1. In House Calls 2008 – 09
September 2009
Private & Confidential

2. 2003 History
The 2003 Story
Back in 2003, the economy was coming out of a growth slowdown led by global and local factors
(drought). Valuations had hit a low point of the cycle and the market rallied hard on the back of
liquidity.
Central Banks around the world, including India has ease off liquidity in the markets for growth
revival. This liquidity drove the markets higher. Valuations rose 50% from the lows and the
market started appearing expensive.
However, the expectation of growth returning and strong earnings in future was the word
everywhere. Thus, despite the assets being expensive, the markets sustained its performance in
2004 and beyond.
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3. Will 2003 History Repeat?
2009 Recalling of 2003 (Déjà vu? 2003 All Over Again)
We see a similar pattern this time around. Valuations cycle hit a low in March 2009.
Liquidity was splashed in the system after the fiscal and monetary stimulus post 2008 crisis.
Stocks have surged with the narrow indices rising ~85% from its low. Valuations have also grown
by ~60% from the low.
Earnings revision has also raised as the growth outlook as improved.
Investors this time is concern that market is pricing in all the growth that is coming over the next
12 months.
The fears of drought leading to a slowdown in growth has not helped change the outlook and
these factors are causing extreme volatility.
However, an outcome similar to 2003 can’t be ruled out i.e., market closing on a strong note in
2009. Infact the liquidity and economic measures seems to be more forceful than in 2003. (even
though valuations are higher).
We are still out on the vigor of the growth recovery and we are yet to determine how much pace
this market recovery gathers beyond 2009.
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4. In-house calls summary
11th April ’08
• Large cap stocks were available at reasonable valuation due to crash in the stock market
looking at the India Growth story.
• Also, technical's had given a buy call for the immediate short term rally in the market &
hence Invested in Large Cap Mutual Funds
9th June ’08
• Investors who can not sustain high volatility is advised to redeem 25% to 30% of the
portfolio & stay invested in liquid fund.
22nd Sept ’08
• With an inflation hovering above 12% & 10 yr g-sec at around 8.5%, we strongly
believed that over a period of time the spreads between G-Sec & Corporate yield will
contract which were around 400 bps
• Also with contracting spreads & capital appreciation in bonds makes income fund more
attractive
• Hence, Invest the cash into Gilt Fund
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5. In-house calls summary
3rd Nov ‘08
• Due to Lehman brothers & Other big banks collapse, the global markets had tumbled
including India. Indian markets have almost fallen by 40% in a single month.
• We believed that relief rally would take place in the next 6 to 9 months & can see 50%
rise in the market.
• Hence it is advised to switch from Mid-Cap & Opportunities fund to Large-Cap funds in
a three months staggered form (STP) .
24th April ’09
• With the credit policy out from RBI & higher volatility in interest rate, we
recommended switch from Gilt fund to Short Term Income Funds / Liquid Fund & start
staggering into MIPs from now to June ’09
• One can also look to invest in gilt / income fund again when g-sec bounce back to 7 to
7.25%
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6. In-house calls summary
25th May ‘09
• The election results has turned out to be a complete “Game Changer”
• We feel that there is huge difference in valuation and earnings ratio compared to large
cap and hence we recommended a switch to Midcap fund from large cap funds
• Large caps has already rallied in pre-election rally and also after the election results and
hence we advised to book profits to the tune of 25% of the portfolio in large cap funds
• Investment into Mid-cap funds has to be in two stages:
Lump sum investment of 25% (Switch from Large cap)
Three month staggered investment (STP)
13th July ’09
• We advised client to do lateral sift (5% – 10%) to Gold from the Liquid funds.
