The document discusses a conversation between a member and analyst from HBJ Capital regarding the state of the stock market and appropriate investment strategies. The analyst recommends building cash levels to 40-50% and avoiding major buying, as a correction of 25-30% is expected in the first half of 2011. The analyst advises selectively buying stocks after maintaining healthy cash levels and following any buy recommendations from HBJ Capital. Market moves by large investors and concerns over sovereign debt defaults in Europe are also discussed.

2. Snapshot of the Report sent on 24th Nov 2010

3. Helpline Numbers Available (24x7)
For health check of your portfolio, please e-mail your portfolio
to Info@hbjcapital.com or Speak to our research analyst.

4. What Next?

5. Shall we start doing bottom fishing? – No, it’s time
for building/raising CASH allocation.
Conversation between our members & our analyst
Member: What do you think, where market is likely to go?
Analyst: Based on our previous market outlook report, send on Nov 24th 2010, we are
expecting a correction of 25-30% in H1 2011. Correction might have started in
Nov 2010 and we might see a small relief rally in Dec 2010. Sometime after MOIL
listing when the euphoria of retail investors will be at peak, we are expecting fresh
round of selling to start. We have been advising 40 - 50% of cash allocation and to
take profits in various counters.
Member: I have not sold any stocks, do I get chance in Dec 2010 to exit?
Analyst: We would advice you to partially book profit, exit from few counters after
consulting with us and make sure that you have at least 40-50% cash in hand by end
of Dec 2010. There are high probability of year end rally to take place before next
round of selling but it is advisable to slowly exit few counters and raise cash levels.
Member: Most of the small/mid caps stocks has fallen down by 20-30% or
more, shall I go ahead and buy?
Analyst: Small qty of selective stock buying can be done at current levels but only after
maintaining healthy cash levels of 40-50%. Focus must be on raising cash rather than
doing bottom fishing. Please avoid any kind of major buying at this point of time. We
will keep you advising on when/what to buy when the right time comes.

6. Do selective stocks buying in Dec’10. At right time,
we will advice you list of stocks to accumulate.
Member: Do I need to buy/sell TMP or MMP Stocks to raise cash levels? Do you
think these offline portfolio will be able to achieve their long term targets?
Analyst: TMP & MMP are the offline portfolios maintained at our end and replicated by you.
You just need to follow the changes done every month in these portfolio. In fact TMP &
MMP are exposed 60-65% only in stocks and rest in cash form.You have to strictly follow
these portfolios as and when they are changed. These portfolios will be able to achieve long
term goals in spite of downturn in the market because each portfolio has kept cash levels up
to 40%.
Member: What shall I do with your reco coming in Dec & Jan etc? Do I need to
buy them?
Analyst: While sending the reco, we will advice you on the exposure you need to take at CMP.
of the stock.You need to follow accordingly. Also when right time comes, we will suggest
you the list of stocks you can accumulate.
Member: I wanted to hedge my portfolio using Future & Options, can I do that?
Will your trading unit www.stoplosstrade.com help me?
Analyst: Hedging is a tool used by HNI & few fund houses. If you have discipline you can make
money in trading and well you can use Nifty/Stock future & option to protect your
portfolio & make money even in falling market. One must consult their technical analyst
before any kind of trading activities.

7. Don’t listen to Brokerage house bullish views, listen
to an independent research company - HBJ
Member: I have got a mail from my brokerage house saying that market will be
bullish in Jan-Mar’11 and we can see higher levels, is it true?
Analyst: A Brokerage house will always show good optimistic future to you because they
don’t want you to get fear and stop trading. Their income is your brokerage hence they
will show rosy picture even in dull market. Team HBJ Capital knows that our 1st duty is
to protect your wealth and 2nd is to grow your wealth, hence what is TRUE is what we
will say. We may not be right always but yes, we will always try to be truthful.
Member: Penny/Small Caps are down by 20-40% from their peak, shall I go
ahead and buy them?
Analyst: We do not advice buying at this moment in spite of attractive price because
sentiments are very bad and after all markets are driven by sentiments so let the fall gets
over, let the speculative money exit the counters, let the dust settled down before buying
anything. Usually fall in large caps are followed by fall in small/mid-caps but this time it
is other way round, hence when index will fall further which is more likely, we will see
small/mid-caps going down further.
Member: India is domestic demand driven country, we can de-couple from the
world and grow, why do we need to bother about US or UK problems?
Analyst: Our real economy is definitely a domestic demand driven because we don’t
depends on exports but our stock markets are ruled by foreign money, hence follow the
smart money or fat boys.

