1. India The Structural and Secular Bull Story Time for Introspection

2. Outline The Bull Market The Correction Drivers of the Bull Market Deductions Risks Possibilities Investment Attitudes

3. The Bull Market

4. The Correction Corrections always have two dimensions - Price and Time –Price correction: 35% of the gains upto May-06 –Gains of last 5 months out of the 37 months have been lost in the correction –Time correction: Underway Worst Excesses –IPOs, Real Estate stocks, Micro Caps Sensex Delta Decomposition

5. Drivers of the Bull Market India’s economic growth Superlative corporate performance Market architecture and infrastructure in placeMarket architecture and infrastructure in place The tectonic shift of imperatives to invest in emerging marketsThe tectonic shift of imperatives to invest in emerging markets Vast under-exposure to equities in India

6. All major drivers for the structural and secular bull market are in place, are they?

7. Drivers of the Bull Market India’s economic growth Superlative corporate performance Market architecture and infrastructure in place The tectonic shift of imperatives to invest in emerging markets Vast under-exposure to equities in India

8. Deductions After the unprecedented rise from 6000 to 12600 in 12 months, and excesses becoming apparent; it was rational that the exuberance was corrected The intrinsic structural and secular bull market story is very much alive and kicking Corrections / Consolidations are part and parcel of all bull markets and they cleanse interim excesses How far and how deep the price correction, and how long the time correction / consolidation will last are anybody’s guess Historical valuations range suggests that in absence of earnings damage, Sensex would trade with the 9250-9750 range acting as a strong support Markets are not going to make a new high in a hurry

9. Risks Risks to Earnings Growth –Input prices –Global slowdown –Interest rates –Politics in India Risks to Valuation and Sentiment –Global Asset Allocation shift –Global and Domestic liquidity –Growth perceptions –Currency and Current Account deficit –Interest rate All these risks can only temporarily impact, and not reverse, the basic direction of earnings, valuation and sentiment

10. Possibilities Base case 2007 Sensex EPS of Rs 662

11. Investment Attitudes Despite all-round optimism and unprecedented gains, never forget the 4-letter word associated with equities – RISK. As a trader, react to Price. As an investor, react to fundamentals. Don’t always react to the apparent, or with the herd. Investing success is not a one way street. Its not about buying the optimism and selling the pessimism. Superior Investment returns are not gained without pain, time, introspection and doubt. Expect realistic returns, this is not a Casino. Be Greedy, But be Long-term Greedy. Despite All-round pessimism, never forget the opportunity in equities.

12. “I believe that the secular and structural bull market is very much alive and kicking. Although factors known / unknown may slow it, it will really need God’s wrath for it to be reversed prematurely” Thank You

13. India’s Economic growth Democracy Skill-sets Entrepreneurship Demographics

14. India’s Economic Growth – So far Structural and Secular Change driving growth –Productivity: Airfares half, Passengers manifold –Lowest Costs: Mobile costs lowest, Mobile companies profitable –Confidence: Indian companies acquiring globally –Consumption: Discretionary spends rising, Organised retail exploding, Brands flourishing –Savings: Driven by better demographics, lower Govt deficits Growth is a result of above factors, not prices of natural resources (eg. Russia, Australia) Growth in spite of Constraints –Infrastructure –Policy environment Change  Irreversible and Inevitable –Temporary blips possible, which may lower pace, or create doubt

15. Superlative Corp Performance

17. Market Infrastructure in place Infrastructure for equity flows in place –Modernised trading system + Dematerialisation –Competitive private sector Mutual Fund industry –Effective Regulatory environment –Corporate governance thru market’s sword Tax paradise –Short term capital gains at 10% –No Long term capital gains tax –Dividend tax free

18. Tectonic shift to Emerging markets Developed countries have an ageing population with rising life-expectancies and prohibitive healthcare costs resulting in huge pension deficits make the quest for superior returns imperative Superior economic growth, Globalisation, better capital access, freer movement of capital, improving corporate governance and regulation in emerging markets, market influenced exchange rates, converging and aligned interest rates have made emerging countries an asset class that cannot be ignored by asset managers

19. Tectonic shift to Emerging markets Real GDP Growth Rates Comparison – Developed Countries vs. Emerging Countries

20. Under-exposure to equities in India

21. Savings explosion combined with poor equity exposure Limited investment alternatives Equities are most tax efficient asset class for investors Under exposure to equities will be inevitably corrected