Markets at a glanceMarch 2012

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Report Code : ISP 090312052

Dr. G RamachandranHead - Private Clients Research Group

2

Dear All,

The US economy grew at an annualized rate of 3% in the Q4-2011. Growth was largely driven by an inventory build-up, while finalconsumer demand remains sluggish. Japan's economy contracted at an annualised rate of 2.3% in the Q4-2011. The primary reasonsfor this contraction were weak exports due to weak global demand and a strong currency. The floods in Thailand added to the growthwoes of the economy. Euro zone GDP growth turned negative in the Q4-2011 for the first time in two and a half years as the region'sdebt crisis undermined business and consumer confidence, and governments of member countries resorted to deep spending cuts.GDP fell 0.3% QoQ in the Q4-2011 from 0.1% in the Q3-2011. The euro zone economy is expected to witness a mild recession in 2012according to the IMF and the European Commission. The ECB offered a second round of unlimited three-year loans amounting to EUR530 billion on February 29, 2012 via a longer-term refinancing operation, after handing out EUR 489 billion in December 2011. The ECBkept its benchmark interest rate unchanged at 1% in its monetary policy meeting on March 8, 2012. To give a boost to the investorssentiments, the People's Bank of China cut its required reserve requirement by 50bps to 20.5% from an earlier 21%. Consumerinflation in China dropped to 3.2% YoY in February 2012, down from 4.5% in January 2012. This is the lowest since June 2010.

Demand for safe haven assets, amidst the crisis in the euro zone, drove the sharp rally in US Treasuries over the past 12 months.As of March 6, 2012, 10-year US Treasuries were trading at 1.96% while 30-year bonds were quoted at yields of 3.11%. In 2012,however, company bonds have outperformed US government securities. Euro zone finance ministers finally reached a long-delayed EUR 130 billion second bailout for Greece after private sector holders of Greek bonds agreed to take even deeper lossesthan agreed earlier. Although Greek bondholders agreed in October 2011 to accept a 50% cut in the face value of their bonds,they will now be offered a "voluntary" deal with a haircut of 53.5% as reported in the Financial Times. As reported in the FinancialTimes on March 9, 2012, Greece moved closer to a EUR 206 billion debt restructuring after private sector bondholders representingalmost 85% of securities said they were backing the deal.

The bailout package for Greece produced mixed reactions on the bourses of various countries. The US benchmark indicesreached almost the post-crisis highs after the news of the Greek bailout. The S&P 500 closed up 0.1% to 1,362.21. The benchmarkindex is now up 8.3% in 2012, which is the best yearly start that the index has witnessed since 1997. The S&P 500 index and theDow Jones Industrial Average index increased by 3.63% and 2.27% respectively in February 2012. On YTD basis, the indiceshave risen by 9.11% and 6.45% respectively (as of March 6, 2012). The FTSE Eurofirst 300 Index and Stoxx Euro 600 index roseslightly in the month of February 2012 by 1.5% and 1.6% respectively. Emerging market stocks have rallied for seven straightweeks in 2012 as investors' risk appetite gained momentum due to positive news on Greece and improving data prints in the US.

The EUR gained after the policy makers in the euro zone finally signed off on the bailout for Greece on February 21, 2012. Thecurrency has firmed-up to 1.34 levels versus the USD since then. The single currency lost 1.6% against the dollar over the weekending March 2, 2012 and was trading at 1.3228 due to weaker than expected US and European economic data prints. TheJapanese yen appreciated 0.84% in January 2012, but has depreciated 6.50% in February 2012. The recent intervention by theBank of Japan (BoJ) has led to the weakening in the JPY. The rupee held up well in the first two months of 2012 despite theincreased uncertainty in the euro area. Increased volumes of portfolio inflows in the economy, moderating inflation, and a CRRcut by the RBI have underlined the INR's strength this year. The rupee traded in a band of 48.82 and 49.51 in February 2012. TheUSD/INR pair rose to a near six weeks high of 50.20 on March 6, 2012 in a rather sudden reversal following fears of a potentialslowdown in capital inflows as growth slows in emerging markets. Investors were also focused on state election results declaredon March 6, 2012 for clues on the Congress-led federal coalition's ability to revive stalled reforms.

Oil prices have risen quite sharply in the past couple of weeks. WTI crude oil prices rose above USD 106/bbl on February 22,2012, while Brent crude prices rallied above USD 121/bbl as Iran halted crude sales to French and British companies. Brent crudewitnessed a jump in prices to USD 128/bbl on March 1, 2012 after a report stated that a pipeline has burst in Saudi Arabia, whichwas later denied by Saudi Arabian officials. Gold prices were trading around USD 1,703/oz at the time of writing following a dropto USD 1,663/oz on March 6, 2012 as the USD strengthened. In the event of dollar strengthening in the near-term, USD 1,650/oz will act as a key support level.

India's GDP clocked a disappointing growth rate of 6.1% in the Q3 FY 2011-12 due to poor performance of the manufacturing,mining and farm sectors. The official Wholesale Price Index (WPI) for "All Commodities" for the month of January 2012 grew atan annual rate of 6.55%. The RBI cut its Cash Reserve Ratio (CRR) by 50bps to 5.5% and signaled a willingness to cut rates ifinflation fell further. The liquidity situation in the banking system continued to remain negative in February 2012. The liquiditydeficit has often been more than two times the comfort zone of RBI despite the cut in CRR in January 2012. The 10-yearbenchmark bond yield ended February 2012 at 8.20%, down 7bps from previous month's close. Inflation is expected to moderatein the coming months largely on the back of a high base effect. However, upside risks to inflation remains on account ofanticipated revision of domestic prices of various fuel items, and the possibility of further sharp rise in crude oil prices. In thenear-term, liquidity tightness would continue to remain above the RBI's comfort zone especially with the advance tax outflows.With sharp crunch in liquidity RBI may cut CRR in the upcoming monetary policy on March 15, 2012. Indian equity marketslogged gains for three consecutive weeks of February 2012 as continued foreign fund inflows, easing inflation, and firm globalstocks boosted investor sentiments. However, the market tumbled in the last week of February 2012, snapping a seven-weekrally in 2012, as investors booked profits on higher concerns over rising crude oil prices, high trade deficit, and dismal economicgrowth in the Q3 FY 2011-12. The markets could witness volatility in anticipation of credible economic reforms measures in therun-up to the Union Budget 2012-13 on March 16, 2012.

Global Scenario

Gold and dollar index portray a negative relation The ISM Manufacturing and the ISM Non-manufacturingsurvey results remained consistent with the view that theUS economy is witnessing a modest economic growth

The regional manufacturing surveys have shown an uptrendsimultaneously

Retail sales in the economy might improve further with apick-up in consumer confidence and employment

In February 2012 (YTD), Indian equities advanced on sustainedbuying by FIIs

The Fed rate remains low compared to most of the centralbank policy rates of the developed markets

Source: Bloomberg, ICICI Bank Source: Bloomberg, ICICI Bank

Oversupply of existing houses is still a concern in the economy

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Content

Global Macro Developments

Global Macro 6

Global Fixed Income Outlook 8

Global Currency Outlook 10

Global Equity Outlook 11

Feature Article

India’s GDP clocked a disappointing growth rate of 6.1%in the Q3 FY 2011-12 13

Alternative Investment Assets

Real Estate Overview 15

Private Equity 16

Commodities 17

Mutual Funds 19

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Global Macro Developments

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Euro zone approves a second bailout package for Greece; Japan and euro zone growth contracted in the Q4-2011;higher oil prices poses downside risks to global economic conditions

Argentine and Greek crisis: different yet similarThe Greek economy shrank 6.8% in 2011, leaving the level of output an estimated 16% below its pre-crisis peak. The situationseems mild when compared to Argentina in 2001, when it suffered a 20% peak-to-trough drop in output after defaulting on itsdebt. While comparing crises is like comparing apples and oranges, as every country is different economically and politically,still lessons could be learnt from the past by asking the question: what went wrong?

First the similarities. Argentina's 'convertibilidad' policy, which pegged the peso against the dollar, and the adoption of the euroin Greece, established a fixed and overvalued exchange rate regime. This helped in countering inflation, but at the cost ofdeteriorating local productive capacity. Both the economies became dependant on capital inflows to stimulate domesticeconomy; however, later due to permanent balance of payment deficits, the economies became dependent on foreign debt.Later, post the East Asian crisis of 1997, Argentina was encouraged by the IMF to implement orthodox measures like reduc-tion of social spending, despite the context of recession. In Greece, too, after undergoing a short period of Keynesianism, theIMF and EU imposed unpopular fiscal adjustments like the ones in Argentina.After the crisis in 2001, Argentina defaulted on nearly 65% of its total public debt and devalued its currency by two-thirds.Combined with the commodity boom, the natural resource rich Argentine economy experienced a growth of unprecedentedgrowth. The 2001 story of Argentina resonates currently in Greece, however the political economy of Greece makes theGreek path of recovery difficult. Greece could expect similar disruptions, if it exits the euro, in addition to the chaos such amove would cause in the rest of Europe. There is also a possibility of an opposition by Germany, whose export competitive-ness would suffer if Greece were to exit the monetary union and the EUR appreciated vis-à-vis other currencies as well as thenew drachma. In addition, while Argentina already had peso in circulation, Greece would have to mint an entirely newcurrency and wait for it to stabilize, which would take long. Greece's transition after exiting the euro would not be as easy asArgentina, which had robust agriculture and manufacturing. Greece offers little for foreign consumption beyond shipping andtourism. However, some analysts estimate that in the event of Greek default, the economy would have an easier time thanArgentina to re-negotiate its debt and converting them to a new currency. This is because most of the Greek bonds wereissued under Greek law, which can be modified, whereas Argentina had issued the bonds in New York and London. However,even if the Greek crisis is eventually resolved, policy makers will continue to face many of the same hard choices BuenosAires encountered a decade ago.

Source: www.brettonwoodsproject.com, www.lapasserelle.com, www.money.cnn.com, www.seekingalpha.com

US: The US economy grew slightly faster than previouslyestimated in the Q4-2011 in another encouraging sign of stablerecovery. The Bureau of Economic Analysis revised its initialestimate of annualised growth in the Q4-2011 from 2.8% up to3%. Growth was largely driven by an inventory build-up, whilefinal consumer demand was sluggish. Estimates ofconsumption growth were revised upwards from an annualised2% to 2.1% and final sales to domestic purchasers, a crucialmeasure of demand in the US economy, was revised upwardsfrom 0.9% to a still weak 1.1%. US Chicago Purchasing ManagerIndex (PMI) for February reported a 10-month high reading of64 as against 60.2 in January 2012. Recent data prints suggestthat credit conditions are easing and the labour market is startingto improve, but that has not fed through into a robust rise inconsumption and investment, raising doubts about thesustainability and momentum of growth in 2012. The US Fedexpects the inflation in the US to remain range-bound between1.5%-2% in 2012, 2013 and 2014. However, a persistent oilshock could give rise to concerns about the inflation outlook inthe medium-term. The US faces a long-term political risk ofcontrolling fiscal spending in the economy. According to IMFdata, the fiscal deficit figure for 2012 and 2013 are 7.92% and6.19% respectively. The economy faces ample political risksin view of the long-run issue of controlling federal spending.The weak housing market and the high rate of unemploymentalso adds up to risks in the economy.

