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Net Inflows in Equity Mutual Funds and
BSE Sensex
Net Inflow s (Rs. In crs) - LHS BSE SENSEX - RHS
120,000 25000
100,000
20000
80,000
15000
60,000
40,000
10000
20,000
5000
0
-20,000 0
2000 2001 2002 2003 2004 2005 2006 2007 2008
2
Gold Demand and Price
Gold Demand (Tonnes) - LHS Price (INR) - RHS
900.00 45000
40000
800.00
35000
700.00
30000
600.00 25000
500.00 20000
15000
400.00
10000
300.00
5000
200.00 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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SENSEX vs GOLD
(July 31, 1988 – July 31, 2008)
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The Indian Growth Story
GDP Growth Rates Forecast (%)
2006 2007 2008E
Global Economies
India is now a trillion dollar US 2.9 2.2 1.9
economy. Growing at 7-9% p.a. EU 2.9 2.6 1.5
Japan 2.4 1.7 0.9
Regional Economies
China 11.1 11.4 10.0
India 9.4 9.0 7.8
Hong Kong 6.8 6.0 4.6
Indonesia 5.5 6.2 6.0
Korea 5.0 5.0 4.1
Malaysia 5.9 5.9 5.3
Singapore 7.9 7.9 6.0
Size
Sizeand
andgrowth
growthmake
makeIndia
Indiaaacompelling
compellingasset.
asset.
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India transitioning to a large economy
2006 G D P 5 year 2011G D P
(U S $ b n ) CAG R (U S $ b n )
(Estimates)
USA 1 3 ,2 0 2 3 .0 1 5 ,3 1 3
Japan 4 ,3 4 0 1 .8 4 ,7 4 6
G e rm a n y 2 ,9 0 7 1 .1 3 ,0 6 3
UK 2 ,3 4 5 2 .5 2 ,6 4 7
F ra n c e 2 ,2 3 1 1 .5 2 ,4 0 6
Ita ly 1 ,8 4 5 0 .7 1 ,9 0 7
C anada 1 ,2 5 1 2 .7 1 ,4 3 3
M e x ic o 839 2 .8 963
B r a z il 1 ,0 6 8 3 .2 1 ,2 5 2
0
C h in a 2 ,6 6 8 1 0 .0 4 ,3 0 1
I n d ia 906 7 .8 1 ,3 1 8
India is fast catching up with the bigger economies of the world due to the higher
growth rates. The Indian economy will be one of the biggest among developed and
developing countries, nearing that of Canada in the coming years.
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Economy Review
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India’s vulnerability to oil
Adverse effect
on Equities
Equity Markets are forward looking, hence most probably have bottomed out
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Impact of oil
Source: Bloomberg
As on August 15, 2008 Slowing global growth, stability in USD,
suggest best of commodity prices are behind 11
World Oil consumption
Source: BP Amoco
Low savings & lower growth rates should impact oil demand in US/Europe
(50% of consumption)
12
Oil – on one side demand is slowing
20,500
20,000
19,500
19,000
Jan Feb Mar April May June July Source: DoE, IEA, Broker estimates
13
Oil – on the other, supply is growing
FY08
Domestic Mutual Fund Investments $ 2.6bn
Insurance company flows to equity markets $ 16bn (approx)
(# includes both New Business Premium and Renewal Premium)
FIIs Investments $ 13bn
FY09YTD
Domestic Mutual Fund Investments $ 1bn
Insurance company flows to equity markets $ 3.2bn (approx)
(# includes both New Business Premium and Renewal Premium of 1QFY09)
FIIs Investments ($ 3.3bn)
# Lehman Estimates
Source: www.sebi.gov.in 15
Institutional flows to equity markets
1300
(-) actual sale $ 6bn
1200
Current value (est) $221bn
1100
1000
FII exposure to India down 38% in CY-08
900
8/13/2007
9/3/2007
9/24/2007
10/15/2007
11/5/2007
11/26/2007
12/17/2007
1/7/2008
1/28/2008
2/18/2008
3/10/2008
3/31/2008
4/21/2008
5/12/2008
6/2/2008
6/23/2008
7/14/2008
8/4/2008
MSCI Emerging markets Index down
20% only
25000
20000
FII sold $
2.3bn
15000
FII Sold $
FII Sold
162mn
$1bn
10000 FII sold $
1.9bn
5000
Since Jan FIIs have
sold $6.4bn
0
pr 3
pr 4
pr 5
pr 6
pr 7
pr 8
ct 3
ct 4
c 5
c 6
ct 7
8
Ju -03
Ja -03
Ju -04
Ja -04
Ju -05
Ja t-05
Ju -06
Ja t-06
Ju -07
Ja -07
Ju -08
A -0
A -0
A -0
A -0
A -0
A -0
O l-0
O l-0
O l-0
O l-0
O l-0
l-0
n
n
Ja
15x
16,500
12x
11,000
5,500
0
96 97 98 99 00 01 02 03 04 05 06 07 08
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Conclusion
Deep pessimism has given way to cautious optimism
Favourable developments
FIIs Under- weight India
Decent cash balances of local Institutions
Poor supply of new stocks
Dividend Inflows ($10 bn)
Ranbaxy Buyback $1.7bn
Risks/concerns
Further increase in Crude prices
Populist measures/ government policy
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Finally, in the last 20 years,
we’ve seen ….
