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Advice For The Wise: June'2011

Advice For The Wise: June'2011






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    Advice For The Wise: June'2011 Advice For The Wise: June'2011 Presentation Transcript

    • ADVICE for the WISE Newsletter –June’11
    • Index Page No.Economic Update 4Equity Outlook 8Debt Outlook 13Forex 15Commodities 16Real Estate 17 2
    • This uncertainty has led to several predictions of doomsday in Dear Investor, case a Eurozone country defaults. While we do not share the worst of these predictions, our belief is that the sheer Last month saw renewed concerns over sovereign debt in Europe. Another bailout for Greece seems to be on cards, failing which a uncertainty will drive the major Eurozone countries to react proactively to pre-empt a default by a member of Eurozone. hard or a soft default seems to be the only option. Although In light of the subdued global sentiment, equity markets are bailout is safer from the point of financial markets stability in likely to stay range-bound in the short term. We believe that Europe as well as the rest of the world, it is politically quite the investors can either look at relatively safer international unpalatable for the major countries in Eurozone. The other markets like US and China through ETFs or look to invest in intermediate solutions being discussed for Greece include a roll- more globally oriented sectors like IT and Pharma. over of debt by banks and restructuring by the major bondholders. These options however do not quite solve for the underlying solvency crisis in Greece and simply buy it more time. Actual cash During range bound markets informed investors can also implement the covered call strategy. In this strategy the transfers from other countries or default are the only ways which investor who has a bearish view and holds stocks or can immediately address the solvency issue for Greece. In case of diversified mutual funds can write a call on the relevant stock all the other options, there is an implicit hope that the Greek or index respectively. If the markets go up, part of the economy recovers enough in the time it will have bought to solve portfolio is then sold to settle the claims arising out of writing for solvency as well. of the call. If the markets stay subdued, the investor keeps the The downgrade of Italian Government debt made the investors premium on writing the call option. This strategy should be across the globe even jitterier about the sovereign debt crisis in implemented only after fully understanding the risks involved the Eurozone. In our view, the implications of default by a and with the full knowledge that the underlying asset has to Eurozone country are not fully understood since there have been no precedents to the same. Earlier sovereign defaults happened in be sold if the markets rally. Otherwise it becomes a naked call strategy which is highly risky and not recommended. single currency economies and had only one government dealing Debt markets are likely to remain subdued due to expectation with each. of the impact of diesel price hike on inflation. A lot depends on the monsoon which might ease the food inflation concerns thus reducing the pressure on RBI to raise rates.“Advisory services are provided through Karvy Stock Broking Ltd. (PMS) having SEBI Registration No: INP000001512. Investments are subject to market risks. Please read the disclaimer on slide no.24” 3
    • As on May Change over Change over 130 125 Sensex Nifty S&P 500 Nikkei 225 31st 2011 last month last year 120 115 110 BSE Sensex 18503 (3.3%) 9.2% 105 100 95 Equity S&P Nifty 5560 (3.3%) 9.3% 90 85 80 markets S&P 500 1345 (1.4%) 23.5% Nikkei 225 9694 (1.6%) (0.8%) 8.60 10 yr Gsec 8.40 8.20 8.00 7.80 7.60 7.40 10-yr G-Sec Yield 8.41% 28 bps 85 bps 7.20 7.00 6.80Debt Markets Call Markets 7.25% 50 bps 215 bps Fixed Deposit* 8.25% 0 bps 225 bps 23000 22000 21000 20000 19000 18000 17000 RICI Index 4177 (5.2%) 41.6% 16000 15000 Gold Commodity Gold (`/10gm) 22505 1.6% 22.5% markets Crude Oil ($/bbl) 117 (7.4%) 60.5% 48.00 `/$ 47.00 46.00 45.00 44.00 Forex Rupee/Dollar 45.03 (1.4%) 3.6% 43.00 42.00 31-May-10 31-May-11 30-Sep-10 31-Jan-11 28-Feb-11 31-Mar-11 30-Jun-10 31-Aug-10 31-Dec-10 30-Apr-11 31-Oct-10 30-Nov-10 31-Jul-10 markets Yen/Dollar 80.85 1.1% 12.7%* Indicates SBI one-year FD 4
