ADVICE for the WISE

Newsletter – February’11

2

Economic Update 4

Equity Outlook 8

Debt Outlook 12

Forex 15

Commodities 16

Index Page No.

Real Estate 19

Dear Investor,

January 2011 was one of the worst months in recent periods for Indianequities. While the large cap indices slid more than 10%, the mid-cap aswell as some sector indices lost more than 15% in absolute terms. Muchof this has been attributed to FII sell-off and lack of participation fromdomestic investors. What drove the FII sell off is however not entirelyobvious. There has been resurgence of regulatory concerns onparticipatory notes which many FIIs use for their investments. Alsoabove expectation performance of US economy has diverted some riskcapital back home. This is reflected in the nearly 10% increase in the USequity indices since December last year. We expect significantuncertainty to continue in the short term. Hence it is advisable to holdoff major equity investments for now. Systematic investments shouldhowevercontinue uninterrupted.

Debt markets moved as per expectations in January as RBI increased thekey interest rates by 0.25%. Inflation has not moved significantly in therecent past. This indicates that the monetary tightening may not be overyet. Consensus of further interest rate hikes for the year 2011 rangesbetween 0.5% and 1.5%.

Inflation has become a much more widely observed phenomenon nowwith most emerging economies experiencing sustained high inflation.Even US is expected to experience moderate inflation in near future.Part of the global inflation is driven by quantitative easing in the US. Thisis the demand side of inflation which acts through increased moneysupply.

Part of the inflation is driven by the robust growth of emergingeconomies and relatively stable even if low growth of developedeconomies. This has renewed the concerns of commodities suppliesdriving their prices up leading to the supply side factors of inflation.Given such a context, monetary policy tightening in India is likely tocontinue.

Our outlook for the Indian economy and Indian equity marketsremains bullish for the medium term. Hence we do not advise anexit from Indian equities at this point of time. For risk takinginvestors, it is a good idea now to bet on a sharp recovery inFebruary using deeply out of the money call options. Theunderlying belief in this strategy is that the currently ongoing sell-off might have over-stretched, considering that the broad indicesare near their 200 day moving averages, and might be followed bya recovery as markets find a bottom. Also a pre-budget rally canboost positive sentiments. This however is a significantly riskytrade and should be restricted to a small portion on one’s investiblesurplus.

For most of their investible surplus investors should be locking inthe high yields offered by fixed maturity plans. For some part of theinvestible assets they can look to diversify beyond Indian assets –one such option is managed futures in the global equities,commodities and currencies markets. Owing to their investmentstrategy, managed futures tend to do quite well in trendingmarkets – whether up or down. This makes them quite valuable fordiversification in times of turbulence like now.

3“Advisory services are provided through Karvy Stock Broking Ltd. (PMS) having SEBI Registration No: INP000001512. Investments are subject to market risks. Please read the disclaimer on slide no.23”

Change over last month

As on Jan 31st 2011

Equity markets

Debt markets

Commodity markets

Forex

markets

Change over last year

* Indicates SBI one-year FD

18,3285,5061,286

10,238

8.13% 6.90%8.25%

4,02019,920

98.97

45.9582.16

(10.6%)(10.2%)

2.3%0.1%

7 bps20 bps25 bps

3.2%(3.2%)

5.8%

2.5%0.7%

12.0%12.8%19.8%

0.4%

54 bps395 bps200 bps

33.3%22.7%39.0%

(0.8%)(9.0%)

BSE SensexS&P NiftyS&P 500 Nikkei 225

10-yr G-Sec YieldCall MarketsFixed Deposit*

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

Rupee/DollarYen/Dollar

4

10 yr Gsec

Gold

4444.5

4545.5

4646.5

4747.5

48

`/$

15000

16000

17000

18000

19000

20000

21000

6.8

7.3

7.8

8.3

8.8

80

90

100

110

120

130

140Sensex Nifty

S&P 500 Nikkei 225

5

US

Europe

Japan

Emerging economies

• The HSBC China Manufacturing Purchasing Managers Index rose slightly to54.5 in January from 54.4 in December indicating growth in themanufacturing activity after slowing down in December.

• China’s economy grew by 10% in 2010 compared to 9.1% in 2009. The retailsales were up 18.5% showing that it is now relying more on domesticconsumption.

