Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013

•
Indian Markets
•
2013: Where we got lost
•
2014-15 : Winds of change- The way ahead
•
India Inc.: On the path to recovery
•
Budget view
•
Valuations and Expectations
•
Market Outlook
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GDP Growth slowed down amid external and internal factors
12
11
10
9
8
7
6
5
4
3
India Quarterly GDP Growth, %yoy
Persistent high inflation resulted in high rates, input costs
16%
15%
14%
13%
12%
11%
10%
9%
8%
%yoy CPI Food Inflation
CPI
9.7%
8.6%
Industrial Production – flat for the last ~2.5 years now
20%
15%
YoY%
YoY% 3MMA
10%
5%
0%
-5%
-10%
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Mar-
11
Mar-
12
Mar-
13
Mar-
14
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Increasing interest rates have hit margins, investments
12%
11%
10%
9%
8%
7%
6%
5%
4%
3%
Reverse Repo Rate
91-Day T-Bill Yield
Repo Rate
Source: Morgan Stanley Research
3

Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013 4

1.
2.
3.
4.
5.
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013 5

450
400
350
300
250
200
150
100
50
0
404
143
161
Why is a stable Government so important?
Most number of seats won by any party
244
Majority needed - 272
182 180
145
206
282
35
30
25
20
15
10
5
0 months
Average time taken for Environment
Clearance
1984 1989 1991 1996 1998 1999 2004 2009 2014
20 (% YoY real GDP)
15
10
5
0
(5)
(10)
Gujarat All-India
Gujarat average GSDP growth
FY03-FY12: 10.3%
India average GDP growth
FY03-FY12: 7.9%
12%
10%
8%
6%
4%
2%
0%
GDP Growth : Pvt. + Public Consumption, Net Exports and others
GDP Growth attributed to GFCF change
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 E
Source: CLSA, BSLAMC
Birla Sun Life Asset Management Company Limited
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Priorities of the new regime
1.
Reduce Inflation - Release food stock, Restructure APMC laws
2.
Improve Governance, decision-making
3.
Job creation by stimulating manufacturing investments - liberalize
FDI limits and law, create industrial clusters
4.
Reforms in mining, power sectors and land acquisition
5.
PSU reforms Holding company structure
6.
Accelerate infrastructure creation
• Dedicated Freight Corridor, 100 new cities, River-linking, Road and
Rail Diamond Quadrilateral, National Gas Grid, Strengthen Power
Grid, High Speed Rail, Alternate Energy
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As bad as it gets: USD 130 billion projects stalled
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
(Rsbn)
Quarterly Investments added during the quarter
Private Sector Government
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Projects Under
Implementation
Growth YoY %
10,000
8,000
6,000
4,000
2,000
-
Projects Stalled
Growth YoY %
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
200%
150%
100%
50%
0%
-50%
• Investment cycle suffered a virtual collapse.
Corporate sentiments were impaired due to lack of clear road map, slowing GDP growth and elevated cost of capital.
• Projects worth INR 8,000 bn got stalled – due to Fuel linkages /EC/FC/Regulatory
Clearances, creating a large back log of capital work in progress.
• Better policy framework and governance to revive investments.
8
60%
50%
40%
30%
20%
10%
0%
-10%
-20%

120,000
100,000
80,000
60,000
40,000
20,000
-
Rs. Crs
MRTS projects under development 2013-2017
So urc e: Ed el weis s
Mass Rapid Transit System
109,600
16000
14000
12000
10000
National Highway Projects Pipeline &
Execution
Cummulative Projects Under Execution (km)
2 yr rolling execution (km)
8000
6000
4000
2000
0
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
So urce: NHAI
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
10,000
9,000
8,000
7,000
6,000
5,000
4,000
Railway Track addition in Kms.
Dedicated Freight Corridor
Feeder routes
5,500
The DFC impact
3,000
2,000
3,300
Trunk routes
1,000
0
-1,000
661
193 244
-133 -5 -54
742
-41
486
140
470 500
Source: Barclays
• FDI in critical sectors like defense, media
• Policy for labor-intensive sectors like textiles and construction are likely
9

