- Global equity markets saw sharp corrections in January led by a steep fall in crude oil prices. The Nifty breached 7500 support level touching a 52-week low. - Third quarter Indian company results were mixed, with some benefiting from lower commodities while banks may need more time to recover. - The budget will be a key upcoming event, with the government expected to focus on rural spending, manufacturing, and fiscal reforms.

1. Advice for the Wise
February 2016

2. Contents
From the desk
of the CEO
Did you
know?
Domestic
Equity
Outlook
Global Equity
Outlook
Domestic
Debt Outlook
Domestic
Debt Strategy
Global Debt
Outlook
Global
Economy
Update
Foreign
Exchange
Commodities
Real Estate
Outlook
What’s
Trending?

3. From the desk of the CEO
Dear Investors,
Barely had we gotten over the revelry of the New Year, we were
jolted by a sharp correction in the global equity markets in early
January this year. Led by a steep fall in crude prices, the Nifty
breached the 7500 support level to touch a 52-week low of 7241.
It is easier to do a post-mortem of the events that led to the fall
than to actually anticipate them. With fresh supply coming in
from Iran and a further fall in demand from China, crude prices
dropped to a 12-yr low of $27.8/barrel; and analysts are not
ruling out lower levels sometime later this year. Though this may
be good news for oil-importing countries like India, it could
seriously cripple the economies of several countries that are
dependent on oil exports like Venezuela, Brazil & Russia. The
other fallout has of course been the huge redemptions from
Indian equity markets of sovereign funds from the Middle East.
The free fall in equity markets was somewhat contained following
comments on further monetary easing by the ECB President
Mario Draghi after their recent policy meeting. Amidst the global
volatility, the US Federal Reserve also kept rates unchanged for
the time being. The World Bank has projected a growth of 2.9%
in global GDP in 2016, slightly higher than the 2015 figure of
2.5%. The U.S. is estimated to grow at about 2.5%, the highest
annual rate since the Global financial crisis. Though emerging
markets as a whole continue to be a pocket of concern, India
stands out with an estimated growth forecast of 7.9%.
Back home, the third quarter results have been a mixed bag so
far. While some companies have shown improved revenues and
better margins on the back of lower commodity prices, others
(noticeably banks) may need a couple of quarters more to come
out of the woods.
While the indices have seen a significant price correction (down
20% from the all-time high), the negative bias may last a little
longer. So how does one approach his/her investments in this
environment? The market is currently at fairly attractive
valuations. With the recent correction in midcaps, the midcap
indices have also given up some of their froth. It is always a good
idea to strictly follow one’s asset allocation based on risk profile,
at all times. It is certainly a good idea to continue with SIP’s and
also start new ones in equity mutual funds; they will give the
double benefit of rupee cost averaging as well as the power of
compounding in the long run. The risk-reward ratio at this point
of time appears favourable, and long term investors could even
consider lumpsum investments in equity while more conservative
investors could look at balanced funds.
The next major event is the Annual Budget of the Central
Government, where the fiscal numbers will be keenly watched. It
will also be interesting to see how the Government intends to
take its reforms agenda forward. The investor sentiment has been
so weak that expectations of a pre-budget rally seem to be low,
but one can never rule out that possibility. Equity markets have
always rewarded those who invest with a positive outlook and for
the long term.

4. Did You Know?
#Source: investinganswers
The U.S. takes the top spot in the
foreign direct investment
confidence index from last 3
years.
India has overtaken Thailand as
the world’s largest rice exporter in
2015.
Switzerland has been the most
globally competitive country in
terms of innovation, R & D and
stable macro environment.

