Monthly Markets Update (India) - January 2011

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Monthly review of key market segments within India including Equity (Domestic and International), Fixed Income, Currency, Economic Indicators, Mutual Funds & Recommended Portfolios (India).

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Monthly Markets Update (India) - January 2011

  1. 1. ` Monthly Markets Update - India January 2011 Prepared by: iFAST Research Team
  2. 2. Monthly Markets Update - India January 2011 Key Point • December 2010 was positive for global equity markets with most of the benchmark equity indices ending the month in a positive territory except, Chinese markets. • After sell-off in November, BSE Sensex revived during December and ended the month with positive return of 5.06%. BSE Midcap and Small Cap Index continued to underperform Sensex by huge margin and gave a return of 0.50% and 0.76% respectively during the same tenure. • Domestically, the performance of sectoral indices was mixed with BSE Metal leading the pack. However, Realty and Bankex and Consumer Durables closed the month in negative. • Foreign Institutional Investors (FIIs) continued to pump in money into Indian stocks making a net investment of about US$ 0.45 billion (INR 2,049 crore) into Indian equities. And after being net sellers for last six months, December 2010 brought some relief to the mutual fund industry. During December 2010, mutual funds were net buyers of equity to the tune of INR 1,376 crore. • In December, the dollar index was down by about 2.78%. The Indian rupee closed the month as well as the year in a positive territory and has appreciated by 2.58% and 3.92% respectively. • In Fixed Income Market during the month of December, yields rose sharply on the shorter end of the curve, whereas there was some relief on the longer end of the curve. • RBI in its second mid-quarter policy meet reduced Statutory Liquidity Ratio (SLR) by 1% and has also announced Open Market operation (OMO) auctions for purchase of government securities to the tune of INR 48,000 crore in next one month. • The y-o-y Industrial growth for October grew 10.80% from 4.40% last month. The yo-y WPI Inflation for November rose by 7.48%, slightly higher than Bloomberg estimate of 7.45% • The Indian fund industry’s assets (average assets under management) decreased by 1.83% or by 12,653 crore to 6,78,160 crore in the last quarter (October – December) of 2010 in comparison to the third quarter (July – September) of 2010. • The actively managed diversified equity funds have underperformed the benchmark Sensex index on m-o-m basis, delivering an average positive return of 1.82% in the December while, the Sensex gave a return of 5.10%. • During December , funds focusing on the Information Technology sector have topped the list for the equity segment and fund investing in long term government securities paper have topped the list for the fixed income segment.
  3. 3. Monthly Markets Update - India January 2011 Equity Markets Update International Markets (as at December 2010 end): 2010 2010 2009 P/E P/E P/E Earnings Growth Earnings Growth MTD YTD Return (%) Yr 2010 Yr 2011 Yr 2012 2010 (%) 2011 (%) Asia ex Japan (MSCI Asia ex Japan) 5.46% 16.99% 68.30% 14.5 12.8 11.2 45.20% 13.90% Emerging Markets (MSCI EM) 7.02% 16.36% 74.50% 13.3 11.4 10.0 43.90% 16.60% Europe (Stoxx 600) 5.34% 8.63% 28.00% 12.5 10.9 9.8 39.50% 14.20% Japan (Nikkei 225) 2.94% -3.01% 19.00% 18.2 15.9 13.1 134.50% 14.30% USA (S&P 500) 6.53% 12.78% 23.50% 14.8 13.0 11.5 38.00% 13.90% Australia (S&P/ASX 200) 3.51% -2.57% 30.80% 14.0 12.2 11.1 21.70% 15.10% Brazil (IBOV) 2.36% 1.04% 82.70% 12.9 10.4 9.1 31.40% 23.60% China (HS Mainland 100) -0.48% 2.15% 61.30% 13.1 11.3 9.8 26.50% 15.80% Hong Kong (HSI) 