• The Conference Board Consumer Confidence Index, which had dipped inDecember, increased in January. The Index now stands at 60.6, up from 53.3 inDecember. Consumers expressed greater confidence that the economy willcontinue to expand and generate more jobs in the months ahead.

• US m-o-m unemployment rate worsened to 9.4 per cent in Dec’10.

• Euro-zone purchasing managers index rose to 57 in January from 55.4 inDecember. France and Germany continued to lead the Eurozone growth. Theeuro zone's services sector unexpectedly expanded more than initiallyprojected in January, rising to a five-month high.

• Unemployment rate in the Euro zone was steady at 10.1% in December.

• Japan’s industrial production increased by 3.1% in December marking thesecond consecutive monthly increase. Transport equipment and Electronicparts & devices were the major contributors. For 2010, industrial outputjumped 15.9%, marking the first annual rise in three years.

• Japan’s unemployment rate was stagnant at 5.1% in Dec 10.

6

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

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

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

IIP monthly data

GDP growth

• Industrial output as measured by the Index ofIndustrial Production (IIP) grew by 2.7% (y-o-y) inNovember ‘10 as compared to an upward revised11.3% in October ’10. The growth was the lowestin 19 months.

• Growth in manufacturing, which constitutesaround 80 per cent of the IIP saw growth of 2.3%as compared to 11.3% last month.

• Though a double digit growth (12.6%), Capitalgoods also grew at lower pace than October(22%).

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

4

5

6

7

8

9

10

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

0.0%

5.0%

10.0%

15.0%

20.0%

• Bank credit growth increased in the month ofDecember to 26.6% as compared to 23.6% in themonth of November 2010.

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

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

• Inflation as measured by WPI stood at 8.43% (y-o-y) for the month of December -10 ascompared to 7.48% during November 10. Thesefigures are based on the new base year andWPI list. The increase is due to the increase inFood inflation by 3.7% over November.

• We expect WPI inflation numbers to moderatein m-o-m inflation numbers due to the expecteddecrease in food inflation and the monetarytightening stance by RBI, but increasing fuelprices may be a cause of worry.

Growth in credit & deposits of SCBs

7

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

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

Bank Credit Aggregate Deposits

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-10

May

-10

Jun

-10

Jul-

10

Au

g-10

Sep

-10

Oct

-10

No

v-10

Dec

-10

Wholesale Price Index

8

The winter this year extended itself well into January in India. And the stock markets certainly could not escape the unexpected chill. January 2011 posted the highest (over 10%) loss in any month over the last two years. A stubborn inflation and uncertainty on policy reforms have raised the possibility of a moderation in growth and even corporate earnings, and have sparked a sell-off by foreign investors. Foreign institutional investors (FIIs) turned net sellers for the first time since the Greek debt crisis in May. They were net sellers by about $1.2 bn worth of equities in January. While many analysts expect the markets to remain weak till inflation tapers off and the interest rate cycle peaks, they remain optimistic that foreign investors would resume buying in the next quarter as valuations become more attractive and greater clarity emerges on earnings growth for fiscal 2012.

2010 has ended on a positive note for Indian equities with several new records created. The BSE Sensex closed at its highest year-end level of 20,500 (up 17% YoY), FIIs poured in a record US$29.3b (previous high US$17.8b in 2007), primary market issuance was at a new high of US$15.6b in 2010 and corporate earnings resumed their strong growth path. All these have led to India ending 2010 as amongst the top performing markets globally. But the mood at the start of CY 2011 seems to be somber in the light of many emerging domestic headwinds. Macroeconomic concerns arising out of high food inflation that has touched 15%, the spike in prices of global commodities, and the current account deficit that’s hovering at 3% of India’s GDP have added to the concerns on the political stalemate in India.As we enter 2011, these headwinds would be the key determinants of the performance of Indian equities. Interestingly, our bottom-up compilation of earnings growth still shows a robust growth of 20% in 2HFY11 and further 19% in FY12. Importantly, the distribution of earnings growth in FY12 is superior compared to FY11, where dominance of global cyclicals is low.