• ‘Minimum Government, Maximum Governance’ on its way a) Abolished several Group of Ministers (GoM) and Empowered GoM (EGoM) b) Downsized the cabinet c) Emphasized time-bound and transparent decision-making and sharply increased the accountability of bureaucrats and ministers alike.
• Kick-starting the investment cycle a) Government promised to achieve 25km/day of road construction in FY15 b) Issues with 3 critical railway links for coal transportation
– stuck for a long time on various issues – are being resolved with at least one project now on track.
• Inflation Control: The road is long
• Measures to address inflation in the short term
•
Exhorting states to delist trade of fruits and vegetables through the Agriculture
Produce Market Committees (APMCs)- so farmers can sell directly
• The budget also promised a restructuring of the Food Corporation of India
(FCI)
Birla Sun Life Asset Management Company Limited
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12%
10%
8%
6%
4%
2%
0%
-2%
WPI Core WPI 12.00%
11.00%
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
CPI
Core CPI
-4%
• Both the inflation matrix have registered a sharp decline in the month of June. Favorable base effects will continue to provide lower inflation prints till November.
• More importantly the momentum of Core inflation in case of both wholesale and retail has been trending down vs. its historical average.
• Going forward we expect inflation to atleast achieve RBI glide path thus creating a headroom for monetary easing eventually.
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Source: Bloomberg, BSLAMC
11

55.0
50.0
45.0
40.0
70.0
65.0
60.0
PMI Manufacturing
PMI Services
IIP
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
•
•
• Industrial activity has shown green shoots since the beginning if the fiscal. High frequency data such as automobile sales freight traffic etc. has also registered positive growth rates.
The PMI for both manufacturing and services is back to expansionary mode. The business expectation index also hits at revival continuation.
The nascent sign of recovery in PMI and IIP reflect a cyclical upturn in GDP growth rate.
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013 12

50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
Policy responses have worked..
Imports, 3mma
Exports, 3mma
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
Current Account
Capital Account
• Dramatic reduction seen in India’s trade deficit due to falling imports and rising imports
• Gold imports are down 70%. Non Oil, Non Gold imports also down. Current account deficit for quarter ended March 14 is the lowest in 4 years
• Indian Rupee is amongst the best performing in the past 9 months
130
125
120
115
110
105
100
95
90
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Indian Rupee
Brazilian Real
S. African Rand
Indo Rupiah
% of GDP, quarterly annualised
Source: Bloomberg, BSLAMC
13

Budget Overview 2014-15
 GDP growth estimated between 5.4 - 5.9% as per the economic survey
 Fiscal deficit budgeted at 4.1 % of GDP- and fiscal path 3.6% in FY16 and
3% in FY17.
 Current account deficit expected at 2.1% of GDP
 Revenue deficit projected at 2.9% of GDP
 Net market borrowing to be Rs. 4.6 lakh crores
Road Map expected
 Market expected clarity on Road map for GST & reforms for Subsidy rationalization.
 Lack of clarity on the application of GAAR created uncertainty for a host of entities.
Source: Bloomberg, BSLAMC
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 The fiscal deficit for FY14 was finally pegged at 4.5% of GDP v/s budget estimates of 4.8% of GDP
 Sharp cut in planned expenditure key reason (10.8% growth vs BE of
29.4%)
 Revenues were running below budget estimates due to slowdown in economic activity and shortfall in divestment receipts
 The fiscal arithmetic is based on nominal GDP growth of 13.4%, total revenues rising 15.6% and expenditure rising 12.9%
 GDP growth assumption moderately optimistic, expect receipts targets to be met on account of non-tax revenues
 Higher expenditure budgeted for an investment starved economy
 Upside risks to fiscal deficit unlikely
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Sector
Infrastructure
Capital Goods
Capital Goods
Banking
Banking and
Insurance
Power Utilities
Impact
Positive for all Road developers/ Asset
Owners
Positive for T&D companies
Announcements
NHAI allocation, Plan to construct 8000Km road,
Increase in planned Expenditure, REIT
New Feeder separation scheme
Positive for all
Industrial companies
Positive for entire sector
Positive for Infra-
Finance
Positive for insurance companies
Investment allowance of 15% for investments made above Rs250mn as compared to Rs1bn earlier for a period of 3 years.
Govt. to oversee that all power companies to get adequate coal supply
Banks to be permitted to raise long term funds for lending to infrastructure sector
Proposed to increase foreign ownership limit in the insurance sector from 26% to 49% through the FIPB route
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Source: Bloomberg, BSLAMC
16

