Monthly Market Update (India) January 2016 ifast Research

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2 ECONOMIC INDICATORS Trade (Nov 15) Exports declined % y-o-y and were valued at USD billion in November 2015 as against USD billion in November 14. Imports reduced by % y-o-y and were valued at USD in November 2015 as against USD billion in November India s trade deficit stood at USD 9.78 billion as against USD billion in November Industrial Production (Oct 15) The Index of Industrial Production (IIP) expanded by a robust 9.8% in October 2015 as against 3.60% in the previous month. During the month, the Mining, Manufacturing and Electricity Sectors grew by 4.7%, 10.6% and 9.0% respectively. On a Use-based classification, Basic Goods, Capital Goods and Intermediate Goods grew by 4.1%, 16.1%, and 6.7% respectively. Markets & Valuations (As on December 28, 2015) The benchmark Index (Sensex) was at 26, Estimated PE & earnings growth for BSE Sensex Price/Earnings 18.62X 15.49X 13.09X Earnings Growth 8.32% 20.19% 18.32% RBI s Monetary Policy Stance (5 th Bi-Monthly Policy meeting ) The Reserve bank of India maintained its key interest rate (repo rate) unchanged at 6.75% after a 50 bps rate cut in the previous policy meeting. The cash reserve ratio has also been maintained at 4% of net demand and time liability (NDTL) while the reverse repo rate under the LAF stands unchanged at 5.75%. Inflation (Nov 15) CPI (Consumer Prices): stood at 5.41% for November as against 5% in October 15, recording the highest year-on-year growth since September Food & Beverages inflation was at 6.08% in Nov 15 as against 5.34% in Oct 15. Inflation on Pulses was at an alarming 46.08% as against 42.2% in the previous month. - Fuel and Light inflation was at 5.28% in Nov 15 as compared to 5.32% in the previous month. WPI (Wholesale Prices): declined by -1.99% y-o-y in November 2015 as against -3.81% in October. - Primary articles inflation was at 2.27% in November 2015 as against -0.36% in the previous month. Food Articles grew by 5.2% y-o-y as against 2.44% in the previous month. - Fuel & Power prices declined by % year-onyear in November 2015 as against a % decline in the previous month. - Manufactured Products inflation was at -1.42% as against -1.67% in the previous month.

3 EQUITY MARKET BSE Sensex - Top & bottom performers in December Top Performers MTD Bottom Performers MTD Sun Pharmaceutical Industries Ltd 11% Mahindra & Mahindra -9% Tata Steel 10% State Bank of India -9% NTPC 10% Tata Motors -7% Earnings estimates of top weighted stocks: Stock FY-16 FY-17 FY-18 HDFC Bank Ltd. 2.79% 23.30% 36.09% Infosys Ltd. 3.68% 14.04% 12.81% Our View The markets ended December on a negative note. One of the biggest concerns of the market was the fact that the Government was not able to pass major reforms. The 2 major bills, i.e. GST and Bankruptcy Code could not be passed in the winter session of the Parliament and this has unnerved investor sentiments. During the first half of the month, there was also uncertainty on the rate hike by the US FED, however it did not deter the sentiments of the market once it became a reality. BSE AUTO BSE FMCG BSE Power BSE CG BSE IT BSE-HC Broader Indices (Performance in December 2015)* BSE SMALL CAP BSE MID CAP Nifty Index BSE Sensex -3.15% -0.11% 0.14% 1.40% 1.72% -1% 0% 1% 1% 2% 2% Sectoral Indices (Performance in December 2015)* -3.76% -2.35% -2.95% -0.51% 0.03% 1.02% 1.85% 2.44% 2.94% 3.93% 3.72% -6% -4% -2% 0% 2% 4% 6% *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms

4 1-Dec-15 3-Dec-15 5-Dec-15 7-Dec-15 9-Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec-15 DEBT MARKET OUTLOOK 10 Year G-sec Yield Curve Our view The 10 year G-Sec yield continued to remain volatile during the month of December. During the policy review done at the beginning of the month, the RBI Governor had maintained a status quo, yet the uncertainty surrounding the FED rate hike, the increase in inflation and the government s resolve on its fiscal consolidation map weighed on market sentiments

