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    Newsletter – January’11
Index             Page No.

Economic Update        4

Equity Outlook         8

Debt Outlook          15
Forex            ...
Dear Investor,                                                                                             Global economy ...

                                             As on   Change over   Change over    120
• The Conference Board Consumer Confidence Index, which had improved in
              November, decreased slightly in Dece...
20.0%        IIP monthly data
18.0%                                                 • The GDP growth rate for Q2 FY11 came...
Growth in credit & deposits of SCBs
Look west before going east
CY 2010 turned out to be a volatile year for equities. The Sensex started 2010 at 17,473, fell...
The other important trend at the end of the year, from India’s point of view, is the rise in commodity prices. The Reuters...
Sector     Stance                                                      Remarks
                             We believe in ...
Sector        Stance                                                   Remarks

                                Rich valua...
•   DELTA seeks to invest in a portfolio of mutual funds through a PMS route that aims to would provide higher returns tha...
1 Year                    Since Inception (29/4/09)
               Portfolios                           6 Months (Absolute...
8.8                Yield curve
      8.6                                                     • The benchmark 10 yr G-sec y...
Category    Outlook                                 Details
                          We recommend short term bond funds w...
  • To invest in a portfolio of High Yielding Securities

Investment Rationale:
  • The strategy of this portfo...
Basic Theme
OMEGA is a multi-asset portfolio that seeks to invest in Equity, Debt and Gold through a PMS route, and aims t...
Rupee movement vis-à-vis other currencies (M-o-M)                            Trade balance and export-import data
   4.0% ...

             Seasonally gold will be stronger in 4QCY till mid-January.                                            ...
Aries – India’s First Multi Asset structured Products

  Tenor                                                            ...
Leveraging breadth of related businesses that KARVY is in
KARVY is an integrated financial services group, with Karvy Priv...
The information and views presented here are prepared by Karvy Private Wealth or other Karvy Group companies. The
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Advice for the wise January' 11


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Our ‘Advice for the Wise’ monthly newsletter gives you an outlook across sectors along with economic updates both from a global and domestic perspective.

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Advice for the wise January' 11

