India : Gold :: World : Gold A leap forward - LBMA 2016/LBMA_Singapore_2016...India : Gold :: World : Gold A leap forward Shekhar Bhandari Senior Executive Vice President Kotak Mahindra

India : Gold :: World : Gold A leap forward

Shekhar BhandariSenior Executive Vice President Kotak Mahindra Bank Ltd

2

Source: CEIC, Kotak Bank Research

Indias macro fundamentals improving :: potential of 8% - 10%

Gradual economic recovery underway

Retail inflation falls to ~ 5% from double digits in 2013 and is expected to remain benign through next year

Centre to consolidate to 3% GFD/GDP by FY18; States already at sub 3% levels

Fiscal Federalism giving greater financial power to States

Medium Term fiscal consolidation target

Policy focus shifts towards inflation control :: Fiscal @ less than 3%

Source: CEIC, Kotak Mahindra Bank

Intent of medium-term fiscal consolidation

without compromising on qualitative spending

Focus on pruning wasteful expenditure

Linking social schemes with infrastructure projects

RBI started targeting CPI inflation since 2014

RBIs comfortable target range according to the new monetary policy framework is +/-200bps of 4%.

4

India transforming into a digitized economy

5

Digitization

Demographics

Consumerism

India undergoing a transformation state

6

The JAM moment

Policy drives a major leg of Digitization :: 247 mn New Accounts

Source:: Economic survey Kotak Economic Research estimates

7

Public sector push to digitization

No. of Balance in % of zerorupay account balance

Rural Urban Total debit cards (Rs bn) accountsPublic sector banks

110 86 197 155 346 24

Regional rural banks

36 6 42 28 74 21

Private banks 5 3 9 8 16 36

Grand total 152 96 247 191 435 24

No. of accounts (mn)

Number of accounts opened in Jan - Dhan Yojana, September 2016

trade details

Imports of gems & jewelry have contracted sharply in 5MFY17

Details of India's gems and jewelry trade, March fiscal year-ends (US$ bn)

2011201220132014201520165MFY165MFY17

Exports

Gems and jewelry42.346.443.041.441.339.416.117.7

Gold5.64.84.93.02.85.52.32.1

Gold and other precious metal jewelry7.413.014.010.913.211.04.25.6

Pearl, precious, semi-precious stones29.428.524.127.224.822.49.49.9

Silver0.00.00.00.00.00.00.00.0

Other precious and base metals0.00.00.00.30.40.40.20.1

Imports

Gems and jewelry77.091.083.958.462.456.426.217.1

Gold40.756.553.828.734.431.715.46.1

Gold and other precious metal jewelry0.30.95.21.00.60.70.40.2

Pearl, precious, semi-precious stones33.928.222.724.022.620.18.610.1

Silver2.05.22.04.54.53.71.60.7

Other precious and base metals0.20.20.20.20.30.20.10.1

Source: CEIC, Kotak Institutional Equities

net consumption

'Net' domestic consumption of gems & jewelry is negligible in 5MFY17

Details of India's gems and jewelry trade, March fiscal year-ends (US$ bn)

2011201220132014201520165MFY165MFY17

Imports77.091.083.958.462.456.426.217.1

Exports42.346.443.041.441.339.416.117.7

Domestic consumption34.744.740.917.021.117.010.1(0.6)

Adjusted exports33.937.134.433.133.031.612.914.2

'Net' domestic consumption43.153.949.525.329.324.913.32.9

Notes:

(a) We assume 20% value addition in the actual exports to derive the adjusted exports.

Source: CEIC, Kotak Institutional Equities estimates

launch

Residential market seeing a declining trend in new launches

New launches trend, residential, Calendar year-ends, 200912 (mn sq. ft)

Source: Propequity, Kotak Institutional Equities

Bengaluru392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423074233842368423994242942459424894251942550425805.24.954.98000000000000043.11.693.874.61000000000000032.953.982.214.582.275.091.461.815.40.482.25999999999999982.641.660.440.450.952.952.172.742.623.31.471.09000000000000015.595.631.743.31.424.972.466.842.938.746.146.8711.098.529999999999999411.827.267.0912.259.97000000000000067.6512.457.668.364.626.756.646.8210.146.1811.538.86999999999999928.3412.2911.3313.729.1611.911.429.0612.649.7612.112.1111.8313.3814.3610.13000000000000111.5216.6312.637.838.259.94999999999999938.567.714.310.469.596.485.669.53999999999999919.589.96.85.47.565.274.80999999999999965.097.098.086.17.834.794.69000000000000049.433.331.341.27Chennai392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423074233842368423994242942459424894251942550425800.041.891.011.684.05999999999999961.24.872.235.493.030.740.560000000000000051.480.550000000000000040.840.730.252.363.880.910.590.941.650.330.371.360.440.970.321.813.112.24000000000000021.450.930.972.18000000000000022.20000000000000023.075.486.63.736.24.533.747.895.535.623.812.29999999999999982.932.923.664.884.23000000000000048.19999999999999932.743.515.362.615.053.311.772.54999999999999988.686.593.55.842.463.861.695.123.790.792.741.771.231.773.323.964.093.481.052.02999999999999983.992.351.852.372.271.591.933.811.281.241.961.424.09999999999999961.520.851.550.640.330.560000000000000051.13999999999999991.361.791.440.670.740.11Gurgaon392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423074233842368423994242942459424894251942550425801.850.694.783.980.21.410.426.317.193.392.22000000000000023.530.864.90000000000000041.434.630.82.20000000000000021.891.694.763.360.421.481.435.254.620.560000000000000053.032.22000000000000022.560.140000000000000013.840.13.392.634.075.144.286.9311.5411.074.37.560.745.523.382.20000000000000025.468.63000000000000086.35.962.83.844.746.364.88999999999999972.949.28999999999999912.988.92.49000000000000025.325.282.663.553.348.744.55.513.252.211.975.560.752.62.420.182.950.494.40000000000000041.8303.330.721.610.540.912.541.730.371.540.431.322.3900.9901.922.780.9402.31999999999999981.421.50.700.041.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.040.840.832.350.931.992.652.20000000000000021.12000000000000010.40.760.920.870.650.871.891.080.280000000000000032.351.697.162.371.341.381.190.371.938.111.963.094.711.921.583.924.048.78999999999999911.522.154.929.156.573.265.284.127.573.693.563.422.40.772.134.19000000000000040.91.63.031.041.361.412.47000000000000023.691.672.27999999999999983.556.42.443.295.243.612.385.154.172.712.43000000000000022.412.76.182.653.166.013.973.191.372.683.391.12999999999999993.22.191.711.651.955.283.640.954.61000000000000031.392.152.12.54999999999999980.93.333.132.751.822.251.871.720.720.810.05Pune39264392953932639356393873941739448394793950839539395693960039630396613969239722397533978339814398453987339904399343996539995400264005740087401184014840179402104023840269402994033040360403914042240452404834051340544405754060340634406644069540725407564078740817408484088840909409404096941000410304106141091411224115341183412144124441275413064133441394414254145541486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absorption

