EMERGING MARKETS OPPORTUNITIES - INDIA 2011 SPECIAL REPORT

EMERGING MARKETS OPPORTUNITIES l INDIA 2 INSIDE THE REPORT 3 Prologue Indias Economic Indicators 4 5 6 7 8 9 11 13 16 17 19 20 India as a preferred destination for Investments? Indias Rating Indias significanc e over the rest of world markets Economic growth and projections by IMF Sectoral Contribution to Indias Growth Trends in Industrial Output Foreign Investments & Performance Scenarios Best Investment Options for 2011 Performance of Foreign Funds in India Funds Sta tus in India Investment news Concluding Remarks

EMERGING MARKETS OPPORTUNITIES l INDIA 3 PROLOGUE The worlds largest democracy and second most populous nation, India has seen a si gnificant growth in its economic investment and output since the 1990s. As compa red to figure, Indias economy has shown an average growth rate of more than 7% in the decade since 1997, thereby decreasing poverty by about 10 percentage points . The countrys diverse economy sees agriculture as the primary dependence, though services now accounts for more than half of Indias output and one third of its e ntire labor force. India had shown viable improvement in IT sector, becoming a m ajor exporter of software services and software/IT workers. India emerged relati vely untouched from the financial crisis of 2007-08 as it reported a strong GDP growth of 7.4% in the 2009-10 fiscal year, even with a poor rainy season during this period. First half GDP growth this year has been reported at 8.9 percent ov er the same period in the previous year. India has also attracted large amounts of foreign investment in the form of FDI as well as portfolio investments this y ear, due to its quick recovery from financial crisis. The recovery crisis still prevails in nations like Europe and the United States, though India along with m any other emerging markets has seen an increased influx of foreign capital. Capi tal requirements for Indian industry remain high given the rapid expansion of th e economy, which means FDI investments are easily absorbed. Portfolio investment in India this year has broken all previous records resulting in a steep rise in the equity markets. This has increased the chances of bubble formation. Between April 1, 2009, and November 8, 2010, the BSE Sensex showed sharp hike from 9,90 1 points to an all-time closing high of 21,004 points. That index has been hover ing around the 20,000 mark ever since. The table below represents the trend of I ndias major economic indicators over years India: Selected Economic Indicators Country 2007/08 2008/09 2009/10 (Est) 2010/11 2011/12 2012/13 (Proj) (Proj) (Proj) Real GDP (at factor cost, % change) Wholesale Price Index (average % change) Exp orts (% change in current US) Imports (% change in current US) Current Account B alance (% of GDP) 9.2 4.5 26.4 32.1 -1.4 5.0 74.5 6.7 8.3 7.9 11.5 -2.5 8.8 75.1 7.4 3.4 -12.5 -7.8 -2.4 9.5 77.1 8.5 8.0 20.4 18.3 -2.4 8.5 74.1 9.0 6.0 17.4 15.3 -2.3 7.4 71.3 8.5 5.0 17.0 14.4 -2.1 6.6 69.2 Sources: Central Statistical Organization, Reserve Bank of India and World Bank Staff Estimates. General Government Deficit (% of GDP) General Government Debt (% of GDP)

EMERGING MARKETS OPPORTUNITIES l INDIA 4 INDIA AS A PREFERRED DESTINATION FOR INVESTMENTS India is expected to achieve 9 percent economic growth in the current financial year, driven by strong performance by the agriculture and industria sectors. The economy grew by 8.9 per cent in the second quarter of the FY2010. India has eme rged as one of the worlds top ten countries in industrial production. The nations industrial production grew at the fastest, India is the worlds largest recipient of overseas remittances. The remittances grew from $49.6 billion in 2009 to $55 billion in 2010. It is also the country with the second largest number of emigra nts after Mexico, according to the World Bank. India is one of the fastest growi ng automobile markets in the world, expanding at 35 per cent on average in the f irst four months of the FY2010. The Bombay Stock Exchange has been rated as the worlds best performing stock market recently. With a 13 per cent gain, Sensex is among the worlds 10 biggest markets, according to data collected by Bloomberg. Th e Indian economy is the eleventh largest in the world by nominal GDP and the fou rth largest by purchasing power parity (PPP). India is among the top 10 nations in terms of foreign exchange reserves. The countrys foreign exchange reserves bre ached the $300-billion mark for the first time since 2008 with an addition of $2 .2 billion on the back of a healthy rise in foreign currency. The nations forex r eserves currently stand at $296.40 billion. Indias services sector, backed by the IT revolution, remains the biggest contributor to the countrys GDP, with a contr ibution of 58.4 per cent. The industry sector contributed 24.1 per cent and the agriculture sector contributed 17.5 per cent to the GDP. The Indian IT-BPO indus try is expected to exceed $70 billion in fiscal 2011. The Indian IT-BPO exports are projected to grow by 13 per cent to 15 percent while domestic IT-BPO will gr ow slightly more by 15 per cent to 17 per cent during fiscal 2010-11. India owns over 18,000 tonnes of above ground gold stocks worth approximately $800 billion and representing at least 11 per cent of global stock, according to estimates o f World Gold Council. India ranks 11th in the world with 557.7 tonnes of gold re serves. Indias civil aviation sector will be among the top five in the world in t he next five years. Indian domestic air traffic is expected to reach 160-180 mil lion passengers per year, while international traffic will exceed 80 million. In dia, China and Brazil are the top three target countries for foreign direct inve stment until the end of 2012 with the United States, for years number one, now i n fourth place, according to the UN trade and development agency UNCTAD. The Ind ian telecommunications industry is the worlds fastest growing telecommunications industry, 723.28 million telephone (landlines and mobile) subscribers and 687.71 million mobile phone connections as of September 30, 2010.