The two primary headwinds for equities performance would be persistence of inflationary trends and indications of slowdown in industrial activity. These factors will have a direct bearing on earnings growth as well as valuations of sectors with domestic bias. India’s outperformance over global equities and its increased share in global equity allocation has generally coincided with a positive outlook on domestic economy. Current market valuations of ~14x FY12E earnings are also a result of expectations of broad basing of earnings growth in FY12, in our view.

9

The two important events to drive equities in 1QCY11 would be (1) RBI’s monetary stance, and (2) Government’s Union Budget for FY12. As the RBI meets twice every quarter now (v/s twice every year till few years back), it will continue to monitor inflation trends and respond accordingly. Tight liquidity has already led to deposit rate hikes of up to 200bp and lending rate hikes of over 100bp. Further hikes in rates from current levels will impact growth and could lead to earnings downgrades, particularly of sectors with domestic orientation. The Union Budget in February 2011 will be another important event as the government will have to work around its fiscal deficit targets for FY12. With absence of telecom bounty and overhang of higher oil subsidy, rollback of fiscal stimulus made in FY09 is an imminent possibility. This will also impact earnings adversely. In this backdrop, we view H1CY11 as a challenging period for Indian equities. This also needs to be considered in context of an FY12 P/E of ~14x, which is same as the long-term average.

Overall, we would believe that markets holding at current levels in 1QCY11/1HCY11 will be a positive. As confidence in earnings growth improves in 2HCY11, markets would look to move higher, albeit slower than earnings growth, implying continued de-rating to valuations in-line with historic averages at least. With expectations of range-bound markets in the near term, our portfolio has several large sectors with weights closer to index. We have largely maintained weights in Financials, Infra, Consumer Discretionary and Pharma sector with a focus on earnings quality, visibility and opportunity size.

• After a year of record investments into Indian Equities, FIIspulled out ` 4,813 Cr. In the month of January 2011. Thiswas prompted by improving global conditions anduncertainties in the Indian markets due to factors likeInflation, Liquidity etc.

• Mutual Funds invested around ` 614 Cr. in the month ofJanuary.

FII & MF data

-15000.0

-10000.0

-5000.0

0.0

5000.0

10000.0

15000.0

20000.0

25000.0 FII MF

10

Sector Stance Remarks

HealthcareHighly

Overweight

We believe in a large sized opportunity presented by Pharma sector in India. India’s strength in

generics is difficult to replicate due to quality and quantity of available skilled manpower. With the

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

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

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

E&C Overweight

The USD 1 trillion Infra opportunity is hard to ignore. Here, we have carefully taken Power sector as

our dominant bet over other sub sectors such as ports, roads and telecom infrastructure, because of

favorable economics under PPP model. Within power, we focus on the engineering companies over

utilities, T&D and other infrastructure owners because of their superior profitability and better

competitive dynamics.

BFSI Overweight

Financial sector is undeniably the lubricant for economic growth. Whether the growth comes from

consumption or investments, credit growth is inevitable. Being a well regulated sector, BFSI in India

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

available makes an attractive long term opportunity.

FMCG Neutral

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

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

also provides a defensive posture to the portfolio.

Telecom Neutral

Despite the regulatory hurdles, competitive pressures and leverage we believe in the mammoth

opportunity here, largely because of the continuing under-penetration of voice in rural markets and

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

reasonable pace. Discretionary consumption again.

11

Sector Stance Remarks

IT/ITES Underweight

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

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

look at.

Automobiles Underweight

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

indicates issues. The rich valuations don’t help either. We have taken a position in the

commercial vehicle segment as things are looking much better there.

Energy Underweight

Through a single company, we have taken a large-sized exposure to refinery and natural gas

exploration sector. The regulatory cap on RoE does not allow a vast value creation opportunity in

the infrastructure owning companies. We have also purposely tried to stay away from PSUs, due

to issues of cross subsidization distorting the underlying economics of oil exploration and refinery

businesses.

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

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

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

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

Power Utilities Negative

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

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

time being.

12

• The benchmark 10 yr G-sec yield increased from8.07% in the month of December ‘10 to close ataround 8.13% in January ‘11.

• With no respite from the high inflation in spiteof monetary tightening, it is possible that RBImay take a stand that the monetary tightening isunlikely to bring down food inflation in a directmanner.