Absorption trend is on a decline

Absorption trend, residential, Calendar year-ends, 2009-12 (mn sq. ft)

Source: Propequity, Kotak Institutional Equities

Bengaluru392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423084233842369424004242942460424904252142551425827.46.636.566.745.675.75.285.174.924.545.09999999999999964.474.69000000000000043.192.642.041.361.862.852.212.12.372.24000000000000022.442.672.742.993.393.552.923.653.223.193.542.883.533.263.944.054.884.34999999999999964.665.195.25.285.154.795.2266.286.436.295.715.425.955.955.866.316.46.616.846.747.167.538.417.969.238.698.498.21000000000000097.837.587.577.467.347.947.948.02999999999999948.247.978.367.538.46000000000000098.197.688.18.017.517.27.147.3787.387.196.766.696.66.256.496.076.456.946.546.46.696.586.276.085.29Chennai392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423084233842369424004242942460424904252142551425821.231.261.171.391.761.52.171.731.841.791.621.511.51.191.170.950.691.041.431.291.170.882.41.171.31.221.471.421.411.651.881.711.71.841.851.912.252.352.573.282.973.283.113.183.713.343.363.283.022.772.582.862.52.883.393.213.183.343.093.323.213.093.023.434.19000000000000043.673.883.63.453.012.942.932.622.72.592.292.272.442.31999999999999982.47000000000000022.31999999999999982.24000000000000022.232.25999999999999982.27999999999999982.24000000000000022.212.252.172.172.122.1222.04999999999999981.962.132.061.981.871.710.850.511.321.441.561.611.511.451.38Gurgaon392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423084233842369424004242942460424904252142551425822.972.422.252.761.952.11.743.264.263.413.393.592.50999999999999982.021.71.2311.21.551.82.25999999999999983.172.45000000000000023.522.54999999999999983.244.23000000000000043.453.633.663.833.412.794.19000000000000043.152.913.913.264.714.085.224.536.54.19000000000000044.293.413.234.124.19000000000000044.15000000000000044.164.09999999999999964.553.524.433.553.353.83.64.073.815.11000000000000034.053.754.19000000000000043.233.823.552.872.962.932.312.331.881.71.751.481.781.591.671.741.321.351.261.581.421.241.321.391.541.571.531.711.711.551.51.441.551.31.241.181.421.441.381.361.241.21.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.773.132.963.023.053.083.062.932.632.392.1521.781.721.521.391.221.14999999999999991.381.393.222.27999999999999982.361.661.721.931.892.362.24000000000000022.312.412.20000000000000022.25999999999999982.522.623.432.782.912.853.353.523.113.213.172.992.942.672.742.372.27999999999999981.972.382.091.831.861.811.921.861.962.041.91.862.152.582.332.132.783.272.20000000000000022.091.761.681.741.811.922.191.821.842.25999999999999982.061.91.911.831.912.112.162.042.162.132.49000000000000022.772.792.792.592.572.42.18000000000000022.06999999999999982.022.50999999999999982.582.372.25999999999999982.132.152.11.861.741.47Pune392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405444057540603406344066440695407254075640787408174084840888409094094040969410004103041061410914112241153411834121441244412754130641334413944142541455414864151641547415784160841639416704169841729417594179041820418504188141912419424197342004420354206342094421244215542185422154224642277423084233842369424004242942460424904252142551425825.355.185.56.175.485.245.895.164.934.924.634.764.033.022.542.11.421.912.482.73.084.11000000000000033.323.843.593.383.483.983.183.273.913.43.723.944.13999999999999974.15000000000000044.48000000000000044.034.454.334.75.75.595.365.295.165.11000000000000035.09999999999999964.36000000000000034.40000000000000044.13999999999999974.54.594.835.194.84.90000000000000044.934.844.715.455.524.73000000000000044.664.974.875.164.954.69000000000000044.65000000000000044.374.294.134.34.334.794.624.36000000000000034.424.34999999999999964.334.54.494.84.674.414.594.994.914.834.925.385.285.09999999999999965.014.764.54.424.23000000000000044.284.264.254.23000000000000044.24.044.043.893.823.32

real interest rate

Real interest rates have been positive over the last few years

Trend in 10-year Gsec yield adjusted for CPI inflation (%)


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Suvodeep Rakshit (Research, KIE): 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Government Securities Yield: 10 Years (India)CPI: Industrial Workers (India)

Unit% pa2001=100

10-year Gsec yieldCPI inflationReal interest rateSourceReserve Bank of IndiaLabour Bureau Government of India