0.12% 5.32% 52.00% 14.4 12.4 10.8 25.70% 15.80% India (SENSEX) 5.06% 17.43% 81.00% 19.2 15.9 13.4 23.50% 20.40% Indonesia (JCI) 4.88% 46.13% 87.00% 18.0 14.6 12.5 28.10% 23.10% Malaysia (KLCI) 2.27% 19.34% 45.20% 16.1 14.4 13.0 24.40% 12.20% Russia (RTSI$) 10.97% 22.70% 128.60% 8.5 7.3 6.7 81.50% 16.70% Singapore (STI) 1.44% 10.09% 64.50% 15.7 14.2 13.0 23.20% 9.90% South Korea (KOSPI) 7.68% 21.88% 49.70% 11.9 10.3 9.2 47.60% 15.00% Taiwan (Taiwan Weighted) 7.17% 9.58% 78.30% 15.0 13.2 12.0 84.40% 13.50% NASDAQ 100 (Technology Heavy) 4.75% 19.22% 53.50% 17.0 14.9 13.3 41.80% 14.40% Thailand (SET Index) 2.75% 40.60% 63.20% 14.6 12.4 10.8 23.70% 17.70% Source: Bloomberg, iFAST Compilations All returns are in respective local currency terms and MSCI Index returns are in USD • The last month of 2010 was positive for global equity markets with most of the benchmark equity indices ending the month in a positive territory except, Chinese markets. • During the month of December, Russian market has been the best performing market and has delivered return of 10.97% as Russia’s central bank left the benchmark refinancing rate unchanged at 7.75% but, increased deposit rates as an effort to address the negative real interest rate scenario. Also, the recent economic indicators have suggested that the economic activities have quickened. For instance, PMI Manufacturing rose from 51.1 points in November to 53.5 points in December. Moreover, industrial output expanded at 6.70%, faster-than-expected. We expect Russia economy to grow at a faster pace in 4Q10. • China’s headline inflation accelerated to 5.10% in November, well above the 3% target set earlier this year. The escalating inflation figure probably explains the aggressive monetary tightening in December – one reserve requirement plus one interest rate hike. Dreading further policy tightening, the Chinese equity market has come down from its recent highs and has ended the month with a negative return of 0.48%. • During the month of December, Sensex delivered return of 5.06% and touched 20,500 levels on the back of upward revision of GDP numbers, strong IIP numbers and downward trending inflation.
  4. 4. Monthly Markets Update - India January 2011 Domestic Markets (as at December 2010 end): • After sell-off in November, BSE Sensex revived during December and ended the month with positive return of 5.06%. BSE Midcap and Small Cap Index continued to underperform Sensex by huge margin and gave a return of 0.50% and 0.76% respectively during the same tenure. • Domestically, the performance of sectoral indices was mixed with BSE Metal leading the pack and delivered a return of 12.61%, followed by BSE IT with 8.63%. However, Realty and Bankex and Consumer Durables closed the month in negative 2.36%, 1.76% and 1.20% respectively. • BSE Metal Index heavyweights, Hindalco, Tata Steal and Jindal Steal and Power Ltd delivered 19.29%, 16.22% and 12.02% respectively in December, with expectations of increase in domestic flat steel prices in January arising from improved domestic demand and higher international prices. • In the calendar year 2010, Consumption related sectors like Consumer Durables, Auto were the best performing sectors, on the back of strong consumption by both rural and urban India. • On the basis of absolute and relative valuation as compared to global markets, we continue to believe that Indian markets are trading above fair value and we remain neutral on India on medium-term basis, however on the long-term, India continues to remain one of the fastest growing economies and an attractive investment destination. • On sector front, for 2011, we advise investors toI consider Infrastructure and Banking sector. Investor can also look at some of the low beta sectors like FMCG and Pharmaceuticals.
