PORTFOLIO

MANAGER'S PORTFOLIO
VIEW
Volume II January - February 2011
NAVIGAT R
Prashanth Narayan, VP & Head - PMS,
ING Investment Management (India) Pvt. Ltd.

Political Instability And Inflation –

Key Risks For Indian Markets
I nflation globally is climbing and, with it, the pressure on
Central Banks to raise rates. The BoE are likely to tighten
first, followed by the ECB. The inflation is “cost-push”,
arising from increases in the prices of crude, foodstuffs,
steel, and the like. It is surprising that the USA is not seeing
similar inflationary pressure, especially as the USD has
weakened so much, however as the steepening of the USD
yield curve suggests that there is an expectation of higher
inflation in the coming quarters.
The US economy is seeing an
expanding GDP as well as a rising stock
market. However, the concerns over
the US economy largely remain
unchanged. Are there any real
investments in US? When will the
access to cheap money end? What
will happen when QE2 ends? When
will inflation in US start to increase?
Historically excessive quantitative
easing has clearly led to higher
inflation and we opine that increase in
inflation in the US is just around the
corner.
A significant development which is becoming more evident
in early 2011 is the growing importance of China’s role in
financial markets. We have already seen their contribution
to the rescue of the EUR when China bought Spanish and
Ireland bonds, and it is now lending more to Emerging
Markets than even the World Bank. This can mean 2
important changes; firstly, China is very worried about its
lending to US (in way of purchasing of US treasury) and
wants to diversify and secondly, they are slowly becoming a
financial powerhouse. China, in its efforts to diversify its
forex holdings might be a significant buyer of gold and other
precious metals in coming years.
Indian companies have been reporting 3Q FY11 earnings;
the reporting season will continue till February end. A
common trend of quarterly reporting has been strong
volume growth and disappointing margin performance.
Financials and IT stand out with Financials having reported
healthy credit growth and better-than-expected net interest
margins and IT companies continue to be positive in their
growth outlook. FIIs sold upwards of USD 1bn in the month
and domestic investors, after a long time, were net buyers to
the tune of USD 1.5bn. To put this in perspective, domestic
institutional investors were net sellers of approximately USD
4.3bn for the entire year of 2010.
Political stability and the
ability to continue with
reforms have taken a hit in
the recent past and the
premium the Indian market
has been enjoying due to
political stability is
dwindling. The government
has further postponed the
rollout of GST (Goods &
Service Tax) as well as DTC
(Direct Tax Code) to FY2013
and PSU follow on offers
calendar is also behind
schedule. 2011 also has 6
state elections which is
crucial for the Congress party. Given this backdrop, we think
the budget will be a populist budget. We expect the
government to reduce import duty to ease the inflationary
pressures.
Inflation continues to be a big risk to domestic markets with
WPI rising to 8.4% from 7.5% last month, led by a renewed
surge in primary article inflation and a continued pickup in
the momentum of non-food manufacturing. The Central
Bank hiked benchmark rates by 25 bps, against market
expectation of 50 bps, landing the Repo rates at 6.5%.
The banking system is still tight with liquidity with the call
money rates hovering at 7%. Most of the banks have
increased their lending and deposit rates to adjust to the
tight liquidity situation. The 10Y yields strengthened from
7.91% to 8.16% due to higher inflation and anticipation of
interest rate hikes.

Note: ING ADAPT is a portfolio management strategy offered by ING Investment Management (India) Pvt. Ltd.
PORTFOLIO
MANAGER'S PORTFOLIO
VIEW
Volume II January - February 2011
NAVIGAT R

Summary

ING ADAPT is a Multi Asset product which uses Active and Dynamic Asset Allocation to generate
risk adjusted optimal returns. ING ADAPT offers 5 different investment options based on different TM

client profiles. The investment options are classified as Very Conservative, Conservative, Moderate,
Aggressive & Very Aggressive. The asset allocation will be monitored actively to keep in line with the
defined risk bands for each of the investment options.