Oct-9613.78.75.0 1/197060.0

Nov-9613.78.75.0 1/197061.0

Dec-9613.811.82.0 1/197061.0

Jan-9713.711.81.9 1/197062.0

Feb-9713.411.81.7 1/197062.0

Mar-9713.410.13.3 1/197063.0

Apr-9712.98.64.3 1/197062.0

May-9712.97.05.8 1/197062.0

Jun-9712.66.95.6 1/197063.0

Jul-9711.75.56.2 1/197063.0

Aug-9711.65.46.2 1/197064.0

Sep-9711.95.46.5 1/197065.0

Oct-9710.95.35.5 1/197066.010.0

Nov-9711.05.35.6 1/197068.011.5

Dec-9711.25.35.9 1/197068.011.5

Jan-9813.39.24.1 1/197068.09.7

Feb-9812.69.23.4 1/197069.011.3

Mar-9812.17.94.2 1/197069.09.5

Apr-9811.99.22.7 1/197068.09.7

May-9812.110.51.6 1/197068.09.7

Jun-9812.111.70.4 1/197068.07.9

Jul-9812.215.6(3.4) 1/197069.09.5

Aug-9812.214.1(1.9) 1/197070.09.4

Sep-9812.316.7(4.4) 1/197014.071.09.2

Oct-9812.319.0(6.7) 1/197072.09.1

Nov-9812.220.3(8.0) 1/197073.07.4

Dec-9812.216.3(4.0) 1/197013.974.08.8

Jan-9912.29.62.6 1/197074.08.8

Feb-9912.38.43.9 1/197013.775.08.7

Mar-9912.08.53.5 1/197013.775.08.7

Apr-9911.98.43.5 1/197013.876.011.8

May-9911.77.14.6 1/197013.776.011.8

Jun-9911.95.86.0 1/197013.476.011.8

Jul-9911.73.48.3 1/197013.476.010.1

Aug-9911.63.48.3 1/197012.976.08.6

Sep-9911.62.29.4 1/197012.976.07.0

Oct-9911.60.011.6 1/197012.677.06.9

Nov-9911.40.011.4 1/197011.777.05.5

Dec-9911.20.011.2 1/197011.678.05.4

Jan-0010.92.28.7 1/197011.978.05.4

Feb-0010.43.37.1 1/197010.979.05.3

Mar-0010.95.65.2 1/197011.079.05.3

Apr-0010.45.64.8 1/197011.280.05.3

May-0010.85.65.3 1/197013.383.09.2

Jun-0011.14.46.7 1/197012.683.09.2

Jul-0011.34.37.0 1/197012.182.07.9

Aug-0011.44.37.0 1/197011.983.09.2

Sep-0011.83.28.6 1/197012.184.010.5

Oct-0011.63.28.4 1/197012.186.011.7

Nov-0011.42.19.3 1/197012.289.015.6

Dec-0010.93.27.7 1/197012.289.014.1

Jan-0110.53.27.3 1/197012.391.016.7

Feb-0110.03.26.8 1/197012.394.019.0

Mar-0110.32.18.1 1/197012.295.020.3

Apr-0110.12.18.0 1/197012.293.016.3

May-019.72.17.6 1/197012.291.09.6

Jun-019.54.25.2 1/197012.390.08.4

Jul-019.34.25.1 1/197012.089.08.5

Aug-019.15.23.9 1/197011.990.08.4

Sep-019.14.25.0 1/197011.790.07.1

Oct-018.84.14.7 1/197011.991.05.8

Nov-017.95.22.8 1/197011.792.03.4

Dec-018.35.23.1 1/197011.692.03.4

Jan-027.65.22.4 1/197011.693.02.2

Feb-027.55.22.3 1/197011.694.00.0

Mar-027.35.22.1 1/197011.495.00.0

Apr-027.44.13.3 1/197011.293.00.0

May-027.75.22.5 1/197010.993.02.2

Jun-027.64.03.5 1/197010.493.03.3

Jul-027.44.03.4 1/197010.994.05.6

Aug-027.24.03.2 1/197010.495.05.6

Sep-027.25.02.2 1/197010.895.05.6

Oct-027.04.03.0 1/197011.195.04.4

Nov-026.53.92.5 1/197011.396.04.3

Dec-026.14.02.1 1/197011.496.04.3

Jan-036.33.03.4 1/197011.896.03.2

Feb-036.24.02.3 1/197011.697.03.2

Mar-036.24.02.2 1/197011.497.02.1

Apr-035.95.01.0 1/197010.996.03.2

May-035.84.90.9 1/197010.596.03.2

Jun-035.73.91.8 1/197010.096.03.2

Jul-035.63.81.8 1/197010.396.02.1

Aug-035.32.92.4 1/197010.197.02.1

Sep-035.32.92.4 1/19709.797.02.1

Oct-035.13.81.3 1/19709.599.04.2

Nov-035.12.82.3 1/19709.3100.04.2

Dec-035.12.92.3 1/19709.1101.05.2

Jan-045.24.80.4 1/19709.1100.04.2

Feb-045.33.81.5 1/19708.8101.04.1

Mar-045.23.81.3 1/19707.9102.05.2

Apr-045.12.82.3 1/19708.3101.05.2

May-045.32.82.5 1/19707.6101.05.2

Jun-045.93.72.1 1/19707.5101.05.2

Jul-046.23.72.5 1/19707.3101.05.2

Aug-046.24.61.5 1/19707.4101.04.1

Sep-046.24.61.6 1/19707.7102.05.2

Oct-046.94.62.3 1/19707.6103.04.0

Nov-047.23.73.5 1/19707.4104.04.0

Dec-046.64.62.0 1/19707.2105.04.0

Jan-056.74.62.1 1/19707.2105.05.0

Feb-056.53.72.8 1/19707.0105.04.0

Mar-056.73.73.0 1/19706.5106.03.9

Apr-057.24.62.6 1/19706.1105.04.0

May-057.13.63.4 1/19706.3104.03.0

Jun-056.92.74.2 1/19706.2105.04.0

Jul-056.93.63.4 1/19706.2105.04.0

Aug-057.23.53.7 1/19705.9106.05.0

Sep-057.23.53.7 1/19705.8107.04.9

Oct-057.13.53.6 1/19705.7107.03.9

Nov-057.15.31.8 1/19705.6108.03.8

Dec-057.15.31.8 1/19705.3108.02.9

Jan-067.34.42.9 1/19705.3108.02.9

Feb-067.35.32.0 1/19705.1109.03.8

Mar-067.55.32.2 1/19705.1109.02.8

Apr-067.45.32.1 1/19705.1108.02.9

May-067.76.11.5 1/19705.2109.04.8

Jun-068.17.90.2 1/19705.3109.03.8

Jul-068.36.91.4 1/19705.2109.03.8

Aug-067.96.01.9 1/19705.1109.02.8

Sep-067.76.80.8 1/19705.3110.02.8

Oct-067.67.60.0 1/19705.9111.03.7

Nov-067.46.70.7 1/19706.2112.03.7

Dec-067.66.70.9 1/19706.2113.04.6

Jan-077.86.71.1 1/19706.2113.04.6

Feb-077.97.60.4 1/19706.9114.04.6

Mar-077.96.71.2 1/19707.2113.03.7

Apr-078.16.71.5 1/19706.6113.04.6

May-078.16.61.5 1/19706.7114.04.6

Jun-078.25.72.5 1/19706.5113.03.7

Jul-077.96.51.5 1/19706.7113.03.7

Aug-077.97.30.7 1/19707.2114.04.6

Sep-077.96.41.5 1/19707.1114.03.6

Oct-077.95.52.4 1/19706.9114.02.7

Nov-077.95.52.4 1/19706.9116.03.6

Dec-077.85.52.3 1/19707.2117.03.5

Jan-087.65.52.1 1/19707.2117.03.5

Feb-087.65.52.2 1/19707.1118.03.5

Mar-087.67.9(0.2) 1/19707.1119.05.3

Apr-088.07.80.2 1/19707.1119.05.3

May-088.17.80.4 1/19707.3119.04.4

Jun-088.77.71.0 1/19707.3119.05.3