EMERGING MARKETS OPPORTUNITIES l INDIA 5 INDIAS RATING Standard & Poors raised Indias outlook to stable from negative on expectations tha t the economys fiscal position may recover and the economy would remain on a stro ng growth path. The agency also affirmed its rating on the long-term and short-t erm credit. Following are key economic issues for Asias third-largest economy. In dias wholesale price index topped expectation and came within touching distance o f double digits in February. Annual wholesale price inflation accelerated to 9.8 9 percent in February, the highest since October 2008 and well above the Reserve Bank of Indias (RBI) endMarch projection of 8.5 percent and the 8.56 percent Jan uary reading. Fitchs Outlook on Long-term ratings for Indian banks remains Stable in 2011, after a negative bias in 2009 following the credit crisis. The Stable Outlook reflects easing asset quality concerns, together with an improving loan loss reserves position and expectations of further infusions of common equity by the government. Moodys Investor Service had upgraded Indias local bond rating to B a1, one notch below investment grade, citing improving public finances due to rec ent government reforms. Moodys also said it would consider unifying Indias local a nd foreign currency ratings at Baa3. Fitch Ratings raised Indias local currency r ating outlook to stable from negative forecasting lower debt ratios on the back of strong economic growth and robust cash flows from telecom auctions. The agenc y affirmed Indias BBB-minus local and foreign currency rating and the stable outl ook on its foreign currency rating. COMPARITIVE SURVEY NCEAR Dun and Bradstreet and RBI (Per cent) 175 65 60 125 55 50 75 45 40 25 7 8 9 0 6 7 8 9 6 7 8 9 0 7 8 9 0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -1 1 -1 ep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep S 35 NCAER HSBC-Markit Dun&Bradstreet FICCI RBI-BEI (Expectation Quarter) HSBC-Market and FICCI (Per cent) Business Conditions Survey: A Comparison 225 75 70

EMERGING MARKETS OPPORTUNITIES l INDIA 6 Reserve Banks Industrial Outlook Survey: Business Expecation Index 130 125 120 115 110 105 100 95 90 85 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 20 20 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 n ep ec 2 ar un ep ec a r un ep ec ar un ep ec ar un ep ec ar un ep ec s s s s Ju s M J M J M J M J M J s r- ul- t-D n- r- ul- t-D n- r- ul- t-D n- pr- Jul- ct-D an- pr- Jul- ct-D anpr- Jul- ct-D A O O J O J A Ap J Oc Ja Ap J Oc Ja Ap J Oc Ja A 80 Assessment Expectations Threshold INDIAS SIGNIFICANCE OVER THE REST OF WORLD MARKETS India to overtake US as 2nd largest economy by 2050: PwC As per the report published by PwC, India is expected to overtake the USA and em erge as the Worlds second largest economy on purchasing power parity basis by 205 0. It also stated that India has the potential to surpass China as the country h as a significantly younger and faster growing working age population than China. Global financial crisis has further accelerated the shift in economic power to the emerging economies. India among the worlds top three preferred investment hubs A Columbia University report stated that India is amongst the worlds top three pr eferred investment destinations, but equity caps limit the size of potential inf lows. The report stated that as the main drivers of foreign investment in India were liberalization in foreign direct investment (FDI) policy and several econom ic sectors, a globally competitive workforce, and rapid gross domestic product ( GDP) and market growth. It also stated that India is presently the 13th largest in terms of foreign investment inflows, which have risen 15-fold since 2000. The report said while investors initially concentrated on manufacturing, power and telecommunications, they now focus on services. Indias growth drives global economic recovery: World Bank World Bank President Robert Zoellick has recently stated that the high level of growth in India is helping the international economy recover from the disastrous effects of recent financial turmoil. He said that when the world economies were trying to recover