  1. 1. ADVICE for the WISE Newsletter – January’11
  2. 2. Index Page No. Economic Update 4 Equity Outlook 8 Debt Outlook 15 Forex 19 Commodities 20 2
  3. 3. Dear Investor, Global economy continued to remain anemic. Concerns about the future of Euro as a currency are beginning to be voiced more and Indian equity markets continued to experience significant turbulence in more regularly. While the currency per se is stable, the underlying December. While January began on a positive note, profit booking has implicit and explicit accords amongst its member countries are not. continued to exert downward pressure on the indices. We expect a We do not expect a major blow-up amongst the Eurozone moderate growth in the Indian equities in the present calendar year – countries. However the recurrence of sovereign debt concerns in driven primarily by earnings growth since the P/E ratio of Indian equities Europe will continue to drag the global investor sentiment down. is already quite high. Considerable earnings expectations have been That might be a constructive influence in face of the likely liquidity upgraded in recent past. Hence the results can at best bring glut in the US and its bubble-prone impact on the asset markets disappointments. We do not expect a major upward move on the basis around the world. of the quarterly results. However the build-up of positive expectations Owing to the divergence of global economy and Indian economy in before the budget can drive the valuations higher. terms of growth and its vigor, we believe Indian equities and gold are likely to perform well in the years to come. Interestingly in The inflation issue continues to haunt Indian economy. There is a recent past, gold has been negatively correlated with Indian general consensus that the persistence of high headline inflation is equities in the periods of fall in equity markets, while in the good driven mainly by runaway food inflation which itself is due to supply times, the correlation has been small and positive. A product side constraints. There is wide anticipation of an interest rate hike by the combining Indian equities and gold is hence likely to do quite well Reserve Bank of India in its monetary policy announcement on 25th in the next 2-3 years. We have launched one such product named January. However we believe that RBI may take a stand that the Aries as part of our endeavor to bring world class products to monetary tightening is unlikely to bring down food inflation in a direct Indian investors. manner – thus rendering the tightening ineffective at best and damaging We expect several interesting opportunities to emerge in for growth at worst. Long term bonds are a good bet on the high interest residential real estate space. There might be a correction in rates prevalent in India. For one, the investors can lock in high yields residential real estate in parts of the country, creating low entry which are unlikely to increase any further. If inflation worries subside points for long term investors. The correction however may not be and RBI takes a more dovish stance on interest rates in the second half visible in the per square foot rate offered by the developers. of 2011, long term yields will fall as well. In such a scenario long term Instead the discount in price may come as reduction or waiver of bonds can provide capital appreciation in addition to high yields. additional costs associated with a property purchase. Hence decisions to invest should be made on the basis of total purchase price in Rupees rather than the per square foot rate. “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.23” 3
  4. 4. 125 As on Change over Change over 120 Sensex S&P 500 Nifty Nikkei 225 Dec 31st 2010 last month last year 115 110 105 BSE Sensex 20,509 5.1% 17.4% 100 Equity S&P Nifty 6,134 4.6% 17.9% 95 90 markets S&P 500 1,257 6.5% 12.8% 85 80 Nikkei 225 10,229 2.9% (3.5%) 8.8 10 yr Gsec 8.3 10-yr G-Sec Yield 8.07% (13 bps) 39 bps 7.8 Debt markets Call Markets 5.75% 15 bps 240 bps 7.3 6.8 Fixed Deposit* 8.00% 100 bps 200 bps 21000 20000 19000 18000 Commodity RICI Index 3,896 7.8% 19.0% 17000 Gold markets Gold (`/10gm) 20,575 0.4% 23.2% 16000 15000 Crude Oil ($/bbl) 93.52 8.0% 20.0% 48 47.5 `/$ 47 Forex Rupee/Dollar 44.81 2.7% 3.7% 46.5 46 45.5 markets Yen/Dollar 81.15 3.1% 11.6% 45 44.5 44 Jul-10 Dec-09 Dec-10 Apr-10 Oct-10 Jan-10 Jun-10 Feb-10 Mar-10 Aug-10 Sep-10 Nov-10 May-10 * Indicates SBI one-year FD 4
