Debt Market Presentation

8/4/2019 Debt Market Presentation

1/15

Time To Bond

Fixed Income Update- January 2008


2/15

Inflation under control

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Sep-07

Oct-07

Nov-07

Dec-07

CPI Ind Worker CPI Urban

CPI Rural WPI

Low WPI benefits from low manufacturing inflation (3.6%) and governmentpreventing a pass through of high international crude prices.

CPI too coming off and will continue to come down further with waning offestival season demand and improvements in supply conditions

Source: Bloomberg


3/15

Monetary tightening affecting growth

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-5

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Jan-05

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Jan-07

Mar-07

May-07

Jul-07

Sep-07

IIP Cons Durables Capital Goods

Moderation in IIP growth led by slowdown in interest rate sensitive sectors.

Capacity addition and improvement in infrastructure will reduce inflationary pressures

Source: Bloomberg


4/15

Monetary Indicators getting under control

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Apr-05

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Dec-07

M3 growth

Deposit Growth

Credit Growth

Credit growth slowed to 22% from 30% last year and lower than thedeposit growth which has increased to 24%.

Deceleration in accumulation of forex reserves and slowing credit growth willgradually bring down M3 growth

Source: Bloomberg


5/15

RBI Changes Track

0.80

0.85

0.90

0.95

1.00

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1.10

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0.20

Forex Reserves

MSS

Global financial turmoil has resulted in forex inflows turning uncertain.

After withdrawing Rs. 15000 cr. with the CRR hike RBI adds an amountmore than that thru Monetary Stabilisation Scheme (MSS) withdrawals.

Open Market Operations (OMO) purchases by RBI also help in reducing

the supply overhang of G Secs.Source: Bloomberg


6/15

Inflation vigil to continue

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40

60

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120

Jan-04

Mar-04

May-04

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Nov-07

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190London Metal Index Brendt Crude

DJ Agri Comm Index

Oil still above $ 90 per barrel, global agricultural commodity prices still high.

Strong revenue growth will enable government to take fiscal steps to controlprimary article inflation.

RBI is mindful of potential inflationary pressures.

Source: Bloomberg


7/15

Expectations

Expectations of any rate cut in January premature. RBI likely to indicateneutral stance in the coming monetary policy.

Credit spreads to narrow further.

10-Yr G-Sec to be in the range of 7.40% to 7.80%

Over the longer term interest rates nearing peak of the cycle.


8/15

Our Recommendation

Kotak Bond short Term with a time horizon of over 3 months

Kotak Bond Regular with a time horizon of over 6 months

Performance

Performance

3 Months 6 Months 1 Year

Since Allotment

(Nov 25, 1999)Kotak Bond Regular - Growth 3.89 7.24 9.58 9.72

Crisil Composite Bond Index 2.57 5.20 6.92 5.86

3 Months 6 Months 1 Year

Since Allotment

(May 2, 2002)

Kotak Bond Short Term Plan - 2.27 5.21 9.15 6.78

Crisil Short Term bond Index 1.99 4.29 7.98 5.77

Returns (%) are as on Dec 31, 2007. Returns less than one year are absolute and over one

year are Compounded annualised (CAGR).Past performance may or may not be sustainedin future.Please read the offer document before investing.


9/15

Industry

/Rating

% to Net

Assets

LIC Housing Finance Ltd. AAA 11.07%TAS Trust Series III, TM L Fin. Ser. A1 AA+(so) 10.95%

Indian Retail ABS Trust Series 56 PTC A2 AAA 3.66%

Infrastruture Leasing & Financial Services Limited LAAA 1.09%

Corporate Debt / Financial Institutions - Total 26.77%

Punjab National Bank AAA 10.78%

State Bank Of India. AAA 9.13%Public Sector Undertakings - Total 19.91%

8.33% Government Stock - 2036 SOV 18.77%



Government Dated Securities - Total 32.15%

Unitech Ltd. F1+(ind) 6.06%

Corporate Debt / Financial Institutions - Total 6.06%

Net Current Assets/(Liabilites) 15.11%

Grand Total 100.00%

PORTFOLIO OF KOTAK BOND AS ON 31-Dec-2007

Issuer / Instrument

Debt Instruments

Debentures and Bonds

Commercial Paper (CP)/Certificate of Deposits (CD)

Corporate Debt / Financial Institutions


Public Sector Undertakings

Government Dated S ecurities

Money Market Instruments

Kotak Bond Regular- Portfolio

High credit quality portfolio with

about 32% of the net assets in Govt.stocks and 34% in AAA

rated paper.

Average maturity of 10.61 years toyield benefit from any potentialsoftening in interest rates over mediumto long term.

Yield to maturity of 8.75%

Past performance may or may not besustained in future.