8. Speculative Money Exiting

9. Fear of price rigging and murky dealings
• At this juncture, traders just do not know which stock would be next to fall. Every stock
which falls sharply, they suspect price rigging and some murky dealings.
Few days back, a bunch of stocks were reported to being investigated by CBI. Ruchi Soya, KS Oils, Karuturi Global etc are
suspected of price rigging. The news is that market operator, Vimal Rathod was accumulating shares of these
companies on behalf of NRI investor C Shivasankaran or Siva as he is better known, based on insider information. The
modus operandi was – pick up stake in these companies, then engineer a massive fall in the prices, then pick up major
chunks of shares thro’ various shell companies and then take the price to new heights and sell the entire stake at that
high. Price rigging is suspected to have happened with the promoters involved.
Why did the CBI zero on these companies only now? Siva holds stake in Sing Tel which was one of the beneficiaries of A
Raja's largesse's in 2G scam. And once the CBI started unraveling this tight knot, it led to Siva’s other murky
operations and thus to Ruchi Soya and KS Oils and Karuturi. He has recently picked up (officially) a 2.99% stake
through open market purchases in Karuturi Global. Prior to that, he picked up 11.63% in Ruchi Soya and then
4.29% into KS Oils.
There was also the news on 2nd December of Ketan Parekh being very much active in the markets and this time around,
he is said to have honed into stocks like Pipavav Shipyard, Amtek Auto, Orchid Chemicals, GMR Infrastructure, Cairn
India, Deccan Chronicles Holdings, Reliance Industries, Punj Lloyd, Indiabulls Real Estate and the list is endless.

10. The traders are completely spooked
That’s not all. Last week, the Securities and Exchange Board of India pulled up promoters of four companies -- Welspun
Corp, Ackruti City, Murli Industries and Brushman India -- for allegedly rigging their own stocks. The promoters of
these companies allegedly colluded with stock market operators, Sanjay Dangi and his associates and the Ashika
Group, to manipulate their stock prices. Following Sebi's orders, stock prices of these companies fell sharply. Ackruti
City, Welspun Corp and Murli Industries fell by 20, 27 and 20 per cent, respectively, the next day. While many
operator-driven stocks allow traders to make a quick buck, for retail investors who have invested in these stocks,
things could be difficult.
• How does one know if the stock is operator manipulated or sentiment driven?
Difficult task but what one can do is keep a sharp eye on the price movements. If share price fluctuates very sharply and
price does not justify the fundamentals, clearly something is amiss. Small companies typically are breeding grounds
for such operators and best to stay away from them.
What about companies where promoters could manipulate the books to show bumper numbers?
Such manipulation is not sustainable over the long run, so watch out for quarter numbers and that should be able to give
you even the slightest inkling of any manipulation. There are companies which have a tarnished reputation but to wash
that blemish, they change the name of the company or float other companies. But unfortunately, character does not
change. So the same routine can be seen in companies whose promoters have a track record of insider trading.

11. Follow the “Fat Boys”

12. You can't beat the Fat Boys, you can join them.
Evidences mentioned below points to a top in the market during Dec 2010. You can also see
how Fat Boys has sold Puts in Oct’10, brought down markets in late Nov’10 and most
likely to cover their shorts in Dec’10. You can see how smart money who knows the rules
of the game is playing with retail money.
Back in October everyone was certain that the markets were going to fall. We suggested that nothing was
going to happen in Oct’10 because the public were cautioned & buying puts as insurance and the Fat
Boys were selling them (writing Puts). At the same time the Fat Boys were going short (Selling Nifty
etc). We suggested a new highs in Oct’10 or early Nov’10 followed by a pullback (down ward) into the
3rd week of November which we have already seen.
That is what has happened. Now we see the puts expired worthless and the Fat Boys are back knocking at the
door, looking to cover their shorts. We have a nasty looking head and shoulders top forming as
well. The public and small funds are teetering on the precipice of another sell off. The tone of the media
has turned more bearish and they are already trotting out the bears . This time there is no signs of traders
buying protection against a market decline.We are already down 10% from the peak and Fat Boys are
most likely to cover their short position sooner or later which will create a temporary bounce in the
market during Dec’10, call it relief rally or call it a pullback rally, but it will be short lived.