5. Domestic Equity Outlook
As on 25th
Jan 2016
1 month
change
1 year
change
Equity
Markets
BSE Sensex 24486 -5.24% -16.37%
CNX Nifty 7436 5.41% -15.84%
BSE Mid cap 10217 -7.27% -4.47%
BSE Small cap 10698 -8.80% -5.88%
Equity markets corrected further as concerns on China slowdown and devaluation of Yuan gained momentum. Indian
markets, during January, though down fared somewhat better compared to other key global markets. Keeping global
scene in mind, US Fed avoided any monetary tightening during the month. Domestic macros too did not lend any help to
the Indian equities. Retail inflation during the month inched up higher to 5.6%. To add woes, Industrial production
showed a contraction of 3.2%. Corporate results for December quarter till now have largely been in line with expectations.
Revenues continue to remain subdued with volume pressure seen in segments related to commodities or rural growth.
However soft commodity and crude prices have led to gross margin expansion; also improving the bottom line. Recent
initiatives and reform measures taken by the government should translate into higher growth over next couple of years.
However till that time arrives, focus should remain on domestic driven growth sectors which have a better visibility of
earnings. We believe themes like consumer discretionary and sectors like Automobiles, FMCG and select financials should
out-beat the overall markets over long term.
90
92
94
96
98
100
102
104
106
108
110 S & P BSE Sensex CNX Nifty
BSE Midcap BSE Smallcap

6. Domestic Equity Outlook
Government Policy
With no great progress in the winter session of Parliament, focus would now be on the forthcoming budget session.
Market participants would keenly monitor how the government plans various strategies related to rural boost, Make In
India theme and re-working of the fiscal math.

7. Domestic Equity Outlook
 India's wholesale prices index stood at -1.07% for
December, 2015 as compared to -1.99% for the month of
November.
 Food inflation in the month of December for food articles
was 8.17%. Inflation in the fuel and power segment was -
9.15%, while that of manufactured products it was -1.36%
in December.
 CPI for the month of December came in at 5.61% as
compared to 5.41% in November.
 The food and beverages inflation rose to 6.3% from
6.1% in December, vegetables rose by 4.6% as
compared to 4% and pulses and products stood at
45.9% versus 46% on M-O-M basis.
Wholesale Price Index Consumer Price Index
#Source: Business standard
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00% WPI CPI

8. Domestic Equity Outlook
 Index for Industrial Production (IIP) fell down to the
levels of -3.2% in November as compared to 9.8% in
October.
 The manufacturing sector, which constitutes over 75% of
the index, fell by 4.4% in November 2015. Meanwhile,
the mining sector output down by 2.3% in November
2015.
 The cumulative growth for April –November 2015 grew
at 3.9% .
 India's Gross Domestic Product (GDP) growth for the
second quarter of the current financial year grew at
7.4% versus 7% for the previous quarter.
 Manufacturing sector showed a robust growth of 9.3%,
whereas agricultural growth came in at 2.2% exceeding
expectations. Mining sector witnessed a slowdown with
growth coming at 3.4%.
#Source: Business today
4.0
5.0
6.0
7.0
8.0
GDP
-5.0%
0.0%
5.0%
10.0%
15.0%
Nov
14
Dec
14
Jan
15
Feb
15
Mar
15
Apr
15
May
15
Jun
15
Jul
15
Aug
15
Sep
15
Oct
15
Nov
15
IIP

9. Sector Outlook
Sector Stance Remarks
Automobiles
Passenger vehicles and CVs to outperform two-wheeler segment. Tractors could benefit on
base effect. Auto-ancillaries expected to do well due to revival of demand.
IT/ITES
Select verticals displaying better growth. Long term outlook to improve once global
uncertainties come down.
FMCG
We prefer “discretionary consumption” theme within FMCG. Key beneficiaries such as
durables and branded garments, as the growth in this segment will be disproportionately
higher vis-à-vis the increase in disposable incomes. Gross margin expansion to tone down as
cos will be expected to share the benefits.
Energy
With the price deregulation of diesel, we believe the total subsidy burden on Oil PSU’s will
come down significantly this year. Govt. has decided to pay full subsidy to OMC’s .
Power Utilities
Lack of fuel linkages , poor SEB health, adverse CERC guidelines have compromised the ROE’s
leading to de-rating in near term. Reform initiatives through UDAY can improve sector
prospects in long run.
Cement
Cement volumes and realizations continue to witness pressure. Cost benefits would drive
earnings. Pricing would be key for sector valuations.

