4
Anup BagchiMD & CEO
ICICI Securities Ltd.
An important part of any investor's life is to see to his life-stage goals and achieve them with proper financial planning. It's a long journey from setting goals to attaining them and the choices investor makes on the path ultimately decide outcome of the journey. Once these milestones are categorized into short-term and long-term goals managing finance f o r t h e m b e c o m e s m o r e convenient.
Be it the amount for down payment of the dream house that you intend to buy in next couple of years, accumulating capital for a business start-up or a vacation fund for next summer holidays; short-term goals are all about growing money in shorter period (less than three years) with minimal risk and penalty.
However, if the goal to purchase a house is not on top of the list or a start-up is going to take longer than five years to get established investor's horizon is naturally extended. Long-term goals like retirement planning, purchase of property, child's future etc. aims at building wealth over the period of time. Thus they require more elaborate portfolio that can produce generous returns in long run.
An investor can either opt for short-term or long-term arrangement depending upon his financial requirement. Simply put, the amount that is required to fulfill urgent or nearer future needs is invested in short-term vehicles and the amount that can remain untouched for quite a few years, say five to ten, is moved in long-term investment vehicles.
A short-term investment option fits best when talking about capital protection, rainy day fund, and immediate cash usage etc. Whereas long-term investment is dedicated to larger and farther goals.
1ICICIdirect Money Manager October 2016
Eventually it all depends upon the objective of an investment and nature of the investor.
A short-term strategy implies easy accessibility of cash where a person can liquidate his investment almost instantly and meet current economic needs. This is a convenient option when objective of an investment is to safeguard one's money. These plans provide the much needed flexibility which gives control over funds without extended lock-in periods.
Moreover, short-term investment tools like liquid funds and debt mutual funds manage to produce substantial returns even over the period of few months by investing into debt market instruments.
On the other hand, right from fixed deposits to equity mutual funds, almost all the investment avenues submit stronger returns over longer tenure. Equity, especially, has shown multi-fold results over the past two decades. And despite of domestic andglobal market fluctuations, it continues to give inflation-adjusted returns.
While investing in equity via direct stocks or even mutual fund, it is recommended to stay invested for at least full market cycle. This helps to average out the returns and make best of 'buy low sell high' investing strategy. The power of returns is the most appreciative when invested for prolonged period.
A lot of conservative investors may find bank fixed deposits the most sensible investment tool, whereas an aggressive risk taker might see stock investments as the only potential vehicle to produce high returns. All in all, only the right proportion of both short-term and long-term investment instruments is what makes the portfolio an ideal picture.
Although short-term investment tools are prominent to resolve unforeseen crisis in one's personal finance, long-term vehicles are equally significant and have crucial role to play in financial journey. The two terms differ in their objectives, tax implications, risks and returns relations but it is important to find the right balance so that their blend gives perfect balance to an individual's personal finance cart.
Our message remains the same –'Keep investing and stay invested for your life goals.' Through this magazine and our website www.icicidirect.com we want to make an earnest attempt to partner with you in setting and achieving your financial goals. Give us an opportunity to serve you, walk into any of your Neighborhood Financial Superstore and talk to us.
2
As important it is to set goals in one's life, it is equally necessary to plan financial strategies according to these goals. A short-term goal demands an investment of shorter period which can yield results within few months or years. Whereas a distant goal can be achieved by a long-term investment planning. Identifying each one of them and including the right combination of both in your portfolio is what makes personal wealth management a successful task.
Apart from goal, several other factors are influential in deciding the term of an investment. Some investment plans have proportional risk-returns relation while some are designed to give stable returns while maintaining low risk profile. Important thing to remember is that it's not just the number of years an investor has to look upon. The elements that contribute to the average rate of returns, external factors affecting investment performance, tax concessions and rules applicable to the tool and several such things have to be taken into consideration before choosing the path.
