as on 04th May, 2012

Financial Market & Economy Update

1. India's foreign exchange reserves stood at $295.361 billion as of April 27, higher than $294.602 billion recorded in the previous week, as per the latest weekly statistical supplement available on RBIs website. 2. RBI has hiked the interest rate ceiling on foreign currency nonresident deposit of banks from 125 bps above the corresponding LIBOR/Swap rates to 200 bps for maturity period of 1 year to less than 3 years, and to 300 bps for maturity period of 3 to 5 years. 3. India is considering a review of the Double Taxation Avoidance Treaty with Mauritius to raise revenues. However, no fresh dates have been finalised for the next round of talks on the issue. 4. Total of ECB and FCCB for the month of March stood at $3.8 billion against $2.6 billion recorded in the previous month. 5. As stated by Minister of State for Finance, RBI is holding gold reserves of 557.75 tonne valued at $27.02 billion as on April 20, 2012.

Domestic Markets

Index BSE Sensex S&P CNX Nifty CNX Midcap CNX 500 BSE Smallcap

04-May-2012 16,831 5,087 7,215.00 4,051 6,588.00

27-Apr-2012 % Change 17,134 5,191 7,369.00 4,131 6,698.00 -1.77 -2.00 -2.09 -1.94 -1.64

Source: www.yahoofiance.com

Global Markets

Equity Market Update

1. The key benchmark indices ended sharply lower on concerns over depreciating rupee and likely wording of the General Anti Avoidance Rule (GAAR) in the Finance Bill. In addition, heavy selling by foreign funds due to fresh concerns over the Mauritius tax treaty review and weakness in European markets further pulled the market down. 2. Significant selloff have been witnessed in Capital Goods, Bankex, Metals, PSU and Realty stocks as these BSE indices fell in the range of 2-4%. Healthcare sector gained marginally by 0.24%. 3. Asian shares fell on Friday, following a sharp overnight drop in crude oil prices hitting energy stocks ahead of the closely-watched U.S. nonfarm payrolls report. Index Dow Jones Nasdaq S&P 500 FTSE 100 Shanghai Composite Hang Sang
Source: www.yahoofiance.com

04-May2012 13,207.00 3,024.00 1,392.00 5,720.00 2,452.01 21,086.00

27-Apr-2012 % Change 13,205.00 3,051.00 1,400.00 5,777.10 2,396.32 20,983.19 0.02 -0.88 -0.57 -0.99 2.32 0.49

Equity Market Outlook

The long term outlook continues to remain positive for Indian equities as the economic growth momentum remains healthy with real GDP growth remaining at around 7%. We expect earnings and the earnings growth to translate on positive outlook remaining intact, the near term challenges can influence markets as it gets mpacted by events / newsflows that can have a near term negative implications. Hollande won in the French elections. His manifesto was built on calling an end to the austerity and promoting socialist leanings. His win puts the entire Eurozone austerity measures in doubt. Although we believe that too much austerity does not benefit anyone, and some compromise like the one Hollande is standing for is good in the long term. However in the near term it will appear that the Eurozone leadership is in crisis, further exaggerating the impact on markets. In the local markets we see pockets of value emerging. Certain stocks are trading at bargain values and we are adding these stocks to the portfolio. We are reducing the defensive bias in the portfolios to some extent. Though some more downside may be left we do not think it will be very large.

Institutional Flows (Equity)

Description (INR Cr) FII Flows* MF Flows*

Purchases 6716.5 1067

Sales 5840.4 1341.5

Net 876.1 -274.5

Source: NSE & SEBI website. *FII Cash and MF Flows are for last 3 days.

F&O FII Trends (Rs. Crs)

Date 30-Apr-12 02-May-12

Index 906.39 236.69 256.51

Stocks 74.49 -88.59 -214.61

Debt Market Update

1. Bond yields ended higher snapping two day of falls, as traders turned bearish after the RBI sold debts at lower-than-expected prices. Traders also remained deeply cautious given the hefty supply of bonds, tight liquidity, and lingering concerns about foreign outflows. 2. The benchmark 10-year bond was not traded on Friday because of the regular "shut period" ahead of Saturday's coupon payment. 3. Liquidity eased further on Friday after banks borrowing under the LAF window stood at Rs.64,770 crore. 4. Call rate settled at a seven-month low of 7.50%, well below the repo rate, as liquidity conditions improved and demand for funds eased as the two-week reporting fortnight drew to a close. 5. RBI on Friday fixed the rate of interest on FRBs, 2016 for the period May 7, 2012 to May 6, 2013 at 8.29% per annum. 6. RBI conducted auction of 8.19% GS 2020, 9.15% GS2024, 8.97% GS 2020 and 8.83% GS 2041 worth Rs.18,000 crore, for which the cut-off yield stood at 8.54%, 8.72%, 8.92% and 8.99% respectively.

