Funda and Tech Analysis Final

Fundamental and Technical Analysis Of Gas Authority of India Limited

Submitted to: Professor A.K. Puri FORE School of Management

Submitted By Latika Sadhwani FMG XV B 61070

Fundamental AnalysisAbout Gas Authority of India Limited (GAIL)GAIL dominates the natural gas transmission business in India backed by 4,500 km of gas pipeline spread over 9 key states, handling approximately 23 bn cubic meters of natural gas. Moreover, it also operates a 1,500 Km Jamnagar-Loni LPG pipeline. This virtually makes it a monopoly utility service provider with an assured rate of return on its assets. The company is India's leading producer of household gas (LPG) with over 1.1mtpa capacity. Gail has JVs with BPCL and British Gas to supply piped natural gas and compressed natural gas to Delhi and Mumbai respectively. The company is also a key stakeholder in Petronet LNG, an LNG import JV, with plans to import nearly 7.5 mtpa in the country by FY05. Gail operates a 300 thtpa petrochemical plant in UP and has plans to up its capacity to 440 thtpa over the next 3 years. Gail has also interest in exploration (JV with ONGC) and telecom (GailTel). In short, Gail is a giant in the gas transmission business and plans to straddle all aspects of this business going forward. Today, GAIL's Business Portfolio includes:

5,800 km of Natural Gas high pressure trunk pipeline with a capacity to carry 130 MMSCMD of natural gas across the country 7 LPG Gas Processing Units to produce 1.2 MMTPA of LPG and other liquid hydrocarbons North India's only gas based integrated Petrochemical complex at Pata with a capacity of producing 3,10,000 TPA of Ploymers 1,922 km of LPG Transmission pipeline network with a capacity to transport 3.8 MMTPA of LPG 30 oil and gas Exploration blocks and 3 Coal Bed Methane Blocks 13,000 km of OFC network offering highly dependable bandwith for telecom service providers Joint venture companies in Delhi, Mumbai, Hyderabad, Kanpur, Agra, Lucknow, Bhopal, and Pune, for supplying Piped Natural Gas (PNG) to households and commercial users, and Compressed Natural Gas (CNG) to the transport sector Participating stake in the Dahej LNG Terminal and the upcoming Kochi LNG Terminal in Kerala GAIL has been entrusted with the responsibility of reviving the LNG terminal at Dabhol as well as sourcing LNG Established presence in the CNG and City Gas sectors in Egypt through equity participation in three Egyptian companies: Fayum Gas Company SAE, Shell CNG SAE and National Gas Company SAE. Stake in China Gas Holding to explore opportunities in the CNG sector in mainland China

A wholly-owned subsidiary company GAIL Global (Singapore) Pte Ltd in Singapore

World Economy ViewThe Dow Jones Industrial Average, representing in the US what the Sensex is for Indian stock markets, touched a record high of 14,000 last Thursday. However, the very next day saw the index dropping by over 1%, or 150 points to 13,850 levels. Lacklustre quarterly performance reported by some large corporations and fears of a slowing housing market seem to have rattled investors in US equities. If that is not all, the dollar is also dropping on its knees against the Euro and most of the other major currencies. Oil remains at its historically high levels, bringing to light fears that the world is indeed moving towards an 'oil shock' as supplies decline while demand shows no signs of cooling off. In the meanwhile, the US Federal Reserve, alongwith its other global central bank peers, remain focused on controlling the demon of rising prices of consumer items - foods prices are rising, oil for cooking and traveling and heating is all going up, global travel is getting expensive (for the Americans, each dollar converted to a foreign currency will fetch them a lower disposable amount). Even when we talk of India, the policymakers and stock markets are cheering the cooling off of inflationary pressure. But where are the prices falling. We are paying higher prices for food each passing month. Housing and its maintenance is getting expensive (some experts say that house prices have peaked). Electricity no more costs what it used to. Continued supply of water remains a concern even in cities like Mumbai, so there is higher cost in form of 'scarcity premium'. And if, by chance, you consume un-drinkable water provided by the municipal corporation and get ill, you get to know the rising cost of doctors, hospitals and medicines. So, where is the inflation coming down? And not to forget, the cost of labour is rising as salaries jump through the roof across India Inc. (not really adhereing to the Prime Minister's call for social responsibility from Indian corporate honchos!). People are getting paid better, and they are spending higher on consumer durables and non-durables. But not before they manage to pay higher EMIs on the loans that they took from their bank for that 'dream house' that is now giving them nightmares. That is truly the story of an Indian middle class, which has otherwise been christened as the 'next big opportunity' by so many economic and industry experts. The 'easy' money has been made in the past few years has been a child of the easy money policy of central bankers worldwide, more so of the US central bank. Money became cheap for the Americans -> they bought more homes and splurged on consumption items -> more goods and services were imported from cheaper locations like East, Central and South Asia -> the export receivables, which were in US dollars, were bought by central banks in exporting countries to be invested in US dollar reserves -> these fund that flowed back to the US markets as investments by 'foreigners' again provided ample liquidity to consumers to spend on more of cheap imported merchandise -> this led to

