Reflections June, 2011

Executive Summary
Slowdown fears loomed over the global economy, with International agencies projecting a fall in growth for the world economy, owing to the slow pace of recovery in the US, re-emergence of the debt crisis in Europe and persistent inflationary pressure in emerging countries. The World Bank reduced its forecast for global growth in 2011 to 3.2% from its January estimate of 3.3% and the International Monetary Fund (IMF) lowered its forecast to 4.3% from 4.4%.

The month also saw the re-emergence of the sovereign debt crisis in the country where it all started around a year back viz., Greece. After much haggling and deliberations, the European Union (EU) and the IMF agreed to rescue the country from bankruptcy with a second multi-billion euro financial aid package, albeit only after the country would approve a five-year austerity package to reduce its burgeoning debt. Meanwhile, the US too remained concerned with its mounting public debt, raising pressure on the US government to raise its debt ceiling. The US president even warned that a delay in raising the debt ceiling could reverse the fledgling recovery and trigger a new economic meltdown.

Asia continued to be steady, with the turnaround in growth forming shape in Japan, driven by strong re-development measures. Meanwhile, China continued to tread strongly with the World Bank and the IMF continuing to remain bullish about the economy. But the country's soaring inflation rate remained a cause for concern, with annual consumer price index (CPI) recording its highest reading in 34 months. The continuing high inflation rates prompted the country's central bank to hike its key interest rates in June, making it the 6th hike in 2011.

On the domestic front, the Indian economy saw mixed forecasts from global agencies; however the FM remained confident of the country clocking 8.5% growth rate in FY11. Meanwhile, the country continued to be plagued by high inflation worries. Adding to the inflationary woes, was the government's move to hike diesel, kerosene and cooking gas prices to reduce the losses for state-owned oil companies selling products at subsidised rates. To suppress high prices, the country's central bank continued on its monetary tightening spree, hiking its key rates by 25bps in its mid-quarter monetary policy review.

On the positive, the equity markets bounced back in the month mainly on account of positive cues emanating from Eurozone after Greece passed stringent austerity measures, which were required to get emergency funding from global financial institutions. In the domestic debt market, gilt prices rose on account of improvement in the liquidity situation of the government and as further monetary policy tightening concerns eased after a lower than expected GDP growth and industrial production numbers. Meanwhile, call rates continued to remain high on the back of strong demand from banks and on account of advance tax outflows for the June quarter in the month.

Monthly Update 2011

CONTENT

RBI'S ANNUAL POLICY REVIEW 2011-12 INDIAN ECONOMY GLOBAL ECONOMY EQUITY ROUND UP DOMESTIC EQUITY ROUND UP GLOBAL FIXED INCOME DOMESTIC CURRENCY OVERVIEW COMMODITIES MUTUAL FUNDS-DOMESTIC MONTHLY CORPORATE SNAPSHOT KEY REGULATORY DEVELOPMENTS

1 2 4 8 13 14 18 21 22 31 31

Monthly Update 2011

RBI'S ANNUAL POLICY REVIEW JUNE 2011

Highlights ? Repo rate by 25 bps to 7.50%, consequently the Reverse ?Raised the Repo rate and Marginal Standing Facility have been adjusted to 6.50% and 8.50% respectively.
? ?Kept all other key rates unchanged. ? bank said that liquidity conditions have improved from ?The central

2010-11 GDP data. Growth has decelerated because of the continuing impact of past interest rate hikes by the RBI and relatively weak global demand. Growth in factory output in April 2011, based on a revised index with 2004-05 as the base year, moderated to 6.3% from 7.8% in March 2011. Economic growth in the fourth quarter of 2010-11 was also down to 7.8% from an upwardly revised 8.3% in the previous quarter. This was below the consensus estimates, and the lowest since December 2009. The overall growth estimate for 2010-11 came in at 8.5% vis-vis CSO advance estimates of 8.6%. Fixed investment growth decelerated to 0.4% in the final quarter of 2010-11 from 7.8% in the previous quarter. While it is inevitable that economic growth would slow down further as interest rates are hiked, the central banks continued monetary tightening is justified considering the adverse impact of persistently high inflation on growth. Volatility in call rates reduces On a positive note, underlying volatility in interbank call money rates has reduced because of changes introduced by the RBI in the operating procedure of the monetary policy in May 2011. As liquidity in the banking system tightened, although the peak call rate in the interbank call money market (now the operating target of monetary policy) moved beyond the repo rate in May 2011, it remained below the upper limit set by the MSF rate. Deposits growth to be at robust 17-18% in 2011-12 Given the tight liquidity conditions and persistent demand for credit, many banks hiked deposit rates by 150-200 bps over the last 3 quarters. As real returns turned positive, more people channelised their savings towards bank deposits as an investment avenue. Consequently, deposits growth improved to 18.2% as on June 3, 2011 from 16.6% as on December 31, 2010. Despite this, the deposit growth lagged credit growth, and hence, banks had to raise funds through increased issuances of Certificate of Deposits (Cds). In the second half of 2011-12, we expect further rate hikes in deposit rates across maturities as growth in credit would continue to exceed that in deposits. With increase in deposit rates and real interest rates turning positive, the deposit growth is expected to be in the range of 17-18% by 2011-12. Credit growth to moderate to around 18% in 2011-12 Aggregate y-o-y bank credit growth moderated to 20.6% as on June 3, 2011 from 24.6% as on December 31, 2010 due to the hike in policy rates. Rising interest rates have led to a slowdown in credit growth for sectors such as food processing, textiles, petrochemicals

the previous quarter with average borrowing from the LAF window dropping from Rs 84,000 cr in the previous quarter to around Rs 41,000 cr in this quarter till 15 June
? ?RBI to continue with its anti-inflationary stance; says domestic

inflation remains high (over 9% in May) and above the comfort zone of the central bank.
? ?RBI considered inflation spreading to non-food items a cause for

concern; also stated that inflation numbers understate the pressure as fuel prices have yet to reflect the global crude oil prices
? ?The policy aimed to contain inflation and anchor inflationary

expectations by reining in demand side pressures; and mitigate the risk to growth from potentially adverse global developments. Inflation continues to surprise on the upside Headline inflation remains high, surprising on the upside with each passing month. Inflation stood at 9.1% in May 2011, after having been at 8.7% and 9.8% in April and March 2011, respectively. Though food inflation has softened a bit in the last few months, core inflation has increased from an average of 4.9 % in 2010 to 7.7 % in the first 5 months of 2011. More worryingly, the RBI's household expectations survey suggests that 92 % of households expect prices to rise at the current rate or more in the next one year. Higher inflationary expectations have once again led the RBI to raise interest rates. With an upward revision in March 11 data, headline inflation for the whole of 2010-11 stood at 9.6% as compared to 3.8% in 2009-10. The increase in prices of a number of manufactured products and marketlinked fuel items, like petrol, kept headline WPI inflation firmly above the RBI's comfort level for a large part of 2010-11. In 2011-12 too, we expect the same scenario to continue. We expect average inflation to be in the range of 7.5-8.0% in 2011-12, mainly due to higher commodity, food and metal prices. Therefore, there appears to be upside risks to RBI's March-end 2011-12 forecast of 6.0%. GDP growth moderates, investment growth slows down The Indian economy has slowed down in the last couple of months, as signaled by the fall in industrial output growth and fourth quarter

Page No. : 1

Monthly Update 2011

and telecommunications. We expect credit growth to slow down further to around 18% in 2011-12 due to decelerating capital investments across sectors like telecom, airport infrastructure, cement and retail. At present, with repo rate being the effective policy rate, the increase of 25 bps would push up the cost of funds for banks. Slowing demand for credit and the limited ability of banks to pass on this increase in cost of funds would cause the net interest margin of banks to drop by 15-20 bps in the coming quarters. Incremental credit-deposit ratio to be 75-80% by March 2012 With moderation in credit offtake due to higher interest rates, and relatively higher growth in deposits, the incremental credit-deposit ratio declined to 80.5% on June 3, 2011 from 105% on December 31, 2010. As this scenario is likely to continue, we expect the ratio to fall to 75-80% by the end of 2011-12.

Inflation worries mount as government hikes fuel prices again The government hiked fuel prices for a second month, following high international crude prices and continuing losses at the stateowned oil companies selling products at subsidised rates. Diesel prices were raised by Rs 3 per litre, kerosene by Rs 2 per litre and cooking gas by about Rs 50 per cylinder. The increases added to country's inflation woes, with the FM urging all states to reduce taxes on diesel, kerosene and LPG after the price-hike. The FM also warned that inflation posed a major challenge to the Indian economy and that the rate of inflation would be more than 6.5% this year. The FM's plea was responded to by some states. For its part, the Centre has moved to slash duties on petroleum products. Meanwhile, India's headline inflation rate based on the wholesale price index (WPI) rose to 9.06% in May, higher than the annual rise of 8.66% in April. Chairman of the PM's economic advisory council, said the decision to raise fuel prices could push inflation close to 10% by July. RBI tightens monetary policy further Rising inflation rates prompted the central bank to continue monetary tightening measures. The RBI hiked its key interest rate, the repo rate, by 25 bps to 7.5% in its mid-quarter policy review. Consequently, the reverse repo rate and marginal standing facility rate, which are linked to the repo rate, were hiked by similar amount to 6.50% and 8.50%, respectively. This is the RBI's 10th hike in key rates since March 2010, when the central bank moved to suppress inflation. Domestic WPI Inflation
W P I I n f la t io n (% )

INDIAN ECONOMY
FY12 GDP forecasts a mixed bag Growth forecasts for India came in fixed in June. The IMF kept its forecasts unchanged at 8.2% for 2011 and 7.8% in 2012, while the World Bank estimated the country to grow at 8.2% in FY12, slightly lower than 8.5% in FY11. The OECD, however, said India had the potential to clock double-digit growth over the medium term, provided the right policies are implemented and demographic developments push savings rate higher. Fitch retained India's sovereign rating at BBB, stating that the country has "robust growth prospect" and solid external financial condition. FM sounded optimistic and said the economy would grow by around 8.5% this fiscal, despite the RBI's conscious decision to sacrifice growth in a bid to contain inflation. Separately, India's chief economic advisor said that India's per capita income could touch $10,000 by 2039, up from $1,000 at present, if 8%-plus growth is sustained for the next 25 years. Meanwhile, the government's chief statistician said that the GDP base year would be revised to FY12 from the current FY05 to give a more accurate reading of the economy's structure. Domestic GDP Growth
Domestc GDP Growith %
12 10 8 6 4 2 0 2006 -07 2007 -08 2008 -09 2009 -10 2010 -11 9.6 9.3 8.0 6.8 8.5

12 10 8 6 4 2 0 -2 Jan Feb Mar Apr

2011

May
2010

Jun

Jul
2009

Aug

Sep
2008

Oct
2007

Nov

Dec

*Note: Inflation data is as per 2004-05 base year

Government confident of meeting divestment target The government remained confident of meeting the divestment aim of Rs 40,000 cr in FY12, despite the volatile conditions prevailing in the domestic stock market. The department of disinvestment has diluted a key conflict of interest clause regarding appointment of investment banks for the sale share of state-run companies, and allowed them to manage private sector float provided the name of companies were disclosed.

