Advice for the wise december'10


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Advice for the wise december'10

  1. 1. ADVICE for the WISE Newsletter – December’10
  2. 2. Index Page No.Economic Update 4Equity Outlook 8Debt Outlook 17Forex 21Commodities 22 2
  3. 3. Dear Investor, While we advise staying invested in the equity markets, investors worried about short term volatility or carrying a Indian equity markets experienced significant turbulence in the trading portfolio can use a 2 month slightly out-of-the-money past month. This was owing to both domestic and global factors. put option on the Nifty Index to hedge the downside. On the domestic front the uncovering of multiple scams spooked When one looks beyond the next quarter, the effect of global the investors who worried about the potential fallout of the scams factors on Indian markets is going to play an important role. on political stability. Globally monetary tightening in China and The desperate efforts of the US Federal Reserve to drive renewed sovereign debt concerns in Ireland renewed the fears of economic activity by bringing down long term yields through most investors regarding the fragile nature of recovery in global quantitative easing will send a wave of liquidity through the economy. The fears of political instability on the domestic front globe. Much as it happened in 2006 and 2007, this is likely to have now subsided. However the concerns regarding the so-called boost the asset markets globally. The Indian investors need to ‘unknown unknowns’ remain. be cognizant of the impending over-valuation this may bring Globally the state of affairs is unlikely to become much better in to equity and real estate markets here. Equally importantly near future. Europe is likely to continue to experience periodic they should be mindful of the potential falls that come as the bouts of sovereign debt concerns amongst its less stable risk appetite subsides. The next few years thus are likely to be economies. While this may cause worry for the global investors, it fairly volatile for Indian asset markets. is likely to have limited impact on either the Indian economy or the As we had recommended over last few months, gold continues investor sentiments regarding Indian markets. On the other hand, to be effective as a useful hedge against asset bubble built on the policy-driven slowdown in growth in China to tame inflation easy liquidity and their pricking. Most importantly since the might cause reduction of risk appetite for emerging markets source of the liquidity is the US thus potentially driving value amongst global investors. There might be a silver line for Indian of dollar down, gold becomes relevant as dollar hedge as well. markets here if the pace of Chinese slowdown is not significant and Last month saw several specific stocks drop significantly in the global investors merely reallocate the emerging market price owing to their perceived link to the housing loan scam. portions of their portfolios. However, a hard landing for the While some of these are likely to have a real impact on their Chinese economy however will most certainly bring about the books due to the crisis, most are beaten down by panic. That proverbial ‘flight to safety’ driving down asset markets in emerging makes a good case for buying selectively into some of the economies! ‘fallen angels’.“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
  4. 4. As on Change over Change over 128 123 Sensex S&P 500 Nifty Nikkei 225 Nov 30th 2010 last month last year 118 113 BSE Sensex 19,521 (2.1%) 15.3% 108 Equity S&P Nifty 5,863 (2.6%) 16.5% 103 98 markets S&P 500 1,180 (0.2%) 7.8% 93 88 Nikkei 225 9,937 8.0% 6.3% 8.4 8.2 8 7.8 10-yr G-Sec Yield 8.19% 4 bps 94 bps 7.6 7.4Debt markets Call Markets 6.50% (25 bps) 350 bps 7.2 10 yr Gsec 7 Fixed Deposit* 7.00% 0 bps 100 bps 6.8 20000 19500 19000 18500 18000 Commodity RICI Index 3,614 2.7% 11.1% 17500 17000 markets Gold (`/10gm) 20,500 4.2% 16.1% 16500 16000 Gold 15500 Crude Oil ($/bbl) 86.60 6.3% 11.4% 15000 48 47.5 `/$ 47 Forex Rupee/Dollar 46.04 (3.4%) 0.9% 46.5 46 45.5 markets Yen/Dollar 84.15 (4.6%) 2.9% 45 44.5 44 Jul-10 Dec-09 Apr-10 Oct-10 Jan-10 Jun-10 Feb-10 Mar-10 Nov-09 Aug-10 Sep-10 Nov-10 May-10* Indicates SBI one-year FD 4