EMERGING MARKETS OPPORTUNITIES l INDIA 7 from financial turmoil, Indias growth rate picked up to 7.4 percent in 2009-10 fr om 6.7 percent a year ago. The economy expanded by 8.9 percent in the first half of the current fiscal, making India one of the fastest growing economies in the world. As per the International Monetary Funds (IMF) forecasts, Indian economy i s expected to record a growth rate of 8.8 percent in 2010-11. Domestic market opportunities are growing fast in India As per the India Economic Update by World Bank, the countrys middle class is estim ated to expand from 50 million people in 2005 to 500 million by 2025. The outloo k for the next 20 years, however, makes India an attractive market to invest in, and many international consumer goods companies do so. For now many of them con tend themselves with sales outlets rather than production bases, because economi es of scale allow them to do produce cheaper elsewhere. This is changing, howeve r, in particular when production costs in East Asia are rising with rising wages . ECONOMIC GROWTH PROJECTIONS BY IMF Country 2007 2008 2009 2010 2011 World Output (at Market Exchange Rates) Advanced Economies Emerging & Develping Economies U.S.A. Eurozone Germany France Italy Spain Netherlands Japan U.K. Cana da Austrailia Korea, South Taiwan Singapore Note : Asean 5 are Indonesia, Thaila nd, Philippines, Malaysia and Vietnam Source: Update to World Economic Outlook, IMF, July 2010 and WEO April 2010 Database China India Asean 5 Brazil Russia Sou th Africa 3.9 2.8 8.3 2.1 2.8 2.5 2.3 1.5 3.6 3.6 2.4 2.6 2.5 4.7 5.1 6.0 8.2 13.0 9.4 6.2 6.1 8.1 5.5 1.8 0.5 6.1 0.4 0.6 1.2 0.3 -1.3 0.9 2.0 -1.2 0.5 0.4 2.4 5.1 6.0 8.2 9.6 7.3 4. 7 5.1 5.6 3.7 -2.0 -3.2 2.4 -2.4 -4.1 -5.0 -2.2 -5.0 -3.6 -4.0 -5.2 -4.9 -2.6 1.3 0.2 -1.9 -2. 0 8.7 5.7 1.7 -0.2 -6.6 -1.8 3.6 2.6 6.8 3.3 1.0 1.4 1.4 0.9 -0.4 1.3 2.4 1.2 3.6 3.0 5.7 7.7 9.9 10.5 9.4 6. 4 7.1 4.3 2.6 3.4 2.4 6.4 2.9 1.3 1.6 1.6 1.1 0.6 1.3 1.8 2.1 2.8 3.5 5.0 4.3 4.9 9.6 8.4 5.5 4.2 4.1 3.6

EMERGING MARKETS OPPORTUNITIES l INDIA 8 SECTORAL CONTRIBUTION TO INDIAS GROWTH The sectors contributing to the Indias GDP is big in numbers and includes food pr ocessing, transportation equipment, petroleum, textiles, software, agriculture, mining, machinery, chemicals, steel, cement and many others. Agriculture is the major occupation in India, employing more than 50 percent of the population whil e service sector employs more than 25 percent and the industrial sector accounts more than 10 percent. AGRICULTURAL SECTOR Indian agricultural yields lag the highest yields found elsewhere in the world. Outlook- The better rainfall this year has lead to far higher agricultural growt h. The Central Statistical Organisation (CSO) has reported that Indias farm secto r grew by 2.5% and 4.4% in the first two quarters of this year and with the good rainy season this year and the expectation of good rains next year too, the out look for Indian agriculture in 2011 is good. According to the monsoon forecasts by the Meteorological Department, crop output is expected to show a strong rebou nd in 2010/11. Ex INDUSTRIAL SECTOR The General Index of Industrial Production (IIP) has posted double digit growth rate driven by similar growth rates in output in the manufacturing and mining se ctor. Manufacturing output growth in 2009/10 was strong in all the quarters, esp ecially in the case of capital goods and durable consumer goods while growth in non-durable consumer goods were impacted by poor export growth and a lower outpu t of sugar. Outlook- Industrial performance in India in 2011 will be influenced more by external factors than the domestic circumstances. Domestic consumption a nd economic recovery in Europe and North America will play a huge part in indust rial growth in India. Industrial growth in 2011 is forecasted to be between 6-7 percent with significant downside risks. Overall, GDP in the industrial sector i s forecasted to expand 9.6 per cent in 2010/11, rising to 10.3 per cent in 2011/ 12. Ex CONSTRUCTION SECTOR Services sector grew to 57 percent of GDP by 2009-10. The services industry in I ndia is well diversified due to which overall growth in the sector has been resi lient even through economic troughs. Outlook - The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as expo sed to the financial instruments or the loose lending that many western banks we re involved in. Overall, non-farm sector GDP grew by 8.8 per cent in 2009/10. Th e expansion in the services sector is expected to approach 9 per cent in 2010/11 and inch up to 9.6 per cent in 2011/12. Over all, the non-farm sector is expect ed to grow by 9.2 per cent in 2010/11 and 9.8 per cent in 2011/12.

EMERGING MARKETS OPPORTUNITIES l INDIA 9 SERVICE SECTOR Services sector grew to 57 percent of GDP by 2009-10. The services industry in I ndia is well diversified due to which overall growth in the sector has been resi lient even through economic troughs. Outlook - The outlook for services in 2011 is good to the extent that the Indian financial system is nowhere nearly as expo sed to the financial instruments or the loose lending that many western banks we re involved in. Overall, non-farm sector GDP grew by 8.8 per cent in 2009/10. Th e expansion in the services sector is expected to approach 9 per cent in 2010/11 and inch up to 9.6 per cent in 2011/12. Over all, the non-farm sector is expect ed to grow by 9.2 per cent in 2010/11 and 9.8 per cent in 2011/12. INDIA: RISK ASSESSMENT RISK TYPE JANUARY 2011 Sovereign risk Currency risk Banking sector risk Source : India: Country risk su mmary Political risk Economic structure risk BB BB BB BBB BBB FISCAL DEFICIT TRENDS (IN % OF GDP) 12% 10% 8% 6% 4% 2% 0% Source : Ministry of Finance 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 States Fiscal Deficit Off - Budget Liablities Centres Fiscal Deficit