upward pressure on inflation which kept the real cost of borrowing low for American consumers. In the meanwhile, higher demand for goods from US consumers kept factories in exporting countries running at full steam, thus aiding the economic growth of the entire region. This economic growth and corporate growth attracted more of foreign (this time American and European) investors to invest in 'attractive' emerging markets assets like stocks, debt, commodities and real estate. Asset prices in these regions rose stupendously as there was strong and continued demand. Foreigners from the West started to buy anything and everything that was 'emerging' and local investors, believing that these assets will continue to rise as foreigners will continue to buy come what may, began investing their savings (which increased over the past few years due to reason mentioned in the above paragraph) into these assets, and all kind of them, hoping that the foreigners will come the next day and next month to take the asset prices up, up and away! But the foreigner is now facing troubles at home. His second house, on the back of which he had been on a consumption spree over the past 4-5 years, is not selling and he does not have enough money to pay mortgage installment on the first one, which is actually much larger and lavish than is required. And he plans to reduce his consumption expenditure as the debt on his head still stands at US$ 1.3 compared to his income of US$ 1. So, what happens if the US consumer stops of even reduce his spending of all those cheap 'Made in East' goods? What will happen to all those export oriented capacities created in China and elsewhere in Asia to cater to the 'unending' needs of this foreigner? We are yet to figure that out. Currently, we are busy trying to figure out why the consumer price inflation in India is falling while cost of consumption items, both durables and non durables) are on a rise. Why are the stock markets rising when they generally should not have a direct correlation between rising cost of living of domestic investors, a perilous global economy, high energy prices and confused central bankers? We are yet to figure that out!

Global Economy View With focus on Oil and Natural Gas sectorGlobal Trade Imbalances Due To Moderate Oil Prices The financing of the large current account deficit of the US is increasingly becoming a cause for concern. Government saving has fallen in the US and Japan and household financial saving has virtually disappeared in countries with housing booms. On the counterpart side, many emerging markets, particularly in Asia, have run current account surpluses resulting in build-up of international reserves. The US current account deficit is projected by the OECD to exceed 7.0 per cent of GDP in 2007 with substantial surpluses elsewhere. Such a configuration could increase the probability of a disorderly unwinding of macro imbalances and disruptive movements in major currencies.

Within the mounting global imbalances, oil-exporting countries are currently running large current account surpluses, repaying debt, as in the case of Russia, and building up assets. Oil exporting countries have been actively using their export revenue to buy financial assets in various countries. Thus, the rise in oil prices has represented a sizeable redistribution of income from oil consumers to oil producers, which could have an impact on global demand and the future course of unwinding of global imbalances. Consumption of natural gas worldwide increases from 100 trillion cubic feet in 2004 to 114 trillion cubic feet in 2030. By energy source, the projected increase in natural gas consumption is second only to coal. Natural gas remains a key fuel in the electric power and industrial sectors. In the power sector, natural gas is an attractive choice for new generating plants because of its relative fuel efficiency.

