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WhiteMonk PREDICTS SENSEX WILL TOUCH 17800 IN DECEMBER 2009

Research of the last eight years of daily SENSEX pricing data (2001-2008) for the month of December, we
believe Sensex, in the month of December, would gain at least 4.6% and consequently should go to
17781.7 by our conservative estimate. Out of eight years of data, Sensex returned negative returns in
just two years (2001 and 2006); in rest of the years it has given excellent returns to investors. We have
calculated couple of important data points which is as given below:

Average Daily Standard

Gain Deviation Maximum Minimum 1-Dec 31-Dec Gain(%)
2001 -0.02% 1.4% 3,442.89 3,131.78 3,275.47 3,262.33 -0.4%
2002 0.21% 0.8% 3,398.00 3,207.36 3,228.82 3,377.28 4.6%
2003 0.59% 0.8% 5,838.96 5,131.54 5,160.85 5,838.96 13.1%
2004 0.27% 0.8% 6,602.69 6,227.83 6,227.83 6,602.69 6.0%
2005 0.24% 1.1% 9,397.93 8,815.53 8,944.78 9,397.93 5.1%
2006 -0.02% 1.5% 13,972.03 12,995.02 13,844.78 13,786.91 -0.4%
2007 0.25% 1.5% 20,375.87 19,079.64 19,363.19 20,286.99 4.8%
2008 0.44% 2.5% 10,099.91 8,739.24 8,839.87 9,647.31 9.1%
Average 0.33% Average 7.12%

We did not include negative returns of Sensex in calculations as those negative returns are because of
specific reasons in 2001 and in 2006 (Due to soft recession and again recession expectations in US).
Below is the mean and standard deviation analysis of daily returns.

Minimum 4.6%
Maximum 13.1%
Stdev 3.4%
Forecasted
Sensex 18210.6
Minimum 17781.7
Maximum 19233.7

What will drive up Sensex?

We are now aware of most of the Indian economic and financial data. Except for the hurdle of
inflationary pressure, Indian market is all set to sail smoothly for the month of December and in first
quarter of FY2010. Let us study a bit US market as well. At present, barring unemployment data and
consumer confidence, we are seeing positive data coming from US (positive GDP, Low Inflation, and
increased order for durable goods). In one of our earlier research, we concluded that Indian equity
market and US market specially Dow Jones is tightly coupled (with correlation factor of .33) and hence

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to understand Sensex performance we should analyze US data carefully. According to latest survey by
Moody’s Economy (www.economy.com), global business confidence is improving and overall business
sentiment is positive” as depicted in following graph. This sentiment is important in context with the
Sensex, as most of past rally is due to foreign investor’s investments (FDI), investors, who continue to
believe that Indian market will give them attractive returns in medium-long terms.

Let us look at the couple of key indicators (US DATA: source Finance yahoo), except two indicators (CPI
and Housing), all are positive. We understand that ‘housing start’ is a vital and a key matrix but it will not
pick strongly until unless unemployment data improves in US.

Time Briefing Market

Date (ET) Statistic For Actual Forecast Expects Prior
Retail
16-Nov 8:30 AM Sales Oct 1.40% 0.70% 0.90% -2.30%
Retail
Sales
16-Nov 8:30 AM ex auto Oct 0.20% 0.10% 0.40% 0.40%

10:00 Business
16-Nov AM Inventories Sep -0.40% -1.00% -0.70% -1.60%
17-Nov 8:30 AM Core PPI Oct -0.60% 0.20% 0.10% -0.10%
17-Nov 8:30 AM PPI Oct 0.30% 0.70% 0.50% -0.60%
Capacity
17-Nov 9:15 AM Utilization Oct 70.70% 70.50% 70.80% 70.50%

Industrial
17-Nov 9:15 AM Production Oct 0.10% 0.20% 0.40% 0.60%

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Housing
18-Nov 8:30 AM Starts Oct 529K 585K 600K 592K
Building
18-Nov 8:30 AM Permits Oct 552K 585K 580K 575K
18-Nov 8:30 AM CPI Oct 0.30% 0.20% 0.20% 0.20%
18-Nov 8:30 AM Core CPI Oct 0.20% 0.00% 0.10% 0.20%

We wish we can have similar tracking mechanism and access to latest economic data for Indian market
as well. Now the question is which sector will be performing well. Let us analyze PE ratio of Sensex as
well as its key components.

Which Sector will outperform in December:

At present BSE is trading at PE multiple of 17.62, most of the past performance is because of excellent
performance given by BSE 100 and BSE 200. Now we believe, in coming months we will see more action
in mid cap and in small cap segment. The MID CAP index PE is trading at 14.21 and small cap index PE is
trading at 14.21 respectively.

Dividend
year Open High Low Close Pex P/BV Yield
BSE 100 2009 5,021.58 9,198.20 4,122.83 8,955.67 19.24 3.26 1.35
BSE 200 2009 1,163.67 2,166.43 955.60 2,112.95 18.14 3.09 1.38
BSE MID CAP 2009 3,244.92 6,709.56 2,547.91 6,465.61 14.21 2.15 1.71
BSE SMALL CAP 2009 3,690.82 7,883.50 2,864.24 7,527.32 11.73 1.41 2.16

BSE 2009 9,720.55 17,493.17 8,047.17 17,021.85 17.62 3.33 1.47

We believe Indian market will behave optimistically for the month of December and should give a 4-5%
of returns to its shareholders. The overall price performance should be coming from Mid Cap and Small
Cap sector players.

PS: Please check our author’s profile:

http://www.whitemonk.in/info.php?about%20us&osCsid=nojtmuv3saf9c4ej8o004rddp5

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