Birla Sun Life Asset Management Company Limited
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12%
BoP
Crisis
10%
8%
6%
4%
2%
0%
South
East
Asian
Crisis
Dot.Com
Bust & 9/11
Global
Financial
Crisis
GDP Growth
Rate
Avg ('91-'13) =
6.63%
Since ‘91 India’s growth has averaged 6.6%. We believe GDP growth has bottomed out in 2014
Source: Bloomberg, BSLAMC
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013 18

Sales growth for
SENSEX Companies
20
27
34
23 21 20
16
22
33 30 32
22
37 36 38
44
31 30
6
19
32
28
22
18
23
26
23 25
19 17
11
8 6
2
13 14 14
-5
-11
-6
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E
25 26 25
30
37
34 33 34
28 28
30
28
EBITDA Margin (%) for
SENSEX Companies
26 26 26
24 25 24 24 23 25 24 24 24 25 25 25
22 22 23 21 22 21 20 21 21 21 21 22 22
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Source: MOFSL, BSLAMC
19

90%
85%
80%
75%
70%
65%
60%
55%
50%
Aggregate Interest to EBITDA Total asset turnover ratio
60%
50%
40%
30%
20%
10%
0%
7%
6%
5%
4%
3%
2%
1%
0%
Corporate Profits (% of GDP) Profit to GDP halved
26
SENSEX ROE (%)
24.2
22
15 Year Average 19.0%
18
14
10
16.2
Source: Bloomberg, BSLAMC, IIFL & MOSL
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013 20

1900
1750
1600
1450
1300
1277
1150
1000
Apr2010 Oct2010
FY12
FY13
FY14
FY15E
FY16E
1483
Apr2011
1497
1129
Apr2012
1684
1287
1806
1834
1576
1352
Oct2011 Oct2012 Apr2013 Oct2013 Apr2014
• Over the last four years we have seen an earning decline cycle. In FY12,FY13, FY14 we say sharp cuts in Sensex earnings estimates.
• From Dec 2013 we saw consensus earning revision towards the positive side.
• Historically, analyst estimates for earning growth tends to lag in accelerating GDP growth environment,. Over the course of next few years we expect upwards revision in estimates
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Source: Morgan Stanley Research
21

Sensex PE (x)
35000
24.04
Mutiple de-rating
25000
20686
15000
5000
26.00
25246
23.00
20.00
15.82 17.00
14.00
11.00
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27
22
17
12
7
SENSEX P/E (x)
15 Year Average is 15.1x
2.5
1.5
0.5
4.5
3.5
SENSEX P/B (x)
15 Year Average 2.6x
160%
140%
120%
100%
80%
60%
40%
20%
0%
India Market Cap to GDP
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
• Valuations are slightly above the Long term averages of 15.1x. Currently Sensex trades at
15.8x 1 Year forward PE.
• Even as indices are trading near all-time high levels, valuation parameters are comfortably below the 2008 highs.
• The current PE are on moderate earnings growth estimates. As earning upgrades cycle sets in on visibility in reform process, valuations will provide further comfort.
Source: Morgan Stanley Research
23

6.0
5.0
4.0
3.0
2.0
1.0
0.0
Defensives vs Sensex P/B Cyclicals vs Sensex P/B
FMCG-Sensex P/B +2 SD -2 SD Average
4.0
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Cap Goods-Sensex P/B +2 SD -2 SD Average
1.3
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Pharma-Sensex P/B +2 SD -2 SD Average
1.7
1.2
1.0
0.8
0.6
0.4
0.2
Metals-Sensex P/B +2 SD -2 SD Average
0.5
Cyclical sectors trading below their LT average levels makes a compelling case for mean reversion as outlook improves.
Source: MOFSL, BSLAMC
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Copyright Aditya Birla Nuvo Limited 2013 24

FY93-96: 45%
CAGR
129 181 of
FY93-FY14: 14% CAGR
FY08-14:
8% CAGR
FY96-03: 1% CAGR
250 266 291 278 280
FY03-08: 25% CAGR
718
833 820 834
1,024
1,123 1,184
450 523
216 236 272
348
FY14-16E: 16%
CAGR
1,802
1,525
1,338
Sensex PE (x) growth and
PE Re-rating
17.65
19.38
Sensex CAGR -1%
Sensex CAGR 39%
17.651
Sensex CAGR -1%
26
20
15.8 14
8
Birla Sun Life Asset Management Company Limited
Copyright Aditya Birla Nuvo Limited 2013
Source: MOFSL, BSLAMC
25