EMERGING MARKETS OPPORTUNITIES l INDIA 10 TRENDS IN INDUSTRIAL OUTPUT (UNIT: PERCENT) Sectoral Classification General Manufacture Electricity Mining Basic goods Capit al goods Use Based Classification InterConsumer mediate goods goods Total 2007/0 8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007/08 2008/09 2009/10 2010/11 Durables N on-Durables 10.3 8.7 8.3 6.7 5.3 4.7 0.8 0.8 3.8 9.0 13.4 15.1 8.5 2.8 10.1 9.8 11.1 8.9 8.9 7.3 5.8 4.9 0.5 0.3 3.4 9.2 14.6 16.0 9.0 2.8 10.5 10.1 8.3 7.1 4.6 5.5 2.0 3.2 2.9 3.0 6.0 7.4 3.8 6.7 6.4 2.8 5.8 7.5 2.7 7.4 5.5 5.2 4.0 3.8 2.0 0.9 6.8 9.0 10.3 12.7 5.2 2.6 9.7 8.0 9.4 9.3 5.0 4.7 2008/09 19.1 21.3 20.8 12.2 7.9 13.2 3.8 5.0 2.0 8.6 21.6 41.1 18.0 7.3 20.0 28.0 9.3 10.5 8.9 7.1 2.6 -1.7 -5.8 -3.2 7.4 11.7 19.3 17.1 8.9 -2.1 13.5 6.3 9.0 2.2 6.2 6.8 8.6 6.6 3.3 1.2 -0.5 10.1 12.5 7.5 6.1 4.7 7.3 8.5 -0.7 -5.5 2.1 0.1 3.5 10.8 -1.8 5.6 15.6 23.7 33.7 31.5 -1.0 4.5 25.1 16.5 12.4 5.1 7.6 8.9 10.1 5.1 4.9 -0.1 -5.3 5.1 6.0 0.2 8.5 4.8 1.6 5.3 3.1 4.7 2.4 0.4 2009/10 6.3 5.9 6.1 10.1 7.0 2.6 7.3 5.7 Source : EAC, Gov of India AVERAGE SECTORAL CONTRIBUTIONS TO ECONOMY (%CHANGE) Agriculture, hunting, forestry, fisheries Manufacturing Brazil China Republic of Korea Russian Federation India Mexico South America, ex cl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe C IS, excl. Russian Fed. -1 0 1 2 3 4 5 6 Brazil China Republic of Korea Russian Federation India Mexico South America, ex cl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe C IS, excl. Russian Fed. 87 -1 0 1 2 3 4 5 6 87

EMERGING MARKETS OPPORTUNITIES l INDIA 11 Mining, quarrying and utilities Services Brazil China Republic of Korea Russian Federation India Mexico South America, ex cl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe C IS, excl. Russian Fed. -1 0 1 2 3 4 5 6 Brazil China Republic of Korea Russian Federation India Mexico South America, ex cl. Brazil south Asia, excl. India south-East Asia North Africa Central Europe C IS, excl. Russian Fed. 87 -1 0 1 2 3 4 5 6 87 Source : World Bank; Period 1995-2010 FOREIGN INVESTMENTS & PERFORMANCE SCENARIOS Top ten sectors attracting FDI Inflows (US$/mln) 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 10446 26197 25411 23221 17842 13925 12513 45668 41938 39455 r Se pu t vic eS t t ec or H S er of wa & re ar a dw re un ic io at ns Re al t Es at e n Ac it tiv ies

P e ow r ile M l Te om ec m Ho u g& sin Co ns io ct tru t Au om ob st du In et al lu ry n lI ica rg st du le s rie & t Na u l ra s Ga Ch em ica ls m Co tro Pe

um FDI India, which was a minor global FDI player in 2000, is presently the worlds thirt eenth largest FDI host country. Presently services sector accounts for approxima tely 61% of Indias annual FDI inflows and manufacturing accounts for 27%, while p rimary sector activities (primarily mining and petroleum) accounts for 9% approx imately. Eighty percent of post-2000 FDI inflows have been in the form of Greenf ield investments. The average investment size also quadrupled from US$ 9 million to US$ 34 million over this period.

EMERGING MARKETS OPPORTUNITIES l INDIA 12 Sectors attracting FDI inflows (% Share) 4% 4% 6% 30% 3% While the largest recent greenfield investments span various sectors, the larges t recent M&As focus on telecommunications, energy and pharmaceutics/healthcare s ector. In 2010/11 and 2011/12 analysts forecast a continued expansion of net FDI to $30 billion in both years, portfolio capital inflows of $25 billion and $35 billion and a steady increase in net loan capital inflows to $17 and $25 billion respectively. Overall, our estimates for capital inflows are $73 billion in 201 0/11 and $91 billion in 2011/12. This would be adequate to finance the large cur rent account deficit in the two years and leave a modest $31 and $41 billion (2. 0 and 2.4 per cent of GDP) to be absorbed in the foreign exchange reserves. 7% 10% 12% 12% 12% Offshore opportunity Despite India accounting for 51 per cent market share of the off shoring market, there is still tremendous space for growth as current off shoring market is sti ll a small part of the outsourcing industry. Indian companies are expected to fo cus on mainland Europe to tap growth opportunities in the offshore technology se rvices market worth tens of billions of dollars. According to Gartner Research, the countrys technology services, dominated by IT services exports worth USD 60 b illion will touch USD 3.6 trillion in 2011. Service Sector Computer Software & Hardware Telecommunications Housing & Real Es tate Construction Activities Power Automobile Industry Metallurgical Industries Petroleum & Natural Gas Chemicals 60000 52398 50000 40000 30000 20000 11557 10000 9204 6269 5289 4631 4498 2903 1870 1828 0 M au rit iu s Si a ng