    • • The Conference Board Consumer Confidence Index, which had improved in April, decreased in May. The Index now stands at 60.8 down from 66.0 in April. This is US due to consumers’ short-term outlook, which had improved in April, turned pessimistic in April. • US m-o-m unemployment rate increased to 9.1 per cent in May 11. • Euro-zone PMI fell to 55.4 in May from 57.8 in April 11. The slowing was much more pronounced in manufacturing, where production rose at the weakest pace Europe in seven months. • Unemployment rate in the Euro zone remained unchanged in April ‘11 at 9.9%. • The Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 51.3 in May down from March’s 46.4, owning sharp easing in supply Japan chain pressures enabled firms to restart production lines following the disruption caused by Marchs earthquake and tsunami. • Japan’s unemployment rate increased to 4.7% in April ’11 from 4.6% in March’11 • The HSBC China Manufacturing Purchasing Managers Index is down to 10 month low at 51.6 in May from 51.8 in April. Emergingeconomies • Chinese economy is expected to slow down to grow at 9.6% in 2011. The retail sales increased by 17.1 percent year-on-year basis in April 5
    • 20.0% IIP monthly data • The GDP growth rate for Q4 FY11 came in at 7.8%18.0%16.0% the lowest in the year while the Q1 estimates for14.0% Q1 and Q3 were revised upwards to 9.3 (from 8.9)12.0% and 8.3 (from an earlier 8.2) respectively. The10.0% economic growth for the year, is 8.5% for 2010-’11 8.0% 6.0% backed by improved farm output and growth in the 4.0% services sector. 2.0% 0.0% • The slowdown in the rate of growth in the last quarter was due to poor performance of the Mar 10 Mar 10 Jan 11 Jan 11 Mar 11 May 10 May 10 May 10 Nov 10 Nov 10 Nov 10 Jul 10 Jul 10 Sep 10 Sep 10 Feb 11 Feb 11 Jun 10 Jun 10 Apr 10 Apr 10 Aug 10 Aug 10 Dec 10 Dec 10 Oct 10 Oct 10 manufacturing sector which grew at 5.5% v/s the 15.2% growth last year. A slowdown was also seen • Industrial output as measured by the Index of Industrial Production (IIP) increased to 7.3% (y-o-y) in the mining, trade and hotels while services, in March ‘11 as compared to 3.6% in February ’11. including banking and insurance witnessed growth in the last quarter. • 13 out of 17 industry group recorded positive growth in March with the IIP for Manufacturing • The next year growth target is 8% which we growing by 7.9%. Capital goods grew at 12.4% while believe is achievable. Consumer goods witnessed an overall growth of 7.7%. 10.0 GDP growth 9.0 • The IIP figures have been very volatile in the last 8.0 year. We believe that monthly indicators and IIP in 7.0 isolation may not a very efficient way of indicating 6.0 long term growth. Owing to a high base in April, we 5.0 may see a lower number next month but we expect 4.0 the growth to eventually moderate out. High input FY10 (Q1) FY10(Q2) FY10(Q3) FY10(Q4) FY11(Q1) FY11(Q2) FY11(Q3) FY11(Q4) costs may also be a dampener for manufacturing. 6
    • Growth in credit & deposits of SCBs • Inflation as measured by WPI decreased30.0% Bank Credit Aggregate Deposits marginally and was recorded at 8.66% (y-o-y)25.0% for the month of April 11 as compared to an20.0% upward revised 9.04% during March 11. The15.0% slight decrease was seen due to a decrease in the prices of select food items. However, prices10.0% of manufactured food items, fuel and power still5.0% continued to increase in the last month. These figures are based on the new base year and WPI list. • We expect WPI inflation numbers to moderate • Bank credit growth rose to 21.8 percent in May* in m-o-m inflation numbers due to the expected from 21.2 percent in the month of April while decrease in food inflation and the monetary Deposits grew by 16.6 percent compared to 16.7% in tightening stance by RBI, but increasing fuel April 2011. prices may be a cause of worry. • Growth of credit demand and tight liquidity had put 11.0% Wholesale Price Index pressure on the banks to raise their deposit rates. 10.0% We have seen a rate hike of 50 bps in the May policy 9.0% review but high inflationary pressure may lead the 8.0% RBI to increase rates further in the coming year. This 7.0% increase may dampen the rate of credit growth 6.0% though. May-10 Aug-10 Apr-10 Apr-11 Jul-10 Sep-10 Nov-10 Feb-11 Dec-10 Oct-10 Jun-10 Jan-11 Mar-11* End of period figures 7
