ADVICE for the WISE

Newsletter – December’10

2

Economic Update 4

Equity Outlook 8

Debt Outlook 17

Forex 21

Commodities 22

Index Page No.

Dear Investor,

Indian equity markets experienced significant turbulence in thepast month. This was owing to both domestic and global factors.On the domestic front the uncovering of multiple scams spookedthe investors who worried about the potential fallout of the scamson political stability. Globally monetary tightening in China andrenewed sovereign debt concerns in Ireland renewed the fears ofmost investors regarding the fragile nature of recovery in globaleconomy. The fears of political instability on the domestic fronthave now subsided. However the concerns regarding the so-called‘unknown unknowns’ remain.Globally the state of affairs is unlikely to become much better innear future. Europe is likely to continue to experience periodicbouts of sovereign debt concerns amongst its less stableeconomies. While this may cause worry for the global investors, itis likely to have limited impact on either the Indian economy or theinvestor sentiments regarding Indian markets. On the other hand,the policy-driven slowdown in growth in China to tame inflationmight cause reduction of risk appetite for emerging marketsamongst global investors. There might be a silver line for Indianmarkets here if the pace of Chinese slowdown is not significant andthe global investors merely reallocate the emerging marketportions of their portfolios. However, a hard landing for theChinese economy however will most certainly bring about theproverbial ‘flight to safety’ driving down asset markets in emergingeconomies!

While we advise staying invested in the equity markets,investors worried about short term volatility or carrying atrading portfolio can use a 2 month slightly out-of-the-moneyput option on the Nifty Index to hedge the downside.When one looks beyond the next quarter, the effect of globalfactors on Indian markets is going to play an important role.The desperate efforts of the US Federal Reserve to driveeconomic activity by bringing down long term yields throughquantitative easing will send a wave of liquidity through theglobe. Much as it happened in 2006 and 2007, this is likely toboost the asset markets globally. The Indian investors need tobe cognizant of the impending over-valuation this may bringto equity and real estate markets here. Equally importantlythey should be mindful of the potential falls that come as therisk appetite subsides. The next few years thus are likely to befairly volatile for Indian asset markets.As we had recommended over last few months, gold continuesto be effective as a useful hedge against asset bubble built oneasy liquidity and their pricking. Most importantly since thesource of the liquidity is the US thus potentially driving valueof dollar down, gold becomes relevant as dollar hedge as well.Last month saw several specific stocks drop significantly inprice owing to their perceived link to the housing loan scam.While some of these are likely to have a real impact on theirbooks due to the crisis, most are beaten down by panic. Thatmakes a good case for buying selectively into some of the‘fallen angels’.

3“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”

Change over last month

As on Nov 30th 2010

Equity markets

Debt markets

Commodity markets

Forex

markets

Change over last year

* Indicates SBI one-year FD

19,5215,8631,1809,937

8.19% 6.50%7.00%

3,61420,500

86.60

46.0484.15

(2.1%)(2.6%) (0.2%)

8.0%

4 bps(25 bps)

0 bps

2.7%4.2%6.3%

(3.4%)(4.6%)

15.3%16.5%

7.8%6.3%

94 bps350 bps100 bps

11.1%16.1%11.4%

0.9%2.9%

BSE SensexS&P NiftyS&P 500 Nikkei 225

10-yr G-Sec YieldCall MarketsFixed Deposit*

RICI IndexGold (`/10gm)Crude Oil ($/bbl)

Rupee/DollarYen/Dollar

4

10 yr Gsec

88

93

98

103

108

113

118

123

128 Sensex Nifty

S&P 500 Nikkei 225

6.8

7

7.2

7.4

7.6

7.8

8

8.2

8.4

1500015500160001650017000175001800018500190001950020000

Gold

44

44.5

45

45.5

46

46.5

47

47.5

48

No

v-0

9

De

c-0

9

Ja

n-1

0

Fe

b-1

0

Ma

r-1

0

Ap

r-1

0

Ma

y-1

0

Ju

n-1

0

Ju

l-1

0

Au

g-1

0

Se

p-1

0

Oct-

10

No

v-1

0

`/$

5

US

Europe

Japan

Emerging economies

• The HSBC China Manufacturing Purchasing Managers Index, rose to 55.3 inNovember from 54.7 in Oct. indicating accelerating manufacturing activity.