  5. 5. • The Conference Board Consumer Confidence Index, which had improved in November, decreased slightly in December. The Index now stands at 52.5, US down from 54.3 in November. This indicated a tepid and cautious outlook from the consumers. • US m-o-m unemployment rate worsened to 9.8 per cent in Nov’10. • Euro-zone purchasing managers index remained constant at 55.4 in December, unchanged from November. Eurozone recovery remained on track as strong Europe France-Germany core offset weakness elsewhere. Disparities further widened as Service Job Index continued to rise in Germany and was at three month high in France. On the other hand Italy, Spain & Ireland saw job losses. • Unemployment rate in the Euro zone was steady at 10.1% in November. • Japan’s industrial production increased by 1% in November showing increase for the first time in six months, Transport equipment and Electronic parts & Japan devices were the major contributors. The manufacturing PMI increased to 48.3 from 47.3 November but still indicated contraction in the Japanese markets. • Japan’s unemployment rate was stagnant at 5.1% in Dec 10. • The HSBC China Manufacturing Purchasing Managers Index, fell to 54.4 in December from 55.3 in Nov. indicating increased manufacturing activity Emerging albeit at a slower rate. economies • China’s GDP is expected to rise 10% in 2010 (revised upwards from 9.5%) 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. 20.0% IIP monthly data 18.0% • The GDP growth rate for Q2 FY11 came in at 8.9% 16.0% backed by a strong growth in services and 14.0% 12.0% agricultural output. 10.0% 8.0% 6.0% • The agriculture sector, which accounts for nearly 4.0% 17% of GDP, rose 4.4% and this offset the moderation manufacturing sector growth, where production went up by 9.8%. The services sector too grew at 9.7% during July-September this year, • Industrial output as measured by the Index of led mainly by finance and real estate as well as Industrial Production (IIP) grew by 10.8% (y-o-y) trade, hotels, transport and communication in October ‘10 as compared to 4.4% in September ‘10 mainly on account of strong base • The Finance ministry is targeting FY11 growth at effect and robust growth in the capital goods ~8.50% - 8.75% which may be revised upwards. We sector. believe the current target is sustainable as we • Growth in manufacturing, which constitutes expect manufacturing and service sectors to around 80 per cent of the IIP saw growth rise continue to drive growth in the next few quarters. back to 11.3% from a low of 4.5 per cent last month. 10 • Capital goods showed a spectacular recovery at 9 GDP growth 8 22%, much higher than the 4% fall in September. 7 6 • We believe the growth will eventually moderate 5 out and may end lower than that seen in the first 4 part of the fiscal. FY09 (Q3) FY09 (Q4) FY10 (Q1) FY10(Q2) FY10(Q3) FY10(Q4) FY11(Q1) FY11(Q2) 6
  7. 7. Growth in credit & deposits of SCBs 25.0% • Inflation as measured by WPI stood at 7.48% 23.0% Bank Credit Aggregate Deposits (y-o-y) for the month of November -10 as 21.0% 19.0% compared to 8.58% during October 10. These 17.0% figures are based on the new base year and 15.0% 13.0% WPI list. The decline is due to the decline in 11.0% Food inflation from 14.1% in October to 9.4% in 9.0% 7.0% November. 5.0% Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 • We expect WPI inflation numbers to moderate in m-o-m inflation numbers due to the expected • Bank credit growth increased in the month of decrease in food inflation and the monetary November to 23.6% as compared to 20.4% in the tightening stance by RBI, but increasing Fuel month of October 2010. prices may be a cause of worry. • Growth of credit demand and tight liquidity has put 12.0% Inflation pressure on the banks to raise their deposit rates, 10.0% hence shrinking their margins. The RBI has been 8.0% intervening to provide adequate liquidity and more 6.0% such interventions may be seen in the near future. 4.0% • We expect credit growth to settle at ~20% levels in 2.0% the coming quarters on the back of improving business confidence and decline in risk aversion on 0.0% Jan-10 Mar-10 Jun-10 Oct-10 Apr-10 May-10 Aug-10 Nov-09 Feb-10 Jul-10 Sep-10 Nov-10 Dec-09 the part of banks. Increase in exposure to -2.0% Infrastructure projects is also expected in the second half of the fiscal. 7
  8. 8. Look west before going east CY 2010 turned out to be a volatile year for equities. The Sensex started 2010 at 17,473, fell a bit in February, regained its previous level in March, lost its footing for a while in May and then started to move up from June. The upward momentum started slowing in October and after a brief high in November, it started losing some ground. Interestingly, the US dollar index started moving up from the middle of January 2010 and continued its upward movement till it reached a peak in early June. Worry about the debt burdens and unsustainable fiscal deficits in Greece and other countries of the European periphery was the reason for the strengthening dollar. After June, however, the response of the European authorities appears to have satisfied the markets and the dollar index started to fall. This coincided with the turnaround in the Sensex. Apart from a brief pause in August, the dollar index then fell all the way till early November. The weakness this time seems to have been driven by expectations of a second round of quantitative easing (QE2) by the US Federal Reserve, which was widely expected to lower interest rates