    • May turned out to be a lackluster month for markets with nifty being down 3.3%. RBI’s more than anticipated hike in interest rate leadto a dampening of equity market sentiment. FII’s withdrew around 5000 Crores from Indian markets. There has been a net outflow ofaround 1000 Crores by FIIs so far in this calendar year.The Q4 earnings season has ended with more negative surprises than positive. Sectors like Energy, PSU banks and real estatedisappointed with their Q4 numbers. On the other hand, private banking, Pharma and IT space delivered a good set of numbers.Pressure in margin is visible for engineering, construction and manufacturing companies due to increase in commodity prices and risinginterest rates. Metal companies on the other hand benefitted from this rise in commodity prices.With good monsoons on the cards, we expect the food inflation to come down. However, Crude oil prices have not come down andhave been hovering around 110$/barrel for brent crude. A partial pass though of this is expected with an anticipated increase in dieselprices. This would put further upward pressure on inflation numbers which could average around 8.5-9% for the next six months. In aneffort to bring down the headline inflation, the RBI has raised its policy (Repo) rate nine times by a total of 250 basis points since March2010 but increasing fuel costs and commodity prices have kept the inflation above acceptable levels. The Real Estate and capital goodsspace could see moderation in demand due to this increase in borrowing costs. Pharmaceutical and IT sector are two sectors which arerelatively immune to inflation and interest rate pressures and would do well going forward.Since the beginning of this calendar year, Nifty has corrected by more than 9%. Post this, the markets are trading at a very reasonablevaluation of 14 times FY12 earnings. Despite the expectation of an economic slowdown, the economy is still expected to grow at 7.5-8% for FY12. There are short term concerns like inflation, interest rates and global volatility but a large part of that is already discountedby the market. We look forward to quarter one earnings for FY12 starting in July to give more clarity on full FY12 earnings. The monsoonsession of Parliament, also starting in July, could see some reform measures being announced. We expect a robust earnings growth of17-18% for FY12 which will drive equity market returns in the medium to long term. 8
    • Sector Stance Remarks We believe in a large sized opportunity presented by Pharma sector in India. India’s strength in generics is difficult to replicate due to quality and quantity of available skilled manpower. With theHealthcare Overweight developed world keen to cut healthcare costs, and a vast pipeline of drugs going off-patent, Indian pharma players are at the cusp of rapid growth. Here, we have taken exposure to medium-sized, non- index ideas while trying to play on the opportunity in Generics and CRAMS. Robust volume growth led by some uptick in pricing makes IT an attractive investment. Market shareIT/ITES Overweight gains led by deeper and wider expansion of global delivery model will drive earnings growth. Best played through Tier I stocks. Financial sector is undeniably the lubricant for economic growth. Whether the growth comes from consumption or investments, credit growth is inevitable. Being a well regulated sector, BFSI in IndiaBFSI Equalweight has good asset quality and capital adequacy ratios. This, when juxtaposed to the growth opportunity available makes an attractive long term opportunity. The exposure is in “discretionary consumption” beneficiaries such as Paints and branded food, as theFMCG Equalweight growth in this segment will disproportionately higher vis-à-vis the increase in disposable incomes. This also provides a defensive posture to the portfolio. Demand outlook remains very robust with strong earnings growth despite raw material price hikesAutomobiles Equalweight and raging competition. We are more bullish on commercial vehicle and agricultural vehicles segment due to lesser competition and higher pricing power. 9