This month's issue is a discussion platform on the very same dilemma of short-term & long term investments. The main feature is built up around various factors and characteristics affixed to both these investment horizons. In talk with Mr Venugopal Manghat, Head Equities, L&T Investment Management, this month's Money Manager tries to provide some expert insights into personal finance management, taking into consideration current market scenario.
Taking the opportunity of festival time we have included a special feature to highlight the ways in which one can celebrate his/her personal finance. It's an attempt to enlighten our readers about productive ways to channel the festival bonus and help manage personal finance more efficiently.
I would also like to draw your attention to our updated Mutual Fund Top Picks, which are revised by the team of our efficient market research team. So read ahead and s tay updated. Do share your feedback a t [email protected] and let us know your thoughts and opinions on our edition.
Your magazine is now also available on www.magzter.com, a digital newsstand.
ICICIdirect Money Manager October 2016
Editor & Publisher : Abhishake Mathur, CFA
Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey
CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Research Team
Coordinating Editor : Namrata Lonkar
3ICICIdirect Money Manager October 2016
MD Desk.........................................................................................1
Editorial...........................................................................................2
Contents..........................................................................................3
News..............................................................................................4
Stock ideas: Infosys and Jubilant..................................................5
Flavour of the MonthA clear distinction between short-term and long-term
investment and an in-depth understanding of these
phenomena can make the investment decision simpler and
more convenient.........................................................................14
Special featureOptimize your festival bonus by adopting smart investment and personal finance management choices……...................... 31
Ask Our PlannerThe journey of financial management takes a lot of thinking and
planning. Our expert here answers the queries related to
personal wealth management................................................... 33
Mutual Fund Analysis..................................................................... 36
Equity Model Portfolio.....................................................................50
Quiz Time.......................................................................................56
Prime Numbers.............................................................................. 57
Tête-à-TêteMr. Venugopal Manghat, Head Equities, L&T Investment
Management shares his proficient views on investment choices
to be made in current economic environment..........................26
4
Indirect Tax collections up
The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to September 2016 in the current Financial Year 2016-17 show that net revenue collections are at Rs 4.08 lakh crore which is 25.9% more than the net collections for the corresponding period last year i.e. 2015-16. Till September 2016, 52.5% of the Budget Estimates of indirect taxes for Financial Year 2016-17 has been achieved.
Courtesy: TOI
Analysts tracking the IT sector expect slow growth for the software services industry, despite the July-September quarter being the strongest quarter traditionally for Indian IT services companies. According to ICICI Securities the top-five IT services companies are expected to witness their slowest sequential Q2 growth in the past decade.
The gloomy forecast is attributed to the slowdown in healthcare and banking and financial services (BFS) segments, project delays with clients, Britain's impending exit from the European Union, wage increases and cuts in discretionary spending by customers.
The Hindu Courtesy:
IT majors to witness slow growth in Q2
IPOs in 2016 set to hit six-year high
The year 2016 is turning out to be a blockbuster for IPOs with collections set to hit the highest level in six years. Until now, 50 companies have already raised $2.93 billion while another 22 are set to issue shares in the next two months, taking the estimated issuances during the year to $5.8 billion, more than double the $2.18 billion raised by 71 companies last year.
Some of the big ticket listing expected in FY16 include Vodafone, SBI Life Insurance, IL&FS, National Stock Exchange, Bombay Stock Exchange, PNB Housing and GoAirlines. Vodafone which is expected to raise $3 billion could become India's biggest IPO.
Courtesy: TOI
ICICIdirect Money Manager October 2016
5
STOCK IDEAS
ICICIdirect Money Manager October 2016
Infosys – Aspiration to achieve US$ 20 billion in revenue by 2020…
Company Background
Renew and New Strategy…
Infosys is a global leader in
technology services and
consulting. Enable clients in
more than 50 countries to
create and execute strategies
for their digital transformation.
F r o m e n g i n e e r i n g t o
application development,
knowledge management and
b u s i n e s s p r o c e s s
management, Infosys help its
clients to find the right
problems to solve, and to solve
these effectively. Infosys
employs around 199,000+
innovators, across the globe, is
d i f f e r e n t i a t e d b y t h e
imagination, knowledge and
experience, across industries
and technologies that bring to
every project it undertakes.