5 MARKETS ACROSS THE GLOBE Asia ex Japan (MSCI Asia ex Japan) P/E P/E P/E MTD YTD Return (%) Earnings Growth Earnings Growth Yr 2015 Yr 2016 Yr (%) 2016 (%) -0.71% % 2.20% % 11.90% Emerging Markets (MSCI EM) -2.48% % -4.60% % 15.80% Europe (Stoxx 600) -5.09% 6.79% 4.40% % 12.00% Japan (Nikkei 225) -3.61% 9.07% 7.10% % 10.40% USA (S&P 500) -1.75% -0.73% 11.40% % 12.90% Australia (S&P/ASX 200) 2.50% -2.13% 1.10% % 9.70% Brazil (IBOV) -3.92% % -2.90% % 27.50% China (HS Mainland 100) -1.20% % 4.90% % 12.00% Hong Kong (HSI) -0.37% -7.16% 1.30% % 10.70% India (SENSEX) -0.11% -5.03% 29.90% % 19.40% Indonesia (JCI) 3.30% % 22.30% % 15.30% Malaysia (KLCI) 1.22% -3.90% -5.70% % 8.60% Russia (RTSI$) % -4.26% % % 18.80% Singapore (STI) 0.94% % 6.20% % 7.00% South Korea (KOSPI) -1.54% 2.39% -4.80% % 23.00% Taiwan (Taiwan Weighted) 0.21% % 8.10% % 8.70% Technology Heavy (NASDAQ 100) -1.53% 8.43% 17.90% % 15.30% Thailand (SET Index) -5.27% % 15.30% % 11.90% *Returns are as at 31 December Source: Bloomberg, ifast Compilations All returns are in respective local currency terms and MSCI Index returns are in USD

6 GLOBAL MARKET UPDATE GROUP 7 COUNTRIES G7 Countries - Performance in December 2015* Germany (DAX) -5.62% Japan (Nikkei 225) -3.61% Italy (FTSE MIB) -5.72% France (CAC-40) -6.47% USA (S&P 500) -1.75% UK (FTSE 100) -1.79% Canada (S&P/TSX) -3.47% -8% -6% -4% -2% 0% Our View US equities have rebounded from its lows in September and remain within a range that is close to all-time highs, with forecasted returns of the US equity market still remaining one of the lowest among the markets under our coverage. We continue to advocate investors to underweight the US in their portfolio exposures and consider equity long-short strategies for the US market. We maintain a rating of 2.0 Stars Unattractive for US equities. At current levels, the Europe market trades at 14.8X and 13.3X based on 2016 and 2017 earnings, a premium against our estimated fair PE of 13.5X based on 2016 s earnings. Given the further easing of monetary policy, investors should note the potential for further depreciation of the EUR. We maintain our rating for Europe at 2.5 stars Neutral at this juncture. Japan s investors have experienced a temporary shock as the preliminary 3Q 15 GDP growth number indicates a -0.8% year-on-year contraction, which would have made Japan the first major economy that fell into a technical recession in Valuations remain rather attractive compared with other countries. Thus, we maintain our star ratings of the Japanese market at an Attractive rating of 3.5 USA Fed Funds rate hiked to 0.25% 0.50% Unemployment rate remained at 5.0% in Nov 15 Nonfarm payrolls rose by 211,000 in Nov 15, after an upward-revised 298,000 increase in Oct 15 Industrial production declined -0.6% m-o-m in Nov 15, after a downward-revised -0.4% m- o-m decline in Oct 15 EUROPE Advance Eurozone PMI composite fell to 54.0 in Dec 15, down from a downward finalised 54.2 reading in Nov 15 Consumer Confidence rose to -5.7 in Dec 15 from a -5.9 reading in Nov 15 ECB s Draghi extends asset purchase programme duration, cuts deposit rate further by 10 bps. JAPAN Japan s Consumer Confidence increased to 42.6 in Nov 15 from 41.5 in Oct 15. Japan s HSBC Manufacturing PMI rose from 52.5 in Nov 15 to Dec 15 s Japan s exports fell -3.3% y-o-y in Nov 15, much lower than the 1.6% drop as markets expected and lower than the -2.1% y-o-y decline in Oct. Imports slumped by -10.2% y-o-y in Nov 15, lower than the market consensus s -7.3% but higher than the -13.4% decline in Oct 15. *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms

7 GLOBAL MARKET UPDATE ASIA PACIFIC (Ex-JAPAN) *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms Our View Singapore s economy is forecast to remain on a modest growth trajectory, with GDP growth in 2016 expected to come in at 1 3%. On current forecasts (as of 31 December 2015), the Singapore equity market represents a significant discount to our fair PE estimate of 16.0X for the market. With a potential annualised return of about 23.3% by end-2017 (with dividends reinvested), we think a 4.0 stars Very Attractive rating for the Singapore equity market continues to be warranted at this juncture. As for Indonesia, with the JCI Index trading at a premium and market conditions deteriorating on weak exports and dampening consumption, we maintain our Neutral rating of 2.5 stars for Indonesian equities. The Hong Kong equity market is currently trading at 10.5X and 9.5X based on 2015 s and 2016 s estimated earnings, well below the fair PE ratio of 14.5X. Therefore, we maintain our 5.0 Stars Very Attractive rating for Hong Kong. Asia Pacific (Ex Japan) - Performance in December 2015* Malaysia (KLCI) Indonesia (JCI) Australia (S&P/ASX 200) South Korea (KOSPI) Thailand (SET Index) Taiwan (Taiwan Weighted) Hong Kong (HSI) Singapore (STI) -5.27% -1.54% -0.37% 0.21% 1.22% 3.30% 2.50% 0.94% -6% -4% -2% 0% 2% 4% South Korea s exports are under the spotlight again when the December export value reveals that the country has suffered from a consecutive 12 month decline on its export value. However, valuations remain rather attractive compared with other countries. Thus, we maintain our star ratings for South Korean markets at a Very Attractive rating of 4.5 stars. SINGAPORE CPI remained unchanged at -0.8% y-o-y in Nov 15 Industrial production fell -5.5% y-o-y in Nov 15, after a revised -4.7% decline in Oct 15. Purchasing Managers Index was at 49.2 in Nov 15, up from a reading of 48.9 in Oct 15. INDONESIA Bank Indonesia remained its benchmark interest rate at 7.5% Indonesia posted a trade deficit of USD -346 million in Nov 15, compared to a downward-revised surplus of USD 1013 million in Oct 15. CPI moderated to 4.9% y-o-y in Nov 15, after a 6.3% y-o-y increase in Oct 15. HONG KONG GDP in 3Q 15 fell to 2.3% y-o-y increase, compared with a 2.8% y-o-y increase in 2Q 15 CPI increased by 2.4% y-o-y in Nov 15 from 2.4% y-o-y in Oct 15. SOUTH KOREA KRW depreciated against USD by 1.51% month-to-date and by -5.59% YTD. Korea s HSBC Manufacturing PMI remained at 49.1 in Nov 15. Korea s exports decreased -4.7% y-o-y in Nov 15, higher than the -9.0% market consensus and much higher than the -15.8% decline in Oct 15. Imports decreased by % y-o-y in Nov 15, lower than consensus estimates of a -14.7% y-o-y decrease.

8 GLOBAL MARKET UPDATE BRIC (Ex-INDIA) Our View BRIC (Ex-India) - Performance in December 2015* Russia (RTSI$) % Brazil (IBOV) -3.92% China (HS Mainland 100) -1.20% -15% -10% -5% 0% *Source: Bloomberg, ifast Compilations. All returns are in respective local currency terms Despite Brazil s economic woes, the Bovespa Index trades at estimated PE ratios of 10.2X and 8.0X for 2016 and 2017 respectively (as of 31 December 2015), as compared to its fair PE ratio of 11.5X, offering investors a total potential annualised return of 24.9% by end 2017, with dividends reinvested. A star rating of 4.0 stars Very Attractive for Brazilian equities continue to be warranted at this juncture. As for Russia, volatility is still expected in the near-term as markets remain concerned over geopolitical tensions and issues, as well as the overall direction of oil prices. We retain Russia s star ratings at 4.5 stars Very Attractive. Looking forward, we expect both the China A and H markets to remain volatile in However, we do not believe that there is a significant deterioration in market fundamentals. In such a volatile market environment, we continue to favour the HSML100 Index, which has limited downside due to its cheap valuations relative to other equity markets around the world. Therefore, we maintain our 5.0 Stars Very Attractive rating for the offshore Chinese equity market. BRAZIL Brazil s GDP shrank by -4.5% y-o-y in 3Q 15, after a downward-revised -3.0% contraction in 2Q 15 Industrial production fell -11.2% y-o-y in Oct 15, after a -10.9% fall in Sep 15 IPCA inflation was at 10.48% y-o-y in Nov 15, up from a 9.93% y-o-y increase in Oct 15 Unemployment rate was at 7.5% in Nov 15, down from 7.9% in Oct 15 RUSSIA Industrial production declined by -3.5% y-o-y in Nov 15, up from -3.6% in Oct 15 CPI increased by 15.0% y-o-y in Nov 15, slowing from a 15.6% increase in Oct 15 CBR rate at 11.0% in Dec 15 CHINA GDP in 3Q 15 increased by 6.9% y-o-y, compared with a 7.0% y-o-y increase in 2Q 15 China 1-Year Lending Rate is at 4.35% since 24 Oct 15. Caixin China Manufacturing PMI rose to 48.2 in Dec15 as compared with 48.6 in Nov 15. CPI rose 1.5% y-o-y in Nov 15, compared with the 1.3% y-o-y increase in Oct 15. Industrial production gained 6.2% y-o-y in Nov 15 as compared to 5.6% y-o-y in Oct 15.