further in the US, which in turn was expected to lead to money flowing out of the US into non-dollar assets, thereby leading to a weaker dollar. Ironically, the dollar index reversed direction once again in early November, after the announcement of QE2. During the second half the US economy, long seen to be practically comatose, started exhibiting distinct signs of recovery. Leading indicators started to improve, jobless claims started to show a downward trend, factory production rose and retail sales showed signs of a turnaround. It was this new-found strength of the US economy that led to a stronger dollar and the trend was aided and abetted by continuing problems in the euro area. The net result: the dollar index started moving up and the Sensex started moving down. The correlation between the US dollar index and the Sensex is remarkable. Indian economy – a robust performance In the meanwhile, the Indian economy continued to perform well. Real gross domestic product (GDP) growth at factor cost was 8.6% in the first Q1 CY10 and 8.9% in the succeeding two quarters. Sensex profit after tax growth shot up in the first quarter of the calendar year and was moderately high in the next two quarters. But in spite of the GDP for the September quarter coming in much higher than expected, it had little impact on the market. That suggests the driving force for the Indian market (and indeed for emerging markets), is what happens to interest rates in the US. An IMF study points out that the single biggest factor accounting for returns in emerging market equities is liquidity in the mature economies. 8
  9. 9. The other important trend at the end of the year, from India’s point of view, is the rise in commodity prices. The Reuters Jefferies CRB index went down during H1CY10 and reached its January peak only in October. Since then, though, it has made a new high for the year in December. Crude oil prices, in particular, are headed up. India being net importer of most of the commodities is vulnerable to this. The outlook At the end of 2010, the Indian equity market faces the prospect of higher commodity prices, demand-pull inflation pressures and higher interest rates, while liquidity is being diverted to the US markets. And while earnings growth promises to be strong, the favorable base effect is wearing off, while valuations continue to be reasonable, though not cheap. Going forward, the investors need to be more discrete in stock-picking and more patient while riding the volatility. Only a growth in the earnings can be the next return generator. The earnings for the index are expected to grow at higher teens and that would be a fair expectation from Indian equity markets as well. In the Indian markets, we should now focus more on corporate investment than domestic consumption, with analysts projecting a rebound in the capital expenditure cycle that would lead to a change in the fortunes of infrastructure and capital goods sectors. Challenges in the execution of infrastructure projects, however, remain a key issue and policy initiatives to tackle them might act as an upside trigger for the market. Within consumption, the focus seems to be shifting from consumer staples to discretionary consumption. Telecom —an underperformer for most of 2010—should deliver higher returns next year as the worst seems to be over for the sector. Real estate might continue to be unattractive as bank loans for the sector slow. FII & MF data • FIIs invested ` 2,050 Cr. in equities in the month of 25000.0 FII MF 20000.0 December. This was ` 16,243 Cr. lesser than last month and 15000.0 much lower than October which witnessed huge inflows in 10000.0 the Coal India IPO issue. 5000.0 0.0 • Mutual Funds invested around ` 1767 Cr. in the month of -5000.0 -10000.0 December. -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 Highly Healthcare 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 of E&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 India BFSI 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 the FMCG 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 and Telecom 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 cautious IT/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 competition Automobiles 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 in Energy 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 international Metals 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 services Power Utilities Negative providers. Utilities may be a more defensive play, but we have been defensive enough for the time being. 11
  12. 12. • 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 funds Asset Allocation for DELTA: Asset Class DELTA Conservative DELTA Moderate DELTA Aggressive Equity 43% 66% 82% Debt 57% 34% 18% 12
