ADVICE for the WISE

Newsletter –May’11

2

Economic Update 4

Equity Outlook 8

Debt Outlook 13

Forex 15

Commodities 16

Index Page No.

Real Estate 19

Dear Investor,

There have been several important developments in the recentweeks. Sustained high inflation and RBI’s hawkish stance in light ofit has fundamentally shifted the growth expectations downwards.This will have a cascading effect on the expectations of IIP, creditgrowth, infrastructure development and fiscal deficit. While acontinued increase in interest rates through this year was alwayson cards, an explicit statement by RBI about potentially lower GDPgrowth has made most investors and market watchers to peg theirgrowth expectations lower as well.

The reaction from equity markets in the short term has beennegative. Our expectation is that the subdued mood wouldcontinue amongst investors for a while since most of the effects ofthe monetary policy are important and long lasting in nature.However, since the pricing of Indian stocks is still quite in line withtheir fundamental attractiveness and there are very few majornegative shocks that can be expected in near term, we continue torecommend investing into Indian equities at this point of time.Different sectors will be impacted differently through this changeof expectations. Infrastructure will probably languish for sometime to come while technology might emerge as a winner since itis free from inflation concerns and is largely immune to interestrates as well. A more detailed discussion on the same is includedin the equity markets outlook.

Debt markets saw an increase in the long term yields since arate hike of 50 bps was not fully factored in. In light of futurerate increases we continue to maintain a negative outlook onlong term debt and a positive outlook on short term credit.Fixed Maturity Plans are a suitable vehicle for taking anexposure to short term credit.

On the real estate front, the cash crunch for developers islikely to continue. This does create some opportunities interms of specialized lending to credible developers atattractive interest rates for investors. At Karvy Private Wealthwe have been working on two proposals based on this.Owing to the relatively stable equities markets and fairly highyields on debt instruments along with advent of severalinnovations such as real estate backed debentures andstructured products linked to equities and gold, it would beadvisable for clients to clean up their portfolios. By includingproducts with suitable risk-reward ratio in the portfoliospectrum, clients can look to improve average expectations ofreturns or reduce the overall risk.

3“Advisory services are provided through Karvy Stock Broking Ltd. (PMS) having SEBI Registration No: INP000001512. Investments are subject to market risks. Please read the disclaimer on slide no.24”

Change over last month

As on Apr 30th 2011

Equity markets

Debt markets

Commodity markets

Forex

markets

Change over last year

* Indicates SBI one-year FD

19,1365,7491,3649,850

8.14% 5.75%8.25%

4,40522,140

126.6

44.3881.73

(1.6%)(1.4%)

2.8%1.0%

16 bps(350 bps)

0 bps

3.0%6.6%

8%

0.6%1.4%

9.0%8.9%

14.9%(10.9%)

7 bps181 bps225 bps

34.0%30.1%

47%

1.1%15.1%

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

70

80

90

100

110

120

130

Ap

r-10

May

-10

Jun

-10

Jul-

10

Au

g-10

Sep

-10

Oct

-10

No

v-10

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-11

Sensex Nifty

S&P 500 Nikkei 225

6.8

7.3

7.8

8.3

8.8

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-10

Sep

-10

Oct

-10

No

v-10

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-1

1

15000

16000

17000

18000

19000

20000

21000

22000

23000

42

43

44

45

46

47

48

Ap

r-1

0

May

-…

Jun

-10

Jul-

10

Au

g-1

0

Sep

-10

Oct

-10

No

v-1

0

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-1

1

`/$

5

US

Europe

Japan

Emerging economies

• The HSBC China Manufacturing Purchasing Managers Index, remainedunchanged in April at 51.8.

• Chinese economy is expected to slow down to grow at 9.6% in 2011. Theretail sales increased by 18.5 percent year-on-year basis in April

• The Conference Board Consumer Confidence Index, which had decreased inMarch, improved in April. The Index now stands at 65.4 up from 63.8 inMarch. This is due to consumers’ short-term outlook, which had soured inMarch, improved moderately in April.

