SPECIAL MONTHLY REPORT ON

Bullions & Energy(November 2013)

2

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LL

ION

S &

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GY

November 2013

-3.72

-1.46

-6.89

-0.18

-0.30

0.64

-5.81

0.56

-8.00 -7.00 -6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00

Gold

Silver

Crude oil

Natural Gas

BULLIONS AND ENERGY PERFORMANCE ( - 31st October 2013) (% change)30th September 2013

Source: Reuters and SMC Research

COMEX/NYMEX MCX

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BULLIONS

In the month of October lower level buying was

witnessed in the bullion counter as bounce back in

the international market supported its prices

higher. After testing low of below $1250 on domestic

bourses its prices witnessed short covering and test

above $1350 in COMEX. Decline in greenback

supported the bullion counter. But during later part

of the month bounce back in greenback and profit

booking pressurized the prices lower. Gold retreated

during last week of October trimming a monthly

advance, on speculation that the U.S. Federal

Reserve will begin scaling back monetary stimulus

as the economy improves. In the month of

November 2013 bullion counter can move sideways

with positive path. On domestic bourses the

movements of local currency Rupee will be key

factor to watch out which can again depreciate

towards 64 in the month of November.

Recent Trend in Central banks Gold reserves

Russia reduced gold reserves for the first time in a

year in September as Mexico cut holdings for a 17th

straight month, according to International

Monetary Fund data. Russian reserves declined

about 0.37 metric ton to 1,015.1 tons, while Canada

and Mexico also sold. Kazakhstan's reserves

expanded 2.52 tons to 137.04 tons, the data showed.

Central bank gold purchases may total 350 tons in

2013, the World Gold Council predicts, after they

added 534.6 tons last year, the most since 1964.

Canada's holdings fell to 3 tons last month from 3.1

tons, and Mexico's lost 0.1 ton to 123.5 tons, the IMF

data showed. Turkey's holding rose 2.9 tons to 490.3

tons in September, increasing for a third month, the

data showed. Azerbaijan's hoard expanded for a

ninth month, while Belarus, Kuwait, the Kyrgyz

Republic, Serbia, and Ukraine also added to

reserves.

BU

LL

ION

SNovember 2013

WORLD OFFICIAL GOLD HOLDINGS

International Financial Statistics, October 2013

Top 20 World gold holdings countries

Euro Stress tests can impact Gold

European Central Bank announced that in November it

will be starting asset-quality reviews of 130 European

financial institutions. Because of a new regulations

created by the central bank, financial institutions will

have to set aside 8% of their risk-adjusted capital as a

buffer against bad loans on their balance sheets.

Economic indicators and Gold

Gold traders need to continue to closely monitor the

U.S. economic calendar. Weaker data will prolong the

period of time before the Fed actually begins trimming

its monthly bond purchases. The dollar will remain

under pressure as long as the U.S. economic data

continues to show signs of a sluggish economy just

limping along. Bearish dollar could prove bullish for

Gold.

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SNovember 2013

Rising US debt

Just one day after President Barack Obama signed into law a bipartisan deal to end the government shutdown

and avoid default, the US debt surged a record $328 billion, the first day the government was able to borrow

money. The U.S. national debt has increased by more than a trillion dollars in the past 12 months. This pushed

the total debt above $17 trillion for the first time in history. As the debt increases and GDP growth slows, the debt-

to-GDP ratio will continue to rise at an accelerating pace. The following charts show the steepening rise in total

public debt and the debt-to-GDP ratio of the United States.

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SNovember 2013

Analysis: Silver's underlying demand/supply fundamentals remain weak and that inventory is abundant.

Above ground inventory in China (the growing source of demand for the metal since 2009) remains as high as 18

months of fabrication demand, up from 16 months at the start of 2012 and only 4 months in 2009.