  5. 5. • The Conference Board Consumer Confidence Index rose to a five month high of 54.1 in November from 50.2 in October. This indicated a positive outlook US from the consumers and favorable business conditions as the holiday season begins. • US m-o-m unemployment rate remained unchanged at 9.6 per cent in Oct’10. • Euro-zone purchasing managers index rose to 55.4 in November from 54.6 in October. The growth was driven by improvement in the German and French Europe economies while debt burdened Ireland and Spain continued to struggle. Owing to a strong German recovery, the Service Job index was at its highest level since February ’10. • Unemployment in the Euro zone was at a 10 yr. high of 10.1% in October. • Japan’s industrial production declined by 1.8% in October as stimulus effects waned and slowing global demand hit exports. The manufacturing PMI Japan increased to 47.3 from 47.2 October but still indicated contraction in the Japanese markets. • Japan’s unemployment rate increased to 5.1% in Oct 10 from 5% in Sept 10. • The HSBC China Manufacturing Purchasing Managers Index, rose to 55.3 in November from 54.7 in Oct. indicating accelerating manufacturing activity. Emerging • China’s GDP is expected to rise 10% in 2010 (revised upwards from 9.5%)economies accelerating from 9.1% in 2009. The economy grew at 11.9% in the first quarter, 10.3% in the second quarter and 9.6% in the third quarter. 5
  6. 6. 19.0% IIP monthly data • The GDP growth rate for Q2 FY11 came in at 8.9%14.0% backed by a strong growth in services and 9.0% agricultural output. 4.0% • The agriculture sector, which accounts for nearly 17% of GDP, rose 4.4% and this offset the moderation manufacturing sector growth, where • Industrial output as measured by the Index of production went up by 9.8%. The services sector Industrial Production (IIP) grew by 4.4% (y-o-y) in too grew at 9.7% during July-September this year, September ‘10 as compared to an upward led mainly by finance and real estate as well as revised 6.9% in August ‘10. Decline in capital trade, hotels, transport and communication goods output along with a base effect pulled down the index. • The Finance ministry is targeting FY11 growth at ~8.50% - 8.75% which may be revised upwards. We • Though 14 out of the 17 industries, which believe the current target is sustainable as we constitute the IIP, posted positive growth in expect manufacturing and service sectors to September, the quantum of increase was continue to drive growth in the next few quarters. modest. Important sectors like chemicals, metals and machinery registered negative growth. • Growth in manufacturing, which constitutes 10 GDP growth 9 around 80 per cent of the IIP saw growth slip to 8 4.5 per cent from 11 per cent a year ago. 7 6 • We believe the growth will eventually moderate 5 4 out and may end lower than that seen in the first FY09 (Q2) FY09 (Q3) FY09 (Q4) FY10 (Q1) FY10(Q2) FY10(Q3) FY10(Q4) FY11(Q1) FY11(Q2) part of the fiscal. 6
  7. 7. Growth in credit & deposits of SCBs23.0% Bank Credit Aggregate Deposits • Inflation as measured by WPI stood at 8.58%21.0% (y-o-y) for the month of October -10 as19.0% compared to 8.62% during September 10. These17.0%15.0% figures are based on the new base year and13.0% WPI list.11.0%9.0% • We expect WPI inflation numbers to moderate7.0%5.0% in m-o-m inflation numbers due to the expected Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 decrease in food inflation and the monetary tightening stance by RBI. • After a dip in August and September, bank credit growth increased in the month of October to 20.4% 12.0% as compared to 19.0% in the month of September Inflation 10.0% 2010. 8.0% • We expect credit growth to further improve in the 6.0% next few quarters and settle at ~20% levels on the 4.0% back of improving business confidence and decline 2.0% in risk aversion on the part of banks. Increase in 0.0% exposure to Infrastructure projects is also expected Jan-10 Oct-09 Mar-10 Jun-10 Oct-10 May-10 Nov-09 Apr-10 Aug-10 Sep-10 Feb-10 Jul-10 Dec-09 in the second half of the fiscal. -2.0% 7