Euro zone: GDP fell 0.3% QoQ in the Q4-2011 from 0.1% inthe Q3-2011. Germany's GDP growth contracted 0.2% in theQ4-2011, while France's economy witnessed an unexpectedpositive growth rate of 0.2% in the fourth quarter. In Spain,output fell by 0.3% QoQ, while in Italy GDP decreased by 0.7%

QoQ after losing 0.2% QoQ in the previous quarter. Europeanservices and manufacturing output shrank in February 2012 asthe euro zone economy struggles to rebound from a contractionin the Q4-2011. A euro-area composite index based on a surveyof purchasing managers in both industries dropped to 49.3 from50.4 in January 2012. A reading below 50 indicates contractionin economic activity. Euro zone services output dropped to48.8 in February from 50.4 in January 2012, led by Italy andSpain. Unemployment in the euro zone jumped to a recordhigh of 10.7% in January 2012. The situation was most alarmingfor Spain, where jobless rate has hit 23.3% and youthunemployment is only slightly less than 50%. While thetroubled nations continue to suffer from double-digitunemployment levels, the jobless rate was around 4% in

US GDP growth in the Q4-2011 was largely driven by aninventory build-up

Source: Bureau of Economic Analysis

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Austria, 5% in the Netherlands and 5.8% in Germany. The eurozone economy is expected to witness a mild recession in 2012.According to the European Commission, the euro zoneeconomy will contract 0.3% in 2012. Euro zone financeministers finally reached a long-delayed EUR 130 billion secondbailout for Greece on February 21, 2012 after private sectorholders of Greek bonds agreed to take even deeper lossesthan agreed earlier. Although Greek bondholders agreed inOctober 2011 to accept a 50% cut in the face value of theirbonds, they will now be offered a "voluntary" deal with a haircutof 53.5%. That will reduce Greek debt levels to 120.5% of GDPby 2020 from 160% of GDP in 2011. The ECB offered a secondround of unlimited three-year loans amounting to EUR 530billion on February 29, 2012 via a longer-term refinancingoperation, after handing out EUR 489 billion in December 2011.

UK: The Bank of England announced on February 9, 2012 thatit will pump another GBP 50 billion into the UK economy toprotect a nascent recovery from the threat posed by the eurozone debt crisis. The Monetary Policy Committee (MPC) raisedthe target for bond purchases to GBP 325 billion from theprevious GBP 275 billion. The MPC also held its benchmarkinterest rate unchanged at 0.5% on February 9, 2012. Thecentral bank started the bond purchases on February 13, 2012and will hold three GBP 1.5 billion auctions a week for threemonths. It will buy bonds in three maturities - three to sevenyears; seven to 15 years; and longer than 15 years. Annualinflation fell in January 2012 to its lowest point since December2010, as an increase in the value-added tax (VAT) last year fellout of comparison. The CPI rose by 3.6% YoY, down from 4.2%in December and a peak of 5.2% in September 2011 as reportedby the Office for National Statistics (ONS). UK consumer

Euro zone real GDP growth turned negative in the Q4-2011

Source: Bloomberg, ICICI Bank

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confidence for the month of February 2012 came in at -29, thesame as January 2012, suggesting a still uncertain economicoutlook. Labour market conditions continue to deteriorate.Unemployment rose to its highest level since 1994 in the threemonths through December 2011. The jobless rate rose to anaverage of 8.4% from 8.3% in the previous three-month period,as reported by the ONS.

Japan: Japan's economy contracted at an annualised rate of2.3% in the Q4-2011. The primary reasons for this contractionwere weak exports due to weak global demand and a strongcurrency. The floods in Thailand added to the growth woes ofthe economy. Deflation has been the feature of Japan'seconomy, and so the central bank has been maintaining anultra-loose monetary policy to boost growth. In order to boostthe ailing economy, the Bank of Japan (BoJ) said it wouldincrease its asset-purchasing programme, which is its mainpolicy tool given the interest rates are near zero, to JPY 65trillion from JPY 55 trillion. Japan recorded its first trade deficitin three decades, which has been a vital driver of economicgrowth. Japan registered a trade deficit of JPY 2.49 trillion (USD32 billion) in 2011. A positive data came in the form of Japaneseindustrial production, which rose for a second consecutivemonth in January 2012 by registering a growth of 1.2% overthe previous month. The growth was primarily driven by healthygrowth of automobiles and electronics.

China: China's official purchasing managers' index rose to 51.0in February 2012 from 50.5 in the previous month, marking afive-month high. The sub-index for new export orders rosesharply to 51.1 in February from 46.9 a month earlier, anindication of a pick-up in demand from consumers in the USand euro zone. On the contrary, the Chinese government hasrevised its growth target to 7.5% this year, which is the lowestsince 2004. Inflation in China jumped to 4.5% in January 2012,up from a 15-month low of 4.1% seen in December 2011. Themajor cause for an increase in inflation was China's New Yearholiday, which pushed up the food and apparel prices, therebyleading a rise in overall price level. However, the 'festive season'effect has also been observed over previous years and isexpected to be temporary. To give a boost to the investorssentiments, the People's Bank of China cut its required reserverequirement by 50bps to 20.5% from an earlier 21%. Importsplummeted 15.3% in January 2012, leaving the economy witha trade surplus of USD 27.3 billion.

China’s official purchasing managers’ index rose to 51.0 inFebruary 2012 from 50.5 in January 2012, marking a five-month high

Source: Bloomberg, ICICI Bank

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Source: Bloomberg, ICICI Bank

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%

UK CPI YoY BoE Policy rate

8

US: As of March 6, 2012, 10 year US Treasuries were trading at1.96% while 30 year bonds were quoted at yields of 3.11%.The difference between yields on 10 year notes and TreasuryInflation Protected Securities, a gauge of expectations forconsumer prices during the life of the debt was quoted at 2.21%.Five-year inflation swaps, which allow investors to exchangefixed-interest rates for returns equivalent to the consumer priceindex were trading at 2.37% against a 5 year average of 2.11%.In 2012 company bonds have outperformed US governmentsecurities. Treasuries have handed investors a 0.4% loss in2012 till March 5, 2012, versus a 3.5% gain for the corporatebond gauge, according to Bank of America Merrill Lynch indexes

For the first time since the Treasury Department begancompiling the data in 2001, China, the largest holder of USdebt, reduced its holdings of U.S. government securities in2011. The world's second largest economy held treasuriesworth USD 1.15 trillion as of December 31, 2011, down fromUSD 1.16 trillion at the end of 2010, according to Treasury datareleased on March 05, 2012. Japan maintained its place asAmerica's second-largest lender, with USD 1.06 trillion ofTreasuries in December 2011, while Brazil held USD 226.9billion. Hong Kong held USD 121.7 billion as of December 2011,according to the data. Total foreign holdings amounted to USD5 trillion, up from USD 4.44 trillion in December 2010.

As China's demand for Treasuries waned in 2011, buyers inEurope have ramped up treasury buying as the region's debtcrisis worsened. Luxembourg increased its holdings by 74%to USD 150.6 billion in 2011; Switzerland increased its holdingby close to 33% to USD 142.5 billion while Belgium increasedits holdings to close to USD 135.2 billion. The Fed still remainsthe top holder of US debt with USD 1.66 trillion on its balancesheet.

Euro zone: Moody's placed the UK, France and Austria onnegative outlook on February 14, 2012 raising the prospectthat the three countries would lose their AAA ratings due toexposure to the euro zone debt crisis. A negative outlook meansthat Moody's could downgrade the above countries in the next12 to 18 months. Moody's also downgraded Italy, Spain andPortugal. Italy was cut to A2 from A3, Portugal cut to Ba3 fromBa2, Spain downgraded to A3 from A1. Moody's has also warnedthat it may cut the credit ratings of 114 European financialinstitutions.

Euro zone finance ministers finally reached a long-delayed EUR130 billion second bailout for Greece after private sector holdersof Greek bonds agreed to take even deeper losses than agreedearlier. Although Greek bondholders agreed in October 2011to accept a 50% cut in the face value of their bonds, they havenow been offered a "voluntary" deal with a haircut of 53.5% asreported in the Financial Times. That will reduce Greek debtlevels to 120.5% of GDP by 2020 from 160% of GDP in 2011,close to the IMF's goal for long-term debt sustainability. Greecemust achieve 66% participation to avoid disorderly default thismonth; above 75% to avoid activating CAC (Collective ActionClauses) which could be deemed as default by the InternationalSwaps and Derivatives Association (ISDA). Banks, insurers,and asset managers holding EUR 81 billion in Greek debt have

Global Fixed Income: Greece moves closer to a EUR 206 billion debt restructuring

EM local currency debt continues to outperform in 2012

Source: Bloomberg, ICICI Bank

-2 0 2 4 6 8 10 12

German bunds

Eurobloc government bonds

UK Gilts

US Treasuries

Asia dollar bonds

Latam dollar bonds

Emerging Europe dollar bonds

Local currency Asia bonds

Local currency Latam bonds

Local currency Emerging Europe bonds

YTD returns in USD terms (%)

agreed to exchange their bonds for new instruments that willleave them with losses of about 75%. The list of 30 participantsincludes Allianz, BNP Paribas, Deutsche Bank, HSBC and RoyalBank of Scotland, as well as several Greek banks. The Greekgovernment has threatened to use CAC to force holders ofGreek-law bonds to accept the swap if necessary. Europeanofficials are pressing investors to swallow net present valuelosses of more than 70% to avert the even greater hit thatwould result from a disorderly default. The second rescuepackage of EUR 130 billion depends on the debt swap outcome.As reported in the Financial Times on March 9, 2012, Greecemoved closer to a EUR 206 billion debt restructuring after privatesector bondholders representing almost 85% of securities saidthey were backing the deal. German 10-year bonds rose,pushing yields toward a seven-week low as the debt crisisundermined confidence in Italian and Spanish governmentsecurities. The 10-year bund yield fell 4bps to 1.77% at thetime of writing - the lowest since January 18, 2012. Two-yearyields dropped to 0.16%. German bonds have returned 12%over the past year, according to indices compiled by Bloombergand the European Federation of Financial Analysts Societies(EFFA). Investors are seeking safety in German bunds asGreece seeks to conclude a deal with creditors before a bondrepayment due March 20, 2012.