Key Benefits

l An Actively Managed Asset Allocation Product

• Asset Allocation product investing into Equity, Debt, Gold and Cash (Portfolio consists of: Equities -
Direct Equities, ETFs; Gold - Gold ETFs; Debt - Mutual Funds, Cash - Mutual Funds, ETFs)
• Flexibility to chose an investment strategy based on your risk profile
• Each of the investment strategy is classified based on the ability to take downside risk in the
Portfolio.
• Risk is clearly defined for each of the options in the form of semi deviation targets
• Process run Portfolio, avoiding human bias
• The Portfolios are continuously monitored keeping the investments in line with the chosen
risk tolerance

Investment Process

Constraints
Semi Deviation Targets*

Very Conservative : 0 – 1.5%

Conservative : 0 – 3.25%
Moderate : 0 – 5%
Aggressive : 0 – 7%
Very Aggressive : 0 – 10%

Estimated Asset Returns

Portfolio#
Optimization For All
Estimated Asset Risks Risk Bands
• Volatility
# Portfolio Consists Of:
• Semi Deviation
Equities Direct Equities, ETFs
• Expected Maximum
Draw Down Gold Gold ETFs

Debt Mutual Funds, ETFs

Cash Mutual Funds, ETFs

* Semi deviation evaluates the fluctuations in returns below the mean. It provides an effective measure of downside risk for a portfolio. It's similar to standard deviation, but it only looks at
periods where the portfolio's return was less than the target or average level. This allows investors to see how much loss can be expected from a portfolio, instead of only looking at its
expected fluctuations, although there is no assurance that this semi deviation target will be achieved. The endeavor is to contain the portfolio semi deviation to defined target level.

Note: ING ADAPT is a portfolio management strategy offered by ING Investment Management (India) Pvt. Ltd.
PORTFOLIO
MANAGER'S PORTFOLIO
VIEW
Volume II January - February 2011
NAVIGAT R

Model Portfolio Performance Contribution

Very Conservative (As on 31st Jan'11) Conservative (As on 31st Jan'11)

Asset Class Model Contribution to Model Asset Class Model Contribution to Model
Portfolio Weight Portfolio Performance Portfolio Weight Portfolio Performance
Gold Bees 8.57% -0.81% Gold Bees 7.79% -1.01%
Nifty Bees 5.60% -1.52% Nifty Bees 8.36% -3.48%
Liquid 36.69% 0.24% Liquid 42.99% 0.10%
Short Term 29.74% 0.11% Short Term 30.60% 0.05%
Gilts 19.30% -0.07% Gilts 10.11% -0.04%
Total 99.90% -2.05% Total 99.85% -4.37%

Moderate (As on 31st Jan'11) Aggressive (As on 31st Jan'11)

Asset Class Model Contribution to Model Asset Class Model Contribution to Model
Portfolio Weight Portfolio Performance Portfolio Weight Portfolio Performance
Gold Bees 27.33% -0.81% Gold Bees 32.65% -0.65%
Nifty Bees 46.11% -5.21% Nifty Bees 48.25% -5.81%
Liquid 8.61% 0.06% Liquid 4.56% 0.03%
Short Term 9.30% 0.03% Short Term 7.88% 0.03%
Gilts 8.52% -0.03% Gilts 6.29% -0.02%
Total 99.86% -5.96% Total 99.63% -6.42%