Natural gas also burns more cleanly than coal or petroleum products, and as more governments begin implementing national or regional plans to reduce carbon dioxide emissions, they may encourage the use of natural gas to displace liquids and coal. Much of the worlds natural gas use is for industrial sector processes. With world oil prices expected to remain high relative to historical levels throughout the projection period, natural gas is projected to displace liquids in the industrial sector to some extent. Industrial use of natural gas is projected to increase at an average annual rate of 1.9 percent from

2004 to 2030, as compared with an average increase of 1.1 percent per year for liquids consumption in the industrial sector.

Short Term Energy Outlook

The significant crude oil price increases of the last 2 months are the result of increasingly tighter world oil markets. In May, the refiner acquisition cost (RAC) for crude oil averaged $61.60 per barrel. By August, the average monthly RAC price is projected to be $73.50 per barrel. The annual average RAC price is expected to increase from $60.23 per barrel in 2006 to $64.86 per barrel in 2007 and to $68.75 per barrel in 2008. West Texas Intermediate (WTI) crude oil prices are projected to average $67.60 per barrel for 2007 and $71.25 per barrel in 2008. As of August 6, retail motor gasoline prices have fallen by almost 40 cents per gallon from the spring peak of $3.22 per gallon on May 21, even as the price of WTI crude oil has risen by over $9 per barrel (22 cents per gallon) over the same period. The exceptionally high refiner margins that were the result of numerous refinery problems earlier in the year have eased considerably. Gasoline prices at the pump are projected to continue to decline through the end of 2007 and then begin their seasonal increase next spring.

Consumption. On an annual basis, total natural gas consumption is expected to rise by 4 percent in 2007 and 1.3 percent in 2008 (Total U.S. Natural Gas Consumption Growth). In annual terms, EIA projects increased consumption of natural-gas-fired in the electric power sector in 2007, rising 4.8 percent over 2006. In 2007, the residential and commercial sectors are expected to show annual growth of 10.5 and 7.5 percent, respectively, because of the projected return to normal winter weather, while industrial sector consumption is expected to decline by 1.5 percent.

Production and Imports. Growth in onshore production continues to offset declines in production from the Gulf of Mexico. Through the first half of 2007, year-over-year Federal Gulf production has declined about 2.3 percent. Conversely, production over this same period in the Lower-48 onshore region has increased by 3.1 percent. On an annual basis, Gulf production is expected to decline by 4.2 percent in 2007 while Lower-48 onshore production is expected to rise by 1.6 percent. EIA projects a total hurricaneinduced outage of 81 billion cubic feet (bcf) for the Gulf of Mexico (down from 85 bcf projected in the last Outlook). Total U.S. dry natural gas production is expected to rise 0.8 percent in 2007 and 1.5 percent in 2008. Imports of liquefied natural gas (LNG) for the first half of 2007 totaled 460 Bcf, about 53 percent more than the comparable period in 2006. For the remainder of the year EIA is forecasting a decline in LNG imports as more cargoes are expected to be directed to European and Asian markets. In Europe, market prices in recent weeks have risen from relatively lower levels earlier this year and are now more competitive with U.S. market prices. Total LNG imports in 2007 are still expected to reach 850 bcf, which would be a record high. Inventories. On July 27, 2007, working natural gas in storage was 2,840 bcf (U.S. Working Natural Gas in Storage). Strong injections in July pushed current stocks over year-ago levels for the first time since EIAs storage report for January 27, 2007. Current inventories are now 410 bcf above the 5-year average from 2002 to 2006, and 68 bcf above the level from the corresponding week last year. Prices. Current spot prices at the Henry Hub reflect an inactive hurricane season thus far in the Gulf, storage inventories that recently surpassed the corresponding level of a year ago, and mild summer weather in the West South Central region (which represents about one-third of the electric power sectors total natural gas demand). As a result, the average monthly spot price has declined for 3 consecutive months (May, June, and July). However, the hurricane season runs through November 30, and current price projections remain vulnerable to potential storm-induced supply disruptions during that period. Taking into account EIAs current assumption about hurricanes, the Henry Hub spot price is expected to average $6.66 per mcf in the third quarter and $7.96 per mcf in the fourth quarter. For the year, the Henry Hub spot price is expected to average about $7.45 per mcf in 2007 and $8.06 per mcf in 2008.

