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FIXED INCOME MARKET ENCOURAGING SIGNS AHEAD

N O V E M B E R 2 0 1 4

Marzban IraniVice President,Fixed IncomeDSP BlackRock Mutual Fund

The Indian bond market has been experiencing a bull run since early

September due to several reasons like:

Sustained fall in prices of consumer goods

Sharp fall in crude oil and key commodity prices

Emergence of deflationary headwinds in Europe, Japan and China

The prices of consumer goods and services have been gradually

declining of late and are expected to remain soft. The recent decline in

local petrol and diesel prices is not only likely to have a positive impacton inflation, but may also reduce Indias crude import bill. This,in turn,

could help narrow the Current Account Deficit and Fiscal Deficit for

FY2015.

Global bond yields have also been trending lower lately amid

expectations of further monetary stimulus by the European Central

Bank (ECB), Bank of Japan (BOJ) and the Peoples Bank of China

(PBOC), even though the Federal Open Market Committee (FOMC) has

recently concluded its bond purchase program. This has led to a

significant improvement in the outlook for emerging market bonds.

Market participants in emerging markets are focusing on a gamut offactors. These include a significant improvement in Indias

macro-economic landscape in the last three months, stable to

declining consumer prices, a sharp fall in bank credit growth,

relatively stable currency and the prospect of rate cuts by the Reserve

Bank of India (RBI) in 2015.

Foreign Investors have maintained a favorable view on Indian bonds.

They have invested around $23 billion in Indian fixed income assets

since the beginning of the year, due to relatively attractive bond yields

and a stable currency.

Market Outlook

We expect Indian bond yields to decline further in a gradual manner

amid the improving macro-economic landscape. The recent decline in

consumer prices and developments in global markets may provide the

RBI with headroom to reduce the Repo Rate. We expect the RBI to

announce its first rate cut around March-April 2015. We also expect

the benchmark 10Y government bond yield to touch 8% by April 2015.

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A further decline in the benchmark 10Y government bond yield will depend on expectations of an additional

reduction in Repo Rate by the RBI. Current inversion in the OIS curve implies that market participants expect

a 75 basis-point reduction in the Repo Rate over the next two years.

Where do opportunities lie in the fixed income market?

We firmly believe that Indias rate cycle has peaked out. Now is the time for investors to consider investing in

longer duration fixed income funds, as bond yields are likely to decline going forward. We recommend thatinvestors consider fixed income funds with higher average maturity and higher duration, depending upon

their risk appetite and investment horizon.

Investors with an investment horizon of more than a year may consider the DSP BlackRock Short Term Fund.

Investors with an investment horizon of more than three years and who wish to invest in higher average

maturity funds may consider investing in the DSP BlackRock Income Opportunities Fund.

For investors who wish to have exposure to both corporate bonds and government bonds, we suggest the DSP

BlackRock Bond Fund. This is suitable for investors who seek a long-term asset allocation to fixed income as

well as for those with an investment horizon of more than three years.

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^Investors should consult their financial advisors if in doubt about whether thescheme is suitable for them.Note: Risk may be represented as:

Investors understand that their principal will be at Low risk(Blue)

Investors understand that their principal will be at Medium risk(Yellow) Investors understand that their principal will be at High risk(Brown)

DSP BlackRock Short Term Fund (DSPBRSTF)

This Open-ended Income Scheme is suitable for investors who are seeking^

Income over a medium-term investment horizon

Investment in money market and debt securitiesLow Risk(Blue)

DSP BlackRock Income Opportunities Fund (DSPBRIOF)

This Open-ended Income Scheme is suitable for investors who are seeking^Income over a medium-term investment horizon

Investment in money market and debt securities

Low Risk(Blue)

DSP BlackRock Bond Fund (DSPBRBF)

This Open-ended Income Scheme is suitable for investors who are seeking^Income over a long-term investment horizon

Investment in money market and debt securities

Low Risk(Blue)

Note: Effective November 29, 2014, there will be a change in the fundamental attribute of the DSPBRBF whereby the weighted averagematurity of the DSPBRBF will remain between one year and twenty years. For more details please refer the notice dated October 22, 2014available at www.dspblackrock.com

In this material DSP BlackRock Investment Managers Pvt. Ltd. (the AMC) has used information that is publicly available, including informationdeveloped in-house. Information gathered and used in this material is believed to be from reliable sources. The AMC however does not warrantthe accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in thisdocument, which contain words, or phrases such as will, expect, should, believe and similar expressions or variations of suchexpressions that are forward looking statements. Actual results may differ materially from those suggested by the forward lookingstatements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general

economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, themonetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices orother rates or prices etc.

For investment objective, asset allocation, scheme specific risk factors and more details, please read the Scheme Information Document,Statement of Additional Information and Key Information Memorandum of Scheme available on www.dspblackrock.com.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.