10. Sector Outlook
Sector Stance Remarks
Healthcare
Regulatory risks have become more evident and frequent with FDA inspections for pharma
sector. Additionally, M&A and currency movements poses additional risk to earnings of cos.
E&C
Order inflows expected to improve as spending and capital expenditure likely to move up on
economic recovery.
BFSI
Retail focused Private sector banks continued to deliver stable earnings in line with expectations.
However, PSUs to deliver muted numbers on asset quality concerns and lower credit growth. We
expect this trend to continue going forward.
Telecom
Regulatory uncertainties have come down. However, aggressive bids for spectrum has revived
fears of sub-optimal returns on capital. Further, expected launch of R-Jio at competitive prices in
4QFY16 will have negative implications.
Metals
Lower global growth and Chinese slowdown has kept the growth subdued. Absence of US
monetary stimulus will lead to further downward pressure on prices.

11. Global Equity Outlook
As on 25th
Jan 2016
1 month
change
1 year
change
Equity
Markets
MSCI World 1521 -9.00% -11.07%
Hang Seng 19340 -12.25% -21.13%
S&P 500 1877 -9.07% -9.02%
Nikkei 16708 -11.07% -3.58%
US Fed kept the key policy rates unchanged during the month. However the medium term path seems fine and based on
the commentary, a small rate hike could be expected during March quarter. China continues to slow down and fear of
further Yuan devaluation remains. However, loose monetary policy by Japan and Europe could support global markets in
the near term.
80
90
100
110
120
130
140
150
MSCI World Hang Seng S&P 500 Nikkie

12. Global Economy Update
United States
•U.S. economic growth likely braked sharply in the fourth
quarter as businesses doubled down on efforts to reduce an
inventory glut and unseasonably mild weather cut into
consumer spending on utilities and apparel.
•The U.S. central bank has now put the world on notice that
the slide in oil prices and sharp slowdown in global growth
may rank as one of those very shocks.
Emerging Economies
•China’s central bank will inject 20 billion yuan (2.36 billion
pounds) into the money markets through seven-day reverse
bond repurchase agreements and an additional 80 billion
yuan through 28-day reverse repos
•India's fiscal deficit was 4.88 trillion rupees ($71.90 billion)
during April-December, or 87.9 percent of the full-year target,
government data showed on Friday.
a year ago
Japan
• The Bank of Japan unexpectedly cut a benchmark interest
rate below zero on Friday, stunning investors with another
bold move to revive the economy as volatile markets and
slowing global growth threaten its efforts to beat
deflation.
• Japan's seasonally adjusted unemployment rate held
steady in December at 3.3 percent,
Europe
• Banks that mis-sold complex financial products to shield
companies from interest rate hikes that never happened
have paid 2.1 billion pounds ($3 billion) in compensation
so far, with reviews of customers completed,
• German economic output probably increased only slightly
in the fourth quarter of 2015, but leading indicators
suggest Europe's largest economy will soon recover.
#Source: Reuters

13. Domestic Debt Outlook
•The yields on 10 Yr G sec closed at 7.80% which is 5 bps higher than
the last months close of 7.75%.
•The latest inflow comes following a net investment of Rs 45,856
crore (USD 7.4 billion) by overseas investor in the debt markets in
2015.
•Raghuram Rajan seen buying extra $4 billion of India bonds after
outflows
•Indian companies raised the lowest amount via both onshore and
offshore debt markets in six years last year owing to subdued
domestic investment climate and volatile global markets.
As on 25th
Jan 2016
1 month
change
1 year
change
Debt Markets
10-Yr G-Sec Yield 7.80 5bps 9bps
Fixed Deposit 7.25 0bp (100bps)
0
50
100
150
200
250
300
350
AAA AA+ AA AA- A+ A A- BBB+
Corporate Bond Spreads
5 Years 10 Years 15 Years
7.40
7.60
7.80
8.00
8.20
8.40
8.60
8.80
9.00
9.20
9.40
G-Sec
10 YR Gsec Yield 5 YR Gsec Yield
15 YR Gsec Yield