    • Sector Stance Remarks Indian metal companies will benefit from global upturn in demand. Commodity prices haveMetals Equal weight moved up significantly as recovery takes place in US and Europe. Positive on the producers of Steel, Copper and Aluminium. The USD 1 trillion Infra opportunity is hard to ignore. Here, we have carefully taken Power sector as our dominant bet over other sub sectors such as ports, roads and telecom infrastructure, becauseE&C Underweight of favorable economics under PPP model. Within power, we focus on the engineering companies over utilities, T&D and other infrastructure owners because of their superior profitability and better competitive dynamics. The regulatory hurdles, competitive pressures and leverage prevent any return to high rofitabilityTelecom Underweight levels in the short to medium term. The huge capex incurred in the rollout of 3G services will put further stress on the already stretched balance sheets. Remain cautious on Sector’s prospects. Through a single company, we have taken a large-sized exposure to refinery and natural gas exploration sector. The regulatory cap on RoE does not allow a vast value creation opportunity inEnergy Underweight the infrastructure owning companies. We have also purposely tried to stay away from PSUs, due to issues of cross subsidization distorting the underlying economics of oil exploration and refinery businesses. Cement demand will certainly grow over the next three years. But the issue is on the supply side.Cement Underweight We do see an oversupply situation for the next 3-4 quarters. We like the growth prospects of power sector but believe that value will be created byPower Utilities Underweight engineering services providers. Merchant power rates have been sliding downwards and coal prices have been on the way up putting pressure on return ratios. 10
    • • DELTA seeks to invest in a portfolio of mutual funds through a PMS route that aims to would provide higher returns than the blended benchmark.• The asset allocation between Debt and Equity would be done on the basis of the risk profile of the investor (conservative, moderate or aggressive)• There is further allocation into sub-asset classes depending on our views on the same• The portfolio would be reviewed and rebalanced regularly to maintain the asset allocation and the right selection of fundsAsset Allocation for DELTA: Asset Class DELTA Conservative DELTA Moderate DELTA Aggressive Equity 50% 75% 100% Debt 50% 25% 0% 11
    • 1 Year Since Inception (29/4/09) Portfolios 3 Months (Absolute) (Absolute) CAGR Conservative 3.61% 5.09% 22.30% Market Return Benchmark** 3.06% 5.38% 17.32% Moderate 4.61% 5.19% 28.65% Market Return Benchmark** 4.05% 6.67% 23.68% Aggressive 6.08% 7.55% 36.25% Market Return Benchmark** 5.21% 6.88% 28.98% Absolute Return Benchmark 1.50% 6.00% 8.00% Asset Class Benchmarks Market Return Benchmark: Equity BSE 200 Market Return Benchmark: Debt Blended Bond Fund Index Absolute Return Benchmark SBI 1 year Fixed deposit rate*(Returns as on 31st May 2011)The performance specified is post expenses.The performance indicated here is based on in-house testing of the portfolio. The portfolio has been offered on thePMS platform since 23rd November 2010**The Market Return Benchmark is based on BSE 200 and Blended Bond Fund index, taken in the same proportion as the asset allocation of that variant 12
    • 8.54 Yield curve 8.52 8.50 • The benchmark 10 yr G-sec yield increased from 8.48 8.14% in the month of April ‘11 to close at 8.46 around 8.41% in May‘11. 8.44 8.42 • With no respite from the high inflation in spite 8.40 of monetary tightening, we may see a few more 8.38 interest rate hikes in the year. With inflation(%) 0.02 0.94 1.86 2.78 3.70 4.62 5.54 6.46 7.38 8.30 9.22 10.15 11.07 11.99 12.91 13.83 14.75 15.67 16.59 17.51 18.43 19.35 coming down marginally, the June policy review would be important. • We expect yields across the yield curve to remain at elevated levels. High inflation, monetary 8.60 10-yr G-sec yield tightening and rising credit growth will keep the 8.40 yields at the longer end range bound. 8.20 8.00 7.80 7.60 • The liquidity in the system is expected to tighten 7.40 7.20 further as the advance tax outflows begin this 7.00 month. 6.80 13