po re US A UK Ne er th la nd s Ja n pa Cy u pr s r Ge m y an Fr an ce UA E Exports Indias exports showed an extraordinary annual growth of 36.4% which was highest i n 33 -month with consignments in December 2010 raising prospects of the country exporting $215-225 billion worth of merchandise in the current fiscal. IndiExpor ts in December aggregated $22.5 billion, while imports contracted by 11.1% to $2 5.1 billion, resulting in a narrow trade deficit of $2.6 billion, the lowest in three-year.

EMERGING MARKETS OPPORTUNITIES l INDIA 13 Countries attracting FDI inflows (% Share) 4% 5% 5% 3% 2% 2% In 2010/11, analysts forecast the value of crude oil imports to be high due to i ncrease in crude prices by almost 15 per cent and an increase in the quantities imported. The oil import bill is expected to rise to $103 billion in 2010/11 and to $120 billion in 2011/12. Amongst the non oil imports, a comparatively slower growth is expected in the case of gold, silver imports and a stronger growth in the remaining segments. 6% 52% 9% 12% The overall merchandise imports on balance-of-payments basis are expected to ris e to nearly $354 billion (up 18 per cent) in 2010/11 and $414 billion (up 17 per cent) in 2011/12. On the export side, petroleum products would be slightly high er than that of imports at 24 and 16 per cent in 2010/11 and 2011/12 respectivel y. Mauritius Singapore USA UK Netherlands Japan Cyprus Germany France UAE 100 80 60 Growth (in per cent) 40 20 0 -20 -40 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar -09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Exports Imports -60 BEST INVESTMENT OPTIONS FOR 2011 The Indian Securities market remained stable during 2009-10, as the global marke ts too witnessed improved stability with an indication of prospects of firm reco very. However, fiscal concerns remain strong as sovereign risks continue to be a cause of concern in some European countries. Primary Securities Market and Secondary Securities Market Indian primary market witnessed renewed activity in terms of resource mobilisati on and number of issues during 2009-10, building it further from its relatively subdued pace in 2008-09. In view of the recovery witnessed in equity markets pos t global financial crisis, companies entered the primary market and investors res ponse to public issues was encouraging in 2009-10 when compared to 2008-09. Seco ndary market also witnessed revival following sharp fall in the previous year in the wake of global financial crisis that had plunged global equity markets. Inv estors

EMERGING MARKETS OPPORTUNITIES l INDIA 14 24000 19000 14000 20000 18000 16000 14000 12000 10000 Aug-10 Dec-09 Feb-10 Jun-09 Jun-10 Aur-09 Ap r-09 Apr-10 Oct-09 8000 Rs crore 9000 4000 -1000 -6000 -11000 FII Investment Mutual Fund Investment Average BSE Sensex (RHS) regained confidence and the Indian market rallied post announcement of general e lection results during May 2009. Equity Growth During 2009-10, all the equity markets witnessed uptrend, however, in different magnitude. The Indian benchmark indices namely BSE Sensex and S&P CNX Nifty gave year on year return of 80.5 percent and 73.8 percent respectively in 2009-10. T he BSE Small-cap index recorded an increase of 161.7 percent in 2009-10. Among t he sectoral indices, highest increase was recorded by BSE Metal index (210.2 per cent), BSE Consumer Durables (159.7 percent) and BSE Auto index (150.6 percent). While the metal index reflected the strengthening of metal prices, the general upward trend in the economy and industrial production got reflected in increase in the capital goods and auto indices. The equity market has entered territory t hat it occupied exactly two years ago and in similar fashion the level of the st ock market (the Bombay Sensitive Index or SENSEX) is close to 21,000. Relative v aluations are on the richer side and hence analysts expect moderation in index r eturns for 2011 (in the 10- 15 percent zone from current levels). Investments in Mutual Funds Mutual funds after witnessing redemption pressures during later half of 2008-09 post global credit crisis witnessed renewal of investors interest in terms of mob ilization of resources through new fund offerings as well as existing schemes. T he gross mobilisation of resources by all mutual funds during 2009-10 was at Rs. 100190 billion compared to Rs.54263 billion during the previous year indicating an increase of 84.7 percent over the previous year. Redemption also rose by 82.2 percent to Rs.99359 billion in 2009-10 from Rs.54546 billion in 2008-09. All mu tual funds, put together, recorded a net inflow of Rs.830 billion in 2009-10 as compared to an outflow of Rs.282 billion in 2008-09. The assets under management by all mutual funds increased by 47.2 percent to Rs.6139 billion at the end of March 2010 from Rs.4173 billion at the end of March 2009.