Equity markets have rallied on decisive election outcome leading to hopes of improving pace and quality of economic recovery.
• A pro-reform government coupled with decisive leadership will accelerate the reforms and growth process.
• The depressed corporate profitability will improve over the next 3 to 5 of years as the economy sees a cyclical uptick, clocking CAGR of 18% - driven by higher revenues, operating leverage and interest costs savings.
• Even post the sharp run up- Sensex trades at 1year forward PE of 16.8x. Earning upgrades cycle on visibility in reform process will provide further support to market and valuations.
•
We expect cyclical recovery in economy with average GDP growth of 6% over the next
5years with exit GDP of 7.5 to 8%. - equity returns will be driven both by earning growth and valuation re-rating providing investor a good investment opportunity.
• In the current scenario, equity investments provide a compelling case over other asset classes. Indian investors should increase their equity allocations and benefit from
Indian growth story.
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Birla Sun Life Asset Management Company Limited
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Internal views, estimates, opinions of BSLAMC expressed herein may or may not materialize. These views, estimates, opinions alone are not sufficient and should not be used for the development or implementation of an investment strategy.
The portfolio of the scheme is subject to changes within the provisions of the Scheme Information Document(SID) of the scheme. Please refer to the SID for asset allocation, investment strategy and scheme specific risk factors. Forward looking statements are based on internal views and assumptions and subject to known and unknown risks and uncertainties which could materially impact or differ the actual results or performance from those expressed or implied under those statements.
This document is strictly confidential and meant for private circulation only and should not at any point of time be construed to be an invitation to the public for subscribing to the units of Birla Sun Life Mutual Fund. Please note that this is not an advertisement. The document is solely for the information and understanding of intended recipients only. If you are not the intended recipient, you are hereby notified that any use, distribution, reproduction or any action taken or omitted to be taken in reliance upon the same is prohibited and may be unlawful. Views expressed herein should not be construed as investment advice to any party and are not necessarily those of Birla Sun Life Asset Management Company Ltd.(BSLAMC) or any of their officers, employees, personnel, directors and BSLAMC and its officers, employees, personnel, directors do not accept responsibility for the editorial content. Wherever possible, all the figures and data given are dated, and the same may or may not be relevant at a future date. Further the opinions expressed and facts referred to in this document are subject to change without notice and BSLAMC is under no obligation to update the same. While utmost care has been exercised, BSLAMC or any of its officers, employees, personnel, directors make no representation or warranty, express or implied, as to the accuracy, completeness or reliability of the content and hereby disclaim any liability with regard to the same.
Recipients of this material should exercise due care and read the scheme information document (including if necessary, obtaining the advice of tax/legal/accounting/financial/other professional(s) prior to taking of any decision, acting or omitting to act. Further, the recipient shall not copy/circulate contents of this document, in part or in whole, or in any other manner whatsoever without prior and explicit approval of BSLAMC.
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Statutory Details: Constitution: Birla Sun Life Mutual Fund (BSLMF) has been set up as a Trust under the Indian
Trusts Act, 1882. Sponsors: Aditya Birla Financial Services Private Limited and Sun Life (India) AMC Investments Inc.
(liability restricted to seed corpus of 1 Lac). Trustee: Birla Sun Life Trustee Company Pvt. Ltd. Investment Manager:
Birla Sun Life Asset Management Company Ltd.
Risk Factors: Mutual Funds and securities investments are subject to market risks and there can be no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme may go up or down depending on the various factors and forces affecting capital markets and money markets. Past performance of the Sponsor / Investment
Manager / Mutual Fund does not indicate the future performance of the Schemes and may not necessarily provide a basis of comparison with other investments. The names of the Schemes do not, in any manner, indicate either the quality of the Schemes or their future prospects or returns. Unitholders in the schemes are not being offered any guaranteed/assured returns. Investors should read the Statement of Additional Information / Scheme Information
Document/ Key Information Memorandum available at Investor Service Centers and with distributors carefully before investing.
The Material provided in this communication cannot be reproduced or quoted anywhere without express permission from Birla Sun Life Asset Management Company Ltd.
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