• 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 firstquarter, 10.3% in the second quarter and 9.6% in the third quarter.

• The Conference Board Consumer Confidence Index rose to a five month highof 54.1 in November from 50.2 in October. This indicated a positive outlookfrom the consumers and favorable business conditions as the holiday seasonbegins.

• 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 inOctober. The growth was driven by improvement in the German and Frencheconomies while debt burdened Ireland and Spain continued to struggle.Owing to a strong German recovery, the Service Job index was at its highestlevel 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 effectswaned and slowing global demand hit exports. The manufacturing PMIincreased to 47.3 from 47.2 October but still indicated contraction in theJapanese markets.

• Japan’s unemployment rate increased to 5.1% in Oct 10 from 5% in Sept 10.

6

• The GDP growth rate for Q2 FY11 came in at 8.9%backed by a strong growth in services andagricultural output.

• The agriculture sector, which accounts for nearly17% of GDP, rose 4.4% and this offset themoderation manufacturing sector growth, whereproduction went up by 9.8%. The services sectortoo grew at 9.7% during July-September this year,led mainly by finance and real estate as well astrade, hotels, transport and communication

• The Finance ministry is targeting FY11 growth at~8.50% - 8.75% which may be revised upwards. Webelieve the current target is sustainable as weexpect manufacturing and service sectors tocontinue to drive growth in the next few quarters.

IIP monthly data

GDP growth

• Industrial output as measured by the Index ofIndustrial Production (IIP) grew by 4.4% (y-o-y) inSeptember ‘10 as compared to an upwardrevised 6.9% in August ‘10. Decline in capitalgoods output along with a base effect pulleddown the index.

• Though 14 out of the 17 industries, whichconstitute the IIP, posted positive growth inSeptember, the quantum of increase wasmodest. Important sectors like chemicals, metalsand machinery registered negative growth.

• Growth in manufacturing, which constitutesaround 80 per cent of the IIP saw growth slip to4.5 per cent from 11 per cent a year ago.

• We believe the growth will eventually moderateout and may end lower than that seen in the firstpart of the fiscal.

4

5

6

7

8

9

10

FY09 (Q2) FY09 (Q3) FY09 (Q4) FY10 (Q1) FY10(Q2) FY10(Q3) FY10(Q4) FY11(Q1) FY11(Q2)

4.0%

9.0%

14.0%

19.0%

• After a dip in August and September, bank creditgrowth increased in the month of October to 20.4%as compared to 19.0% in the month of September2010.

• We expect credit growth to further improve in thenext few quarters and settle at ~20% levels on theback of improving business confidence and declinein risk aversion on the part of banks. Increase inexposure to Infrastructure projects is also expectedin the second half of the fiscal.

• Inflation as measured by WPI stood at 8.58%(y-o-y) for the month of October -10 ascompared to 8.62% during September 10. Thesefigures are based on the new base year andWPI list.

• We expect WPI inflation numbers to moderatein m-o-m inflation numbers due to the expecteddecrease in food inflation and the monetarytightening stance by RBI.

Growth in credit & deposits of SCBs

Inflation

7

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

21.0%

23.0%

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

Bank Credit Aggregate Deposits

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Oct

-09

No

v-0

9

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

8

Bloodbath that started on the Dalal Street after the Diwali week got extended through the month as global worries and 2G spectrum

allocation and housing loan scams back home spooked the bourses. Volatility remained evident throughout the month as futures and

options’ (F&O) traders switched their positions from November month contracts to next month series. Realty counter suffered deep

cuts during the month as investors rushed for profit booking in anything related to real estate or infrastructure space after the Central

Bureau of Investigation (CBI) unearthed fake housing loan scandal. Metal, public sector undertaking and capital goods pockets also took

serious beating from the bears. On the flip side, software and technology counters showed some strength in relative sense. The S&P