Emerging markets: The year 2012 has started on a positivenote for the emerging markets fixed income funds. This hasbeen possible on account of the changed perception of risk infavour of emerging markets as compared to developedeconomies of the euro zone and the US. Indonesia andPhilippines enjoy lower borrowing costs than Spain and Italy,while Colombian bond yields are less than that of Belgium. Inthe month of February 2012 alone, EM fixed income fundsreceived inflows of around USD 3.9 billion, according to EPFRdata. Also, inflows into EM fixed income funds have ticked upto USD 887 million in the week ending March 3, 2012, accordingto EPFR data. According to the JP Morgan bond indices,Emerging Europe local currency government bonds have givenreturns of 11.4% YTD (as of March 07, 2012). Investor sentimenthas improved aided by expectation that a second bailoutpackage for Greece would contain the debt crisis, which is likelyto support the upward trend in the coming months.

9

Indian Fixed Income: Bond yield rallied as RBI announced bond purchases

Source: Bloomberg, ICICI Bank

10 year yield movementThe bond market reacted positively in the start of the monthon expectation that the Reserve Bank of India (RBI) would onceagain continue to purchase bonds under its OMO program. The10-year benchmark 8.79% 2021 G Sec hit a nine-month lowafter the RBI announced to buy up to INR 100 billion of debt intandem with the government's bond auctions. On the first dayof the month, the 10-year benchmark G Sec fell sharply by12bps bringing yields to 8.14% after touching a low of 8.10%,a level last seen on April 28, 2011. However in the secondweek, the bond yields rose sharply higher to touch 8.27% asthe RBI held back from announcing a debt buy back throughopen market operation (OMO) to support this weekly auction.Later the yield moved in a tight band of 8.19-8.23% as positivesentiments on account of RBI's bond purchases were set offby the higher crude oil prices and tight liquidity conditions. Theten-year benchmark bond yield ended the month at 8.20%,down 7bps from previous month's close. In line with thegovernment bond yields, the 5-year AAA corporate debtdeclined by 3bps during the month to 9.33%. However, due tolack of risk appetite the yields on sub AAA papers rose byaround 15bps during the month. The spread between the 5-year AAA paper and the corresponding G Sec paper contractedby 8bps to close the month at 100bps.

The liquidity situation in the banking system continued toremain negative in February 2012. During the month, banks onan average borrowed around INR 1,438 billion from the RBIunder the Liquidity Adjustment Facility as compared to INR1,238 billion in the previous month. The liquidity deficit hasoften been more than two times the comfort zone of RBI despitethe cut in CRR in January monetary policy. The RBI evencontinued to conduct regular OMOs and so far has bought backbonds worth over INR 1,000 billion so far. On March 1, 2012,the banks borrowed a record INR 1,917 billion from the Repowindow. The call rates during the month hovered between8.45-9.00% levels. As liquidity situation continued to worsen,the short-term rates continued to rise during the month. Therates on the 3M-Certificates of Deposits (CD) issued by bankshave risen to over 11% in the beginning of March 2012, asbanks rush to meet their year-end demand. The sharp rise inCD rates could be attributed to the lack of mutual fundinvestments after the SEBI reduced the threshold of marked-to-market requirements on debt instruments to 60 days froman earlier threshold of 91 days.

The government discontinued the weekly release of WPIreasoning that the weekly figures displayed extreme volatilityand created confusion when compared with the monthly figures.The monthly WPI for January 2012, eased sharply below RBI's7.0% projection, to a 26-month low of 6.55% YoY as comparedto 7.47% YoY in the previous month. Inflation in themanufacturing sector eased to 6.49% YoY in January 2012 ascompared to 7.41% YoY in the previous month. Core inflationdeclined to a one-year low of 6.68% from 7.72% in the previousmonth. For the first time, India released the annual ConsumerPrice Index (CPI) data last month which came in at 7.65% YoY forJanuary 2012. The Food group rose moderately by 4.11% inJanuary 2012. Inflation in the other groups remained at double-digits – Fuel group rose by 13.13% and “clothing, bedding andfootwear” prices increased by 12.43% in the same month.

Outlook: The market would closely watch the two major eventsthis month: mid-quarter review of monetary policy and the

union budget. Expectations from the outcomes of these eventsride high for a positive turnaround in debt market sentiment.Inflation is expected to moderate in the coming months largelyon the back of a high base effect. However, upside risks toinflation remains on account of anticipated revision of domesticprices of various fuel items while at the same time possibilityof further sharp rise in crude oil prices cannot be ruled out incase the ongoing geo-political tensions. This would fuelinflationary pressures considerably leading to widening ofcurrent account deficit, which would prompt rupeedepreciation. In the near-term liquidity tightness would continueto remain above the RBI's comfort zone especially with theadvance tax outflows next month. With sharp crunch in liquidityRBI may cut CRR in the upcoming monetary policy on March15, 2012.

With inflation moving below the RBI's comfort zone and thelagged impact of monetary tightening beginning to manifest ina moderation in economic activity, the RBI has enough room tocut repo rates. However, the RBI may look at the budgetnumbers and magnitude of government's borrowings nextfiscal, before taking a call on repo rates, as it has clearly statedthat country's fiscal consolidation would be one of the majorfactors that would shape the policy stance. With the lastscheduled bond auction on March 9, 2012 and expectations ofCRR cut, it would be positive for the bond market for now, butthe major risk to bonds would be in terms of higher governmentborrowing next fiscal owing to weak government policies. Themarkets would closely watch for directions from the fiscal deficitnumber for FY 2013 to be announced in the budget in themiddle of March 2012. Oil prices have risen sharply so far thisyear to around USD 125/barrel and would likely hurt the positivebond market sentiments.

G Sec yields would remain range bound on the supply frontand are not expected to firm up significantly as markets wouldfind some support from moderating inflation and expectationsof a rate cut. Yield curve is expected to steepen going ahead asthe RBI begins to cut the policy rate. The short end of the curvewill fall sharply while the long end would probably not fall muchin the near term because of the deficit and the supply concerns.We expect the 10-year benchmark bond yield to remain in therange of 8-8.4% in the near term. In the current scenario, fixedincome looks good considering that the interest rates wouldstart easing. We would recommend investors with low riskappetite to invest in shorter maturity products like FMPs, Liquidand Ultra Short Term funds for 3-6 months horizon, Short TermIncome Funds for 6-12 months horizon. However, investorswho could take some volatility may invest in a staggeredmanner in Income over Gilt for 12-18 months horizon.

7.5

7.8

8.0

8.3

8.5

8.8

9.0

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Ap

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10

EUR/USDThe decision of the policy makers in the euro zone to finallysign off the bailout for Greece on February 21, 2012, providedstrength to the euro. The EUR/USD pair gained by around 1.31%in February 2012, lower than the appreciation of 2.37%witnessed in January 2012. In the month of February 2012, thecurrency pair remained range-bound between 1.30 and 1.34levels. Following the bailout announcement, the commoncurrency pushed through the 90 day moving average andtouched 1.3293 against the USD. The second bailout packagefor Greece, which is worth EUR 130 billion, requires the privateholders of Greek debt to take deeper losses than agreed uponearlier. The deal states a 53.5% haircut for private sectorcreditors as opposed to the earlier accepted 50%. Reports thateuro zone members had delayed approval of more than half ofthe EUR 130 billion bailout for Greece, pending proof fromAthens that it would implement agreed spending cuts andreforms, also weighed on the single currency. In addition,weaker than expected retail sales data from the powerhouseeconomy of Germany, high unemployment figures in the eurozone in general and Spain, in particular, and inflation drove theeuro down 0.8% to 1.3203 against the USD on March 2, 2012.The single currency lost 1.6% against the dollar over the weekending March 2, 2012. The common currency was trading at1.3228 above the 23.6% retracement level of 1.3007 at thetime of writing. Sovereign debt is expected to remain the centraltheme in the medium to long-term in the euro area sinceapprehensions regarding the ability of Greece to meet the termsof the bailout package persist. The euro has breached the 23.6%retracement levels and it finds its nearest resistance at 1.36levels. The nearest support is provided by the 50 DMA of1.3073. If the pair breaches this level, it could even go down to1.26.

USD/INRThe INR was trading at 50.52 levels at the time of writing. Therupee held up well in the first two months of 2012 despite theincreased uncertainty in the euro area in February 2012. TheINR witnessed 8.10% appreciation against the USD as ofFebruary 29, 2012. Increased volumes of portfolio inflows inthe economy have underlined the INR's strength against theUSD this year. The rupee traded in a band of 48.82 and 49.51 inFebruary 2012. The narrow range of the rupee, despite theuncertainty in the euro area, was primarily because of improvedsentiment on the inflation front, CRR cut by the RBI, andincreased FII inflows. Since April 2011 to February 2012 (as onFebruary 20, 2012), India has witnessed net FII inflows of USD14.3 billion. Out of the USD 14.3 billion inflow, USD 8.2 billionhas come since January 2012. USD/INR pair rose to a near sixweeks high of 50.20 on March 6, 2012 in a rather suddenreversal following fears of a potential slowdown in capitalinflows as growth slows in emerging markets. China has set anexpansion target of 7.5% for 2012, lower than the 8% goal inplace since 2005. India's economic growth has further slowed

Source: Bloomberg, ICICI Bank

The euro gained after euro zone policy makers arrived at adecision regarding the long-delayed Greek bailout packageon February 21, 2012

Currency movements

Source: Bloomberg, ICICI Bank

Global Currency: The INR was supported by huge portfolio inflows in February 2012

As on

5-Mar 1 Mth 3 Mth 6 Mth 1 Yr YTD

1.32 0.57 (1.46) (6.33) (5.46) 2.10

81.31 6.22 4.48 5.75 (1.13) 5.73

49.79 1.65 (3.33) 8.11 10.03 (6.72)

% Change

EUR vs USD

USD vs JPY

USD vs INR

1.15

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1.25

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1.35

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EUR/USD 200 DMA 100 DMA 50 DMA

to 6.1% in the Q3 FY 2011-12 from 6.9% in the previous quarter.Investors were also focused on state election results declaredon March 6, 2012 for clues on the Congress-led federalcoalition's ability to revive stalled reforms. In Uttar Pradesh,the regional Samajwadi Party (SP) has won an outright majorityin the 403-member assembly. It would prove difficult for theCongress to push ahead with pending reforms with SP in aposition to govern alone in UP. Besides the risks of a slowdownin FII inflows, dollar demand would remain high on rising crudeprices. The USD/INR pair has crossed over the 50 DMA (daymoving average) and the 100 DMA from above in February2012. The currency finds a near-term resistance at the 200DMA of 48 per USD levels. The nearest support would be the100 DMA of 50.75 levels. If this is breached, the next supportis around 51 levels. Any appreciation in the currency wouldhappen only gradually. Upside inflation risks on higher oil prices,the Union Budget, tensions between Iran and the West, andevents in the euro zone will also determine the direction of thecurrency pair in the near-term. We expect the rupee to remainin the range of 48-52 in the next 3-6 months period.