• US m-o-m unemployment rate dropped to 8 per cent in Apr 11.

• Euro-zone PMI increased to 57.8 in April from 56.6 in March 11. This was thesecond-highest reading since June 2007, defying that rising energy prices andthe prospect of a Portuguese bail-out would dampen growth.

• Unemployment rate in the Euro zone remained unchanged in March ‘11 at9.9%.

• The Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonallyadjusted 45.7 in April, reaching the lowest since April 2009, down fromMarch’s 46.4, owning to substantial reduction in manufacturing output amidongoing disruptions caused by the earthquake and tsunami.

• Japan’s unemployment rate remained unchanged at 4.6% in March ’11.

6

• The GDP growth rate for Q3 FY11 came in at 8.2%backed by a strong growth in agricultural outputand amidst high inflation, high interest rates andlower government expenditure.

• The economic activities which registeredsignificant growth in Q3 agriculture, forestry &fishing at 8.9 per cent, construction at 8.0 percent,trade, hotels, transport and communication at 9.4per cent, and financing, insurance, real estate andbusiness services at 11.2 per cent.

• The Finance ministry is targeting FY11 growth at~8.50% - 8.6%. We believe the current target issustainable as the agricultural growth is expectedto drive growth in the next few quarters whileindustrial growth will remain moderate.

IIP monthly data

GDP growth

• Industrial output as measured by the Index ofIndustrial Production (IIP) slowed to 3.6% (y-o-y) inFebruary ‘11 as compared to an upward revised3.7% in January ’11.

• Though 15 out of 17 industry group recordedpositive growth, manufacturing slipped to 3.5percent from 16.1 percent last year. Mining andCapital goods sectors were the majordisappointments with mining collapsing to nearzero.

• We believe that monthly indicators are not a veryefficient way of indicating growth and the lowernumbers could also be attributed to higher baseeffect. But, the growth will eventually moderate out.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

4

5

6

7

8

9

10

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

• Bank credit growth declined to 21.2 percent in Aprilfrom 23.2 percent in the month of February whileDeposits grew by 16.7 percent compared to 16.4% inFebruary 2011 though moderation was seen inMarch at 15.8%.

• Growth of credit demand and tight liquidity had putpressure on the banks to raise their deposit rates.We have seen a rate hike of 50 bps in the May policyreview but high inflationary pressure may lead theRBI to increase rates further in the coming year.

• We expect credit growth to settle at ~20% levels inthe coming quarters.

• Inflation as measured by WPI increasedmarginally and stood at 8.98% (y-o-y) for themonth of March 11 as compared to 8.31%during February 11. Rising oil prices and highfood prices have led to high inflation in themonth. These figures are based on the newbase year and WPI list.

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

Growth in credit & deposits of SCBs

7

Wholesale Price Index

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%Bank Credit Aggregate Deposits

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

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

Feb

-11

Mar

-11

8

April turned out to be a lacklustre month for markets with nifty being down 1.4%. FII investments continued in April with a total amount

of 7000 crore invested in addition to the 7,000 cr invested in last week of March. There has been a net inflow of around 5000 crores by

FIIs so far in this calendar year.

RBI announced the annual policy for FY12on 3rd May. Policy actions undertaken are as follows:

• Repo Rate increased by 50 bps to 7.25%

• Reverse repo to be now a derived value fixed at 100bps discount to Repo. The new rate is 6.25%

• MSF, a new programme for banks to borrow overnight from RBI, with the rate fixed at 100bps premium to repo rate (8.25%).

• Savings Rate increased by 50 bps from 3.5% to 4%.

• Provisioning requirement for certain non-standard assets increased.

All the measures combined could lead to margin compression for the banking space. The savings rate hike would lead to a 12-13bps

pressure in banks margins. So far, demand for both industrial and consumer credit has held on quite well. However, if demand softens,

banks may not be able to fully pass through interest rate hike to clients resulting in further margin pressures. Also, higher interest rates

might lead to NPL creation. There could be some pressure on Capital Goods space as cost of capital increases and the order inflow

activity slows down. Home loans would become expensive.

