Equity Commentary. conducive for both the RBI and the government to pursue more measures to stimulate growth.

Transcription

1 April 2009

2 Equity Commentary The global financial crisis triggered in the summer of 2007 in the US subprime mortgage market subsequently spread to various sectors of the US and global economy. It has since metamorphosed into the most serious global recession since the Great Depression causing a near freezing of global credit markets, severe falls in the commodity and equity markets and turmoil in the foreign exchange markets. Countries in Europe were swept-in due to their financial institutions being closely inter-twined with the US banks and the Far- Eastern economies were affected primarily due to the close trade interdependence. Rapid rise in unemployment, severe demand contraction, several factory/business closures, plummeting consumer and business confidence, rising social tensions and increase in trade & financial protectionism have manifested in various countries. The central banks and governments in both the developed and developing world have responded vigorously to stimulate demand by adopting a coordinated approach by providing aggressive monetary and fiscal stimulus packages to stop their economies descending into deflationary spiral. The ultra-soft monetary policies have been supplemented by radical measures like quantitative easing by some countries like the USA, UK and Japan. The idea is to lower the borrowing costs to consumers and businesses and try to create an environment to whet the almost-frozen risk appetites. The first signs of thawing in global economy are beginning to emerge and a semblance of stability seems starting to get restored in various asset markets across different countries for instance there appears to be a deceleration in the fall in housing prices in the US, green shoots are seen to be emerging in growth in new home sales, rapid rise in mortgage refinancing cases, small increase in consumer durable sales and a small bounce in consumer confidence. The Indian economy has been affected due to sharp fall in financial flows especially affecting the rapid roll-out of various long gestation, capital intensive and sorely-needed infrastructure projects and fall in exports affecting sectors like gems & jewelry, textiles, chemicals, leather, software etc. RBI has responded to the slowdown by aggressively reducing interest rates, reserve requirements in the form of SLR and CRR, adopting countercyclical measures in the form of relaxation of bad loans recognition norms. The Government has pro-actively reduced excise duty, service tax and allowed to raise tax free bonds to be utilized for focused infrastructure development. The impact of these measures to stimulate domestic consumption is already evident in terms of rise in sales of two-wheelers, cars, cement, long products in steel, consumer durables and FMCG products. The IMF estimates that in 2009 all the seven developed economies would simultaneously contract for the first time and developing countries that are primarily dependent on exporting commodities like Brazil and Russia would grow at anemic low rates close to zero. However, China and India would stand out as the beacons of growth by growing at 6.7% and 5.1% in In India's case domestic consumption which constitutes 70% of our economy would act as bulwark. Within this the buoyancy in rural economy due to bountiful harvests and low leverage levels accentuated by farm loan waiver scheme and demand from government employees due to acceptance of sixth pay commission recommendations has acted as a strong fiscal impetus. What was ailing Indian economy last year was the ballooning off-balance sheet liabilities due to rapid increase in fuel and fertilizer subsidies. The sharp fall in crude, fertilizer and commodity prices has acted as the strongest tailwind for Indian economy. The savings that would accrue would be gargantuan enough to tilt us into a current account surplus scenario. This, ceteris paribus, would lead to strengthening of rupee and act as a magnet for foreign in-flows. Besides with such a sharp plummeting in base metal and steel prices the entire user-industrial sector would see a sharp rise in margin profile. Fy09 has witnessed high inflation of 12.9%, and subsequently, a 30-year low of 0.3% in the latest weekly data. In CY08, the average WoW change in WPI was 0.156%, much above the preceding 3-year average change of 0.107%. The two key drivers of this inflation were prices of base metals and oil, which have declined significantly in the last six months. We expect inflation to turn negative for the next six months. A deflationary environment would be 2 conducive for both the RBI and the government to pursue more measures to stimulate growth. Two events to watch out for are the fourth quarter earnings and the general elections. We expect the earnings to be better in 4QFY09 vis-à-vis 3QFY09. Volume growth in consumer sectors has been better on a q.o.q. basis, fall in commodity prices will help perk up margins. What has been seen over the last decade is that although governments with vastly different political ideologies lead coalitions, reforms continued apace. Policies that favored liberalization, increased access to private and foreign