1. ENAM 1 July 2004 Investment Outlook: Its all in Your Mind

2. ENAM 2 July 2004 Summary  Investing is easy!  Avoid the distractions  Disaggregate the market  Focus on business drivers  Follow the Rules  Asset Allocation  Time Horizon  Reasonable Expectations  Learn & get wise

3. ENAM 3 July 2004 Investing is easy if you avoid the distractions! Market/ Sensex  Your index is important not the market  Sensex flat since 1992  Wealth creation has occurred  Your index is important not the market  Sensex flat since 1992  Wealth creation has occurred Macroeconomics  Interest rates, Currencies, Oil prices, Politics.. do not alter basic competitiveness Media & Intermediaries  Have their own compulsions  Caveat Emptor!  Have their own compulsions  Caveat Emptor!

4. ENAM 4 July 2004 Market shows low correlation to current “fears” Sensex vs Oil price Sensex vs Fiscal deficit Sensex vs Monsoon *% of district having excess/normal rainfall Sensex vs Govt CongressUF NDA Source: BP statistics Source: Statistical outline of India Source: RBI Drought

5. ENAM 5 July 2004 Index P/E (Forward Earnings) Source Bloomberg

6. ENAM 6 July 2004 BSE Index Scenarios  Current Sensex Earnings aggregate to Rs. 381 (FY04A)  IBES consensus earnings estimates 17% growth  Current Sensex is at 4,951  Implied PER is 13x (trailing) and 10.5x (forward).  The table below sets out the range of Index expectations over next year Risk-Reward in favour of Upside! P/E (x) 2005 EPS growth (%) 152025 104,3824,5724,763 146,1346,4016,668 187,8878,2308,572

7. ENAM 7 July 2004 … but the Index hides more than it shows! ITPharmaceuticalsBankingMedia & Auto All Figures indexed 100= price in 1994

8. ENAM 8 July 2004 Multibaggers of the last 10 years Price as on 14/7/94 Price on 15/7/04 CAGR (%) Satyam Computers 3 32662 Infosys Technologies 13 144360 Wipro 6 52556 Sun Pharmaceuticals 21 35133 Hero Honda 33 46030 Cipla 41 23119 Ranbaxy 214 97616 Zee Telefilms 30 12615 HDFC 161 55013 Dr Reddy's 248 74912 Source: Bloomberg; Adjusted for bonuses and stock splits; NIFTY constituents only

9. ENAM 9 July 2004 Multibaggers since 9/11 : The REAL BSE-30! CompanyPrice as on Price on CAGR 15/7/04 11/9/01 (%) Oriental Bank2403492 Mahindra & Mahindra4766891 SAIL33587 Tata Motors4077576 ONGC65413669 Shipping Corp Of India Ltd1172468 Tata Iron & Steel Co Ltd3278457 BHEL52713557 IPCL1574057 Grasim95227451 GAIL1825351 Reliance Energy57117648 ABB73022548 Bajaj Auto84126647 Tata Chemicals Limited1213945 CompanyPrice as on Price on CAGR 15/7/04 11/9/01 (%) National Aluminium Co Ltd1394843 HPCL28811138 Tata Tea38615037 Hero Honda46018336 Tata Power25410136 Sun Pharma35114135 Ranbaxy97641533 ICICI Bank23810332 SBI Bank43118732 Glaxo60328229 Indian Hotels37017528 BPCL31415926 Satyam Computers32617523 ACC23212822 Gujarat Ambuja27515521 Source: Bloomberg; Adjusted for bonuses and stock splits; NIFTY constituents only

10. ENAM 10 July 2004 Investing is easy if you disaggregate the market Note : Companies may change characteristics over time! Global Outsourcers  IT  Pharmaceuticals  Engineering Global Commodities  Oil  Metals Domestic Demographics  FMCG  Auto  Banking Emerging Business  Telecom  Media  Retail Sustainability of Advantage Sources of Advantage High Low Many

11. ENAM 11 July 2004 Focus on Micro, Company specific factors  How is Product or Service Quality?  Germany/Japan/China v/s India, v/s competition  How is Cost & Capital Efficiency?  Frugality as a mindset v/s “professionally managed”  What are their Value Systems?  Sugar in the milk  How is their Service to the Customer?  The “goodwill” earned

12. ENAM 12 July 2004 Markets continuously discount all factors Use Bond Yield Reciprocal (100/8)=12.5x as your benchmark Value Time ROE : 25% ROE : 15% 8% Bonds Cash P/E=20x P/E=12x PE multiple represents – Predictability, Sustainability, Scaleability

13. ENAM 13 July 2004 Investing is easy if you follow the RULES  KNOW YOURSELF  Are you Schumacher or Buffet? If not – Why not Hire them!  Have a 3 – 5 year outlook Time is the friend of a good business  Proper asset allocation prevents panic attacks!  Have reasonable return expectation: 15% CAGR compounds to lot of money!  In equities – 6/10 is a good success rate  PAY FOR QUALITY  Good men make good companies : Relative goodness is good enough!  Good companies, like good men – are FEW!  Competitiveness & culture (Micro factors) matter more than Macro trends  IS IT IN THE PRICE?  Don’t double count factors! Remember to BOOK PROFITS !!

14. ENAM 14 July 2004 Thank You