10/15

Kotak Bond Short Term- Portfolio

Industry/Rating

% to NetAssets

Rabo India Finance Ltd. P1+ 4.45%

LIC Housing Finance Ltd. AAA 3.28%

BHW Home Finance Ltd LAA+ 3.24%

ICICI Bank Ltd. CARE AAA 2.19%

Indiabulls Financial Services Ltd F1+(ind)(SO) 2.17%

Sundaram Finance Ltd. LAA+ 2.13%Tata Sons Ltd. AAA 2.13%

Citicorp Finance (India) Ltd. AAA 2.12%

Mahindra & Mahindra Financial Services Ltd. AA+ 1.91%

RB Loan Trust Series V 2007 Ser A1(Unitech) F1+(ind)(SO) 1.60%

Long Bond Receivables NMBR 400BP 2006 IV PTC A1 AAA(so) 1.39%

Citifinancial Consumer Finance India Ltd. AAA 1.14%

Shriram Transport Finance Co Ltd. AA(ind)(SO) 1.08%

Citicorp Maruti Finance Ltd. AAA 1.06%

Indian Cor Loan Sec.Trust Sr XXXVIII - Sr A1 P1+(so) 0.98%

BHPC Auto Sec. Trust JUNE 2005 PTC A3 AAA(so) 0.31%

31.18%

Power Finance Corporation Ltd. AAA 3.31%

State Bank Of India. AAA 2.28%

5.59%

Government Stock - 2017 SOV 2.19%

Government Stock - 2010 SOV 2.09%

4.28%

PORTFOLIO OF KOTAK BOND SHORT TERM AS ON 31-Dec-2007

Issuer / Instrument

Debt Instruments

Debentures and Bonds



Government Dated Securities

Unitech Ltd. F1+(ind) 6.05%

ING Vysya Bank Ltd P1+ 5.21%

ABN Amro Bank N.V A1+ 4.86%

ICICI Home Finance Company Limited A1+ 3.05%

Citibank N.A. P1+ 2.07%

Centurion Bank of Punjab Ltd. F1+(ind) 1.71%

Tata Motors Ltd. P1+ 1.07%

ICICI Bank Ltd. P1+ 1.04%

ICICI Bank Ltd. A1+ 1.01%

26.07%

State Bank of Travancore P1+ 7.26%

Allahabad Bank P1+ 5.33%

Punjab National Bank P1+ 5.26%

Canara Bank P1+ 3.20%Union Bank of India A1+ 2.09%

State Bank Of India. P1+ 1.04%

State Bank of Indore P1+ 1.04%

National Bank for Agriculture and Rural Development CARE AAA 1.02%

26.24%

Collateral Borrowing & Lending obligation 0.22%

Net Current Assets/(Liabilites) 6.42%

Grand Total 100.00%

Commercial Paper (CP)/Certificate of Deposits (CD)Corporate Debt / Financial Institutions


Money Market Instruments

Average maturity of 1.58 years

Yield to maturity of 8.75%

Investments in high credit quality paper withover 50% in Money market instruments tocapitalise on tight liquidity conditions and highshort term rates.

Past performance may or may not be sustained in future.


11/15

Emphasis on Credit, Duration & liquidity of assets

Credit

Credit risk analysis by thecredit committee

Analysis of different rating

category universeCompare against benchmark

ratios

Quarterly result analysis ofthe companies

Meetings with companymanagement at least once ayear for updates

Liquidity

Regular monitoring ofLiquidity

Liquidity managed as per

interest rate view andinvestment objective

Duration

Emphasis on modifiedduration in a way that best fitsthe investment objective

Our Investment Philosophy


12/15

Investment Strategy

Quality Assets withevaluation of the yieldcurve, modified duration,the total volume traded etc.

Strong internal creditprocesses for fresh creditinvestment

Economy & Market closeassessment of the macroeconomic factors such asmoney supply, deposit

growth etc. and the marketfactors such as policy risk,money flow etc..

DEBTMarket


13/15

Liquidity Risk Credit Risk

Liquidi ty risk is managed primarilythrough the use of

Monitoring of daily liquidity requirement

and cash flow forecasting

Monitoring systems & risk limits

Scenario analysis

Stress testing

Use of credit exposure limits Limits based on rating & type of security

Deals mostly in highly rated securities

Credit exposure are compared against

limits on daily basis Regular review of corporate

performance and emphasis on

management discuss ion to have a check

on potential credit risk

Risk Management


14/15

Risk Factors

Mutual Funds and securities investments are subject to market risks and there is noassurance or guarantee that the objectives of the Scheme will be achieved. *As withany securities investment, the NAV of the Units issued under the Scheme can go up ordown depending on the factors and forces affecting the capital markets. * Pastperformance of the Sponsor / Fund / AMC or that of existing Schemes of the Fund does

not indicate the future performance of the Scheme. *Kotak Bond and Kotak ShortTerm Bond, are only the names of the Schemes and does not in any manner indicateeither the quality of the Scheme, future prospects or returns. * The NAV of the Schememay be affected, inter alia, by changes in the market, performance of individual stocks,trading volumes, settlement periods and transfer procedures. * Appreciation of thevalue of the Units issued under the Scheme can be restricted in the event of a highasset allocation to cash, when stock appreciates. * Tax laws may change, affecting thereturn on investment in Units. *In the event of receipt of a very large number ofredemption requests or very large value redemption requests or of a restructuring ofthe Schemes portfolio, there may be delays in the redemption of Units. Please refer tothe paragraph on "Right to limit Redemption" in the Offer Document. *Kotak

Mahindra Bank Limited is not liable or responsible for any loss or shortfall resultingfrom the operations of the Scheme Statutory: Kotak Mahindra Mutual Fund is a Trust(Indian Trusts Act, 1882). Investment Manager: Kotak Mahindra Asset ManagementCompany Ltd. Sponsor: Kotak Mahindra Bank Ltd. (liability Rs. NIL). Trustee: KotakMahindra Trustee Company Ltd. Before investing, please read the OfferDocument. Before investing, please read the Offer Document.


15/15

Think Investments. Think Kotak

Debt Market Presentation

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