PERFORMANCE DEPICTED ABOVE ARE BASED ON THE MODEL PORTFOLIOS CONSTRUCTED

Very Aggressive (As on 31st Jan'11) USING THE PROPRIETARY QUANT STRATEGY BEFORE CONSIDERING ANY EXPENSES.
Investors or prospective investors are requested to note that the model portfolios’ performance results
are derived considering that the securities in the model portfolios are bought at their closing prices as
Asset Class Model Contribution to Model on the day of initial investment/rebalancing. Hence, unlike an actual performance record, the results
Portfolio Weight Portfolio Performance depicted above may have over or under compensated for the impact, if any, of certain market factors
such as lack of liquidity, money flow, etc. Investors/Prospective investors may also note that the
Gold Bees 35.00% -0.83% performance of actual portfolios of clients may vary due to factors such as expenses charged, timing
of entry and exit, timing of additional flows and redemptions, individual client mandates, specific
Equity 64.44% -6.33% portfolio construction characteristics or structural parameters. These factors may have bearing on
Total 99.44% -7.16% individual portfolio performance and hence individual returns of clients for the said portfolio type may
vary significantly from the data on performance of the portfolio depicted above. Neither the Portfolio
Manager, nor its Directors or employees shall in any way be liable for any variation noticed in the
returns of individual portfolios.

The performance indicated above does not indicate or guarantee, in any manner, the performance of
ING ADAPT strategy offered by ING Investment Management (India) Private Limited. The Portfolio
Manager does not make any representation that any investor will or is likely to achieve profits or losses
similar to those shown above. PAST MODEL PERFORMANCE IS NO GUARANTEE OF FUTURE
RETURNS OF THE CLIENT PORTFOLIOS.

Market Review
It was not a pleasant sight for our markets for the month of January. It was also the beginning of the New Year and it was a
very shaky start for the year to say the least. It was also a month of contrast with most of the developed markets posting
handsome gains whilst the domestic market bleeded. The consensus for the US economic growth improving, lead to
outflows from our markets from the FIIs. The news on the economic data domestically also added to the weakness with IIP
growth plunging to 2.7% for the month of November. On the monetary policy front, RBI continued with the calibrated
monetary normalization process in the January policy review meeting and hiked the benchmark rates- Repo and Reverse
repo by 25 bps each.
In the midst of result season, there was also a lot of stock specific action as the results were announced. The overall results
till date can be characterized as being healthy on volume/sales growth but pressure pertaining to margins were visible on
account of rising commodity prices.
Foreign institutional investors (FIIs) were sellers of Indian equities over the month to the tune of $ 1 bn. This was the first
significant outflow after a sustained inflow over the last year.
The benchmark indices of Sensex and Nifty lost 10.64% and 10.25% respectively. The sectors with global exposures like IT,
Metal and Pharma were relative outperformers. Real estate and Auto were the worst hit on fears of rising interest rates.

Portfolio Performance
It was one of the months where all the riskier asset classes – Equities, Gold and Gilts ended with significant losses, thus impacting
the performance across all variants of ING ADAPT. This is the first month since the launch of the strategy where all variants
suffered losses and ended with significant negative returns.

Note: ING ADAPT is a portfolio management strategy offered by ING Investment Management (India) Pvt. Ltd.
PORTFOLIO
MANAGER'S PORTFOLIO
VIEW
Volume II January - February 2011
NAVIGAT R