capital were encouraged. We expect a similar trajectory to be followed. As the Sensex declined from 21,000 to below 10,000, all the key valuation parameters fell below the historical averages. The BSE Sensex now trades at a forward P/E of 11.3x v/s the 15-year median of 13.3x, while the P/B multiple has declined from 4.3x to 1.9x. Following the deceleration in earnings momentum, Sensex RoE is now estimated at 17% v/s its peak RoE of 24%. At the current levels, earnings yield to bond yield is 1.3x, close to its all-time peak of 1.4x. We believe early signs of return to normalisation are evident and would be keeping a close watch regarding sustenance of the same in 2HFY It is time to shed some risk aversion and think of shifting the paradigm that prevailed for the better part of last months of return of capital to return on capital by buying Indian equities. Index Last PX_Close % Change Price 1 Month 1 Month BSE SENSEX 30 INDEX % NSE S&P CNX NIFTY INDEX % BOMBAY STOCK EX 100 IDX % BOMBAY STOCK EX 500 IDX % BSE MID-CAP INDEX % BSE SMALL-CAP INDEX % DOW JONES INDUS. AVG % S&P 500 INDEX % NASDAQ COMPOSITE INDEX % BRAZIL BOVESPA STOCK IDX % FTSE 100 INDEX % DAX INDEX % HANG SENG INDEX % NIKKEI % SHANGHAI SE COMPOSITE IX % Source : Bloomberg Net Equity Investments by FII & Mfs (US $ Million for the month) Mar-09 Source -SEBI 3-Mar-09 4-Mar-09 5-Mar-09 6-Mar-09 9-Mar Mar Mar Mar Mar Mar Mar Mar-09 FII MF Sensex 23-Mar Mar Mar Mar Mar Mar Mar

3 Debt Commentary The new fiscal brings in a heavy government borrowing calendar. The government is scheduled to borrow Rs 241,000 crores in the period April September The months of April, May and June will see government bond auctions of Rs 48,000 crores each. This means Rs 12,000 crores of government bond supply every week for the next three months. The months of July, August and September will see auctions of Rs 34,000 crores, Rs 31,000 crores and Rs 32,000 crores respectively with an auction scheduled for three weeks of each month. The bond market is concerned about the absorption of the supply and has taken up bond yields on the back of the supply concern. Ten year benchmark government bond yields rose 100bps in March 2009 on supply concerns. The government bond supply for the first half of fiscal is not as heavy as it looks. Net of redemptions of Rs 66,000 crores (including MSS or Market Stabilization Scheme bonds) and RBI's slated bond purchase of Rs 80,000 crores the incremental supply is only Rs 95,000 crores. This works out to around Rs 16,000 crores a month. The non utilization of Rs 33,000 crores of MSS funds in fiscal is available for use in , which further brings down the net borrowing amount. in depth and size. The market will take time to adjust to higher supply and as the adjustment takes place, interest rate fundamentals will take over. Interest rate fundamentals were positive with growth weakening and inflation coming off sharply. Inflation as measured by the WPI (Wholesale Price Index) fell to 0.27% as of week ended 14th March Inflation is expected to turn negative and stay negative for the next three to four months. IIP (Index of Industrial Production) growth came in negative 0.5% for the month of January 2009, the second consecutive month of negative growth. The IIP growth for April- January 2009 dipped sharply to 3% from 8.7% seen in the previous year. Globally economies went into deeper recession with economic growth turning sharply negative across geographies. Growth outlook has deteriorated substantially with industrial production and global trade falling sharply. The rise in yields in March does seem unwarranted if supply was the concern. March saw RBI buying Rs 41,500 crores of bonds negating the Rs 46,000 crores of additional government bond supply. The RBI had cut reverse repo and repo rates by 50bps and inflation has come down to close to zero percent levels. Given this picture bond yields are showing conflicting trends by moving up. The reason for bond yields moving up can be attributed to the market being unused to supply. The market has been used to Rs 150,000 crores of issuances every year for the last eight year and has really not grown Market Indicators Security 31st Mar 28th Feb Month on Month Change Basis Points (bps). Yield % Yield % Policy Rates Reverse Repo Rate Repo Rate Cash Reserve Ratio (CRR) Liquidity Average Reverse Repo Rs Crores Average Repo Rs Crores Average Call Rate% Government Securities 91 Day T-Bill Day T-Bill Five Year Benchmark Ten Year Benchmark Currency USD/INR Rs % Inflation (% Change Week Week Year on Year) Ended Ended 14th Mar th Feb 2008 WPI Corporate Bonds 5 Year AAA Benchmark Month CD Benchmark Year CD Benchmark Interest Rate Swaps 1 Year OIS* Year OIS* * Overnight Index Swap USD / INR /2/09 3/4/09 3/6/09 3/8/09 3/10/09 3/12/09 3/14/09 3/16/09 3/18/09 3/20/09 3/22/09 3/24/09 3/26/09 3/28/09 3/30/09 Source : CCIL, Bloomberg Ten Year AAA Spread /2/09 3/4/09 3/6/09 3/8/09 3/10/09 3/12/09 3/14/09 3/16/09 3/18/09 3/20/09 3/22/09 3/24/09 3/26/09 3/28/09 3/30/09 Source : CCIL, Bloomberg 3

