Mar 22, 2014

RETAIL RESEARCH

Weekly Debt Report

Strategy recommended:
Given the present scenario of uncertainty on the direction of the interest rate movement, short term income funds with 2-3 years
Average Maturity may be the right bet for any kind of investors while the investors who wish to stay invested for more than 18 months
or two years may consider Income, Dynamic Income funds and Gilt funds (although with reduced expectations). Selective Dynamic
funds which are managed actively are suitable for medium term say for 6-12 months. Investors those who do not want MTM risk can
choose Ultra Short term funds as they are low risk low return products.

Outlook for the week:

We feel that the new 10-year G Sec yields could trade in the 8.60% - 8.90% band for the week

G Sec:
Indian bond markets saw yields of the bonds inching up marginally during the shortened week ended Mar 21, 2014. G sec market
opened the week on Tuesday on a bearish note tracking tight liquidity condition in the system due to advance tax outflows. Absence
of any fresh cues also weakened the market.
Gilt prices ended up on Wednesday amid caution ahead of the US FOMC policy decision. Easing concerns over Ukraine and
improvement in the domestic currency also supported the market sentiment.
Prices of government securities ended lower on Thursday following the US Fed Chief Janet Yellen's statement that the central bank
may hike interest rates around six months after winding up its asset purchase programme. The US FOMC maintained its tapering
course and cut its monetary stimulus programme by $10 bln per month to $55 bln. Caution ahead of the release of the
governments borrowing plan for the next fiscal on Mar 28 further weighed on the prices.
Gilt prices ended higher on Friday tracking the improvement in the rupee value. Value buying at some higher side also supported
the market.
Hence, the yields of the 10 year benchmark G Sec 8.83% GS 2023 ended up by one basis point at 8.80% (Rs. 100.16) on Friday in
comparison to the previous weeks close of 8.79%.

Weekly Debt Report

Change in the values of debt benchmarks and securities during the week:

T Bill Auctions:
The T-Bill auctions held last week were fully subscribed. The cut-off for 91-Days T-Bill was set at Rs 97.76, implying a yield of 9.19%
(previous week yield 9.27%). The cut-off for 362-Days T-Bill was set at Rs 91.86, implying a yield of 8.89%.
The central bank announced the sale of 91 Day T-Bill (for Rs. 8,000 crore) and 182 Day T-bill (for Rs. 6,000 crore) on 26 Mar.
Liquidity, Call & CBLO:
The liquidity in the banking system hardened last week compared to the previous week. The net infusion from the LAF window was
a daily average of Rs. 34,658 crore for last week (Rs . 32,578 crore in previous week.
The inter bank call rates hovered around 9% levels on Friday. The CBLO rates were positioned at 7.5% level.
Corporate Debts :
The 1 year bond ended at 9.53% compared to the previous week close of 9.5%.
The 10-year AAA bond traded at 9.64% compared to the previous week close 9.72%.

RETAIL RESEARCH

Weekly Debt Report

Gilt Securities Yields Movements in last 4 weeks:

Currency:
The USD depreciated against the Euro by 0.46% for the week ended 07th Mar 2014.
The USD appreciated against the Yen by 1.51% for the week.
The USD appreciated against the Pound by 0.13%.
Change in CD Rates:

RETAIL RESEARCH

Weekly Debt Report

Change in CP Rates:

Commodity price Changes:

Gold & Crude oil:

International crude oil prices (WTI) ended higher by 0.58% for the week ended 21st Mar 2014 to close at USD 99.46 per barrel.
International gold prices declined by 3.12% for the week ended 21st Mar 2014.
Forthcoming Auctions:

RETAIL RESEARCH

Weekly Debt Report

Global Updates:
India:

RBI data shows money supply in the economy rose 14.2% yoy in the fortnight ended March 7, compared with 12.8% a year earlier.

Finance Ministry rescinds IRDAs decision to withdraw third party insurance pool.

Insurers request IRDA to have an assistance model in buying insurance on the internet.

India's CPI inflation rate for Agricultural Labourers fell to a 20 month low of 8.14% in February compared with 9.08% in the previous
month.

RBI to conduct 14 day term repo auction for an amount of about Rs 40,000 cr on March 21 and a 5 day term repo auction for an
amount of Rs 20,000 cr on March 28.

Securities Appellate Tribunal (SAT) asks SEBI for written submissions on the impact that recent rule changes may have on an insider
trading case involving RIL; also adjourns the hearing in the insider-trading case against RIL to April 16.

SEBI renews the license of the currency bourse United Stock Exchange.

Asia:
Japans leading economic index advanced to112.2 in January from 111.7 in December.
Japans coincident economic index moved up to 114.8 in January from 112.3 in December.
Chinas HSBC Services PMI rose to 51 in February compared to 50.7 in January.
Chinas official non-manufacturing PMI rose 1.6% to a three-month high of 55.0 in February.
BoE / GfK Inflation Expectations Survey for February shows inflation expectations for the coming year are at 2.8% (the lowest level
since February 2010) compared to 3.6% in November 2013.

RETAIL RESEARCH

Weekly Debt Report

US:

US existing home sales declined 0.4% in February to 4.60mn units from 4.62mn units in January.

US initial jobless claims rose less than expected by 5,000 in the week ended March 15 to 320,000.

US Federal Reserve Bank of Philadelphia says its manufacturing index improved to a reading of 9.0 in March from Februarys
reading of -6.3.

Conference Board says its index of leading US indicators increased 0.5% in February following a 0.1% rise in January.