  13. 13. 1 Year Since Inception (29/4/09) Portfolios 6 Months (Absolute) (Absolute) CAGR Conservative 5.67% 9.09% 26.76% Market Return Benchmark** 6.64% 9.89% 22.35% Moderate 7.66% 11.55% 38.21% Market Return Benchmark** 9.29% 12.64% 31.88% Aggressive 8.67% 12.59% 46.13% Market Return Benchmark** 10.78% 14.20% 38.62% Absolute Return Benchmark 2.63% 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 31st December 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 13
  14. 14. Minimum Tenor Scheme Name Type Open Date Close Date Investment Amount (Rs.) Reliance FHF-XVII-2 Debt 30-Dec-2010 05-Jan-2011 5000 367 Days Birla SL FTP-CK Debt 30-Dec-2010 06-Jan-2011 5000 368 Days DSP BlackRock FMP- 3M-Series-27 Debt 04-Jan-2011 06-Jan-2011 10000 3 Months Birla Sun Life Short Term FMP-Series 4 Debt 05-Jan-2011 06-Jan-2011 5000 91 days ICICI Pru FMP-53-6M-A Debt 28-Dec-2010 10-Jan-2011 5000 182 Days IDFC Fixed Maturity Plan - Yearly Series 35 Debt 05-Jan-2011 10-Jan-2011 10000 1 Year Principal Pnb FMP-367D-II Debt 30-Dec-2010 10-Jan-2011 5000 367 Days BNP PARIBAS FIXED TERM FUND SERIES 20 A Debt 03-Jan-2011 11-Jan-2011 5000 370 Days Kotak FMP Series 32 Debt 10-Jan-2011 11-Jan-2011 5000 370 Days Religare FMP Sr-4 F Debt 07-Jan-2011 12-Jan-2011 5000 368 Days Axis FTP - Series 11 Debt 03-Jan-2011 12-Jan-2011 5000 371 Days ICICI Pru FMP Sr-53-1Yr-Plan E Debt 03-Jan-2011 12-Jan-2011 5000 1 Year Fidelity Fixed Maturity Plan Series IV - Debt 10-Jan-2011 12-Jan-2011 5000 368 Days Plan F ( 368 days) Birla Sun Life Fixed Term Plan-Series CL Debt 05-Jan-2011 13-Jan-2011 5000 368 days ICICI Pru FMP Sr-53-1Yr-Plan F Debt 05-Jan-2011 18-Jan-2011 5000 1 Year 14
  15. 15. 8.8 Yield curve 8.6 • The benchmark 10 yr G-sec yield decreased 8.4 from 8.19% in the month of November to close 8.2 at around 8.07% in December. 8.0 7.8 • Though RBI is expected to increase the policy 7.6 7.4 rates in its upcoming review, we believe that RBI 7.2 may take a stand that the monetary tightening is 7.0 unlikely to bring down food inflation in a direct (%) manner – thus rendering the tightening 2.9 10.6 0.0 1.0 1.9 3.9 4.8 5.8 6.7 7.7 8.6 9.6 11.5 12.5 13.4 14.4 15.4 16.3 17.3 18.2 19.2 ineffective at best and damaging for growth at worst. • We expect yields at the longer end of the yield curve to remain stable. High inflation, monetary 8.4 tightening and rising credit growth will keep the 8.2 10-yr G-sec yield yields at the longer end range bound. 8 7.8 • The 10 year G Sec yields are currently around 7.6 8.07%. If the inflation continues to be high, there 7.4 7.2 may be another increase in the interest rates but 7 not one in the immediate future. The yields will 6.8 stabilize around 7.5 – 8.5% levels by year end. 15
  16. 16. Category Outlook Details We recommend short term bond funds with a 6-12 month investment horizon as we expect them to deliver superior Short 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 hence Short term bond funds and FMPs provide an interesting investment option in this space. 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. 16
  17. 17. Objective: • To invest in a portfolio of High Yielding Securities Investment 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. Jeewan Vehicle The investments will be made through the PMS structure Target 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. 50,00,000 Entry Load NIL Exit 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. 17
  18. 18. Basic Theme OMEGA is a multi-asset portfolio that seeks to invest in Equity, Debt and Gold through a PMS route, and aims to provide higher returns than the blended benchmark. The asset allocation is 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 products. Our Product Universe is as follows: Equity - Direct Equity, Mutual Funds, Exchange Traded Funds, Equity linked debentures Debt - Mutual Funds, Exchange Traded Funds, Bonds, Non Convertible Debentures Gold - Exchange Traded Funds, Gold Linked Debentures Fund Manager: Swapnil Pawar Performance* (31st December 2010) Swapnil is the head of products and investments Portfolios 6 M (Abs.) 1 Y (Abs.) Since 29/4/09 (CAGR) at Karvy Private Wealth. He has completed his Conservative 7.38% 11.47% 26.66% MBA from IIM Ahmedabad and a B.Tech in Market Return Benchmark** 7.16% 11.75% 22.33% Aerospace Engineering from IIT Bombay. He was Moderate 8.45% 12.31% 36.59% a co-founder of PARK Financial Advisors. Prior to Market Return Benchmark** 9.05% 13.27% 31.38% Aggressive 8.81% 12.58% 42.35% that, Swapnil worked with The Boston Consulting Market Return Benchmark** 10.67% 14.92% 37.46% Group (BCG), Mumbai, across various industries Absolute Return Benchmark 5.25% 6.00% 7.75% including retail banking services. *Portfolio performance is net of all fees and expenses. The fixed fee model is assumed for management fee in all cases. **The Market Return Benchmark is based on BSE 200, Crisil Bond index and Mumbai Spot Gold Prices taken in the same proportion as the asset allocation of that variant 18