  8. 8. Bloodbath that started on the Dalal Street after the Diwali week got extended through the month as global worries and 2G spectrumallocation and housing loan scams back home spooked the bourses. Volatility remained evident throughout the month as futures andoptions’ (F&O) traders switched their positions from November month contracts to next month series. Realty counter suffered deepcuts during the month as investors rushed for profit booking in anything related to real estate or infrastructure space after the CentralBureau of Investigation (CBI) unearthed fake housing loan scandal. Metal, public sector undertaking and capital goods pockets also tookserious beating from the bears. On the flip side, software and technology counters showed some strength in relative sense. The S&PCNX Nifty lost about 2.6% to close at 5,863 in November. The real damage however was inflicted in the mid cap and small cap indiceswhich declined by over 6%. The real estate index lost over 10% during the month, while BSE Bankex fell by a little over 6%. Mirroringtheir faith on the Indian economy, overseas funds have infused a staggering $4.78 billion in the capital market in November, taking theyear-to-date total to $39 billion.The index for food prices came down to a single digit after four months, dipping to an 18-month low of 8.6% in the week endedNovember 20. The decline came about on arrival of winter crops in the market but onions, fruits and milk became costlier. Food inflationwas at this level last in May 2009. The decline is expected to ease pressure on headline inflation, which stood at 8.58% in October,allowing the Reserve Bank some breathing space in its next monetary policy review. The new GDP numbers released by the governmentshow that the Indian economy continues to maintain its growth momentum despite a tough global environment. At 8.9% for a secondquarter in a row, the economy is growing near its trend rate and fears of overheating seem to be overdone right now. There are twounderlying trends that deserve closer attention.First, the revival in farm output this summer from its drought-induced trough in 2009 has pushed up GDP in the second quarter. Farmoutput has grown at the fastest rate in 11 quarters. Maintaining this growth rate is almost impossible. Meanwhile, manufacturinggrowth has slowed down and has also been volatile in recent months. There have been problems with the way the index of industrialproduction is calculated but that is the best indicator we have for now. The wild swings in factory output are a worry. 8
  9. 9. Second, the GDP numbers show that private sector demand continues to pick up. A huge increase in government spending hadsupported economic activity in the crisis months of late 2008 and early 2009, but the private sector has now stepped it to pick up theslack in domestic demand that could have arisen as the government tries to cut its fiscal deficit. Yet, private consumer demand seemsto be doing better than private investment demand. High frequency data on cement dispatches, telecom subscribers, car sales andairline bookings suggest that consumer spending continues to be robust.The domestic equity markets may consolidate around the current levels next month before showing any significant moves either way.Developments on recently unearthed housing loan scandal will be on investors’ radar. Developments from South Korea and Ireland willalso be important for the equity markets across the globe. While news flow will continue to impact markets in the near term, thevaluations remain fair and will continue to attract foreign money. The prospective risk return ratio looks favorable for entry into thesemarkets for long term investors. Investors should increase exposure to quality equity ideas selectively. At 16.5x FY12 earnings, growthis clearly the guiding valuation influencer for the markets. And that is unlikely to change in the near future. FII & MF data • FIIs invested ` 18,293 Cr. in equities in the month of 25000.0 FII MF November. This was ` 10,000 Cr. lesser than last month 20000.0 which witnessed huge inflows in the Coal India IPO issue. 15000.0 The markets declined by 2% in the month on account of the 10000.0 various scams discovered in the real estate, banking and 2G 5000.0 space. 0.0 • Mutual Funds invested around ` 251 Cr. in the month of -5000.0 November as market correction provided good levels to-10000.0 invest.-15000.0 9
  10. 10. 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 the HighlyHealthcare developed world keen to cut healthcare costs, and a vast pipeline of drugs going off-patent, Indian Overweight 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. 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, because ofE&C Overweight 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. 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 Overweight 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 Neutral growth in this segment will disproportionately higher vis-à-vis the increase in disposable incomes. This also provides a defensive posture to the portfolio. Despite the regulatory hurdles, competitive pressures and leverage we believe in the mammoth opportunity here, largely because of the continuing under-penetration of voice in rural markets andTelecom Neutral huge demand for data services in urban markets. 3G & BWA will make sure the revenues grow at reasonable pace. Discretionary consumption again. 10