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SNovember 2013

U.S. gold coin Sept sales down 81 pct and $3.34 billion worth of gold jewellery in the first six

safe-haven bids weak months to September, down 58.34 percent from the

same period the year earlier. Total gems and jewellery Demand for U.S. gold coins fell 81 percent in exports fell 15.91 percent to $16.54 billion during the September on a year-over-year basis, as political same period. Imports of gold into India in August and turmoil in Syria failed to rekindle retail buying that September fell to 10.62 tonnes, all of which went into has slowed after months of exceptional bargain the Special Economic Zones. That compares with a hunting.record high of 162 tonnes in May.

India's third biggest gold fund reopens to World demand estimates by WGC for second investorsquarter 2013

India's third biggest gold fund have started In a turbulent second quarter of 2013 gold demand fell accepting fresh investments again after shutting off by 12% to 856.3 tonnes .A wave of outflows from ETFs new buy-ins three months ago to support was the principal cause of the decline, although this government efforts to curb bullion demand and was mitigated by record demand for gold bars and control a rising trade deficit. Reliance Gold Savings coins. Continuing the theme of the previous quarter, Fund, which manages about $300 million have demand for jewellery grew significantly to reach multi-begin accepting subscriptions.year highs. Supply declined by 6%, the primary reason

being a marked contraction in recycling.India's Sept gold jewellery exports rise for

second month

Exports of gold jewellery from India rose for a

second straight month in September. India shipped

India and China still lead the field --WGC period in 2012.In both markets, the strength in second

quarter demand was indicative of opportunistic The consumer market for gold was once again buying not only at the consumer level but also by the dominated by global leaders India and China, which trade, which used the opportunity to bolster stocks. together accounted for almost 60% of the global This attitude among consumers is perhaps a more jewellery sector and around half of total bar and surprising result for China, where the historical coin demand. On a year-to-date basis, total tendency has been to buy into a rising trend, and is consumer demand (for jewellery, bars and coins) in more remarkable for the fact that the second quarter is each country is almost 50% ahead of the same

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SNovember 2013

traditionally a seasonal low point for gold, coming very positive reception across the globe. Despite the

as it does after the Q1 peak of Chinese New Year- lower prices, demand in value terms was the fourth

related purchases. highest on record. India and China generated the

largest volume increase almost 120t of the 155t

increase in demand was from the two Asian giants.Jewellery demand in Second quarter –WGC

India and China generated the largest volume increase Quarterly jewellery volume rose to its highest level

almost 120t of the 155t increase in demand was from for five years as the sharp drop in prices met with a

the two Asian giants.

Investment demand decline. In value terms, total investment was at a two-

year low. The 151.5t of OTC investment and stock flows Total investment demand (which includes OTC demand was made up of inflows from a number of investment and stock flows – the element of different sources, including investment in gold deposit investment capturing less visible investment flows accounts (not captured in total bar and coin demand): and possible stock changes, as well as any statistical growing interest in such investment vehicles was residual) also showed a notable year-on-year notable in China, Turkey and Japan.

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SNovember 2013

Gold supply of the year was the lowest first-half total since 2007.

The second quarter saw an extension of the upward A 62.4t decrease in the supply of gold during the drift in mine production, which has been relatively second quarter was almost solely due to reduced stable with a moderate upward bias since Q1 2008. quantities of recycling coming onto the market. The Main contributors to growth in the sector were little 672.1t of recycling supply in the first six months of changed from last quarter, with China generating the the year was the lowest first-half total since 2007. bulk of the increase thanks to expansion among a The 672.1t of recycling supply in the first six months number of small- to medium-sized operations.

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SNovember 2013

Range

Gold MCX Rs 28500-31500 per 10 gms

COMEX $ 1250-1380 per troy ounce

Silver MCX Rs 45000-52000 per kg

COMEX $ 21-25 per ounce

China Gold Demand Equals World Production!

Analysis: China gold demand equals world important medical weapon. The Silver Institute

production as the chart above shows, the gray observed that the medical use of silver has helped

background representing global output. Chinese and reduce the growing threat of antibiotic-resistant

Indian consumers have been buying gold for germs spreading through a hospital. Today, the need

hundreds of years and that trend is unlikely to stop to combat antibiotic-resistant superbugs and to

anytime soon. As these countries continue to gain suppress hospital-acquired infections has increased

economic power and with the population shifts at the importance and number of uses of silver-infused

their back, gold will remain a cornerstone of emerging products.

market consumer's wealth-building strategy.