Wars, terrorism, droughts & floods
At least two major financial scandals
Assassination of 2 prime ministers
At least 3 recessionary periods
10 different governments and
Sept 11th , Pokharan blasts etc
Yet, GDP has grown nearly 15% p.a. and the Sensex by 19%
p.a.
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NO. YEAR END SENSEX ROLLING 1 YR ROLLING 5 YR ROLLING 10 YR ROLLING 15 YR
GROWTH GROWTH GROWTH GROWTH
0 Mar-79 100
1 Mar-80 129 29%
2 Mar-81 173 34%
3 Mar-82 218 26%
4 Mar-83 212 -3%
5 Mar-84 245 16% 20%
6 Mar-85 354 44% 22%
7 Mar-86 574 62% 27%
8 Mar-87 510 -11% 19%
9 Mar-88 398 -22% 13%
10 Mar-89 714 79% 24% 22%
11 Mar-90 781 9% 17% 20%
12 Mar-91 1168 50% 15% 21%
13 Mar-92 4285 267% 53% 35%
14 Mar-93 2281 -47% 42% 27%
15 Mar-94 3779 66% 40% 31% 27%
16 Mar-95 3261 -14% 33% 25% 24%
17 Mar-96 3367 3% 24% 19% 22%
18 Mar-97 3361 0% -5% 21% 20%
19 Mar-98 3893 16% 11% 26% 21%
20 Mar-99 3740 -4% 0% 18% 20%
21 Mar-00 5001 34% 9% 20% 19%
22 Mar-01 3604 -28% 1% 12% 13%
23 Mar-02 3469 -4% 1% -2% 14%
24 Mar-03 3049 -12% -5% 3% 15%
25 Mar-04 5591 83% 8% 4% 15%
26 Mar-05 6493 16% 5% 7% 15%
27 Mar-06 11279 74% 26% 13% 16%
28 Mar-07 13072 16% 30% 15% 8%
29 Mar-08 15644 20% 39% 15% 14%
Average Return 28% 19% 18% 18%
Probability of Loss 10/29 3/25 1/20 0/15
Past performance of the SENSEX may or may not be sustained in future
*Returns for the 1 year period are absolute
**Returns for periods more than 1 year are shown on a compounded annualised basis
Note:
The base year of the SENSSEX is 1978-79 and the base value is 100. Please visit www.bseindia.com for the SENSEX calculation methodology 24
Thank You
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Disclaimer: This presentation is for information purposes only. These views alone are not sufficient and should not be
used for the development or implementation of an investment strategy. It should not be construed as investment advice
to any party. All opinions, figures and estimates included in this presentation are as of the latest available date and are
subject to change without notice. The opinions, figures and other charts, etc. are sourced from publicly available
information, other sources like www.sebi.gov.in, www.bseindia.com, Merrill Lynch, DoE,www.amfiindia.com,
www.gold.org, BP Amoco, in house research and/or are just internal interpretation/analysis of reports/data sourced from
the aforesaid sources. Neither HDFC Asset Management Company Limited (HDFC AMC), nor any person connected
with it, accepts any liability arising from the use or in respect of anything done in reliance of the contents of this
information /data. While utmost care has been exercised while preparing the presentation, HDFC AMC does not warrant
the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of
this information. The recipient of this material should rely on their investigations and take their own professional advice.
Risk Factors: Mutual funds and securities investments are subject to market risks. Please read the offer document of the
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Statutory Details: HDFC Mutual Fund has been set up as a trust sponsored by Housing Development Finance
Corporation Limited and Standard Life Investments Limited (liability restricted to their contribution of Rs. 1 lakh each to
the corpus) with HDFC Trustee Company Limited as the Trustee (Trustee under the Indian Trusts Act, 1882) and with
HDFC Asset Management Company Limited as the Investment Manager.
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