USD/JPYThe Japanese yen appreciated 0.84% in January 2012, but hasdepreciated 6.50% in February 2012. The yen is currentlytrading at 81.31 levels (as on March 6, 2012). JPY has gained alot in the Q4-2011 due to its safe haven status amidst the globalrisk aversion especially due to euro zone debt crisis. However,the recent intervention by the Bank of Japan (BoJ) has led tothe weakening in the JPY. The BoJ has taken further monetaryeasing steps in February 2012, announcing that it would addJPY 10 trillion to its asset buying and lending scheme, underwhich it buys and lends cheap funds against various types ofcollateral. The BoJ further stated that the entire increasedamount would be used for the purchases of long-termgovernment bonds. The sudden intervention by the BoJ hasled to a 3.66% weakening in the JPY against the greenbacksince the central bank's move on February 14, 2012. The yenstood at 81.81 per USD on March 2, 2012, the lowest levelwitnessed in nine months. This has brought some respite tothe domestic exporters who were adversely affected by thestrength of the currency seen earlier. The forwards indicatethat the JPY would trade around 81-82 levels per USD till theQ2-2012.

11

Global Equities: Equity markets across the globe saw a rally in February 2012

Indian equity market outperformed its peers in 2012

Source: Bloomberg, ICICI Bank

The S&P 500 index and the Dow Jones Industrial Average indexincreased by 3.63% and 2.27% respectively in February 2012.On YTD basis, the indices have risen by 9.11% and 6.45%respectively. The Dow Jones closed at over 13,000 level onFebruary 28, 2012, a feat that had not happened in nearly fouryears. The rally has been supported on the back of technologystocks, which have experienced huge gains this year. The rallyin the technology stocks is expected to continue. In addition,the banking sector stocks seem to have taken cues from thesanction of the Greek bailout package and have experienced amodest rise towards the end of the month, after suffering lossesin the beginning of February 2012. Fears regarding the possibilityof Greek debt default and inconclusive meetings of the eurozone finance ministers have continued to attract pessimism inequities in the euro area. The FTSE Eurofirst 300 Index and StoxxEuro 600 index rose slightly in the month of February 2012 by1.5% and 1.6% respectively. The euro area's economycontracted in the Q4-2011 as investment plunged the most since2009, and exports and consumer spending also dropped. Grossdomestic product declined 0.3% QoQ in the Q4-2011, accordingto the European Union's statistics office. In response, the StoxxEurope 600 Index declined 1.3% on March 6, 2012. Japan'seconomy contracted at an annualised rate of 2.3% in the Q4-2011. The primary reasons for this contraction were weak exportsdue to weak global demand and a strong currency. The stockmarket in Japan reacted positively to the monetary easing stepsannounced by the Bank of Japan (BoJ) on February 14, 2012,rallying 3.66% since then. People's Bank of China cut the reserverequirement ratio by 50bps from 21% to 20.5% on February 19,2012, boosting investors confidence. The monetary policyeasing led to a rise of 3.22% in the Shanghai Composite for theweek ending February 24, 2012.

Indian equity markets shoots up in the month of February2012 on positive global cuesIndian equity markets logged gains for consecutive three weeksof February 2012 as continued foreign fund inflows, domesticgovernment data showing inflation in January 2012 easing to26-month low and firm global stocks boosted the investorsentiments. However the market tumbled in the last week ofFebruary 2012, snapping a seven-week rally in 2012, asinvestors booked profits as concerns mounted over risingcrude oil prices. Higher oil prices spoiled investor sentiment.India imports about 80% of its total oil consumption and therise in prices could worsen a widening trade deficit.

BSE Small-cap and Mid-cap outperformed the Sensexin the month of February 2012In February 2012, buying interest was seen across the indicesand market breadth remained strong. The Sensex gained 1.2%as compared to BSE Mid-cap and Small-cap indices, which roseby 6.3% and 3.3% respectively. On the sectoral front, ConsumerDurables delivered highest monthly returns of 12.3% followedby Power stocks delivered 6.4% returns after Prime Minister,initiated clearance of coal supplies to power generation firms.However, BSE Metals ended with a marginal decline of 0.3%in February 2012 as investors fear slow in global demand formetals. Expectations of a interest rate cut by the RBI in itsmonetary policy review meeting scheduled on March 15, 2012,drove interest rate sensitive stocks to end higher for the month.However, most of the sectoral indices delivered single digitreturns in February 2012 as compared to double digit gains forthe most of sectoral indices in January 2012.

Outlook– Key announcements from Union Budget FY2012-13 and outcome of the RBI mid-quarter policy review meetingto provide further direction for the marketsMarkets witnessed a second straight month of gains in February2012. FIIs continued to invest in Indian equities as investors’appetite for riskier assets improved globally, to get the FII flowsat the same pace seems difficult going forward Indian equitymarkets moved in tandem to global peers as better-than-expected economic data from the US and improved consumerconfidence measures globally led a rally in global markets.However, macro-economic worries over a rise in crude pricesat international level, high trade deficit in the economy anddismal performance for India’s GDP growth in the Q3 December2011, weighed on investors’ sentiment recently. The Indianequity market could gain stability although at a slower pace inthe near term, but volatility may creep in anticipation of credibleeconomic reforms measures through Union Budget 2012-13,scheduled on March 16, 2012. Investors’ sentiment in equitieswould also eye the crucial decision from the RBI’s mid-quarterpolicy review meeting on March 15, 2012. Globally, unfoldingof international events both at political and economic frontwould tend to be a major aspect for Indian equities performance.Sensex could move in the range of 15500-19,000 in the nearterm. Investors should avoid timing the market and rather takea long-term view, invest through the SIP and STP route andcontinuously buy at every dip. One should not be swayed bymarket momentum, but should restructure one's portfolio givenopportunities and book some profits at higher levels as long asthe global economic as well as political environments remainuncertain. An investor may use current levels to enter themarkets in a staggered manner in large-cap and diversified fundswith a holding horizon of 2-3 years kept in mind.

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China India Indonesia

Russia Brazil Korea

EM EM (Asia)

Global Equity PerformanceVolatility

% Change 1

week 2012 YTD 1 Month 3 Months 6 Months 1 Year

3 Years -

CAGR 2 Years

World 0.76 9.82 4.83 9.63 9.05 (3.14) 20.04 22.45

EM 1.40 17.79 7.28 16.28 7.45 (2.94) 29.30 23.45

North & South America

US 0.59 8.93 4.11 9.76 12.92 4.79 23.09 24.16

Argentina (13.69) (6.53) (17.90) (10.20) (27.45) (40.22) 20.75 34.52

Brazil 0.25 21.15 5.98 18.30 10.03 (6.07) 27.26 31.23

Mexico 0.22 10.54 3.41 8.26 4.44 (1.74) 34.58 27.93

Europe

MSCI Europe 0.94 10.88 6.59 9.10 6.56 (10.27) 16.79 31.50

UK 1.18 8.21 5.48 8.25 11.24 (3.36) 19.78 28.07

France 1.36 12.97 7.97 9.09 0.85 (16.94) 11.86 38.13

Germany 1.23 19.48 8.52 11.65 10.92 (10.81) 19.22 38.91

Italy (0.38) 11.70 5.63 6.63 0.89 (26.77) 4.11 43.07

Spain 0.31 2.19 6.48 (3.04) (18.18) (30.07) 2.39 31.07

Sweden 2.09 17.15 10.80 15.92 13.01 (6.31) 33.21 41.98

Switzerland 0.01 7.34 4.61 9.18 2.34 (5.06) 19.17 25.20

Poland 2.59 20.15 5.64 10.07 (8.87) (19.88) 27.90 41.33

Russia 5.73 25.84 11.51 12.47 6.96 (9.67) 37.71 36.66

Turkey 0.41 26.97 6.67 15.65 11.79 (4.24) 31.37 36.34

Asia & Middle East

MSCI EM (Asia) 0.80 16.73 7.25 17.49 7.88 (1.72) 28.98 26.35

Australia 1.55 10.95 2.25 9.10 1.86 (6.65) 28.51 31.38

China 0.45 18.04 8.08 20.96 9.73 (5.10) 19.84 30.98

Hong Kong 1.71 18.80 9.22 20.86 8.18 (2.65) 23.49 24.66

India (1.41) 26.63 7.95 19.03 3.25 (11.69) 28.95 26.50

Indonesia 0.06 2.49 (0.51) 5.82 (2.74) 9.97 54.65 30.03

Korea 0.83 15.07 5.55 13.09 9.82 5.07 39.75 38.32

Malaysia 1.31 8.60 5.22 12.71 7.92 5.48 28.97 17.42

Philippines (1.19) 15.89 6.84 20.01 13.74 26.82 33.79 22.62

Singapore 1.24 19.77 6.10 16.20 4.72 (2.08) 30.83 25.15

Taiwan 2.42 17.10 9.32 20.58 6.85 (6.64) 25.79 26.65

Thailand 3.39 21.12 13.98 24.01 13.17 17.68 47.51 28.54

Japan 0.63 9.75 4.94 10.53 5.00 (13.17) 10.07 24.22

Returns in USD (%)

Equity Markets

As on February 29, 2012 Source: Bloomberg, ICICI Bank

12

Feature Article

13

India’s GDP clocked a disappointing growth rate of 6.1% in the Q3 FY 2011-12

Manufacturing, along with mining and agriculture, dampenedthe pace of economic growth in the Q3 FY 2011-12India’s economy expanded at a slower pace in the Q3 FY 2011-12 compared to the previous quarters of FY2011-12 due topoor performance of the manufacturing, mining and farmsectors. The third quarter’s 6.1%YoY increase was the slowestrate of growth since 2009. It is a significant slowdown from6.9% in the second quarter of FY 2011-12 and marks the fourthstraight quarter of growth below 8%. There was a large disparityamong different sectors. The most disappointing componentis fixed investment, which continued to fall in the Q3 2011-12,reflecting declining business confidence and higher interestrates.

The economic activities which registered significant growth inQ3 of FY 2011-12 over Q3 of FY 2010-11 are electricity, gas &water supply at 9%, construction at 7.2%, trade, hotels,transport & communication at 9.2%, and financing, insurance,real estate & business services at 9% and community, social &personal services at 7.9%. The growth rate in agriculture,forestry & fishing, mining and quarrying, and manufacturing isestimated at 2.7%, -3.1% and 0.4%, respectively in this period.