CNX 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 indices

which declined by over 6%. The real estate index lost over 10% during the month, while BSE Bankex fell by a little over 6%. Mirroring

their faith on the Indian economy, overseas funds have infused a staggering $4.78 billion in the capital market in November, taking the

year-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 ended

November 20. The decline came about on arrival of winter crops in the market but onions, fruits and milk became costlier. Food inflation

was 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 government

show that the Indian economy continues to maintain its growth momentum despite a tough global environment. At 8.9% for a second

quarter in a row, the economy is growing near its trend rate and fears of overheating seem to be overdone right now. There are two

underlying 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. Farm

output has grown at the fastest rate in 11 quarters. Maintaining this growth rate is almost impossible. Meanwhile, manufacturing

growth has slowed down and has also been volatile in recent months. There have been problems with the way the index of industrial

production is calculated but that is the best indicator we have for now. The wild swings in factory output are a worry.

9

Second, the GDP numbers show that private sector demand continues to pick up. A huge increase in government spending had

supported economic activity in the crisis months of late 2008 and early 2009, but the private sector has now stepped it to pick up the

slack in domestic demand that could have arisen as the government tries to cut its fiscal deficit. Yet, private consumer demand seems

to be doing better than private investment demand. High frequency data on cement dispatches, telecom subscribers, car sales and

airline 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 will

also be important for the equity markets across the globe. While news flow will continue to impact markets in the near term, the

valuations remain fair and will continue to attract foreign money. The prospective risk return ratio looks favorable for entry into these

markets for long term investors. Investors should increase exposure to quality equity ideas selectively. At 16.5x FY12 earnings, growth

is clearly the guiding valuation influencer for the markets. And that is unlikely to change in the near future.

-15000.0

-10000.0

-5000.0

0.0

5000.0

10000.0

15000.0

20000.0

25000.0 FII MF

• FIIs invested ` 18,293 Cr. in equities in the month ofNovember. This was ` 10,000 Cr. lesser than last monthwhich witnessed huge inflows in the Coal India IPO issue.The markets declined by 2% in the month on account of thevarious scams discovered in the real estate, banking and 2Gspace.

• Mutual Funds invested around ` 251 Cr. in the month ofNovember as market correction provided good levels toinvest.

FII & MF data

10

Sector Stance Remarks

HealthcareHighly

Overweight

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

developed world keen to cut healthcare costs, and a vast pipeline of drugs going off-patent, Indian

pharma players are at the cusp of rapid growth. Here, we have taken exposure to medium-sized, non-

index ideas while trying to play on the opportunity in Generics and CRAMS.

E&C Overweight

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

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.

BFSI Overweight

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

has good asset quality and capital adequacy ratios. This, when juxtaposed to the growth opportunity

available makes an attractive long term opportunity.

FMCG Neutral

The exposure is in “discretionary consumption” beneficiaries such as Paints and branded food, as the

growth in this segment will disproportionately higher vis-à-vis the increase in disposable incomes. This

also provides a defensive posture to the portfolio.

Telecom Neutral

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

huge demand for data services in urban markets. 3G & BWA will make sure the revenues grow at

reasonable pace. Discretionary consumption again.

11

Sector Stance Remarks

IT/ITES Underweight

Rich valuations, maturing growth and the menace of appreciating Rupee makes us little cautious

here. We have chosen to be with the bellwether stock here and believe we have better sectors to

look at.

Automobiles Underweight

We believe in the growth prospects here but raw material prices and raging competition

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.

Energy Underweight

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

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.

Metals UnderweightIndia is not completely isolated from global slowdown. Commodity prices are an international

issue. We have chosen to stay away with a cautious view to the global commodity cycle.

Cement NegativeCement demand will certainly grow over the next three years. But the issue is on the supply side.

We do see an oversupply situation for the next 3-4 quarters.

Power Utilities Negative

We like power sector but believe that greater value will be created by engineering services

providers. Utilities may be a more defensive play, but we have been defensive enough for the

time being.

12

Stock CMPPrice as on 5th

Nov.52 Wk high 52 Wk. Low P/E P/B

Central Bank of India 198.4 243.4 249.05 136.55 6.72 1.84

Biocon 406.1 433.0 464.60 253.15 27.26 5.19

PNB 1269.6 1376.0 1395.00 842.10 9.33 2.47

Orbit 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 therecent weeks. During this correction, some stocks have been hit particularly harder than the rest and thushave witnessed a much sharper fall than their peers. Many of them have fallen well below their fairmarket value.

