India Investment Committee

Investment Strategy & Outlook for Asset Classes

November 2018

For Addressee Only. Further distribution of this material is strictly prohibited (Marketing Material)
Contents

01 Summary

02 House View

03 Asset Allocation

04 Economic Update

05 Equities

06 Fixed Income

07 Glossary
Summary

Global growth remains robust. Major developed economies are growing at above-potential rates,
01 compensating for moderation in EM growth.

The outlook for the US economy remains strong over the medium-term. We expect growth to
02 accelerate in 2018 to +2.9%, boosted by tax cuts, fiscal spending, easy financial conditions, etc.

India has jumped 23 spots in the new World Bank Ease of Doing Business (EODB) 2019 rankings to take
03 up the 77th spot, with a score of 67.23.

04 Brent crude tumbled more than $15 from its Oct. 3 high at $86.74, falling nearly 20 % to ~$69.5.

DB analysts expect earnings to rebound in FY’19E and FY’20E . Though the estimated Nifty EPS
05 estimates growth is at double digits, likely to see downgrades going forward.

06 Asset Allocation – We are having a neutral stance towards Equities and fixed income.

Deutsche Bank
Wealth Management 2

— For internal use only

 Global Macros
United States Europe

§ The outlook for the US economy remains strong over the medium- § The Euro area is growing at an above-trend pace despite the slowdown
term. We expect growth to accelerate in 2018 to +2.9%, boosted by in 1H18, supported by easy financial conditions & solid income growth.
tax cuts, fiscal spending, easy financial conditions, etc. Growth We have reduced our 2018 euro area GDP forecast to 2.0% from 2.1%;
momentum is also supported by rebound in consumer spending and 2019 unchanged at 1.7%
solid capital expenditures § Recent euro area macro indicators edged lower –September
§ The fiscal impulse is expected to stay positive until 2020, and then to manufacturing PMI fell to two year low (53.2) driving composite PMI
slow a bit as the effects of tax reform and recent spending packages down 0.4 points (54.1). In aggregate, the euro area PMIs still point to
fade. On the supply side, there is scope for productivity to rise, as 0.5% qoq growth, higher than our projection of 0.4% qoq. Hard data has
higher wages pressure firms to lower costs been mixed this quarter, amid new fuel regulations which have affected
auto production
§ Residential investment spending presents slight downside risks to our
near term growth forecasts. Also, downside risks remain from § Downside risks: Italy 2019 budget leaves debt sustainability vulnerable
potentially tighter financial conditions, higher-than-expected to shocks and a “no deal” Brexit outcome would also be costly, both for
inflation, or an external shock from China, Europe, or trade. Hence, the UK and the EU.
we expect slightly lower growth in 2019 (2.8%)

China Emerging Economies

§ We revise down China's current account forecast to a small deficit of - § EM growth has moderated, not collapsed. Overreaction to growth fears
0.2% of GDP in 2019. This is mainly underpinned by our expectation of the summer months has corrected and more troubled and
of lower exports due to the US tariffs. On growth front, we maintain idiosyncratic economies seem to be turning the corner.
our GDP forecasts of 6.6% for 2018 and 6.3% in 2019
§ Different regions are at different cyclical stages, with Asia peaking, LatAm
§ The main risk to the outlook is further trade policy escalation with likely at a trough, and a dim outlook for EMEA’s largest economies. EM
the US, which could derail exports. So far, Chinese exports to the US vulnerability is still rising with LatAm (ex-Venezuela) under least stress
have not fallen dramatically, but there are risks this represents front- while Asia looks most stressed. Overall, we expect 4.9% growth for EM in
loading ahead of tariff implementation. As tariffs phase in this fall and 2018 and 2019
in the first quarter next year, there are risks that Chinese exports to
§ The election results in Brazil point to a more reformist government – a
the US decelerate or contract
boost for Argentina, where persevering on tight policy is anchoring the
§ Monetary policy will be eased further to support growth, which will currency. Tighter policy has also eased concerns in Turkey, while, in South
weaken yuan over the medium term. We target the Chinese currency Africa, market-friendly responses to set-backs contain risks
at 7.4 for end-2019, another 6.6% depreciation from its current level DB Research The House View October,2018,
Deutsche Bank The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Wealth Management events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions 3
and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of
future returns. — For internal use only
House View

Global Macros India’s Macro

§ Global growth remains robust. Major developed economies are § Brent crude oil prices fell by a sharp 8.76% in October to close at
growing at above-potential rates, compensating for moderation in EM $75.47 per barrel on October 31, 2018 vis-à-vis $82.72 per barrel on
growth. In 2018, we expect global growth to rise to +3.8%, but to September 28, 2018 owing to rising crude oil supplies and concerns
then decelerate marginally by the end of next year about global oil demand in the wake of the US-China trade war, its
impact on the global economy
§ Trade wars remain a key risk to the global economy as tensions reach
levels that could weigh on global trade volumes, and potentially on § The rupee weakened in October, with the exchange rate settling at Rs
global growth. Also, concerns of US-China trade war translating into a 73.96 per dollar on October 31 as against Rs 72.48 per dollar on
broader economic war can further dent growth prospects. The September 28.
USMCA agreement diminishes one source of near-term trade § September IIP grew at 4.5% vs 4.3% in August. Manufacturing output
uncertainty, but elevates another front against China recorded 4.6% growth in September vs 5.1% growth in August.
§ A shock from either a “crash Brexit” or from Italy’s debt situation § Nikkei Manufacturing PMI for Oct-2018 stood at 53.1 as compared to
would pose downside risks to euro area growth 52.2 in Sept-2018. Services PMI for Oct-2018 stood at 52.2 as against
§ EM growth has moderated without collapsing, and overreaction to 50.9 in Sept-2018. Composite PMI was at 53 in October vs 51.6 last
growth fears of the summer months has corrected. Some of the more month.
troubled and idiosyncratic economies seem to be turning the corner
Commodities India's Inflation & Monetary Policies
§ Oil - Neutral for now - We view supply and demand as close to § Consumer Price Index (CPI)-based inflation fell slightly to 3.3% in
balanced, as higher US and Saudi production balance out disruptions October 2018 from 3.8% on September 2018. The downside was
in Iran and Venezuela. mainly on account of softer food prices.
§ RBI in its 4th Bi-monthly monetary policy surprised the market by
not hiking the policy repo rate, though the MPC committee
changed the neutral stance to one of “calibrated tightening”,
confirming that India remains in the midst of a rate hike cycle.

Source: DB WM CIO Cockpits Asset Class Trends September 2018 , DB India Economics Weekly 9 th November 2018

The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that events
Deutsche Bank
will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions and
Wealth Management 4
hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of future
returns.
— For internal use only
House View
Equities Asset Allocation
§ DB analysts expect earnings to rebound in FY’19E and FY’20E . § Equity markets are expected to remain volatile in short term
Though the estimated Nifty EPS estimates growth is at double on back of volatile oil prices, geo-political tensions, trade wars
digits, likely to see downgrades going forward. and US monetary policy.