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Monthly Update 2011

Rs. cr

400,000 350,000 300,000 250,000 200,000 150,000 100,000 F Y 2 0 01 F Y 2 0 03 F Y 20 0 0 FY 2005 FY 2009 F Y 2 00 2 FY 2007 F Y 2 00 4 F Y 2 00 6 F Y 2 00 8 F Y 2 01 0 F Y 20 1 1 50,000

6 4 2 0

Indicators Monthly WPI Inflation Industrial Growth Exports

Current 9.06% (May 11) 7.8% (April-March Fy11) $49.79 bn (April-May Fy11) $ 73.74 bn (April-May Fy11) -$23.95 bn ( April-May Fy11) Rs 61,313 cr (April-May FY11)

Previous 8.66% (April 11) 10.5% (AprilMarch Fy10)

Fiscal Deficit (Rs cr)

% of GDP

$34.27 bn (April-May Fy10) $55.32 bn (April-May Fy10) -$ 21.05 bn ( April-May Fy10) Rs 62,222 cr (April-May FY10)

? deficit for April and May 2011 stood at Rs 1.31 lakh cr, or ?Indian fiscal

Imports

31.7% of the full-year target.

Trade Deficit

Gross Tax Collections

Government continues efforts to reduce tax evasion, promote trade growth The government continued with its efforts to reduce tax evasion and promote trade growth for the economy. The FM called for stepping up multilateral co-operation to end the era of banking secrecy and deal with the "abusive" transfer pricing mechanism that he said was robbing developing nations of scarce natural resources. Further, the FM said that India and the OECD have agreed to strengthen cooperation in cross-border taxation issues. India has also resumed talks with Mauritius to review the provisions of the double taxation avoidance agreement (DTAA) between the two countries, the FM said. India and Singapore signed a DTAA for effective exchange of information in tax matters between the two countries. The government also notified a DTAA with Mozambique. In areas of trade growth, India and Russia signed a pact to boost investment and trade in the textile industries of both countries. Further, India decided to ask Russia for greater access to certain sectors, including pharmaceuticals and animal products. The Centre also asked for simplified work permits and business visas and mutual recognition of standards and institutions to reduce its growing trade imbalance with the country. India and Japan are scheduled to implement a comprehensive free trade agreement from August 1 to boost bilateral trade to US$25 bn by 2015. India extended its duty-free market access to Afghanistan as part of its economic package for the least developed countries. Further, after much deliberation, the finance ministry extended the duty entitlement passbook scheme by three months till September 30, 2011.

Industrial Growth
19 IIP G rowt h , M OM (% ) 17 15 13 11 9 7 5 3 M ay -1 0 Au g -1 0 Ju n -1 0 Ju l-1 0 Se p -1 0 O ct -1 0 Nov -1 0 De c-1 0 Jan -1 1 Fe b -1 1 M ar-1 1 Apr-1 1 1

? output growth (as per new revised base of FY05) slowed Industrial

to 6.3% in April, vs., 13.1% a year ago, due to moderation in the consumer goods, manufacturing, capital goods and mining sector IIP-Core Sector Growth

Core IIP Growth, MOM %

8 7 6 5 4 3 2 Ju n-1 0 Au g-1 0 Sep -1 0 Nov -10 Dec-1 0 F eb-1 1 Apr-1 1 Jul-10 May -1 1 Oct-1 0 Jan-1 1 Mar-11 1

? core sector industries slowed to 5.3% in May from 7.4% in ?Growth of

the same month a year ago

Page No. : 3

Monthly Update 2011

The government also planned to pay brokers a commission to encourage staffers in divesting public sector units to subscribe to these issues. Meanwhile, a government panel decided to soon review four sick public-sector companies Hindustan Cable, Richardson & Cruddas, Hindustan Machine Tools and Tungabhadra Steel to fast track divestment in their case.

Fiscal Deficit

450,000

Other major indicators

? ?India's exports grew 56.9% year-on-year to $25.9 bn in May, while

Other major developments

? A government panel recommended discontinuation of the Kisan

imports increased 54.1% to US$40.9 bn, resulting in a trade deficit of $15 bn.
? ?Net tax receipts were Rs 23,103 cr, while total expenditure was Rs 1.66

Vikas Patra scheme, a hike in the interest rate on post office savings accounts to 4%, reduction in the maturity of National Savings Certificates to five years, and increasing the annual contribution limit to Rs 1 lakh.
? ?Government lowered the age limit for pension under the Indira

lakh cr for the first two months of Fy12.

? collections grew 23% to Rs 1.02 lakh cr in the first quarter of ?Direct tax

Gandhi National Old Age Pension Scheme to 60 years.

? ?Finance ministry decided to allow FDI in proprietary trading,

the current financial year.

? ?External debt for the quarter ended March 2011 rose 17.2% on-year to

despite opposition from the RBI.

?ministry decided to spend up to Rs 5,000 cr from the ?Telecom

$305.9 bn short-term external debt stood at $65 bn, while longterm external debt stood at $240.9 bn.
? ?FDI declined 62% in FY11 to $7.1 bn from $18.8 bn the previous year.

Universal Service Obligation fund to provide a subsidy to operators providing broadband services in rural areas.
? ?Government roped in chief executives of leading mobile phone

Government details India's Balance of Payments during JanuaryMarch 2011 (Q4 Fy11) ? For Q4 FY11, the BoP surplus was $2.03 bn compared with $2.14 bn a year ago while for FY11 BoP surplus was $13.05 bn as compared with $13.44 bn year ago. ? The capital account surplus for Q4 FY11 fell to $7.4 bn as compared with $15 bn year ago while for FY11 it rose to $59.75 bn versus $53.40 bn year ago.
?

companies, industry associations and all key government departments to oversee the implementation of the its Rs 20,000 cr project to roll out a national optic fibre network.
? minister told the communications minister that the ?Defence

defence forces will not vacate any more spectrum. ? Government decided to set up a Rs 1,000 cr mortgage-risk guarantee fund to facilitate home loans for the urban poor.
? ?The ministry of corporate affairs has discontinued a 46-year

?The current account deficit for Q4 FY11 fell to $5.4 bn compared with $12.8 year ago because of robust growth in exports and some improvement in invisibles however for FY11 it rose to $44.28 bn from $38.38 bn year ago.

system of prescribing sector-specific cost accounting record maintenance rules for 36 industrial segments. GLOBAL ECONOMY

? ?India's trade deficits contracted marginally to 29.86 bn in Q4 FY11

from $31.46 bn a year ago while for FY11 the trade gap widened to $130.47 bn from $118.37 bn year ago.
? On BoP basis, India's exports grew 47.1% on year during Q4 FY11 vs.,

Agencies lower global growth estimates International agencies projected a fall in growth for the world economy, owing to the slow pace of recovery in the US, reemergence of the debt crisis in Europe and persistent inflationary pressure in emerging countries. The World Bank reduced its forecast for global growth in 2011 to 3.2% from its January estimate of 3.3% and the International Monetary Fund (IMF) lowered its forecast to 4.3% from 4.4%. The fund also lowered its forecast for growth in advanced economies to 2.2% in 2011 from 2.4% earlier. The Organisation for Economic Co-operation and Development (OECD) said the world economy was slowing down due to a combination of factors such as the Eurozone's debt problems and a weak US housing sector, but added it did not see a double-dip.

36.4% rise year ago, while imports rose 27.4% on year during the quarter compared with a 43.3% rise a year ago.

Page No. : 4

Monthly Update 2011

IMF GDP Estimates For 2011

IM F W o rld GD P E st im at es (% ) 12 10 8 6 4.1 4 2 0 US -2 Euro-zone UK 2.5 2.0 1.5 -0.7 Japan China Brazil India 9.6 8.2

World GDP Growth

6
W orld GD P G row t h %

4 2 0 -2 -4 -6 -8 QI 2009 Q II 2009 Q III 2009

US GDP

Q IV 2009

QI 2010

Q II 2010
Euro zone

Q III 2010

Q IV 2010

QI

UK GDP

Major Indicators
US GDP US unemployment UK GDP Euro Zone GDP Japan GDP China GDP Singapore's GDP

Current
1.9% Q1 2011 9.1% May 2011 0.5% Q1 2011 0.8% Q1 2011 -3.5% Q1 2011 9.7% Q1 2011 22.5% (QoQ) Q1 2011

Previous
3.1% Q4 2010 9% April 2011 -0.5% Q4 2010 0.3% Q4 2010 -1.3% Q4 2010 9.8% Q4 2010 3.9% (QoQ) Q4 2010

Major Global Central Bank

US Fed Funds Rate Bank of England (Repo Rate) European Central Bank (Repo Rate) Japan Benchmark Rate

Latest Key Interest rate

0-0.25% 0.50% 1.50% 0-0.10%

US US debt ceiling weighs on the world The mounting public debt continued to pressure the US government to raise its debt ceiling, even as fears rose a failure to do so may severely impact the global markets. As per the latest available numbers, the US budget deficit rose 42.7% to $ 57.6 bn in May, pushing the imbalance in the first eight months of current fiscal year close to $ 1 trillion. However, the numbers were better than the $135.9 bn dollars in May 2010. The US Federal Reserve acknowledged that the country would surpass the 100% total debt-to-GDP ratio by the end of this fiscal, ending September 30. Citing the crisis, US president warned that a delay in raising the debt ceiling could reverse the fledgling recovery and trigger a new economic meltdown. The IMF too urged a higher debt ceiling to avoid a big shock for the world economy and financial markets. Meanwhile, after S&P, other leading rating agencies Moody's and Fitch also warned of lowering the US credit rating if US lawmakers failed to increase the borrowing limit. IMF, World Bank lower US growth forecasts Slowdown worries continued to haunt the world's largest economy, with the Federal Reserve lowering its growth estimates for 2011 to 2.72.9% from its April estimates of 3.1-3.3%. International agencies followed suit, citing the slowdown in the country's economic growth due to a weak housing market, high commodity prices and spillover effects from the potential European debt contagion. The IMF lowered

its US economic growth forecast for 2011 and 2012 to 2.5% and 2.7%, respectively, from 2.8% and 2.9% earlier. The World Bank said the US would grow at 2.6% in 2011, down from its earlier estimate of 2.8%. Meanwhile, US GDP growth for Q12011 was revised slightly up to 1.9% from the earlier estimate of 1.8%. The Fed continued to keep its interest rates at the record low of near 0%. The central bank added that it will complete its US$ 600 bn treasury-buying programme by June 30 as planned. Among other developments the Fed proposed to expand the list to the 35 largest banks by requiring firms with assets of $50 bn or more to submit annual plans. The US House of Representatives passed a $ 42.3bn homeland security funding bill. Further, regulators sued JPMorgan Chase and RBS in a bid to recover about $840 mn in losses on securities that the banks sold to five wholesale credit unions; the securities, tied to highrisk mortgages, failed during the financial crisis. Key corporate developments in the US
? America ?Bank of

reached a $ 8.5bn settlement with investors over failed mortgage securities.