Such stocks may be interesting investment options at their current levels. Few of these have beenspecified above. Besides these, several other stocks in the real estate and banking domain will beattractive buys due to the sharp correction experienced by both those sectors.

13

Fund Details

NAV (As on 30th Nov, 2010)

Rs. 114.11

AUM: Rs. 1,503 Cr.

Minimum investment:

Rs. 5,000

Entry Load: Nil

Exit Load:

< 1 yr 1.00%

Else Nil

Options:

Growth, Dividend

Expense Ratio:

1.99%

Fund framework & management style

Extent of diversification

Active

Passive

MedmHigh Low

Moderate• Concentrated stock portfolio investing in a single sector

• The fund is managed by Mr. Sunil Singhania whobelieves in capital appreciation though long terminvestingM

anag

em

en

t St

yle

Performance and performance attribution

36.5%

50.0%

22.9%

30.1%28.8% 35.6%

7.8%

23.2%

0%

20%

40%

60%

80%

6 mth 1 year 3 years 5 years

Reliance Banking

BSE Bankex

• The fund has very consistent performances overthe years and has outperformed the index at everyinstant over time periods

• While the Banking sector as a whole has been anoutperformer, the fund has consistently beaten theBanking index due to superior stock selection skills

Sector concentration & view on sector orientation Top company exposures & portfolio quality

• Fairly concentrated stock portfolio with18 stocks with top ten stocksconstituting 82.6% of the portfolio

• Stock selection has been excellent inthe last few years

• Banking is the best proxy to GDP growth• We believe Banking stocks are attractive due to

low NPAs and reasonable P/Es. As the economyimproves, we expect NPAs to further go downand credit growth to pick up; thereby aidinggrowth in Banks.

Risk Analysis

Sharpe Ratio: 0.22

Std. Deviation: 37.44%

Risk Level: High

Return Potential: High

Market Cap: Large

Summary

We 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

• 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%

14

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

*

15

Portfolios 6 Months (Absolute)1 Year

(Absolute)Since Inception (29/4/09)

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%

*(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

Outcomes at Maturity Note Return

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.

Karvy Principal Protected Note Linked to S&P CNX Nifty Index

Issuer Karvy Financial Services Limited

Tenor 36 / 40 months

Index S&P CNX Nifty Index

Minimum Investment Rs. 50,00,000

Principal Protection 100%

Participation Rate 50%

Assured Coupon 22.50%

Initial Level Official Closing level of S&P CNX Nifty Index level on DDA

Final Level 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)}

16

17

• The benchmark 10 yr G-sec yield increased from8.15% in the month of October to close ataround 8.19% in November.

• We believe that future monetary tighteningmeasures are unlikely to have a major impact onthe longer end of the yield curve. We alsobelieve that this is the peaking of the Interestrate cycle and unless Inflation doesn’t increasedrastically, we may not have further tighteningin the system. We expect the 10 yr G-sec yieldsto remain in the broad range of 7.5 – 8.5% in thenext few quarters.

10-yr G-sec yield

Yield curve

• We expect yields at the longer end of the yield curve to remain stable. High inflation, monetary tightening and rising credit growth will keep the yields at the longer end range bound.

• With increase in rates in the November review, the 10 year G Sec yields were around 8.15%. We expect this to be the peaking of the interest rate cycle and another rate hike may not be seen in the immediate future. The yields will stabilize around 7.5 – 8.5% levels by year end.

(%)

7.2

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

9.0

9.2

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

10

.41

1.1

11

.81

2.4

13

.11

3.8

14

.51

5.2

15

.91

6.6

17

.31

8.0

18

.71

9.4

6.8

7

7.2

7.4

7.6

7.8

8

8.2

8.4

OutlookCategory Details

Long Tenure Debt

We expect this to be the peaking of the yields at the longer endof the yield curve. Yields may move to the broad range of 7.5–8.5% in the next few quarters. As the inflationary pressuresettles down towards the end of the fiscal, these may be anattractive investment. We recommend gradual entry into longtenor debt.