Consumption expenditure remains robustOn the demand side, consumer spending, which is representedby private final consumption continues to hold up well. On ayearly basis, consumption expenditure was up 6.2% in the Q3FY 2011-12 from a year ago compared to 2.9% YoY in theprevious quarter. However, gross fixed capital formation, whichrepresents the creation of productive assets by businesses,

slumped by 1.2% from a year ago, although this is better thanthe –4% YoY registered in the previous quarter. The slowdownin investment spending is a cause for concern. Investmentactivity continues to reel under the effect of high raw materialcosts and high borrowing costs. Government final consumptionexpenditure has declined to 4.4% YoY in the Q3 FY2011-12from 6.1% YoY in the Q2 FY 2011-12. Imports growth pickedup pace in the Q3 FY 2011-12 and rose to 17.3% YoY as against6.9% YoY previously. Exports growth declined sharply to 13.1%YoY from the previous 23.3% YoY.

Manufacturing remains a key challengeAccording to the advance estimates of national incomepublished by the Central Statistics Office (CSO), Indianeconomy is forecasted to grow at 6.9% in the FY 2011-2012from 8.4% in FY 2010-11. The Indian economy witnessed aslowdown in the growth rate of the Index of IndustrialProduction (IIP) for the month of December 2011. The IIP grewby 1.8% in December 2011 as compared to December 2010.The decline in the growth rate was primarily due to a drop incapital goods, mining and manufacturing. The index of mining,manufacturing and electricity, registered growth rates of -4.6%,0.8% and 9.6%, respectively in the Q3 of FY 2011-12, ascompared to the growth rates of 6.3%, 9.2% and 6.5% in thesesectors in Q3 of 2010-11. According to the Prime Minister’sEconomic Advisory Council (PMEAC), India’s GDP growth isestimated to expand at 7.1% in the FY 2011-12. Manufacturinggrowth has declined from 7.2% YoY in the Q1 FY 2011-12 to2.7% in the Q2 FY 2011-12. With manufacturing that constitutes15% of GDP registering an abysmal growth rate of 0.4% in theQ3 FY2011-12, an overall growth rate of 7% for FY 2011-12would be difficult to achieve unless manufacturing activity picksup in the final quarter. The decline in inflation and below trendgrowth will make it easier for the central bank to cut rates in thecoming months.

Gross fixed capital formation remains a drag on GDP growth

PFCE - Private final consumption expenditureGFCF - Gross fixed capital formationGFCE - Government final consumption expenditureSource: CSO, ICICI Bank

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Q1 F

Y0

9

Q3

FY

09

Q1 F

Y1

0

Q3

FY

10

Q1 F

Y1

1

Q3

FY

11

Q1 F

Y1

2

Q3 F

Y1

2

%

-20

-10

0

10

20

30

40

50

60

%

GDP % (YoY) PFCE % (YoY) GFCF % (YoY) GFCE % (YoY), Rhs

Sharp slowdown in manufacturing activity hurt GDP growth

Source: Bloomberg, ICICI Bank

0

1

2

3

4

5

6

7

8

9

10

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

GDP (% YoY) Manufacturing (% YoY)

14

Alternative Investment Assets

15

Real Estate Overview

UK Real Estate:The UK housing market still struggles to gain momentum,amidst the shortage in supply of homes on sale and record lowinterest rates being followed by the Bank of England, as thebanks restrict lending and inflation erodes the spending powerof buyers. According to the Nationwide Building Society, theUK housing market recorded the maximum drop in ten monthsduring August 2011 tracking the slow recovery, which threatensto undermine demand. Moving further ahead, according to theRoyal Institution of Chartered Surveyors, the UK house priceindex remained unchanged during September 2011, trackingthe weak customer sentiment and the uncertainty over theeconomic outlook that is keeping the potential sellers andbuyers away from the market.

However, London is witnessing an uptrend in prices. The homesellers have increased the asking prices by the most in twoyears in October 2011, thereby raising the capital values to arecord. According to analysts, the cash rich buyers with hugedeposits, who are benefiting from the cheap mortgage rates,have largely boosted the demand in London. According to aninternational real estate adviser, Savills, prime residentialproperty values across the whole of London have closed 2011on a record high. A `flight to quality' by the international safehaven buyers means that the best central addresses havesignificantly outperformed vis-à-vis locations that were fuelledonly by domestic buyers and hence, have lost momentum.The top end of the prime central London has witnessedexceptional levels of growth. International buyers haveaccounted for almost 75% of sales. The ultraprime sector, withaverage values of over GBP 15 million, witnessed valuesincrease by 18.6% during 2011, which is a testament to thegrowing demand from the global super rich.

According to experts, UK commercial real estate marketprobably will dip 4.9% in 2012 as the European debt crisis andconcerns that the economy will slip back into a recession hurtdemand for assets in all but the best locations. Experts are ofthe opinion that during the periods of economic uncertainty,investors and tenants focus on buildings in the best locationsand tend to move away from the secondary and riskier markets.A two-year recovery in values for UK shops, offices andwarehouses moderated in the H2-2011 as the efforts to shoreup the finances of the countries such as Greece, Spain andItaly failed to stem the rising government borrowing costs.According to the National Institute for Economic and Socialresearch, the British economy has a 50% chance of slippingback into a recession during 2012. Overall, we recommend a‘wait and watch’ scenario with regards to the UK real estatesector for the H1-2012 tracking the weak economic scenario.

China Real Estate:Will the Chinese real estate bubble burst? This is a questionwhich the officials in China are dreading and are trying toincreasingly avoid. The Chinese regulators have asked thebanks to tighten their lending to the real estate sector onconcerns that the credit risks may increase as the government

tightens its stance towards the sector in the forthcomingmonths. The People's Bank of China has asked the lenders notto extend the maturity of loans to developers, not to grant anynew credit to developers to repay their maturing debt and toset significantly higher standards on loans to commercialproperties compared to those for residential. Chinese PremierWen Jiabao promised more support to the real economy - areference to efforts to channel money to productive businesseswhile preventing credit from fuelling stocks and real estatespeculation. The Premier also stated that the nation would curbthe house price gains in the tier II and III cities. He further statedthat the Chinese property market is at a critical stage and thenation needs to focus efforts on the curbing of the house pricegains in these cities. He additionally reiterated that Beijing willnot relax its clamp down on the property market until the priceshave settled at reasonable levels. According to Standard's andPoor's, the credit outlook for Chinese developers shall be`increasingly severe' amid government efforts to contain homeprices.

The government increased the down payment requirementsand mortgage rates on some of the homes in 2011 and issuedhome purchase restrictions in about 40 cities. Land sales haveslowed down sharply in China during 2011, according to a seriesof industry reports that highlight the deepening woes of thedebt laden local governments that depend on the land auctionsas a critical revenue source. While the dipping sales are faraway from the crisis point, authorities are increasingly underpressure to choose between the costly help for the worst hitcities and an unpalatable relaxation of policies aimedat avertinga dangerous property bubble. According to Centaline, a realestate company, nearly 900 land auctions have failed in 2011,approximately three times more than in 2010.

Although the weakness in sales was expected owing to thesustained measures on behalf of the government to cool downthe property sales, the deterioration appears to have beensudden, accelerating at the end of the year. According to arecent report released by REICO, a research institute set up bythe China Real Estate Chamber of Commerce, a semi-government association and a fund created by developers, thehome prices in China are likely to fall moderately in the H1-2012 before stabilizing in the H2-2012 as the economymaintains its market tightening measures. Average homeprices have declined nationwide since October 2011 and thegovernment has repeatedly stated that they want to pull theprices back to the reasonable levels. Rapid increases inconstruction of new homes from March to November 2010would lead to increases in supply from the Q3- 2012. Moreover,they stated that the softening prices and loose monetary policywould lead to easier and cheaper mortgage loans for the first-time home buyers and increase transactions, whereas slowerexpansion by developers would cool real estate investment in2012. Henceforth, we take a cautious stance with regards tothe Chinese real estate market for the H1-2012

16

Private Equity: India continues to be a small- to medium-sized deal market

The global private equity (PE) majors are altering their strategywith respect to their investments in the listed space. The PEmajors are reducing their exposure towards the large-cap listedcompanies, as the stock market has broadly been in the recoverymode off late. Simultaneously, they are stepping up presencein similar mid-sized companies. PE majors Carlye and WarburgPincus had, in two separate deals, made a partial exit from theirinvestments in India's leading mortgage lender HDFC Ltd andleading lender Kotak Mahindra Bank, respectively. Accordingto experts, the facts of higher percentage of stake as well asprominent place in the board drive more PE firms into the mid-sized listed companies.

India continues to be a small- to medium-sized deal market,with SMEs continuing to be the backbone of most PEinvestment portfolios in India, according to a recent report byProtiviti Consultants and the Asian Venture Capital Journal. Thereport, India Investment Opportunity: An Insight, based on asurvey of PE fund executives, stated that 48% of respondentsfelt SMEs presented a better value opportunity than othercategories of companies, while 40% responded that it woulddepend on the sector, and only 12% cited large enterprises. Interms of investment size, India continues to be a small- tomedium-sized deal market.

Most survey respondents (61%) felt that India still appearsmore promising as a long-term investment destination relativeto China or Brazil. However, 62% pointed out that lack ofsuccessful exits and valuation mismatches would make it harderfor General Partners (GPs) to raise India-dedicated funds relativeto the ones dedicated to China or Brazil. Survey respondentslisted out four other factors that contributes to the difficult today- than in the past - for India-dedicated funds to raise resources:the large number of India-focused GPs that are looking to raisefunds; the tightening global liquidity scenario; volatile macro-economic factors (high inflation and a large fiscal deficit) inIndia; and corporate governance issues.

On what would be the most significant challenge facing India-focused GPs in the next 12-18 months, survey respondents

cited the difficulty in exiting existing investments; the difficultyin finding quality investment opportunities; the uncertainregulatory and reform scenario; and economic uncertainty. 57%of the respondents held that the recent corporate accountingscams have had a medium-to-high impact on their investmentdestination decisions. Managing profitable exits and buildingtop-quality professional managers and stricter investmentparameters of Limited Partners (LPs)/investment committeeswere the key challenges respondents felt Indian PE/VCs couldface in the near future.

Further, 64% of the respondents were of the opinion that thePE/VC investment in India would slow down over the next 12months. Respondents listed pharmaceuticals / healthcare,FMCG, education, energy, banking and finance, hospitality,infrastructure, IT, retail, auto ancillary, real estate and telecom(in that order) as the most promising for investment over thenext 12-18 months. While the "bear runs" in the stock marketshave created attractive investment opportunities in listedentities (PIPE - private investment in public equity deals) andrecent changes to the takeover code may lead some PEs toappear more favorably at PIPEs, 75% of the survey respondentswere in favour of investing in unlisted entities. Only 25% werein favour of investing in listed entities. The preferred exitchoices of respondents for current investments in the next 24-36 months were strategic sales (40%) and secondary sales(36%) - understandable, owing to the recent volatility in stockmarkets, which has caused dormancy in the IPO market andalso given that promoter buybacks in India have been historicallyunsuccessful.