    • Category Outlook Details We recommend short term bond funds with a 6-12 month investment horizon as we expect them to deliver superiorShort Tenure returns due to high YTM. We have seen the short term yields Debt harden due to reduced liquidity due to expected advance tax outflows and consecutive rate hikes prompted by inflationary pressures. Hence, Short term bond funds and FMPs provide an interesting investment option. Some AA and select A rated securities are very attractive at the current yields. A similar trend can be seen in the Fixed Credit Deposits also. Tight liquidity in the system has also contributed to widening of the spreads making entry at current levels attractive. With tight liquidity and inflationary pressure being high, we expect more rate hikes in the current year. As the inflationary Long Tenure pressure begins to settle down, these may be attractive Debt investments but currently, we would recommend staying out of the longer term investments. 14
    • Rupee movement vis-à-vis other currencies (M-o-M) Trade balance and export-import data 60 Export Import Trade Balance (mn $) 0 1.5% 40 -5000 1.0% 20 -10000 0 0.5% -20 -15000 0.0% USD GBP EURO YEN-0.5% • Exports for the month of April increased by 34.42% (y-o-y) while imports increased by 14.3% over last year. The trade-1.0% deficit decreased to USD 8.9 bn.-1.5% 140000 120000 Capital Account Balance-2.0% 100000 80000 60000 40000• The Rupee depreciated against all the currencies except the 20000 Euro. Major reasons for the depreciation are high inflation, 0 FIIs pulling out of the Indian Equity markets & recent political FY 09 (Q4) FY 10 (Q1) FY 10 (Q2) FY 10 (Q3) FY 10 (Q4) FY 11 (Q1) FY 11 (Q2) FY 11 (Q3) tension regarding corruption scandals. • Capital account balance continues to be positive through• Fall of Euro against Dollar was due to resurfacing of the FY11 and stands at `241293 Cr. for the Q1 – Q3. European debt crisis and increasing uncertainty in the • We expect the capital account balance to remain positive Eurozone area. as higher interest rates would make investment in the Indian markets attractive hence drawing investments into the market. 15
    • 23000 Gold prices continue to remain stable amid Greece concern; 22000 Gold however The US Federal Reserves quantitative easing 21000 programme (commonly known as QE2) is coming to an end on 20000 19000 June 30. The 2010 rally in the commodities and emergingPrecious 18000 markets was largely due to funds flowing in from QE2. These 17000 Metals markets can correct sharply if the US does not launch the next 16000 15000 stimulus programme (QE3). The possibility of QE3 currently is 31-Aug-10 30-Apr-11 30-Nov-10 30-Jun-10 31-Jan-11 31-Jul-10 31-Mar-11 31-May-10 30-Sep-10 28-Feb-11 31-May-11 31-Dec-10 31-Oct-10 very low and expect some correction in this counter which should be used as an entry point for long term players. 130.0 120.0 Crude Crude oil prices are expected to continue the bearish trend as 110.0 weak economic data expectation from major countries may 100.0 pressurize oil prices. 90.0Oil & Gas Civilian unrest in Yemen, the neighbour country of Saudi 80.0 Arabia may support oil prices movement. On fundamental front, crude oil inventory has increased the 70.0 most in the one month. Keystone Pipeline outage is still a 60.0 concern which may create further supply shortage. Oct 10 May 10 Nov 10 May 11 Jul 10 Sep 10 Jan 11 Feb 11 Mar 11 Jun 10 Apr 11 Aug 10 Dec 10
    • Asset Classes Tier-1* Tier-II** Residential This sector is the only one to be left out of the correction These cities still manage to sell from the attractive entry point wrath. Heavy media reporting’s on probable correction, 40% (Avg. Rs.2800-3600 per sqft) but are getting over-supplied in down-trend in sales and unavailability of finance to pockets. A recent report from Knight Frank suggests that these developers are the major factors putting pressure on this cities have seen lot of investor confidence between 2007-2009 segment to correct. The investor community also varies on which for some reasons have seen 30% down-trend. Typically the assumptions on account of bad sales and gives their “no the investor’s early buy-in and upfront payment of the total confidence motion” towards