The Principles… …of profit taking

FII Flows driving the Markets

1. FII flows were strong in both cash and futures markets. The FII flows for the month were the largest ever, at US$5.8 billion. The derivative market received a record FII inflow during September.

2. Year to date, FIIs have purchased securities worth US$18.2 billion through these two market segments.

3. Domestic institutions were net sellers during September after making near record purchases in August.

FII Flows

Sensex in September

Q. When is the right time to sell my fund?

Proposed Checklist

Is the fund a core holding?

Does the fund add diversification to your portfolio?

Is the fund’s volatility more than what you can bear?

Is your portfolio overly concentrated in this asset class or region?

Has the fund undergone a fundamental shift in its strategy?

Suggested Response

Hold and ride through market gyration

Hold and allow diversification benefits to play out over the longer term

Consider switching to a lower volatility fund that matches your risk tolerance

Bring in new money to balance out portfolio’s asset mix and take advantage of new market opportunities

Reassess the fund’s fundamentals

IF YES

1. Rebalance: Book Profit based on your financial goals

Asset Allocation of portfolio(without rebalancing) (1998-2007)

Bonds – Crisil fund dx

Equities- Sensex.

The charts are for illustrative purposes only and does not constitute as a recommendation for the purchase or sale of any security. Past performance is not indicative of future performance.

Financial goals:

•The asset allocation mix must be regularly reviewed and fine-tuned

•The rebalancing must be done based on the financial goals.

• In order to rebalance, you will need to buy the asset that has performed less well and is therefore relatively cheap.

Rupee Cost Averaging:Active rebalancing is similar to rupee cost averaging as it imposes a discipline of investing at a lower cost, but without having to make market timing decisions.Take out profit, not capital

50

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Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06

% in Equity % in Bond

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2002 2003 2004 2005 2006

2. Harness the power of compounding

BSE SENSEX (2002-2006)

In case you don’t need income re-invest your dividends which will mean that your capital can even grow faster.This show how Rs 100 invested in BSE Sensex in the

Year 2002 grows over 5 Years

New base amount

Profit

Source: Bloomberg. For illustration only. Does not constitute a recommendation for the sale of any products. Past results do not guarantee future returns.

THE POWER OF COMPOUNDING

8,000

9,000

10,000

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Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07

3. Take profit in stages (Systematic Withdrawal Plans)

Sensex (March’05 – March’06)

Taking profit in stages reduces your reliance on market timing!

Source: Bloomberg. For illustration only. Does not constitute a recommendation for the sale of any products. Past results do not guarantee future returns.

In either an up or down market, profit taking at regular time intervals allows you to average out your potential gains.

In this case, selling in 3-month phases since June 06 would have increased your average selling price from 9193 to 12031.

A: Av selling price: 9193A+B+C: Av Selling Price: 12031

A:9193

B:11892

C:14919

4. Don’t trade in mutual funds

Remember the Principles…

Source: Bloomberg. For illustration only. MSCI World Index used as a proxy for an Equity Mutual Fund. Does not constitute a recommendation for the sale of any products. Past results do not guarantee future returns.

1. Rebalance: Book Profit based on your financial goals.Take out profit, not capital out your profits, not your capital, to stay balanced.

2. Harness the power of compounding re-investment helps boost returns in a slowly and steadily rising market

3. Take profit in stages to average out your selling price

4. Don’t trade in mutual funds. Trading in mutual funds can eat into your profits

Source: Citibank, N.A.  “This presentation is provided for general information only and nothing contained in the material constitutes a recommendation for the purchase or sale of any security and/or currency. Although the statements of fact in this report are obtained from sources that Citibank consider reliable, we do not guarantee their accuracy and any such information may be incomplete or condensed. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment. Investments are not deposits or other obligations of, guaranteed or insured by Citibank N. A. , Citigroup Inc., or any of their affiliates/subsidiaries (unless specifically stated), or by any local government or insurance agency, and are subject to investment risk, including the possible loss of the principal amount invested. Investors investing in investments denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Past performance is not indicative of future performance, prices can go up or down. Mutual Funds are not available to US Persons and may not be available in all jurisdictions.”