Corporate governance has historically taken a back seat in SMEs,as observed in the report. However, with the recent spate ofaccounting irregularities, there is renewed focus amonginvestors on corporate governance and stronger financialcontrols. Survey respondents also stated that the first in linefor a change after their investment would be positions in thefinance function, followed by internal audit, external audit andMIS.

17

Commodities: Gold drops on dollar strength, while oil rises fanned by tensions between Iran and the West overIran's nuclear programme

Gold could see consolidation around USD 1,600-1,650/oz levelsGold prices have remained above USD 1,700/oz in the previousmonth amid weak dollar and ongoing uncertainty over Greece'ssecond bailout. The market sentiment was further boosted bythe reduction of the reserve requirement ratio by 50bps by thePeople's Bank of China, thereby lending support to all metals.The cut is expected to add around RMB 400 billion to thefinancial system and boost economic activities in China.Starting March 2012, gold has dropped below USD 1,700/oz asinvestors resorted to profit-booking on positive economic datareleases from the US and some uncertainty on the Greek debtswap deal.

The recent rally in gold has also been driven by positive demandfundamentals. The main driver was the investment sector withIndia, China and Europe being the pre-eminent markets.According to Bloomberg, investors held a near-record 2,389.7tonnes of gold as of February 16, 2012. Gold demand hit 14-year highs in 2011, driven by record investment, buying in China,which is likely to overtake India this year as the world's topconsumer. Total demand for gold in China in 2011 rose 20% to769.8 tonnes, driven by jewellery and investment demand,compared with a 7% fall in demand in India to 933.4 tonnes asa result of volatile gold prices and a weak rupee. Chinesejewellery demand increased every quarter of 2011 and was thelargest single jewellery market worldwide for the second half of2011. Chinese household demand for gold jewellery in valueterms grew by 27% on YoY basis, which implies that Chinesehouseholds spent three times as much as did US consumers.Central banks bought 439.7 tonnes worth of purchases in 2011,more metal than at any time since the end of the gold standardin 1971, compared with 77 tonnes in 2010.

Outlook: Gold prices were trading around USD 1,673/oz at thetime of writing following a drop to USD 1,663/oz on March 6,2012 as the USD strengthened. In the event of dollarstrengthening in the near-term, USD 1,650/oz will act as a keysupport level. Gold prices in INR terms was trading at INR27,759/10g at the time of writing, around 4.6% below the highof INR 29,111/10g. Prices are likely to remain supported giventhe global concerns, high oil prices, and domestic concernssuch as rising fiscal deficit, fall in the growth rate, and a weakINR. Prices can move further upwards on account of risk aversionwith USD 1,800/oz acting as the next level of resistance.

Oil above the key resistance level of USD 105/bblWTI crude oil prices rose above USD 106/bbl on February 22,2012, while Brent crude prices rallied above USD 121/bbl asIran halted crude sales to French and British companies andhas been negotiating with new customers such as China. Iranthreatened to halt oil shipments to Italy, Spain, Portugal, Greece,France and the Netherlands unless they agreed to long-termcontracts and payment guarantees. Companies controllingmore than 100 supertankers have decided to stop loadingcargoes from Iran. For instance, Overseas Shipholding Group,holding 45 supertankers, Nova Tankers A/S and Frontline Ltd.,with combined 93 vessels, have decided not to ship crudefrom Iran. Iran has also threatened to block shipments throughthe Strait of Hormuz in the Persian Gulf through which about20% of the world's globally traded oil passes. The arrest of twoIranians after bombings of the Israeli diplomatic vehicles inNew Delhi and the Georgian capital of Tbilisi in the secondweek of February 2012, further heightened the geopoliticalconcerns. According to the Commodity Futures TradingCommission, speculators and hedge funds turned bullishtoward the energy complex with the bullish oil bets rising by28,180 contracts to 233,889 in the week ending February 14,2012, the largest increase since October 25, 2011.

EU nations together bought 18% of Iran's exports of crude oiland condensates in the H1-2011 i.e. 452,000 bbls per day. Thiswas followed by France and the UK, which purchased 49,000bbls a day and 11,000 bbls per day in H1-2011 respectively.France gets about 3% of its oil imports from Iran, while Germanygets only about 1% of their oil from Iran. Greece, Italy andSpain are more dependent on oil imports from Iran as Greecegets about one-third of its oil from Iran, while Italy and Spaineach get about 13%. According to the data compiled byBloomberg, Iran produced 3.55 million bbls of crude per day inJanuary 2012, i.e. 11% of OPEC's total production. Accordingto the US Energy Department estimates, total revenue of Iranfrom oil sales was USD 73 billion in 2010.

Brent crude witnessed a jump in prices to the highest levelsince mid-2008, after a report stated that a pipeline has burst inSaudi Arabia. The report, which was later denied by SaudiArabian officials, led to oil prices gaining USD 5.75 to reachUSD 128.4/bbl on March 1, 2012. The US and five other worldpowers agreed on March 6, 2012 to reopen talks with Iran onits nuclear programme in a move seen by many diplomats as alast chance to forge a negotiated solution to the crisis and avoidan air strike by Israel. The announcement that the US, Russia,China, the UK, France and Germany plan to meet Iran helpedpush down the price of oil up to 2%, sending Brent crude, theglobal benchmark, briefly below USD 122/bbl.

Outlook: WTI oil prices are trading above the key resistancelevel of USD 105/bbl. Crude has gained 7% since the start ofthe year on fears regarding lower supplies from Iran. Incase thegeopolitical risks escalate further; oil prices could rise evenfurther. However, if prices are unable to consolidate aroundthese levels, USD 103.60/bbl reached on January 5, 2012, willact as a short-term support level. USD 100/bbl levels, whichcoincide with the 50 DMA, will act as the next support level.Consolidation is expected around USD 95/bbl levels.

Gold is trading very close to its 200 Day Moving Average

Source: Bloomberg, ICICI Bank

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Mar-

06

Sep-0

6

Mar-

07

Sep-0

7

Mar-

08

Sep-0

8

Mar-

09

Sep-0

9

Mar-

10

Sep-1

0

Mar-

11

Sep-1

1

Mar-

12

US

Dp

er

ou

nce

Gold prices in USD/oz

50 Day Moving Average

100 Day Moving Average

200 Day Moving Average

18

Mutual Funds

19

What is IMAP?IMAP stands for ICICI Bank Mutual Fund Analysis andPerformance Rating. IMAP is a copyright and a trademark ofICICI Bank Limited. It is a relative ranking of mutual fund schemesas compared to their respective peer group in each schemecategory.

Eligibility CriterionIMAP rating for mutual funds covers all open-ended schemes,which have disclosed their net asset values (NAV) for at leasttwo years, and make a 100% disclosure of their portfoliocomposition. The overall cut off for the AMC as a whole is INR20bn. There are individual scheme specific cut off in eachcategory. Also atleast five schemes in a category should fulfillthe above criterion to start the ratings.

MethodologyThis exercise is undertaken on a monthly basis (with timeweighting to make it forward looking) to rank various mutualfund schemes. The relative performance rank is based on thefollowing criteria - Peer Group Relative Benchmarking Score(PGRBS) of the scheme portfolio, Concentration of the schemeportfolio (scrip & sector specific), Liquidity of the schemeportfolio (helps capture impact costs), Asset Quality in case ofDebt portfolio, and Asset Size of the Scheme (Investorconfidence). Besides, this exercise includes key risk analyticsthat portray fund management styles like Downside RiskParameter, Degree of Improper Diversification and FundManagement Skill measure. A comprehensive score iscalculated based on weighting the various relative factor-scores.Weightages are based on constrained linear programming.Scoring of each factor is converted to a relative scale and finallycomprehensive performance rating involving all the factorsconsidered, is assigned to each scheme using truncatedstatistical distribution.

Comparative advantages of IMAP:• Compared to other Rating methodologies in existence globally,

IMAP adopts Process and Performance-based parameters.The parameter weightages have been scientifically arrivedat by integrating fund management process in understandingscheme performance against its peer group

• The process-based approach reflects the inherent strength ofthe rated fund. Consistency and time weightings make themforward looking unlike others.

• Absolute Performance based ratings on statistical distributionfitting gives an edge over clustered or quartile basedperformance ratings in existence (e.g. IMAP ratings of 4.15as against **** Star)

• It is totally unbiased automated quantitative approach withouthuman intervention. Rating differences between any twoschemes captures performance differences.

• Methodology in existence for the past 5 years. The hallmarkof this approach is that it results in risk profiles for variousschemes in a category (for example only aggressive fundsgenerally will be the top performers , say ratings above 4)

Categories covered under IMAP:• Rated mutual fund categories in

open end debt category includeLiquid Plans, Liquid Plus, ShortTerm Plans, Income Funds, andGilt Funds,

• In case of Equity Funds, funds are further classified underDiversified, Large Cap Mid Caps, Dividend yield and Value.While arriving at peer group performance rankings, diversifiedequity funds are benchmarked with BSE 200, large caps withBSE100 and mid caps with CNX Midcap indices. Subclassifications within equity schemes facilitate investmentplanning under multicap scenario.

• Others like ELSS and Sector Funds are rated separately,though it is similar to equity funds. Similarly in case of sectoralfunds, the respective BSE sub indices are used as benchmark.Tracking errror is the main criterion for rating Index funds.

• Balanced and Monthly Income Plans are rated on income andequity parts.

About ICICI Bank Mutual Fund Rating

IMAP RATINGIMAP score Interpretation

4-5 Aggressive Performer3-4 Conservative Performer2-3 Average Performer1-2 Under Performer

IMAP Rating Process

League Table Performance

• Look for consistent risk adjustperformance

• Daily returns in excess of PeerGroup returns per unit of volatility

• Time weighting for 3 TimeHorizons

Risk Management ProcessFund Size*

6 Months 1 Year 2 Year

Fund Performance relative to benchmark

Fund Corpus Impact Cost* Fund ManagementComplexity*•External liquidity risk

•Internal liquidity risk

(in case of debt funds)•Credit Risk•Duration Risk

• Downside Risk• Degree of improper

diversification• Fund Management skills• Concentration risk

corporates & sector

Fund Management & Investment Process

20

Relative Risk Return Analysis

Source: ICICI Bank

Mutual Funds

Relative Risk Return Analysis

Source: ICICI Bank

Income FundsIncome Funds delivered returns in the range of 0.5% to 1.27% in the month of February2012. The ten-year benchmark bond yield ended the month at 8.20%, down 7bps fromprevious month's close. In line with the government bond yields, the 5-year AAA corporatedebt declined by 3bps during the month to 9.33%. However, due to lack of risk appetite theyields on sub AAA papers rose by around 15bps during the month. The spread between the5-year AAA paper and the corresponding G Sec paper contracted by 8bps to close themonth at 100bps. Investors with longer investment horizon and higher risk appetite canconsider Income Fund and may invest in a staggered manner with expectation of reversalin monetary policy going ahead and as corporate spreads would remain supported giventhe relative lack of supply of corporate bonds.