EMERGING MARKETS OPPORTUNITIES l INDIA 15 PE and Venture Capital Investments The year 2011 is likely to witness maximum number of private equity/venture capi tal exits in the history of Indian PE industry. The typical cycle of investmentexit is expected to get completed in 2010-11 for many PE investors in India. Pri vate equity firms exited a record 121 companies in India during 2010, while inve stments almost doubled to $7.97bn from the 2009 figure. Venture capital and priv ate equity investments in India had witnessed a phenomenal growth both in terms of amount invested (from $1.8 billion in 2004 to $22 billion in 2007 before tape ring off to $8.1 billion in 2008) as well as the number of deals (from 80 in 200 4 to 481 in 2007 and then slowing down to 297 in 2008). There were huge PE inves tments in technology-led, capital intensive sectors like Telecom, Power and Infr astructure in addition to those sectors that were traditionally preferred by VCP E investors like IT & ITES, Healthcare, etc. Private Equity firms invested $7,97 4 million over 325 deals in India during the 12 months ending December 2010, com pared to $4,068 million across 290 deals during the previous year, according to analysis by Venture Intelligence, a research service focused on Private Equity a nd M&A activity. (These figures include VC investments and exclude PE investment s in Real Estate). With 34 investments worth about $2,141 million, Energy compan ies topped in terms of investment value during 2010, while Information Technolog y and IT-Enabled Services (IT & ITES) with 79 investments worth $696 million top ped in terms of volume. BFSI with 44 investments worth $1,054 million came secon d on both parameters. IPOs in 2010 Indian IPO market has witnessed a strong comeback in 2010 after sluggish perform ance in 2009 as most of the companies rushed to capital markets to raise funds o n encouraging stock markets. Jubilant FoodWorks, Thangamayil Jeweller, Talwalkar s Better Value Fitness emerged as top 3 performers in 2010. Meanwhile, Coal Indi a and MOIL were most successful IPOs which received overwhelming response from i nvestor community. IPO 2011 Scenario India IPO 2011 outlook seems bright with at least 100 public issues in the pipeline, with an indicative size of around Rs 4 00billion. If the government maintains its Rs 400 billion target for the next fi scal too, total may be Rs 900 billion, up 27% from 2010. Thirty five prospectuse s have already got the SEBIs clearance, while the remaining sixty five are awaiti ng nod. The country also celebrated its biggest IPO ever this year with the worl ds largest coal producer Coal India, collecting $3.5 billion in October. Big priv ate companies, like Jindal Power and Sterlite Energy which are planning an initi al public offering in 2011, may have to lower valuation expectations as investor s turn choosy, after profiting from state-owned companies issues that were priced attractively. IPO outlook for the year 2011 will see a massive bunch of issues hit the market unlike before and the issuers will have to price their trade more sensibly to attract investor attention. Corporate Bond Market The number of trades in corporate bonds during 2009- 10 rose by 68.5 percent in comparison to 2008-09. In comparison to increase in number oftrades, increase in the volume of trades during 2009-10 is very significant. This increase is mainl y attributed to increase in volume of trades reportedat FIMMDA by 218.5 percent followed by NSE at 206.9 percent and BSE at 42.9 percent.

EMERGING MARKETS OPPORTUNITIES l INDIA 16 PERFORMANCE OF FOREIGN FUNDS IN INDIA Fund Name AIG India Equity Fund - Reg - Growth Benchmark Derivative Fund - Growt h Benchmark Equity And Derivative Opportunities Fund - Growth Benchmark S&P CNX 500 Fund - Growth BNP Paribas China-India Fund - Growth BNP Paribas Dividend Yie ld Fund - Growth BNP Paribas Equity Fund - Growth BNP Paribas Mid Cap Fund - Gro wth BNP Paribas Opportunities Fund - Growth BNP Paribas Sustainable Development Fund - Growth Fidelity Equity Fund - Growth Fidelity India Growth Fund - Growth Fidelity India Special Situations Fund - Growth Fidelity India Value Fund - Grow th Fidelity International Opportunities Fund - Growth Franklin Asian Equity Fund -Growth Franklin India Bluechip - Growth Franklin India Flexi Cap Fund - Growth Franklin India High Growth Companies Fund - Growth Franklin India Index Fund BSE Sensex Plan - Growth Franklin India Index Fund - NSE Nifty Plan - Growth Fra nklin India Opportunity Fund - Growth Franklin India Prima Fund - Growth Frankli n India Prima Plus - Growth Franklin India Smaller Companies Fund - Growth HSBC Dynamic Fund - Growth HSBC Equity Fund - Growth HSBC India Opportunities Fund Growth HSBC Midcap Equity Fund - Growth HSBC Progressive Themes Fund - Growth HS BC Unique Opportunities Fund - Growth ING C.U.B. Fund - Growth ING Contra Fund Growth ING Core Equity Fund - Growth ING Dividend Yield Fund - Growth ING Domes tic Opportunities Fund - Growth ING Midcap Fund - Growth ING Nifty Plus Fund - G rowth ING OptiMix Multi Manager Equity Fund - Plan A - Growth JPMorgan India Equ ity Fund - Growth Performance 1 Mth % 3 Mths % 6 Mths % 1 Yr % 3 Yrs % -9.69 0.54 0.69 -10.92 -7.41 -9.16 -10.4 -13.59 -11.23 -11.46 -9.11 -9.33 -9.21 -9.92 -6.46 1.36 -8.53 -8.92 -11.22 -10.31 -10.26 -9.99 -12.9 -8.16 -11.24 -8.48 -8.7 -9.4 -15.4 -14.38 -9.79 -10.91 -10.71 -8.67 -8.68 -10.43 -10.28 -10 -12.14 -10.8 -11.01 1.7 2.06 -13.23 -10.59 -13.04 -10.08 -18.49 -15.68 -14.88 -10.65 -10.26 12.22 -14.27 -6.72 3.1 -7.89 -11.62 -16.62 -9.95 -10.39 -13.03 -17.71 -9.72 -16. 73 -9.91 -10.29 -11.33 -22.98 -22.71 -13.25 -16.16 -13.9 -10.59 -12.5 -15.36 -15 .54 -10.12 -15.46 -12.27 -3.93 3.25 3.76 -2.75 -1.39 -1.82 1.69 -8.15 -6.05 -4.45 0.01 0.48 -1.27 -3 3.23 9.89 2.5 1.13 -3.89 1.84 1.33 -1.48 -6.76 0.77 -5.71 3.05 1.66 0.67 -9.91 -12.5 2.89 -6.04 -5.8 2.24 -0.96 -5.34 -7.4 1.36 -7.37 -0.38 3.24 4.75 5.46 5 9.14 14.49 11.15 9.65 4.61 5.65 18.34 18.01 13.18 10.59 17.8 17 .26 14.86 14.19 4.87 12.23 12.11 9.2 6.05 11.66 6.45 11.39 13.6 10.92 -2.36 -5.3 9 13.25 7.41 2.66 14.54 17.33 6.88 7.46 11.87 3.71 16.57 -0.11 N/A 5.52 N/A -0.96 7.93 -3.49 -10.27 -14.5 -1.76 7.26 7.61 3.65 N/A 7.39 6 .95 7.29 5.6 0.36 0.56 1.09 -2.62 0.78 4.51 -0.74 -3.13 0.17 -2.67 -5.92 -11.95 -5.61 -3.28 2.85 0.27 13.67 -1.66 -2.04 1.22 -7.51 -0.18