§ In October 2018, in the cash market FIIs sold Indian equities § Demand revival and earnings pick up would impact the
worth USD 3.75 bn and domestic mutual funds were net valuations.
buyers worth USD 3.33 bn. In CY’18 FIIs have been net sellers § In Fixed Income space short term strategy can provides better
to the extent of USD 5.76 bn whereas domestic mutual funds risk return trade-off.
are net buyers worth USD 16.40 bn.
§ Key events to track – Bond yields, US trade stance, emerging
market flows and currencies, crude oil prices, domestic credit
market related news flows,
Fixed Income Key Risks
§ Sep trade deficit narrowed to lowest levels in 5 months to § Sharp market correction / volatility, triggered by a re -
$14bn from $17.4bn previously with deceleration in both assessment of Fed hiking cycle, trade-war, oil price hike and
exports & imports (10.5% from 25.4%). Major commodity dollar strengthening.
groups showed positive export growth with petroleum products § Shock to growth in Europe, e.g., negative macro impact from
(26.8%) & inorganic chemicals leading the pack (16.9%) Brexit or deepening of bank stress.
§ The benchmark yield fell by ~15 basis points in Oct, its largest § Domestic challenges like fiscal, state elections and banking
fall since March. The yield also fell for the first time in three sector distress could constitute a sustained drag on growth.
months.
§ India has jumped 23 spots in the new World Bank Ease of Doing
Business (EODB) 2019 rankings to take up the 77th spot, with a
score of 67.23.
§ FII’s were net sellers for $1.37 bn and MF’s were net buyers
close to $ 3.74 bn in the month of Oct’18. YTD FIIs have been
sellers tune to $ 7.34 bn and MFs net buyers tune to $28.4 bn. Source: Deutsche Equities Report dated 9th November, 2018

Deutsche Bank The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that events
Wealth Management will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions and 5
hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of future
returns. — For internal use only
Asset Allocation

§ Equities - Neutral weight & buy on correction

§ Fixed Income – We prefer short / medium term accrual funds which provide better risk return tradeoff

Target Portfolio Allocation (11th July 2016)**

Conservative Balanced Growth

Asset Class
Strategic Tactical Change Strategic Tactical Change Strategic Tactical Change
Cash & Equivalent 3% 3% 3%
Total Cash & Equivalent 5% 3% 5% 3% 5% 3%
Gilt Funds / Income Funds 2% -3% 7% -3% 7% -3%
Short Term Funds / FMPs 70% 40% 15%
Total Fixed Income 70% 72% 45% 47% 20% 22%

Equity Funds / PMS / Structured Products 20% 40% 60%

Total Equities 20% 20% 40% 40% 60% 60%

Alternative Investments 5% 10%
Total Alternative Investments 0% 0% 5% 5% 10% 10%
Gold 5% +3% 5% +3% 5% +3%
Total Commodities 5% 5% 5% 5% 5% 5%
Grand Total 100% 100% 100% 100% 100% 100%

** Target allocation is subject to change, no guarantee that the target allocation can be achieved

Source: Deutsche Bank, PWM India Investment Committee – October 2018

Deutsche Bank
Wealth Management Past Performance is not indicative of future returns. Allocations are subject to change without notice. 6

— For internal use only

Key Economic Data - India

Gross Domestic Product FY15/16 FY 16/17 FY 17/18 FY 18/19F FY 19/20F Balance of Payment FY15/16 FY 16/17 FY 17/18F FY 18/19F FY 19/20F
(yoy %) USD bn
Real GDP 8.1 7.1 6.5 7.4 7.8 Exports 266.4 280.1 309.0 341.9 365.8
Agriculture 0.6 6.3 3.4 3.5 3.0 Imports 396.4 392.6 469.0 543.3 589.3
Industry 11.6 8.7 5.5 8.1 8.3 Trade Account -130.1 -112.4 -160.0 -201.4 -223.5
Services 8.8 6.7 7.6 8.1 8.8 % of GDP -6.2 -4.9 -6.2 -7.7 -7.7
Expenditure side GDP 8.1 7.1 6.7 7.4 7.8 Invisibles, net 108.0 98.1 111.4 124.5 138.8
Consumption
% of GDP
Expenditure 7.3 7.8 7.2 7.6 7.6 5.2 4.3 4.3 4.8 4.8
Private 7.8 7.0 6.6 7.4 7.3 Current Account -22.1 -14.4 -48.7 -76.9 -84.8
Government 4.6 12.4 10.9 8.6 9.5 % of GDP -1.1 -0.6 -1.9 -2.9 -2.9
Investment 4.9 9.6 7.6 9.2 10.2 Capital Account 41.1 36.4 91.3 43.0 90.7
Exports -5.5 4.8 5.6 8.9 7.2 % of GDP 2.0 1.6 3.5 1.6 3.1
Imports -5.9 4.0 12.4 10.9 10.2 Overall BoP 17.9 21.5 43.6 -33.9 5.9

Fiscal Operations FY15/16 FY 16/17 FY 17/18 FY 18/19F FY 19/20F Latest Readings Date Reading Date Reading
% of GDP yoy %
Central Govt. Fiscal
Manufacturing PMI* Oct-18 53.1 Sep-18 51.7
Deficit -3.9 -3.5 -3.5 -3.3 -3.1
Government Revenue 9.2 9.5 9.3 9.7 9.9 Services PMI* Oct-18 52.2 Sep-18 50.9
Government Expenditure 13.1 13.0 12.8 13.0 13.0 Composite PMI* Oct-18 53.0 Sep-18 51.6
Central Primary Balance -0.7 -0.4 -0.4 -0.3 -0.1 Industrial Production yoy % Sep-18 4.5 Aug-18 4.3
Consolidated Deficit -7.5 -6.5 -6.5 -6.0 -5.8 WPI* yoy % Oct-18 5.28 Sep-18 5.1
Debt / GDP 70.0 69.7 69.7 68.3 67.0 CPI * yoy % Oct-18 3.3 Sep-18 3.8
Credit Growth yoy % 25-Oct-18 14.60
Inflation (yoy %) avg FY 16 FY 17 FY 18F FY 19F FY 20F Deposit Growth yoy % 26-Oct-18 9.0
Consumer Price Index 2-Nov-18 76.75
4.9 4.5 3.6 4.1 4.5 Credit Deposit Ratio
(CPI)

(Source: Reuters, RBI, DB India Economics Weekly 9th November 2018)

No assurance can be given that any forecast or target will be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be
incorrect.
Past Performance is not indicative of future returns
* PMI – Purchasing Manager’s Index; WPI – Wholesale Price Index, CPI – Consumer Price Index; BoP – Balance of Payment

Deutsche Bank
Wealth Management 7

— For internal use only

 Coping with uncertainty
Contribution of sugar & milk inflation to headline CPI Contribution of pulses and vegetables
inflation inflation to CPI