Jul-089.48.31.0 1/19707.5119.05.3

Aug-088.79.0(0.3) 1/19707.4120.05.3

Sep-088.79.8(1.1) 1/19707.7121.06.1

Oct-087.510.4(3.0) 1/19708.1123.07.9

Nov-087.110.4(3.3) 1/19708.3124.06.9

Dec-085.39.7(4.4) 1/19707.9124.06.0

Jan-096.010.4(4.4) 1/19707.7125.06.8

Feb-096.69.6(3.1) 1/19707.6127.07.6

Mar-097.08.0(1.0) 1/19707.4127.06.7

Apr-096.38.7(2.4) 1/19707.6127.06.7

May-096.88.6(1.9) 1/19707.8127.06.7

Jun-097.09.3(2.3) 1/19707.9128.07.6

Jul-097.011.9(4.9) 1/19707.9127.06.7

Aug-097.511.7(4.2) 1/19708.1128.06.7

Sep-097.311.6(4.3) 1/19708.1129.06.6

Oct-097.611.5(3.9) 1/19708.2130.05.7

Nov-097.513.5(6.1) 1/19707.9132.06.5

Dec-097.715.0(7.2) 1/19707.9133.07.3

Jan-107.616.2(8.6) 1/19707.9133.06.4

Feb-107.914.9(7.0) 1/19707.9134.05.5

Mar-107.814.9(7.0) 1/19707.9134.05.5

Apr-107.813.3(5.6) 1/19707.8134.05.5

May-107.513.9(6.4) 1/19707.6134.05.5

Jun-107.613.7(6.1) 1/19707.6135.05.5

Jul-107.811.3(3.4) 1/19707.6137.07.9

Aug-108.09.9(1.9) 1/19708.0138.07.8

Sep-107.99.8(1.9) 1/19708.1139.07.8

Oct-108.19.7(1.6) 1/19708.7140.07.7

Nov-108.08.3(0.3) 1/19709.4143.08.3

Dec-108.09.5(1.5) 1/19708.7145.09.0

Jan-118.29.3(1.2) 1/19708.7146.09.8

Feb-118.18.8(0.7) 1/19707.5148.010.4

Mar-118.08.8(0.8) 1/19707.1148.010.4

Apr-118.19.4(1.3) 1/19705.3147.09.7

May-118.48.7(0.3) 1/19706.0148.010.4

Jun-118.48.6(0.3) 1/19706.6148.09.6

Jul-118.58.40.1 1/19707.0148.08.0

Aug-118.49.0(0.6) 1/19706.3150.08.7

Sep-118.410.1(1.7) 1/19706.8151.08.6

Oct-118.99.4(0.5) 1/19707.0153.09.3

Nov-118.89.3(0.6) 1/19707.0160.011.9

Dec-118.56.52.1 1/19707.5162.011.7

Jan-128.35.33.0 1/19707.3163.011.6

Feb-128.27.60.6 1/19707.6165.011.5

Mar-128.68.6(0.1) 1/19707.5168.013.5

Apr-128.710.2(1.6) 1/19707.7169.015.0

May-128.510.2(1.7) 1/19707.6172.016.2

Jun-128.210.1(1.8) 1/19707.9170.014.9

Jul-128.39.8(1.6) 1/19707.8170.014.9

Aug-128.310.3(2.0) 1/19707.8170.013.3

Sep-128.19.1(1.0) 1/19707.5172.013.9

Oct-128.29.6(1.4) 1/19707.6174.013.7

Nov-128.29.5(1.3) 1/19707.8178.011.3

Dec-128.211.2(3.0) 1/19708.0178.09.9

Jan-137.911.6(3.7) 1/19707.9179.09.8

Feb-137.912.1(4.1) 1/19708.1181.09.7

Mar-138.011.4(3.4) 1/19708.0182.08.3

Apr-137.810.2(2.5) 1/19708.0185.09.5

May-137.510.7(3.2) 1/19708.2188.09.3

Jun-137.511.1(3.6) 1/19708.1185.08.8

Jul-138.310.8(2.6) 1/19708.0185.08.8

Aug-138.810.7(2.0) 1/19708.1186.09.4

Sep-138.810.7(1.9) 1/19708.4187.08.7

Oct-138.711.1(2.4) 1/19708.4189.08.6

Nov-138.711.5(2.8) 1/19708.5193.08.4

Dec-138.89.1(0.4) 1/19708.4194.09.0

Jan-148.97.21.6 1/19708.4197.010.1

Feb-148.96.72.2 1/19708.9198.09.4

Mar-148.96.72.2 1/19708.8199.09.3

Apr-148.97.11.8 1/19708.5197.06.5

May-148.77.01.7 1/19708.3198.05.3

Jun-148.86.52.3 1/19708.2199.07.6

Jul-148.57.21.3 1/19708.6201.08.6

Aug-148.66.81.9 1/19708.7205.010.2

Sep-148.56.32.2 1/19708.5206.010.2

Oct-148.35.03.3 1/19708.2208.010.1

Nov-148.14.14.0 1/19708.3212.09.8

Dec-147.95.92.1 1/19708.3214.010.3

Jan-157.77.20.5 1/19708.1215.09.1

Feb-157.86.31.5 1/19708.2217.09.6

Mar-157.86.31.5 1/19708.2218.09.5

Apr-157.95.82.1 1/19708.2219.011.2

May-157.65.71.9 1/19707.9221.011.6

Jun-157.96.11.8 1/19707.9223.012.1

Jul-157.84.43.4 1/19708.0224.011.4

Aug-158.14.33.7 1/19707.8226.010.2

Sep-157.55.12.4 1/19707.5228.010.7

Oct-157.96.31.6 1/19707.5231.011.1

Nov-158.16.71.4 1/19708.3235.010.8

Dec-158.16.31.8 1/19708.8237.010.7

Jan-167.55.91.6 1/19708.8238.010.7

Feb-167.65.52.1 1/19708.7241.011.1

Mar-167.45.51.9 1/19708.7243.011.5

Apr-167.95.92.0 1/19708.8239.09.1

May-167.56.60.9 1/19708.9237.07.2

Jun-167.86.11.7 1/19708.9238.06.7

Jul-167.46.50.9 1/19708.9239.06.7

Aug-167.25.31.9 1/19708.9242.07.1

1/19708.7244.07.0

1/19708.8246.06.5

1/19708.5252.07.2

1/19708.6253.06.8

1/19708.5253.06.3

1/19708.3253.05.0

1/19708.1253.04.1

1/19707.9253.05.9

1/19707.7254.07.2

1/19707.8253.06.3

1/19707.8254.06.3

1/19707.9256.05.8

1/19707.6258.05.7

1/19707.9261.06.1

1/19707.8263.04.4

1/19708.1264.04.3

1/19707.5266.05.1

1/19707.9269.06.3

1/19708.1270.06.7

1/19708.1269.06.3

1/19707.5269.05.9

1/19707.6267.05.5

1/19707.4268.05.5

1/19707.9271.05.9

1/19707.5275.06.6

1/19707.8277.06.1

1/19707.4280.06.5

1/19707.2278.05.3