  5. 5. Monthly Markets Update - India January 2011 Institutional Flows Into Indian Equity Markets • Foreign Institutional Investors (FIIs) continued to pump in money into Indian stocks, though it has slowed down dramatically as compared to last couple of months, making a net investment of about US$ 0.45 billion (INR 2,049 crore) into Indian equities, following a US$ 4.12 billion (INR 18,293 crore) net investment made in the previous month. • In 2010, FII net inflows have been positive every month, except in January and May 2010. • During the calendar year 2010, FIIs have pumped in close to US$ 29.36 billion in Indian Equity market. In calendar year 2009, FIIs have made a net investment of US$ 17.5 billion in Indian equities. In combination of both Debt and Equity Markets, FIIs have pumped in around US$ 39.47 billion in Indian Markets. • After being net sellers for last six months, December 2010 brought some relief to the mutual fund industry. During December 2010, mutual funds were net buyers of equity to the tune of INR 1,376 crore. In the calendar year 2010, Mutual funds were net buyers only in May and December 2010. • In the calendar year 2010, the domestic mutual funds have been net sellers to the tune of INR 28,132.5 crore.
  6. 6. Monthly Markets Update - India January 2011 Currency Update • The dollar started depreciating again against most currencies and in December, the dollar index was down by about 2.78%. The Australian Dollar gained the most against the greenback in December rising by 6.70% during the month, whereas, Hong Kong Dollar was the one of the weakest and depreciated by 0.09%. • Australian Dollar was one of the best performing currencies for the month on the back of improved sentiment over the Irish debt crisis, and the strong data in the labour market. The booming labour market, which is closely watched by policy makers, suggests that rate hikes are now back on the agenda. In the calendar year 2010, Australian currency has appreciated the most against US Dollar. • Hong Kong’s headline inflation gained pace, up from 2.6% year-on-year in October to 2.9% year- on-year in November. Apart from the rising rental and food prices, Hong Kong also suffers from imported inflation amid the devaluation of the HKD dollar. • The Indian rupee closed the month as well as the year in a positive territory and has appreciated by 2.58% and 3.92% respectively. During the calendar year 2010, the Indian markets saw record capital flow which in turn helps the rupee to close strongly against UD Dollar. • We expect rupee to remain strong against dollar in 2011 on the back of expected rate hike by RBI as well as capital flows to continue flow in the country on the back of expected strong economic growth.
  7. 7. Monthly Markets Update - India January 2011 Fixed Income Markets Update • In December, yields rose sharply on the shorter end of the curve, whereas there was some relief on the longer end of the curve. On the shorter end of the curve, yields on 3 month, 6 Month and 1 year rose by 39 bps, 41 bps and 41 bps respectively. • In order to ease the tight liquidity situation prevailing in the market, RBI in its second mid- quarter policy meet reduced Statutory Liquidity Ratio (SLR) of scheduled commercial banks (SCBs) from 25% of their net demand and time liabilities (NTDL) to 24%, with effect from 18 December 2010. In addition, RBI has also announced Open Market operation (OMO) auctions for purchase of government securities to the tune of INR 48,000 crore in next one month. • Reverse repo volumes continued to be negative throughout the month of December, on account of the liquidity squeeze due to huge equity issuance, sluggish growth in bank deposits even though credit growth has accelerated, large Government surplus lying with the RBI and advance tax payment. During the month, Indian bank roughly borrowed on an average 1.2 trillion rupee every day from RBI. M3 (broad money) growth has reduced and stands at 15% as at 16 December 2010. • We continue to believe that short term rates are trading at very attractive levels and yield curve across 1 year AAA rated corporate paper to 5 year AAA rated corporate paper is almost flat. Investor looking to park money for short time horizon can look at investing in FMPs. As G-sec yield continuous to trade above 8%, thereby, moderately aggressive and aggressive risk appetite investor can look at investing some portion of their debt portfolio in long duration Gilt funds.