4 IDFC Classic Equity Fund (IDFC - CEF) An open-ended equity fund Nature : Equity Fund size : Rs Crore Fund Manager : Ajay Bodke Investment objective : The investment objective of the scheme is to seek to generate long term capital growth from a diversified portfolio of predominantly equity and equity related instruments. Investment style : The Scheme seeks to achieve out performance through sector rotation, theme selection, market cap bias and bottom up stock picking. Ideal investment horizon : 3 years or more Risk profile : High Entry load : IDFC-CEF - Plan A : Purchases of less than Rs. 5 Crores- 2.25%, Rs. 5 Crore or more (including by way of SIP/STP) - Nil, by an FOF (irrespective of the amount of Purchase)-Nil, by way of Dividend Re-investment - Nil. A switch-in/stp may also attract an Entry Load like any Purchase however no load shall be chargeable on investments switched in by investor from any other Equity Scheme(s) of IDFC Mutual Fund (other than in case of switch-ins of less than Rs. 5 Crores from IDFC Arbitrage Fund & Arbitrage Plus Fund, where entry load of 2.25% shall be applicable). Such switches may however be subject to exit load as applicable in the scheme from where the investments are switched out. IDFC-CEF - Plan B* : Nil Exit load: (Plan A & Plan B*): Purchases of Rs. 5 Crores or more (including by way of SIP/STP)-Nil, In case of purchase of less than Rs. 5 Crores if redeemed within 1 year from the date of Purchase(s) applying First in First out basis (including Purchases made through SIP/STP) %. There will be no exit load for investment made by FOF schemes irrespective of amount of redemption / switch outs. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between different options of. Options available: Growth, Dividend. Reinvestment facility is available under the Dividend Option. Minimum investment amount ( Plan A & Plan B*): Rs. 5,000 & in multiples of Re. 1 Additional investment amount : Re.1 SIP (minimum amount) ( Plan A & Plan B*): Rs Inception Date: 9 August 2005 Statistical Measures : Beta 0.89 R Square 0.94 Standard deviation 8.57% Last 3 dividends (Rs./ unit) : 22 August NAV May NAV Oct NAV NAV (Rs.): Growth Dividend Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 85.33% / 12.60% / 2.06% Fund manager s comment American economy is showing signs of resilience as reflected in better than expected housing sales and consumer confidence index, while the federal government is doing its best to handle the toxic assets in the system. World-over the impact of de-stocking appears to be over. Meanwhile, Indian government as well has proactively undertaken policy measures in the form of various monetary and fiscal stimulus. The agriculture based rural economy in India is relatively insulated from global slowdown, in addition the increase in salary and payment of arrears for government employees as per sixth pay commission recommendations is expected to drive the consumption led growth. Recent data of auto sales, cement consumption, FMCG sales, and telecom subscriber addition has been buoyant. However, we are taking cognizance of general elections in India, geopolitical risk, and concerns over rising fiscal deficit. We continue with our cautious stance and hold on with a large cap, liquid bias in our portfolios. * w.e.f. April 2, 2009 under the IDFC-CEF-Growth as of 31 March 2009 Market value in % of Name Lac (Rs.) NAV Bajaj Auto Ltd Auto State Bank of India HDFC Bank Ltd Axis Bank Ltd Banks Larsen & Toubro Ltd Construction Project ITC Ltd United Spirits Ltd Consumer Non Durables Hindustan UniLever Ltd Diversified Jindal Steel & Power Ltd Ferrous Metals Power Finance Corporation Ltd Housing Development Finance Corp Ltd Finance Bharat Heavy Electricals Ltd Industrial Capital Goods Time Technoplast Ltd Sintex Industries Ltd Industrial Products Oil & Natural Gas Corporation Ltd Oil Reliance Industries Ltd Indian Oil Corporation Ltd Petroleum Products Sun Pharmaceutical Industries Ltd Pharmaceuticals NTPC Ltd Power Infosys Technologies Ltd Software Bharti Airtel Ltd Telecom - Services Call / Reverse Repo/ CBLO Corporate Debentures Net Current Asset Grand Asset Allocation 3 Month (Absolute) 6 Month (Absolute) Last 1 Year Last 2 Years Last 3 Years 4.05% 4.03% 13.12% -1.86% -1.40% % % % % -6.67% -6.88% Since Inception 3.48% 3.65% 3.27% 3.33% 3.35% 4.22% 4.50% 4.66% 4.75% 5.95% 7.03% 6.47% 7.49% 9.38% % % 0.70% IDFC-CEF - Growth BSE200 - Compounded Annualised Growth Rate Benchmark : BSE 200 Auto Ancillaries Ferrous Metals Power Oil Industrial Products Pharmaceuticals Auto Software Construction Project Finance Diversified Consumer Non Durables Industrial Capital Goods Telecom - Services Banks Petroleum Products 4

5 IDFC Imperial Equity Fund (IDFC - IEF) An open-ended equity fund Nature : Equity Fund size : Rs Crore Fund Manager : Kenneth Andrade Investment objective : The investment objective of is to seek to generate capital appreciation and/or provide income distribution from a portfolio of predominantly equity and equity related instruments. There is no assurance or gurantee that the objectives of the scheme will be realized. Investment style : The Scheme seeks to invest predominantly in companies based on the potential value unlocking (subsidiary listing), strong growth in domestic demand and emerging sectors in the Indian economy. Ideal investment horizon : 3 years or more Risk profile : High Entry load : IDFC-IEF - Plan A : Purchases of less than Rs. 5 Crores (including by way of SIP/STP) 2.25%, Rs. 