Source: DB India Economics Weekly 9th November 2018

§ Over the next two months, CPI inflation will likely moderate further to 2.5% or lower, aided by a favorable base effect and benign food prices. As the base
effect fades away in Jan-March, CPI will start inching up but will likely remain below 4% by end-March’19. This will lead to a considerable undershoot
compared to RBI’s latest CPI projection of 3.9-4.5% for 2HFY19 and 4.8% for April-June’19. With headline CPI inflation expected to dip below 3% in the
next few months and given the ongoing credit crunch in the NBFC sector, RBI will likely be on the sidelines for the rest of this financial year. Core inflation
trend is not comforting at this stage, and even after some moderation, will likely stay above 5% by end-March’19. We think RBI will monitor core inflation
trend closely and if it does not show much improvement, then possibility of rate hikes can arise once again in April-June’19.
§ In the latest monetary policy (5 October), RBI projected CPI inflation to be 4% in July-Sep’18, 3.9-4.5% in 2HFY19 (Oct’18-March’19) and 4.8% in April-
June’19. July-Sep CPI inflation has averaged 3.9%, slightly lower than RBI’s revised projection of 4% (and 70bps lower than RBI’s estimate of 4.6% in
August) and current price trend indicates that CPI inflation will likely fall below RBI’s lower range of 3.9-4.5% for 2HFY19. In fact, if food prices remain
well behaved through November-December, in line with the positive seasonality, CPI inflation could fall to 3% (or even lower) by December’18, aided
particularly by a favorable base effect (in December’17, CPI inflation was at 5.1%).
§ Three food items – vegetables, pulses, sugar – will continue to record a benign year on year inflation rate in the next few months and this is likely to
result in lower-than-expected CPI inflation outturn during 2HFY19, in our view. We think it is constructive to focus on the underlying inflation rate by
excluding these food items or tracking the core inflation trend (which excludes food, fuel, transport and housing from CPI). Measuring in this manner,
core inflation is currently at 5.2% and is likely to be about 5% by April-June’19, as per our estimates. Source: DB India Economics Weekly 9th November 2018
The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Deutsche Bank
events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions
Wealth Management and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of
8
future returns.
— For internal use only
 Coping with uncertainty
We expect the next rate hike to get
Growth momentum has started to moderate
postponed to April-June'19

Source: DB India Economics Weekly 9th November 2018

§ September IP data was also released. IP grew 4.5%yoy in September versus an upward revised outturn of 4.7%yoy in August. July-Sep IP growth averaged
5.2%yoy, similar to the previous quarter’s outturn. Electricity sector growth was robust, mining sector growth turned slightly positive, while
manufacturing sector growth moderated (4.6% vs. 5.1%). Capital goods production growth was considerably weaker than the previous month, partly due
to an adverse base effect, while consumer durables (5.2% vs. 5.3%) and non-durables (6.1% vs. 6.5%) growth moderated slightly.
§ While the likely slowdown in IP growth is already incorporated in our lower GDP growth forecast for 2HFY19, there is likely to be additional downside
risks emanating from the ongoing problems in the NBFC sector, which has helped support growth in the last few years, while bank credit growth was
weak. With NBFC sector credit growth expected to slow down, bank credit growth has started to pick up. Indeed, October data shows a pickup in bank
credit growth to 14.5%yoy, from 11.9%yoy in end-Sep’18. However, on an overall basis, growth momentum will likely be affected due to the ongoing
problems in the NBFC sector, over and above the base effect led moderation in GDP growth that is expected through 2HFY19 (Oct’18-March’19). We
have penciled in about 7% average growth for 2HFY19, but risks are clearly to the downside.
§ Going ahead, the focus will shift to the important RBI board meeting on 19 November, in which the authorities are likely to discuss, among other issues,
the state of the NBFC sector and whether additional support is required to reduce stress and liquidity shortage in the sector. With access to funding from
banks and mutual funds having reduced significantly for the NBFC sector, a legitimate question arises whether there should be additional liquidity
support provided through a special window for systemically important non-deposit taking NBFCs (NBFCs-ND-SI).
Source: DB India Economics Weekly 9th November 2018
The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Deutsche Bank
events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions
Wealth Management and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of
9
future returns.
— For internal use only
 How low can FX reserves fall?
USD/INR: median estimate of professional forecasters, We expect a sizable BOP deficit in FY19 and
DB estimate and forward rate only a marginal BOP surplus in FY20

Source: DB India Economics Weekly 9th November 2018

§ In the 5th October monetary policy, RBI in a surprising move did not hike the repo rate and argued that interest rate defense will not be used to support
the rupee, which should find its own level through market forces of demand-supply. Post the policy, INR breached the 74 mark to touch 74.48 on 11th
October. RBI intervened in the FX market to smoothen out volatility and subsequently some one-off capital inflows and lower crude oil prices have helped
the rupee to stage a mild recovery. Within one week of the RBI policy, gross FX reserves have dipped by USD5.1bn, pushing the total number below
USD400bn (USD394.5bn as on 12 Oct; back to end-August’17 levels). Forwards position is also likely to have turned mildly negative, from +USD5.7bn
outstanding in end-August’18.
§ Gross FX reserves adjusted for forwards is currently at USD392.5bn, as per our estimates, while foreign currency assets (excluding gold/SDR/IMF deposit)
adjusted for forwards is about USD368bn. Gross FX reserves adjusted for forwards (and including valuation changes) have reduced by USD52.9bn in the
current fiscal year thus far (April’18 to 12 Oct’18), which is the sharpest pace of reserves depletion since the period post the global financial crisis (GFC).
Thankfully, India’s FX reserves (including forwards and valuation changes) had increased significantly in FY18 (USD64.6bn), which likely provided comfort
to the central bank to step up its FX intervention in FY19 thus far.
§ How much more can the reserves go down in FY19? In our view, RBI will probably not want to reduce FX reserves more than what was accumulated in
FY18 (USD64.6bn). This means RBI probably will tolerate another USD12-13bn drop in reserves (spot + forwards + valuation changes) during the
remainder period of this fiscal year.
Source: DB India Economics Weekly 9th November 2018
The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Deutsche Bank
events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions
Wealth Management and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of
10
future returns.
— For internal use only
 How low can FX reserves fall?
Probability pattern of GDP growth Real GDP growth estimate

Source: DB India Economics Weekly 9th November 2018

§ If rupee negative factors dominate in the next six months, it will be interesting to track at what pace RBI is allowing the depletion of reserves, assuming
that the authorities will not be willing to reduce reserves more than USD12-13bn in the remainder period of FY19. It is not that RBI cannot allow a sharper
depletion of reserves, but in that case, the various reserves adequacy metrics will weaken more than what we have estimated by end March 2019.
§ We think RBI will focus on the reserves adequacy metrics not just on the basis of FY19 considerations, but also taking into account FY20 expectations. As
of now, the median forecast for analysts show only a marginal BOP surplus for FY20, given likelihood of current account deficit remaining elevated
because of higher global oil prices. Consequently, beyond another USD10-15bn drop in FX reserves, the authorities in our view, will likely have to depend
on other capital flow generating measures (such as NRI deposit scheme), if the pressure on rupee persists. We are forecasting INR/USD at 75 by end-
Dec’18 and end-March’19, thereafter moderating to 72 by end-Dec 2019.
§ National accounts data for July-Sep’18 will be released on 30 November. Growth momentum is likely to have moderated to 7.3%yoy, after peaking at
8.2%yoy in April-June’18, aided by a particularly favorable base effect. There has been a noticeable slowdown in the momentum of exports during July-
Sep (particularly in September: -2.2%yoy) and vehicle sales, which along with a normalization of the base effect should result in lower growth outturn
during the quarter. For 1HFY19, growth is likely to average 7.8%yoy, higher than the average growth recorded during 2HFY18 (7.4%yoy).