Mobiles and Paints

Growing Industrial Demand of SilverMotorola uses silver embedded in plastic housings for

Silver conducts heat and electricity better than any many of its mobile phones. Other manufacturers are

other metal on Earth. It is also anti-bacterial. These using silver in keys, or in the cases of calculators and

amazing properties make silver indispensable in a vast other hand-held instruments. Paints too have been

array of modern industrial and technological made more effective against molds, yeasts and various

applications. This industrial demand has been bacteria with the addition of silver.

shifting dramatically since the turn of the century, as In the month of November 2013 bullion

defunct applications for silver like photographic film counter will remain on volatile path as the

have been replaced by new technologies like movement of greenback, outcome of various

photovoltaic power. The evolution of silver's indicators, and movement of local currency

industrial applications continues unabated, with new rupee coupled with Physical, ETF and central

uses being developed every year. In spite of a recent bank demand will influence its prices.

dip in demand for industrial silver due to global

economic volatility, the fundamentals of the

industries consuming silver look promising.

Biotechnology

Recent advances in biotechnology have brought a

renewed focus on silver's centuries old history as an

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SNovember 2013

Chart OF HUI (AMEX Gold bug index) (Top 15 US Gold mining companies)

Source: Kitco

ENERGYENERGYCRUDE OIL & NATURAL GASCRUDE OIL & NATURAL GAS

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ENERGY COMPLEX

Crude Oil

In the month of October crude oil prices continued

to tad lower on the backdrop of easing of Middle East

tensions coupled with increasing stockpiles. On

domestic bourses strong local currency kept the

prices pressurized in the crude oil counter. Prices

traded in range of nearly $96-104 in NYMEX and

5950-6500 in MCX. West Texas Intermediate

traded near a four-month low as crude stockpiles

gained for a sixth week in the U.S., the world's

biggest oil consumer. U.S. refineries operated at

87.3 percent of capacity, up 1.4 percentage points

from the prior week. Utilization rates usually peak

during the summer months when U.S. gasoline

demand rises and decline in September and

October.

In November 2013 Crude oil may trade on volatile

path with some short covering can be seen at

current levels .Movement of local currency rupee

can further influence the crude oil prices. Easing

geopolitical tensions, improving crude supplies and

tepid demand growth is keeping lid on crude oil

prices. Crude oil can trade in range of 5700-6450 in

MCX and $92-105 in NYMEX. According to Crude

inventories at Cushing, Oklahoma, the largest U.S.

oil-storage hub and the delivery point for WTI

futures contracts rose by 2.2 million barrels to 35.5

million.

Some key points from EIA estimates

Global Crude Oil and Liquid Fuels

Consumption

EIA projects global consumption to grow by 1.1

million bbl/d in 2013 and by another 1.2 million

bbl/d in 2014, with China, the Middle East, Central

and South America, and other countries outside of

the Organization for Economic Cooperation and

Development (OECD) accounting for essentially all

consumption growth. Projected OECD liquid fuels

consumption declines by 0.2 million bbl/d in both

2013 and 2014. The declines in OECD consumption

are largely due to lower consumption in Europe and

Japan.

Non-OECD Asia, particularly China, is the leading

contributor to projected global consumption

growth. EIA estimates that liquid fuels consumption

in China will increase by 420,000 bbl/d in 2013 and

by a further 430,000 bbl/d in 2014, compared with

average annual growth of about 510,000 bbl/d from

2003 through 2012.

November 2013

Non‐OPEC Supply

Forecast non-OPEC liquid fuels production increases by

1.6 million bbl/d in 2013 and by 1.4 million bbl/d in

2014. The largest area of non‐OPEC growth is North

America, where production increases by 1.4 million

bbl/d and 1.1 million bbl/d in 2013 and 2014,

respectively, resulting from continued production

growth in U.S. onshore tight oil formations and from

Canadian oil sands.