Gilt FundsGilt Funds delivered returns in the range of 0.86% to 1.54% in the month of February2012. In the beginning of the month the 10-year benchmark 8.79% 2021 G Sec hit a nine-month low after the RBI announced debt buy back through OMO. Later the 10-yearbenchmark hovered in a tight band of 8.19-8.23% as positive sentiments on account ofRBI's bond purchases were set off by the higher crude oil prices and tight liquidity conditionsand closed the month at 8.20%, down 7bps from previous month's close. Given thecurrent volatility in debt markets, we expect yields to remain range bound in the near termand do not recommend fresh money in Gilt Funds at the current juncture.

Relative Risk Return Analysis

Source: ICICI Bank

Short Term PlansShort Term Plans have delivered returns in the range of 0.55% to 0.88% in the month ofFebruary 2012. As liquidity crunch in the system continued to worsen, the short term ratesduring the month shot up sharply. The yields of the 3M papers, especially, came underpressure. The rates on the 3M-Certificates of Deposits (CD) issued by banks have risen toover 11% by March beginning, as banks rush to meet their year-end demand. The sharp risein CD rates could be attributed to the lack of mutual fund investments after the SEBI reducedthe threshold of marked-to-market requirements on debt instruments to 60 days from anearlier threshold of 91 days. The 3M Commercial paper (CP) rates have risen by 75bps inFebruary to end the month at 11%. Investors should continue to invest in Short Term Plans inorder to benefit from high accruals, as short-term rates remain high. They would also benefitfrom capital gains as and when the rates decline.

Source: ICICI Bank

Equity FundsIn the month of February 2012, most of the diversified funds maintained their respec-tive positions in the relative risk return matrix. Kotak Opportunities, FIFC , ICICI Pruden-tial Dynamic posted a change in respective quadrant positions in February 2012. ICICIPrudential Dynamic equity fund moved to Low Risk High Return quadrant from its HighRisk High Return quadrant due to change in its overall portfolio strategy. Franklin IndiaFlexi Cap moved to High Risk and Low Return quadrant from its High Risk High Returnquadrant, while SBI Magnum Multiplier moved to High Risk High Return quadrant fromits position in High Risk Low Return quadrant on improved performance. Overall, thediversified funds covered in the relative risk return matrix delivered positive returns inFebruary 2012.

Source: ICICI Bank

Relative Risk Return Analysis

Relative Risk Return Analysis

Ultra Short Term FundsUltra Short Term funds have delivered returns in the range of 0.46% to 0.86% in themonth of February 2012. The liquidity condition continued to remain sharply negativethrough out the month, in spite of RBI continuing with its government bond purchaseunder its OMO program and cutting the CRR by 50bps in its January monetary policyreview. During the month, banks on an average borrowed around INR 1,438 billion fromthe RBI under the Liquidity Adjustment Facility as compared to INR 1,238 billion in theprevious month. On March 1, 2012, the banks borrowed an all time high of INR 1,917billion from the Repo window. The call rates during the month hovered between 8.45-9.00% levels. As liquidity situation continued to worsen, the short-term rates continuedto rise during the month. Ultra Short Term funds continue to remain a good investmentavenue in the current scenario as they not only generate high returns with low interestrate risk but also provide an option of easy liquidity.

UTI Bond

Kotak Bond

HDFC Income

Birla Income

Plus

ICICI Pru Income

HDFC HIF

Low Risk High Return

Low Risk Low Return

High Risk High Return

High Risk Low ReturnStandard deviation - 1 year

Templeton IBA

Templeton IncomeDSPBR Bond

Reliance Inc

IDFC Income

SBI Magnum

Income

Retu

rns

-1

Yea

r

ICCI Pru LTP

Standard Deviation - 1 Year

Retu

rns

-1

Yea

r

HDFC GiltICICI Pru Gilt

Birla Gilt Plus

Kotak Gilt

Low Risk High Return High Risk High Return

High Risk Low ReturnLow Risk Low Return

Templeton GSF LTP

DSPBR G Sec

Tata GSF

SBI Magnum Gilt

UTI G Sec

Temp GSF Comp

UTI Gilt Adv

Reliance Gilt

Standard Deviation - 1 Year

Retu

rns

-1

Yea

r Templeton India STP

Reliance STP

Low Risk High Return High Risk High Return

High Risk Low ReturnLow Risk Low Return

IDFC SS UTI STIF

HDFC STPHDFC

HI STP

Kotak STP

SBI SHDF

ICICI Pru STP

Reliance RSF-D

Standard Deviation - 1 year

Ret

urn

s-1

year

RRSF

HDFC Equity

ICICI Pru Dy

Low Risk Low Return

Low Risk High Return High Risk High Return

Reliance Eq Opp

HDFC Growth

Birla Div Yield

F IPP

DSPBR Opp

FIFC

Tata Eq Opp

Sund India Lead

Tata Div Yield

High Risk Low Return

SBI MMPsDSPBR Eq

UTI Div Yield

UTI Equity

BFL

K Opp

IDFC

Retu

rns

-1

Year

High Risk High ReturnLow Risk High Return

Birla SL CM

SBI SHDF

Rel MMF

Sundaram Ultra STF

TIUSBF

Kotak Flexi

High Risk Low ReturnLow Risk Low Return

Kotak Floater-LT

Tata Floater

Standard Deviation - 1 Year

ICICI Pru FRF

DSP

MMF

UTI FRF

Birla USTF

HDFC CMF

Birla SL Savings

UTI TA

ICICI Pru Flexi IP

IDFC UST

Rel MTF

Rel FRF

IDFC MMF

21

Funds Snapshot

Funds IMAP Ratings* Average Quaterly AUM Return (Point to Point) % ** Volatility(%) ̂February 2012 Dec. 2011 (INR Mn) 1mth 3mths 6mths 1 Year 2 Years 2 Year

