advice for the wise january' 11

ADVICE for the WISE

Newsletter – January’11

2

Economic Update 4

Equity Outlook 8

Debt Outlook 15

Forex 19

Commodities 20

Index Page No.

Dear Investor,

Indian equity markets continued to experience significant turbulence inDecember. While January began on a positive note, profit booking hascontinued to exert downward pressure on the indices. We expect amoderate growth in the Indian equities in the present calendar year –driven primarily by earnings growth since the P/E ratio of Indian equitiesis already quite high. Considerable earnings expectations have beenupgraded in recent past. Hence the results can at best bringdisappointments. We do not expect a major upward move on the basisof the quarterly results. However the build-up of positive expectationsbefore the budget can drive the valuations higher.

The inflation issue continues to haunt Indian economy. There is ageneral consensus that the persistence of high headline inflation isdriven mainly by runaway food inflation which itself is due to supplyside constraints. There is wide anticipation of an interest rate hike by theReserve Bank of India in its monetary policy announcement on 25thJanuary. However we believe that RBI may take a stand that themonetary tightening is unlikely to bring down food inflation in a directmanner – thus rendering the tightening ineffective at best and damagingfor growth at worst. Long term bonds are a good bet on the high interestrates prevalent in India. For one, the investors can lock in high yieldswhich are unlikely to increase any further. If inflation worries subsideand RBI takes a more dovish stance on interest rates in the second halfof 2011, long term yields will fall as well. In such a scenario long termbonds can provide capital appreciation in addition to high yields.

Global economy continued to remain anemic. Concerns about thefuture of Euro as a currency are beginning to be voiced more andmore regularly. While the currency per se is stable, the underlyingimplicit and explicit accords amongst its member countries are not.We do not expect a major blow-up amongst the Eurozonecountries. However the recurrence of sovereign debt concerns inEurope will continue to drag the global investor sentiment down.That might be a constructive influence in face of the likely liquidityglut in the US and its bubble-prone impact on the asset marketsaround the world.Owing to the divergence of global economy and Indian economy interms of growth and its vigor, we believe Indian equities and goldare likely to perform well in the years to come. Interestingly inrecent past, gold has been negatively correlated with Indianequities in the periods of fall in equity markets, while in the goodtimes, the correlation has been small and positive. A productcombining Indian equities and gold is hence likely to do quite wellin the next 2-3 years. We have launched one such product namedAries as part of our endeavor to bring world class products toIndian investors.We expect several interesting opportunities to emerge inresidential real estate space. There might be a correction inresidential real estate in parts of the country, creating low entrypoints for long term investors. The correction however may not bevisible in the per square foot rate offered by the developers.Instead the discount in price may come as reduction or waiver ofadditional costs associated with a property purchase. Hencedecisions to invest should be made on the basis of total purchaseprice in Rupees rather than the per square foot rate.

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.23”

Change over last month

As on Dec 31st 2010

Equity markets

Debt markets

Commodity markets

Forex

markets

Change over last year

* Indicates SBI one-year FD

20,5096,1341,257

10,229

8.07% 5.75%8.00%

3,89620,575

93.52

44.8181.15

5.1%4.6% 6.5%2.9%

(13 bps)15 bps

100 bps

7.8%0.4%8.0%

2.7%3.1%

17.4%17.9%12.8%(3.5%)

39 bps240 bps200 bps

19.0%23.2%20.0%

3.7%11.6%

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

Gold

80

85

90

95

100

105

110

115

120

125Sensex Nifty

S&P 500 Nikkei 225

6.8

7.3

7.8

8.3

8.8

15000

16000

17000

18000

19000

20000

21000

44

44.5

45

45.5

46

46.5

47

47.5

48

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

De

c-1

0

`/$

5

US

Europe

Japan

Emerging economies

• The HSBC China Manufacturing Purchasing Managers Index, fell to 54.4 inDecember from 55.3 in Nov. indicating increased manufacturing activityalbeit at a slower rate.

• 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, which had improved inNovember, decreased slightly in December. The Index now stands at 52.5,down from 54.3 in November. This indicated a tepid and cautious outlookfrom 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 strongFrance-Germany core offset weakness elsewhere. Disparities further widenedas Service Job Index continued to rise in Germany and was at three monthhigh 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 increasefor the first time in six months, Transport equipment and Electronic parts &devices were the major contributors. The manufacturing PMI increased to 48.3from 47.3 November but still indicated contraction in the Japanese markets.

• Japan’s unemployment rate was stagnant at 5.1% in Dec 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 10.8% (y-o-y)in October ‘10 as compared to 4.4% inSeptember ‘10 mainly on account of strong baseeffect and robust growth in the capital goodssector.

• Growth in manufacturing, which constitutesaround 80 per cent of the IIP saw growth riseback to 11.3% from a low of 4.5 per cent lastmonth.

• Capital goods showed a spectacular recovery at22%, much higher than the 4% fall in September.

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

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

4

5

6

7

8

9

10

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

• Bank credit growth increased in the month ofNovember to 23.6% as compared to 20.4% in themonth of October 2010.

• Growth of credit demand and tight liquidity has putpressure on the banks to raise their deposit rates,hence shrinking their margins. The RBI has beenintervening to provide adequate liquidity and moresuch interventions may be seen in the near future.