EIA expects smaller production growth from a number

of other areas, including Central & South America and

Asia & Oceania. In Central & South America, forecast

liquid fuels supply increases by 0.1 million bbl/d and 0.2

million bbl/d in 2013 and 2014, respectively, mainly

driven by increases in Brazil's offshore, pre-salt oilfields

output. EIA expects total liquid fuels supply in

Asia & Oceania to increase by 0.1 million bbl/d in 2013

and 0.2 million bbl/d in 2014. The increase in supply in

2014 in this region comes mostly from production

growth in China, Malaysia, and Australia.

Of the 2.7 million bbl/d of total supply disruptions

globally, approximately 0.6 million bbl/d of the outages

occurred among non-OPEC producers. These estimates

of unplanned liquid fuels outages exclude normal

maintenance and reflect the level of volumes shut in

compared with an assessment of effective production

capacity, which EIA periodically updates. Sudan and

South Sudan, Syria, and Yemen accounted for more

than 80% of all non-OPEC disruptions, with smaller

volumes shut in elsewhere, including Brazil and the

North Sea.

OPEC Supply

EIA projects total OPEC liquid fuels production to

decline by 0.8 million bbl/d in 2013 and 0.2 million

bbl/d in 2014. These declines reflect unplanned outages

of crude oil production among some OPEC producers as

well as decreases in Saudi Arabia's production in

response to the increase in non-OPEC supply. Total

OPEC surplus crude oil production capacity in the

second quarter of 2013 averaged 2.2 million bbl/d,

which is 0.2 million bbl/d above the year-ago level, but

still nearly 1.0 million bbl/d lower than the historical

three-year average. EIA projects OPEC surplus capacity

will increase to an average of 2.5 million bbl/d in the

fourth quarter of 2013, and 4.6 million bbl/d in the

fourth quarter of 2014. These estimates do not include

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November 2013

additional capacity that may be available in Iran but

is currently offline because of the effects of U.S. and

EU sanctions on Iran's oil sector.

U.S. Liquid Fuels Consumption

In 2012, total liquid fuels consumption declined by

395,000 bbl/d (2.1%). Total liquid fuels

consumption for the first half of 2013 rose by 70,000

bbl/d (0.4%) compared with the same period last

year, led by increases in liquefied petroleum gas and

distillate consumption. Projected total liquids

consumption during the second half of 2013

increases 180,000 bbl/d (1%) from the same period

last year, with all of the finished products

contributing to that growth. However, EIA

continues to expect declining gasoline consumption

in 2014 as improving fuel economy of new vehicles

continues to outpace growth in highway travel.

Also, jet fuel consumption remains flat as increased

fuel efficiencies brought about by fleet turnover

more than offset increases in air freight and travel.

In 2014, total consumption of liquid fuels increases

by only 30,000 bbl/d (0.2%) with further declines in

motor gasoline offset by higher distillate fuel

consumption.

U.S. Liquid Fuels Supply

EIA expects U.S. crude oil production to rise from an

average of 6.5 million bbl/d in 2012 to 7.5 million bbl/d

in 2013 and 8.4 million bbl/d in 2014. The continued

focus on drilling in tight oil plays in the onshore

Williston, Western Gulf, and Permian basins is

expected to account for the bulk of forecast production

growth over the next two years. Offshore production

from the Gulf of Mexico is forecast to average 1.3 million

bbl/d in 2013 and 1.4 million bbl/d in 2014. Since

reaching 12.5 million bbl/d in 2005, total U.S. liquid

fuel net imports, including crude oil and petroleum

products, have been falling. Total net imports fell to 7.4

million bbl/d in 2012, and EIA expects net imports to

continue declining to an average of 5.4 million bbl/d by

2014. Similarly, the share of total U.S. consumption

met by liquid fuel net imports peaked at more than 60%

in 2005 and fell to an average of 40% in 2012. EIA

expects the net import share to decline to 29% in 2014,

which would be the lowest level since 1985.

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November 2013

Crude oil may remain downbeat with

some short covering can be seen at lower

levels as global macroeconomic numbers

along with weekly inventory data in US is

likely to affect the overall sentiments.