Real interest rate35339353703540035431354623549035521355513558235612356433567435704357353576535796358273585535886359163594735977360083603936069361003613036161361923622036251362813631236342363733640436434364653649536526365573658636617366473667836708367393677036800368313686136892369233695136982370123704337073371043713537165371963722637257372883731637347373773740837438374693750037530375613759137622376533768137712377423777337803378343786537895379263795637987380183804738078381083813938169382003823138261382923832238353383843841238443384733850438534385653859638626386573868738718387493877738808388383886938899389303896138991390223905239083391143914239173392033923439264392953932639356393873941739448394793950839539395693960039630396613969239722397533978339814398453987339904399343996539995400264005740087401184014840179402104023840269402994033040360403914042240452404834051340544405754060340634406644069540725407564078740817408484087840909409404096941000410304106141091411224115341183412144124441275413064133441365413954142641456414874151841548415794160941640416714169941730417604179141821418524188341913419444197442005420364206442095421254215642186422174224842278423094233942370424014243042461424914252242552425834.97534782608696174.96444782608696221.98809411764705681.89529411764705641.66279411764705643.28787246376811564.29337142857143845.83184647887324915.64135555555555886.17604794520547976.17439459459460596.4567945945946055.53146666666667745.63196666666667595.91194210526316424.13717368421053073.41537368421053074.22276315789473422.70887368421053051.60488421052630410.42028831168831715-3.3921155844155901-1.902464102564096-4.3946666666666747-6.6926417721518892-8.0310645569620238-4.01740000000000742.61034578313252123.89686506024096963.49581463414633483.4565650602409694.58644285714286066.04804651162789678.33531348314605948.26481348314606029.383297802197809311.592411.43410000000000111.24718.74559780219781057.10826666666665565.24832247191012164.81074444444444275.2630444444444426.70479560439559836.95217391304348197.02367391304348048.57929354838709918.41631063829787259.29563684210525667.71009354838709987.25839354838709926.81889354838710038.14604042553192197.97263684210525627.60963684210525675.24457368421053535.09423333333332543.93106666666667434.98013333333332664.66558865979380772.76926082474226393.05826666666667452.43906666666667432.26416666666667422.13536666666667423.27148865979380692.4982608247422643.52969595959595583.37329999999999693.19560396039603582.1975999999999963.01870396039603592.53573137254901142.12140396039603643.36870297029702752.27170396039603612.23320396039603610.954804950495045550.945939215686269821.84940485436893361.77444615384614492.40485714285715262.40175714285715271.29567619047618182.31311132075470652.2796571428571530.383407692307686791.46077619047618161.34467619047618212.31591132075470622.49786168224300112.12938224299065392.48979629629630231.52487037037037171.61497037037037222.27804403669725273.53557522935779821.96137037037037222.12194403669725332.81697522935779793.01557522935779782.59944403669725333.42383636363636254.18079729729730243.37367142857141913.65197699115043673.66827699115043693.56962807017542791.80106548672565571.80936548672565592.9230350877193072.03436548672565552.21936548672565512.13094210526316361.54054912280702090.237063157894734641.38434827586207821.94749401709401580.839993162393164461.4581355932201667E-20.683410924369749930.884410924369749551.05121092436974980.382374789915971291.21331092436974951.46493333333333541.5109297520661162.46484308943089751.45918709677419930.661335483870974631.51549999999999412.35808897637796292.40998897637796272.29388897637796242.06188897637796222.1580500000000002-0.237315748031504010.205600000000000450.354962015503883950.959492307692312531.0166666666666746-0.31045639097744271-1.0560360902255681-2.9669611940298584-3.3280611940298588-4.3986925373134271-4.4436611940298585-3.0585296296296329-0.98779708029197177-2.4033521739130377-1.8802935251798472-2.3321142857142743-4.8955118881118969-4.2272379310344839-4.3061356164383593-3.8987864864864914-6.0555135135135085-7.2293863945578165-8.6348162162162065-7.0078648648648683-7.0398648648648683-5.5567333333333302-6.386684768211925-6.1496901960784269-3.4214000000000038-1.8902432098765427-1.9196509202454095-1.5790696969696913-0.28353333333332564-1.5140556213017788-1.1518255813953449-0.7252294117646958-0.80122941176469631-1.2850647058823643-0.30863023255813182-0.268889655172419145.2233707865159573E-2-0.63446404494382058-1.6583659217877091-0.50736519337017505-0.581259340659329382.05941351351351282.96865106382979690.6324324324324424-8.7948648648648486E-2-1.5627537634408508-1.7005278074866279-1.8260100529100463-1.5814595854922189-1.9957783505154723-0.99825583756345715-1.3949595959596017-1.3496186934673453-2.9671726903553193-3.6744416161616122-4.136181507537696-3.4325860696517463-2.4560024390243997-3.1993116504854324-3.5972923076923138-2.5763266037735768-1.9646635514018644-1.9347744186046523-2.3513078341013784-2.7500899082568893-0.363520091324199161.62998099547511632.21194260089686352.18117142857141831.81055398230087411.66915614035087772.26009350649351591.25875744680851211.87414514767931812.22447899159663813.32044688796680014.0081736625514372.05935941422593680.514304219409281061.46297899159663911.52294937238493772.10527603305784791.90559508196721781.77213902439023843.43992063492062793.70627391304348122.39166007905139111.59608932806323361.35043241106718881.76988932806323261.61318818897638842.10490316205534531.89068897637796242.01272499999999970.875852713178304931.65313180076627650.945221673003802111.9169696969697014