Source: DB India Economics Weekly 9th November 2018

The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Deutsche Bank
events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions
Wealth Management and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of
11
future returns.
— For internal use only
Equity- Attractive Long Term Performance
10 Year Chart of Sensex

Sensex
42000 Unexpected and decisive
electoral mandate for NDA-II
39000
36000
RBI cuts 125 bps in
33000 Dithering leadership, CY2015
policy paralysis
30000
RBI custs 25 bps
27000 in CY2016

24000
21000
Start of global
18000 market rally
Pullback post GFC, strong
15000 Better than expected economic performance driven
stronger UPA-II mandate by sops announced during GFC
12000
GFC led by the
9000 sub-prime crisis
6000 Post unexpected
UPA-I mandate
3000
0
Oct-03

Apr-04

Oct-04

Apr-05

Oct-05

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Apr-11

Oct-11

Apr-12

Oct-12
Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Oct-18
Compounded Annual Growth Rate (CAGR) Returns

1 Year 2 Year 3 Year 5 Year 10 Year 15 Year

Sensex 3.70% 11.03% 8.90% 10.22% 13.40% 21.50%
Nifty 0.50% 9.64% 8.78% 10.51% 13.66% 20.89%
Source: Reuters , 31st October 2018
Note - UPA - United Progressive Alliance, GFC – Global Financial Crisis, NDA – National Democratic Alliance

Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be incorrect.

Deutsche Bank The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Wealth Management events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions 12
and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved.
— For internal use only
Equities as On 31st October 2018

Global Markets – YTD Performance India – Monthly Performance

Energy -10.8%
Turkey -21.8%
Auto -7.4%
China -21.3%
I.T. -7.0%
Korea -17.7%
Metals -5.7%
Hong Kong -16.5% NIFTY -5.0%
South Africa -12.2% SENSEX -4.9%
Germany -11.4% BSE200 -4.1%
Singapore -11.3% FMCG -3.3%
Mexico -11.0% Healthcare -2.0%
Chile -8.3%
Nifty SmallCap -1.4%
Realty -1.4%
Taiwan -7.9%
PSU -1.3%
UK -7.3%
Cons.Durable 0.0%
Thailand -4.8% Nifty Midcap 0.2%
Japan -3.7% BANKEX 1.3%
India 1.1% Power 1.5%
USA 1.4% Capital Goods 2.2%
Brazil 14.4%

Source: Reuters, Bloomberg

§ Global equity markets was down significantly for the month § October’18 followed the downward trend from the previous
gone by as most of the equity markets marked down for month as weaker sentiments ensured that most of Indian
October’18 bringing down overall YTD gains. Barring India and equity indices being in the negative territory. However broader
USA which are showing flat 1% YTD gains, Brazil is the only markets saw a positive reversal and outperformed the
market that is positive YTD on account of a strong October’18. benchmarks after last month’s underperformance.
§ Going forward (though the US mid term elections have § October’18 saw most of the sector indices closing the month in
concluded), in the short term volatility expected to remain the negative except the Engineering sector whereas Banks
high on account of higher US yields, volatile oil prices, capital turned in a flat performance. Energy, Auto and Information
outflows from emerging markets and US Fed policies. Technology were the significant laggards.
Source: Reuters, Bloomberg
Past Performance is not indicative of future returns. The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied
Deutsche Bank
upon by the reader. There can be no certainty that events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018.
Wealth Management 13
Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target
will be achieved.
— For internal use only
 Equities – Flows
Flows & Sensex Performance

$Mn
35000 90%
30000
65%
25000

20000 40%
15000
10000
15%

5000
-10%
0

-5000 -35%
-10000
-60%
-15000

-20000 -85%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

NETMF NETFII Sensex $ returns (%)

Source: Bloomberg, 31st October 2018

§ Indian equity market’s returns exhibit high correlation with equity inflows.
§ Subdued FII flows in CY’15 and CY’16 resulted in negative dollar returns for Sensex (-9%) and (-1%) for both years respectively. However in
the last three years the correlation of markets performance with FII flows has come down with markets doing well on the back of increasing
domestic equity inflows, notwithstanding the FII inflows into the equity market. In CY’17 domestic mutual funds had pumped in significantly
more money than the FIIs into the Indian markets which led to strong double digit returns.
§ In October 2018 FIIs sold Indian equities worth USD 3.75 bn and domestic mutual funds were net buyers worth USD 3.33 bn. In YTD’CY’18
FIIs have remained net sellers to the extent of USD 5.76 bn whereas domestic mutual funds continued to be net buyers worth USD 16.40 bn.

Past Performance is not indicative of future returns. The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon
Deutsche Bank
by the reader. There can be no certainty that events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are
Wealth Management based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. 14

— For internal use only

 Equity - Valuations
Trailing PE – Markets Fairly Valued Nifty Valuation & Outlook

25.8x
Nifty as on 31st October 2018 10387

20.0x Particulars FY18A FY19E* FY20E* FY21E* CAGR

17.5x
EPS 485 563 684 783
15.5x
EPS Growth (%) 4% 16% 21% 14% 17%

15.0x P/E (Fwd) 7273 8444 10254 11741 17%

9.0x

17.5x P/E (Fwd) 8484 9851 11963 13698 17%

Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Oct-14
Oct-15
Oct-16
Oct-17
Oct-18
20.0x P/E (Fwd) 9697 11258 13672 15654 17%

Source : Reuters 31st October 2018 * A: Actual, E:Expected, Nifty Fiscal Annual Consensus Earnings Estimates from Bloomberg