  8. 8. Monthly Markets Update - India January 2011 Economic Indicators Economic Releases during the Month of December 2010 Event Period Consensus Actual Prior India Local Car Sales November -- 161,497 182,992 Industrial Production YoY October 8.50% 10.8% 4.40% Monthly Wholesale Prices YoY% November 7.45% 7.48% 8.58% Exports YoY% October -- 21.3% 23.2% Imports YoY% October -- 6.8% 26.1% Statutory Liquidity Ratio (SLR) December -- 24% 25% Current Account Balance 2Q 2010-11 -US$15.3 B -US$15.8 B -US$12.1 B Source: Bloomberg, iFAST Compilations • The import growth for the month of October saw a huge decline from 26.10% (y-o-y) in September to 6.80% in October. This dip can be attributed to the base effect. On a month on month basis, the imports have increased by 2.02%, while the exports fell by 0.35% • November local car sales fell to 161,497 from the all-time high of 182,992 cars in October. The car sales have increased by 20.80% on y-o-y basis and have decreased by 11.75% (m-o-m). • The industrial production for October grew to 10.80% from 4.40% in September. The industrial growth for October was well above the Bloomberg expectation of 8.50%. The Mining, Manufacturing and Electricity sub-sectors have shown growth of 6.50%, 11.30% and 8.80% respectively as compared to October 2009. The surge in the IIP data for the month of October could be attributed to the Diwali festival. • The Wholesale Price Index (WPI) Inflation rose by 7.48% (y-o-y) in November, slightly higher than Bloomberg estimate of 7.45%. The headline inflation is currently at a 11 month low. The Reserve Bank will hike rates from January 2011 onwards after it took a pause in hiking rates in December, as it needs to achieve the inflation target of 5.50% in March 2011. • The RBI chose not to hike any policy rates in the mid-quarter monetary policy review held in December. The Repo, Reverse Repo and Cash Reserve Ratio (CRR) rates have been kept constant at 6.25%, 5.25% and 6.0% respectively. The RBI decided to ease the liquidity a bit by reducing the Statutory Liquidity Ratio from 25% to 24% • The current account deficit increased from US$ 12.1 billion in first quarter of FY2010-11 to US$ 15.8 billion in second quarter of FY2010-11. However, the capital account has increased from US% 15.9 billion to US$ 19.0 Billion, which is a good sign.
  9. 9. Monthly Markets Update - India January 2011 Mutual Fund Industry Asset Trends • This is the first time that AMFI has declared assets on a quarterly basis. The Indian fund industry’s assets (average assets under management) decreased by 1.83% or by 12,653 crores to 6,78,160 crore in the last quarter (October – December) of 2010 in comparison to the third quarter (July – September) of 2010. • In absolute terms, DSP Blackrock Mutual Fund has registered the largest addition in quarterly average assets, as the fund house added on about INR 3,427 crore of assets during the last quarter of 2010, and followed by the SBI Mutual Fund at about INR 1,776 crore. • On a quarter on quarter basis, Birla Sun Life Mutual Fund registered the largest drop in average assets. The assets of Birla Sun life Mutual fund fell by over 6,692 crores, while ICICI Prudential Mutual Fund registered the next largest drop in assets. The average assets of ICICI Prudential Mutual Fund fell by over 3,221 crores. • In percentage terms, mainly AMCs that launched their operations in 2010 saw their assets increase by large values. Pramerica Mutual Fund saw the largest growth in average assets (354.5%) in the last quarter of 2010 as compared to third quarter of 2010, while Shinsei Mutual Fund registered the largest drop in average assets during the quarter (-62.74%).
  10. 10. Monthly Markets Update - India January 2011 Fund Category Returns Fund Category Returns (as at December 2010) 1 Month 1 Year Equity: Diversified 1.82 17.60 Equity: ELSS 1.66 16.04 Equity: Index 4.13 17.44 Equity: Overseas 3.45 14.26 Balanced 1.57 9.76 Debt: MIP 0.65 6.65 Debt: Income 0.40 5.07 Debt: Gilt Short Term 0.66 5.16 Debt: Gilt Long Term 0.93 4.08 Debt: Floating Rate 0.58 5.23 Debt: Ultra Short Term 0.58 5.23 Debt: Short Term 0.44 4.91 Liquid 0.56 4.90 Fund of Funds: Overseas 3.81 16.89 Source: MFI Explorer, iFAST Compilations (Excludes Institutional Plans) • The actively managed diversified equity funds have underperformed the benchmark Sensex index on m-o-m basis, delivering an average positive return of 1.82% in the December while, the Sensex gave a return of 5.10%. However, on a one year basis, the diversified equity funds have narrowly outperformed SENSEX with 17.60% while, the SENSEX delivered 17.43%. • Index funds have performed well in December by delivering 4.13% returns. Since Index funds mimic the indices at the portfolio level, the returns from index funds is similar to that of the Indices. Both SENSEX and NIFTY gave 5.1% and 4.6% returns respectively in December. • Overseas funds have performed better than domestic diversified funds during December with the Equity: Overseas and Fund of Funds: Overseas categories returning 3.45% and 3.81% respectively in December. The overseas funds have performed better on account of good performance by many overseas equity markets. However, the gains from overseas funds in December would have been higher if, the Rupee had not appreciated by 2.6% (m-o-m). • In the debt segment, all the categories have given positive returns and in excess of 0.4% in December. Gilt – Long Term and Short Term funds have given the highest returns in the debt category in November.