Under the new CEO, Infosys is
u n d e r g o i n g s t r a t e g i c
transformation and is broadly
emphasising on two themes:
1. renewing the core business,
and 2. innovating into new
business. Infosys has set an
ambitious goal of achieving
$20 billion in revenue by 2020
with operating margins of 30%
and achieving revenue per
employee at $ 80,000. We
believe this transformation is
demanding and aspiration is
s l i g h t l y s t r e t c h e d , b u t
management s t i l l f ee l s
confident of strong execution.
Management emphasised
massive embrace of design
thinking – new – in renewing
existing offerings such as
consulting services, product
engineering and finacle and
committ ing considerable
investments in this area.
Currently, ~8300 entry level
and 160+ senior employees
have been trained on design
thinking while more could
follow. Interestingly, 70% of
the US based consultants have
been trained on design
Embracing new technologies…
6ICICIdirect Money Manager October 2016
STOCK IDEAS
thinking while 1000 people
h a v e b e e n t r a i n e d o n
AI/machine learning with 500
being added every quarter. The
company is hiring aggressively
in new technologies with
headcount up 59% in data
analytics, 31% in infrastructure
services, 22% in security, 13%
in cloud, and 4% in digital in
the past few quarters.
“Renew and new strategy” to
drive growth is seeing some
signs as visible in top accounts
revenue growth with average
revenue per 10 accounts grew
8% YoY to $214 million in Fy16
and large deal wins grew by
45% to $ 2.8 billion. In order to
expand the bandwidth of the
business, recently Infosys has
also split its business into 12-
15 smaller business units each
with revenue of $500-700
million which could help
company in better market
p e n e t r a t i o n a n d c l i e n t
management. Attrition too saw
Strong operat ional metr ics
visible…
moderation in past couple of
years which now stood at
15.7% in Q2FY17 vs 18.7% in
FY14. One of the traditional
lever utilisation too improved
sharply from 70.7% in FY13 to
82.5% by Q2FY17.
Infosys is trading at an
attractive valuation of 14.9x
FY18 EPS with near term
weakness is factored in as it is
trading at 10% discount to
average PE multiple of 16.2x
during FY11-16E. Also its
dividend yield of ~2.5% limits
the downside. We now
anticipate Infosys revenues to
grow at a CAGR of 10.6% with
average EBIT margin of 24.9%
over FY16-18E. Hence, we
m a i n t a i n o u r B U Y
recommendation on Infosys
with target of 1175.
Valuations compelling to BUY…
`
7ICICIdirect Money Manager October 2016
STOCK IDEAS
Stock Data
Key Financials
Valuations Summary
Key risks include:
Global macro environmentInfosys derives maximum revenue from US and Europe, so any macro volatility in respective economies could impact company's revenue growth.
Currency volatilityInfosys derives revenues in terms of currency from AUD (7.5% of revenue), GBP (6%), EURO (9.6%) etc, any adverse currency movement could impact revenue and margin profile.
Net Sales 53,319 62,441 68,931 76,387
EBITDA 14,901 17,079 18,698 20,956
Net Profit 2,369 2,394 9,421 2,374
EPS ( ) 53.9 59.0 62.3 69.1
(YoY Growth) FY15 FY16 FY17E FY18E
`
P/E 19.0 17.4 16.5 14.9
Target P/E 21.8 19.9 18.9 17.0
EV / EBITDA 13.6 11.7 10.4 9.0
P/BV 4.3 3.8 3.4 3.1
RoNW (%) 22.5 21.8 20.7 20.6
RoCE (%) 31.4 30.2 29.0 28.9
(x) FY15 FY16 FY17E FY18E
Market Capitalization 234,723.3
Total Debt (FY16) 0.0
Cash and Investments (FY16) 32,697.0
EV (FY16) 188,746.2
52 week H/L ( ) 1278 / 996
Equity capital 1,144.0
Face value 5
MF Holding (%) 6.6
FII Holding (%) 40.4
`
`
8ICICIdirect Money Manager October 2016
STOCK IDEAS
ANALYST CERTIFICATION We /I, Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report.