The tone of the policy was clearly hawkish. RBI stressed on managing inflationary expectations as its number one priority. It expects the

high crude oil and commodity prices to sustain at these levels and even gain going forward. RBI has forecasted the Fy12 growth at

8%. There could be downside risks to that if infrastructure and manufacturing activity slows down further. RBI also expressed concern

about the ongoing fiscal consolidation with the budgeted crude oil and fertilizer subsidies being clearly insufficient. This might lead to

enhanced government borrowing programme in H2 FY12 putting further upward pressure on bond yields.

9

• FIIs After pulling out ` 9,400 Cr. in this year (Jan & Feb) FIIscontinued buying and invested `7213 Cr. in the Indianmarkets in the month of April’11. High growth prospects inthe Indian market are a driver for these investments.

• Mutual Funds witnessed outflows of around ` 1365 Cr. inthe month of April.

FII & MF data

We would expect a GDP growth of 8% for this year which would be slightly lower than FY11. The reviving global economic growth

augurs well for Indian IT and Metal companies. Also, we believe that consumption stays strong and with the expectation of a good

monsoon, discretionary consumption should stay buoyant.

The earnings season is on and most of the companies have come out with inline results for Q4 FY11. While banks have generally

delivered a good set of numbers, companies in Oil and gas and cement space have disappointed. Some pressure in margin is visible for

engineering and construction companies due to increase in commodity prices and rising interest rates, but that should get

compensated by the increase in earnings of Metal companies. We expect a steady earnings growth of 17-18% for Nifty as a whole for

Q4 FY11.

While we remain concerned about rising interest rates & high crude oil prices in the short term, we continue to expect a robust

earnings growth of 20% for FY12 which will drive equity market returns in the medium to long term. The market looks inexpensive and

is trading at 14-15 times FY12 and 12 times FY13 earnings. After the recent correction in banking space, we believe valuations have

become attractive. We prefer private sector banking names as they fare better on asset quality issues vis-à-vis their PSU peers. Also,

sectors like Information Technology, Healthcare which are relatively lesser impacted by interest rate and inflation risks, should do well

going forward.

-15000.0

-10000.0

-5000.0

0.0

5000.0

10000.0

15000.0

20000.0

25000.0 FII MF

10

Sector Stance Remarks

Healthcare 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. We would bet on the opportunity in Generics and

CRAMS space

Automobiles Overweight

Demand outlook remains very robust with strong earnings growth despite raw material price hikes

and raging competition. We are more bullish on commercial vehicle and agricultural vehicles segment

due to lesser competition and higher pricing power.

FMCG NeutralWe prefer “discretionary consumption” beneficiaries such as Cigarettes and branded jewellery, as the

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

E&C Equalweight

The USD 1 trillion Infra opportunity is hard to ignore. We believe Power sector to be a better play over

other sub sectors such as ports, roads and telecom infrastructure, because of favorable economics

under PPP model. Within power, we like on the engineering companies over utilities, T&D and other

infrastructure owners because of their superior profitability and better competitive dynamics.

BFSI Equalweight

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. Despite the increasing in interest rates, we believe

banks will be able to pass on higher cost of funds to clients as demand remains strong

11

Sector Stance Remarks

IT/ITES Equalweight

Robust volume growth led by some uptick in pricing makes IT an attractive investment. Market

share gains led by deeper and wider expansion of global delivery model will drive earnings

growth. Best played through Tier I stocks.

Metals Equal weight

Indian metal companies will benefit from global upturn in demand. Commodity prices have

moved up significantly as recovery takes place in US and Europe. Positive on the producers of

Steel, Copper and Aluminium.

Energy Underweight

The regulatory cap on RoE does not allow a vast value creation opportunity in the infrastructure

owning companies. We would stay away from oil PSUs, due to issues of cross subsidization

distorting the underlying economics of oil exploration and refinering businesses.