any visible appreciation. Markets consideration for best discount gives the developer strong hold like NCR, Pune, Hyderabad and Chennai would set the course time for local demand. Ironically, across markets Investors of correction on the forthcoming over-supply. contribute not more than 15% of sales.Commercial/IT Still in the shadows of over-supply and cautious expansion Commercial segment not that significant, but unlike Tier-I the approach by corporate, this segment has gone through price differentiation is double favoring commercial since most correction. Rates per sqft have seen almost 30% down-trend of them are in CBD areas. and will be stagnant for the coming 2-3 quarters. Surely, the segment is at the down-tip of the cycle, and is the best opportunity for companies looking for long term holding of real estate office space. Since most of the commercial growth had happened in 05-06, many lease agreements are getting expired giving way for companies to shift base, re-negotiate, etc. IT/ITEs would remain the main driver for consumption. Retail Sales have definitely recovered but distress in the over- Unlike the Tier 1 markets the retails is unable to cope with sales supplied market is evident. Many deals have been done on and thus the sales to rent ratio is becoming bigger pulling down Revenue Share, giving more control to the Lessee to hold the rent paying capacity. Important point also is that, unlike the price per sqft for a longer time-frame Tier 1 markets more than 40% of any mall in these cities are operated by local franchisees making cash-flows not regulated Land Land is highest in demand and still a maintaining a steady Very similar to the trend in Tier 1 cities. Opportunistic growth of 15-20% per annum investment can really give great returns since N.A land is still available cheap (between 200-300 per sqft) 17
    • Residential Market Snapshot (Supply and Developers)As you would find out from the below mentioned table, most cities have supply concentrated in a particular zone and investment in these zones would belucrative (entry point being low) with a long term view, since the supply would always keep the capital value appreciating to 5-7% per annum. Rest zoneswould be always speculative and demand led behavior. The only differentiator would be quality development which could command premium. Markets Major Locations/Zones Total Sqft (In Mn), Expected in Established Builders 2011-2013 Bangalore Hebbal, Whitefiled, Hosur Road, Jayanagar, MG Road, 74Mn Sqft, out of which 60% supply is Shobha, Prestige, Salarapuria, Malleshwaram in Hosur & Whitefiled followed by 18% Purvankara, Brigade Group, Nitesh in Hebbal Estate, Mantri, Confident group, Pride Group NCR Gurgaon - DLF city, Sohna Rd, Manesar 436 Mn sqft, out of which Noida-32%, Parsavnath, Emaar MGF, DLF, Unitech, Ghaziabad-21%, Gurgaon-24% & Ansal properties, M2K, Uppal, Cosmos, Noida – Sec 14,15,92,93,128 and Greater Noida Faridabad-12%. Suncity, Vipul Ghaziabad – Indirapuram, Vaishali Faridabad – prime chandanwood village, Sec 78,89 Mumbai Prime Residential Among Zones 183 Mn Sqft, out of which 69% is Hiranandani Developers Pvt Ltd, accounted from Prabhadevi, Ghatkopar, Marathon Realty Pvt Ltd, Akruti City Napean Sea Road, Tardeo, Worli, Lower Parel, Bandra, Goregaon, Malad, Gorbunder, kalyan, Ltd, Kalpataru Ltd, K Raheja Universal Andheri West, Juhu and Powai Dombivili, Belapur and Panvel. Pvt Ltd, K Raheja Corp, Lokhandwala Malad/Goregaon accounts for more Group of Companies, Sheth, Mid Segment Among Zones than 23mn sqft and other btw 10-12Mn Rustomjee, DB Realty, Godrej Prabhadevi, Ghatkopar, Goregaon, Malad, Gorbunder, sqft properties, Oberoi to name a few. Kalyan, Dombivili, Belapur and Panvel Hyderabad Banjara hills, Shameerpet, Securabad Contonment, 58 Mn sqft, out of which 58% supply is DLF, Jayabheri, Manjeera, Mantri, Ghatkesar, Old Hyderabad and Shamshabad expected in and around Hi-Tech city Saisree, SMR Holdings, Aliens Group 18