It is confirmed that Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.
It is confirmed that Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
9ICICIdirect Money Manager October 2016
STOCK IDEAS
Jubilant Lifesciences – Waning debt concerns +FCF generation = rerating
Company Background
Incorporated in 1978, Jubilant
Life Sciences (JLS; formerly
Jubilant Organosys), is a mid
sized integrated chemicals
turned pharmaceuticals player.
It started as a full fledged
chemical company by entering
the vinyl acetate monomer
(VAM) business in 1983.
B r o a d l y, t h e c o m p a n y
operates through two business
segments- Pharmaceuticals
(46% of the turnover) and Life
Science Ingredients (54% of
t h e t u r n o v e r ) . T h e
Pharmaceuticals segment
consists of sub segments such
as 1) Generics- APIs and
formulations, 2) Specialty
Pharma- Radio Pharma,
Allergy Therapy products and
Contract manufacturing (CMO)
of Sterile injectables, 3) Drug
discovery and development
solutions. EBITDA margins in
Pharmaceuticals segment are
normally much higher due to
presence of formulations and
specialty pharma. The LSI
segment consists of sub
segments such as as 1)
Advanced intermediates and
Specialty Ingredients, 2)
Nutrition Products, 3) Life
Science Chemicals. This
segment caters to more kind of
rout ine customers wi th
committed requirements.
Because of the commodity
nature, the margins in this
segment are relatively low.
Pharmaceuticals business has
grown at a CAGR of 14.5%
between FY11-16 driven by the
Gener ics and Spec ia l ty
pharma. However pricing
pressure in the drug discovery
b u s i n e s s a n d s o m e
formulations in the US have
put consistent pressure on the
EBITDA margins of the Pharma
business. Add to this, the
expenses at the US based
Spoken facility to address the
USFDA warning letter and the
subsequent postponement of
shipment has deteriorated the
P h a r m a c e u t i c a l s b u s i n e s s
segment getting back to normal
10ICICIdirect Money Manager October 2016
STOCK IDEAS
financials further. However, off-
late the margin scenario is
getting back to normal on the
back of generic launches in the
US, launches in the Specialty
pharma space and successful
resolution of the two CMO
facilities. We expect Pharma to
grow at CAGR of 17.2%
between FY16-19E to | 4912
crore.
The Life Science Ingredients
(LSI) caters to more kind of
rout ine customers wi th
committed requirements.
Because of the commodity
nature, the margins in this
segment are around 15-16%.
The business has grown at a
CAGR of 7.7% between FY11-
16. Off-late the company has
adopted calibrated approach
thereby the focus will shift to
prof i table products and
defocus on less lucrative / loss
making sub-segments. We
expect LSI to de-grow at CAGR
of 2% between FY16-19E to |
2589 crore.
LSI segment mostly commoditised
but offers stable returns
Debt no more a fear factor
In its pursuit for building
capacities and create multiple
revenue heads the debt
situation had complicated over
the years. As most of the debt
had been US$ denominated,
the sharp | depreciation has
worsened the debt situation
further. After hitting the trough
in FY15, things have started to
change especially in Fy16
w h e r e i n t h e c o m p a n y
registered best ever EBITDA
margins in the last ten years.
W i t h i m p r o v e m e n t i n
operational performance, free
cash flow (FCF) situation has
improved markedly. While the
Net D/E ratio improved to 1.4x
from 1.8x in FY15, the
Debt/EBITDA has improved to
3.5x from 7.0x. As the capex
cycle moderates in medium
term, the company expects to
utilise maximum FCF for debt
repayment. We expect the
company's Net D/E ratio further
go down to 0.4x by FY19E from
1.4x in FY16 and Debt/EBITDA
ratio to 1.3x from 3.5x in Fy16.