EMERGING MARKETS OPPORTUNITIES l INDIA 17 JPMorgan India Smaller Companies Fund - Growth Morgan Stanley A.C.E Fund - Growt h Morgan Stanley Growth Fund - Growth Pramerica Equity Fund - Growth PRINCIPAL D ividend Yield Fund - Growth Principal Emerging Bluechip Fund - Growth PRINCIPAL Growth Fund - Growth PRINCIPAL Index Fund - Growth Templeton India Equity Income Fund - Growth Templeton India Growth Fund - Growth -12.92 -11.2 -11.74 -10.24 -10.22 -13.69 -11.41 -10.29 -5.56 -9.87 -16.98 -13.8 -14.64 N/A -14.89 -17.82 -13.79 -10.47 -4.73 -11.89 -7.05 -3.17 -1.86 N/A -1.39 -7.6 -4.31 1.24 10.21 0.86 12.18 10.69 10.35 N/A 14.21 4.96 4.28 11.76 21.33 12.23 -5.91 N/A -0.19 N/A 4.81 N/A -8.12 0.04 10.68 9.19 Note: Performances till date FUNDS STATUS IN INDIA Fund Name No. of Schemes* Asset Under Management As on Billion Rupees Corpus As on Corpus Net inc/dec in corpus AIG Global Investment Group Mutual Fund Axis Mutual Fund Baroda Pioneer Mutual F und Benchmark Mutual Fund Bharti AXA Mutual Fund Birla Sun Life Mutual Fund BNP Paribas Mutual Fund Canara Robeco Mutual Fund Daiwa Mutual Fund Deutsche Mutual Fund DSP Blackrock Mutual Fund Edelweiss Mutual Fund Escorts Mutual Fund Fidelit y Mutual Fund Franklin Templeton Mutual Fund HDFC Mutual Fund HSBC Mutual Fund I CICI Prudential Mutual Fund IDBI Mutual Fund IDFC Mutual Fund ING Mutual Fund JM Financial Mutual Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund 45 39 33 18 45 238 119 90 11 133 126 39 30 79 163 201 83 379 12 201 85 88 37 152 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 8.83 50.13 29.61 29.35 4.12 576.89 50.21 73.92 1.35 62.85 276.68 2.14 2.03 89.01 394.4 878.83 47.29 658.41 20.52 173.48 13.86 64.54 51.96 265.89 30-Sep-10 30-Sep-10 31-Oct-10 30-Nov-10 30-Sep-10 31-Oct-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 10.20 46.36 41.39 29.90 5.11 613.55 49.65 77.19 3.19 65.21 266.74 2.15 1.98 85.3 6 421.42 931.06 48.10 697.28 22.00 183.98 14.68 63.30 84.48 284.30 -1.37 3.77 -11.78 -0.55 -0.99 -36.66 0.56 -3.26 -1.84 -2.36 9.94 -0.01 0.05 3.65 -27.00 -52.22 -0.81 -38.87 -1.48 -10.51 -0.82 1.24 -32.52 -18.41