§ Nifty after hitting a CY’18 YTD interim low towards October’18 end (15% correction lifetime highs seen in August’18 end) has recovered 5% in Novembrr’18
(from recent lows) and is currently trading at (10585 as on November 09,2018) at 22x, 19x, 15x for FY’18A, FY’19E and FY’20E respectively (EPS 485, 563 & 684
Bloomberg Consensus Nifty Earnings Estimates {BCNEE} earnings). Valuations however have not de-rated significantly despite this correction because of recent
consensus earnings downgrades .
§ Last year CY’17 was one of the best years for Indian equity markets (benchmarks up by 28%) but the introduction of a 10% long term capital gains (LTCG) tax on
equity gains of more than 1 year announced in the FY’19 union budget in early February’18, sullied the sentiments. Domestic markets have endured a rough
time recently by due to rising crude oil prices, potential trade wars, swiftly depreciating currency, deteriorating macros and fears over liquidity and solvency
condition of a few key NBFCs leading to a double digit correction. Deutsche Equities strategy outlook for CY’18 (source: DB Equity Strategy report dated January
03, 2018) continues to hold the Nifty target at 11,500 (implied Sensex target being 37000) by the end of CY’18.
§ According to DB analysts for 1QFY’19, Nifty revenue, EBITDA and net profit rose by 22%, 26% and 12% yoy (year on year(source: DB Equity Strategy report
dated August 15, 2018). For the Q2FY’19 ongoing corporate results season, DB analysts were estimating aggregate Nifty revenue, EBITDA and earnings to
increase 26%, 11% and 16% yoy, respectively, led by global and export oriented sectors aided by the sharp INR depreciation. (source: DB Equity Strategy report
dated October 5, 2018). However on the evidence of major corporate results announced so far the net profit growth had been quite tepid which could lead to
further earning downgrades going forward. Consensus earnings for FY’19E and FY’20E have already been downgraded by 4% and 2% respectively.

Deutsche Bank No assurance can be given that any forecast or target will be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models or
Wealth Management analysis which may prove to be incorrect. Past performance is not indicative of future returns. 15

— For internal use only

 Equities - Outlook

§ After a very weak September’18, Indian equity markets continued to trade lower in October’18 as most of the benchmarks and sector indices (except Capital Goods and Utilities)
closed in the negative. The benchmark indices fell (Nifty 5% & Sensex 4.9% for October’18) with the benchmarks touching fresh CY’18 interim intraday lows towards the end of
October’18 resulting in CY’18 ytd (year to date) performance being flat to negative with Sensex at +1.1% and Nifty at -1.37%. The broader indices (mid-caps and small caps)
however saw a positive reversal - outperforming (down by single digits) the benchmarks after significant underperformance in September’18. After a slew of negative news
impacted sentiments and valuations in September’18, the month gone by started off in the same vein with heightened concerns both on the domestic macro and micro
economic fronts, continuing emerging market outflows, sharply falling global equity markets, concerns over rising domestic and global bond yields leading to higher volatility on
the downside being seen in equity markets. However there was some relief in the forms of crude oil prices which fell by 9% in the month gone by (has fallen 18% from high seen
in early October’18) and currency too falling from highs seen in month gone by. On the micro front the follow up news flows on the liquidity condition of many NBFCs (Non-
Banking Finance Companies) following the default of IL&FS last month also kept investor sentiments on tenterhooks. FIIs continued to be net sellers (3.75 bn USD) in equity
markets whereas domestic mutual funds continued to be positive net buyers (3.33 bn USD) in October’18. Despite the negative news flows net inflows into India's domestic
equity mutual funds continued to be robust witnessing a strong 13%% (month-on-month) inflow in October’18. Aggregate net inflows into Equity and Equity Linked Savings
Schemes (ELSS) was at Rs.77.36 bn (US$ 1.1 bn) with inflows in to monthly equity SIPs (Systematic investment plans) continuing to trend upwards (Source: DB equity strategy
report dated 12th November, 2018). On an absolute basis from lows of (6825 on February 2016) Nifty is up by 52% till end of October’18 (YTD CY’18 returns Nifty stands at -
1.37%).
§ Though investor sentiments had nosedived in September’18 with fears on the liquidity and solvency position of the NBFC sector rising due to the IL&FS default fiasco it improved
a little in October’18 on account of better earnings performance by quite a few key NBFCs. However the mid sized real estate and housing finance focused plays within the NBFC
space continued to witness downswings as investors clearly chose to de-risk within the sector looking to prefer well capitalized and consumption focused NBFC names. On the
macro economic front there was good news in the month gone by as crude oil, INR, trade balance, IIP, CPI & WPI and PMIs showed favorable trends, however the ongoing
impasse between the banking regulator RBI and the Government is likely to be another sentiment dampener (especially for the FIIs) if not resolved amicably going forward.
§ Globally equity markets were quite volatile and mostly down in October’18 as concerns over rising yields in the US leading to steady emerging market outflows, rising geopolitical
fears from the Middle east and mid term elections in the US the results of which could determine Trump administration’s stance towards trade posturing. Domestically though
lower crude oil prices and relatively stable currency has soothed frayed nerves, the lower than expected 2QFY’19 corporate results performance which could lead to further
earnings downgrades could depress investor sentiments further. Though domestic equity markets have corrected by almost 11% from life time highs of August’18 accompanied
by high volatility amidst worsening macros, continuing negative news both domestically and globally and expectation of steady earning downgrades going forward we are still
some way away from a fair valuation zone (contrary to what was expected earlier). Also 4QCY’18 is also lined up to see some key volatility inducing events like important state
elections, and emerging market situation remaining fluid, we would continue to see highly volatile markets going forward. As volatility continues to rule the roost we continue to
retain a neutral stance and advocate staying on the sidelines until these global, macro and micro headwinds pass with a preference to the consumption theme over investment.
§ Preferred Sectors –We are positive on the consumption theme both urban and rural. We like select consumer facing names, mainly discretionary which are beneficiaries of higher
disposable incomes. We had introduced a couple of FMCG (Fast moving consumer goods) plays in the portfolio, we also like specific consumer discretionary plays from the
jewelry and automobile space. We are also playing themes like consumer and housing finance, large private sector bank and insurance by looking at select leaders in these
sectors. We also continue to hold a downstream refining and petrochem play.
§ Underweight Sectors – Changing business dynamics, rising competitive intensity and stringent audits by the USFDA has led to Healthcare (generic pharma names) continuing to
be a play which we do not prefer currently. We also continue to stay away from the utilities space on account of Government interference, PSU banks which would continue to be
under pressure on account of asset quality related negative news and telecom due to predatory pricing and competition.
Deutsche Bank Source: DIIPL November 12, 2018
Wealth Management No assurance can be given that any forecast or target would be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may 16
prove to be incorrect Past performance is not indicative of future returns.
— For internal use only
Equities – Sector Outlook
Price Earnings Benchmark
Sector Valuations Comments
Volatility Growth Relative Weight
Volume growth slipped across segments in 2QFY’19. With rising costs the focus on more profitable
product mix has increased though margins were fell in 2q because of rising costs. Domestic auto majors
Automobiles &
Components
High + / + continue to fare better than companies with global footprint Favor select passenger and specific auto
component plays. Passenger vehicles and commercial volume growth numbers for YTD CY’19 has
decelerated in the last 2 months likely to pick up due to festive demand .
Robust volume growth seen across sectors in Q2FY’19. Demand to continues to revive on account of
seventh pay commission hikes, rural recovery and GST regularization. Prefer diversified names, significant
Consumer
Staples
High + + - downside risk, (for single product companies). Q1’FY’18 saw companies showing improved volume
growth momentum with better margin performance though cost pressures could rise going forward on
account of higher crude oil and intermediate prices .