5 Crore - or more (including by way of SIP/STP) - Nil, by an FOF (irrespective of the amount of Purchase)-Nil, by way of Dividend Re-investment - Nil. A switch-in/stp may also attract an Entry Load like any Purchase however no load shall be chargeable on investments switched in by investor from any other Equity Scheme(s) of IDFC Mutual Fund (other than in case of switch-ins of less than Rs. 5 Crores from IDFC Arbitrage Fund & Arbitrage Plus Fund, where entry load of 2.25% shall be applicable). Such switches may however be subject to exit load as applicable in the scheme from where the investments are switched out. IDFC-IEF - Plan B* : Nil Exit load: (Plan A & Plan B*): In case of purchases of Rs. 5 Crores or more (including by way of SIP/STP)-Nil, In case of purchase of less than Rs. 5 Crores if redeemed within 1 year from the date of Purchase(s) applying First In First Out basis (including Purchases made through SIP/STP) %. There will be no exit load for investment made by FOF schemes irrespective of amount of redemption / switch outs. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between different options of. Options available: Growth, Dividend. Reinvestment facility is available under the Dividend Option. Minimum investment amount (Plan A & Plan B*): Rs. 5,000 Additional investment amount : Re.1 SIP (minimum amount) ( Plan A & Plan B*): Rs. 1,000 Inception Date: 16 March 2006 Statistical measures : Beta 0.87 R Square 0.93 Standard deviation 8.65% Last dividends (Rs./ unit) : 14 May NAV NAV (Rs.): Growth Dividend Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 62.14% / 25.27% / 12.59% Fund manager s comment The capital markets have been battling a significant destruction in asset values through In 2009, though the outlook has not materially changed valuations and solvency risk of corporates are more identifiable. The focus of Imperial has always been to find itself as a core part of an investors portfolio. Hence the portfolio construction has revolved around selecting companies which have low financials risks and are self sustaining. We believe that these companies are not vulnerable to solvency risks in a down cycle and will be the first to change direction when the cycle re-emerges. The investment process revolves around taking a call on where valuations trade & not so much on the evolution of the organisation / company. Market value in % of Name Lac (Rs.) NAV Mahindra & Mahindra Ltd Maruti Suzuki India Ltd Auto State Bank of India HDFC Bank Ltd Banks Ambuja Cements Ltd Cement ITC Ltd Consumer Non Durables Steel Authority of India Ltd Ferrous Metals GAIL (India) Ltd GAS Bharat Heavy Electricals Ltd Industrial Capital Goods Sterlite Industries Ltd Non - Ferrous Metals Oil & Natural Gas Corporation Ltd Oil Reliance Industries Ltd Indian Oil Corporation Ltd Reliance Petroleum Ltd Bharat Petroleum Corporation Ltd Petroleum Products Reliance Infrastructure Ltd Power Infosys Technologies Ltd Software Bharti Airtel Ltd Telecom - Services Other Corporate Debentures Call / Reverse Repo/ CBLO Net Current Asset Options Grand Long Future * w.e.f. April 2, 2009 Asset Allocation under the IDFC-IEF-Growth as of 31 March % 6 Month (Absolute) Last 1 Year Last 2 Years 0.84% 2.87% 16.84% -1.40% 3 Month (Absolute) % -2.21% % -6.88% -5.65% Last 3 Years Since Inception % % 3.51% 3.73% 3.81% 3.85% 4.47% 4.71% 4.89% 5.94% 6.10% % 1.02% 1.55% 1.73% IDFC-IEF - Growth BSE200 - Compounded Annualised Growth Rate Benchmark : BSE 200 Ferrous Metals Power Gas Non - Ferrous Metals Oil Software Industrial Capital Goods Cement Consumer Non Durables Auto Telecom - Services Banks Petroleum Products 5

6 IDFC Premier Equity Fund (IDFC - PEF) An open-ended equity fund Nature : Equity Fund Size : Rs Crore Fund Manager : Kenneth Andrade Investment objective : The Scheme shall seek to generate long-term capital growth from an actively managed portfolio of predominantly equity and equity related instruments. Investment style : Focus on buying great companies at low valuation with a longer term perspective. The scheme portfolio would seek to acquire, inter alia, small and medium size business with good long term potential, which are available at cheap valuation. Such securities would be identified through disciplined fundamental research keeping in view medium to long term trends in the business environment. The Scheme shall endeavor to accumulate long term investor wealth by opening subscriptions to units during periods when stocks are available at reasonable valuations. By doing so, the Fund managers would endeavor to prevent short term money from flowing into the fund which can prove detrimental to the interest of long term investors. Ideal investment horizon : 3 years or more Risk profile : High Entry load : IDFC-PEF - Plan A : Purchases of less than Rs. 5 Crores- 2.25%, Rs. 5 Crore or more (including by way of SIP/STP) - Nil, by an FOF (irrespective of the amount of Purchase)-Nil, by way of Dividend Re-investment - Nil. A switch-in/stp may also attract an Entry Load like any Purchase however no load shall be chargeable on investments switched in by investor from any other Equity Scheme(s) of IDFC Mutual Fund (other than in case of switch-ins of less than Rs. 5 Crores from IDFC Arbitrage Fund & Arbitrage Plus Fund, where entry load of 2.25% shall be applicable). Such switches may however be subject to exit load as applicable in the scheme from where the investments are switched out. IDFC-PEF - Plan B* : Nil Exit load: IDFC-PEF (Plan A & Plan B*): In case of purchases of Rs. 5 Crores or more (including by way of SIP/STP)-Nil, In case of purchase of less than Rs. 5 Crores if redeemed within 1 year from the date of Purchase(s) applying First In First Out basis (including Purchases made through SIP/STP) %. There will be no exit load for investment made by FOF schemes irrespective of amount of redemption / switch outs. