Report on latest outlook on Debt Market

2. Debt Outlook
July 15th, 2013July 15th, 2013

3. RBI announcements on 15th July
Cap Borrowing under LAF to Rs. 750bn
Hikes Bank Rate and Marginal Standing FacilityHikes Bank Rate and Marginal Standing Facility
Rate by 200 bps from 8.25% to 10.25%
Announced an OMO sale of securities of Rs.
12,000 Crores

4. Effect on the Market
Interest Rates shot up across the curve
10 year Bond trading above 8% ( as high as 8.23)
1 Year CD levels approaching 10%
Such steep increases in yields was not expected
These levels has not been witnessed by markets over long term

5. Outlook and strategy
Domestic Macro factors are supportive to softer rates
Global markets volatility and sharp depreciation has led to
RBI tighteningRBI tightening
Stated objective of RBI is to restore stability in Forex
Market
Historically it takes around 3-6 months for Forex Market to
stabilize

6. Outlook and strategy
We believe there could be possibility that RBI may look at other liquidity measures if the liquidity
tightness is not transmitting into the system in a desired way.
It would be too early to conclude end of volatility in the bond market and therefore, it is preferred to be
careful and vigilant until the market stabilizes
Volatility will still be prevalent as more critical issues on magnitude and mode of financing CAD is yet to be
properly resolved
We expect RBI to Roll back these measures once the stated objective of stability in Forex Market is achieved
We believe Debt Funds with Accrual strategy are better suited to benefit from present chaos. We continue
to focus Templeton India Corporate Bond Fund and BSL Medium Term fund for 2-3 Years Horizon

7. End of PresentationEnd of Presentation