14. Domestic Debt Strategy
Our recommendations regarding short term debt is that investors with the time horizon
of 1 year to 2 years can look for short term debt funds. Even though, most of the short
term fund’s YTMs have fallen to sub-9%, our recommended short term debt funds still
have high YTMs (8%-11%) providing interesting investment opportunities.
The corporate bond market segment continues to be attractive over the medium term,
especially with expectations of an improvement in corporate profitability; an improved
economic outlook and due to the benefits of credit easing. With credit easing, there are
chances that the companies’ rating will be upgraded that would further cause a rally in
bonds, which in turn will benefit corporate bond funds.
As RBI has reduced the key policy rates, dynamic bond funds have benefited a lot as most
of them have a mix of gilt and long term bonds in their portfolio. A rally caused by easing
yields could lead to capital appreciation in gilts as well as corporate bonds, which means
over medium to long term we could see more gains coming from these funds.
As RBI has done the front loading of rate cut, we expect it to halt it for some time and go
for further rate cuts over medium to long term as inflation comes down. Long term debt
and Gilt funds looks attractive over medium to long term and is advisable for aggressive
investors only.
Short Term
Debt
Corporate
Bond Funds
Dynamic
Bond Funds
Long Term
Debt Funds

15. Global Debt Outlook
•German 10-year yields -- the euro zone's
benchmark -- fell 2 basis points to 0.35 percent,
their lowest since April 2015. U.S. Treasury yields
dropped 6 bps from their day's high of 2.05 percent.
•Investors are deserting emerging market bonds at
the fastest rate on record, withdrawing more money
than they did at the height of the global financial
crisis.
• Europe and Africa and the Middle East recorded
net outflows. However, Latin America had net
inflows of an estimated $4.2bn.
•Shrugging off economic weakness in China, Japan
and Europe, the Fed last month raised its key
overnight lending rate by a quarter point to a range
of 0.25 percent to 0.50 percent and issued upbeat
economic forecasts that suggested four additional
hikes this year.
#Source: Reuters
Ratings Country
10 Yr G-Sec
Yield
1 month change
AAA
Germany 0.40% (19bps)
Hong Kong 1.65% 10bps
Sweden 0.71% (34bps)
Switzerland -0.22% 12bps
AA+ USA 1.99% (24bps)
AA-
China 2.91% 3bps
Japan 0.23% (3bps)

16. Commodities
Gold prices jumped up almost 5% during January. Flight to safety
and fragile currency globally were primary reasons for upward
movement in Gold. For near to medium term, the larger band of
$1000-1200 remains..
.
. As on 25th Jan, 2016: `26,269 per 10gm
1 month change : 4.46%
1 year change : -6.24%
The expectation of crude oil prices going ahead would be around
$30 per barrel in then first quarter of the year, and $38 by the end
of 2016.
As on 25th Jan, 2016 : $29.89per bbl
1 month change : -20.5%
1 year change : -37.2%
*RICI: Rogers International Commodity Index – Tracks 38 commodity futures from 13 international exchanges,
Business Insider
24000
25000
26000
27000
28000
29000
Gold
2,000
2,200
2,400
2,600
2,800
3,000
RICI
0.00
20.00
40.00
60.00
80.00
Crude