jandhan

Over 240 mn accounts opened under Pradhan Mantri Jan-Dhan yojna

Number of accounts opened in Pradhan Mantri Jan - Dhan Yojana, September 2016

No. ofBalance in% of zero

No. of accounts (mn)rupayaccountsbalance

RuralUrbanTotaldebit cards(Rs bn)accounts

Public sector banks1108619715534624

Regional rural banks36642287421

Private banks53981636

Grand total1529624719143524

Source: Ministry of Finance, Kotak Institutional Equities

http://www.pmjdy.gov.in/account-statistics-country.aspx

http://www.pmjdy.gov.in/account-statistics-country.aspx

BC Model

230 mn savings account opened through banking correspondent model

Savings account, March fiscal year-ends, 2010-16 (mn)

Source: Company, Kotak Institutional Equities

2010201120122013201420152016CAGR 2010-16

Banking outlets in villages - branches00000007.6

Banking outlets in villages - branchless mode000001158.0

Banking outlets in villages - total000001143.3

Urban locations covered through BCs0000000147.4

BSBDA-Through branches (mn)60738110112621023825.8

BSBDA-Through branches (Rs bn)445811016527336547448.6

BSBDA-Through BCs (mn)1332578111718823161.548.8341383721

BSBDA-Through BCs (Rs bn)11181118397516456.955.1713133209

BSBDA-Total (mn)7310513918224339846936.334.9570170811

BSBDA (Rs bn)557612018331244063850.552.990470352

OD facility availed in BSBDAs (mn)013468988.6

OD facility availed in BSBDAs (Rs bn)0012162029157.3

KCCs total (mn)2427303440434711.9

KCCs (Rs bn)1,2401,6002,0682,6233,6854,3825,13126.7

GCC-Total (mn)1224791149.1

GCC-Total (Rs bn)353542761,0971,3021,49386.9

BC-Total transactions (mn)278415625032947782777.4

BC-Total transactions (Rs bn)758972345248601,687150.1

Transactions has grown by 77% CAGR since FY2010Volumes have grown by 150% CAGR since FY2010

BC transactions, March fiscal year-ends, 2010-16 (mn)BC volumes, March fiscal year-ends, 2010-16 (Rs bn)

Source: Company, Kotak Institutional EquitiesSource: Company, Kotak Institutional Equities

Transactions has grown by 77% CAGR since FY2010Volumes have grown by 150% CAGR since FY2010

Bank presence in branchless mode, March fiscal year-ends, 2010-16 (#)Urban locations covered by BC, March fiscal year-ends, 2010-16 (#)

Source: Company, Kotak Institutional EquitiesSource: Company, Kotak Institutional Equities

There has been a significant growth in since FY2013

Savings account balances, March fiscal year-ends, 2010-16 (Rs bn)

Source: Company, Kotak Institutional Equities

BC-Total transactions (mn)201020112012201320142015201626.584.16155.87250.46328.6477826.8

BC-Total transactions (Rs bn)20102011201220132014201520166.95897.09233.88524.4859.81686.9

Urban locations covered through BCs20102011201220132014201520164.4700000000000002E-43.771E-35.8910000000000004E-32.7143E-26.0729999999999999E-29.6847000000000003E-20.102552

Branch20102011201220132014201520163.3377999999999998E-23.4811000000000002E-23.7470999999999997E-24.0836999999999998E-24.6126E-24.9570999999999997E-25.1830000000000001E-2Branchless20102011201220132014201520163.4315999999999999E-28.1396999999999997E-20.144281999999999990.227617000000000010.337677999999999980.504141999999999980.53447699999999998

BSBDA-Through BCs (mn)20102011201220132014201520161331.6357.381.27116.9188231

BSBDA-Through BCs (Rs bn)20102011201220132014201520161118.2310.5418.223975164































black money

Crackdown on undisclosed income and wealth

Various initiatives have been taken to curb domestic and foreign black money

InitiativesDescription

Special Investigation Team (SIT) on black moneyThe Supreme Court-appointed SIT was formed to investigate assets abroad and come up with guidelines to curb generation & circulation of black money. SIT has recommended on various administrative and institutional measures through various reports

Foreign Black money compliance windowA 90-day window was provided in 2015 to declare undisclosed foreign assets; Rs42 bn was disclosed at a penal tax rate of 60%

Black Money Act, 2015Aims to create a framework to tackle and ensure compliance with regards to black money abroad by residents. CBDT is the currently the administrative authority. Stringent provisions: Undisclosed foreign assets to be taxed at 30%; penalty at 3X of tax payable with imprisonment from 3-10 years

Income Declaration Scheme, 2016A one-time window was provided for resident Indians to declare their undisclosed assets and pay taxes on them without incurring punitive actions. More than Rs650 bn was disclosed under this scheme

Mandatory PAN requirementsGovernment has made it mandatory to use PAN for all transactions done through cash or prepaid cards, including jewelry, above Rs0.2 mn. PAN is mandatory for purchases of immovable properties above Rs1 mn

