Our investment philosophy is carved out from stringent and robust investment policies. Risk management is an integral part of our investment process. The company has well defined risk policies and processes covering both portfolio and process risk. Our equity investments are currently made primarily in large cap stocks (>85%), as they are less volatile than mid cap and small cap stocks. The debt portfolio of the Company is currently invested only in highest credit quality assets comprising Government of India securities and securities issued by AAA rated companies. A reasonable level of liquidity is maintained with the respective funds so as to enable a smooth redemption process for switches, claims and so on. This is followed in line with the liquidity norms prescribed in our investment policy manual. To sum up, our endeavor is to generate for our policyholders, consistent, risk-adjusted returns in a disciplined and repeatable manner with the aim of beating the defined benchmarks by active fund management.

For FY12 the target fiscal deficit is 4.6% against 5.1% for FY11. The actual borrowing in FY12 could be impacted by higher subsidy burden. The inflationary pressures have shown resistance at 8% level since last six months. Spill-over effect of elevated food prices was seen in non-food items like manufacturing products. RBI’s recent policy statements continue to reflect the discomfort with inflation levels. Unless there is meaningful easing of price pressures, we could see further rate hikes in the near future. Meanwhile if the prices stabilize at current levels we could see lower inflation rates in first couple of months due to higher base effect.
As emerging economies like India and China saw monetary tightening due to mounting inflation, developed economies like Europe and US saw quantitative easing to further stimulate consumer demand and increase productivity. However by the end of the fiscal year due to higher food and oil prices internationally the accommodative monetary stance could see the dusk. Hence we could see the beginning of a less benign monetary policy regime in developed markets.

In an environment of heightened global economic uncertainty, a domestic demand driven country such as India is poised to gain on account of relatively better economic growth potential and strong fundamentals. There are near term concerns that interest rates may still edge higher and companies might have to struggle with higher input costs that may affect their profitability. A combination of domestic and international issues may affect India’s growth outlook in the near term. The economic story of India could face challenges in the form of persistently high inflation, volatile oil prices and widening current account deficit. Sluggish investment is likely to keep economic expansion below the government's GDP target of 8.5% in the coming year.
These near term concerns are likely to be over-powered by India’s strong economic potential, greater role for free market rather than state control and re-assuring legal systems. Significant transactions during the year such as British Petroleum acquiring a stake in Reliance’s E&P business or Vodafone increasing its stake in its Indian operations are indicative of the potential that foreign corporates sense in India.
The Reserve Bank of India is expected to reach near the end of its interest rate hiking policy over the next few months. The end of quantitative easing in the United States would also lead to a correction in commodity prices. A combination of above along with healthy growth prospects for Indian corporates along with reasonable valuations means that the Indian equity markets would regain momentum soon. While global factors would dictate the near term market direction, any intermittent corrections should be viewed as opportunity to build the portfolio progressively.