  11. 11. Monthly Markets Update - India January 2011 Top and Bottom Five Performing Equity Funds in December Top Five Performing Equity Funds on our Platform during the Month of December Sector MTD Returns YTD Returns ICICI PRUDENTIAL TECHNOLOGY FUND Technology 9.6% 44.5% DSP BLACKROCK TECHNOLOGY.COM FUND Technology 8.6% 15.5% BSL NEW MILLENNIUM FUND Technology 8.4% 16.6% DSP BLACKROCK NATURAL RESOURCES AND NEW ENERGY FUND Power 6.7% 19.5% MIRAE ASSET GLOBAL COMMODITY STOCKS FUND Overseas 6.64% 7.54% Bottom Five Performing Equity Funds on Our Platform during the Month of December Sector MTD Returns YTD Returns RELIGARE BANKING FUND Banking -2.67% 38.53% JM SMALL & MIDCAP FUND Midcap & Small Cap -2.76% -2.57% UTI BANKING SECTOR FUND Banking -3.58% 30.53% RELIANCE BANKING FUND Banking -3.59% 46.08% SUNDARAM FINANCIAL SERVICES OPPORTUNIES Banking -3.64% 35.51% Source: iFAST Compilations • Funds focusing on the Information Technology sector have topped the list for the equity segment in the month of December. However, none of the best performing technology funds were able to deliver better returns than BSE IT Index or CNX IT Index in December. In December, the BSE IT Index and CNX IT Index gave 12.0% and 11.7% returns respectively. • The top performing fund from the equity segment in December was ICICI PRUDENTIAL TECHNOLOGY FUND. • The bottom performing funds list is mostly composed of banking funds. In December, the BSE BANKEX and CNX Bank Index fell by 1.8% and 1.3% respectively and all of the banking funds in the bottom performing funds list have underperformed both the Banking indices. The banking stocks fell in December as banks have increased their fixed deposit (FD) rates. The hike in FD rates may lead to lower Net Interest Margins if the banks are not able to increase their lending rates soon. This fear led to the negative performance of banking stocks in December. • The bottom performing fund for December was SUNDARAM FINANCIAL SERVICES OPPORTUNIES FUND with -3.64% returns in December.
  12. 12. Monthly Markets Update - India January 2011 Top and Bottom Five Performing Debt Funds in December Top Five Performing Debt Funds on our Platform during the Month of December Sector MTD Returns YTD Returns TEMPLETON INDIA GOVERNMENT SECURITIES FUND LONG TERM PLAN Gilt - Long Term 1.65% 2.01% TEMPLETON INDIA GOVERNMENT SECURITIES FUND COMPOSITE PLAN Gilt - Long Term 1.55% 1.83% BARODA PIONEER GILT FUND Gilt - Long Term 1.36% 18.12% KOTAK GILT INVESTMENT Gilt - Long Term 1.32% 5.06% ICICI PRUDENTIAL GILT FUND INVESTMENT PLAN Gilt - Long Term 1.30% 5.29% Bottom Five Performing Debt Funds on Our Platform during the Month of December Sector MTD Returns YTD Returns ICICI PRUDENTIAL LONG TERM PLAN Income 0.01% 3.51% BARODA PIONEER SHORT TERM BOND FUND Short Term -0.03% NA KOTAK BOND SHORT TERM Short Term -0.03% 4.04% BARODA PIONEER PSU BOND FUND Income -0.07% 4.20% HDFC MULTIPLE YIELD FUND MIP -0.21% 10.52% Source: iFAST Compilations • The top performers from the debt segment during December were Gilt – Long Term funds, the top performers even during November. However, due to the rate hikes from RBI, close to two thirds of the Gilt – Long Term funds have given returns in the range of 1.6% to 3.95% • The top performing fund from the debt segment in December was TEMPLETON INDIA GOVERNMENT SECURITIES FUND LONG TERM PLAN. • The bottom performing debt funds in December comprised of Income, Short Term and Monthly Income Plan funds. • The bottom performing debt fund in November was an aggressive Monthly Income Plan (MIP) fund called HDFC MULTIPLE YIELD FUND. This is the only MIP fund that has given a negative return, the other MIPs have given positive return and overall, MIP funds on an average, have given 0.65% return in December.