10-yr G-sec yield

Yield curve

• We expect yields at the longer end of the yieldcurve to remain stable. High inflation, monetarytightening and rising credit growth will keep theyields at the longer end range bound.

• After the rate hike by RBI on Jan 25, the 10 year GSec yields are trading around 8.13%. If theinflation continues to be high, there may beanother increase in the interest rates by Marchbut the yields will stabilize around 7.5 – 8.5%levels by year end.

(%)

6.5

7.0

7.5

8.0

8.5

9.0

0.0

0.9

1.9

2.8

3.7

4.6

5.5

6.5

7.4

8.3

9.2

10.1

11.1

12.0

12.9

13.8

14.7

15.7

16.6

17.5

18.4

19.4

Spot Interest rate

6.8

7

7.2

7.4

7.6

7.8

8

8.2

8.4

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

OutlookCategory Details

Long Tenure Debt

We expect this to be the peaking of the yields at the longer endof the yield curve. Yields may move to the broad range of 7.5–8.5% in the next few quarters. As the inflationary pressuresettles down towards the end of the fiscal, these may be anattractive investment. We recommend gradual entry into longtenor debt. 10 Year Govt. paper at 8.25% and 10 Year PSU papersat ~9.25% would be good buys.

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

13

We recommend short term bond funds with a 6-12 monthinvestment horizon as we expect them to deliver superiorreturns due to high YTM and concerns over credit quality easeas the economy recovers, thereby prompting ratings upgrade.We have seen the short term yields harden due to reducedliquidity in the market and hence Short term bond funds andFMPs provide an interesting investment option in this space.

Short Tenure Debt

Credit

14

Scheme Name Open Date Close DateMinimum

Investment Amount (Rs.)

Tenor

Reliance Fixed Horizon Fund XVII Series 13 21-Jan-2011 04-Feb-2011 5000 24 months

Sundaram Fixed Term Plan-AF-14 Months 01-Feb-2011 04-Feb-2011 5000 14 months

Principal Pnb FMP-367D-III-(G) 24-Jan-2011 07-Feb-2011 5000 367 days

BNP PARIBAS FIXED TERM FUND SERIES 20 C 31-Jan-2011 07-Feb-2011 5000 15 months

SBI DFS 370 Days-9(G) 02-Feb-2011 07-Feb-2011 5000 370 days

Birla SunLife Short Term FMP- Series 7 07-Feb-2011 07-Feb-2011 5000 91 days

Axis FTP - Series 12 03-Feb-2011 08-Feb-2011 5000 367 days

DSPBR FMP 12M-14-(G) 08-Feb-2011 08-Feb-2011 10000 12 months

SBI DFS 180 Days-15(G) 04-Feb-2011 08-Feb-2011 5000 180 days

Kotak FMP Series 34 03-Feb-2011 08-Feb-2011 5000 370 days

IDFC Fixed Maturity Plan - Yearly Series 37 04-Feb-2011 09-Feb-2011 10000 1 year

L&T FMP-Sr3 (369 D-A) Jan-11 31-Jan-2011 09-Feb-2011 5000 369 days

ICICI Prudential FMP Series 55 - 1 Year Plan B 03-Feb-2011 10-Feb-2011 5000 1 year

ICICI Prudential FMP Series 55 - 6 Months Plan A 02-Feb-2011 11-Feb-2011 5000 6 months

ICICI Prudential FMP Series 55 - 15 Months Plan A 03-Feb-2011 14-Feb-2011 5000 15 months

15

•The Rupee depreciated v/s all the above currencies in themonth of January.

• The rupee fell due to weak global cues and continued outflow of foreign institutional investor funds.

•We expect the Rupee to remain weak as foreign investorshave been shying away from the Indian markets due to highinflation and corruption scandals. High global oil prices couldlead to higher capital outflows.

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

• Exports for the month of December increased by 36.4%(y-o-y) while imports decreased by 11.1% over last year.The trade deficit decreased to USD 2.6 bn.

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

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

-60000

-10000

40000

90000

140000

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

Capital Account Balance

-15000

-10000

-5000

0

-20

0

20

40

60

80Export Import Trade Balance (mn $)

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

USD GBP EURO YEN

16

Precious

Metals

Oil & Gas

Gold is expected to plateau in the near future. We also expect

dollar index to be stronger in the near future and the

consequences of which due to reversal of carry trade positions

shall have a wide spread correction across all asset classes and

commodities as an asset classes will tend to correct early.