13. If you are not with market movers you are a victim.
During last 3 weeks of Nov’10 we have seen market falling by 10-12% from the peak. One can expect a
relief rally of 4-5% in Dec’10 followed by further fall which will spread across 1st half of 2011.
We would advice you to build your cash position in Dec’10 & go slow in fresh buying. Listing of MOIL which
is expected with 35-50% gain on Dec 15th 2010 will bring maximum euphoria among retail investors
hence it will be best time for Fat Boys to start fresh round of sell-off.

14. Just follow the Fat Boys (Market Movers)
Fat Boys made money in Oct’10 by Selling Puts and making money in Nov’10 by Selling Calls.
You can see in the previous page, Nifty chart for last 6 months. It graphically shows how we reached the point we are
at now. We have formed a head and shoulders top pattern because of the dynamics created when the public loaded up
on puts in Oct’10 months to try and beat the Fat Boys. The put options all expired worthless and the Fat Boys kept
the premium. Now in Nov’10 public was not buying any insurance (they though since the market did not fell down in
Oct’10 so it will not fall in Nov’10 also). On top of that, they loaded long and are totally exposed. Coal India, IPO
has made good amount of money for retail investors and that was the best time when Fat Boys can start selling
because public were ready to buy anything & everything. It’s very simple do just opposite to the whole masses.
Here's the thing – A year end rally followed by the fall.
Look what happened when we topped out the rally in early 2010. Due to cyclicality, we fell back into February. If we
top out and start to fall now, we should fall all the way into February again and it won't be pretty. My point is that it is
too early to start down into the next cycle low. We have to be open to a solid year end rally occurring again this year.
Why do we expect year end rally?
There are two fundamental reasons. First of all, we know Bernanke and co. want to see higher asset prices. They
probably don't want a stock market plunge putting a damper on our Christmas spirit and purse strings either.
Secondly, there are a lot of Christmas bonuses tied to fund performance at year end. If you are the Fat Boys, why not
let the funds buy the price up into a strong, year ending close.

15. Sovereign Debt Default

16. Sovereign Debt Default / Bailout and Contagion
Risk Graph - November 2010
Iceland, Greece & Ireland are bailed out. Portugal is next with Belgium and Spain to trigger a probable bailout of sorts
during the next 12 months. However it is possible that a line could be drawn under the bankrupting PIGIBS with
Spain, especially if new mechanisms are introduced by the Euro zone for a more orderly partial debt restructuring
that is able to release pressures on the likes of Italy and France and therefore have far less of a contagion effect. Next
round of sell-off in stock market will be the side effect of debt default from Euro zone.

17. New phase of debt crisis! Striking NOW!
• Europe was sinking deeper into a new, more severe phase of its sovereign debt crisis.
This crisis is unfolding despite Herculean rescues by the European Union, the
International Monetary Fund and the U.S. Federal Reserve. It’s striking right now.
And it’s threatening to spread to all of the world’s big debtor nations, including the
biggest of all — the United States.
• The Real Trauma of The Irish Debt Crisis . Default insurance is the telltale indicator.
• And right now, the cost of insuring €10 million of 5-year Irish government bonds
against default has skyrocketed — to an extremely high €600,000.
• That’s 55 percent more than it cost for the same insurance in the aftermath of the
Lehman Brothers failure — a time when it seemed the entire world was on the brink
of collapse.
• It’s 50 percent more than the cost of insuring equivalent Greek debt at the peak of
Greece’s first round of financial difficulties earlier this year.
• It’s at least DOUBLE the cost of insuring the debts of deeply troubled lesser nations
like Romania, Lebanon, Latvia, and even Iceland.
• Most shocking of all, today’s €600,000 price tag for Irish default insurance is higher
than it was BEFORE the European Union and IMF first announced their intent to
engineer a $113 billion rescue for Ireland just eight days ago.
• Earlier this year, when Europe announced a similar bailout for Greece, traders in this
kind of insurance — credit default swaps — gave Greece at least a 30-day reprieve.
Now, they’ve given Ireland no more than three days.
• Investors obviously don’t believe promises by politicians anymore.