Telecom Underweight

The regulatory hurdles, competitive pressures and leverage prevent any return to high profitability

levels in the short to medium term. The huge capex incurred in the rollout of 3G services will put

further stress on the already stretched balance sheets. Remain cautious on Sector’s prospects.

Cement UnderweightCement 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 Underweight

We like the growth prospects of power sector but believe that value will be created by

engineering services providers. Merchant power rates have been sliding downwards and coal

prices have been on the way up putting pressure on return ratios.

Basic Theme

A diversified portfolio of stocks that seeks Alpha through superior stock selection. The Portfolio Management adopts a comprehensiveapproach and invests across sectors, investment themes and market capitalization categories.

Portfolio Details

Placement fee 2%Exit Load Nil (Full management fee to be levied if redeemed before 1 yr)

Management Fee2.5% for investments below Rs. 1 Cr.

2% for investments above Rs. 1 Cr.

NIL

Profit Share NIL NIL 15% of all gains

Top 10 Holdings

Comparatives 3 Month Since Inception

Alpha Portfolio 4.7% 16.7%

S&P CNX Nifty 4.4% 10.1%

Sector Allocation Performance (as on 30th Apr 2011)

Absolute Returns (%)

4.7%

16.7%

4.4%

10.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

3M Since Inception (30/11/09)

Alpha Portfolio Nifty

12

Reliance Industries Ltd. 7.9

HDFC Ltd. 6.3

Infosys Ltd. 6.0

Axis Bank 5.7

Punjab National Bank 5.9

Titan Industries Ltd. 5.5

Larsen & Toubro Ltd. 4.8

Bharti Airtel Ltd. 4.7

Tata Motors Ltd. 4.6

Bharat Heavy Electricals Ltd. 4.6

Top 10 Stock Concentration 55.9

BFSI25.90%

Metals8%

Healthcare

8.20%

IT10.30%

Others12.50%

Auto8.50%

Capital Goods12.70%

Cons. Goods13.90%

13

• The benchmark 10 yr G-sec yield increased from8.0% in the month of March ‘11 to close ataround 8.15% in April‘11.

• With no respite from the high inflation in spiteof monetary tightening, we may see a few moreinterest rate hikes in the year.

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 in May, the 10 year GSec yields are trading around 8.15%. A hike wasseen in the yields as a 50 bps hike was notcompletely factored in.

(%) 7.60

7.80

8.00

8.20

8.40

8.60

8.80

9.00

9.20

0.0

2

0.9

4

1.8

6

2.7

8

3.7

0

4.6

2

5.5

4

6.4

6

7.3

8

8.3

0

9.2

2

10

.15

11

.07

11

.99

12

.91

13

.83

14

.75

15

.67

16

.59

17

.51

18

.43

19

.35

Spot Interest rate

6.8

7

7.2

7.4

7.6

7.8

8

8.2

8.4

Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11

OutlookCategory Details

Long Tenure Debt

With tight liquidity and inflationary pressure being high, weexpect more rate hikes in the current year. As the inflationarypressure begins to settle down, these may be attractiveinvestments but currently, we would recommend staying out ofthe longer term investments.

Some AA and select A rated securities are very attractive atthe current yields. A similar trend can be seen in the FixedDeposits also. Tight liquidity in the system has alsocontributed to widening of the spreads making entry atcurrent levels attractive.

14

We recommend short term bond funds with a 6-12 monthinvestment horizon as we expect them to deliver superiorreturns due to high YTM. We have seen the short term yieldsharden due to reduced liquidity in the market andconsecutive rate hikes prompted by inflationary pressures.Hence, Short term bond funds and FMPs provide aninteresting investment option.

Short Tenure Debt

Credit

15

• The rupee depreciated against all the currencies except the USD. Speculation regarding the economic recovery of U.S. and continuation of the Quantitative Easing plan resulted in depreciation of the USD against a basket of currencies.

• Going forward, the rupee will be helped by the narrowing of the current account deficit and the inflow of funds into the domestic markets as the longer term market outlook remains strong. However rising oil prices remains a cause of concern.