Positive economic climate has reduced credit risks without acommensurate decrease in credit spreads. Some AA and selectA rated securities are very attractive at the current yields. Asimilar trend can be seen in the Fixed Deposits also. Tightliquidity in the system has also contributed to widening of thespreads making entry at current levels attractive.

18

We recommend short term bond funds with a 6-12 monthinvestment horizon as we expect them to deliver superiorreturns due to high YTM and concerns over credit quality easeas the economy recovers, thereby prompting ratings upgrade.We have seen the short term yields harden due to reducedliquidity in the market and it may further increase as we seeoutflows for Advance tax payments in December.

Short Tenure Debt

Credit

19

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.

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

21

•The Rupee marginally depreciated v/s the US dollar in themonth of November but appreciated against the Euro onaccount of the increased uncertainty regarding the Eurozonecrisis.

•We expect the Rupee to remain volatile in the next monthwith no clear direction. Higher interest rates in India wouldattract large capital inflows putting an upward pressure onthe Rupee while increase in the Current account deficit wouldput a downward pressure on the Rupee. Hence, a clear trendmight not be seen.

Rupee movement vis-à-vis other currencies (M-o-M) Trade balance and export-import data

• Exports for the month of October increased by 21.2% y-o-y while imports increased by 6.8% increasing the tradedeficit to USD 9.7 bn.

• Capital account balance was positive throughout FY10 andended at `2,53,058 Cr. for the year.

• We expect the capital account balance to remain positiveas higher interest rates would make investment in theIndian markets attractive hence drawing investments intothe market.

-60000

-10000

40000

90000

140000

FY 07 (Q1)

FY 07 (Q2)

FY 07 (Q3)

FY 07 (Q4)

FY 08 (Q1)

FY 08 (Q2)

FY 08 (Q3)

FY 08 (Q4)

FY 09 (Q1)

FY 09 (Q2)

FY 09 (Q3)

FY 09 (Q4)

FY 10 (Q1)

FY 10 (Q2)

FY 10 (Q3)

FY 10 (Q4)

Capital Account Balance

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

-40

-20

0

20

40

60

80Export Import Trade Balance (mn $)

-0.04

-0.03

-0.02

-0.01

0.00

0.01

0.02

0.03

0.04

USD GBP EURO YEN

22

Precious

Metals

Oil & Gas

The geo political tensions in Korea, the European crisis and

continued concerns on global economy will all keep gold

afloat. However, any persistent strength in USD would be fatal

to risky assets worldwide and gold in particular. Given this

scenario, it is prudent for the investor to stay aside in the near

term or reduce exposure to gold in the short term. Needless to

say that the long term bullishness is intact and gold should find

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.

• The crude prices increased by 6.3% (m-o-m) in November. Thiswas due to uncertainty in the Global markets. During themonth, prices moved between $83-$88 per barrel.

• We expect the oil prices to moderate Although emergingmarket economies are showing robust growth, developedeconomies are expected to remain sluggish next year, whichcombined with abundant supply, high inventories and weakOPEC quota compliance may cap a further oil price rally.

Crude

1500015500160001650017000175001800018500190001950020000

No

v-09

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-10

May

-10

Jun

-10

Jul-

10

Au

g-10

Sep

-10

Oct

-10

No

v-10

Gold

60

65

70

75

80

85

90

No

v 0

9

Dec

09

Jan

10

Feb

10

Mar

10

Ap

r 10

May

10

Jun

10

Jul 1

0

Au

g 10

Sep

10

Oct

10

No

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KARVY 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.

Leveraging breadth of related businesses that KARVY is in

Maximum choice of products & services

KARVY 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.

Set 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.

All-India presence

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.

Product-neutral advice

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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

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Bangalore 080-26606126

Chennai 044-45925925

Delhi 011-43533941

Hyderabad 040-44507282

Kolkata 033-40515100

Mumbai 022-33055000

Pune 020-30116238

Email: wealth@karvy.com SMS: ‘HNI’ to 56767 Website: www.karvywealth.com

Corporate Office : 702, Hallmark Business Plaza, Off Bandra Kurla Complex, Bandra (East), Mumbai – 400 051