• We expect credit growth to settle at ~20% levels inthe coming quarters on the back of improvingbusiness confidence and decline in risk aversion onthe part of banks. Increase in exposure toInfrastructure projects is also expected in the secondhalf of the fiscal.

• Inflation as measured by WPI stood at 7.48%(y-o-y) for the month of November -10 ascompared to 8.58% during October 10. Thesefigures are based on the new base year andWPI list. The decline is due to the decline inFood inflation from 14.1% in October to 9.4% inNovember.

• 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, but increasing Fuelprices may be a cause of worry.

Growth in credit & deposits of SCBs

7

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

21.0%

23.0%

25.0%

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

Bank Credit Aggregate Deposits

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

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

No

v-1

0

Inflation

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.

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.

• FIIs invested ` 2,050 Cr. in equities in the month ofDecember. This was ` 16,243 Cr. lesser than last month andmuch lower than October which witnessed huge inflows inthe Coal India IPO issue.

• Mutual Funds invested around ` 1767 Cr. in the month ofDecember.

FII & MF data

-15000.0

-10000.0

-5000.0

0.0

5000.0

10000.0

15000.0

20000.0

25000.0 FII MF

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.

• 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

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

13

Portfolios 6 Months (Absolute)1 Year

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

CAGR

Conservative 5.67% 9.09% 26.76%

Market Return Benchmark** 6.64% 9.89% 22.35%

Moderate 7.66% 11.55% 38.21%


Aggressive 8.67% 12.59% 46.13%


Absolute Return Benchmark 2.63% 6.00% 7.75%

*(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

14

Scheme Name Type Open Date Close DateMinimum

Investment Amount (Rs.)

Tenor

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 -

Plan F ( 368 days) Debt 10-Jan-2011 12-Jan-2011 5000 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

15

• The benchmark 10 yr G-sec yield decreasedfrom 8.19% in the month of November to closeat around 8.07% in December.

• Though RBI is expected to increase the policyrates in its upcoming review, we believe that RBImay take a stand that the monetary tightening isunlikely to bring down food inflation in a directmanner – thus rendering the tighteningineffective at best and damaging for growth atworst.

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.

• The 10 year G Sec yields are currently around 8.07%. If the inflation continues to be high, there may be another increase in the interest rates but not one in the immediate future. The yields will stabilize around 7.5 – 8.5% levels by year end.

(%) 7.0

7.2

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

0.0

1.0

1.9

2.9

3.9

4.8

5.8

6.7

7.7

8.6

9.6

10

.61

1.5

12

.51

3.4

14

.41

5.4

16

.31

7.3

18

.21

9.2

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.

16

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 hence Short term bond funds andFMPs provide an interesting investment option in this space.

Short Tenure Debt

Credit

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.

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

Performance* (31st December 2010)Fund Manager: Swapnil Pawar

Swapnil is the head of products and investments

at Karvy Private Wealth. He has completed his

MBA from IIM Ahmedabad and a B.Tech in

Aerospace Engineering from IIT Bombay. He was

a co-founder of PARK Financial Advisors. Prior to

that, Swapnil worked with The Boston Consulting

Group (BCG), Mumbai, across various industries

including retail banking services.

Portfolios 6 M (Abs.) 1 Y (Abs.) Since 29/4/09 (CAGR)

Conservative 7.38% 11.47% 26.66%


Moderate 8.45% 12.31% 36.59%


Aggressive 8.81% 12.58% 42.35%


Absolute Return Benchmark 5.25% 6.00% 7.75%

18

*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

19

•The Rupee strongly appreciated v/s the US dollar & GBP inthe month of December but marginally depreciated againstthe Yen on account of pick-up in Japanese economy.

• US dollar faced selling pressure on dollar by exporters and Banks.

•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 26.5%(y-o-y) while imports increased by 11.2% reducing thetrade deficit to USD 8.9 bn.

• Capital account balance continues to be positive throughFY11 and stands at `1,79,02958 Cr. for the Q1 & Q2.

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

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

-20

0

20

40

60

80Export Import Trade Balance (mn $)

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

USD GBP EURO YEN

-60000

-10000

40000

90000

140000

FY 09 (Q3) FY 09 (Q4) FY 10 (Q1) FY 10 (Q2) FY 10 (Q3) FY 10 (Q4) FY 11 (Q1) FY 11 (Q2)

Capital Account Balance

20

Precious

Metals

Oil & Gas

Seasonally gold will be stronger in 4QCY till mid-January.

Hence, gold is expected to plateau in the near future. Further,

we expect dollar index to be stronger in the near future and

the consequences of which due to reversal of carry trade

positions shall have a wide spread correction across all asset

classes and commodities as an asset classes will tend to correct

early.

We expect crude oil may continue to have an uptrend given

the expectation of reviving US economy and the ongoing high

intensity winter across the US and Europe. Although a sharp

fall is not expected, any upside surprise on the dollar index will

take a toll on the energy market as well.

Crude

Gold

15000

16000

17000

18000

19000

20000

21000

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

Dec

-10

60

65

70

75

80

85

90

95

Dec 09

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Jul 10

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Outcomes at Maturity Note Return

This example is for illustrative purpose only and does not constitute a guaranteed return or performance. 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

Gold Performance {Final Level / Initial Level}-1

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

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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http://www.sxc.hu/browse.phtml?f=download&id=900130

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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: [email protected] SMS: ‘HNI’ to 56767 Website: www.karvywealth.com

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

Kochi 0484-2322723

Goa 0832-2731822