Waning Middle East tensions and production recovery in Libya and Nigeria along with

movement of local unit rupee will also give further direction to the prices.

Range

Crude Oil

MCX Rs 5700-6450 per barrel

NYMEX $92-105 per barrel

16

Natural Gas Colder winter temperatures in 2013 and 2014 (compared with the record-warm temperatures in

Natural gas futures in the month of October traded 2012) are expected to increase the amount of

sideways with lot of volatility tracking mixed natural gas used for residential and commercial

NYMEX prices. It traded in range of $3.4-3.85 in space heating. However, the projected year-over-

NYMEX and 220-249 in MCX. In natural gas year increases in natural gas prices contribute to

weather condition in US will give further direction declines in natural gas used for electric power

to the prices. MDA Weather Services stated that in generation from 25.0 Bcf/d in 2012 to 22.1 Bcf/d in

the next 11 to 15 days, the weather pattern continues 2013 and 21.6 Bcf/d in 2014.

to favor above average temperatures "over the U.S. Natural Gas Production and Trade south-central U.S. toward the East, while colder

temperatures remain in the West." Also pressuring Natural gas marketed production is projected to the market is natural-gas production, which increase from 69.2 Bcf/d in 2012 to 69.9 Bcf/d in remains at record highs, fueled by hydraulic 2013 and to 70.4 Bcf/d in 2014. Onshore fracturing and horizontal-drilling techniques that production increases over the forecast period, while have enabled energy producers to tap supplies in federal Gulf of Mexico production from existing shale-gas fields. Natural gas can move in range of fields declines as the economics of onshore drilling 210-250 in the month of November. remain more favorable. Natural gas pipeline gross

imports, which have fallen over the past five years, Warmer weather in autumn is bearish for natural are projected to fall by 0.2 Bcf/d in 2013 and then gas because it decreases demand for the fuel to heat remain near 2013 levels in 2014. LNG imports are buildings. Roughly half of all U.S. households rely expected to remain at minimal levels of around 0.4 on natural gas as their primary heating source, Bcf/d in both 2013 and 2014.a c c o r d i n g t o t h e E n e r g y I n f o r m a t i o n

Administration. In an updated forecast for November, the National Oceanic and Atmospheric

US natural gas storage levels lift above the Administration said the Midwest and Northeast are

six-year historical averageshowing uncertain trends, with equal chances of

From 5 April to 13 September, US natural gas above-normal or below-normal temperatures next inventory has increased by 94% to 3.3Tcf, just above month.the six-year (2007-2012) historical average. US natural gas inventories usually rise in this period as

EIA Natural gas estimates US gas production outweighs demand. For the same time last year, US natural gas storage levels were U.S. Natural Gas Consumption5.4% higher at 3.4Tcf. Henry Hub natural gas prices

EIA expects that natural gas consumption, which have lifted 29% to USD3.64/mmbtu in the past

averaged 69.7 Bcf/d in 2012, will average 69.9 Bcf/d year.

and 69.3 Bcf/d in 2013 and 2014, respectively.

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November 2013

Analysis: Natural gas demand has lifted since the US Environmental Protection Agency (EPA) drafted laws to restrict emissions on new coal power plants. It is likely that the CO2 emission standard for new coal plants will be eased before the draft proposal becomes finalised, but it is st i l l unlikely to change the preference for gas power over coal power in the US utility landscape. We expect the changes to support a structural shift toward natural gas power generation in the medium to longer term, but higher natural gas prices could slow this transition in the immediate term.

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Natural gas prices will depend upon weather

conditions and power generation demand

coupled with its consumption pattern and

inventory position in the month of November.

Range

Natural gas

NYMEX $3.20- $3.80 per mmBtu

MCX Rs200-245 per mmBtu

SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at www.sebi.gov.in and the website of the Book Running Lead Managers i.e. Tata Securities Limited at www.tatacapital.com and IL&FS Capital Advisors Limited at www.ilfscapital.com. Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus.

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November 2013