    • Pune Pimpri Chichwad and Chakan, 93 Mn Sqft, out of which over 70% is Kumar Builders, Gera, Lunkad, accounted by Pimpri Chinchwad, Konark, Goel Ganga, Marvel, Hinjewadi, Baner, Audh, Wakad and Balewadi Hinjewadi and Kalyani Nagar zones Magarpatta, Rohan Kothrud, Kondwa, Hadapsar, Central Pune Kalyani Nagar, Viman Nagar, Kharadi Kolkata CBD Areas-Ballygaunge, Carmac street and Park street 55Mn Sqft, out of which North 24 Ekta Developers, Eden group, Fort, Parganas accounts for more than 50% Mayfair, Merlin, Srijan group, Salt Lake & EM Bypass of supply Swastic, Somani, Godrej, GM Group, North 24 Parganas-Rajarhat, Barasat, madhyamgram nangalia, Orbit, Bengal Sharachi, Sriji Developers South 24 Parganas – narendrapur, Sonarpur Batanagar & Mahestala Chennai North Chennai – Ayanavaram, Kilpauk, Korathur, 68 Mn Sqft, of which South Chennai Emmar, Ozone, Chaintanya, Mantri, madhavaram, Perambur, Villivakam accounts for 64% of supply Doshi, Sabari, Hiranandani, L&T, South Chennai – Adambakam, Chromepet, madipakkam, Unitech Medavakkum, Sholinganur, OMR, Selaiyur, tamabaram, Urapakam, Velachery West – Ambattur, Annanagar, Avadi, KK Nagar, manapakam, Nolambur, Porur, salingramam, Sriperumpudur, Vadapalani Central – Adayar, Alwarpet, Egmore, mataliyapuram, Nungampakkam, Parry’s, TnagarPlease Note:1.Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkata2.Tier II* markets includes all state capitals other than the Tier I markets3.The IC note is proposed to be presented every quarter 19
    • Overview Attractiveness• An unlisted secured NCD issue with a fixed coupon of 18% per • The cash flow schedule is very attractive driven by interest annum. NCD is a debt instrument used to raise short-term inflows and principal repayment starting early. A good loans from HNIs. The funds raised through this issue will be proportion of the total return is realized over the tenure of the utilized by the developer for aggregating the land for an product through regular monthly payouts starting from the upcoming residential project in Sus Village in Pune. second month itself. This considerably reduces the risk to total returns for investors.Product Features • The debentures are secured with a security cover of at least• Issue Size – Initial two series of 5Cr each and following two two times the outstanding debenture amount. Both the series of 7.5Cr each principal and the interest are securitized and hence the default• Tenure – 24 months risk is negligible.• Minimum Investment – INR 10,00,000 • The IRR for this structure stands at 19.16%. This can give a• Set Up Fee – 1% upfront considerable boost to the overall returns of one’s fixed income• Management Fee – 0.5% p.a. portfolio.• Guaranteed Coupon – 18% p.a. • This product is a good bet on the high interest rates prevalent• Frequency of Interest – Monthly in India now. The investors can lock in high yields which are• Principal repayment – 4 equal quarterly installments starting not likely to increase much further. end of fifth quarter 20
    • Introduction Product Features• Superfund is a group of investment companies with reach • Superfund A2 is available in Dollar, Euro and Gold across 20 countries – predominantly in Europe, followed by US denominations. The minimum ticket size is $5,000 or €5,000. and Asia. It was founded in 1996. The investment can be made from Indian money taken abroad• Superfund group manages a number of funds – all of which use in line with the RBI limit of $200,000 per person per year. exclusively futures contracts in commodities, currencies, stock Alternately, it can be made from funds available with the indices and bonds across several global exchanges. Hence the investor in a foreign bank account. product belongs to the asset class of “Managed Futures”. Fund manager/strategy• It can be thought of as an alternative investment avenue with • Superfund does not employ human fund managers. Its focus on absolute returns – in a manner similar to hedge investment strategy is that of trend following. It focuses on funds, but with greater regulatory oversight and restriction to spotting definitive trends in the markets and entering/exiting trading in only highly liquid futures. The investment strategy the markets on the basis of pre-determined rules. It is used by Superfund Funds is algorithmic trading focused on illustrated in the graph below. trend following. Performance 2011 (YTD) 2010 2009 Superfund Green Gold A2 SPC 5.1% 38.86% -17.11% Barclays CTA Index 2.27% 5.47% -0.10% 21
