NOVEMBER 2008 FACTSHEET Equity Outlook ndia has been through probably one of the worst terror attacks in history and while that would have its impact on the economy, we believe that prompt policy action in terms of Ireduction of interest rates, announcement and award of large and profitable infrastructure projects (which can be financed during these times), increasing the attractiveness of the equity markets through lower tax rates, etc. could quickly restore business confidence. Prateek Agrawal HEAD - EQUITY % Change Comments Index Price 1 month 6 month MSCI World 893 (6.72) (45.23) India was one of the worst performing economies globally as Sensex 9,093 (7.10) (46.30) the stress on the economy increased. Despite of the sharp fall Dow Jones 8,829 (5.32) (34.83) in prices of imported commodities, the trade deficit MSCI Emerging Mkts 527 (7.63) (57.49) continued to be high and there has been a sharp drop in the MSCI Latin America 2,028 (6.66) (63.31) foreign exchange reserves. Lead indicators like monthly auto MSCI EM Asia 212 (7.17) (53.33) sales point to a drop in IIP figures going forward. Commodity prices have declined sharply and the producers may be S&P 500 index 896 (7.48) (41.10) saddled with large inventory losses apart from reduced FTSE 100 4,288 (2.04) (32.33) margins from continued operations. Hang Seng 13,888 (0.58) (45.99) Nikkei 8,512 (0.75) (44.71) Sectoral Index % Change Comments Price 1 month 6 month BSE Midcap 2,886 (9.82) (57.70) The performance of the various sectoral indices bring about BSE 200 1,062 (7.27) (49.12) the same trends. While defensive businesses like FMCG and BSE Healthcare 2,888 3.93 (35.82) pharmaceuticals have outperformed, metals, auto and real BSE Metal 4,383 (18.34) (74.15) estate have been underperformers. Operating environment BSE Capital Goods 6,387 (8.98) (52.85) has become less favorable for midcaps vs large caps and BSE Auto 2,331 (13.22) (50.69) Midcap index has continued to underperform. BSE Oil 5,618 (9.32) (47.23) BSE Tech Index 2,002 (7.39) (45.82) BSE FMCG Index 1,937 7.60 (22.12) BSE Real Estate 1,561 (21.09) (78.82) BSE Bank Ex 4,645 (7.30) (42.15) NSE Volatility Index 57.44 Outlook We believe that the period of forced selling on account of de- we believe that prompt policy action in terms of reduction of leveraging may be slowly getting behind us. The flows into the interest rates, announcement and award of large and profitable market are now longer term in nature. Over the next 3-4 months, infrastructure projects (which can be financed during these we expect the total institutional flows into the stock markets to times), increasing the attractiveness of the equity markets be balanced or positive vs. significant net selling witnessed over through lower tax rates, etc. could quickly restore business the past several months. This is on account of the fact that the life confidence. insurance companies, who have been willing buyers, get a large We believe that the ability of the government to spend during part of their yearly inflows during this period and their ability to FY10 has improved significantly given the current prices of invest would get further enhanced. While global influence on fertilizers and crude oil while that of corporate India may have Indian market would remain, it may reduce going forward on taken a hit on account of state of the capital markets and have account of reduced flows. positioned the portfolio accordingly. We continue to remain We continue to believe that while the Indian economy would positive on banking space because we believe that banks today experience a slowdown, the current market levels of around have the pricing power and are in a position to choose good 9000 on the Sensex, adequately reflect this fact and in terms of credit at profitable terms. valuations, we are trading at one of the lowest valuations seen Going forward, we continue to believe that the valuations are over past several years. cheap but the markets would remain volatile and expect the large India has been through probably one of the worst terror attacks cap outperformance to continue. in history and while that would have its impact on the economy, Fixed Income Outlook nterest rates are expected to drop further on the back of easy liquidity and possible rate reductions by the RBI. The corporate credit spreads would take a while before they start Icontracting. Hence, in the near term, Gilts are expected to outperform corporate bonds. Sujoy Kumar Das HEAD - FIXED INCOME MACRO ECONOMIC REVIEW Interest rates are heading downwards. 