New DTAAs signed along with renegotiation of old onesIndia has signed DTAAs with Cyprus, Mauritius and Singapore, which are aimed at limiting round-tripping of money into capital markets. Government has negotiated an automatic information exchange agreement with Switzerland and is negotiating similar treaties with other tax havens

Using FEMA to regulate exports earningsIn line with the recommendations from the SIT nearly 788 exporters (as of July 2016) were being probed for not bringing back earnings to India within the stipulated timeframe

Amendments to Prevention of Money Laundering Act 2002, vide Finance Act, 2015The act has been amended to enable attachment and confiscation of equivalent assets in India wherever assets located abroad cannot be confiscated

Enforcement measuresMinistry of Finance notified that surveys (till May 2016) over last two years have led to disclosure of around Rs450 bn of undisclosed income. There has also been a significant rise in criminal prosecutions filed

Source: Press releases, Kotak Institutional Equities

houshold financial savings

We expect India's domestic national savings rate and household financial savings to rise rapidly as a proportion of GDP

Estimates of savings rates (proportion of GDP), March fiscal year-ends, 2011-25E (%)

201120122013201420152016E2017E2018E2019E2020E2021E2022E2023E2024E2025E

Household (incl. gold savings)25.222.821.920.919.119.021.122.425.425.827.026.726.426.026.7

Household physical savings14.915.814.813.311.411.111.912.614.514.915.815.214.313.513.9

- Savings in gold2.02.62.20.91.10.90.80.70.70.60.50.50.40.40.3

Household financial savings10.37.07.17.77.77.99.29.710.810.911.211.512.112.512.9

Public savings2.61.51.41.31.21.92.43.03.64.14.54.85.15.35.5

Private corporate savings8.09.29.810.812.712.612.512.412.212.112.112.112.212.312.4

Domestic savings rate35.733.533.133.033.033.536.137.841.141.943.543.543.643.644.6

CAD/GDP2.74.24.71.71.71.21.41.72.02.22.12.12.12.12.0

Investment rate36.535.534.834.834.634.737.439.543.144.145.645.745.745.646.6

Growth

Base8.96.74.54.75.56.97.57.98.68.8

Bull6.97.98.810.111.0

Bear6.97.17.27.57.3

ICOR

Base4.15.37.87.36.35.05.05.05.05.0

Bull5.04.84.54.34.0

Bear5.05.35.55.86.0

Notes:

(a) Gold savings is assumed to be equal to net gold imports.


jewellery val

We do not expect much upside in investment demand in the jewelry sector

Valuation summary of gems and jewelry stocks under coverage, March fiscal year-ends

Price (Rs)PER (X)EV/EBITDA (X)Price/BV (X)RoE (%)

CompanySectorRating7-Oct-162017E2018E2019E2017E2018E2019E2017E2018E2019E2017E2018E2019E

Titan CompanyConsumer ProductsTTAN IN EQUITYREDUCE39540.032.328.426.821.318.28.77.46.423.324.924.2

PC JewellerConsumer ProductsPCJL IN EQUITYADD48218.415.712.89.67.76.52.92.42.117.717.617.6

Source: Companies, Kotak Institutional Equities estimates

building val

Pace of recovery would be important given the expensive valuations of building materials and paint stocks

Valuation summary of cements, paints & building material stocks under coverage, March fiscal year-ends

Price (Rs)PER (X)EV/EBITDA (X)Price/BV (X)RoE (%)

CompanyRating7-Oct-162017E2018E2019E2017E2018E2019E2017E2018E2019E2017E2018E2019E

Cements

ACCSELL1,62531.821.817.717.212.09.73.43.02.711.014.716.2

Ambuja CementsSELL25330.823.317.613.09.47.12.22.11.99.69.211.4

Dalmia BharatADD1,89033.120.616.710.98.77.53.93.32.712.417.217.8

Grasim IndustriesRS1,02512.910.89.76.04.63.61.61.41.313.414.113.8

India CementsREDUCE161NM17.914.59.07.86.91.31.21.25.57.18.3

J K CementBUY95924.012.89.810.97.86.33.62.82.216.024.725.4

JK Lakshmi CementADD50525.015.110.512.18.06.13.83.12.416.322.625.8

Orient CementADD20730.412.59.913.78.16.73.83.02.413.127.026.8

Shree CementSELL17,58028.124.421.318.714.712.57.45.74.630.226.523.9

UltraTech CementSELL3,93431.724.721.617.413.912.14.53.93.315.316.916.5

Paints

Asian PaintsREDUCE1,18555.146.640.534.829.425.317.114.612.533.733.833.2

Building materials

Astral Poly TechnikREDUCE43038.929.022.519.515.412.15.74.84.015.717.919.3

Cera SanitarywareREDUCE2,57735.027.723.020.416.213.66.75.54.520.821.821.7

HSILADD34323.417.913.39.67.96.71.71.61.57.59.211.4

Source: Companies, Kotak Institutional Equities estimates

Mobile coverage across India :: 1081 mn People

This will further give push to JAM Movement, improved digitization and e-commerce

Source:: Economic survey Kotak Economic Research

Mobile coverage of ~1081mn population

9

Potential digital banking consumers :: 450mn by 2020

India currently low on penetration

But there is huge underlying potential

Smart phones to become major source of digitization

Smarter India going forward :: 507 mn online shoppers

India's youth has higher smartphone usage than its adults but pales in comparison to China

India ChinaUnder 25 55 9825-34 40 9935-44 31 9045-54 19 62Above 55 11 30

Smartphone usage across categories (%)

Source: BGC, Consumer Barometer, Kotak Institutional Equities estimates

162224

304

386

467

550

625

388 389 364332

291243

195

343

387 434477

525577

629

0

100

200

300

400

500

600

700

2014 2015 2016 2017 2018 2019 2020

Number of smart phone users Number of non smart phone usersNumber of active bank accounts