Finance Ministers from the G-20 economies agree to implement policies to boost world GDP by more than $2 trillion over the next
five years.
US trade deficit increased to $39.1bn in January up 0.3% from December's revised $39bn deficit.
US added 175,000 jobs in February compared to an upwardly revised 129,000 in January; the unemployment rate rose 0.1% to
6.7%.
UK:

UK construction PMI fell to 62.6 in February from 64.6 in January.

Bank of England keeps its key interest rate unchanged at 0.5% and also leaves its bond purchasing program unchanged at 375 bn
pounds.

Euro Zone:
Japans merchandise trade balance recorded a deficit of 800.3bn yen in February from a downwardly revised deficit of 2791.7bn yen
in January.
European central bank leaves its benchmark interest rate unchanged at 0.25%.
Eurozone GDP grew by 0.3% in Q4 2013 compared to 0.1% growth in the third quarter.

RETAIL RESEARCH

Weekly Debt Report

Economic Calendar:

RETAIL RESEARCH

Weekly Debt Report

US Dollar Vs Indian Rupee

The US dollar depreciated against the rupee by 0.76% for the week ended 21st Mar
2014. The rupee rose at almost a three-month high against the US dollar enthused by a
narrowing current account deficit (CAD) and domestic stock indices logging new peaks.
The better-than expected CAD numbers have undoubtedly improved sentiment in the
market. Continued foreign funds inflow and persistent dollar selling by exporters and
some banks also boosted the rupee value.

WPI Inflation (YoY)

The Wholesale Price Index based inflation dipped sharply to eight-month low of 5.05%
in January 2014 from 6.16% in December 2013, mainly driven up by decline in
vegetables and mineral oil inflation. The inflation for primary articles dipped from 34months high of 15.9% in November 2013 to 10.8% in December 2013 and further
declined 6.8% in January 2014. This may give enough room for the RBI to ease the
policy rates in the forthcoming meet.

RETAIL RESEARCH

Relationship among policy rates and benchmarks

Essence of the Patel Committee report has found its place in the RBI's objectives.
However, higher rates can make the currency more attractive for foreign investors, too
much tightening can dent economic growth, eroding confidence, and in turn hit stocks.

Deposit vs. Advance Growth (YoY)%

Demand for credit continued to be muted and non-food credit grew only by 14.64%
year-on-year for the fortnight ended February 21, RBI data show. Outstanding nonfood credit at the end of the fortnight was Rs.57,55,169 crore compared to R50,20,340
crore from the same period last year. Deposits continued to outpace loans and grew at
15.842% y-o-y to Rs.76,05,171 crore. Growth in deposits dropped from the years high
of 17% in the fortnight ended December 13.

Weekly Debt Report

Money Stock (M3) (YoY) (%)

Corporate Spread vs. 10Y G Sec Yield

India's money supply rose 14.5 percent year-on-year in fortnight ended Feb. 21
compared with 12.7 percent a year earlier, the Reserve Bank of India said on
Wednesday. Money supply was 93.59 trillion rupees ($1.5 billion) as on Feb. 21,
compared with 93.49 trillion rupees on Feb. 7, the central bank data showed.
Reserve money rose an annualised 10.5 percent in the week to Feb. 28, higher than
2.9 percent a year earlier, the RBI said.

Corporate bond Yields saw a rise during last week. The one year AAA credit spreads
rose by 3 basis points while 5 year spread rose by 2 basis point.

Foreign Exchange Reserves (mn of USD)

Indias foreign exchange reserves increased by $1,838 mn in the week ended Mar to
$297.29 bn.

RETAIL RESEARCH

LAF window by RBI (Bn. Rs)

The liquidity in the banking system improved last week compared to the previous week.
The net infusion from the LAF window was a daily average of Rs. 13,200 crore for last
week (Rs. 32,031 crore in previous week).

Weekly Debt Report

MFs net investment in Debt (Rs Crs):

Certificates of Deposit (%)

Mutual funds had been net buyers in January month to the tune of Rs. 24,111 crore
while they have remained net buyers in the Febuary month to the tune of Rs. 55,804
crore. So far in March, mutual funds have bought debts to the tune of Rs. 17,879 crore.

CD rates saw inching up in the recent periods. The CD rates hovered around 9.3% level (as
per the latest data) (one year CD).

FIIs net investment in Debt (Rs Crs):

FII bought net of Rs. 3,651 crore during January month while they have bought debt
securities in February to the net of Rs. 16,952 crore. FII have bought debt securities to
the tune of Rs.17,879 crore in March so far.

RETAIL RESEARCH

Commercial Paper (%)

Rates of Commercial papers also traded higher in the last one week. The CP rates are
hovering around 10.05% level (one year maturity CP).

10

Weekly Debt Report

Analyst: Dhuraivel Gunasekaran (dhuraivel.gunasekaran@hdfcsec.com)

(Database sources: AMC Sites, NAVIndia & Ace MF)

RETAIL RESEARCH Fax: (022) 3075 3435

Corporate Office: HDFC Securities Limited, I Think Techno Campus, Building B, Alpha, Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai
400 042 Fax: (022) 30753435 Website: www.hdfcsec.com
Disclaimer: Mutual Fund investments are subject to risk. Past performance is no guarantee for future performance. This document has been prepared by HDFC Securities Limited and is
meant for sole use by the recipient and not for circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer
to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be
relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment
banking, or other services for, any company mentioned in this document. This report is intended for non-Institutional Clients.

RETAIL RESEARCH

11