03-May-12
Source: NSE & SEBI website

Policy Rates

Key Rates (%) Reverse Repo Repo CRR SLR

Source: bloomberg

04-May-2012 1 Week Ago 7 8.00 4.75 24 7 8.00 4.75 24

1 Month Ago 7.5 8.5 4.75 24

Debt Market Outlook

Liquidity for the previous week was relatively easy on account of second week of reporting. Banks borrowed an average of Rs. 100000crs as compared to Rs. 113000crs in the previous week. The 10yr GSEC yields rose to 8.70% on announcement of auction. However, the yields fell to 8.60% on account of hopes of OMO on account of high borrowing numbers and fall in rupee. Later during the week, the auction cutoff came at higher yields and the 10yr traded back at 8.67%. Brent Crude oil has fallen to levels of $112/barrel during the weekend which may provide support to the 10yr in the coming week. We expected the 10yr gsec to trade in the band of 8.60%-8.70%.

Key Rates

Key Rates (%) Mibor Overnight CALL (O/N) CBLO T Bills Index (12M) 10 Yr GOI (8.79 GS 2021)
Source: bloomberg

04-May-2012 27-Apr-2012 8.25 8.25 7.46 8.27 8.62 8.38 8.40 8.05 8.25 8.64

% Change -1.55 -1.79 -7.33 0.24 -0.23

Kotak Mutual Fund Update

Kotak Mutual Fund has launched-Kotak FMP Series 87, a close ended debt scheme with the duration of 370 days from the date of allotment of units. The new issue opens for subscription from 4th May and will close on 9th May 2012.

Commodity Market

Commodity (INR) Gold (10 gm) Silver (10 gm)

Disclaimer:Disclaimer: Mutual Fund and securities investments are subject to market risks. Please read the Scheme Information Document (SID) and Statement of Additional Information (SAI) of the scheme carefully before investing. SID & SAI available on mutualfund.kotak.com.

04-May2012 29125 54,951 114.57

Gain+/Loss- % Change 123 -879 -5.37 0.42 -1.57 -4.48

Crude Oil ($/barrel)

Source: bloomberg

Commodity Market Update

1. Gold prices rebounded on Friday after trading around $ 1,626.80 an ounce after a report showed that worlds largest economy added more jobs than anticipated which revived hopes of further monetary easing by US Fed to boost growth. Spot gold was up by $4.70 and was seen trading at $1,639.50 an ounce. 2. Crude oil continued the downside movement and slipped below $114 per barrel, after fragile U.S jobs report added to doubts about the pace of economic recovery. Brent crude traded at $113.45 .

Currency Market

Currency USD/INR EURO/INR GBP/INR JPY/INR

Source: RBI

04-May-2012 53.72 70.65 86.98 67.01

Gain+/Loss1.04 1.27 1.86 1.83

% Change 1.97 1.83 2.19 2.81

Currency Market Update

1. INR recovered sharply in the second half from its intra-day lows, which sparked debate about the RBIs intervention in the market. The currency closed weak at 53.47/48 and posted its fifth straight week of fall on rising fears of foreign outflows. 2. Euro dropped marginally against the dollar after weak Euro zone services data. Market players are likely to wait for the U.S. jobs data later in the day and weekend elections in France and Greece. Euro was down 0.2% against the dollar at $1.3125.

Disclaimer The information contained in this material are extracted from different public sources and does not represent views/opinions of Kotak Mahindra Asset Management Company Limited or its associated companies. Kotak Mahindra Asset Management Co Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication. This is not a sales literature and all the information is for the information of the person to whom it is provided without any liability whatsoever on the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee thereof. Risk Factors Mutual Funds investments are subject to market risks and there is no assurance or guarantee that the objectives of the Schemes will be achieved. As with any securities investment, the NAV of the Units issued under the Schemes can go up or down depending on the factors and forces affecting the capital and money markets. Past performance of the Sponsor/AMC/Fund or that of existing Schemes of the Fund does not indicate the future performance of the Schemes. Statutory Details: Kotak Mahindra Mutual Fund is a Trust (Indian Trust Act, 1882).Investment Manager: Kotak Mahindra Asset Management Company Ltd. Sponsor: Kotak Mahindra Bank Ltd. (liability Rs. Nil). Trustee: Kotak Mahindra Trustee Company Ltd. Kotak Mahindra Bank Limited is not liable or responsible for any loss or shortfall resulting from the operations of the Scheme. Please read the Scheme Information Document (SID) and Statement of Additional Information (SAI) carefully before investing. SID and SAI are available on mutualfund.kotak.com.

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