? ?Madoff trustee sought $19 bn in damages from JPMorgan Chase for

its role in Bernard Madoff's fraud.

? PNC Financial Services agreed to buy Royal Bank of Canada's US

retail bank operations for $3.4 bn Page No. : 5

Monthly Update 2011

? judge ruled that Ford Motor must pay nearly $2 bn in ?An Ohio

UK's growth forecast fall for 2011 Forecasts for the British economy fell, with the IMF predicting the country's GDP to grow at 1.5% in 2011, down from an April forecast of 1.7%. It also urged the British government to continue with its deficit-reduction strategy despite weaker-than-anticipated economic growth. The minutes of the Bank of England (BoE) meeting showed that policymakers judged growth outlook weak and warned of a possible need for a second round of quantitative easing. Meanwhile, the National Institute of Economic and Social Research (NIESR) said that UK's GDP growth inched up to 0.4% in the three months to May from 0.1% in the three months to April. To promote growth, the BoE continued to keep its interest rate unchanged at 0.5% and also held its bond-purchase programme at 200 bn. Further, the central bank said the Eurozone debt crisis posed the biggest risk to the stability of the UK financial system and that banks should build up capital buffers when earnings are strong. Elsewhere in Europe no sooner had the sovereign crisis of Portugal abated following a bailout plan crafted by the European Union (EU) and the IMF, June saw the re-emergence of a sovereign crisis in the country where it all started around a year back Greece. After much haggling and deliberations, the EU and the IMF agreed to rescue the country from bankruptcy with a second multi-billion euro financial aid package, albeit only after the country would approve a five-year austerity package to reduce its burgeoning debt. Eurozone finance ministers too decided to extend 12 bn euros in emergency loans to Greece, on condition the country introduced harsh austerity measures. Greek lawmakers approved after protests and uncertainty, paving the way for the nation's second bailout. Eurozone finance ministers have agreed to seek voluntary rollover of Greek debt by private bondholders to finance a substantial part of Greece's funding needs in the coming years. Meanwhile, S&P lowered Greece's credit rating to CCC from B and said that it doubts the country will be able to sell bonds to finance itself in 2012. Meanwhile, in order to contain the spreading of the debt contagion, the guarantee under the European Financial Stability Facility was raised to 780 bn euro from 440 bn euros. Further, European Central Bank (ECB) president Jean-Claude Trichet said the EU should exercise greater control over the spending by national governments to strengthen the 17-country currency union against debt crises in future. Key economic indicators
? current account deficit widened to 5.1 bn euros in April ?Eurozone's

damages to thousands of dealerships in a 2002 class-action lawsuit that said the automaker violated dealer agreements.
? Group launched a $3.8 bn hostile bid for Toronto Stock ?The Maple

Exchange operator TMX Group. Key economic pointers

? ?US Homebuilder confidence fell to a nine-month low in June with the

NAHB/Wells Fargo Housing Market Index showing a reading of 13, after a reading of 16 in May.
? ?Existing home sales fell 3.8% to a seasonally-adjusted annual rate of

4.81 mn in May from a downwardly revised 5 mn in April.

? sales dropped 2.1% to a seasonally-adjusted annual rate New home

of 319,000 in May after rising 6.5% in April

? Beige Book showed that the economy slowed in several ?US Fed's

regions, burdened by high fuel prices and the tsunami and nuclear crises in Japan that reduced manufacturing output.
? ?US unemployment rate edged up to 9.1% in May from 9% in April. ? sales fell for the first time in 11 months, dropping 0.2% in May ?US retail

after a downwardly-revised 0.3% growth in April.

? ?US industrial production grew by 0.1% in May following no change in

April.
? ?US current account deficit widened to $ 119.3 bn in Q12011, or 3.2%

of GDP, from $ 112.2 bn in Q42010. EURO-ZONE Eurozone growth strong, but inflation worries rise Growth projections for the Eurozone remained strong in June, with the IMF revising its growth forecast for the region to 2%, up from 1.6%, despite persistent concerns about the peripheral countries, citing the relatively stronger growth in core countries. Meanwhile, the Eurozone's GDP growth rate remained unchanged on-year at 0.8% in Q12011 and up from the 0.3% rise seen in Q42010. The region, however, continued to worry about rising inflation. The ECB raises interest rates for the second time this year by 25 bps to 1.5%in July; it also signalled further policy tightening to tackle inflation despite the Euro zone's intensifying debt crisis. Meanwhile, Eurozone annual inflation eased to 2.7% in May from 2.8% in April, while core inflation rose to 1.7% in May from 1.6% in April.

following a revised deficit of 3 bn euros in March, while its trade balance swung into deficit of 4.1 bn euros in April following a surplus of 1.6 bn euros in March.

Page No. : 6

Monthly Update 2011

? ?Eurozone's

Industrial production rose 0.2% on-month in April after being flat in March.

? ?Eurozone's unemployment rate remained unchanged in April at 9.9%

for the third consecutive month.

? trade balance was in a surplus of 2.8 bn euros in March, after ?Eurozone

government said that the March 11 earthquake and tsunami destroyed buildings and infrastructure worth about $ 210bn, excluding costs caused by the subsequent Fukushima nuclear accident. Major indicators in Japan
? ?Japan's exports dropped 10.3% in May from a year earlier to 4.76

a deficit of 3 bn euros in February.

? unemployment rate remained at 9.9% in April, the same as ?Eurozone

in February and March.

? sector borrowing fell to 17.4 bn in May 2011 from 18.5 bn ?UK public

trillion yen, while imports rose 12.3% to 5.61 trillion yen, resulting in a trade deficit of 853.7 bn yen.
? ?Japan's current account surplus fell to 405.6 bn yen in April, down

a year earlier.
? ?UK's industrial production declined 1.7% in April, the biggest monthly

69.5% from a year earlier, while the trade balance reflected a deficit of 417.5 bn yen.
? ?Japan's Industrial output rose 5.7% in May against a 1.6% rise in

decline since August 2009, following a 0.2% rise in March, while manufacturing output dropped 1.5% in April after a 0.2% advance in March.
? ?UK's unemployment fell by 88,000 in the quarter ended April, the

April. China's growth continues, but inflation worries remain China continued to see strong growth statements in June, with the World Bank expecting the Chinese economy to grow 9.3% in 2011, 8.7% in 2012 and 8.8% in 2013. The IMF too maintained its forecast for 2011 at 9.6%. But the country's high inflation rate remained a cause for concern, with annual consumer price index (CPI) recording its highest reading in 34 months. Prices in May were up 5.5% over the same month a year earlier, compared with April's increase of 5.3%, driven by an 11.7% jump in food prices. To control inflation, the People's Bank of China hiked the reserve requirement ratio by 50 bps, the 6th rate hike in the current year, taking the ratio for the nation's largest lenders to a record 21.5%. Further, Fitch said Chinese banks could soon be facing the hangover from a lending spree that has left them overexposed to regional governments and property-related ventures. . Meanwhile, a Chinese official at the State Administration of Foreign Exchange warned that the country should guard against risks from excessive holdings of US assets as Washington could pursue a policy to weaken the dollar.

largest fall since the quarter ended August 2000, reducing the unemployment rate to 7.7% from 7.9%. Major corporate news
? ?Italian fashion house Prada raised $2.1 bn in its Hong Kong IPO. ? ?France's Axa Private Equity bought a $ 1.7 bn private equity portfolio

from Citigroup Inc.

? made a 12 bn takeover bid for Kazakh metals producer ?Glencore

ENRC.
? ?The TMX

Group and the LSE scrapped their planned merger after failing to get two-thirds investor support for the $3.4 bn deal.

ASIA Japan long-term growth projections rise Long-term forecasts for the catastrophe-hit Japanese economy were revised upwards in June, driven by strong re-development measures. The IMF lowered the country's 2011 economic growth forecast to 0.7% from 1.4% projected earlier, but increased its 2012 growth forecast to 2.9% from the earlier-projected 2.1%. The World Bank estimated Japan would grow 0.1% in 2011 and 2.6% in 2012, compared to the bank's pre-earthquake estimates of 1.8% and 2%, respectively. The Japanese government too upgraded its assessment of the economy for the first time in four months, saying the economy was showing signs of improvement as the manufacturing sector and supply chains recovered from the earthquake. Meanwhile, the country's growth for Q12011 was revised to -3.5% against -3.7% in the preliminary report in May. The country continued with remedial measures, with the Bank of Japan expanding its lending programme aimed at spurring growth in high-potential industries by 500 bn yen and further relaxed conditions under which it provides the funds. Meanwhile, the

Other major indicators released in the month

? ?China's exports rose 19.4% in May on-year, slowing from the 29.9%

pace of April, while import growth accelerated to 28.4% from 21.8% in April; the country reported a trade surplus of $13.1 bn in May as compared with $11.4 bn in April.
? ?China's industrial production rose at an annual rate of 13.3% in May

following a 13.4% rise in April. Singapore jobless rate at three-year low

? ?Singapore's unemployment rate fell to a three-year low of 1.9% in

March from 2.2% in December.

? nation's inflation rate rose to 4.5% on-year in May while its ?The island

retail sales rose 8.1% on-year in April.

? manufacturing output fell 17.5% on-year in May, Singpore's

compared with a 9.5% on-year drop in April.

Page No. : 7

Monthly Update 2011

EQUITY ROUND UP DOMESTIC Global Equity Markets 1-Year Return and Index Value as of June 30, 2011

DJIA Nasdaq Composite Nikkei 225 Hang Seng Shanghai S&P CNX Nifty FTSE 100 Brazil Bovespa Russia RTS 0% 10% 20% Returns (%)
Domestic Benchmark Indices Trailing P/E
28 T r a iling P /E

12414 2774 9816 22398 2762 5647 5946 62404 1907 30% 40% 50%

25

22 19

16

28-F e b-11

30-A pr-11

30-A ug-09

3 0 - O c t- 0 9

30-D e c-09

28-F e b-10

30-A pr -10

30-Jun-10

30-A ug-10

3 0 - J u n - 90

3 0 - O c t- 1 0

Nifty

Sensex

Nifty EPS
360 340 Nifty Trailing EPS (Rs) 320 300 280 260 240 220 200 Jun-10 Aug-10 May-10 May-11 Feb-10 M ar-10 Sep-10 Nov-10 Feb-11 Mar-11 Dec-09 Dec-10 Jun-11 Apr-10 Apr-11 Jan-10 Jul-10 180 O ct-10 Jan-11

Page No. : 8

30-D e c-

Monthly Update 2011

30-Jun-11

01

13

Indian Indices BSE Sensex S&P CNX Nifty BSE Capitalgoods BSE FMCG BSE BANKEX BSE Power BSE IT BSE Consumerdurables BSE Healthcare BSE PSU BSE Midcap BSE Smallcap BSE Auto BSE Metal BSE Oil & Gas BSE Realty

June 30, 2011 18,846 5,647 13,906 4,045 12,821 2,612 6,100 6,654 6,398 8,543 6,854 8,157 8,798 15,062 9,208 2,020

May 31, 2011 18,503 5,560 13,092 3,858 12,543 2,556 5,994 6,549 6,393 8,582 6,910 8,236 8,933 15,411 9,594 2,178
CG Capital Goods

Change 342.59 87.25 813.48 187.28 278.05 56.19 105.89 104.98 4.94 -39.64 -56.19 -79.12 -134.26 -349.43 -385.76 -158.13
HC Health Care

% Change 1.85 1.57 6.21 4.85 2.22 2.20 1.77 1.60 0.08 -0.46 -0.81 -0.96 -1.50 -2.27 -4.02 -7.26

CD Consumer Durables

Top Nifty Gainers

Price as on June 30, 2011 578.45 Price as on May 31, 2011 501.35 % Changes

Top Nifty Losers

Price as on June 30, 2011 Price as on May 31, 2011 % Changes

Scrip

Scrip

Reliance Capital Ltd.