  11. 11. Sector Stance Remarks Rich valuations, maturing growth and the menace of appreciating Rupee makes us little cautiousIT/ITES Underweight here. We have chosen to be with the bellwether stock here and believe we have better sectors to look at. We believe in the growth prospects here but raw material prices and raging competitionAutomobiles Underweight indicates issues. The rich valuations don’t help either. We have taken a position in the commercial vehicle segment as things are looking much better there. 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. India is not completely isolated from global slowdown. Commodity prices are an internationalMetals Underweight issue. We have chosen to stay away with a cautious view to the global commodity cycle. Cement demand will certainly grow over the next three years. But the issue is on the supply side.Cement Negative We do see an oversupply situation for the next 3-4 quarters. We like power sector but believe that greater value will be created by engineering servicesPower Utilities Negative providers. Utilities may be a more defensive play, but we have been defensive enough for the time being. 11
  12. 12. Price as on 5th Stock CMP 52 Wk high 52 Wk. Low P/E P/B Nov.Central Bank of India 198.4 243.4 249.05 136.55 6.72 1.84Biocon 406.1 433.0 464.60 253.15 27.26 5.19PNB 1269.6 1376.0 1395.00 842.10 9.33 2.47Orbit Corp 91.35 117.75 178.03 57.00 11.8 1.23 Due to a number of scams being unearthed, Indian equity markets have experienced a correction in the recent weeks. During this correction, some stocks have been hit particularly harder than the rest and thus have witnessed a much sharper fall than their peers. Many of them have fallen well below their fair market value. Such stocks may be interesting investment options at their current levels. Few of these have been specified above. Besides these, several other stocks in the real estate and banking domain will be attractive buys due to the sharp correction experienced by both those sectors. 12
  13. 13. Fund Details Fund framework & management styleNAV (As on 30th Nov, 2010) Management Style ActiveRs. 114.11 • Concentrated stock portfolio investing in a single sector ModerateAUM: Rs. 1,503 Cr. • The fund is managed by Mr. Sunil Singhania whoMinimum investment: Passive believes in capital appreciation though long termRs. 5,000 High Medm Low investingEntry Load: Nil Extent of diversificationExit Load: Performance and performance attribution< 1 yr 1.00%Else Nil • The fund has very consistent performances over 80% Reliance BankingOptions: the years and has outperformed the index at every 60% BSE Bankex 50.0%Growth, Dividend instant over time periods 36.5% 40% 35.6% 30.1% 28.8%Expense Ratio: • While the Banking sector as a whole has been an 22.9% 23.2% 20%1.99% outperformer, the fund has consistently beaten the 7.8% Risk Analysis Banking index due to superior stock selection skills 0% 6 mth 1 year 3 years 5 years Sector concentration & view on sector orientation Top company exposures & portfolio qualitySharpe Ratio: 0.22Std. Deviation: 37.44% • Banking is the best proxy to GDP growth • Fairly concentrated stock portfolio with • We believe Banking stocks are attractive due to 18 stocks with top ten stocksRisk Level: High low NPAs and reasonable P/Es. As the economy constituting 82.6% of the portfolioReturn Potential: High improves, we expect NPAs to further go down • Stock selection has been excellent in and credit growth to pick up; thereby aiding the last few yearsMarket Cap: Large growth in Banks. SummaryWe believe the recent correction in the markets provides an opportunity to investors to buy the fund at attractive levels. The fundmanager’s ability to pick up multi baggers in the Banking space has resulted in the fund’s tremendous performance over the yearsand is recommended for investors with a long term investment horizon 13
  14. 14. • 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 43% 66% 82% Debt 57% 34% 18% 14