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

• Exports for the month of February increased by 43.85% (y-o-y) while imports increased by 17.27% over last year. Thetrade deficit decreased to USD 5.6 bn.

• Capital account balance continues to be positive throughFY11 and stands at `241293 Cr. for the Q1 – Q3.

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

0

20000

40000

60000

80000

100000

120000

140000

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

Capital Account Balance-5.0%

-4.5%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

USD GBP EURO YEN-15000

-10000

-5000

0

-20

0

20

40

60

80Export Import Trade Balance (mn $)

16

Precious

Metals

Oil & Gas

Gold prices continue to remain stable amid demand from

emerging economies including China, where the investment

demand growth was strongest last year. The global political

uncertainty and growing Middle East tensions shall continue to

support prices. Further, the seasonal demand during Akshaya

Tritiya in India is likely to support prices. Nevertheless, we do

not expect any sharp spikes in the yellow metal in the near

term; however the falling dollar is a concern and shall push the

metal prices higher.

Although the Middle East status quo remains, crude oil prices

found support from the renewed demand for conventional

energy after the Japanese Nuclear fiasco. The difference

between WTI and Brent continues to wide. Crude is expected

to remain stable in the near term amid declining dollar aiding

its rise.

Crude

Gold

15000

16000

17000

18000

19000

20000

21000

22000

23000

Ap

r-10

May

-10

Jun

-10

Jul-

10

Au

g-10

Sep

-10

Oct

-10

No

v-10

Dec

-10

Jan

-11

Feb

-11

Mar

-11

Ap

r-11

60

70

80

90

100

110

120

130

Apr 10

May 10

Jun 10

Jul 10

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Jan 11

Feb 11

Mar 11

Apr 11

17

Tenor 36/40 months

Issuer Karvy Financial Services Limited

Reference Index S&P CNX Nifty Index

Principal Protection 100%

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

Final Fixing Level Average of Official Closing Level of S&P CNX Nifty Index as on 34M, 35M and 36M

Exit Nifty Level Official Closing level of S&P CNX Nifty Index as on DDA +36M

Participation Rate 200%

Knockout Level 150% of Initial Fixing Level

Knockout Rebate 30%

Payoff2 * Max {0, (Final Fixing Level / Initial Fixing Level) -1}, if Knockout event is nottriggered

Overview

• Aditya Birla has launched a private equity fund targeting

innovation themed growth capital investments within sunrise

sectors – Lifestyle, Lifeskills and Education, Lifecare and

Applied Technologies.

Attractiveness

• We believe that the sectors that they have selected are

attractive growing annually at 20% plus supported by benefits

of higher disposable income and improving infrastructure in

the country.

• The managers have had a successful track record in similar

sectors and have delivered consistent returns. Operational

value addition and domain knowledge would be the drivers of

IRR.

• Based on the Investment team’s extensive business network in

overweight sectors 60 high quality early stage proposals have

been received over the last 12 months

Product Features

• Fund size: Rs. 350 Cr. + green shoe option of Rs. 150 Cr.

• Sponsor Commitment: 10%

• Fund tenure: 6 years with an option of a 1 year extension

• Commitment Period: 30 Months from date of initial closing

• Minimum Commitment: 1,000,000

• Indicative Draw-down:

INR 10 lakh 100%

INR 15 lakh–45 lakh Higher of 20% of commitment or

INR 7.5 lakh

> INR 45 lakh 10% of commitment

• Expected IRR: 25% gross p.a.

• Upside Sharing: 20% of net profits of the fund with catch up

• Management fee: 2% p.a. of the total commitment amount

• Setup fee : 2.25% upfront

18

19

Asset Classes Tier-1* Tier-II**

Residential This sector is the only one to be left out of the correction

wrath. Heavy media reporting’s on probable correction, 40%

down-trend in sales and unavailability of finance to

developers are the major factors putting pressure on this

segment to correct. The investor community also varies on

the assumptions on account of bad sales and gives their “no

confidence motion” towards any visible appreciation. Markets

like NCR, Pune, Hyderabad and Chennai would set the course

of correction on the forthcoming over-supply.