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025India's population (mn) [A] 1,256.8 1,268.7 1,280.6 1,292.7 1,304.9 1,317.2 1,329.7 1,342.2 1,354.9 1,367.7 1,380.6Internet penetration (%) [B] 21.2 27.5 35.0 42.5 50.0 57.5 60.0 62.5 65.0 67.5 70.0Number of internet subscribers (mn) [C=A* B] 267.0 348.9 448.2 549.4 652.4 757.4 797.8 838.9 880.7 923.2 966.4Number of smart phones in stock (mn) 224.0 304.0 386.0 467.0 550.0 625.0 687.5 749.4 809.3 866.0 917.9Proportion of subscribers w ho do commerce online (%) [D] 15.0 20.0 25.0 30.0 35.0 40.0 42.5 45.0 47.5 50.0 52.5Number of online shoppers (mn) [E=C* D] 40.1 69.8 112.1 164.8 228.4 303.0 339.1 377.5 418.3 461.6 507.4

The e-commerce market in India will grow multifold in coming years

Source: Consumer barometer, Kotak Institutional Equities estimates

11

Opportunities in new India

Changing Demographics :: 88% of India to be less than 60 years

0

20

40

60

80

100

0-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80+

88% of Indias population to be less than 60 years old by 2025EIndias age profile in 2025E (% of population)

Source: Kotak Institutional Equities estimates

Improved demographics will imply stronger Indias consumer demand The quality of the expenditure will also see an uptick if the growth is well-distributed Consumption basket will also evolve with time as incomes grow Across a wide-variety of industries, from food to hotels, from housing to transport, from

real estate to gold the nature of the industry can alter dramatically

. And also improving savings rate :: Savings rate @ 45%


National savings rate and household financial savings to rise rapidly

Growth Market size (Rs bn) OpportunityCategories CAGR (%) Rank FY 2012 FY 2025 (Rs bn)Food and beverages 4.5 12 23,590 42,025 18,435 Alcohol and tobacco 5.5 10 1,403 2,805 1,402 Clothing and footw ear 5.1 11 2,904 5,527 2,623 Housing 6.7 4 6,412 14,828 8,416 Household goods 6.0 9 2,282 4,848 2,566 Healthcare 6.8 3 2,482 5,836 3,355 Transport 6.3 6 4,751 10,497 5,746 Communications 6.4 5 1,406 3,163 1,757 Leisure 7.2 1 1,945 4,781 2,837 Education 6.3 7 1,440 3,167 1,727 Hotels 6.9 2 1,661 3,966 2,305 Miscellaneous 6.2 8 5,852 12,871 7,018 Total 5.6 56,129 114,315 58,186

The big winners in Indian consumption story in coming years

As consumption market doubles by 2025, GOLD to benefit

Spending on currently discretionary items to increase as incomes rise

Source: Kotak Institutional Equities estimates

15

Changing dynamics in the Gold Sector

16

Imports of gems & jewelry have contracted sharply in 5MFY17; exports have outgrown imports for first time

2011 2012 2013 2014 2015 2016 5MFY16 5MFY17

Imports 77.0 91.0 83.9 58.4 62.4 56.4 26.2 17.1

Exports 42.3 46.4 43.0 41.4 41.3 39.4 16.1 17.7

Domestic consumption 34.7 44.7 40.9 17.0 21.1 17.0 10.1 (0.6)

Adjusted exports 33.9 37.1 34.4 33.1 33.0 31.6 12.9 14.2

'Net' domestic consumption 43.1 53.9 49.5 25.3 29.3 24.9 13.3 2.9

Net consumption of gold has been fading partly led by policy interventions and in part led by increasing value in re-exports

US$ bn

Source:: CEIC, Kotak Institutional Equities

17

Indias gold demand heavily dependent on monsoons

Source: CEIC, Kotak Mahindra Bank

18

Gold digitization: Sovereign Gold bonds and monetization schemes to begin transforming physical demand in India

Source:: RBI, HDFC securities

19

Higher income levels to boost Indias gold demand :: High Corr of 0.23

Source: IMF, Kotak Economic Research estimates

20

Recent returns on gold have been negligible compared to other asset classes in Indi :: Indian Consumer Smartest in the World

Source:: CEIC, CCIL, JLL, Kotak Economic Research

MCX COMDEX is composite commodity index based on commodity futures*Data till end-Sep 2016 ; *Real estate data starts from 2006 ; COMDEX data from mid-2005

Gold has been one of the worst performing asset classes !

%CAGRComdex futures returns

Debt returns

Equity returns

Gold returns

Real estate returns

2004-2008 5.0% 8.2% 14.1% 22.3% 6.8%

2009-2012 27.8% 6.4% 28.0% 28.8% 12.2%

2013-ytd -6.0% 12.7% 11.9% 0.9% 5.6%

21

India :: Embarking a steady journey for transformation

Game Changers

Demographic dividends Higher financial savings Progressive reform oriented regulatory changes

The big trends

Financial inclusion Financial innovation Positive real interest rate policy focus Technological advancement Shift towards discretionary consumption items led by higher per capita incomes

Changing gold dynamics

As India moves up the economic ladder, gold demand will likely increase But the pace will be slower than other consumption goods as Indian consumers shift towards

other discretionary goods With evolving India, Gold will also catch up from being a part of household saving to a luxury item Regulatory measures and policy initiatives likely to change the direction of physical gold demand

Disclaimer

In the preparation of the material contained in this document, Kotak Mahindra Bank Ltd. (Kotak Bank), has used information that is publicly available, includinginformation developed inhouse. Some of the material used in the document may have been obtained from members/persons other than the Kotak Bank and/or itsaffiliates and which may have been made available to Kotak Bank and/or its affiliates. Information gathered & material used in this document is believed to be fromreliable sources. Kotak Bank however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party inthis material no such party will assume any liability for the same. Kotak Bank and/or any affiliate of Kotak Bank does not in any way through this material solicit anyoffer for purchase, sale or any financial transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should beforedealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice.

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India : Gold :: World : Gold A leap forwardShekhar BhandariSenior Executive Vice President Kotak Mahindra Bank LtdSlide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Changing Demographics :: 88% of India to be less than 60 years. And also improving savings rate :: Savings rate @ 45%Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21DisclaimerSlide Number 23

India : Gold :: World : Gold A leap forward - LBMA 2016/LBMA_Singapore_2016...India : Gold :: World : Gold A leap forward Shekhar Bhandari Senior Executive Vice President Kotak Mahindra

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