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Indian Asset markets – Time to pick the low hanging fruit.

Outlook 2014

Right Horizons PMS

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Agenda / Table of contents

A review of the asset markets in 20131

Are we already in the bull market and we don’t know about it?2

Do we have a safety net for the economy3

Why we could be closer to the take off point?

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Do we have a safety net for the economy3

The next bull market, how does the foundation look like4

We are on the inflextion point, please catch it5

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Asset market in its volatile best – no asset spared…� Equities have continued to perplex the

common man and seasoned investor alike,

leaving no arbitrage between the two.

Large caps have been highly volatile and

positive currently; mid-caps have still a lot

of value left.

� Inverted yield curve means that short term

A review of the asset markets in India - 20131

0.00%

10.00%

20.00%

Asset return in 2013#

in India

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� Inverted yield curve means that short term

was better in 2013 than long duration.

� Gold performed its worst medium term

performance by Indian standards; globally

there was a rout in the asset – falling over

20% in USD terms.

� Real estate in metros continue to grow

~10% yoy, but volumes dry up indicating

medium term slump coming soon.

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-10.00%

Equities -Nifty

Equities -CNX Mid

Cap

Bond -Short Term

Bond -Long Term (GILT)

Gold -ETF

Real Estate - Tier I# YTD Nov 20th 2013

Are we already in the bull market and we don’t know about it?2

Volatility precedes bull markets. 2001-03 was a time which succeeded a period of agony, lackluster returns and high volatility

Early period of the bull market appear like mirage. In 2004-05, at every high point appeared like pullback is eminent. Market trudges higher every quarter with an occasional

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Chart Source: Yahoo Finance

trudges higher every quarter with an occasional pull back.

Not until we reach higher peaks that media and general public proclaim “BULL Market”. But most of the gains are skimmed, frenzy starts to kick in – time to be selective.

Disbelief!!

Where is our safety net; why are we a unique market?3

Growth driver #1: Demography remains favorable

Growth driver #2: Savings rising = higher investments

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Growth driver #3: Integration with global trade rising

Growth driver #4: Structural reforms inevitable

Where is our safety net; why are we a unique market?3

1/4th population of middle income earners – a potent force expected to

reach 1/3rd population by 2025

Highest amount of working class population and addition to workforce by

2030 in the world

Lowest age dependency ratio amongst the developing and developed

economies in the world

Safety Net #1

Safety Net #2

Safety Net #3

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Households practically immune to world currency crises. Est. total

collective GOLD holdings (physical) ~ 22,000 tones = USD 1 Tr at current

prices

Staples such as Rice, Wheat, Fruits & Veggies and Cereals are NOT

imported and produced locally = food insecurity and inflation is temporary

Energy resources such as Oil and Gas are currency independent, policy

dependent = Iran accepts local currency /GOLD in event of a crises

Weak currency = higher exports = higher manufacturing. CAD is a

temporary phenomenon.

Safety Net #4

Safety Net #5

Safety Net #6

Safety Net #7

� Nifty target of around 7200 by December 2014, implying a 18% annual upside

- Factors taking Nifty higher to these levels include

- De-levered balance sheet of corporate India over the next twelve months

- Policy clarity driven by results of Lok-Sabha elections and next central government fomation

- Inflation fatigue due to high base on CPI and WPI indices and consequent softening of RBI stance on tight monetary policy

- Availability of value picks in the large cap space (Index constituents) and higher value proposition in the bigger mid-cap space

Next Bull market & Outlook for 2014 and beyond4

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� 2013-2018 (medium term) outlook. ISRO the market!!!

- Corrective actions imminent after 5 years of flux, inactivity, low productivity and policy

paralysis

- Discretionary demand revival imminent due severe cut-back, higher savings and pent-up

demand outburst

- Strong investments uptick in spectrum of growth sectors – low ticket infrastructure (roads,

water projects, urban infra); capital goods and prosumer goods’ demand

- Strong Index movement based on favorable valuations and growth momentum pick up

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Inflexion point: closer than we might think!5

The foundation of a equity bull market lies in the following ingredients

� Low inflation and sustainably comfortable interest rate outlook. � Policy clarity at local and national level� Easy access to capital, with growing/stable equity markets� Stable domestic currency outlook.