15.38

DLF Ltd

210.45

238.95

-11.93

Hindustan Unilever Ltd.

343.65

304.55

12.84

Tata Motors Ltd. Grasim Industries Ltd.

994.20

1,095.3

-9.23

NTPC Ltd.

186.90

168.25

11.08

2,095.85

2,302.75

-8.98

Page No. : 9

Monthly Update 2011

Top Midcap Gainers (BSE)

Price as on June 30, 2011 2,832.15 318.30 137.30 Price as on March 31, 2011 2,113.65 244.55 105.85 % Changes

Top Midcap Losers (BSE)

Price as on June 30, 2011 Price as on March 31, 2011 % Changes

Scrip

Scrip

Godfrey Phillips India Ltd. Shree Global Tradefin Ltd Kwality Dairy (India) Ltd.

33.99 30.16 29.71

GTL Ltd.

90.75

411.30 32.85 307.55

-77.94 -54.19 -22.74

GTL Infrastructure Ltd. 15.05 Sterling International Enterprises Ltd. 237.60

Top Smallcap Gainers (BSE)

Price as on June 30, 2011 139.95 Price as on May 31, 2011 98.00 % Changes

Top Smallcap Losers (BSE)

Price as on June 30, 2011 Price as on May 31, 2011 % Changes

Scrip

Scrip

Prabhav Industries Ltd. Shri Ganesh Spinners Ltd. Elantas Beck India Ltd

42.81

SV Electricals Ltd

62.70

122.90

-48.98

39.70

28.60

38.81

Rei Six Ten Retail Ltd.

29.15

45.95

-36.56

1597.35

1165

37.11

R M Mohite Inds. Ltd.

64.45

92.15

-30.06

June 2011
Rs. Crore
Buy Sell Net

May 2011
MF Inv (Equity)
9,951 8,750 1,201

FII Inv (Equity)

49,239 45,928 3,311

FII Inv (Equity)

54,937 60,095 -5,158

MF Inv (Equity)
12,206 11,771 435

FII MF net investment

5650 5575 5500 Nifty 5425 5350 5275 5200 31-May-11 01-Jun-11 02-Jun-11 03-Jun-11 06-Jun-11 08-Jun-11 09-Jun-11 10-Jun-11 13-Jun-11 14-Jun-11 16-Jun-11 17-Jun-11 20-Jun-11 21-Jun-11 22-Jun-11 24-Jun-11 27-Jun-11 28-Jun-11 29-Jun-11 30-Jun-11 07-Jun-11 15-Jun-11 23-Jun-11 400 -100 -600 1900 1400 900 FII/ MF Inv Rs. Cr

FII Net Investment MF Net Investment Nifty

Page No. : 10

Monthly Update 2011

Equity markets recover in June

Indian benchmark indices recovered their losses to close up by over 1.6% in June primarily on positive global cues, especially from the Eurozone later in the month. The markets were down earlier in the month, dragged down by weak global cues such as slowdown in economic growth in the US and worries of the re-emergence of the sovereign debt crisis in Greece. A sharp rise in monthly inflation data for May and the RBI's continuing measures to suppress inflation, this time by a 25 bps hike in its key rates also dragged the markets down in the month. A weaker-than-expected reading on the quarterly growth numbers of the Indian GDP and industrial production data for April also dampened investor sentiments. More losses were seen for the market on concerns of renewed tax treaty between India and Mauritius, which dragged stocks of companies with investment from the tax-haven nation. A sell off in index major RIL on reports that the government favoured the company to violate terms of contract for increasing capital expenditure for the KG basin block, also affected the sentiments. Intermittent profit booking brought in more losses into the market. Losses were however erased in the later part on the month as concerns over Greece's debt crisis retreated after the Greek parliament voted in favour of harsh austerity measures to avoid a debt default. Consistent FII inflows later in the month amid the positive trend in the global markets brought in more gains for the Sectoral indices movement market. FIIs were buyers to the tune of Rs 3,310 cr in June 2011 compared with net selling to the tune of Rs 5,158 cr in the month of May. Further gains were witnessed on the back of strong rollovers ahead of the June futures contract expiry amid a dip in weekly food inflation. Intermittent buying in index majors like ICICI Bank and L&T also supported the benchmark. Most BSE sectoral indices rose in the month.
? Goods Index was the topmost gainer, up 6.2%, boosted BSE Capital

by stock specific buying, including that in index major L&T, which surged 11% on the Nifty in the month.
? Index also finished the month on a strong note, up BSE FMCG

around 5%, as investors bought defensive shares amid the current market uncertainty; Hindustan Unilever Ltd. emerged as one the topmost gainers on the Nifty by gaining around 13%.
? losers, BSE Realty Index plunged over 7% in the month Among the

as realty shares witnessed stock specific selling; DLF Ltd. was the biggest faller on the Nifty, down 12% in the month.
? Gas index was the second biggest loser, down 4%, as BSE Oil &

shares of state-owned oil retailers fell on concerns over high energy costs and delay in the meeting of EGM over decision on raising diesel prices

BSE Sensex

BSE IT BSE Health Care BE MId cap BSE Metal BSE CapitalGoods

15 Rebased to 10

BSE FMCG BSE Bankex BSE Auto

Sectoral Indices Value

13

BSE Oil & Gas

11

11-May-11

20-May-11

31-May-11

16-Dec-10

28-Dec-10

17-Sep-10

28-Sep-10

18-Aug-10

27-Aug-10

16-Nov-10

26-Nov-10

20-Apr-11

16-Feb-11

25-Feb-11

2-May-11

6-Jan-11

7-Dec-10

7-Sep-10

9-Mar-11

7-Oct-10

9-Aug-10

5-Nov-10

17-Jan-11

27-Jan-11

18-Mar-11

29-Mar-11

30-Jun-10

18-Oct-10

27-Oct-10

7-Feb-11

7-Apr-11

9-Jun-11

9-Jul-10

20-Jun-11

Page No. : 11

Monthly Update 2011

29-Jun-11

20-Jul-10

29-Jul-10

Yie ld (% )

N ifty S p o t I n d e x

Nifty Put-Call Chart

Nifty Earnings Yield versus 10-Year G-Sec Yield

Page No. : 12
4750 4950 5150 5350 5550 5750 5950 6150 6350 6550

10.00%

30-Jun-09
2 -A u g -1 0

27-Jul-09

23-A ug-09

19-S e p-09
2 -S e p -1 0

16-Oct-09

12-N ov -09
6 -O c t -1 0

9-D e c-09

5-Ja n-10
8 -N o v -1 0

1-F e b-10

28-F e b-10
1 0 -D e c -1 0

27-M a r-10

23-A pr-10
1 3 -Ja n -1 1

20-M a y -10

Nifty earnings yield

1 6 -F e b -1 1 2 2 -M a r-1 1 2 7 -A p r-1 1 3 0 -M a y - 1 1 3 0 -Ju n -1 1 0.70 0.90 1.10 1.30 1.50

16-Jun-10

13-Jul-10

Nifty Spot Index

9-A ug-10

5-S e p-10

2-Oct-10

Put Call Ratio (Open Interest)

29-Oct-10

25-N ov -10

22-D e c-10

18-Ja n-11

14-F e b-11
1.70 1.90 2.10

13-M a r -11

9-A pr-11

10 Year G-Sec yield

6-M a y -11
P u t C a ll R a tio

Monthly Update 2011

2-Jun-11

29-Jun-11

3.50%
3 0 -Ju n -1 0

4.80%

6.10%

7.40%

8.70%

EQUITY ROUND UP GLOBAL

Key global indices analysed ended mostly down in June with Hong Kong's Hang Seng plunging the most, down over 5% while Japan's Nikkei emerged as the biggest gainer, up 1.3%. Wall Street benchmark indices retreated during the month on fear of slowdown in world's largest economy. Markets started the month on a weak note as doubts about the domestic economy's strength were magnified by weaker than expected reports on manufacturing and job sector. Losses further deepened after the US Federal Reserve lowered its projections for US economic growth between 2.7-2.9% for 2011, down from its April estimate of between 3.1-3.3%. Further pessimistic comments from Fed officials coupled with series of weaker economic indicators dented investors sentiments. Meanwhile, weak global cues in the form of fear of spreading debt contagion in European countries also dampened investors' risk taking appetite during the month resulting into sell-off in equities. Further downside for the markets were however restricted as uncertainty over Greece debt crisis eased later in the month after the European Union (EU) and the IMF agreed to provide second bailout package to the debt ridden country and after Greek lawmakers approved key austerity measures in the country, a pre-requisite for its bailout. Some gains were also induced by intermittent domestic positive economic indicators like contraction in trade deficit, rise in industrial production and retail sales data.