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between different options of the Scheme. Options available: Growth, Dividend. Reinvestment facility is available under the Dividend Option. Minimum investment amount (Plan A & Plan B*): Rs. 25,000 Additional investment amount : Re.1 SIP (minimum amount) (Plan A & Plan B*): Rs Inception Date: 28 September 2005 Statistical measures : Beta 0.94 R Square 0.83 Standard deviation 9.72% Last dividends (Rs./ unit) : NA NAV (Rs.): Growth Dividend Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 79.74% / 15.90% / 4.36% Fund manager s comment The portfolio has attempted to identify emerging themes & segment leaders which have a strong correlation to the growth of the economy. The fund is invested close to 86% with the balance in cash. The investment process & the diversification have not undergone any radical shift. The focus remains on buying into emerging business & taking a call on the entrepreneur /organization to ride through successfully the growth curve of the business cycle. Market value in % of Name Lac (Rs.) NAV Exide Industries Ltd Motherson Sumi Systems Ltd Auto Ancillaries Axis Bank Ltd Indian Overseas Bank Banks Shree Cement Ltd Cement Shree Renuka Sugars Ltd Balrampur Chini Mills Ltd Kaveri Seed Company Ltd Bata India Ltd United Spirits Ltd Gokul Refoils And Solvent Ltd Consumer Non Durables Jindal Steel & Power Ltd Ferrous Metals Coromandel Fertilisers Ltd Fertilisers Shriram Transport Finance Corp Ltd Rural Electrification Corp Ltd SREI Infrastructure Finance Ltd Finance Deep Industries Ltd Gas PTC India Ltd Power Pantaloon Retail (India) Ltd Retailing Educomp Solutions Ltd Software Onmobile Global Ltd Telecom - Equipment & Accessories Page Industries Ltd Textile Products Blue Dart Express Ltd IRB Infrastructure Developers Ltd Transportation Corporate Debentures Call / Reverse Repo/ CBLO Net Current Asset Grand Long Future * w.e.f. April 2, 2009 under the IDFC-PEF-Growth as of 31 March 2009 Asset Allocation 3 Month (Absolute) 6 Month (Absolute) Last 1 Year Last 2 Years Last 3 Years 0.12% 7.48% 1.13% 21.66% -1.20% -1.40% -0.60% -6.88% Since Inception Benchmark : BSE % IDFC-PEF - Growth % % BSE % - Compounded Annualised Growth Rate % 0.46% 0.84% 0.90% 1.12% 1.34% 0.06% 0.39% 1.34% Chemicals Oil Pharmaceuticals Industrial Products Miscellaneous Telecom - Equipment & Software Gas 5.77% 4.59% 5.01% 3.52% 3.55% 3.62% 3.65% 3.66% Textile Products Fertilisers Retailing Ferrous Metals Power Cement Banks Transportation 9.65% 8.61% Auto Ancillaries Finance Consumer Non Durables

7 IDFC Arbitrage Fund (IDFC - AF) An open-ended equity fund Nature : Equity & Equity Derivatives Fund Size : Rs Crore Fund Manager : Ashwin Patni & Arjun Parthasarathy Investment objective : The investment objective of is to generate capital appreciation and income by predominantly investing in arbitrage opportunity in the cash and the derivative segments of the equity markets and the arbitrage opportunity available within the derivative segments and by investing the balance in debt and money market instruments. However there is no assurance that the investment objective of the scheme will be realized. Investment style : The Scheme seeks to capture the Cost of Carry by executing simultaneous buy (in the cash market) and sell (In the futures) trades. The amount not so invested is invested in FDs and money market instruments. Ideal investment horizon : 1 year or more Risk profile : Low Entry load : Nil Exit load: 0.25% in both Plan A and Plan B, if redemption / switch is requested within 30 days from the date of purchase, during ongoing period. Plans available: Plan A (Regular), Plan B (Institutional) Options available: Growth, Dividend Minimum investment amount : Plan A: Rs. 5,000, Plan B: Rs. 1,00,000 Additional investment amount : Re.1 SIP (minimum amount) : NA Inception Date: 21 December 2006 Statistical Measures : Standard deviation 0.32% Dividend frequency: When available Last 8 dividends (Rs./ unit) : 14-Aug-08 A NAV Aug-08 B NAV Sep-08 A NAV Sep-08 B NAV Oct-08 A NAV Oct-08 B NAV Nov-08 A NAV Nov-08 B NAV Dec-08 A NAV Dec-08 B NAV Jan-09 A NAV Jan-09 B NAV Feb-09 A NAV Feb-09 B NAV Mar-09 A NAV Mar-09 B NAV NAV (Rs.): Plan A (Regular) Growth Plan A (Regular) Dividend Plan B (Institutional) Growth Plan B (Institutional) Dividend Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 66.48% / 28.49% / 5.03% Fund manager s comment Cash-future spreads became stable towards expiry. The fund was able to successfully roll-over its futures positions. under the IDFC-AF-Growth as of 31 March % 2.06% IDFC-AF-Growth 3.09% 4.66% CLFI 5.99% - Compounded Annualised Growth Rate 8.81% Benchmark : CLFI 