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7. In-house calls performance
100% Equity : 0% Debt Portfolio
Model Portfolio Benchmark Index
110
100
reduced exposure to equity
asset due to high volatility
90
invest cash into Gilt &
Book partial profit in
Income Fund
Large Cap & invest in
80
Midcap
70
60
Buy call for Large cap Fund
50
40
book profits in Gilt &
Income Fund & invest in
30 MIP & hold cash due to
election
switch from Mid & Opp
20 fund into large cap
funds & stay in cash reduced cash exposure &
made lateral shift in
10
Gold
0
Mar-08
Mar-09
May-08
May-09
Oct-08
Dec-08
Jan-08
Jul-08
Aug-08
Jan-09
Jul-09
Aug-09
Feb-08
Apr-08
Feb-09
Apr-09
Jun-08
Sep-08
Nov-08
Jun-09
Note: Model Portfolio does not include 20% upper circuit movement as it was declared as Non-Business day for the Equity Mutual Fund.
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8. In-house calls performance
75% Equity : 25% Debt Portfolio
Model Portfolio Benchmark index
110
105 reduced cash exposure &
reduced exposure to equity made lateral shift in Gold
asset due to high volatility
100 invest cash into Gilt &
Income Fund Book partial profit in
95 Large Cap & invest in
Midcap
90
85
80
75
70
Buy call for Large cap Fund
65
60
55 book profits in Gilt &
Income Fund & invest in
50
MIP & hold cash due to
45 election
switch from Mid & Opp
40
fund into large cap
35 funds & stay in cash
30
Mar-08
Mar-09
May-08
May-09
Oct-08
Dec-08
Jan-08
Apr-08
Jul-08
Aug-08
Jan-09
Apr-09
Jul-09
Aug-09
Feb-08
Feb-09
Jun-08
Sep-08
Nov-08
Jun-09
Note: Model Portfolio does not include 20% upper circuit movement as it was declared as Non-Business day for the Equity Mutual Fund.
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9. In-house calls performance
50% Equity : 50% Debt Portfolio
Model Portfolio Benchmark index
110
105
reduced exposure to equity invest cash into Gilt &
reduced cash
100 asset due to high volatility Income Fund exposure &
made lateral
shift in Gold
95
Book partial profit in
Large Cap & invest in
90 Midcap
85
80
Buy call for Large cap Fund
75
70
switch from Mid & Opp
fund into large cap book profits in Gilt &
65 funds & stay in cash Income Fund & invest in
MIP & hold cash due to
election
60
Mar-08
Mar-09
May-08
May-09
Oct-08
Dec-08
Jan-08
Apr-08
Jul-08
Aug-08
Jan-09
Apr-09
Jul-09
Aug-09
Feb-08
Sep-08
Feb-09
Jun-08
Nov-08
Jun-09
Note: Model Portfolio does not include 20% upper circuit movement as it was declared as Non-Business day for the Equity Mutual Fund.
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10. In-house calls performance
25% Equity : 75% Debt Portfolio
Model Portfolio Benchmark index reduced cash
exposure & made
120 lateral shift in Gold
Book partial profit in
115 Large Cap & invest in
Midcap
110
invest cash into Gilt &
reduced exposure to equity Income Fund
asset due to high volatility
105
100
95
90
book profits in Gilt &
Income Fund & invest in
Buy call for Large cap Fund MIP & hold cash due to
85
election
switch from Mid & Opp
80 fund into large cap
funds & stay in cash
75
Mar-08
Mar-09
May-08
May-09
Oct-08
Dec-08
Jan-08
Apr-08
Jul-08
Aug-08
Jan-09
Apr-09
Jul-09
Aug-09
Feb-08
Feb-09
Jun-08
Sep-08
Nov-08
Jun-09
Note: Model Portfolio does not include 20% upper circuit movement as it was declared as Non-Business day for the Equity Mutual Fund.