FIXED INCOME - DOMESTIC

Indices
DJIA Nasdaq Composite Nikkei 225 (Japan) Straits Times (Singapore) Hang Seng (Hong Kong) FTSE 100 (London) DJIA Dow Jones Industrial Average

June 30, 2011

12,414 2,774 9,816 3,120 22,398 5,946

May 31, 2011

12,570 2,835 9,694 3,160 23,684 5,990

Absolute Change
-155.45 -61.78 122.36 -39.49 -1286.03 -44.28

% Change
-1.24 -2.18 1.26 -1.25 -5.43 -0.74

Global indices movement

14.5
Rebased to 10

G lo b a l I n d ic e s V a lu e

13.5 12.5 11.5 10.5 9.5 8.5

Dow Jones FTSE Straits Times S&P CNX Nifty

Nasdaq Nikkei Hang Seng

1 2 -Ja n -1 1

9 -F eb-1 1

9 - M a r- 1 1

6 - A p r- 1 1

4 -M ay-1 1

1 -Ju n -1 1

3 0 -Ju n -1 0

2 5 -Au g-1 0

2 2 -Sep-1 0

1 7 -N ov -1 0

Page No. : 13

1 5 -D ec-1 0

Monthly Update 2011

2 9 -Ju n -1 1

2 8 - J u l- 1 0

2 0 -O c t-1 0

Britain's FTSE recovered most of its losses made to end slightly down in the month after fear of Greece debt default was averted by a second bailout from the EU and the IMF. Worries of Greece debt crisis and its bailout had strongly influenced the direction of the index during the month. However markets breathed a sigh of relief after the country managed to get the second bailout loan albeit with strict austerity measures. The approval of the five year austerity measures by Greek lawmakers thereby paving way for its second bailout loan to avert default added to the positive sentiments later in the month. Meanwhile, the British index was also dragged down earlier in the month on fears of slowdown in pace of global economic recovery due to weak cues from US economy and on concerns of sovereign debt troubles spreading in Europe. Singapore's Straits Times posted loss of 1.3% during the month as negative global cues raised concerns over the health of global economy. Slowdown in US economy and consequent fall in growth forecast dampened the market sentiments. The lingering issue on Eurozone debt problems also weighed down heavily on the index. Fall in regional bourses due to concerns over Chinese monetary tightening added further losses into the index. Losses were however restricted on hopes of resolution of Greece debt crisis and consequent approval of a second bailout for the debt ridden country. Japan's Nikkei rose 1.3% and was the sole index that ended in positive zone among key indices analysed during the month. The Japanese benchmark was primarily boosted by gradual improvement in the domestic economic conditions after the devastating earthquake and nuclear crisis post March 11, 2011. Sentiments improved after the government upgraded its economic assessments,

and on its continuing efforts to shore up domestic growth. The Bank of Japan also upgraded its economic assessment for the first time in three months, citing better household and business sentiment in the aftermath of the disaster. The Bank of Japan also decided to expand its lending program aimed at spurring growth in high-potential industries by 500 bn yen as well as further relaxing conditions under which it provides the funds. Growing optimism over domestic corporate earnings following relatively robust forecasts by Nissan and Suzuki, also augured well for the index. Gains for the index were however capped by losses made earlier in the month as markets were jittery due to sluggish US economic recovery and re-emergence of Greece debt dilemma. Hong Kong's Hang Seng down over 5%, was worst affected among key global indices analysed in the month on concerns over Chinese monetary tightening, slowdown in the US economy and the European debt crisis. The index reacted negatively at regular intervals to the weak economic cues emanating from US. Further persistent debt problems in Eurozone particularly in Greece prompted investors to be defensive. Back home, relentless inflationary pressure and Chinese government's efforts to deal with it dented the overall sentiment. China's central bank hiked banks' reserve requirement ratio by 50 bps to a record 21.5% to drain excess liquidity and tame inflation. Fall in property developer's shares on concerns of slowing property sales induced more losses into the index. Further fall for the index was however capped by gains in global markets later in the month on increasing optimism that Greece will resolve its debt crisis. Some losses were also reduced after China's Premier commented that the government's efforts to curb inflation have worked, hinting at reduction in efforts to stop inflationary pressures.

FIXED INCOME - DOMESTIC

Indicators
Call Rate NSE Mibor 3 M CP 5 Yr Corp Bond 10 Yr Gsec

June 30, 2011

4.00% 7.75% 8.75% 9.60% 8.33%

Month Ago
7.35% 7.40% 10.10% 9.70% 8.41%

Indicators
Reverse Repo Repo Bank Rate CRR

June 30, 2011

6.50% 7.50% 6.00% 6.00%

Month Ago
6.25% 7.25% 6.00% 6.00%

*Data as of May 3

Page No. : 14

Monthly Update 2011

Y ie ld (% )

Yield (%)

K e y R a te s ( % )

2.20

2.60

3.00

3.40

3.80

4.20

4.60

8.30

8.50

8.70

8.90

Domestic G-sec Yield

US, UK 10-Year Benchmark Yield

Domestic Key Rates-Repo, Reverse Repo, CRR, Bank Rate

Page No. : 15
3% 4% 5% 6% 7% 8% 9%

8.10 1 yr

30-Jun-10

1 2 - O c t- 0 6 2 - J a n - 07 2 5 -M a r-0 7 1 5 -Ju n -0 7

28-Jul-10

2 yr

25-A u g -10

3 yr

22-S e p -10

5 -S e p -0 7 2 6 -N o v -0 7 1 6-Fe b -08 8-M a y -08

Bank Rate

4 yr

20 -O c t-10

17 -No v -10

5 yr
2 9 - J u l- 0 8 1 9 - O c t- 0 8
CRR

1 5-D e c -10

9 - J a n - 09 1 -A p r-0 9 2 2 -Ju n -0 9 1 2 -S e p -0 9

7 yr

Maturity (years)

30-Jun-11

12-Ja n-1 1

8 yr

US 10-Year G-Sec Yield

9 -Fe b -1 1

Repo

3 -D e c -0 9 2 3 -Fe b -1 0 1 6 -M a y -1 0 6 -A u g -1 0 2 7 - O c t- 1 0 1 7 -Ja n -1 1 9 -A p r-1 1 3 0 -Ju n -1 1

9-Ma r-11

9 yr

31-May-11

6-A p r-11

10 yr

Reverse Repo

4-Ma y -11

15 yr

UK 10-Year G-Sec Yield

1-Ju n-11

20 yr

Monthly Update 2011

29-Jun-11

6-Month LIBOR
6 -M on t h L IBOR %
0.80 0.70 0.60 0.50 0.40 0.30 2 4 -Ja n -1 1 3 0 -Ju n -1 0 2 1 -A u g -1 0 1 6 -S e p -1 0 1 2 -O c t-1 0 2 9 -D e c - 10 1 9 - Fe b -11 2 6 -Ju l-1 0 7 -N o v -1 0 3 -D e c -1 0

1 7 - Ma r -1 1

1 2 -A p r -1 1

8 -M a y -1 1

Interbank call money rates moved in the range of 7.00-7.70% in the month amid wavering demand from banks to meet their reserve requirements. Earlier in the month, rates were on the lower side due to lack of demand for funds, while as the month progressed, liquidity situation in the system tightened due to strong demand from banks to meet their requirements. Rates also rose as RBI's move to hike its Reverse Repo rate by 25 bps to 6.50% increased the rate at which banks borrow from banks i.e. the Repo facility to 7.50%. Rates were also upwardly pressurized amid tight liquidity in the system following the outflow towards the advance tax payments. An aberration was however seen on the last day of the month after call money rate fell sharply to 3.50-4.00% as demand from banks plummeted due to fulfilment of their reserve requirements for that fortnight through the RBI's repo auction. Meanwhile, the RBI Governor said that statutory liquidity regime posed growth-stability trade off dilemma for the central bank.

Gilt prices ended higher in the month amid high volatility, with the 10-year benchmark paper 7.80% 2021 ending at 8.33% yield on June 30 as compared to 8.41% yield on May 31. One of the major reasons for the rise in prices was improvement in the liquidity situation for the government. This was evident after a Finance Ministry official told that the government's cash position was comfortable and that it may tweak its weekly borrowing schedule if yields remain high. Prices got further boost after a lower than expected GDP growth and industrial production numbers coupled with intermittent falls in weekly inflation numbers and softer crude oil prices pushed down worries of aggressive monetary tightening by the RBI. Sentiments were also supported after RBI's rate hike in its policy on June 16 was milder than the market expectations. Intermittent value buying and short covering also helped gilt prices rise up in the month. Further rise in prices was however capped as monetary tightening worries resurfaced after monthly inflation soared to 9.06% in May. Intermittent fall in the US bond prices and rise in crude oil prices also weighed on the domestic gilt prices. Prices were also downward pressurised as participants cut their holdings to make room for fresh supply of gilts through the weekly government auctions. Improving prospects of a resolution to Greece's debt crisis pushed down the prices further. Sentiments were also dented on uncertainty that whether India would be successful in meeting its fiscal deficit target.

Page No. : 16

Monthly Update 2011

2 9 -Ju n -1 1

3 -Ju n - 11

10-year G-sec movement

13700 12700 Tu rn over Rs. Cr. 10700 9700 8700 7700 6700 5700 4700 3700 1 0 -Ju n -1 1 1 3 -Ju n -1 1 1 4 -Ju n -1 1 1 5 -Ju n -1 1 1 6 -Ju n -1 1 1 7 -Ju n -1 1 2 0 -Ju n -1 1 2 1 -Ju n -1 1 0 1 -Ju n -1 1 0 2 -Ju n -1 1 0 3 -Ju n -1 1 0 6 -Ju n -1 1 0 7 -Ju n -1 1 0 8 -Ju n -1 1 0 9 -Ju n -1 1 2 2 -Ju n -1 1 2 3 -Ju n -1 1 2 4 -Ju n -1 1 2 7 -Ju n -1 1 2 8 -Ju n -1 1 2 9 -Ju n -1 1 3 0 -Ju n -1 1 2700 8.15% 8.20% 8.35% 8.30% 8.25% Sem i An n u alised Closin g Yield 11700 8.40%

Movement of 07.80% CGL 2021

8.45%

TurnoverRsCr

Semi Annualised Closing Yield

Corporate Bond Yield

10.3% Corporate Bond Yield 10.1% 9.9% 9.7% 9.5% 9.3%

0.5-1 1-2 2-3 3-4 4-5

31-May-11 30-Jun-11

5-6

6-8

8-10

>10.0

Duration Bucket (in Years)

Corporate AAA, AA Bond Spreads

AAA and AA Bond Spreads

3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 3 Year 5 Year 10 Year AAA 3 Year 5 Year AA 10 Year
30/Jun/08 29/Jun/07 30/Jun/11 30/Jun/10 30/Jun/09

Page No. : 17

Monthly Update 2011

Key major developments in the debt market

? Finance Ministry prepared draft legislation on setting up a separate

RBI cautioned that rising interest rate and high cost of funds could hurt the profitability of the banking sector. RBI Deputy Governor expressed displeasure at the balance sheet reporting standards of banks, he also called for changes in the rating and reporting standards of banks, said that a bank should not be rated just on the basis of its net interest margin and net profit, but from a non-financial angle too. RBI issued guidelines for internal vigilance by private and foreign banks on the lines of current norms for state-owned banks. RBI asked all banks to submit an action-taken report on the issue of inflated valuations of real estate properties fro the purpose of loans. RBI expressed concern over rising exposure of banks to the real estate sector. RBI decided to probe Muthoot Finance's method of raising money through gold bonds.

Debt Management Office to manage the government debt.

? RBI informed that the interest rate on the Floating Rate Bonds, 2020

applicable for the half year (June 21, 2011-December 20, 2011) would be 8.23% per annum.
? rating agencies to use common rating symbols and their SEBI asked

meanings for debt instruments.