8.16% 8.04% 7.79% 7.13% 3 Month (Absolute) 6 Month (Absolute) Last 1 Year Last 2 Years Since Inception Market Value in % of Value of Name Lac (Rs.) NAV Futures 3i Infotech Ltd Adlabs Films Ltd Allahabad Bank Alok Industries Ltd Aptech Ltd Arvind Ltd Bajaj Hindustan Ltd Balrampur Chini Mills Ltd Bharat Forge Ltd Birla Corporation Ltd Bombay Dyeing & Mfg Company Ltd Cairn India Ltd Central Bank Of India Ltd Century Textiles & Industries Ltd Chambal Fertilizers & Chemical Ltd Chennai Petroleum Corporation Ltd Dena Bank Development Credit Bank Ltd Fedral Bank Ltd Financial Technologies India GAIL (India) Ltd Gateway Distriparks Ltd GTL Ltd Gujarat Alkalies & Chemicals Ltd Hindustan Const Company Ltd Hotel Leela Venture Ltd ICICI Bank Ltd IDBI Bank Ltd IFCI Ltd India Cements Ltd Indian Hotels Co. Ltd Infrastructure Development Finance Company Ltd ITC Ltd Jaiprakash Associates Ltd Jaiprakash Hydro Power Ltd Kesoram Industries Ltd Mahanagar Telephone Nigam Ltd Maharashtra Seamless Ltd Oracle Financial Services Software Ltd Oriental Bank Of Commerce Petronet LNG Ltd Praj Industries Ltd Ranbaxy Laboratories Ltd Reliance Industries Ltd Reliance Infrastructure Ltd Reliance Power Ltd Rolta India Ltd Strides Arcolabs Ltd Sun Pharmaceuticals Industries Ltd Suzlon Energy Ltd Tata Consultancy Services Ltd Tata Steel Ltd TVS Motor Company Ltd Ultratech Cement Ltd Vijaya Bank Voltas Ltd Welspun Guj Stahl Rohren Ltd Final Call / Reverse Repo/ CBLO Bank Deposit Corporate Debentures Net Current Asset Grand

8 IDFC Enterprise Equity Fund (IDFC - EEF) A Close Ended Equity Fund with automatic conversion into an Open Ended Equity Scheme, on completion of 36 months. Nature : Equity Fund Size : Rs Crore Fund Manager : Kenneth Andrade. Investment objective : The investment objective of the scheme is to seek to generate capital growth from a portfolio of predominantly equity and equity related instruments(including Equity derivatives). The scheme may also invest in debt and money market instruments to generate reasonable income. Investment Strategy (in brief): The term Enterprise connotes activity, venture, project or an endeavour. The Scheme intends to invest in companies which are involved in or are in the process of setting up various business activites, ventures, projects or other commercial endeavours. The Scheme would invest in equities in the IPOs subsequent public offers or in the secondary market, other equity related instruments (including derivatives), benefit out of the cash and derivative markets arbitrage, opportunity and invest the residual sums in debt and money market instruments. For details please refer to the Offer document. The scheme will endeavour to generate capital appreciation through investing in equities by interalia adopting the mode of applying IPOs or subsequent public offering made by companies, if well-priced IPOs are not available the funds collected will be invested in other investment avenues such as index, cash futures arbitrage. Nifty spot futures arbitrage etc. as per the investment strategy of the scheme. Investment style : The Scheme endeavours to generate capital appreciation through investing in equities by inter alia adopting the mode of applying for IPOs or subsequent public offering made by companies. If well priced IPOs are not available the funds collected may be invested in the index, hence generating market return from the index and the alpha from the premium on listing of IPOs Risk profile : High Exit load : To give liquidity to investors, repurchase facility is available on a half yearly basis on specified repurchase dates. The Repurchase date(s) at the applicable NAV in the scheme are December 31, 2006, June 30, 2007, December 31,2007, June 30,2008, July 1,2008, December 31, 2008 & June 9,2009(maturity date). No load shall be charged at the time of exit, however in case of an investor exiting the scheme before amortisation is completed, the AMC shall redeem the units only after recovering the balance proportionate unamortised issue expenses, in accordance with SEBI Regulation. Options available: Growth, Dividend Minimum investment amount : Rs. 5,000 Additional investment amount : Re.1 Inception Date: 9 June 2006 Statistical Measures : Beta (BSE 200) 0.82 R Square (BSE 200) 0.87 Beta (Nifty) 0.87 Rsquare (Nifty) 0.90 Standard deviation 4.26% Last 3 dividends (Rs./ unit) : 14 May NAV NAV (Rs.): Growth Dividend Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 84.92% / 12.93% / 2.15% Fund manager s comment As a strategy, the fund follows a 100% invested philosophy. The fund aims to generate alpha by participating in primary market issuances. The fund is currently invested in Nifty stocks as the primary market pipeline has been quiet and we have not seen any large issuances in the recent past. Market value in % of Name Lac (Rs.) NAV ACC Ltd ABB Ltd Bharat Heavy Electricals Ltd Bharat Petroleum Corporation Ltd Reliance Infrastructure Ltd Idea Cellular Ltd Bharti Airtel Ltd Cairn India Ltd Cipla Ltd DLF Ltd GAIL (India) Ltd Grasim Industries Ltd Ambuja Cements Ltd HCL Technologies Ltd HDFC Bank Ltd Housing Development Finance Corp Ltd Hero Honda Motors Ltd Hindalco Industries Ltd Hindustan UniLever Ltd ICICI Bank Ltd Infosys Technologies Ltd ITC Ltd Larsen & Toubro Ltd Mahindra & Mahindra