    • BSLI Foresight is a first of its kind Type II unit linked insurance plan that provides an option to enhance the investment returns byapplying the concept of “Best Day Possible” – for both the investments as well as locking of gains.•Foresight is 5 pay 10 year unit linked plan offering 10 different funds under self managed plan .•Exclusive Foresight fund is offered under guaranteed option. It is 2nd generation fund of the Platinum fund series.•The investor in foresight fund would benefit from the steep fall in the market and not merely by capital protection of Rs 10 NAV.•It also offers the highest Net Invested Premium value achieved during the first 7 policy years.•On death of life assured Fund Value and the Sum Assured is paid to dependants.•Lower costs and good fund management: The lower costs associated with the product backed up by strong fund managementmake this an ideal investment option when compared with its peers. FUND PERFORMANCE AS ON 31st MARCH 2011 Fund Performance: Since Category Fund name 1 year 2 years 3 years Inception A snapshot of the fund performances of funds having a similar mandate are Foresight ** as indicated: Platinum Plus I 12.2% 32.3% 5.6% 7.0% Platinum Plus II 13.7% 39.2% ** 24.3% Highest NAV Platinum Plus III 12.3% ** ** 16.2% Platinum Plus IV 14.6% ** ** 12.1% Platinum Premier 12.1% ** ** 14.7% 22
    • Leveraging breadth of related businesses that KARVY is inKARVY is an integrated financial services group, with Karvy Private Wealth being one of its arms. The entiregroup’s strengths are leveraged to provide end-to-end wealth advice to Karvy Private Wealth clients. Forexample, SME clients can receive advice on their personal wealth while also getting investment banking advicefrom the I-banking arm of Karvy. Maximum choice of products & servicesKARVY Private Wealth offers the widest breadth of products and services, providing clients a variety of optionsthrough a single contact. Products and services include equities, debt instruments, commodities, Mutual Funds,Insurance, Structured Products, Financial Planning, real estate advice, etc. Product-neutral adviceWe ensure that our recommendations are 100% product-neutral and unbiased because unlike other players,we are neither tied up with any one particular insurance company nor do we have our own mutual funds. All-India presenceSet to have business in 20 - 25 cities we are poised to cater to families and businesses spread across multiplecities in India providing them with combined and integrated advice. For one-off services, if required, we canalso leverage KARVY Group’s presence in 400 cities. 23
    • The information and views presented here are prepared by Karvy Private Wealth or other Karvy Group companies. Theinformation contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouchfor the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any lossincurred based upon it.The investments discussed or recommended here may not be suitable for all investors. Investors must make their owninvestment decisions based on their specific investment objectives and financial position and using such independent advice,as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note thatneither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use ofthis information and views mentioned here.The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentionedcompanies from time to time. Every employee of Karvy and its associated companies are required to disclose their individualstock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investmentrecommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation haseither been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders onlythrough Karvy Stock Broking Ltd.The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors areadvised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expectsignificant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidenceof tax on investments 24
    • Bangalore 080-26606126 Chennai 044-45925923 Delhi 011-43533941 Goa 0832-2731822 Gurgaon 0124-4780228 Hyderabad 040-44507282 Kolkata 033-40515100 Mumbai 022-33055000 Noida 0120-4219708 Pune 020-30116238 Email: wealth@karvy.com SMS: ‘HNI’ to 56767 Website: www.karvywealth.comCorporate Office : 702, Hallmark Business Plaza, Off Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 25