Price Summary Year 2005 2006 2007 a WTI Crude ($/barrel) 56.49 66.02 67.61 Gasolineb ($/gal) 2.27 2.58 2.74 c Diesel ($/gal) 2.41 2.71 2.82 d Heating Oil ($/gal) 2.05 2.36 2.50 Percent Change 2008 05-06 06-07 07-08 71.25 16.9 2.4 5.4 2.81 13.5 6.4 2.3 2.99 12.5 3.9 6.2 2.68 15.2 5.8 7.3

Natural Gasd ($/mcf) 12.84 13.75 13.04 13.64

7.0

-5.2

4.7

National analysisRecent Economic Developments: Real GDP growth maintained its blistering pace in 2006/07 at 9.4% y/y bolstered by strong domestic demand and export growth of nearly 18% backed by notable gains in service sector output. Industrial production grew by a heady 13.6% yoy in April 2007, down slightly from the 14.% yoy growth registered in March, but higher than the 12% registered in the three-month period from December through February 2007, and higher than the 11.5% averaged in the second half of calendar 2006. Indias manufacturing sector accounts for nearly three quarters of industrial output and around 15% of GDP, has been one of the key drivers of the countrys impressive economic expansion in recent years. Monetary Policy: Growing inflation has resulted in Indias Central Bank (RBI) to hike the benchmark bank rate to 6% and the reverse repo rate to 7.5% - their highest levels in over a year. The RBI has also increased reserve requirements on three separate occasions since December, to a high of 6.5%. But the authorities are keeping a watchful eye on the value of the currency, which this winter appreciated to 40-41 rupee per USD, far higher than the authorities preferred level of 44-47 per USD. Overall, slowing growth should result in a softening of the currency vis--vis the USD over the next 12-18 months. Reserve requirements: The Bank continues to maintain its tightening bias on monetary policy on concerns about the rapid credit growth, strains on credit quality and elevated asset prices. Latest inflation data (April/May 2007) shows inflation trending at almost 8% y/y in all four consumer inflation indexes tracked by the authorities, higher than the RBI target of 5.0-5.5%. The RBI is concerned that further interest rate rises may dampen the momentum of economic growth and initiate a surge in bad loans and thus hamper confidence. Given that 60% of Indias population generates income from the primary sector, which depends heavily on cyclical factors like monsoon rains, a rise in defaults would be damaging to the economy and hence the possibility of a forthcoming bad loan crisis has drawn particular attention to the ratio of non-performing loans in one of the weakest segments of the economy. Concerned with these implications, the central bank appears hesitant about further rate hikes. It is not unlikely that the RBI could use alternative tools to tighten policy, like an increase in reserve requirements. Fiscal Policy: In its 2007/08 budget presented in early March, the authorities called for the overall fiscal deficit to decline to 3.3% in 2007/08, and further to 3.1% in 2008/09. On the expenditures side, the authorities are curbing the more onerous expenses (fuel and food subsidies) as well as curbing the chronic fiscal excesses of the component states. On the revenue side, the authorities are hiking revenues, mainly by bringing the domestic software industry into the tax net. Outlook: Indias recent economic growth has created a conundrum of sorts for the authorities. While they would like to maintain present enviable rates of growth, inflation is far too high for comfort, and the authorities are seeking to dampen growth. Surging FDI inflows has boosted the value of the Indian rupee far above its historical band to slightly above 41 per USD, higher than the authorities preferred level of 44-47 per USD.

Overall, the potential for overheating, coupled with the grow infrastructure squeeze, remains another downside risk.