These cities still manage to sell from the attractive entry point

(Avg. Rs.2800-3600 per sqft) but are getting over-supplied in

pockets. A recent report from Knight Frank suggests that these

cities have seen lot of investor confidence between 2007-2009

which for some reasons have seen 30% down-trend. Typically

the investor’s early buy-in and upfront payment of the total

consideration for best discount gives the developer strong hold

time for local demand. Ironically, across markets Investors

contribute not more than 15% of sales.

Commercial/IT Still in the shadows of over-supply and cautious expansion

approach by corporate, this segment has gone through

correction. Rates per sqft have seen almost 30% down-trend

and will be stagnant for the coming 2-3 quarters. Surely, the

segment is at the down-tip of the cycle, and is the best

opportunity for companies looking for long term holding of

real estate office space. Since most of the commercial growth

had happened in 05-06, many lease agreements are getting

expired giving way for companies to shift base, re-negotiate,

etc. IT/ITEs would remain the main driver for consumption.

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 Sales have definitely recovered but distress in the over-

supplied market is evident. Many deals have been done on

Revenue Share, giving more control to the Lessee to hold

price per sqft for a longer time-frame

Unlike the Tier 1 markets the retails is unable to cope with sales

and thus the sales to rent ratio is becoming bigger pulling down

the rent paying capacity. Important point also is that, unlike the

Tier 1 markets more than 40% of any mall in these cities are

operated by local franchisees making cash-flows not regulated

Land Land is highest in demand and still a maintaining a steady

growth of 15-20% per annum

Very similar to the trend in Tier 1 cities. Opportunistic

investment can really give great returns since N.A land is still

available cheap (between 200-300 per sqft)

20

Markets Major Locations/Zones Total Sqft (In Mn), Expected in

2011-2013

Established Builders

Bangalore Hebbal, Whitefiled, Hosur Road, Jayanagar, MG Road,

Malleshwaram

74Mn Sqft, out of which 60% supply is

in Hosur & Whitefiled followed by 18%

in Hebbal

Shobha, Prestige, Salarapuria,

Purvankara, Brigade Group, Nitesh

Estate, Mantri, Confident group, Pride

Group

NCR Gurgaon - DLF city, Sohna Rd, Manesar

Noida – Sec 14,15,92,93,128 and Greater Noida

Ghaziabad – Indirapuram, Vaishali

Faridabad – prime chandanwood village, Sec 78,89

436 Mn sqft, out of which Noida-32%,

Ghaziabad-21%, Gurgaon-24% &

Faridabad-12%.

Parsavnath, Emaar MGF, DLF, Unitech,

Ansal properties, M2K, Uppal, Cosmos,

Suncity, Vipul

Mumbai Prime Residential Among Zones

Napean Sea Road, Tardeo, Worli, Lower Parel, Bandra,

Andheri West, Juhu and Powai

Mid Segment Among Zones

Prabhadevi, Ghatkopar, Goregaon, Malad, Gorbunder,

Kalyan, Dombivili, Belapur and Panvel

183 Mn Sqft, out of which 69% is

accounted from Prabhadevi, Ghatkopar,

Goregaon, Malad, Gorbunder, kalyan,

Dombivili, Belapur and Panvel.

Malad/Goregaon accounts for more

than 23mn sqft and other btw 10-12Mn

sqft

Hiranandani Developers Pvt Ltd,

Marathon Realty Pvt Ltd, Akruti City

Ltd, Kalpataru Ltd, K Raheja Universal

Pvt Ltd, K Raheja Corp, Lokhandwala

Group of Companies, Sheth,

Rustomjee, DB Realty, Godrej

properties, Oberoi to name a few.