18. Will U.S.A become like Japan? – No Way!
Let’s Start With a Little 1990s History in Japan…
Japan’s economic malaise began with twin bubbles — first in its stock market, which peaked in 1989, and then in real
estate two years later. Since then, the country’s overall debt levels have skyrocketed to more than twice the country’s
GDP … its economic output has been rising less than 1 percent a year on average … and consumer prices have fallen
in seven of the last ten years.
And all that has happened in spite of the fact that the Japan’s central bank has kept interest rates at or near zero for nearly a
decade! Japan try other relatively experimental approaches such as “quantitative easing,” in which the central bank
openly buys loans, securities and other assets. For a few years it looked like a turnaround was coming, but those
hopes were dashed by the recent global economic meltdown. And today, despite all its efforts, Japan is still waiting for
a sustained rebound.
We are lucky to be in India……
The U.S. is also much different than Japan in terms of its demographics, trade balance, financial system, savings rate, and
position on the global stage. And even the fact that the Fed remains extremely concerned about the risk of deflation
represents a level of commitment that Japan’s policymakers lacked in the first few years after their crisis.This battle is
far more global in its nature — especially because Europe is wrestling with its own massive problems. Best way is to
invest in emerging economies like China, India, Brazil etc

19. Top 3 Investment Avenues

20. Buy Gold ETF & Crude Future
In general, commodities tend to have a up move when the
U.S. dollar is weak, and a down move when the
greenback strengthens. With news of a compromise
on extending the Bush tax cuts, recent strength in
the U.S. dollar, and signals from China it may raise
interest rates, commodities are likely to fall for short
term.
Gold : Outlook for gold is bearish for short term &
bullish for second half of 2011. The current
correction could be attributed to profit booking, still
would prove to be safest investment vehicle.You
should wait for next 1-3 months and buy Gold ETF
only after the short term fall is complete. Allocate a
part of the portfolio in order to diversify & mitigate
risk.
Crude: We can expect a short term correction in crude
during next 1-3 months followed by upside. Go long
in Crude future only after correction is done. It
seems to be momentum based buying but still
technically a "buy on dips" story.

21. Short Nifty Future / Buy Nifty Put Options
There is no doubt that we are in the down trend
with minor ups in between. 100 EMA is
trading at 5946 & 200 EMA is trading at
5885. If you want to trade or hedge your
portfolio, you can do so by following two
strategies..
1st – Take a positional short position in
Nifty Future (you might need to rollover
for next 2-3 months to maximize you gains).
2nd – Buy Nifty Put Option prefer for Jan
2011 series. In case of market correction,
these options can multiply multifold.
For more about target & stoploss contact
www.stoplosstrade.com or call
09886403791 (JK). Please consult your
technical analyst before taking above
positions.

22. Follow TMP & MMP/ Join HBJ Capital Ventures LLP
The Millionaire Portfolio (TMP) & Money Multiplier Portfolio (MMP)
Most of our members has already taken our two most popular offline portfolio
management services called TMP & MMP. These portfolios are managed by expert
portfolio manager who keep track of each stock, add/remove stocks from the
portfolio & share it with the members which is replicated by them. In spite of the
current market fall, our TMP & MMP were able to sail thru. It means you need a
dedicated portfolio manager to manage your funds offline. Take this services to
maximize your returns.
HBJ Capital Ventures LLP – Investment Unit of HBJ Capital
After successfully running various investment packages & offline PMS, we have started
an asset management fund where your own HBJ Capital will manager your money.
The minimum contribution for this fund by a partner is INR 50 Lacs, so if you are
interested you can approach us at Info@hbjcapital.com to join this call +91
9886736791 (Mr. Sandeep Jain).

23. Visit : www.hbjcapital.in
HBJ Capital™ Services Pvt. Ltd.
#912, 1st ‘F’ Main, Girinagar II Phase,
BSK 3rd Stage, Bangalore - 85
Contact: +91 80 65681133/34, Mob : +91 98867 36791
Bangalore |Chennai |New Delhi |Pune |Hyderabad

24. Disclaimer
This document is not for public distribution and has been
furnished to you solely for your information and must not
be reproduced or redistributed to any other person.
Persons into whose possession this document may come
are required to observe these restrictions. This material is
for the personal information of the authorized recipient
only.
The recommendation made herein does not constitute an offer
to sell or solicitation to buy any of the securities
mentioned. No representation can be made that
recommendation contained herein will be profitable or that
they will not result in loss. Information obtained is deemed
to be reliable but do not guarantee its accuracy and
completeness. Readers using the information contained
herein are solely responsible for their action.
HBJ Capital, or its representative will not be liable for the
recipient’s investment decision based on this report. HBJ
Capital, officers, directors, employees or its affiliates may
or may not hold positions in the companies /stocks
mentioned herein.