9 FUND CATEGORY RETURNS Fund Category Returns ( as on December 2015 ) 1 Month 1 Year Equity: Large Cap -0.19% 0.28% Equity: Multi Cap 0.17% 2.05% Equity: Mid Cap 1.10% 9.05% Equity: ELSS 0.33% 2.87% Equity: Index 0.21% -2.50% Equity: Global -2.32% -6.83% Hybrid: Balanced 0.12% 3.07% Hybrid: MIP 0.35% 5.66% Debt: Gilt Long Term 0.15% 6.05% Debt: Gilt Short Term 0.54% 7.23% Debt: Income 0.27% 6.48% Debt: Short Term 0.54% 8.05% Debt: Ultra Short Term 0.56% 8.16% Liquid 0.62% 8.14% Debt: Floating Rate 0.55% 8.37% Source: NAV India, ifast Compilations

10 TOP & BOTTOM EQUITY FUNDS IN NOVEMBER Top & Bottom Performing Equity funds on our Platform as on 31 December 2015 Large Cap Multi-Cap Scheme 1 Month 1 Year Scheme 1 Month 1 Year Quantum Long-Term Equity Fund (G) 2.58% 3.49% SBI Magnum Comma Fund (G) 2.59% -6.14% IDFC Classic Equity Fund - Plan A (G) 2.11% 5.21% Birla Sun Life India GenNext Fund (G) 2.32% 7.52% CNX Nifty Index (Benchmark) 0.14% -4.06% CNX 500 Index (Benchmark) 0.58% -0.72% Sahara Growth Fund (G) -2.43% -6.99% Franklin India High Growth Companies Fund (G) -2.74% 1.49% HDFC Large Cap Fund (G) -2.39% -4.84% HDFC Premier Multi-Cap Fund (G) -2.28% -1.21% Midcap & Small Cap ELSS Scheme 1 Month 1 Year Scheme 1 Month 1 Year SBI Small & Midcap Fund (G) 6.42% 20.56% Escorts Tax Plan-(G) 2.59% 10.00% Edelweiss Emerging Leaders Fund (G) 5.45% 14.62% Quantum Tax Saving Fund (G) 2.59% 2.45% CNX Midcap Index (Benchmark) 1.12% 6.46% CNX 500 Index (Benchmark) 0.58% -0.72% ICICI Pru Value Discovery Fund (G) -1.16% 5.44% HDFC Tax Saver Fund (G) -2.32% -6.24% Sundaram S.M.I.L.E Fund (G) -0.71% 7.79% Franklin India Taxshield - (G) -0.79% 4.05% Overseas Scheme 1 Month 1 Year DSP BR World Gold Fund (G) 0.88% % L&T India Value Fund (G) 0.80% 12.88% MSCI World Index (in INR) (Benchmark) -2.24% 1.94% DSP BR World Energy Fund (G) -9.95% % HSBC Brazil Fund (G) -7.54% % Source: ifast Compilations

11 TOP & BOTTOM DEBT/HYBRID FUNDS IN NOVEMBER Top & Bottom Performing Debt/Hybrid funds on our Platform as on 31 December 2015 Balanced Scheme 1 Month 1 Year Scheme 1 Month 1 Year Birla Sun Life Dynamic Asset Allocation (G) 2.36% 3.61% DWS Equity Income Fund (G) 1.13% 12.94% Reliance Regular Savings Fund-Balanced (G) 0.97% 8.73% SBI Magnum MIP Floater (G) 1.10% 9.93% Crisil Balanced Fund Index 0.29% 0.48% Crisil MIP Blended Index 0.49% 6.79% LIC NOMURA MF Balanced Fund - (G) -1.50% % Sundaram MIP - Moderate (G) -0.46% 3.69% HDFC Prudence Fund - (G) -0.92% 0.29% HDFC Monthly Income Plan - LTP (G) -0.40% 3.84% MIP Income Gilt - Long Term Scheme 1 Month 1 Year Scheme 1 Month 1 Year Principal Debt Opp Fund Corporate Bond Plan(G) 0.74% 9.20% Escorts Gilt Fund (G) 0.88% 7.43% Franklin India Income Opportunities Fund (G) 0.72% 9.30% Indiabulls Gilt Fund (G) 0.81% 7.92% Crisil Composite Bond Fund Index 0.54% 8.63% Crisil Composite Bond Fund Index 0.54% 8.63% ICICI Pru Income Plan - (G) -0.31% 5.08% IDBI Gilt Fund (G) -0.31% 4.40% Birla Sun Life Income Plus (Displine Advant Plan) -0.23% 4.56% ICICI Pru Gilt Fund - Invest - PF Option -0.27% 5.48% Short Term Scheme 1 Month 1 Year UTI-Banking & PSU Debt Fund (G) 0.96% 8.59% Kotak Income Opportunities Fund (G) 0.82% 9.09% Crisil Short-Term Bond Fund Index 0.59% 8.66% Religare Invesco Short Term Fund (G) 0.28% 7.09% Sundaram Select Debt - STAP (G) 0.34% 7.34% Source: ifast Compilations

