $1.714 trillion - FX swaps (d) $129 billion– estimated gaps reporting  Global FX Daily Turnover Growth : $880 billion in 1992 / $3.21 trillion in Major Markets & Market Share : (1) London (34%)(2) New York (16.6%) (3) Tokyo (6%)(4) Switzerland (6%) (5) Singapore (6%) Major Currency Pairs Traded :(1) EUR/USD (27%) (2) USD/JPY (13%) (3) GBP/USD (12%) (4) AUD/USD (6%) (5) USD/CHF (5%) Global Forex Market – Key Highlights

19. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Trading in Currency Futures began in 1972 on CME.  As per a WSJ Report, 7% of Total Foreign Exchange Volumes is FX Futures  World’s Main Financial Markets size stood at $3.21 trillion in April 2007  FX Futures Market Global Turnover works out to $180 - $200 billion per day.  CME is the world’s largest FX Exchange with daily volumes in excess of $100 billion with 43 Futures Contracts, 32 Option Contracts & 20 global currencies. Other Global Exchanges for FX Derivatives (1) Brazilian Mercantile & Futures Exchange (BM&F) (2) ICE – Intercontinental Exchange (3) Mexican Derivatives Exchange (MEXDER) (4) Korea Exchange(5) Tokyo Financial Exchange (6) Budapest Stock Exchange & (7) Turkish Derivatives Exchange Global Currency Derivatives Market

20. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Currency Movement Impact  Importer Imports good and services Payments in FCY Buys currency from the bank RE – STRONG Gain Re – WEAK Loss  Exporter Exports goods and services Receivables in FCY Sells currency to the bank RE – STRONG Loss Re – WEAK Gain

21. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 USD / INR VS Sensex

22. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Benefits of Currency Derivatives  Linear Payoff – Not complicated for market participants to understand  Standardized Contracts, small lot size – US$ 1,000 / Euro / Pound & 100,000 Yen  Electronic Settlement of MTM Profits / Losses  No counterparty default risk – Novation by clearing house  Efficient price discovery due to high liquidity  Large number of market participants  Transparency – Real-time dissemination of prices  Access through internet from remote locations  Lower transaction costs

23. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 USD / INR - Contract Specification Trading Hours9:00 AM to 5:00 PM (Monday to Friday) Contract SizeUS$ 1,000 Price QuotationINR per USD Tick SizeINR 0.0025 Minimum Initial Margin1.75% on first day & 1% thereafter ContractsAll months with a maturity duration of 12 months Settlement MechanismCash Settled in Indian Rupee Last Trading Day 2 working days prior to the last BD of the expiry month Final Settlement RateRBI USDINR Reference Rate Final Settlement DateLast working day of month, except Saturday

24. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008  Daily Fundamental & Technical Reports covering major commodities / currencies – analyzing global trends, major news events; key data releases and a technical perspective as well.  Provide intraday and positional trading calls with a strike rate of 65%-70% on major commodities such as gold / silver / copper / crude / soybean / guarseed / chana, to name a few.  Publish indepth special monthly reports on Gold / Silver / Currency aimed at educating the investors on global happenings, to help them take advantage of price moves. Our Research Capabilities

25. Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Thank You For further details on research, you can reach us at abm.comresearch@adityabirla.com 022-42333480/022-42333484 abm.comresearch@adityabirla.com 6 0f 6