  15. 15. * 1 Year Since Inception (29/4/09) Portfolios 6 Months (Absolute) (Absolute) CAGR Conservative 7.85% 11.46% 28.17% Market Return Benchmark** 7.06% 9.70% 22.33% Moderate 11.70% 16.23% 40.94% Market Return Benchmark** 10.00% 12.59% 31.79% Aggressive 13.38% 18.56% 49.50% Market Return Benchmark** 11.68% 14.32% 38.54% Absolute Return Benchmark 5.25% 6.00% 7.75% Asset Class Benchmarks Market Return Benchmark: Equity BSE 200 Market Return Benchmark: Debt CRISIL Composite Bond Fund Index Absolute Return Benchmark SBI 1 year Fixed deposit rate*(Returns as on 30th November 2010)The performance specified is post management fee and all other expenses. The fixed fee model has been considered in all cases.**The Market Return Benchmark is based on BSE 200 and Crisil Bond index, taken in the same proportion as the asset allocation of that variant 15
  16. 16. Karvy Principal Protected Note Linked to S&P CNX Nifty IndexIssuer Karvy Financial Services LimitedTenor 36 / 40 monthsIndex S&P CNX Nifty IndexMinimum Investment Rs. 50,00,000Principal Protection 100%Participation Rate 50%Assured Coupon 22.50%Initial Level Official Closing level of S&P CNX Nifty Index level on DDAOutcomes at MaturityFinal Level Note Return Average of Official Closing level of S&P CNX Nifty Index level on DDA+1M, DDA+2M, DDA+3M ……..DDA+36M * for all 36 months+Payoff 22.50% + Max { 0%, PR* (Final Level/Initial Level -1)} 40% 22.50% + 45% return x 50% participation rate 42.50% 10% 22.50% + 10% return x 50% participation rate 27.50% -20% 22.50% + 0% 22.50% This example is for illustrative purpose only and does not constitute a guaranteed return or performance. 16
  17. 17. 9.2 Yield curve • The benchmark 10 yr G-sec yield increased from 9.0 8.15% in the month of October to close at 8.8 around 8.19% in November. 8.6 8.4 8.2 • We believe that future monetary tightening 8.0 7.8 measures are unlikely to have a major impact on 7.6 the longer end of the yield curve. We also 7.4 believe that this is the peaking of the Interest 7.2 rate cycle and unless Inflation doesn’t increase 10.4 11.1 11.8 12.4 13.1 13.8 14.5 15.2 15.9 16.6 17.3 18.0 18.7 19.4 0.0 0.7 1.4 2.1 2.8 3.5 4.2 4.9 5.5 6.2 6.9 7.6 8.3 9.0 9.7(%) drastically, we may not have further tightening in the system. We expect the 10 yr G-sec yields to remain in the broad range of 7.5 – 8.5% in the • We expect yields at the longer end of the yield next few quarters. curve to remain stable. High inflation, monetary tightening and rising credit growth will keep the 8.4 yields at the longer end range bound. 8.2 10-yr G-sec yield 8 • With increase in rates in the November review, 7.8 the 10 year G Sec yields were around 8.15%. We 7.6 7.4 expect this to be the peaking of the interest rate 7.2 cycle and another rate hike may not be seen in 7 the immediate future. The yields will stabilize 6.8 around 7.5 – 8.5% levels by year end. 17
  18. 18. 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 and concerns over credit quality ease Debt as the economy recovers, thereby prompting ratings upgrade. We have seen the short term yields harden due to reduced liquidity in the market and it may further increase as we see outflows for Advance tax payments in December. Positive economic climate has reduced credit risks without a commensurate decrease in credit spreads. Some AA and select Credit A rated securities are very attractive at the current yields. A similar trend can be seen in the Fixed Deposits also. Tight liquidity in the system has also contributed to widening of the spreads making entry at current levels attractive. We expect this to be the peaking of the yields at the longer end of the yield curve. Yields may move to the broad range of 7.5– Long Tenure 8.5% in the next few quarters. As the inflationary pressure Debt settles down towards the end of the fiscal, these may be an attractive investment. We recommend gradual entry into long tenor debt. 18
  19. 19. Objective: • To invest in a portfolio of High Yielding SecuritiesInvestment Rationale: • The strategy of this portfolio is to invest in lower rated higher yielding securities. We believe that the risk-adjusted returns for such bonds are currently very attractive. We would be actively monitoring these bonds, thereby selecting the ones which are relatively safer and offering higher returns.Fund manager K.P. JeewanVehicle The investments will be made through the PMS structureTarget Returns 11% - 13%Minimum returns expected 8% - 9%Risks Interest Rate Risk and Liquidity Risk (No credit risk since all investments are in Sovereign/ Quasi Sovereign Instruments.)Minimum investment Rs. 50,00,000Entry Load NILExit Load NIL; (If withdrawal is earlier than 12m, full years management fee will be charged on the funds or securities withdrawn)Management Fee 0.5% p.a.Profit Sharing 10% p.a. of incremental gains beyond 8% p.a. 19