? SEBI waived the requirement for bankers, debenture trustees and

credit rating agencies to seek prior approval from it to change their status and constitution. ? On the banking front, RBI Governor said that banks would need to increase their capital going forward to meet rising credit demand; also added that banks could see higher provisioning for bad loans unless they get better at managing their portfolios. CURRENCY OVERVIEW Rupee versus Global Currencies

Inverse Scale 30 Currecny Rates 40 50 60 70 80 30-Aug-09 30-Aug-10 30-Jun-09 30-Apr-10 30-Jun-10 30-Apr-11 30-May-11
29-Jun-11
1 USD 1 Euro 1 GBP 100 Yen

30-May-10

30-Nov-10

30-Sep-09

30-Nov-09

30-Sep-10

30-Dec-09

28-Feb-10

30-Mar-10

30-Dec-10

28-Feb-11

Rupee movement
44

Rupees per USD

45

46

47

Inverse Scale

24-Jan-11

19-Fe b-11

17-Ma r-11

12-A pr-11

8-Ma y -11

30-Jun-10

26-Jul-10

21-A ug-10

16-S e p-10

12-O ct-10

7-Nov-10

3-D e c-10

Page No. : 18

29-D ec-10

Monthly Update 2011

3-Jun-11

48

30-Mar-11

30-Jun-11

30-Jul-09

30-Oct-09

30-Jul-10

30-Oct-10

30-Jan-10

30-Jan-11

90

USD/Rupee 1-Year Forward Premium

8.00 USD/Rupee 12- Month Forward Premium (%) 7.00 6.00 5.00 4.00 3.00 2.00 21-Aug-10 16-Sep-10 29-Dec-10 19-Feb-11 17-Mar-11 12-Apr-11 12-Oct-10 24-Jan-11 29-Jun-11 30-Jun-10 8-May-11 26-Jul-10 7-Nov-10 3-Dec-10 3-Jun-11 1.00

Rupee Movement Vs Global Currencies

June 30, 2011

USD GBP EURO 100 YEN 44.69 71.96 64.79 55.59

May 31, 2011

45.06 74.43 64.75 55.29

Absolute Change
0.37 2.47 -0.04 -0.30

% Change
0.82 3.32 -0.06 -0.54

The Indian Rupee appreciated in the month amid volatility to end at Rs 44.69 per USD on June 30, compared with Rs 45.06 per USD on May 31. The primary reason for the rise in the local unit was intermittent gains in the local share markets. Rupee also gained on anticipation of large dollar inflows due to a planned takeover of Indian outsourcing company Intelenet by Britain's Serco. Regular dollar sales by exporters and external commercial borrowings (ECBs) related inflows also augured well for the Indian unit. Sporadic rise in Euro against the US dollar on expectation that the European Central Bank (ECB) would hike its interest rate also supported the local currency. Further fall in US dollar due to negative comments from the US Federal Chairman over US economic growth also supported the rupee. Further gains in the rupee were however restricted by intermittent dollar purchase from oil importers. Sporadic falls in local stocks also affected the home currency. The rupee fell further as US dollar gained due to safe-haven dollar buying amid uncertainty over Greece's

sovereign debt crisis. Meanwhile, International credit rating agency DBRS upgraded India's long-term foreign and local currency debt rating outlook from negative to stable on account of fiscal consolidation and return to pre-crisis growth levels, backed by a robust policy framework. On the reserves front, India's forex reserves rose to $315.72 for week ended July1 as compared to $310.22 bn for the week ended May 27.

Page No. : 19

Monthly Update 2011

China Forex Reserves USD Bn

250 260 270 280 290 300 310 320

Domestic Forex Reserves USD Bn

Page No. : 20

3,100 3,000 2,900 2,800 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000
25-jun-10 21-jul-10 16-aug-10 11-sep-10 7 Oct-10 2-nov-10 28-nov-10 24-dec-10 19-jan-11 14-feb-11 12-mar-11 7-apr-11 3-amy-11 29-may-11 24-jun-11

India Forex Reserves

Oct-09

China Forex Reserves

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

Dec-10

Jan-11

Feb-11

Monthly Update 2011

Mar-11

COMMODITIES
Commodity Prices June 30, 2011 Week Ago Month Ago Year Ago

NYMEX Crude Oil ($ per barrel) Gold $ per ounce

95.42 1,505.50

91.02 1,523.00

102.70 1,536.50

75.63 1,244.00

Global Commodity Prices Movement

G lo b a l C o m m o dity P rice s 32
Crude Oil Gold Platinum

Rebased to 10

27 22 17 12 7

Silver

19-Fe b -11

7-M a r - 11

12-A p r-11

8-Ma y -11

3-Jun -11

30-Ju n -10

21-A u g -10

16-S e p -10

12-O c t-10

29-D e c-10

Crude oil prices ended lower in the month on concerns over fall in demand as weak global economic cues from US, Europe and China raised fear of slowdown in global economy. Crude oil prices fell to $95.42 a barrel on June 30 from $102.70 a barrel on May 31 on the NYMEX. Prices were further downward pressurised on reports that the oil consuming nations would tap reserves. The 28-member International Energy Agency (IEA) said that 60 mn barrels of oil would be released from reserves to make up for the loss of Libyan exports. Further fall was however restricted on optimism that Greece would move to resolve its debt crisis and after the OPEC left its production levels unchanged. Intermittent weakness in US dollar also led to some gains in the oil prices. Meanwhile OPEC Official said that an acceptable range for oil prices is higher than $75 to $85 a barrel because of inflation.

International gold prices were lower in the month on concerns of slow economic growth triggered by the Eurozone debt crisis and sluggish US economic growth. Gold prices ended at $1501 per ounce on June 30 compared with $1537 per ounce on May 31 on LBMA. Intermittent strength in US dollar also led to fall in gold prices. Fall in prices were however restricted on the back of safe haven buying amid concerns about Greece's sovereign-debt crisis Meanwhile, the World Gold Council said that the global gold demand rose 11% year-on-year to 981 tonnes powered by investment demand in bars and coins, while jewellery consumption, the single largest segment of demand, rose 7%. On the domestic front, Indian gold prices fell to Rs 21,963 per 10 gm on June 30 compared with Rs 22,535 per 10 gm on May 31 on the NCDEX tracking weak trend in international prices. Meanwhile, Bombay Bullion Association's President said that the gold imports in India are likely to jump 64% to 500-550 tonnes in 2011, driven by investment purchases that are likely to affect world prices. Among other developments, MCX increased vaulting, loading and unloading charges for gold and silver from July 1.

Page No. : 21

Monthly Update 2011

29-Ju n-11

26-Ju l-10

7-No v -10

3-D e c-10

4-Ja n -11

MUTUAL FUNDS-DOMESTIC
Average Assets under Management (Rs cr)

Mutual Fund Name

Reliance Mutual Fund HDFC Mutual Fund ICICI Prudential Mutual Fund UTI Mutual Fund Birla Sun Life Mutual Fund SBI Mutual Fund Franklin Templeton Mutual Fund Kotak Mahindra Mutual Fund DSP BlackRock Mutual Fund IDFC Mutual Fund Tata Mutual Fund Sundaram Mutual Fund Religare Mutual Fund Deutsche Mutual Fund Fidelity Mutual Fund LIC Mutual Fund Canara Robeco Mutual Fund Axis Mutual Fund JM Financial Mutual Fund BNP Paribas Mutual Fund PRINCIPAL Mutual Fund L&T Mutual Fund IDBI Mutual Fund Taurus Mutual Fund Peerless Mutual Fund HSBC Mutual Fund Baroda Pioneer Mutual Fund Benchmark Mutual Fund JPMorgan Mutual Fund Morgan Stanley Mutual Fund Pramerica Mutual Fund ING Mutual Fund AIG Global Investment Group Mutual Fund Daiwa Mutual Fund Mirae Asset Mutual Fund Motilal Oswal Mutual Fund Sahara Mutual Fund Edelweiss Mutual Fund Bharti AXA Mutual Fund Escorts Mutual Fund Quantum Mutual Fund Grand Total

Apr-June 2011
102,049 92,033 79,857 69,105 67,510 47,874 36,539 34,167 30,022 28,579 25,006 14,541 11,342 11,084 9,462 9,338 8,625 7,453 5,850 5,723 5,434 5,215 5,091 5,021 4,908 4,855 4,430 4,115 3,637 2,053 1,684 1,215 716 665 425 345 265 258 216 209 142 747,060

Jan-Mar 2011
101,718 86,282 73,552 67,189 63,733 41,672 39,582 32,253 30,601 21,851 22,681 14,479 11,505 8,187 9,199 11,196 7,824 8,302 5,918 4,674 5,246 4,030 3,528 2,560 4,202 4,452 2,585 3,404 3,410 2,076 1,629 1,471 796 244 380 301 179 182 289 197 126 703,680

Change (Rs cr)

331 5,751 6,305 1,916 3,776 6,203 -3,042 1,914 -579 6,728 2,325 63 -162 2,897 263 -1,857 801 -849 -68 1,049 187 1,185 1,563 2,461 706 403 1,845 711 227 -24 54 -256 -79 421 46 45 86 76 -72 13 16 43,380

% Change
0.33 6.66 8.57 2.85 5.93 14.88 -7.69 5.94 -1.89 30.79 10.25 0.43 -1.41 35.39 2.86 -16.59 10.24 -10.22 -1.15 22.45 3.57 29.40 44.32 96.16 16.80 9.06 71.38 20.90 6.66 -1.13 3.33 -17.37 -9.99 172.48 12.06 14.82 48.08 41.99 -25.01 6.38 12.79 6.16

AAUM is a 90-days average number and includes Fund of Funds Please note that the table above would change every quarter as AMFI has decided to disclose AAUM on quarterly basis from October 1, 2010.

Page No. : 22

Monthly Update 2011

Mutual Fund's assets rise over 6% in Apr-June quarter The average assets under management (AAUM) of the mutual fund industry rose by over 6% or Rs 43,380 cr to Rs 7.47 lakh cr in April-June quarter as compared to Rs 7.04 lakh cr in January-March quarter. The average AUM rose mainly on record inflows witnessed in April of Rs 1,84,331 cr, 80% of which were in liquid funds. The mutual fund inflow / outflow data from AMFI is available for April and May wherein the latter witnessed outflows of Rs 48,850 cr. It is typical of the industry to witness outflows in the last month of a quarter following redemption by corporates on account of advance tax payments and banks on account of balance sheet capital adequacy requirements. There is generally a reversal of these outflows in the following month. Meanwhile, banks' investments in mutual funds increased from Rs 52,887 cr as on March 26, 2011, to Rs 84,034 cr (source RBI) as on June 17, 2011. Mutual funds emerge as buyers in secondary equity market In the secondary equity market, mutual funds bought equities worth Rs 1,201 cr in June, as against the net buying of Rs 435 cr in May. On the debt front, mutual funds were net buyers to the tune of Rs 34,986 cr in June as compared to net selling of Rs 4,172 cr in May. 31 out of 41 fund houses witnessed growth in AAUM IDFC Mutual Fund registered the highest growth in AAUM in absolute terms; its AAUM rose Rs 6,728 cr or 30.79% to Rs 28,579 cr in June quarter. ICICI Prudential Mutual Fund followed with its AAUM rising 8.6% or Rs 6,305 cr to Rs 79,857 cr in the latest quarter. In percentage terms, Daiwa Mutual Fund was the top gainer, rising over 172% from Rs 244 cr in March quarter to Rs 665 cr in June quarter. Reliance Mutual Fund continued to retain its top position with respect to asset size with it's AAUM rising marginally by 0.3% to Rs 1.02 lakh cr in June quarter. HDFC Mutual Fund maintained second position and saw its asset rising by over 6% to Rs 92,033 cr in quarter ended June. ICICI Prudential Mutual Fund was at third position with it's AAUM rising to Rs 79,857 cr (up by 9%) in the June quarter. The share of top 5 mutual funds' assets stood at 55% in June quarter while the share of top 10 funds' assets was at 79%. The bottom 10 fund houses continued to occupy less than 1% of the AAUM in June quarter. Mutual fund regulatory developments,
? Government detailed the final structure of the infrastructure debt ? Secretary in the Finance Ministry said that the government The Joint