Ltd Maruti Suzuki India Ltd National Aluminium Co. Ltd NTPC Ltd Oil & Natural Gas Corporation Ltd Power Grid Corporation Ltd Punjab National Bank Ranbaxy Laboratories Ltd Reliance Communications Ltd Reliance Capital Ltd Reliance Industries Ltd Reliance Petroleum Ltd Reliance Power Ltd Steel Authority of India Ltd State Bank of India Siemens Ltd Sterlite Industries Ltd Sun Pharmaceutical Industries Ltd Suzlon Energy Ltd Tata Consultancy Services Ltd Tata Motors Ltd Tata Steel Ltd Tata Power Co. Ltd Unitech Ltd Axis Bank Ltd Tata Communications Ltd Wipro Ltd NIFTY Call / Reverse Repo/ CBLO Corporate Debentures Bank Deposit Net Current Asset Grand Long Future Asset Allocation under the IDFC-EEF-Growth as of 31 March % 6 Month (Absolute) Last 1 Year Last 2 Years Since Inception 13.80% -1.40% 3 Month (Absolute) % % -4.89% -1.34% 8.88% 8.37% 8.24% 9.16% 10.89% % % % % 2.09% 1.83% 1.69% 1.45% 0.53% 2.18% 2.28% 2.61% 2.92% 2.38% 2.39% 3.23% IDFC-EEF - Growth BSE200 - Compounded Annualised Growth Rate Benchmark : BSE 200 Construction Gas Cement Construction Project Non - Ferrous Metals Pharmaceuticals Finance Auto Diversified Ferrous Metals Industrial Capital Goods Consumer Non Durables Software Banks Telecom - Services Oil Power Petroleum Products 8

9 IDFC Tax Saver (ELSS) Fund (IDFC - TS[ELSS]) A 10 year closed ended Equity Linked Saving Scheme Nature : Equity Fund Size : Rs Crore Fund Manager : Ajay Bodke Investment objective : The investment objective of is to seek to generate long term capital growth from a diversified portfolio of predominantly equity and equity related instruments. There can be no assurance that the investment objective of the scheme will be realised. Investment style : The Scheme will invest in well- managed growth companies that are available at reasonable value. Companies would be identified through a systematic process of forecasting earnings based on a deep understanding of the industry growth potential and interaction with company management. Risk profile : High Exit load : To give liquidity to investors, repurchase facility is available on all business days. (On completion of lock in period of 3 years from the date of allotment). No load shall be charged at the time of exit, however in case of an exiting the scheme before amortisation is completed, the AMC shall redeem the units only after recovering the balance proportionate unamortised issue expenses, in accordance with SEBI Regulations. Options available: Growth, Dividend Minimum investment amount : Rs. 500 Additional investment amount : Re.500 Inception Date: 15 March 2007 Statistical Measures : Beta 0.85 R Square 0.90 Standard deviation 9.74% Dividends frequency : NA NAV (Rs.): Growth Dividend Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 84.17% / 0.37% / 15.47% Fund manager s comment American economy is showing signs of resilience as reflected in better than expected housing sales and consumer confidence index, while the federal government is doing its best to handle the toxic assets in the system. World-over the impact of de-stocking appears to be over. Meanwhile, Indian government as well has proactively undertaken policy measures in the form of various monetary and fiscal stimulus. The agriculture based rural economy in India is relatively insulated from global slowdown, in addition the increase in salary and payment of arrears for government employees as per sixth pay commission recommendations is expected to drive the consumption led growth. Recent data of auto sales, cement consumption, FMCG sales, and telecom subscriber addition has been buoyant. However, we are taking cognizance of general elections in India, geopolitical risk, and concerns over rising fiscal deficit. We continue with our cautious stance and hold on with a large cap, liquid bias in our portfolios. Market value in % of Name Lac (Rs.) NAV Hero Honda Motors Ltd Auto Exide Industries Ltd Auto Ancillaries HDFC Bank Ltd State Bank of India Banks Madras Cements Ltd Cement Larsen & Toubro Ltd Construction Project ITC Ltd Consumer Non Durables Hindustan UniLever Ltd Diversified Jindal Steel & Power Ltd Ferrous Metals Power Finance Corporation Ltd Housing Development Finance Corp Ltd Finance Bharat Heavy Electricals Ltd Industrial Capital Goods Time Technoplast Ltd Sintex Industries Ltd Industrial Products Oil & Natural Gas Corporation Ltd Oil Reliance Industries Ltd Indian Oil Corporation Ltd Petroleum Products Sun Pharmaceutical Industries Ltd Pharmaceuticals NTPC Ltd Power Infosys Technologies Ltd Software Bharti Airtel Ltd Telecom - Services Call / Reverse Repo/ CBLO Net Current Asset Grand Asset Allocation under the IDFC-TS(ELSS)-Growth as of 31 March Month (Absolute) 6 Month (Absolute) Last 1 Year Since Inception Last 2 Year -1.67% -1.40% 10.99% 12.69% % % % % % % 3.65% 3.65% 3.69% 2.86% 5.35% 5.59% 3.99% 4.03% 4.03% 4.14% 4.28% 3.75% 3.80% 3.82% 3.85% % % IDFC-TS(ELSS) - Growth BSE200 - Compounded Annualised Growth Rate Benchmark : BSE 200 Cement Telecom - Services Oil Auto Construction Project Pharmaceuticals Software Ferrous Metals Diversified Industrial Products Consumer Non Durables Power Industrial Capital Goods Auto Ancillaries Finance Petroleum Products Banks 9