  13. 13. Monthly Markets Update - India January 2011 Recommended Portfolios: “Overweight” to “Neutral” on Equities When we introduced our Recommended Portfolios in February 2010, we were overweight on equities on account of positive macroeconomic factors which were supplemented by expected strong corporate earnings and Foreign inflows. We did highlight then that these portfolios would undergo a ‘rebalancing’ action whenever there is a change in our recommended funds or asset allocation. As we have changed our stance from “overweight on equities” to “neutral “, we would like to inform all our investors who have been closely tracking our portfolios that we are rebalancing our portfolio from 10 January 2011. The neutral stance was adopted on the back of certain risks that Indian markets could face in 2011, as follows: • Sensex is overvalued interms of historical and relative valuation. Historically the fair P/E of Sensex has been around 17X, whereas, we are currently trading above the historical levels. • FIIs have already pumped in around US$ 29.36 billion into Indian equity market (Year-To-Date, as at 31 December, 2010). Any reversal in the FII inflows due to the uncertainty in the global economy could severely impact the stock market. • The huge FII inflows have led to Rupee appreciation, which has reduced the attractiveness of Indian exports. If the central bank resorts to capital controls to arrest the huge inflows, then there may be a sharp correction in the Index. • Although Reserve Bank of India (RBI) is expecting inflation to come down to 5.50% by March 2011, considering the domestic and global factors, we think that the central bank might not meet this target. Hence, we expect RBI to hike interest rates in the coming months. This will have an impact on the GDP growth and the profitability of Indian corporate sector. • Currently, India is witnessing a negative excess yield which means that bonds have better potential to deliver higher returns compared to equities. Considering the negative excess yields and the rate hikes, Indian investors need to look at fixed income mutual funds like Fixed Maturity Plans, Ultra Short Term funds, Short-Term Funds and Gilt Funds.
  14. 14. Monthly Markets Update - India January 2011 Changes in Recommended Portfolios In accordance to the change in our stance, we shall be increasing our allocation to the Debt fund category and within this category, the allocation to Short Term funds will be increased and Gilt funds too will find a place in our Moderately Aggressive and Aggressive portfolios. The allocation to Liquid funds would be zilch as Ultra Short Term Funds are more tax efficient. On the equity side, due to our positive view on the mid-cap space, we will be increasing our allocation to the Midcap funds and will completely move out from Contra funds. In addition to this, the funds in the different categories will also undergo changes as a result of the new Recommended Funds list that will be released in the month of January 2011. A detailed note on the changes made in the Recommended Portfolios would be emailed to our investors by end of next week. Recommended Portfolios Update 1. Conservative Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 90% into bond funds and 10% into equity funds. The target allocation may change depending on our views on financial markets. Currently, we have an overweight position in equities and we target to have an exposure of 80% to bond funds and 20% to equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 9.47% (Inception Date: 26 Feb 2010) Portfolio Value: INR 1,09,478 December 2010 Portfolio Returns: 0.80% Portfolio Commentary: The conservative portfolio gave a return of 0.80% in the month of December. Out of the total returns of the portfolio, Debt funds have made a positive contribution of close to 50% and domestic equity funds have made a positive contribution of slightly over 50%. In the Debt funds, Birla Sun Life Floating Rate Fund and HDFC Floating Rate fund have accounted for over 20% of the overall portfolio returns for December. In the domestic equity funds, HDFC Top 200 fund accounted for 34% of the total returns while the UTI Dividend Yield Fund accounted for 16% of the total portfolio returns. The UTI Divided Yield Fund has performed better than HDFC Top 200 fund in December.