Crude oil prices have risen to three year highs on account of geopolitical concerns. This upward reversal
in crude oil, prices continues to be a medium term negative for PSU OMCs (oil refinery and marketing
Energy Neutral ++ / / companies). In Q2FY’18 OMCs reported better numbers aided by better marketing margins and inventory
gains. Reliance reported better than expected numbers on account of strong performance from the
petrochemical division.
Prefer select Non Banking Financial Companies NBFCs (though the IL&FS fiasco has made us a little
cautious) and private sector banks. Improvement of system’s asset quality, would be the single biggest
trigger for banks going forward. In Q2’FY’19 private sector bank reported strong loan growth, lower than
Financials High ++ / / expected NIIs (Net interest income) and relatively strong fee income growth. Higher provisioning drag
continued. Though there were select bright spots incrementally easing asset quality concerns in select
large corporate banks the incremental news of provision likely to be taken due to exposure to IL&FS
proved to be a sentiment dampener.
Q1 Fy’19 and Q2 FY’19 volume, USD revenue growth and management guidance suggests that things are
on the mend for this sector after the underperformance seen in the last three years, besides the steady
Information
Technology
Neutral + / -- USD INR depreciation also provides a positive tailwind. Leading IT vendors resorting to frequent buy
backs, dividends and bonuses in a bid to improve return ratios. Along with improved demand outlook
earnings growth being aided by sharp INR depreciation

Rating Legend ++ + / - --
Price Volatility /Earning Growth High Above Average Average Below Average Low
Nifty Relative Weight Preferred Over weight Equal weight Under weight Avoid

Deutsche Bank Source : DIIPL November 12, 2018

Wealth Management No assurance can be given that any forecast or target will be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove 17
to be incorrect.
— For internal use only
Equities – Sector Outlook

Price Earnings Benchmark

Sector Valuations Comments
Volatility Growth Relative Weight

Order books and order inflows continue to witness muted growth especially in power transmission
however L&T reported strong order inflow and execution led earnings beat. Management reiterated
positive guidance in 2QFY’19. We are continuing to play the investment theme through L&T and
Industrials Attractive + / -- infrastructure focused cement plays from the material sector and they would be the prime beneficiaries
large ticket capital expenditure (capex) orders and infrastructure projects announced by the government
last month.

Like some bottoms up ideas (which are quasi consumption plays). Prefer discretionary segments like
paints, agri and chemicals and infra related cement names. FY’18 results were impacted by the move
Materials Attractive + + + towards GST, expect improved volume traction in the medium term for the paints, cement and agri
plays. For the medium to long term once GST related disruption is out of the way expect select material
and chemical plays to do well.

Sector slowly witnessing an upturn with regulatory issues and government interference over fuel costs
and power pricing slowly reducing. Q1FY’19 results showed gas utilities delivering a better performance
Utilities Attractive / - -- than power utilities. However issues of power sector’s large debt and liquidity concerns have been time
and again raised by Indian banks, would prefer to stay away.
Headwinds of a tough business environment, regulatory interference seem to be abating, however
prefer to be on the side lines. Reliance Jio entry have changed the dynamics with incumbents focusing
on countering the price war from Jio going pay by end FY’18. With the tariff plans announced by Reliance
Telecom Neutral / - -- Jio sector once again seeing predatory competitive pricing. Fundamentally prefer staying away from
pure telecom plays undergoing an upheaval, but looking at specific diversified new entrants. Q1FY’19
continues to see higher competitive intensity and higher margin pressures.

Rating Legend ++ + / - --
Price Volatility /Earning Growth High Above Average Average Below Average Low

Nifty Relative Weight Preferred Over weight Equal weight Under weight Avoid

Source : DIIPL November 12, 2018

Deutsche Bank No assurance can be given that any forecast or target will be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove
Wealth Management to be incorrect. 18

— For internal use only

 Fixed Income
10 Year Yield Movement Global Bond Yields

Source: Kotak Mutual Fund ( October 18) Source: Kotak Mutual Fund (October 18)

§ RBI surprised the market by not hiking the policy repo rate by 25bps, in the policy, though the MPC committee changed the neutral stance to one of
“calibrated tightening”, confirming that India remains in the midst of a rate hike cycle. What is most surprising is that the change of stance coincided
with a lowering of inflation forecast to 4.8% for April-June’19, from the previous projection of 5.0%.
§ India has jumped 23 spots in the new World Bank Ease of Doing Business (EODB) 2019 rankings to take up the 77th spot, with a score of 67.23.
§ Sep trade deficit narrowed to lowest levels in 5 months to $14bn from $17.4bn previously with deceleration in both exports (-2.2% YoY from 19.3%
Aug) & imports (10.5% from 25.4%). Major commodity groups showed positive export growth with petroleum products (26.8%) & inorganic
chemicals leading the pack (16.9%).
§ October CPI inflation came at 3.3%yoy (vs. 3.8% in September), below Bloomberg consensus estimate of 3.6%; the downside surprise was mainly on
account of softer food prices. However, core inflation (CPI excluding food and fuel) firmed to 6.2%yoy in October, from 5.8%yoy in the previous
month.
§ GoI’s fiscal deficit rises by 19.2% YoY to Rs. 5.9 trillion in H1 FY2019, stands at 95.3% of budget estimate for FY2019.
§ RBI’s FX reserves fell by another US$ 7 billion in October taking the total reserves drawdown to US$ 31 billion FYTD.
The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that events
Deutsche Bank
will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions and
Wealth Management hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of future
19
returns.
— For internal use only
 Fixed Income
Credit Deposit Ratio Inflation in India

Source: ICICI Prudential Mutual Fund ( October 18)

Source: Bloomberg Kotak Mutual Fund (October 18)