EMERGING MARKETS OPPORTUNITIES l INDIA 18 L&T Mutual Fund LIC Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fu nd Motilal Oswal Mutual Fund Peerless Mutual Fund Pramerica Mutual Fund PRINCIPA L Mutual Fund Quantum Mutual Fund Reliance Mutual Fund Religare Mutual Fund Saha ra Mutual Fund SBI Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutu al Fund UTI Mutual Fund 81 62 33 12 2 24 14 72 11 242 110 44 155 175 183 56 227 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31-Dec-10 31.93 186.95 3.28 23.61 3.01 23.06 11.09 57.64 1.17 1020.66 104.11 3.16 414.98 1 45.29 208.55 25.33 653.87 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Sep-10 30-Nov-10 30-Sep-10 35.43 197.27 2.75 23.51 3.05 20.94 6.30 56.42 1.19 1077.49 107.80 7.56 421.00 14 2.41 219.64 23.68 676.18 -3.50 -10.32 0.53 0.10 -0.04 2.11 4.78 1.22 -0.03 -56.82 -3.69 -4.40 -6.03 2.88 -11.09 1.65 -22.30

EMERGING MARKETS OPPORTUNITIES l INDIA 19 INVESTMENT NEWS Global investors buy stocks at record high on rising outlook The Securities and Exchange Board of India, nations market regulator stated recen tly that the Global funds purchased a net 2.24 billion rupees ($49.2 million) of Indian equities on Feb. 4. It stated that foreigners bought 25.8 billion rupees of shares, while they sold 23.5 billion rupees. Overall in 2010, the global inv estors bought a record 1.33 trillion rupees of shares, raising the benchmark ind ex 17 percent and making it the best performer among the worlds 10 biggest equity markets. They invested 464 billion rupees in bonds last year. Indian stocks a clear buy: Goldman Goldman Sachs Asset Managements chief investment officer for India, Prashant Khem ka had stated recently that Indian stocks remains on top pref-erence for buy for the next few years because inflation fears and concerns about overvaluation are unjustified. Khemka believes that Indian compa-nies earnings could post annual g rowth of up to 20 percent over the next three to four years. He said that sluggi sh growth in the U.S. or Europe is good for India rather than a concern for two reasons: first, exports as a percentage of the economy is much smaller for India compared with most countries; second, it helps to keep in check commodity price s, mainly crude oil. He further stated that Indian IT sector also benefited from low capi-tal expenditure and high returns, making it an attractive investment op portunity. Indian Bonds see steady returns Indian bonds seem an attractive buy for International investors to lock in the h ighest yields since 2008, with the rupee forecasted to generate the worlds bigges t returns after the Turkish lira. According to the Bloomberg data the rupee is e xpected to generate a return of 13% including interest-rate income this year, mo re than four times the 3% gain predicted for Chinas yuan. Overseas investments in Indian bonds reached an all-time high of $20.3 billion in January as 10-year yi elds jumped 0.24 percentage point, the first monthly increase since October. HSBC plans to enter Indian equities Garry Evans the Global Head of Strategy at HSBC said that the Emerging Markets a re fundamentally under owned by global investors. He also stated that HSBC may e nter Indian equities in the next one or two quarters. It is getting at a more att ractive price level and the fundamental story still re-mains very attractive for Indian equities, he says. Morgan Stanley plans investments in India infrastructure firm Morgan Stanleys Global Infrastructure Fund plans investment $200 million for an e quity stake in the Indian arm of privately held Spanish construc-tion firm Isolu x Corsan, the Economic Times newspaper stated. The paper stated that funds worth $4 billion fund, which was raised in May 2008, will invest in Isolux which buil ds roads in north India.

EMERGING MARKETS OPPORTUNITIES l INDIA 20 Investors prefer Indian stocks, a lucrative bargain Betting on emerging markets could yield lucrative bargains and be safer than sta nding pat in the United States and risking a double dip, hedge fund managers sai d. Investors are now looking for undiscovered companies so as to make more money r ather relying on market which are termed more efficient. CONCLUDING REMARKS The overall performance of the Indian economy in 2009/10 was beyond expectations . The farm sector which was forecasted to contract showed resilience, growing by 0.2 percent despite the weak South West monsoon. The non- farm sector also foll owed the same line with strong performance. It is estimated that the Indian econ omy would grow at 8.5 percent in 2010/11 and 9.0 percent in 2011/12. In the curr ent fiscal year, agriculture will grow at 4.5 percent, industry at 9.7 percent a nd services at 8.9 per cent. The beginning of the new decade heralds the slow, b ut steady end of the worst recession in the past 60 years. Global GDP, after dec lining by 1.1 per cent in 2009, is predicted to increase by 3.1 per cent in 2010 , and 4.2 per cent in 2011, with developing economies growing thrice as fast as the developed economies. Disclaimer - All information used in the publication of this report has been com piled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. This is not a s olicitation or inducement to buy, sell, subscribe, or underwrite securities or u nits. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment. This document has not been prepared in accordance with the legal requirements designed to promote the inde pendence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It may be difficult or not p ossible to buy, sell or obtain accurate information about the value of securitie s mentioned in this report. Past performance is not necessarily a guide to futur e performance. This report is produced by International Business Times For questions or comment s reach us at researchanalysis@ibtimes.com For more information about our produc ts visit www.ibtimes.com IBTimes 2011. All rights reserved.