has given its approval to foreign retail investment in mutual funds schemes up to $10 bn, adding that SEBI will now issue the notification on framework by August 1. ? mutual fund houses to declare the number of unique SEBI asked investors in every scheme to ensure de-duplication of folios.
? planning to cap the life of a MF licence to just one year SEBI is also

from the date of issue as it aims to avoid a firm with poor finances to begin operations and put investors money at risk. ? RBI Deputy Governor said that the MF industry has not Meanwhile, lived up to expectations in promotion of savings and financial inclusion in the country despite their success in other parts of the world as they chase the affluent in cities ignoring smaller towns.
? AMFI is planning to revive an earlier proposal to launch an online

platform which will help distributors and financial advisors transact MF schemes across sales channels.
? said that number of active MF agents in the country has AMFI also

dropped by 50% over the last year. Among other developments,

? Price complained for the second time about the T Rowe

government's alleged bid to influence the selection of a new CEO for UTI AMC.
? India is in talks with Bharti Axa and two other asset Bank of

management companies for an entry into the MF business and hopes to seal the deal before end September. ? Management is planning to provide customers advisory Taurus Asset services for Shariah-compliant investments. On another front,
? SEBI Chairman said that the Indian mutual fund industry must also

funds, adding that the infrastructure debt funds will be either backed by mutual funds or by non-banking financial company (NBFCs); the funds backed by mutual funds will have a trust-based structure, while those backed by NBFCs will be company-based.
? to allow domestic banks to participate in the proposed RBI is likely

look at introducing pension linked products; further he added that pension investments in the market can work like a cushion against quick foreign fund exits.
? PFRDA planned to continue to cap investments of non-government

pension funds in equities at 50% of their corpus.

? the 10 AMCs, who had evinced interest in managing its EPFO asked

infrastructure debt funds as sponsors through their mutual fund arms.

funds, to submit the financial bids by June 24; however it extended the deadline for appointment of fund managers till August 31, 2011; in the interim, SBI will continue to be its sole fund manager.

Page No. : 23

Monthly Update 2011

?set to appoint a separate custodian for the securities ?EPFO is

? sought approval with SEBI to launch an open-ended Daiwa MF

purchased by the fund managers and subscribers from select branches are now able to view their balance online from July 1.

equity fund. ?MF sought the approval from SEBI to launch Union KBC Union KBC Tax Saver Scheme, an open-ended equity linked savings plan. ? the approval of SEBI for an open-ended fund of funds SBI MF sought scheme, SBI Gold Fund. New Fund Listings
Scheme Name
Union KBC Liquid Fund - Growth Pramerica Treasury Advantage Growth Birla SL Capital Protection Oriented - Sr 6 (761 Days) - Gr Sundaram Equity Plus - Growth

Major fund related news

? ICICI Prudential MF sought the approval of SEBI to launch an open-

ended fund of funds, ICICI Prudential Regular Gold Savings Fund.

? ICICI Prudential MF to launch ICICI Prudential Capital Protection

Oriented Fund - Series III - 36 Months Plan on July 1; will remain open for subscription till July 15.
? Birla Sun Life MF sought approval from the SEBI to merge some of its

AAUM (Rs cr)

N.A 12.03 N.A 135.86

schemes.
? filed offer document with SEBI seeking approval to launch Daiwa MF

its equity scheme.

Top Mutual Fund Performer-Equity Oriented

6 Months
Diversified Equity Funds UTI India Lifestyle Fund - Growth UTI Opportunities Fund - Growth Mirae Asset India Opportunities - Regular - Gr Reliance Equity Opportunities Fund - Growth Taurus Starshare - Growth Midcap Equity Funds HDFC Mid-Cap Opportunities Fund - Growth Religare Mid N Small Cap Fund - Growth Religare Mid Cap Fund - Growth IDFC Premier Equity Fund - Plan A - Growth Sundaram Select Midcap - Growth -0.41 -1.60 -0.34 -6.27 -5.18 1.33 -4.23 -2.62 -3.55 -3.67

1 Year

Returns (%) 3 Years

5 Years

7 Years

12.62 11.85 11.68 11.40 10.39

17.03 21.18 24.00 25.37 11.62

NA 17.17 NA 17.58 15.15

NA NA NA NA 28.41

12.92 10.96 9.81 8.96 7.83

24.60 20.68 17.42 21.28 20.55

NA NA NA 27.09 15.60

NA NA NA NA 32.12

Large Cap Equity Funds ICICI Prudential Focused Bluechip Equity Fund - Growth Reliance Quant Plus Fund - Growth HDFC Equity Fund - Growth Birla Sun Life Top 100 Fund - Growth Franklin India Bluechip Fund - Growth -3.36 -6.51 -5.04 -4.36 -4.53 13.47 12.74 11.03 10.33 10.26 22.52 17.11 25.24 16.25 20.03 NA NA 19.82 13.19 16.62 NA NA 29.65 NA 24.37

Page No. : 24

Monthly Update 2011

Top Mutual Fund Performer-Equity Oriented

Returns (%)
6 Months
ELSS Axis Tax Saver Fund - Growth Franklin Taxshield Fund - Growth Religare AGILE Tax Fund - Growth HDFC Long Term Advantage Fund - Growth Tata Tax Advantage Fund - 1 - Growth Sector and Thematic Funds SBI Magnum Sector Umbrella - FMCG Fund ICICI Prudential FMCG Fund - Growth ICICI Prudential Technology Fund - Growth Franklin FMCG Fund - Growth Banking Index Benchmark Exchange Traded Scheme (Bank BeES) 8.06 13.95 -9.18 8.56 -2.48 23.68 21.75 20.68 20.56 19.53 32.55 21.80 15.20 28.43 32.09 18.26 17.37 14.13 17.51 25.92 24.66 31.12 21.14 27.08 26.88 -0.32 -2.65 -7.93 -5.83 -4.13 13.06 11.75 11.36 10.28 9.17 NA 19.25 2.75 17.91 15.96 NA 15.43 NA 13.46 13.92 NA 23.88 NA 24.00 NA

1 Year

3 Years

5 Years

7 Years

Arbitrage Funds ICICI Prudential Equity and Derivatives Fund Income Optimiser Plan - Growth ICICI Prudential Blended Plan - Plan A - Growth HDFC Arbitrage Fund - Retail - Growth Kotak Equity Arbitrage Fund - Growth SBI Arbitrage Opportunities Fund - Growth 4.26 3.67 3.84 4.09 9.04 8.22 8.12 7.95 6.18 6.23 6.45 5.99 7.22 NA 7.17 NA NA NA NA NA 4.54 9.60 6.26 NA NA

Point to Point returns as of June 30, 2011 Returns are annualised for a period of more than 1-year Top performers sorted on 1 year returns

Page No. : 25

Monthly Update 2011

Top Mutual Fund Performer-Equity Oriented

Returns (%)
6 Months Capital Protection Funds
Franklin Templeton Capital Safety Fund 5 Year Plan - Growth Franklin Templeton Capital Protection Oriented Fund - 5 Year Plan - Growth UTI Capital Protection Oriented Scheme - Series I - 5 Year Plan - Growth IDFC Capital Protection Oriented Fund - Series I - Growth SBI Capital Protection Oriented Fund - Series I Growth 1.81 4.77 9.81 NA NA 2.40 5.24 9.72 NA NA

1 Year

3 Years

5 Years

7 Years

0.73

3.70

9.42

NA

NA

1.03

3.42

NA

NA

NA

1.87

3.11

5.29

NA

NA

Closed-Ended Equity Funds

ICICI Prudential R.I.G.H.T. Fund - Growth Canara Robeco Multicap - Growth UTI Master Equity Plan Unit Scheme Sundaram Equity Multiplier Fund - Growth UTI Wealth Builder Fund - Growth International Equity Funds DSP BlackRock World Mining Fund - Regular - Growth DSP BlackRock World Energy Fund - Growth Birla Sun Life Commodity Equities Fund - Global Agri Plan - Retail - Growth Fidelity Global Real Assets Fund - Growth DWS Global Agribusiness Offshore Fund - Growth 1.99 2.06 29.14 26.92 NA NA NA NA NA NA -6.22 2.12 -8.02 34.08 32.84 30.68 NA NA NA NA NA NA NA NA NA 1.51 -3.06 -5.46 -3.13 -6.20 12.96 7.46 6.86 4.98 4.61 NA 18.99 14.26 12.71 14.98 NA NA 12.91 NA NA NA NA 20.71 NA NA

Index/ETFs SBI Gold Exchange Traded Scheme (SBI GETS) - Growth Reliance Gold Exchange Traded Fund Religare Gold Exchange Traded Fund UTI Gold Exchange Traded Fund Kotak Gold ETF 5.79 5.86 5.79 5.79 5.77 15.46 15.29 15.25 15.23 15.20 NA 17.48 NA 18.04 18.01 NA NA NA NA NA NA NA NA NA NA

Page No. : 26

Monthly Update 2011

Top Mutual Fund Performer-Equity Oriented

Returns (%)
6 Months 1 Year 3 Years 5 Years 7 Years

Balanced Funds HDFC Childrens Gift Investment Plan HDFC Balanced Fund - Growth ICICI Prudential Balanced Fund - Growth HDFC Prudence Fund - Growth Tata Balanced Fund - Growth 4.82 2.30 0.47 -0.63 -0.86 20.07 13.53 11.90 10.76 9.28 22.35 22.37 13.44 24.45 17.44 15.80 16.85 10.60 19.50 15.95 19.72 20.53 18.30 25.93 22.44

Point to Point returns as of June 30, 2011 Returns are annualised for a period of more than 1-year Top performers sorted on 1 year returns

Page No. : 27

Monthly Update 2011

Top Mutual Fund Performer-Debt Oriented

Returns (%)
15 Days
Liquid Funds IDFC Money Manager Fund - Investment Plan - Plan A - (Regular) - Growth Escorts Liquid Plan - Growth JM Money Manager Fund - Regular Plan - Growth IDFC Liquid Fund - Plan A - Growth DWS Cash Opportunities Fund -Regular Plan - Growth 0.42 0.39 0.39 0.38 0.86 0.82 0.80 0.78 2.49 2.47 2.24 2.27 4.98 4.69 4.56 4.20 9.05 8.25 7.73 6.90 0.58 1.10 2.25 4.24 7.10