§ Brent crude tumbled more than $15 from its Oct. 3 high at $86.74, falling nearly 20 % to ~$69.5.
§ India's exports contract by 2.15%, but trade deficit falls to five-month low to $13.98 billion in Sept’18. It was at $17.4 billion in August’18
§ INR touched all-time closing low of 74.39 in October, closed the month at 73.95 with total losses of 104 paise or 1.43% due to global tensions
§ Oct’18 RBI bought government bonds worth around Rs 36000 crore via OMOs. RBI will conduct OMOs worth Rs 40,000 crore in Nov’18
§ Since late September, government yields eased slightly but corporate spreads continued to widen triggered by credit concern due to IL&FS defaults
§ Bank credit growth rose 14.4% on-year in the fortnight ended October 12, 2018 versus 13.5% on-year in the fortnight ended September 14, 2018
§ GST collections in October 2018 (for month of September 2018) increased to ~INR 1,007 bn from ~INR 944 bn a month ago. Average monthly
collection in FYTD19 remained ~7% higher than FY18's average monthly collection (Aug'17 to Mar'18). During first seven months of FY19, average
monthly collection of GST stood at ~INR 970 bn, lower than FY19's budgeted estimate of ~INR 1,100 bn.
§ Liquidity conditions remained positive during first week of the month but turned negative thereafter. On overall basis, as against ~Rs 42,000 crores of
liquidity infused by RBI in September 2018 through various sources, ~Rs 58,000 crores of liquidity was infused by RBI on an average in Oct18.
Deutsche Bank
Wealth Management No assurance can be given that any forecast or target will be achieved. Forecasts are based on assumptions, estimates, opinions and 20
hypothetical models or analysis which may prove to be incorrect. Past performance is not indicative of future returns.
— For internal use only
 Fixed Income - Outlook

§ September Federal Open Market Committee (FOMC) were in line with market expectations and showed strong support to continue on the path of
gradual rates hikes. Dollar index continued to strengthen due to concerns on US-China trade tensions and uncertainty due to negotiations between
Italian Government & European commission on Italy's budget.
§ Going by currency in circulation (CIC) trends just pre-demonetization and adding some nominal growth to it, one is looking at another
approximately INR 175,000 crores currency leakage from here to March. Therefore, one should expect a steady pace of OMOs to continue over the
rest of the financial year, even assuming that the RBI ultimately chooses to keep core liquidity in some deficit.
§ The tightening in financial conditions will get further accentuated with the recent wobble in NBFC / HFCs. This incremental tightening in financial
conditions owes to rise in credit spreads and possible liquidity hoarding, even as quality rates have rallied and rupee has been more stable.
§ With headline CPI inflation expected to dip below 3% in the next few months and given the ongoing credit crunch in the NBFC sector, RBI will likely
be on the sidelines for the rest of this financial year. Core inflation trend is not comforting at this stage, and even after some moderation, will likely
stay above 5% by end-March’19. We think RBI will monitor core inflation trend closely and if it does not show much improvement, then possibility
of rate hikes can arise once again in April-June’19.
§ In the latest monetary policy (5 October), RBI projected CPI inflation to be 4% in July-Sep’18, 3.9-4.5% in 2HFY19 (Oct’18-March’19) and 4.8% in
April-June’19. July-Sep CPI inflation has averaged 3.9%, slightly lower than RBI’s revised projection of 4% (and 70bps lower than RBI’s estimate of
4.6% in August) and current price trend indicates that CPI inflation will likely fall below RBI’s lower range of 3.9-4.5% for 2HFY19. In fact, if food
prices remain well behaved through Nov-Dec, in line with the positive seasonality, CPI inflation could fall to 3% (or even lower) by Dec’18, aided
particularly by a favorable base effect.
§ We had earlier expected RBI to hike rates in the December policy, but given the ongoing negative developments in the NBFC sector and the likely
mix of growth-inflation in the quarters ahead, we now expect the central bank to maintain a pause. With RBI already having hiked by 50bps in
2018, and with global oil prices having corrected by more than USD15/barrel in the last month, we think the RBI will be able to postpone any
potential rate hike to FY20. As the favorable base effect fades away and CPI inflation heads above 4% in Jan-March’19, RBI could consider hiking
the repo rate by another 50bps in 2019, to manage inflation and inflation expectations. We think the next opportunity to hike rates will come in
April-June’2019, by which time the NBFC sector problems should subside to some extent and growth momentum will likely start showing signs of
recovery.
§ Given the expectation of a more hawkish policy by RBI going ahead, we continue to prefer Short term, high credit rating strategy, which provides a
better risk return tradeoff.

Deutsche Bank No assurance can be given that any forecast or target will be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be
Wealth Management incorrect Past performance is not indicative of future returns. 21

— For internal use only

Fixed Income – Key Rates

Data as on 05-November 2018

Debt Indicators Current Month End 1 Month 3 Months 6 Months 12 Months

Money Markets
Repo Rate 6.50 6.50 6.50 6.25 6.00 6.00
Reverse Repo Rate 6.25 6.25 6.25 6.00 5.75 5.75
Call Rates 6.35 6.30 6.50 6.00 6.10 5.80
FBIL Bank Offer Rate O/N 6.54 6.60 6.60 6.25 6.00 6.00
364 Days T Bill 7.42 7.48 7.65 7.16 6.91 6.23
12 M Certificate of Deposit 8.32 8.39 8.40 8.06 8.23 6.57
12 M Commercial Paper 9.20 9.30 9.30 8.50 8.40 7.13
3 M Certificate of Deposit 8.40 8.65 8.60 7.95 7.95 6.25
3 M Commercial Paper 7.49 7.51 7.43 7.30 7.40 6.34
Government Securities
1 Y Gilt 7.53 7.48 7.75 7.25 7.07 6.26
5 Y Gilt 7.79 7.83 8.07 7.90 7.83 6.75
10 Y Gilt 7.81 7.85 8.02 7.77 7.83 6.86
30 Y Gilt 8.13 8.19 8.25 8.12 8.13 7.30
Corporate Debt
3 Year AAA 8.64 8.78 8.92 8.56 8.56 7.15
3 Year AA 9.27 9.37 9.50 9.00 8.87 7.91
5 Year AAA 8.64 8.78 8.99 8.64 8.64 7.55
5 Year AA 8.86 8.96 9.14 9.00 8.99 8.19
10 Year AAA 8.66 8.83 9.00 8.63 8.64 7.57
10 Year AA 9.71 9.78 9.80 9.41 9.20 8.61
Others
Slope (30Y G Sec-1Y G Sec) 0.60 0.70 0.50 0.87 1.06 1.04
Slope (10Y G Sec-1Y G Sec) 0.27 0.37 0.27 0.52 0.76 0.60
Spreads
0.86 0.95 0.92 0.74 0.81 0.80
(5Year AAA- 5 Year G Sec)
Source: Reuters