  20. 20. NABARD:• Set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale, cottage and village industries, handicrafts and rural crafts• Fully owned by the Government of India and Reserve Bank of India• Minimum Ticket Size : `100,000• Tenure : 10 Years• Yield : 8%-8.05 for bonds maturing Jan 2019 if held till maturity• Rating : ‘AAA’ rating by CRISIL & CARE• Taxation : If held for less than a year : Marginal rate of taxation If held for more than a year : 10% without indexation or 20% with indexation whichever is lower• Attractiveness As interest rates are near their peak it is a good time to invest into these Zero Coupon bonds. As yield curve goes down it can present situations to make Capital Gains. Else clients can also hold them till maturity which itself would result in a higher yield vis-à-vis fixed deposits 20
  21. 21. Rupee movement vis-à-vis other currencies (M-o-M) Trade balance and export-import data 80 0 Export Import Trade Balance (mn $) 0.04 60 -2000 0.03 -4000 40 -6000 0.02 20 -8000 0.01 0 -10000 0.00 -20 -12000 -0.01 USD GBP EURO YEN -40 -14000 -0.02 -0.03 • Exports for the month of October increased by 21.2% y-o- -0.04 y while imports increased by 6.8% increasing the trade deficit to USD 9.7 bn.•The Rupee marginally depreciated v/s the US dollar in the 140000 month of November but appreciated against the Euro on Capital Account Balance account of the increased uncertainty regarding the Eurozone 90000 crisis. 40000•We expect the Rupee to remain volatile in the next month -10000 FY 07 FY 07 FY 07 FY 07 FY 08 FY 08 FY 08 FY 08 FY 09 FY 09 FY 09 FY 09 FY 10 FY 10 FY 10 FY 10 with no clear direction. Higher interest rates in India would (Q1) (Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4) (Q1) (Q2) (Q3) (Q4) -60000 attract large capital inflows putting an upward pressure on the Rupee while increase in the Current account deficit would • Capital account balance was positive throughout FY10 and put a downward pressure on the Rupee. Hence, a clear trend ended at `2,53,058 Cr. for the year. might not be seen. • We expect the capital account balance to remain positive as higher interest rates would make investment in the Indian markets attractive hence drawing investments into the market. 21
  22. 22. The geo political tensions in Korea, the European crisis and continued concerns on global economy will all keep gold 20000 Gold 19500 afloat. However, any persistent strength in USD would be fatal 19000 18500 18000 to risky assets worldwide and gold in particular. Given this 17500Precious 17000 scenario, it is prudent for the investor to stay aside in the near 16500 16000 Metals term or reduce exposure to gold in the short term. Needless to 15500 15000 say that the long term bullishness is intact and gold should find Dec-09 Aug-10 Nov-09 May-10 Oct-10 Nov-10 Jul-10 Feb-10 Sep-10 Jan-10 Mar-10 Jun-10 Apr-10 a place in strategic asset allocation. Nevertheless, it is time to move towards tactical asset allocation that would keep smart investor high from the rest of the crowd. Crude • The crude prices increased by 6.3% (m-o-m) in November. This 90 was due to uncertainty in the Global markets. During the 85 month, prices moved between $83-$88 per barrel. 80 75Oil & Gas • We expect the oil prices to moderate Although emerging 70 65 market economies are showing robust growth, developed 60 economies are expected to remain sluggish next year, which Nov 09 Nov 10 Jul 10 May 10 Feb 10 Sep 10 Jan 10 Mar 10 Jun 10 Dec 09 Apr 10 Aug 10 Oct 10 combined with abundant supply, high inventories and weak OPEC quota compliance may cap a further oil price rally. 22
  23. 23. 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
  24. 24. 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
  25. 25. Bangalore 080-26606126 Chennai 044-45925925 Delhi 011-43533941 Hyderabad 040-44507282 Kolkata 033-40515100 Mumbai 022-33055000 Pune 020-30116238 Email: SMS: ‘HNI’ to 56767 Website: www.karvywealth.comCorporate Office : 702, Hallmark Business Plaza, Off Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 25