At this moment, it appears that none of the ingredients are present for making a bull market

recipe over the next several months/quarters. Before we jump – it is extremely important to put

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recipe over the next several months/quarters. Before we jump – it is extremely important to put

the asset market cycle in perspective, explained in the next slide.

However, we believe that the next six months would take care of bullet # 2 and that could pave way to bullet # 4.

Bullet # 1 & #3 could be the outcome of many things including cleansing of the system by severe stress that the system has seen during 2011, 2012 and 2013, consequently leading to decade low GDP.

We believe, as a result, the turning point for Fixed income and equities market is expected in the next few quarters.

Inflexion point: closer than we might think!5

Higher Interest rates

Higher Savings

Low Money Supply

Higher Corporate profits

Rising Inflation

Loss of purchasing power

Asset Market

BUY Real Estate

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Lower investments

Fall in consumption

Lower Investments

Fall in Inflation

Fall in Interest rates

Investments pick up

Higher Money Supply

Increase in Consumption

Market Cycle

BUY Fixed Income

BUY Equities

Right Horizons PMS portfolios – wealth creation vehicles6

Portfolio Strategy

Nifty Plus FlexicapCapital Protection

Super Value

Fixed Income

ObjectiveLong term Wealth

creation

Long term weath

creation

Lower Capital

Volatility

Provide for high

capital

appreciation

Provide for

Inflation beating

returns

Predominantly invests in

Equities

• Nifty Index stocks

• BSE 200 stocks

Equities

•BSE 500 stocks

Fixed Income securities

• Listed securities

(80%)

• Equity Indices

Equities

• Mid-cap

Equities

Fixed Income Securities

• 100%

listed/Unlisted

Fixed income

securities

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• Equity Indices securities

Recommended Holding Horizon

> 18 months > 30 months 24 months >36 months 12 months

Portfolio StrategyBUY & Hold; Weight

Management

BUY & Hold;

Thesis Driven

BUY & Hold;

Trading Driven

Active

Strategy;

Bottom Up

BUY & Hold;

Risk Level Medium Medium Low High Low to Medium

Minimum Strategy Size1 INR 1million INR 1million INR 1million INR 1million INR 1million

1 Each PMS account shall be a minimum of INR25,00,000 set up value

Right Horizons PMS portfolios – performance6

Portfolio Performance (%)

1 month 3 months 6 months 1 year Since Inception

Nifty Plus 2.22% 9.25% 5.49% 6.45% 9.15%

Flexicap 1.02% 6.99% 0.7% 5.86% 3.56%

Super Value

(Mid & Small cap)3.07% 9.87% -0.45% - -8.76%

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(Mid & Small cap)

Nifty Index -0.93% 5.47% 1.01% 6.53% 8.75%

CNX MidCAP Index 2.00% 7.98% -5.17% - -12.63%

Capital Protection 0.76% 1.67% 1.08% 6.76% 6.76%

GSEC Index 0.43% 2.80% 0.73% 5.52% 5.52%

All time frames based on Nov 22 2013 data; Inception dates vary with respect to the different benchmarks adopted by the portfolios

DisclaimerThe information contained herein has been obtained from reports secured from third parties, publicly available sources and

Right Horizons, its affiliates, subsidiaries and/or Group companies take no responsibilities – express or implied for

inaccuracies contained herein.

This document is meant for the use of the intended recipient only. Though dissemination to all intended recipients is

simultaneous, not all intended recipients may receive this document at the same time. This document is neither an offer nor

solicitation for an offer to buy and/or sell any securities mentioned herein and/or official confirmation of any transaction.

This document is provided for assistance only and is not intended to be, and must not be taken as, the sole basis for an

investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document

should make such investigation as he deems necessary to arrive at an independent evaluation, including the merits and risks

involved, for investment in the securities referred to in this document and should consult his own advisors to determine the

merits and risks of such investment.

The investment discussed or views expressed may not be suitable for all investors. This document has been prepared on the

basis of information obtained from publicly available, accessible resources. Right Horizons has not independently verified all

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basis of information obtained from publicly available, accessible resources. Right Horizons has not independently verified all

the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to

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Reach us:contactus@righthorizons.com+91 80 4120 9582+91 22 4100 2018

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