1 3 6 Month Months Months

1 Year

Debt Short Term Funds IDFC Super Saver Income Fund - Medium Term Plan A (Regular) - Growth IDFC Super Saver Income Fund - Short Term Plan A (Regular) - Growth UTI Short Term Income Fund - Growth Peerless Short Term Fund - Growth HDFC High Interest Fund - Short Term Plan - Growth Ultra Short Term Funds Peerless Ultra Short Term Fund - Retail - Growth ICICI Prudential Ultra Short Term Plan - Regular - Growth JM Money Manager Fund - Super Plan - Growth Principal Ultra Short Term Fund - Growth Pramerica Ultra Short Term Bond Fund - Growth 0.77 0.40 0.38 0.37 0.39 1.16 0.82 0.79 0.78 0.78 2.61 2.14 2.39 2.28 2.33 4.69 4.07 4.59 4.43 4.52 7.71 6.84 8.27 7.59 NA 0.59 0.42 0.64 1.20 1.19 1.14 3.12 2.50 2.15 4.64 7.64 3.84 7.46 NA 5.49 0.69 1.26 2.35 4.24 5.59 0.71 1.38 2.09 3.83 5.57

Floating Rate Short Term Funds Escorts Floating Rate Fund - Growth DSP BlackRock Floating Rate Fund - Growth SBI Magnum Income Fund - Floating Rate Plan Savings Plus Bond Plan - Growth Canara Robeco Floating Rate - STP - Growth Birla Sun Life Floating Rate Fund - ST - Growth 0.44 0.38 0.36 0.82 0.78 0.74 2.39 2.45 2.25 4.65 4.67 4.27 7.85 8.09 7.53 0.53 0.43 1.03 0.83 2.94 2.09 5.34 4.02 9.27 7.03

Page No. : 28

Monthly Update 2011

Top Mutual Fund Performer-Debt Oriented

Returns (%)
15 Days 1 3 6 Month Months Months 1 Year

Floating Rate Long Term Funds HDFC Floating Rate Income Fund - LTP - Gr

0.62
ICICI Prudential Long Term Floating Rate Plan - Plan A - Growth Birla Sun Life FRF - LT - Growth SBI Magnum Income Fund - Floating Rate Plan - LTP - Growth Kotak Floater - Long Term - Growth

1.20 0.88 0.85 0.82 0.77

2.67 2.20 2.37 2.51 2.28

5.20 4.34 4.39 4.47 4.41

7.73 6.82 7.67 7.61 7.67

0.57 0.46 0.43 0.38

Point to Point returns as of June 30, 2011 Returns are annualised for a period of more than 1-year Top performers in short term debt funds category sorted on 1 month returns Top performers in long term debt funds category sorted on 1 year returns

Page No. : 29

Monthly Update 2011

Top Mutual Fund Performer-Debt Oriented

Returns (%)
3 6 Month Months 1 Year 2 Year

Long Term Debt Funds SBI Dynamic Bond Fund - Growth Sahara Income Fund - Growth ICICI Prudential Banking & PSU Debt Fund - Premium Plus - Growth HDFC Medium Term Opportunities Fund - Growth L&T Floating Rate Fund - Cumulative 2.95 2.48 2.27 2.15 2.28 4.55 4.79 4.49 4.23 4.46 8.71 7.99 7.99 7.85 7.73 6.75 6.69 NA NA 5.91

Gilt Funds BARODA PIONEER Gilt Fund - Growth HSBC Gilt Fund - Growth L&T Gilt Investment - Cumulative UTI Gilt Advantage Fund - Long Term Plan - Growth UTI Gilt Advantage Fund - Long Term Plan - PF Plan - PDAR 1.02 1.46 0.99 2.26 2.26 3.47 3.26 2.29 3.92 3.92 7.93 7.36 6.71 6.58 6.57 10.74 6.83 4.49 4.62 4.63

Monthly Income Plans HDFC Childrens Gift Savings Plan SBI Magnum Childrens Benefit Plan - Growth HDFC Multiple Yield Fund - Growth ICICI Prudential Child Care Plan - Study Plan SBI Magnum Monthly Income Plan - Floater - Growth 3.73 2.86 3.47 1.86 2.11 4.73 1.64 4.24 2.69 1.43 9.60 8.80 8.67 8.58 8.21 14.05 10.37 11.57 13.49 7.61

Point to Point returns as of June 30, 2011 Returns are annualised for a period of more than 1-year Top performers in short term debt funds category sorted on 1 month returns Top performers in long term debt funds category sorted on 1 year returns

Page No. : 30

Monthly Update 2011

Monthly Corporate Snapshot

?showed that India Inc raised over $2.06 bn from overseas RBI data

submitstatus report of their members and brokers in every three months.

? stock brokers to maintain a record of funds received ?SEBI asked

markets in April via ECBs and FCCBs.

? that the investments in shares of as many as two-third of the CRISIL said

through pre-funded instruments.

? ?SEBI deferred the implementation of new reporting format that FIIs

companies that raised funds through QIPs in 2010 have fetched negative returns.
?warned the Prime Minister's Office and the Finance Ministry Air India

were expected to file for offshore derivative instrument positions to October 7 from earlier stated date of August 7.
? ?SEBI directed companies to dematerialise their entire promoter

that India's sovereign rating may be hit as the airline is on the brink of defaulting on interest payments on foreign loans of Rs 15,000 cr.
? BSNL sought Rs 4,000 cr subsidy from the DoT for the FY12 to meet its

shareholding by September 30 with a view to make dealings in shares more transparent.

? ?SEBI relaxed an earlier norm for name changes, now companies can

operational costs.
? RIL announced that it will become debt-free in the FY12 and is also

planning to partner world leaders for entering new businesses in the country.
? at CAG by saying that the reported comments reflected RIL hits out

change their names if they have invested at least 50% in the assets of the new business.
? that companies that have made buyback offers and not ?SEBI said

complete misunderstanding of legal and contractual issues and has hurt its reputation.
? to sell its 26.27% stake in Africa-focused Riversdale Mining to Tata Steel

bought back a significant amount of shares won't get approval for a fresh buyback
? ?SEBI relaxed its Investor Protection Fund guidelines in favour of

Rio Tinto for $1.11 bn. Tata Steel Ltd sold 51% stake in Tata Refractories to Krosaki Harima Corp, an associate company of Japan's Nippon Steel Corp, for Rs 1,130 cr.
? Tata Communications raised its stake in South Africa-based Neotel Ply

brokers by stipulating that surplus amount after satisfying all claims be returned to them.
? ?SEBI Chairman said that he would make investing hassle free for retail

investors by moving to a single KYC clearance for all capital market functions.
? SEBI decided to soon frame a policy for stock exchanges to go through

Ltd to 61.5% from 49%.

? Tata Motors challenged the West Bengal government's decision to

a stress test to prepare them for handling flash crash-like situations. take back land allotted to it in Singur.
? Hero Honda's shareholders approved the changing of the name of the

? place a framework that will allow investors in Indian SEBI put in Depository Receipts (IDRs) to redeem the instrument if it becomes illiquid. Among other developments

company to Hero MotoCorp Ltd.

? Infosys Technologies changed its name to INFOSYS LTD. ? that Standard Chartered Bank will not be required to SEBI said ?proceed with its $12bn steel plant in Orissa despite the state Posco to

convert their IDRs into shares.

? Sahara Commodity Services Corporation and Sahara SEBI asked

government halting land acquisition for the project due to opposition by villagers.
? Essar group sold its entire 33% stake in telecom services provider

Vodafone Essar Ltd to its British partner Vodafone Group for $4.58 bn.
? Sahara Group moved SC against SEBI order directing the company to

Housing Investment Corporation to refund at least Rs 4,843 cr, raised from investors in 2008 through hybrid securities for allegedly violating securities laws.
? NSE got the approval from SEBI to launch futures contracts on US

return money collected from investors through a scheme along with 15% interest.
? that it has received several "formal indicative offers" for Rcom said

benchmark indices S&P 500 and Dow Jones, though it decided to introduce them only after getting regulatory approval for launching options contracts as well.
? Competition Commission of India asked NSE to pay 5% of its average

buying its controlling stake in mobile tower arm Reliance Infratel Ltd and will undertake due diligence for the stake sale. Key regulatory developments
? ??SEBI allowed stock exchanges to offer incentives to brokers for

annual turnover and also cease and desist from unfair trade practices in the currency derivative trading.
? ?BSE said that trading would halt for the day if the Sensex moves up or

generating volumes in illiquid securities in equity derivatives segment.

? a report from the stock exchanges on the brokerage firms' ?SEBI sought

down 20% in a single day for the July-September quarter.

? composition committee decided to exclude RCom and BSE's index

non-compliance to various regulations; also asked the exchanges to Page No. : 31

Reliance Infrastructure from the benchmark Sensex from August 8 and replace them with Sun Pharma and Coal India

Monthly Update 2011

Contact Addresses India Mumbai Address: IL&FS Financial Centre, B- Quadrant - 5th Floor, Bandra-Kurla Complex, Bandra (East,) Mumbai - 400 051 Telephone: +91-22-6648-0050, Facsimile: +91-22-6648-0040, Email: mumbai@avendus.com New Delhi Address: Suite 22A/B, The Aman Resort, Lodhi Road, New Delhi - 110 003 Telephone: +91 11 45357500, Fax: +91 11 45357540 Bangalore Address: The Millenia Tower, A - 10 Floor, No 1 & 2 Murphy Road, Ulsoor Bangalore - 560 008 Telephone: +91-80-6648-3600, Facsimile: +91-80-6648-3636 , Email: bangalore@avendus.com USA 100 Park Avenue, 16th Floor, New York, NY 10017 Telephone: +1 212 3515066, Fax: +1 484 2312343 London Avendus capital (UK) Private Limited 33, St Jamess Square, London SWY 4JS Telephone: +44 2031594353, Fax: +44 2076619400 This document is strictly confidential and is being furnished to you solely for your information. This document has been prepared by Avendus Capital Private Limited (Avendus) on the basis of information obtained from third parties including publicly available accessible resources. Avendus has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied is made as to accuracy, adequacy, completeness or fairness of the information contained in this document. The information given in this document is as of the date of this document and there can be no assurance that future results or events will be consistent with this information. Avendus, its subsidiary companies, directors, employees, agents or representatives (Avendus and affiliates) are under no obligation to update or keep the information current. Avendus and affiliates shall not be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of this document. This document is neither an offer nor solicitation for an offer to buy and/or sell any securities mentioned herein. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of investments referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. Avendus and affiliates are performing or may seek to perform, distribution and/or other services for the funds / companies referred to in this document. CRISIL Research, a Division of CRISIL Limited has taken due care and caution in preparing this Report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is not liable for investment decisions which may be based on the views expressed in this Report. CRISIL especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. CRISIL Research operates independently of, and does not have access to information obtained by CRISIL's Ratings Division, which may, in its regular operations, obtain information of a confidential nature which is not available to CRISIL Research. No part of this Report may be published / reproduced in any form without CRISIL's prior written approval.
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Monthly Update 2011