Industry AnalysisProspects In order to secure the energy security of the country, government has laid increased thrust on exploration in terms of competitive bidding in NELP, buying oil equity outside the country and encouraging private participation in the exploration segment. There have been some significant discoveries in oil and gas space, with discovery of oil in Rajasthan by Cairns and discovery of gas by Reliance in KG basin. OVL (ONGC Videsh Limited), the overseas investment arm of ONGC has also bought stake in oil blocks in as many as 14 countries. Thus, post 2009; we can see enhanced production of oil and gas in the country. Coal Bed methane (CBM) is expected to commercialize within next couple of years, thus paving the way for alternative sources of energy in the country. On the demand side, petroleum products are expected to grow at the rate of 3%-4% over next couple of years. During the year, the competition in the retail fuel market started to show its results with RIL capturing more than 14% of the diesel sales of the country, however it lost due to higher prices vis--vis its peers. The gain, according to HPCL, has been on the higher side in the diesel segment, given their focus on the highways. As we go forward, both PSU and private oil companies are expected to increase their outlets leading to reduction in thruput per outlet. The total demand for natural gas in the country is expected to grow at a CAGR of 16% to over 300 MMSCMD by FY11. From 8% share in the energy basket currently, natural gas share is expected to touch 14% by FY12. Natural gas is cheaper and cleaner fuel compared to the naphtha and fuel oil. Also, the environmental benefits and economic benefits will lead to increased penetration of the CNG in the country.

Supply

In the upstream segment, supply from the domestic market caters to only 30% of the total demand for crude oil in the country. Thus, the supply of the crude is largely met through import. In the downstream segment, refining has seen significant capacity addition in the recent past. As a matter of fact, over the past 7 years, domestic refining capacity grew at a CAGR of 10.7%. The consumption for petroleum products in India grew at a CAGR of 2.4% (FY00 to FY06), which was far below the rate of capacity expansion. Lack of logistics support can hamper the large-scale export potential of the refined products. Demand for petroleum products is dependent on the level of economic

Demand

activity of a nation. The per capita consumption of India is one of the lowest in the world. In the past, we have seen a fair degree of correlation between the growth in petroleum products and the growth in the overall economic activities. However, the energy matrix is expected to see a significant shift, as share of natural gas will increase significantly. Barriers to entry In the upstream segment, government permission is required to commence operation. Finding, exploration, development and production cost of oil fields are significant, thus capital requirement acts as a major entry barrier in the upstream segment. In the downstream segment, it takes about Rs 5 bn - Rs 10 bn per m tonne to set up a refinery. Also, the size of refinery and its location does matter for the economic viability of refinery. The new players wanting to enter the retail segment need to pump in a minimum of Rs 20 bn in the sector in order to be eligible for the retail marketing business. High, since crude availability of country is only about 30% of the requirement. OPEC, a group of major oil producing countries, accounted for 42% of the total crude oil produced in 2005, thus the group has a greater bargaining power and a major say in the determination of the international crude oil prices. For the petroleum products on the other hand, given the surplus capacity in the country and the commodity nature of the product, the bargaining power is on the lower side. In the upstream segment, government allocates the crude oil produced by the players. Thus, in an indirect way acts as a bargaining arm for OMCs. Moreover, ONGC is forced to share under-recoveries on the sale of petroleum products by way of giving discounts to OMCs. Thus, the lack of transparency and government regulations increase the bargaining power of customers. In the downstream segment, the standalone refineries had to share the subsidy burden (though currently the burden for LPG and SKO is removed again). Given the surplus refining capacity in the country and OMCs increasing their refining capacities, standalone refineries stand to lose. On the retail front, government acts as a strong bargaining arm of customers, with OMCs having to sell the sensitive petroleum products at losses. In the industrial and consumer segment, the competition is moderate and is expected to intensify with the increase in the refining capacity of the country.

Bargaining power of suppliers

Bargaining power of customers

Competition Upstream segment has been made competitive with introduction of NELP, however the dominance of ONGC in the segment is there to

exist for some time to come. In the downstream marketing segment, the competition intensified during the year with private players (read reliance) capturing as much as 14% of the market share in the sales of diesel and also accounted for more than 75% of the incremental sales in petrol (MS). The retail outlet addition grew unabated inspite of losses in the retail segment. OMCs have been aggressively opening new outlets. India had 26,572 retail outlets at the end of FY05, which registered a growth of 16% over the previous number of 22,935 outlets in FY04. This signifies the increased competition in the segment.