12 Outlook and Takeaways for 2016 (as published in Dalal Times) Do we think 2016 is going to be a great year for the Indian markets? I don t think research analysts despite their years of experiences in dealing with the market will be able to answer this question. Are we positive on the markets in the coming years? The answer is yes. Unlike the majority of market participants who were thinking that Team Modi has a magic wand to get India back into a growth trajectory, our views in May 2014 were on these lines. If Modi comes to power, we need to remember that he cannot make a vibrant India in a few months time. The euphoria that we have been seeing in the market for some time is not based on any fundamentals. It is on the hope that if the BJP is able to put forth a stable government then it will be possible for them to implement a lot of policies which their predecessors were unable to. UPA government was known for its policy paralysis and finally rating agencies had to threaten India to get it into action. This is in spite of the fact that this coalition was headed by an economist turned PM who in 1991 brought about economic reforms which changed the face of India in the global markets. Hence, if NaMo gets a majority mandate, then we believe that the next 5 years should be good for investors (Fundsupermart India, May 15, 2015). We stand by this view even after 1.5 years of the new government, with a lot of comments that this government s performance doesn t seem to be impressive enough. However, we believe that the government s focus on sectors such as infrastructure and banks will help the economy to get back into the growth momentum. The Modi government has also realized that controlling inflation is not the sole task of the central bank and the actions that it is taking to manage the supply side situation needs a mention. One of the biggest reasons that we continue to be positive on India is the attractive valuation. As per the consensus estimate as on December 23, 2015, the estimated PE for Sensex is 12.99X for FY This is much below the fair PE for India which is 15X. This means that there is more upside potential for the Indian markets from here on. The biggest USP for the Indian markets is the combination of a government whose focus is on increasing the CAPEX in the major sectors and a pro-active central bank whose priority is to reduce inflation without compromising on growth. The Government and the Central Bank is taking measures to clean up the mess in PSU banks, which is one of the major issues that India is facing today. This along with the improving macro-economic fundamentals and with the attractive valuations should give the confidence to our investors in taking exposure into the markets. This is a better alternative than waiting on the sidelines for an appropriate opportunity to enter the markets. As for the mutual fund space, currently large caps are trading at discount to mid caps, we believe that investors need not exit these funds nor should they cut down their holdings in mid and small cap space and enter this space. As per our asset allocation, our conservative investors should continue to have their equity allocation in large cap funds, while our aggressive investors can continue to keep their allocation into large caps and mid caps in the same proportion as it was before large caps became cheap. We continue to maintain a positive stance on banking and infrastructure funds, a view that we have held since 2011, despite the problems in these two sectors. Our advice to our fixed investors is that, although we are of the view that Dr. Rajan will loosen the monetary policy stance in 2016 as inflation is on a downward trajectory, investors should be ready to face any uncertain events from the global and domestic side which can reverse this stance. In this scenario, it is advisable for our moderately aggressive and aggressive investors to consider dynamic bond funds if they wish to bet on the movement in the interest rates. On the other hand, our conservative investors can continue with their investments into short term funds.

13 DISCLAIMER: THIS REPORT IS NOT TO BE CONSTRUED AS AN OFFER OR SOLICITATION FOR THE SUBSCRIPTION, PURCHASE OR SALE OF ANY MUTUAL FUND. ANY ADVICE HEREIN IS MADE ON A GENERAL BASIS AND DOES NOT TAKE INTO ACCOUNT THE SPECIFIC INVESTMENT OBJECTIVE OF THE SPECIFIC PERSON OR GROUP OF PERSONS. PAST PERFORMANCE AND ANY FORECAST IS NOT NECESSARILY INDICATIVE OF THE FUTURE OR LIKE PERFORMANCE OF THE MUTUAL FUND. THE VALUE OF UNITS AND THE INCOME FROM THEM MAY FALL AS WELL AS RISE. OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.