Diversified Equity Funds (Total Funds covered 54)Reliance Equity Opportunities Fund 4.93 31,592 5.44 12.83 8.93 10.22 12.66 16.74HDFC Growth Fund 4.51 12,283 4.59 12.85 11.13 5.90 10.74 16.08Birla Sun Life Dividend Yield Plus 4.49 10,739 7.81 10.53 6.14 9.51 11.63 13.55UTI Opportunities Fund 4.42 23,852 4.54 10.67 9.60 12.82 11.81 15.58UTI Dividend Yield Fund 4.39 34,517 4.84 9.46 5.98 6.00 9.52 14.65Large Cap Equity Funds (Total Funds covered 16)HDFC Top 200 Fund 4.54 105,371 4.59 13.62 9.28 3.16 8.33 17.61ICICI Prudential Focused Bluechip Equity Fund 4.46 35,322 4.53 11.54 11.24 7.76 11.78 17.15ICICI Prudential Top 100 Fund 4.12 2,966 4.02 15.36 17.23 7.67 8.84 17.47Reliance Top 200 Fund 3.70 8,092 5.06 14.40 9.13 1.88 6.03 18.37DSP BlackRock Top 100 Equity Fund 3.66 30,514 4.35 14.07 9.96 6.60 8.08 16.16Mid Cap Equity Funds (Total Funds covered 18)HDFC Mid-Cap Opportunities Fund 4.96 17,003 8.36 12.00 6.24 16.37 14.87 14.81IDFC Premier Equity Fund - Plan A 4.14 24,070 3.83 7.71 1.92 10.73 11.59 15.33Kotak Midcap 4.14 2,667 7.42 10.76 3.71 8.17 8.12 16.49SBI Magnum Sector Umbrella - Emerging Business Fund 4.10 4,558 2.56 4.89 3.62 17.50 16.21 16.04DSP BlackRock Small and Midcap Fund 3.72 11,683 8.49 10.61 2.79 8.10 8.62 16.82Value Oriented Fund (Total Funds covered 8)ICICI Prudential Discovery Fund 4.22 16,647 14.81 0.87 (7.71) (4.75) 5.59 15.23Tata Contra Fund 3.76 900 12.64 (2.05) (7.70) (0.98) 5.10 15.53UTI Master Value Fund 3.76 6,509 11.96 (6.36) (11.64) (6.36) 4.85 16.03Tata Equity PE Fund 3.36 6,411 12.23 (1.32) (6.95) (6.21) 1.83 15.98Templeton India Growth Fund 3.34 7,098 17.21 1.58 (6.31) (8.53) 2.06 17.85Information Technology Fund (Total Funds covered 5)ICICI Prudential Technology Fund 3.93 1,010 9.27 14.30 26.41 2.81 15.09 19.33Franklin Infotech Fund 3.80 1,178 7.80 12.20 23.94 1.59 10.12 20.79SBI Magnum Sector Umbrella - Infotech Fund 3.42 409 9.37 13.75 23.78 4.55 9.84 20.23Birla Sun Life New Millennium Fund 1.97 488 7.46 10.84 16.19 (1.75) 1.80 18.77DSP BlackRock Technology Fund 1.88 542 4.63 5.05 7.69 (4.92) (1.37) 18.08Infrastructure Funds (Total Funds covered 14)Canara Robeco Infrastructure 4.58 1,196 6.55 11.60 5.43 5.72 5.65 14.15DSP BlackRock India T.I.G.E.R. Fund 4.22 16,525 5.51 14.31 6.03 (0.58) (0.76) 17.07ICICI Prudential Infrastructure Fund 3.87 21,142 3.84 12.19 4.08 (4.49) (1.51) 17.26HDFC Infrastructure Fund 3.64 7,359 6.18 17.89 5.49 (3.98) (0.80) 19.12Birla Sun Life Infrastructure Fund 3.44 3,826 5.35 12.68 1.89 (3.88) (3.86) 17.80Banking Funds (Total Funds covered 5)Reliance Banking Fund 4.00 15,743 6.28 18.25 11.40 (1.39) 14.74 22.95ICICI Prudential Banking and Financial Services Fund 3.72 1,280 5.61 17.65 10.59 0.41 9.37 24.38UTI Thematic - Banking Sector Fund 3.12 3,182 6.39 20.45 13.05 0.66 11.07 25.31Religare Banking Fund - Regular Plan 2.70 382 5.73 18.22 8.82 (0.42) 10.24 23.44Sundaram Select Thematic Funds Financial Services 1.46 2,104 6.09 16.71 10.22 (1.49) 9.36 23.74ELSS Funds (Total Funds covered 18)Franklin Taxshield Fund 4.38 7,869 5.11 9.89 8.52 9.20 10.48 15.30HDFC Long Term Advantage Fund 4.29 8,195 7.27 12.60 7.56 4.41 9.58 15.63ICICI Prudential Tax Plan 4.05 11,972 4.71 12.79 9.20 3.72 6.81 15.74Canara Robeco Equity Tax Saver 3.92 3,075 4.95 10.27 5.72 6.53 9.83 13.58Religare Tax Plan 3.81 1,037 3.25 8.49 2.09 5.01 7.55 14.67Index Funds (Total Funds covered 15) Tracking ErrorFranklin India Index Fund - NSE Nifty Plan 4.07 1,387 3.27 11.67 8.90 1.08 4.67 1.32UTI Nifty Index Fund 4.06 1,744 3.33 11.74 8.84 0.73 4.34 1.31UTI Master Index Fund 3.95 601 2.87 10.65 7.83 0.11 4.45 1.29Franklin India Index Fund - BSE Sensex Plan 3.60 530 2.96 10.68 7.69 (0.22) 4.21 1.29HDFC Index Fund - Nifty Plan 3.59 818 3.14 11.53 8.48 0.39 3.90 1.37Balanced Funds (Total Funds covered 13)HDFC Balanced Fund 4.43 5,026 5.72 9.69 6.75 12.11 13.70 10.66HDFC Prudence Fund 4.30 61,004 4.92 11.07 6.18 7.18 11.29 12.22ICICI Prudential Balanced Fund 4.19 2,998 6.00 9.30 7.61 11.69 11.23 11.40Canara Robeco Balance 3.46 1,792 4.79 8.38 5.02 8.17 9.81 10.01DSP BlackRock Balanced Fund 3.13 6,852 4.42 9.73 5.58 6.01 7.43 11.92MIP Fund - Aggressive (Total Funds covered 8)Canara Robeco Monthly Income Plan 3.73 3,403 1.79 3.72 4.62 8.36 7.97 2.46HDFC Monthly Income Plan - LTP 3.66 78,768 2.12 5.40 4.71 7.69 8.07 3.88ICICI Prudential MIP 25 3.64 6,430 2.16 5.33 6.43 9.17 7.81 4.27DSP BlackRock MIP Fund 3.42 2,086 3.52 7.51 8.60 11.44 7.44 3.22Birla Sun Life MIP II - Wealth 25 Plan 3.30 2,850 2.01 4.11 4.00 8.44 6.64 4.19MIP Fund - Moderate (Total Funds covered 16)ICICI Prudential MIP Plan - Cumulative 4.39 4,757 1.69 4.55 5.28 8.51 7.34 2.81Reliance Monthly Income Plan 4.14 51,823 1.87 6.88 6.01 9.16 7.80 3.59Birla Sun Life Monthly Income 3.98 5,385 1.66 3.81 4.21 8.13 7.18 1.95Birla Sun Life MIP 3.79 1,571 1.28 3.40 4.46 7.79 6.98 2.58Tata MIP Plus Fund 3.77 1,056 2.01 5.83 5.60 8.64 7.10 3.76Income Fund (Total Funds covered 16)UTI Bond Fund 5.00 3,112 0.70 3.74 5.41 12.50 8.93 1.53SBI Magnum Income Fund 3.97 458 1.01 4.43 5.47 10.38 7.68 1.33Birla Sun Life Short Term Fund 3.92 3,493 0.93 2.56 4.49 10.14 7.48 0.77IDFC Super Saver Income Fund - Investment Plan 3.92 2,121 0.90 3.67 5.30 9.76 7.14 1.45Kotak Bond Regular 3.63 511 1.22 6.32 6.54 10.94 7.91 1.84Glit Fund (Total Funds covered 15)Kotak Gilt - Investment - Regular 4.40 457 1.50 8.00 7.58 10.24 7.99 4.34UTI Gilt Advantage Fund - Long Term Plan 4.13 1,282 1.32 5.57 4.79 9.59 7.59 3.30SBI Magnum Gilt Fund - Long Term 3.83 1,542 1.33 5.32 5.39 7.99 6.87 3.65ICICI Prudential Gilt - Investment 3.77 1,876 1.43 6.06 5.72 8.46 7.34 3.77Canara Robeco Gilt PGS 3.55 241 1.49 4.41 5.73 8.05 6.59 2.14Short Term Funds (Total Funds covered 14)JM Short Term Fund 5.00 3,115 0.87 2.45 4.86 9.84 8.05 0.21Taurus Short Term Income Fund 5.00 4,220 0.87 2.45 4.88 9.98 8.37 0.20Templeton India Short Term Income Plan 3.85 46,739 0.70 2.08 4.29 9.48 7.53 0.45IDFC Super Saver Income Fund - Short Term - Plan A 3.81 13,757 0.71 2.46 4.43 10.05 6.97 0.53Religare Short Term Plan - Plan A 3.54 10,522 0.66 3.11 5.64 11.00 7.56 0.50

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ICICI Bank Private Clients Research Group

Dr. G Ramachandran # 91 22 2653 8811 ramachandran.g@icicibank.com

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Anuradha Basumatari # 91 22 2653 7894 anuradha.basumatari@icicibank.com

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Mugdha Sawant #91 22 2653 8884 mugdha.sawant@icicibank.com

Gaurav Maheshwari # 91 22 2653 8871 gaurav.maheshwari@icicibank.com

Chirag Sheth # 91 22 2653 8815 chirag.sheth@icicibank.com

Divya Menon # 91 22 42514922 divya.menon@icicibank.com

Ashima Kharbanda # 91 22 2653 7853 ashima.kharbanda@icicibank.com

Aditya Jagati # 91 22 4251 4739 aditya.jagati@icicibank.com

Pratik Kashyap # 91 22 4251 4731 pratik.kashyap@icicibank.com

Yatin Pujare # 91 22 4251 4971 yatin.pujare@icicibank.com

Anil Mathur # 91 22 4251 4939 anil.mathur@icicibank.com

Funds Snapshot

* Given above are the top 5 IMAP rated funds in each category as per February 2012 ratings* Ratings reflects relative performance within sectors. Please read disclaimer for IMAP usage** Returns are as on February 29, 2012^Volatility is calculated for the two year period ending February 29, 2012***Investments are subject to market risk. Please read the offer document carefully before investing.Source: Crisil, ICICI Bank

IMAP RATINGIMAP score Interpretat ion

4-5 Aggressive Performer3-4 Conservative Performer2-3 Average Performer1-2 Under Performer

Funds IMAP Ratings* Average Quaterly AUM Return (Point to Point) % ** Volatility(%) ̂February 2012 Dec. 2011 (INR Mn) 15 days 1 mnth 3mths 6 mnths 1 Year 1 Year

Ultra Short Term Funds (Total Funds covered 30)Baroda Pioneer Treasury Advantage Fund - Regular 4.41 5,474 0.38 0.83 2.35 4.71 9.41 0.08Tata Floater Fund 4.36 40,163 0.34 0.79 2.31 4.65 9.39 0.08Kotak Floater - Long Term 4.22 36,899 0.33 0.79 2.29 4.60 9.39 0.07Taurus Ultra Short Term Bond Fund - Retail 4.21 10,181 0.39 0.86 2.41 4.84 9.38 0.09Principal Near-Term Fund - Conservative Plan 4.20 3,347 0.38 0.83 2.36 4.68 9.40 0.08Ultra Short Term - Institutional Plan (Total Funds covered 23)Canara Robeco Treasury Advantage Fund - Institutional 4.79 9,070 0.38 0.83 2.32 4.60 9.20 0.05Taurus Ultra Short Term Bond Fund - Institutional 4.12 10,181 0.39 0.87 2.43 4.84 9.78 0.07SBI Short Horizon Debt Fund - Ultra Short Term Fund 3.98 62,331 0.36 0.81 2.32 4.61 9.27 0.06Religare Ultra Short Term Fund - Institutional 3.90 17,899 0.39 0.87 2.39 4.79 9.50 0.07DWS Ultra Short Term Fund - Institutional 3.84 29,435 0.38 0.85 2.40 4.80 9.68 0.07Ultra Short Term - Super Institutional Plan (Total Funds covered 7)Canara Robeco Treasury Advantage Fund - Super Insti. 4.41 9,070 0.39 0.86 2.40 4.76 9.53 0.05Taurus Ultra Short Term Bond Fund - Super Instil. 3.67 10,181 0.40 0.88 2.45 4.90 9.90 0.09Sundaram Ultra Short Term Fund - Super Institutional 3.06 15,764 0.37 0.83 2.37 4.77 9.65 0.09Templeton India Ultra-short Bond Fund - Super Insti. 3.04 23,936 0.37 0.84 2.38 4.80 9.57 0.10ICICI Prudential Floating Rate Plan - Option D 2.94 20,196 0.36 0.82 2.32 4.63 9.33 0.08Liquid Funds - Retail Plan (Total Funds covered 28)BARODA PIONEER Liquid Fund 4.38 35,975 0.39 0.81 2.39 4.73 9.27 0.04JM High Liquidity Fund - Regular Plan 4.19 41,701 0.39 0.80 2.36 4.67 9.21 0.02Kotak Floater - Short Term 4.16 23,414 0.40 0.82 2.38 4.71 9.34 0.05Principal Cash Management Fund 4.15 10,777 0.39 0.81 2.39 4.70 9.23 0.02Taurus Liquid Fund 4.00 24,523 0.39 0.81 2.38 4.69 9.01 0.05Liquid Funds - Institutional Plan (Total Funds covered 19)DWS Treasury Fund - Cash Plan - Institutional 4.08 10,002 0.39 0.81 2.40 4.74 9.49 0.05Taurus Liquid Fund - Institutional 3.98 24,523 0.39 0.81 2.40 4.74 9.33 0.03JPMorgan India Liquid Fund - Super Institutional Plan 3.81 33,091 0.39 0.81 2.41 4.77 9.27 0.05BNP Paribas Overnight Fund - Institutional Plan 3.77 9,115 0.39 0.80 2.40 4.73 9.38 0.05BARODA PIONEER Liquid Fund - Institutional 3.76 35,975 0.39 0.81 2.39 4.73 9.27 0.04Liquid Funds - Super Institutional Plan (Total Funds covered 14)JM High Liquidity Fund - Super Institutional 4.48 41,701 0.39 0.81 2.41 4.77 9.36 0.02DWS Insta Cash Plus Fund - Super Institutional 4.05 47,274 0.39 0.81 2.40 4.74 9.30 0.04Taurus Liquid Fund - Super Institutional 4.02 24,523 0.40 0.82 2.43 4.80 9.43 0.03Birla Sun Life Cash Plus - INSTITUTIONAL PREMIUM 3.67 126,772 0.39 0.81 2.40 4.72 9.30 0.04Religare Liquid Fund - Super Institutional 3.63 41,149 0.39 0.81 2.40 4.74 9.30 0.05

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