We expect crude oil may continue to have an uptrend given

the expectation of reviving US economy. High inventory levels

and expectations of warmer weather across the US and Europe

may pull down prices a little.

Although a sharp fall is not expected, any upside surprise on

the dollar index will take a toll on the energy market as well.

Crude

Gold

60

65

70

75

80

85

90

95

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

15000

16000

17000

18000

19000

20000

21000

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-1

0

Dec

-10

Jan

-11

Outcomes at Maturity Note Return

This example is for illustrative purpose only and does not constitute a guaranteed return or performance. 17

Aries – India’s First Multi Asset structured Products

Tenor 36/40 months

Issuer Karvy Financial Services Limited

Reference Index S&P CNX Nifty Index | Benchmark Gold ETF– GoldBeEs

Initial Fixing Level Reference Index levels on DDA

Final Fixing Level Reference Index levels on DDA+36M

Nifty Performance {Final Level / Initial Level}-1

Gold Performance {Final Level / Initial Level}-1

Principal Protection 100%

Participation Rate 110%

Basket Performance 60% of Nifty Performance + 40% of Gold Performance

Payoff Max{0%,PR * Basket Performance}

Minimum Investment Amount Rs.5,00,000 and in multiples of Rs.1,00,000

Placement Charges 3%+10.30% service tax on placement charges

Introduction

• Superfund is a group of investment companies with reach

across 20 countries – predominantly in Europe, followed by US

and Asia. It was founded in 1996.

• Superfund group manages a number of funds – all of which use

exclusively futures contracts in commodities, currencies, stock

indices and bonds across several global exchanges. Hence the

product belongs to the asset class of “Managed Futures”.

• It can be thought of as an alternative investment avenue with

focus on absolute returns – in a manner similar to hedge

funds, but with greater regulatory oversight and restriction to

trading in only highly liquid futures. The investment strategy

used by Superfund Funds is algorithmic trading focused on

trend following.

Product Features

• Superfund A is available in Dollar, Euro and Gold

denominations. The minimum ticket size is $5,000 or €5,000.

The investment can be made from Indian money taken abroad

in line with the RBI limit of $200,000 per person per year.

Alternately, it can be made from funds available with the

investor in a foreign bank account.

Fund manager/strategy

• Superfund does not employ human fund managers. Its

investment strategy is that of trend following. It focuses on

spotting definitive trends in the markets and entering/exiting

the markets on the basis of pre-determined rules. It is

illustrated in the graph below.

Performance

2011 (YTD) 2010 2009

Superfund Green Gold A2 SPC -9.84% 38.86% -17.11%

Barclays CTA Index -0.23% 5.47% -0.10%

18

Introduction

• The India realty sector would see a lot of action in the coming few months. Breaking of the news like the housing scams in Mumbai and

Delhi coupled with increasing of the lending rates by banks would definitely stretch the decision process of the customers interested in

the residential segment. Similarly the commercial sector has reported a never seen supply-demand gap which has brought down the

sale price and rental of approx 20% from the levels of September 2008 in all the Tier-I markets of the country. The Tier-I markets

accounts for more than 90% of office and IT/ITES supply.

• Unlike the Commercial, IT space, Warehouse and Malls, the Residential segment till date have resisted signs of correction, possibly

because of the change in interest of the floating retail investors towards the residential segment since late 2009. This is evident from

the fact that the price kept increasing despite of the residential bookings declining to almost 30% in the 2nd and 3rd quarters of year

2010-11 compared to last year. With lot of recent media reporting of price corrections, high cost of debts and the PE / FII community to

liquidating their equity in the coming 2-3 months, it would be advised to carefully choose the right price bands of entry for any real

asset class.

19

Asset Classes Tier-1* Tier-II**

Residential Price increase in any zone of the city inflates price

of other zones without any relativity. Lot of

developments in the periphery of all Tier-I cities

offers interesting investment opportunities, though

Investors should be careful about the kind of

projects. Premium residential would see slow

demand and rent correction.

Very lucrative entry points since prices have

increased at regular pace other than few premium

zones. Trends for larger floor plate developments

seen to attract investors. Lot of established builders

launched projects commanding premium.