  19. 19. Rupee movement vis-à-vis other currencies (M-o-M) Trade balance and export-import data 4.0% 80 0 Export Import Trade Balance (mn $) 3.5% -2000 60 -4000 3.0% 40 -6000 2.5% 20 -8000 2.0% -10000 0 1.5% -12000 -20 -14000 1.0% 0.5% 0.0% • Exports for the month of October increased by 26.5% -0.5% USD GBP EURO YEN -1.0% (y-o-y) while imports increased by 11.2% reducing the trade deficit to USD 8.9 bn. •The Rupee strongly appreciated v/s the US dollar & GBP in 140000 Capital Account Balance the month of December but marginally depreciated against 90000 the Yen on account of pick-up in Japanese economy. 40000 • US dollar faced selling pressure on dollar by exporters and -10000 Banks. FY 09 (Q3) FY 09 (Q4) FY 10 (Q1) FY 10 (Q2) FY 10 (Q3) FY 10 (Q4) FY 11 (Q1) FY 11 (Q2) -60000 •We expect the Rupee to remain volatile in the next month with no clear direction. Higher interest rates in India would • Capital account balance continues to be positive through attract large capital inflows putting an upward pressure on FY11 and stands at `1,79,02958 Cr. for the Q1 & Q2. the Rupee while increase in the Current account deficit would • We expect the capital account balance to remain positive put a downward pressure on the Rupee. Hence, a clear trend as higher interest rates would make investment in the might not be seen. Indian markets attractive hence drawing investments into the market. 1
  20. 20. 21000 Seasonally gold will be stronger in 4QCY till mid-January. Gold 20000 Hence, gold is expected to plateau in the near future. Further, 19000 we expect dollar index to be stronger in the near future and 18000 Precious 17000 the consequences of which due to reversal of carry trade Metals positions shall have a wide spread correction across all asset 16000 15000 classes and commodities as an asset classes will tend to correct May-10 Jan-10 Feb-10 Mar-10 Sep-10 Dec-09 Apr-10 Jun-10 Aug-10 Dec-10 Oct-10 Nov-10 Jul-10 early. 95 90 Crude We expect crude oil may continue to have an uptrend given 85 the expectation of reviving US economy and the ongoing high 80 75 Oil & Gas intensity winter across the US and Europe. Although a sharp 70 fall is not expected, any upside surprise on the dollar index will 65 take a toll on the energy market as well. 60 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 09 10 10 10 10 10 10 10 10 10 10 10 10 2
  21. 21. Aries – India’s First Multi Asset structured Products Tenor 36/40 months Issuer Karvy Financial Services Limited Reference Index S&P CNX Nifty Index | Benchmark Gold ETF– GoldBeEs Initial Fixing Level Reference Index levels on DDA Final Fixing Level Reference Index levels on DDA+36M Nifty Performance {Final Level / Initial Level}-1 Outcomes at Maturity Gold Performance Note Return / Initial Level}-1 {Final Level Principal Protection 100% Participation Rate 110% Basket Performance 60% of Nifty Performance + 40% of Gold Performance Payoff Max{0%,PR * Basket Performance} Minimum Investment Amount Rs.5,00,000 and in multiples of Rs.1,00,000 Placement Charges 3%+10.30% service tax on placement charges This example is for illustrative purpose only and does not constitute a guaranteed return or performance. 21
  22. 22. Leveraging breadth of related businesses that KARVY is in KARVY is an integrated financial services group, with Karvy Private Wealth being one of its arms. The entire group’s strengths are leveraged to provide end-to-end wealth advice to Karvy Private Wealth clients. For example, SME clients can receive advice on their personal wealth while also getting investment banking advice from the I-banking arm of Karvy. Maximum choice of products & services KARVY Private Wealth offers the widest breadth of products and services, providing clients a variety of options through a single contact. Products and services include equities, debt instruments, commodities, Mutual Funds, Insurance, Structured Products, Financial Planning, real estate advice, etc. Product-neutral advice We 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 presence Set to have business in 20 - 25 cities we are poised to cater to families and businesses spread across multiple cities in India providing them with combined and integrated advice. For one-off services, if required, we can also leverage KARVY Group’s presence in 400 cities. 22
  23. 23. The information and views presented here are prepared by Karvy Private Wealth or other Karvy Group companies. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment 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 that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this 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-mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through 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 are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidence of tax on investments 23
  24. 24. Bangalore 080-26606126 Chennai 044-45925925 Delhi 011-43533941 Goa 0832-2731822 Hyderabad 040-44507282 Kochi 0484-2322723 Kolkata 033-40515100 Mumbai 022-33055000 Pune 020-30116238 Email: SMS: ‘HNI’ to 56767 Website: Corporate Office : 702, Hallmark Business Plaza, Off Bandra Kurla Complex, Bandra (East), Mumbai – 400 051 24