  15. 15. Monthly Markets Update - India January 2011 2. Moderately Conservative Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 70% into bond funds and 30% into equity funds. The target allocation may change depending upon our views on financial markets. Currently, we have an overweight position in equities and we target to have an exposure of 60% to bond funds and 40% to equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 12.76% Portfolio Value: INR 1,12,760 December 2010 Portfolio Returns: 1.18% Portfolio Commentary: The Moderately Conservative portfolio gave a return of 1.18% in the month of December. Debt funds have made a positive contribution of close to 25% of the total portfolio returns and domestic equity funds have made a positive contribution of slightly over 75%. The funds that have a focus on large caps have performed well this month. In the debt funds, Birla Sun Life Floating Rate fund and Reliance Short Term fund have accounted for slightly over 10% of the total portfolio returns In the domestic equity funds, DSP Blackrock Top 100 Equity fund has accounted for 26% of the total returns while, the HDFC Top 200 Fund has accounted for 15% of the portfolio returns. The DSP Blackrock Top 100 Equity fund has performed the best of all equity funds from the portfolio in December. 3. Balanced Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 50% into bond funds and 50% into equity funds. The target allocation may change depending upon our views on financial markets. Currently, we have an overweight position in equities and we target to have an exposure of 40% to bond funds and 60% to equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 16.75% (Inception Date: 26 Feb 2010) Portfolio Value: INR 1,16,754 December 2010 Portfolio Returns: 1.61%
  16. 16. Monthly Markets Update - India January 2011 Portfolio Commentary: The balanced portfolio gave a return of 1.61% in the month of December. Debt funds have made a positive contribution of close to 13% of the total portfolio returns and domestic equity funds have made a positive contribution of slightly over 87%. The funds that have focus on large caps and infrastructure sector have performed well this month. In the debt funds, Birla Sun Life Floating Rate fund, Reliance Short Term fund and HDFC Cash Management Fund have accounted for 11% of the total portfolio returns. In the domestic equity funds, DSP Blackrock Top 100 Equity fund has accounted for 29% of the total returns and the HDFC Top 200 Fund has accounted for 17% of the total portfolio returns. While the ICICI Prudential Infrastructure Fund, despite its smaller weightage in the portfolio, has managed to account for close to 11% of the portfolio returns. The ICICI Prudential Infrastructure fund has performed the best of all equity funds from the portfolio in December. 4. Moderately Aggressive Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 30% into bond funds and 70% into equity funds. The target allocation may change depending upon our views on financial markets. Currently, we have an overweight position in equities and we target to have an exposure of 20% to bond funds and 80% to equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 21.80% Portfolio Value: INR 1,21,802 December 2010 Portfolio Returns: 1.71% Portfolio Commentary: The Moderately Aggressive portfolio gave a return of 1.71% in the month of December. Out of the total returns of the portfolio, Debt funds made a positive contribution of slightly over 5% and domestic equity funds have made a positive contribution of close to 95%. The funds that have a focus on large caps and infrastructure sector have performed well this month. In the debt funds, Birla Sun Life Floating Rate fund and HDFC Floating Rate fund have accounted for close to 5% of the overall portfolio returns for December. In the domestic equity funds, DSP Blackrock Top 100 Equity fund has accounted for 27% of the total returns and the HDFC Top 200 Fund has accounted for 16% of the total portfolio returns. While the ICICI