Commercial/IT Over supply with less demand has seen a decent

correction of rentals. More than 80% demand was

from the IT and BFSI segment in the year 2010. New

supply would keep the price competitive for the

coming two quarters.

Commercial segment not that significant, but unlike

Tier-I the price differentiation is double favoring

commercial since most of them are in CBD areas.

Retail With the consumer confidence being low in 2008

recession this segment was the most hit but the

sales soon recovered by the 2nd quarter of 2009.

Retailers managed to negotiate with developers

given the collective stand against the opportunist

rentals.

Huge supply in most markets with the over-

estimation of consumer demand by both the retailers

and the developers would have a long lasting effect

in the retail cum mall segment. The high streets

manage to do better than the malls in most cities.

20

Asset Classes Tier-1* Tier-II**

Land Land have been the most in demand in the last two

years. The land shortage within the settled habitat

is becoming scares. The local municipal bodies have

also relaxed FSI norms on accounts of creating

parking spaces, bridges, access roads etc.. Plotted

developments are finding not only investors but

end users also.

Very similar trends though very large parcels of lands

have been blocked by large developers to be cashed

on in the coming years. Plotted developments as new

concepts are catching up.

Other Real Asset Class

Section - Warehouse

Segment

The warehouse segments are predominant on the outskirts of the Tier-I cities mainly on the NH3, NH4 and

NH8. Most of the volume business are done through 3PL service providers. This was always a very

important real estate vehicle and with Govt. of India allowing automatic 100% FDI, the asset is a hit among

all the major real estate private equity players. All major centers like Bhiwadi & Panvel near Mumbai /

Talegoan, Wagholi & Chakan near Pune / Sriperumbudur, Chengalpet & Red-Hills near Chennai / Medchal,

Malkapur & Jeedimetla near Hyderabad / Dharuhera and Pataudi Road near Delhi / NH-6 & NH-2 near

Kolkata have seen rental dropping more 20% percent. The demand of new and better supply is forseen only

to be better with global recovery. The rentals are typically Rs. 11-14 per sqft for a PEB structure and non-

PEB (sheds) anywhere from Rs. 5-8 per sqft. The industry across the has a loading of 20% on carpet area.

21

Please Note:

1.Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkata

2.Tier II* markets includes all state capitals other than the Tier I

KARVY is an integrated financial services group, with Karvy Private Wealth being one of its arms. The entiregroup’s strengths are leveraged to provide end-to-end wealth advice to Karvy Private Wealth clients. Forexample, SME clients can receive advice on their personal wealth while also getting investment banking advicefrom the I-banking arm of Karvy.

Leveraging breadth of related businesses that KARVY is in

Maximum choice of products & services

KARVY Private Wealth offers the widest breadth of products and services, providing clients a variety of optionsthrough a single contact. Products and services include equities, debt instruments, commodities, Mutual Funds,Insurance, Structured Products, Financial Planning, real estate advice, etc.

Set to have business in 20 - 25 cities we are poised to cater to families and businesses spread across multiplecities in India providing them with combined and integrated advice. For one-off services, if required, we canalso leverage KARVY Group’s presence in 400 cities.

All-India presence

We ensure that our recommendations are 100% product-neutral and unbiased because unlike other players,we are neither tied up with any one particular insurance company nor do we have our own mutual funds.

Product-neutral advice

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The information and views presented here are prepared by Karvy Private Wealth or other Karvy Group companies. Theinformation contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouchfor the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any lossincurred based upon it.

The investments discussed or recommended here may not be suitable for all investors. Investors must make their owninvestment decisions based on their specific investment objectives and financial position and using such independent advice,as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note thatneither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use ofthis information and views mentioned here.

The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentionedcompanies from time to time. Every employee of Karvy and its associated companies are required to disclose their individualstock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investmentrecommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation haseither been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders onlythrough Karvy Stock Broking Ltd.

The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors areadvised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expectsignificant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidenceof tax on investments

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Bangalore 080-26606126

Chennai 044-45925925

Delhi 011-43533941

Hyderabad 040-44507282

Kolkata 033-40515100

Mumbai 022-33055000

Pune 020-30116238

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

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

Kochi 0484-2322152

Goa 0832-2731822