Hyderabad Banjara hills, Shameerpet, Securabad Contonment,

Ghatkesar, Old Hyderabad and Shamshabad

58 Mn sqft, out of which 58% supply is

expected in and around Hi-Tech city

DLF, Jayabheri, Manjeera, Mantri,

Saisree, SMR Holdings, Aliens Group

Residential Market Snapshot (Supply and Developers)

As you would find out from the below mentioned table, most cities have supply concentrated in a particular zone and investment in these zones would belucrative (entry point being low) with a long term view, since the supply would always keep the capital value appreciating to 5-7% per annum. Rest zoneswould be always speculative and demand led behavior. The only differentiator would be quality development which could command premium.

Pune Pimpri Chichwad and Chakan,

Hinjewadi, Baner, Audh, Wakad and Balewadi

Kothrud, Kondwa, Hadapsar, Central Pune

Kalyani Nagar, Viman Nagar, Kharadi

93 Mn Sqft, out of which over 70% is

accounted by Pimpri Chinchwad,

Hinjewadi and Kalyani Nagar zones

Kumar Builders, Gera, Lunkad,

Konark, Goel Ganga, Marvel,

Magarpatta, Rohan

Kolkata CBD Areas-Ballygaunge, Carmac street and Park street

Salt Lake & EM Bypass

North 24 Parganas-Rajarhat, Barasat, madhyamgram

South 24 Parganas – narendrapur, Sonarpur

Batanagar & Mahestala

55Mn Sqft, out of which North 24

Parganas accounts for more than 50%

of supply

Ekta Developers, Eden group, Fort,

Mayfair, Merlin, Srijan group,

Swastic, Somani, Godrej, GM Group,

nangalia, Orbit, Bengal Sharachi, Sriji

Developers

Chennai North Chennai – Ayanavaram, Kilpauk, Korathur, madhavaram, Perambur, Villivakam

South Chennai – Adambakam, Chromepet, madipakkam, Medavakkum, Sholinganur, OMR, Selaiyur, tamabaram, Urapakam, Velachery

West – Ambattur, Annanagar, Avadi, KK Nagar, manapakam, Nolambur, Porur, salingramam, Sriperumpudur, Vadapalani

Central – Adayar, Alwarpet, Egmore, mataliyapuram, Nungampakkam, Parry’s, Tnagar

68 Mn Sqft, of which South Chennai

accounts for 64% of supply

Emmar, Ozone, Chaintanya, Mantri,

Doshi, Sabari, Hiranandani, L&T,

Unitech

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Please Note:1.Tier I* markets include Mumbai, Delhi & NCR, Bangalore, Pune, Chennai, Hyderabad and Kolkata2.Tier II* markets includes all state capitals other than the Tier I markets3.The IC note is proposed to be presented every quarter

Overview

• An unlisted secured NCD issue with a fixed coupon of 18% per

annum. NCD is a debt instrument used to raise short-term

loans from HNIs. The funds raised through this issue will be

utilized by the developer for aggregating the land for an

upcoming residential project in Sus Village in Pune.

Product Features

• Issue Size – Initial two series of 5Cr each and following two

series of 7.5Cr each

• Tenure – 24 months

• Minimum Investment – INR 10,00,000

• Set Up Fee – 1% upfront

• Management Fee – 0.5% p.a.

• Guaranteed Coupon – 18% p.a.

• Frequency of Interest – Monthly

• Principal repayment – 4 equal quarterly installments starting

end of fifth quarter

Attractiveness

• The cash flow schedule is very attractive driven by interest

inflows and principal repayment starting early. A good

proportion of the total return is realized over the tenure of the

product through regular monthly payouts starting from the

second month itself. This considerably reduces the risk to total

returns for investors.

• The debentures are secured with a security cover of at least

two times the outstanding debenture amount. Both the

principal and the interest are securitized and hence the default

risk is negligible.

• The IRR for this structure stands at 19.16%. This can give a

considerable boost to the overall returns of one’s fixed income

portfolio.

• This product is a good bet on the high interest rates prevalent

in India now. The investors can lock in high yields which are

not likely to increase much further.

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

Leveraging breadth of related businesses that KARVY is in

Maximum choice of products & services

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

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

All-India presence

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

Product-neutral advice

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

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

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

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

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