17. Foreign Exchange
• The Indian rupee has appreciated by 1.09% against the EURO, 4.11% against YEN, 2.04% against USD and depreciated
by 1.99% against GBP.
• The BOJ said it would apply a negative interest rate of minus 0.1 percent on selected current account deposits that
financial institutions hold with it, effectively charging banks interest for parking excess deposits at the central bank.
• Global investors are keeping faith in India’s rupee bonds, even as the currency inches toward the record low reached
in 2013, saying the nation’s finances have improved over the past two-and-a-half years.
Currency
As on 25th
Jan 2016
1 month
change
1 year
change
USD/INR 67.20 2.04% -9.13%
GBP/INR 96.74 -1.99% -4.10%
Euro/INR 73.12 1.09% -5.60%
Yen/INR 56.93 4.11% -8.66%
USD/Euro 0.9243 1.35% 3.61%
2.04%
-1.99%
1.09%
4.11%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
USD GBP EURO YEN

18. Real Estate Outlook
Tier I
The Central Government has eased FDI norms and lifted
restrictions on ticket size, Project size and stage of entry of
capital thus paving the way for virtually any project to
receive Foreign equity funds. Residential Prices have been
Stable to Stagnant across Tier I markets. All Tier I markets
have continued to witness moderate decrease in demand
with sluggish market sentiments.
Tier II
Bangalore NCR and Hyderabad have seen strong demand in
the commercial segment and even Mumbai has picked up in
the later half of the year. The capital values have also been
on rise in major markets except in NCR where values have
remained stable. Absorption volumes have been surpassing
new completions consistently since H1 2014, as a result of
which, the vacancy levels in India have been dwindling
Low unit sizes have played an important role in
maintaining the absorption levels in these markets.
Lease rentals as well as capital values continue to be
stable at their current levels in the commercial asset
class.
With improvements in infrastructure across cities like
Chandigarh, Jaipur, Lucknow, Ahmedabad, Bhopal, Nagpur,
Patna and Cochin and quality products being offered the end
users /investors are being spoilt for choice. The Demand
drivers remain increasing nuclearization, rising disposable
incomes and easier availability of credit.
Residential
Commercial

19. Tier I Tier II
The Mall concept is new to Tier II cities and High Street
retail is still popular. Anecdotal evidence suggests that
rentals have remained stagnant in this space.
In Mumbai demand for space in successful malls continued to be
on the rise and categories such as F&B, premium apparel and
entertainment dominated leasing activity. International brands
were seen increasing their footprints . Hyderabad has seen a
steady growth in demand while markets like NCR, Bangalore and
Chennai remain stagnant.
Land in Tier II and III cities along upcoming / established
growth corridors have seen good percentage
appreciation due to low investment base in such areas.
Fringe areas with improving connectivity to Metro cities and
other top 8 to 10 cities in India have seen interest in
purchase of Plotted / Villa developments due to lower ticket
size and better marketing by developers /aggregators. There
is an uptick in demand for warehousing with the growth of
E commerce.
Retail
Land
Real Estate Outlook

20. Crude Reality:
What is it?
Oil is a vital source of energy for the world and will likely remain so for many decades to come, even under
the most optimistic assumptions about the growth in alternative energy sources. Most countries are
significantly affected by developments in the oil market, either as producers, consumers, or both. the
decline has been dramatic since last year as crude cracked during this period. The reasons attributed to this
crash in oil prices are, first, increased production in non-OPEC (Organization of the Petroleum Exporting
Countries) countries, Slowing economic activity in regions such as Europe, Japan and China is also said to be
contributing to the decline.
Impact of Rate Hike?
Simply put, at the country level, fall in oil prices will benefit net importers, while exporters would be worse
off. However, at the aggregate level, fall in oil prices is said to be a positive for the global economy.
Oil importers will benefit from a falling oil price because the value of their oil imports will drop. This will
reduce the current account deficit of oil importers; this is important for a country like India who imports
75% of oil consumption and currently has a large current account deficit.
•
What’s Trending?

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