Model Portfolio Performance

14

Very Aggressive
Aggressive
13
Moderate
Conservative
Very Conservative
12

11

10

8
June-10 July-10 August-10 September-10 October-10 November-10 December-10 January-11

ADAPT Very Conservative Conservative Moderate Aggressive Very Aggressive

1 Month -2.13% -4.52% -6.10% -6.52% -7.31%
3 Months 0.07% -2.07% -3.28% -4.19% -7.11%
6 Months 4.96% 5.69% 4.99% 3.69% 4.15%
Since Inception* 4.84% 6.04% 5.23% 4.13% 3.66%
PERFORMANCE DEPICTED ABOVE ARE BASED ON THE MODEL PORTFOLIOS CONSTRUCTED USING THE PROPRIETARY QUANT STRATEGY CONSIDERING A
MANAGEMENT FEE [OF VERY CONSERVATIVE=0.75%; CONSERVATIVE=1.0%; MODERATE=1.5%; AGGRESSIVE=2.0%; VERY AGGRESSIVE=2.5%] AND CUSTODY &
TRANSACTION CHARGES [OF VERY CONSERVATIVE=0.20%; CONSERVATIVE=0.20%; MODERATE=0.20%; AGGRESSIVE=0.35%; VERY AGGRESSIVE=0.35%]. Investors or
prospective investors are requested to note that the model portfolios’ performance results are derived considering that the securities in the model portfolios are bought at their closing
prices as on the day of initial investment/rebalancing. Hence, unlike an actual performance record, the results depicted above may have over or under compensated for the impact, if any,
of certain market factors such as lack of liquidity, money flow, etc. Investors/Prospective investors may also note that the performance of actual portfolios of clients may vary due to
factors such as expenses charged, timing of entry and exit, timing of additional flows and redemptions, individual client mandates, specific portfolio construction characteristics or
structural parameters. These factors may have bearing on individual portfolio performance and hence individual returns of clients for the said portfolio type may vary significantly from
the data on performance of the portfolio depicted above. Neither the Portfolio Manager, nor its Directors or employees shall in any way be liable for any variation noticed in the returns of
individual portfolios.
*Since Inception Dates: Very Conservative=21 June 2010; Conservative=21 June 2010; Moderate=21 June 2010; Aggressive=21 June 2010; Very Aggressive=29 June 2010; Inception
date denotes the date on which the first client investment made under the respective risk profile of the strategy. Past performance is no guarantee of future returns.
Performance depicted above is as on 31/1/2011. Returns up to one year are absolute. The performance indicated above does not indicate or guarantee, in any manner, the performance
of ING ADAPT strategy offered by ING Investment Management (India) Private Limited. The Portfolio Manager does not make any representation that any investor will or is likely to
achieve profits or losses similar to those shown above. PAST MODEL PERFORMANCE IS NO GUARANTEE OF FUTURE RETURNS OF THE CLIENT PORTFOLIOS.

INVESTMENT MANAGEMENT
www.ingim.co.in

ING Investment Management (India) Private Limited is registered with SEBI as a Portfolio Manager (“Portfolio Manager”).
RISK FACTORS
This Document is for information purpose only. This Document and the Information do not constitute a distribution, an endorsement, an investment advice, an offer to
buy or sell or the solicitation of an offer to buy or sell any products/strategy mentioned in this Document or an attempt to influence the opinion or behavior of the
Investors/Recipients. Any use of the Information / any investments and investment related decisions of the Investors/Recipients are at their sole discretion & risk.
Investments in Portfolio Management products/strategy are subject to market risks due to various micro and macro factors and forces affecting the capital markets
which include price fluctuation risks. There is no assurance or guarantee/warranty that the objectives of any of the products/strategy will be achieved. The investments
may not be suited to all categories of Investors/Recipients. As with any investment in any securities, the value of the portfolio under products/strategy can go up or down
depending on the factors and forces affecting the capital market. The investment objective of the ING ADAPT is to generate long term capital appreciation by investing in
multiple asset classes, according to the risk-return profile of investors and each of the 5 plans has a quantitative driven asset allocation which is based on satisfying the
needs to a specific risk-return profile. The strategy aims to maximise return subject to the maintenance of risk bands. ING ADAPT is only the name of the Portfolio
Management Strategy and does not in any manner indicate either the quality of the Strategy or its future prospects and returns. The past performance of
the Portfolio Manager and/or its affiliates is not indicative of future performance. Investors/Recipients are not being offered any guaranteed or assured returns.
The Portfolio Manager, its affiliates/associates, their directors, employees, representatives or agents shall not be liable or responsible, in any manner whatsoever, to any
Investor/Recipient or any other person, for the performance/profitability/operations of the products/strategy, the contents of any document or any investments in the
products/strategy including any and all direct, special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such
damages.
Investors/Recipients are not being offered any guaranteed or assured returns. Prospective Investors are advised to read the Disclosure Document, client
agreement and other related documents carefully and consult their legal, tax and financial advisor before making the investment decision.

Note: ING ADAPT is a portfolio management strategy offered by ING Investment Management (India) Pvt. Ltd.