10 IDFC Arbitrage Plus Fund (IDFC - APF) An open-ended equity fund Nature : Equity Derivatives Fund Size : Rs Crore Fund Manager : Ashwin Patni & Arjun Parthasarathy Investment objective : The investment objective of the scheme is to generate income (absolute to low volatility returns) by taking advantage of opportunities in the cash and the derivative segments of the equity markets including the arbitrage opportunities available within the derivative segment, by using other derivative based strategies and by investing the balance in debt and money market instruments. However there is no assurance that the investment objective of the scheme will be realized. Investment style : The fund aimed to generate absolute returns by investing in trades in the equity and derivative markets. The trades can consist of cash-futures arbitrage as well as relative value (such as pair trades and corporate event- based strategies) and derivatives strategies. Ideal investment horizon : 1 year or more Risk profile : Low Entry load : Nil Exit load: IDFC- APF - Plan A : 0.75% of NAV on investors who purchase/switch in and seek to redeem/switch out such units (of amount less than or equal to 1 Crore) within 1 Year such from the date of effecting such purchase/switch in Plan A (Regular Plan). No Exit Load shall be applicable in case of Purchases / Switch ins of amounts greater than Rs. 1 Crore whether redeemed partly or fully. 0.25% of NAV on investors who purchase/switch in and seek to redeem/switch out such units within 1 month from the date of investment in Plan B. Exit Load shall be Nil beyond 1 month for plan B. Options available: Growth, Dividend Minimum investment amount : Plan A : Rs.10,000, Plan B: Rs. 1,00,000 Additional investment amount : Re.1 Inception Date: 9 June 2008 Statistical measures : Standard deviation 0.76% Last dividend (Rs. / unit): 06 Jan 2009 A 0.06 NAV Jan 2009 B 0.06 NAV Feb 2009 A 0.06 NAV Feb 2009 B 0.06 NAV Mar 2009 A 0.06 NAV Mar 2009 B 0.06 NAV Dividend frequency : When available NAV (Rs.): Growth (A) (B) Dividend (A) (B) Face value (Rs. / unit) : 10 Asset allocation (equity / debt / cash) : 67.04% / 33.23% / -0.24% Fund manager s comment Cash-future spreads became stable towards expiry. The fund was able to successfully roll-over its futures positions related to arbitrage. Apart from arbitrage, the fund successfully participated in open offers, pair trades and options positions. under the IDFC-APF-Growth as of 31 March % 2.06% IDFC-APF - Growth CLFI 5.76% 4.66% Benchmark : CLFI 7.34% 7.25% 3 Month (Absolute) 6 Month (Absolute) Since Inception (Absolute) Market Value in % of Value of Name Lac (Rs.) NAV Futures 3i Infotech Ltd Adlabs Films Ltd Arvind Ltd Bank Of India Bharti Airtel Ltd Canara Bank Century Textiles & Industries Ltd Chambal Fertilizers & Chemical Ltd Chennai Petroleum Corporation Ltd Dena Bank Development Credit Bank Ltd DLF Ltd GTL Ltd HCL Technologies Ltd Hindustan Const Company Ltd Housing Development Finance Corporation ICICI Bank Ltd IDBI Bank Ltd IFCI Ltd India Cements Ltd Indian Overseas Bank Infrastructure Development Finance Company Ltd ITC Ltd 1, , Jaiprakash Associates Ltd Jaiprakash Hydro Power Ltd Kotak Mahindra Bank Ltd Lakshmi Machine Works Ltd Mahanagar Telephone Nigam Ltd Neyveli Lignite Corporation Ltd Oracle Financial Services Software Ltd Oriental Bank Of Commerce Petronet LNG Ltd Polaris Software Lab Ltd Praj Industries Ltd Punj Lloyd Ltd Ranbaxy Laboratories Ltd Reliance Industries Ltd Reliance Infrastructure Ltd. 1, , Reliance Natural Resources Ltd Reliance Power Ltd Rolta India Ltd Rural Electrification Corporation Ltd State Bank Of India Strides Arcolabs Ltd Suzlon Energy Ltd Tata Chemicals Ltd Tata Steel Ltd Ultratech Cement Ltd Welspun Guj Stahl Rohren Ltd , , Matrix Laboratories Ltd Open Position Shaw Wallace & Company Ltd United Spirits Ltd Oriental Bank Of Commerce Canara Bank Indian Oil Corporation Ltd Bharat Petroleum Corp Ltd India Cements Ltd Ultratech Cement Ltd Grasim Industries Ltd Bank Of India Union Bank Of India Ltd Pair Trade 1, , ABB Ltd ACC Ltd Ambuja Cements Ltd Axis Bank Ltd Bharat Heavy Electricals Ltd Bharat Petroleum Corp Ltd Bharti Airtel Ltd Cairn India Ltd Cipla Ltd DLF Ltd GAIL (India) Ltd Grasim Industries Ltd HCL Technologies Ltd HDFC Bank Hero Honda Motors Ltd Hindalco Industries Ltd Hindustan Unilever Ltd Housing Development Finance Corporation ICICI Bank Ltd Idea Cellular Ltd Infosys Technologies Ltd ITC Ltd Larsen & Toubro Ltd Mahindra & Mahindra Ltd Maruti Suzuki India Ltd National Aluminium Company Ltd NTPC Ltd Oil & Natural Gas Corporation Ltd Power Grid Corporation Of India Ltd Punjab National Bank Ranbaxy Laboratories Ltd Reliance Capital Ltd Reliance Communications Ltd Reliance Industries Ltd Reliance Infrastructure Ltd Reliance Petroleum Ltd Reliance Power Ltd Siemens Ltd State Bank Of India Steel Authority Of India Ltd Sterlite Industries Ltd Sun Pharmaceuticals Industries Ltd Suzlon Energy Ltd Tata Communications Ltd Tata Consultancy Services Ltd Tata Motors Ltd Tata Power Fv Tata Steel Ltd Unitech Ltd Wipro Ltd Call April 2009 Option Put April 2009 Option Put April 2009 Option Put June 2009 Option Put June 2009 Option Put September 2009 Option Put September 2009 Option Nifty Stock / Option 1, Final 18, , Bank Deposit Call / Reverse Repo/ CBLO Corporate Debentures Net Current Asset Grand