Radiopharma segment (23% of
Margin accretive businesses on a
faster track
11ICICIdirect Money Manager October 2016
STOCK IDEAS
Pharma business) grew 44%
between FY12-16 to | 713
crore. Jubilant is the only listed
Indian company which has
strong exposure in the niche
Radiopharma segment. We
believe, recently USFDA 505
(b)(2) approval for Ruby-fill
would be a key milestone for
the company. Apart from the
US, the company has received
Ruby-fill approval in Germany,
Switzerland and Canada. We
expect this segment to grow at
27% CAGR over FY16-19E to |
1 4 4 8 c r o r e . O v e r a l l
Pharmaceutical business to
grow at 21% to | 2873 crore on
the back of strong growth in
R a d i o p h a r m a b u s i n e s s
followed by CMO and generic
sub-segments. We expect
Radio pharma's contribution to
Pharma and total revenues to
improve from 23% and 12% in
FY16 to 29% and 19% by FY19.
Similarly the EBITDA margins
are likely to improve to 26.3%
by FY19 from 22.0% Fy16
given the tilt of product mix
towards margin accretive
businesses. With improved
visibility led by improvement in
product approvals and better
segment mix we expect
continuous improvement in
free cash flow generation. Our
target price is | 795 base on
12x FY19E EPS of | 66.2.
Valuation is still substantial
discount to peers pharma
companies due to blended
business model (47% of the
revenues from commoditised
LSI segment) besides volatile
past.
Key Financials
( Crore) FY16 Fy17 FY18E FY19E ` E
Revenues 5,802.3 6,000.9 6,641.9 7,374.8
EBITDA 1,277.8 1,544.0 1,746.2 1,941.3
Net Profit 431.5 699.4 871.9 1,054.2
Adjusted EPS ( ) 26.0 43.9 54.7 66.2`
12ICICIdirect Money Manager October 2016
STOCK IDEAS
Valuations Summary
Stock Data
(` crore)
Key risks include:
Debt still a key concern
Increased USFDA scrutiny
The company has a gross debt of | 4534 crore as on June 2016. Of this, rupee debt is | 2047 crore while foreign currency debt is | 2487 crore. The debt-equity ratio for Fy16 stood at 1.6x.
The company 's US based facilitates Montreal facility and Spokane facility have received warning letters from USFDA in FY13 which were cleared by USFDA in FY14 and Fy15 respectively. The fallout from the
impending patent cliff is the increased intensity of the USFDA scrutiny. As increasing number of drugs were coming out of patent protect ion, the inspect ion intensity for hitherto unknown players was bound to increase to comply with required quality standards. Even the pattern of inspection has changed with more surprises and greater focus on data integrity besides quality. Even established players had to contend with the USFDA embargo besides scores of other Indian companies.
P/E 23.7 14.6 11.7 9.7
Target P/E 29.4 18.1 14.5 12.0
EV / EBITDA (x) 11.3 8.9 7.4 6.3
Price to book (x) 3.5 2.9 2.3 1.9
RoNW (%) 14.2 19.7 20.0 19.6
RoCE (%) 12.0 15.9 17.6 19.0
(x) FY16 Fy17 FY18E FY19E E
Market Capitalization 10244
Total Debt (FY16) 3752
Cash (FY16) 8.4
EV 4273
52 week H/L (`) 676 / 273
Equity capital ( ` Crore) 16
Face value ` 1
MF Holding (%) 0.0
FiII Holding (%) 26.7
13ICICIdirect Money Manager October 2016
STOCK IDEAS
ANALYST CERTIFICATION We /I, Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. P ast performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
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FLAVOUR OF THE MONTH
Which investment path should you choose? Short-term or long-term?
Every investor, on the path of his investment journey, comes across the tug o' war between short-term and long-term investment at least once. They differ from each other in more than one aspect. There is a difference between their risk-return ratio, tax implications & impact of inflation on each of them. An investor, in order to walk on his investment path smoothly, must figure out which horizon is suitable for him first. To know that and more about these two horizons keep reading…..