Company AnalysisEfforts by GAIL in 2007 Gail India Ltd has announced that the Company has launched 'e-tendering' as its e-Governance initiatives in the Company. The etendering was launched on February 13, 2007 by the Company's CMD, Dr. U D Choubey in the presence of all functional Directors and senior officials of the Company. Gail India Ltd and Reliance Industries Ltd (RIL) signing a Memorandum of Understanding (MoU) for cooperation in gas sector on March 15, 2007 . Gail (India) Ltd has formed a joint venture with Indian Oil Corporation (IOC) for gas distribution in Kolkata and other towns. Gail India Ltd has announced that the Company and ONGC on July 24, 2007 signed a Memorandum of Understanding (MoU) for formation of a Joint Venture. Gail India signs MoU with Transparency International India for Integrity Pact with Contractors.

The next 5 year strategy by GAIL Gail continues to build infrastructure for Natural gas sector in the country (lng, transmission and distribution) and has mega Plans in coming years Gail aims to maintain its dominant position in Core business area of gas transmission & Marketing Gails strategy is to integrate vertically in E&P sector (upstream) and in retail gas & Petrochemicals (downstream). Gail pursues globalization route for energy Security of the country and diversification across value chain.

ProjectionsThe projections for EPS and P/E can be done as follows31/03/2005 Shares outstanding (eoy) No. of employees Total wages/salary Avg. wages/employee Net Sales Other income Total revenues Gross profit Depreciation Interest Profit before tax Tax Profit after tax Price Earnings per share P/E ratio (Price/EPS) Year Ending 31/03/2006 31/03/2007 EQUITY SHARE DATA 845.65 3000 2,258 845.65 3000 3,011 30/9/2007 Projections 31/3/2009 31/3/2011

845.65 3000 2,171 648.3 127,030 3,555 130,585 37,745 9,816 1,502 29,982 9,585 20,388 212.2 24.1 7.6

845.65 3000 3016.12 1005.37 170302.98 6295.50 176598.48 33428.89 6222.00 2654 24,553 4910.5789 19642.316 260 23.23 11.19

845.65 2950 4454.91 1510.14 185518.8 8743.75 194262.5 36415.61 6,300 2350 27,766 5553.122 22212.49 357 26.27 13.59

845.65 2850 7499.10 2631.26 208055.8 13662.11 221717.9 40839.41 5,900 2250 32,689 6537.883 26151.53 425 30.92 13.74

655.8 866.7 INCOME DATA 148,788 165,423 4,631 5,596 153,419 171,019 38,174 32,471 6,002 5,944 1,327 1,201 35,476 30,922 10,254 5,435 24,390 25,453 318.15 264.55 28.8 30.1 9.1 8.9

The following assumptions and rationale are behind the projectionsParameter Shares outstanding No. of employees Total wages/salary Avg. wages/employee Assumption No change in at least the past 6 yrs hece no change expected in future also Onset of better technology and streamlined procedures multiplication of wage per employee and no of employees Kept the Wage rate increase rate as 33 % only as high rate can be compensated for by lesser no of employees Consumption will grow at 5.9 % pa as per Fed govt projections till 2030 The price has been either constant or actually declined in the past 4 yrs hence that part can be ignored. Source:Energy Information Administration, USA GAIL has signed a lot of deals with other players for various projects howevr given the nature of the industry they have a gestation period of 5 - 10 yrs, hence no major increase in other income, except for that on account of prices The gross profit will also increase @ 5.9 % assuming the pries remain constant or have minimal increase Depreciation Remains the same due to recent investment in infrastructure. Increases majorly in 2008 as long term debt goes up by more than double Calculated by reducing depreciation and interest from Gross profit Tax @ 20 %, As the effectice tax rate has been falling.Lat yr it was 17 % Calculated by reducin tax amount from profit before tax