  17. 17. Monthly Markets Update - India January 2011 Prudential Infrastructure Fund, with 10% weightage in the portfolio, has managed to account for close to 20% of the portfolio returns. The ICICI Prudential Infrastructure fund has performed the best of all equity funds from the portfolio in December. However, the portfolio returns were lowered by the negative performance of Reliance Banking Fund. 5. Aggressive Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 10% into bond funds and 90% into equity funds. The target allocation may change depending upon our views on financial markets. Currently, we have an overweight position in equities and we will stay fully invested in equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 27.32% Portfolio Value: INR 1,27,324 December 2010 Portfolio Returns: 1.46% Portfolio Commentary: The Aggressive portfolio gave a return of 1.46% in the month of December. The funds that have a focus on large and midcap sector have performed well this month. However, banking sector’s performance was negative. In the domestic equity funds, DSP Blackrock Top 100 Equity fund has accounted for 32% of the total returns and the HDFC Top 200 Fund has accounted for 19% of the total portfolio returns. The ICICI Prudential Infrastructure Fund has managed to account for close to 24% of the portfolio returns, while the DSP Blackrock T.I.G.E.R fund has accounted for -1% of the returns. The Reliance Banking fund has dragged the portfolio performance by -24%. The ICICI Prudential Infrastructure fund has performed the best of all equity funds from the portfolio in December. 6. Moderately Aggressive (Global) Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 30% into bond funds, 46% in domestic equity funds and 25% in global equity funds. The target allocation may change depending upon our views on financial markets. Currently, we have an overweight position in equities and we target to have an exposure of 20% to bond funds, 52% to domestic equity funds and 28% to global equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 19.14% Portfolio Value: INR 1,19,143 December 2010 Portfolio Returns: 2.28%
  18. 18. Monthly Markets Update - India January 2011 Portfolio Commentary: The Moderately Aggressive – Global portfolio gave a return of 2.28% in the month of December due to the superior performance of global markets over India. Out of the total returns of the portfolio, Debt funds made a positive contribution of 4% and the domestic equity funds have made a positive contribution of close to 52% and the global funds have accounted for 44%. The funds that had a focus on overseas sector have outperformed the domestic equity funds. In the domestic equity funds, DSP Blackrock Top 100 Equity Fund has accounted for 14% of the total returns and the HDFC Top 200 Fund has accounted for 12% of the portfolio returns. The ICICI Prudential Infrastructure Fund has managed to account for 11% of the portfolio returns and is the best performing of all equity funds from the portfolio in December. In the global funds, the Principal Global Opportunities fund has accounted for 29% while the Sundaram Global Advantage Fund has accounted for 15% of the total portfolio returns. 7. Aggressive (Global) Portfolio: Portfolio Objective: The portfolio aims to achieve long-term capital appreciation by investing 10% into bond funds, 59% into domestic equity funds and 32% into global equity funds. The target allocation may change depending upon our views on financial markets. Currently, we have an overweight position in equities and we target to have an exposure of 65% into domestic equity funds and 35% into global equity funds. Portfolio Absolute Return since inception: Total Investment: INR 1,00,000 (Inception Date: 26 Feb 2010) 24.42% Portfolio Value: INR 1,24,415 December 2010 Portfolio Returns: 2.43% Portfolio Commentary: The Aggressive – Global portfolio gave a return of 2.43% in the month of December due to the superior performance of global markets over India. Out of the total returns of the portfolio, the domestic equity funds have made a positive contribution of slightly over 52% and the global funds have accounted for 48%. The funds that have a focus on overseas sector have outperformed the domestic equity funds this month. In the domestic equity funds, DSP Blackrock Top 100 Equity fund has accounted for 19% of the total returns and the HDFC Top 200 Fund has accounted for 11% of the total portfolio returns. While the ICICI Prudential Infrastructure Fund has managed to account for 14% of the portfolio returns, it is the best
  19. 19. Monthly Markets Update - India January 2011 performing of all equity funds from the portfolio in December. However, the portfolio returns were lowered by the negative performance of Reliance Banking Fund. In the global funds, the Principal Global Opportunities fund has accounted for 23% while the Sundaram Global Advantage Fund has accounted for 14% of the overall portfolio returns.

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