Deutsche Bank The information herein reflect our current views only, are subject to change, and are not intended to be promissory or relied upon by the reader. There can be no certainty that
Wealth Management events will turn out as we have opined herein. Deutsche Wealth Management expectations / forecast as of October 2018. Forecasts are based on assumptions, estimates, opinions 22
and hypothetical models or analysis which may prove to be incorrect. No assurance can be given that any forecast or target will be achieved. Past performance is not indicative of
future returns. — For internal use only
Glossary
§BoE –Bank of England. §JPY –Japanese Yen
§BoP –Balance of Payments §LAF –Liquidity Adjustment Facility
§CGST –Central Goods & Services Tax §MTD –Month Till Date
§CPI –Consumer Price Inflation §MSF –Marginal Standing Facility
§CD –Certificate of Deposit §MPC –Monetary Policy Committee
§CP –Commercial Paper §NDA –National Democratic Alliance
§CBLO –Collateralized Borrowing & Lending §OMO –Open Market Operations
Obligation §PMI –Purchasing Manager’s Index
§EBITDA –Earnings before interest, taxes, §PAT –Profit after Tax ;
depreciation and amortization; § PSU –Public Sector Undertakings
§EPS –Earning Per Share §PE –Price to Earning
§FII –Foreign Institutional Investor §QE –Quantitative Easing
§FY –Financial Year (April – March) §RBI –Reserve Bank of India
§Fed –Federal Reserve of USA §USD –US Dollar
§FX –Foreign Exchange §SGST –State Goods & Services Tax
§FCNR –Foreign Currency Non Resident §UPA –United Progressive Alliance
§FMCG –Fast Moving Consumer Goods §WPI –Wholesale Price Inflation
§GST –Goods & Services Tax §YTD –Year Till Date
§GDP –Gross Domestic Product
§G Sec –Government Securities
§GVA –Gross Value Added
§GFC –Global Financial Crisis
§IT –Information Technology

Deutsche Bank
Wealth Management

— For internal use only

Disclaimer
The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is
believed by Deutsche Bank to be reliable, but Deutsche Bank makes no representation as to the accuracy or completeness of such information. Opinions, estimates
and projections in this report constitute the current opinion of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank
and are subject to change without notice. Depending on when you receive this report, a substantial period of time may have lapsed since the date of this report and
the information and opinions in this report may have since been changed, modified, amended or updated. Deutsche Bank has no obligation to update, modify or
amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein,
changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. Prices and availability of financial instruments also are subject to
change without notice.

Important Information Regarding Our Independence. The research analyst principally responsible for the preparation of this report receives compensation that is
based upon, among other factors, Deutsche Bank’s overall Private Wealth Management revenues.

Deutsche Bank may engage in securities transactions in a manner inconsistent with this research report, and with respect to securities covered by this report, will
sell to or buy from customers on a principal basis.

This report is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial
instruments or to participate in any particular trading strategy in any jurisdiction. Deutsche Bank acts merely as a distributor of the funds and is not related in any
manner whatsoever in the investment/management of monies in the investment funds. Offer document and terms and conditions of issue of financial instruments
should be read and understood carefully by you before making any investment decisions. You should make an independent assessment, in consultation with your
own advisors, of the appropriateness of any investment in the light of your own objectives and circumstances, including the possible risks and benefits of the
investment. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using
their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. If a financial instrument is
denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the
financial instrument, and such investor effectively assumes currency risk. In addition, income from an investment may fluctuate and the price or value of financial
instruments described in this report, either directly or indirectly, may rise or fall. Furthermore, past performance is not necessarily indicative of future results.

Neither this document nor its contents, nor any copy of it, may be altered in any way, nor transmitted or distributed to any other party in any part of the world. Full
details on distribution fees on products are available on request and are also available on the DB website
http://www.deutschebank.co.in/schedule_of_charges.html.

Deutsche Bank DBAG – Disclaimer 2018

Wealth Management

— For internal use only

Disclaimer
Risk Warning Investments are subject to investment risk, including market fluctuations, regulatory change, possible delays in repayment and loss of income and
principal invested. The value of investments can fall as well as rise and you might not get back the amount originally invested at any point in time. Investments in
Foreign Countries - Such investments may be in countries that prove to be politically or economically unstable. Furthermore, in the case of investments in foreign
securities or other assets, any fluctuations in currency exchange rates will affect the value of the investments and any restrictions imposed to prevent capital flight
may make it difficult or impossible to exchange or repatriate foreign currency. Foreign Exchange/Currency - Such transactions involve multiple risks, including
currency risk and settlement risk. Economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments may
substantially and permanently alter the conditions, terms, marketability or price of a foreign currency. Profits and losses in transactions in foreign exchange will
also be affected by fluctuations in currency where there is a need to convert the product's denomination(s) to another currency. Time zone differences may cause
several hours to elapse between a payment being made in one currency and an offsetting payment in another currency. Relevant movements in currencies during
the settlement period may seriously erode potential profits or significantly increase any losses. High Yield Fixed Income Securities - Investing in high yield bonds,
which tend to be more volatile than investment grade fixed income securities, is speculative. These bonds are affected by interest rate changes and the
creditworthiness of the issuers, and investing in high yield bonds poses additional credit risk, as well as greater risk of default. Hedge Funds - An investment in
hedge funds is speculative and involves a high degree of risk, and is suitable only for "Qualified Purchasers" as defined by the US Investment Company Act of
1940 and "Accredited Investors" as defined in Regulation D of the 1933 Securities Act. No assurance can be given that a hedge fund's investment objective will be
achieved, or that investors will receive a return of all or part of their investment. Commodities - The risk of loss in trading commodities can be substantial. The
price of commodities (e.g., raw industrial materials such as gold, copper and aluminum) may be subject to substantial fluctuations over short periods of time and
may be affected by unpredicted international monetary and political policies. Additionally, valuations of commodities may be susceptible to such adverse global
economic, political or regulatory developments. Prospective investors must independently assess the appropriateness of an investment in commodities in light of
their own financial condition and objectives. Not all affiliates or subsidiaries of Deutsche Bank Group offer commodities or commodities-related products and
services. Investment in private equity funds is speculative and involves significant risks including illiquidity, heightened potential for loss and lack of transparency.
The environment for private equity investments is increasingly volatile and competitive, and an investor should only invest in the fund if the investor can withstand
a total loss. In light of the fact that there are restrictions on withdrawals, transfers and redemptions, and the Funds are not registered under the securities laws of
any jurisdictions, an investment in the funds will be illiquid. Investors should be prepared to bear the financial risks of their investments for an indefinite period of
time. Investment in real estate may be or become nonperforming after acquisition for a wide variety of reasons. Nonperforming real estate investment may require
substantial workout negotiations and/ or restructuring. Environmental liabilities may pose a risk such that the owner or operator of real property may become liable
for the costs of removal or remediation of certain hazardous substances released on, about, under, or in its property. Additionally, to the extent real estate
investments are made in foreign countries, such countries may prove to be politically or economically unstable. Finally, exposure to fluctuations in currency
exchange rates may affect the value of a real estate investment. Structured solutions are not suitable for all investors due to potential illiquidity, optionality, time to
redemption, and the payoff profile of the strategy. We or our affiliates or persons associated with us or such affiliates may: maintain a long or short position in
securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and
earn brokerage or other compensation. Calculations of returns on the instruments may be linked to a referenced index or interest rate. In such cases, the
investments may not be suitable for persons unfamiliar with such index or interest rates, or unwilling or unable to bear the risks associated with the transaction.
Products denominated in a currency, other than the investor’s home currency, will be subject to changes in exchange rates, which may have an adverse effect on
the value, price or income return of the products. These products may not be readily realizable investments and are not traded on any regulated market.

Deutsche Bank
Wealth Management
DBAG – Disclaimer 2018

— For internal use only