Net Sales Other income Gross profit Depreciation Interest Profit before tax Tax Profit after tax

Price Trend

An upward trend can be observed. Though the prices are falling currently the 50 Day moving average also has a decreasing trend. This suggests that the prices are likely to show only decline further. Anybody who holds the share should exit immediately at least with a short term view. However it can be seen that the moving average peaks once a year then starts declining to redo the cycle again after an year. This years peak seems to have 339.05 on 23 July 2007. However every years peak is greater than the last year as there is a net increasing trend.Date 7/23/2007 4/6/2006 10/4/2005 1/3/2005 Peak 339.05 320.1 283.15 250.45

500 450 400 350 300 250 200 150 100 50 0

Technical AnalysisGAIL

Trendlines Resistance Break Out Support 50 Day Moving Average

Break Out

Head and Shoulder

Necklin ee

As we can observe from the graph the support price can be termed between Rs236-238. Resistance can be observed at a price level of Rs 300-302.

We can see that whenever the resistance was breached in Mar 07 the pricesplummeted. When prices crossed the resistance level in the first week of they soared.

Though the prices are falling currently the 50 Day moving average has anincreasing trend suggests that the prices are likely to show an increasing trend.

An upward trend can be observed.Candle Stick Chart

Bearish Line

Piercing line Morning Star

Bearish Line: It occurs when prices open near the high and close significantlylower near the period's low.

Morning Star: The "star" indicates a possible reversal and the bullish (empty)line confirms this

Piercing Line: This is a bullish pattern. The first line is a long black line and thesecond line is a long white line. The second line opens lower than the first line's low, but it closes more than halfway above the first line's real body. Interpretation An upward trend can be observed. Though the prices are falling currently the 50 Day moving average also has a decreasing trend. This suggests that the prices are likely to show only decline further. Anybody who holds the share should exit immediately at least with a short term view. However it can be seen that the moving average peaks once a year then starts declining to redo the cycle again after an year. This years peak seems to have 339.05 on 23 July 2007. However every years peak is greater than the last year as there is a net increasing trend.

RSI Chart

Fast Stochastic Chart

NIFTY

Long Term Trend

Head and Shoulder

Short Term Trend

Resistance 20 Day Moving Avg

A resistance level can be seen at around 2900 No support can be identified. The trend is increasing over the past three years. The 20 day moving average and the 50 day moving average show a kink on the last day that the graph is plotted. This shows that the index is likely to fall.

Candle Stick Graph

Bullish Engulfing Lines Bearish Engulfing Lines Bullish Phase

Bullish engulfing lines: As can be seen white empty lines are spotted after bluefilled ones indicating a trend reversal.

Bullish phase: white empty lines, each time both the opening price and theclosing price is higher than before, showing a strong bullish phase.

Bearish engulfing lines: long filled lines after an significantly upward trend,strongly suggest a bearish pattern. Interpretation The Nifty will show some major decline as a strong downfall seems to have set in. However it is worth noting that it has a resistance level at 2900 and is unlikely to fall below it.

SENSEX

Trendline

Head and Shoulder Neckline

20 Day Moving Avg

No clear support or resistance levels can be identified. An increasing trend is observed in the last three years. The 20 Day moving average shows a kind to turn downwards and further theabsolute value of the Sensex has been falling suggesting an onset of a bearish phase.

Candle Stick Graph

Star

Star: It shows a reversal is in store. It is a long empty line followed by a smallempty line starting near the close of the first. In the Indian context this might be the time when the may market correction was over and the market started rising again.

Interpretation : The Sensex will show some major decline as a strong downfall seems to have set in. However the trend has been rising, over the long term, 6 months or more it will rise only. Short term volatility and a small bear phase are most likely.

ReferencesWebsites

www.equitymaster.com www.moneypore.com www.icicidirect.com www.icharts.in www.in.finance.yahoo.com

Reports and Publications

GAIL annual report 2006-07 Energy information Administration Official statistics by US govt World Bank report 2007 International Energy outlook 2007