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11. In-house calls performance
10% Equity : 90% Debt Portfolio
Model Portfolio Benchmark index
reduced cash
130
exposure & made
lateral shift in Gold
125
Book partial profit in
120 Large Cap & invest in
Midcap
115
invest cash into Gilt &
110 Income Fund
reduced exposure to equity
asset due to high volatility
105
book profits in Gilt &
100 Income Fund & invest in
MIP & hold cash due to
election
95
90 Buy call for Large cap Fund switch from Mid & Opp
fund into large cap
funds & stay in cash
85
Mar-08
Mar-09
May-08
May-09
Oct-08
Dec-08
Jan-08
Apr-08
Jul-08
Aug-08
Jan-09
Apr-09
Jul-09
Aug-09
Feb-08
Feb-09
Jun-08
Sep-08
Nov-08
Jun-09
Note: Model Portfolio does not include 20% upper circuit movement as it was declared as Non-Business day for the Equity Mutual Fund.
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12. Assumptions
Funds Selected
Equity Funds Debt Funds
Large Cap Fund Gilt Fund Liquid Fund
Birla Frontline Equity Fund ICICI Pru Gilt Fund - Investment Plan HDFC CMF - Treasury Plan
DSP Black Rock Top 100 Equity Fund Templeton India Gilt Plan - Composite Plan UTI Treasury Advantage Plan
HDFC Top 200 Fund
HSBC Equity Fund
Mid Cap Fund Income Funds Gold
Birla Mid-Cap Fund Birla Income Plus Investment in Gold
IDFC Premier Equity Fund HDFC Income Fund
Reliance Growth Fund Reliance Income Fund
Opporunities Fund MIP
DSP Black Rock Opportunities Fund Birla MIP
ICICI Pru Dynamic Plan ICICI Pru MIP
Kotak Opportunities Fund Reliance MIP
Benchmark Portfolios
S & P Nifty 100% Equity : 0% Debt
75% - Nifty & 25% - I-Sec Composite Index 75% Equity : 25% Debt
50% - Nifty & 50% - I-Sec Composite Index 50% Equity : 50% Debt
25% - Nifty & 75% - I-Sec Composite Index 25% Equity : 75% Debt
10% - Nifty & 90% - I-Sec Composite Index 10% Equity : 90% Debt
Data source: MFI Explorer
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13. Limitations
Entry and Exit loads have not been considered and incidentally they have no
material bearing in the intervening period as its been exits of older investments
that didn’t feature exit loads.
Taxation has not been considered for the purpose of illustration, as the date of
investments and individual tax status is unknown.
Execution has been closer to the date of recommendation.
Benchmark Index is calculated in proportion with Equity-Debt Allocation of the
Portfolio. Eg. For a 90% Equity – 10% Debt Portfolio, Benchmark Index will comprise
90% allocation in NIFTY and 10% in I-Sec Composite Index. For 80% - 20% Portfolio,
80 % allocation in NIFTY and 20% in I-Sec Composite Index.
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14. Disclaimer
This note has been prepared exclusively for the benefit and internal use of the recipient and does not carry any
right of reproduction or disclosure. Neither this note nor any of its contents maybe used for any other purpose
without the prior written consent of Anagram Capital Limited.
In preparing this note, we have relied upon and assumed, without any independent verification, the accuracy and
completeness of all information available from public sources or which was otherwise reviewed by us.
This note contains certain assumptions, which Anagram Capital Limited considers reasonable at this time and our
views as of this date and are accordingly subject to change. Computations adopted in this note are indicative and
are based on current prevailing market prices and general market sentiment. No representation or warranty is given
by Anagram Capital as to the achievement or reasonableness or completeness of any idea and/or assumptions.
This note does not purport to contain all the information that the recipient may require. Recipients should not
construe any of the contents herein as advice relating to business, financial, legal, taxation, or investment matters
and are advised to consult their own business, financial, legal, taxation and other advisors concerning the
company.
This note does not constitute an offer for sale, or an invitation to subscribe for, or purchase equity shares or other
assets or securities of the company and the information contained herein shall not form the basis of any contract. It
is also not meant to be or to constitute any offer for any transaction.
Wealth Management 14