10.45%, up from 9.8% in September 2008. India’s Index of Industrial Production (IIP) rose by 4.8% in FIIs have pulled out $13.6 billion YTD. September 2008 compared with 1.3% in August, but was still Global Crude Oil is currently trading at $42.5 per barrel, a 3.5 lower than 7.4% in September 2007. The sequential increase year low. in IIP numbers has been supported by a strong growth by capital goods sector, which grew by 18.8% as against 2.3% in In the US, the Fed announced an additional gargantuan bailout August. package of US$ 800 bn closely following on the heels of the first bailout package of US$ 750 bn. The second plan is seen as India’s GDP growth has headed significantly downward. The another attempt to drive down mortgage rates further so that GDP growth for the last quarter was 7.6%, far below the last 3 lending activity gathers pace. year's average of 9%. Another major development in the US was the Treasury Wholesale Price Index (WPI) based inflation eased to 8.84% for agreeing to bailout financial giant Citigroup by infusing $20 the week ending November 15, 2008 witnessing a declining billion of equity funding. It has also agreed to shoulder most of trend for three consecutive weeks. Citigroup’s losses on the bank’s risky assets amounting to However, inflation based on consumer price index (CPI) for about $306 billion. As a fee for this arrangement, Citigroup industrial workers has crossed double-digit in October 2008 will issue preferred shares to the Treasury and FDIC. for the first time since 1995. The CPI for October 2008 was at FIXED INCOME UPDATE The Indian fixed income market has witnessed sharp drop in fixed income market has been induced by liquidity and the rates. softening bias of RBI. The short term interest rates have come down sharply too. The The slope of the yield curve has also changed over the month. average MIBOR for the month of November 2008 was 7.27% The yield curve is currently positively sloped and is in the compared to 10.34% for October 2008. process of flattening out. The benchmark 3 month Bank CD (Certificate of Deposit) rates The Benchmark 10 Year G-Sec has rallied by over 50 bps over have dropped to an average of 9.99% for November 2008 the month and is currently trading at sub 7% levels. (from an average of 12.95% for October 2008) Possible future rate cuts by the RBI have been discounted in the The banking system is flushed with liquidity. The rally in the current prices by market participants. OUTLOOK Interest rates are expected to drop further on the back of easy All Gilt funds and Income funds with higher weightages in Gilts liquidity and possible rate reductions by the RBI. and running moderate interest rate durations are expected to The corporate credit spreads would take a while before they outperform the market over the next 6 to 9 months. start contracting. Hence, in the near term, Gilts are expected to G-Sec yields can see a sharp fall from the current levels with the outperform corporate bonds. ‘flight to quality’ movement catching momentum and easy In the second quarter of 2009, with possible balance sheet liquidity conditions prevailing. contraction, lower issuances form the corporate sector and easy liquidity conditions prevailing, the corporate spreads will contract. Bharti AXA Equity Fund INVESTMENT OBJECTIVE FUND MANAGER To generate income and long-term capital appreciation through a diversified portfolio of Prateek Agrawal predominantly equity and equity-related securities including equity derivatives, across all Experience : Managing this fund since launch. Total of 14 market capitalizations. The Scheme is in the nature of diversified multi-cap fund. The years of experience in the market on buy and sell side. Scheme is not providing any assured or guaranteed returns. All data as on November 30, 2008 SCHEME INFORMATION NAV (Rs.) (as on November 28, 2008) Fund Type: Open Ended Equity Growth Fund Bharti AXA Equity Fund Regular Plan - Bonus 9.89 Benchmark : S&P CNX Nifty Index Bharti AXA Equity Fund Regular Plan - Regular Dividend 9.89 Date of Allotment : October 21, 2008 Bharti AXA Equity Fund Regular Plan - Quarterly Dividend 9.89 AUM: Rs. 18.58 Cr Bharti AXA Equity Fund Eco Plan - Growth 9.89 Total Expense Ratio Bharti AXA Equity Fund Eco Plan - Bonus 9.89 Regular Plan : 2.50% Bharti AXA Equity Fund Eco Plan - Regular Dividend 9.89 Institutional Plan : 1.75% Bharti AXA Equity Fund Eco Plan - Quarterly Dividend 9.89 Eco Plan : 2.25% SECTOR ALLOCATION PERFORMANCE (Absolute %) Metals 2.50% Telecom 4.29% Bharti AXA Equity S & P Pharma 5.61% Period Fund - Regular - CNX Nifty Industrial Manufacturing 6.21% Growth Automobile 6.60% IT 6.67% Construction 6.77% Energy 8.17% Since Inception 3.2359 2.1524 Cash & Cash Equivalent & Fixed Deposit 10.08% Consumer Goods 11.06% Derivatives 14.02% Financial Services 18.02% LOAD STRUCTURE Investments Institutional Regular Plan Eco Plan through SIP / STP Plan Entry Load • For investments < Rs.2 Cr.