ICICIdirect Money Manager October 2016
Managing personal finance eff iciently means taking immediate as well as distant needs into consideration. Since each financial need seeks different f inancial planning the investment choices for them too differs. And time, out of all the aspects, plays a key role in making these choices. Thus a clear distinction between short-term and long-term investment and an in-depth understanding of these phenomena can make the investment decision simpler and more convenient.
Short-term investment:Any investment which is held for less than three years plus allows easy cash accessibility can be called as short-term investment. Meaning, an equity stock held for 6 months and a fixed deposit with the tenure of 3 years both are short-term investments as long as they can be liquidated
immediately.
Long-term investment:The investment which is started with the purpose of substantial returns over long period of time (more than 3 years) is categorized as long-term investment. These type of investments may or may not be easily liquidated and are designed to provide additional income over primary sources.
Objective of investmentFor any investor, irrespective of his financial experience and investing-type, there are three main objectives for starting an investment. Growth, safety and returns.
By definition, investment means gaining more than invested amount so an investor looks forward to pick a tool that can generate wealth over the period of time. But while investing the money, his concern of its safety remains of
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high significance thereby safety being second important objective. And last but not the least is the rate of return. Growth alone is not enough to meet up to an investor's expectations. Speed at which the growth is occurring plays equally crucial role in many investors' eyes.
Risk factorRisk associated with short-term investment is that of purchasing power risk, also known as inflation risk. This means returns of particular inves tment wi l l not be sufficient in future if inflation weakens its worth. The impact of inflation slows down the growth of money hence purchasing power of that amount is adversely affected. Suppose you have invested Rs. 10,000 in a fund with 10% rate of returns. Now, if the inflation rate goes 3%, with every Rs. 100 p roduced on your investment its value becomes that of Rs. 97 and Rs. 94 the next year.
Since the short-term investor is more worried about return of principal amount than returns
on principal amount, the value of his investment is not as worth as it would have been before inflation breached in the economy.
The risk of inflation affects the long-term schemes just as much but the extended duration of regular investment averages out the returns and offer inflation-beating results. L o n g - t e r m i n v e s t m e n t , however, are highly influential during volatile market times as compared to short-term plans.
Short-term investment options:Fixed Deposit SchemesT h e t r i e d - a n d - t r u s t e d traditional method of keeping money in a Fixed Deposit (FD) scheme is one of the most credible short-term investment tool. FDs are the vehicles where one-time amount is invested for a fixed period of time. The amount to be paid on the maturity of scheme is fixed and known to the investor. The rate of interest differs from bank to bank depending upon investor's choice of tenure and amount of investment.
Most FDs range between 7 days to 10 years and their
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ICICIdirect Money Manager October 2016
interest rate usually ranges from 4% to 9%. Although withdrawals before maturity date are not allowed, one can do so by losing up some share of interest to the bank. Investing in fixed deposit for short-term provides easy access to cash to attain immediate financial goals or cover up for emergencies.
Fixed deposit schemes also have an added advantage of overdraft facility wherein an individual can take personal loan against his deposited amount at relatively lower interest rates and make do with his immediate financial needs. Each bank provides certain percentage of pr inc ipa l amount and accrued interest for the account holder to borrow.
Fixed Maturity Plans (FMPs)This is a close-ended debt fund. The amount is deposited one time for a fixed period of one month or extending up to 5 years. These are popular among debt market followers for two main reasons - capital protection and immunity to interest rate volatility.
The capital invested in FMPs mostly goes into corporate deposits (CD), money market instruments, commercial papers and similar debt-concentrated plans. Equity sector is purposely kept out of inclusion thus safeguards funds from radical market fluctuations.
The fund manager of FMP directs investor's money into debt instruments that are set to mature at the same time of FMP's maturity. The fund cannot be liquidated before the maturity and trading through stock is the only route to exit it. The indexation benefit is an added advantage for the FMP holder.
Liquid Funds This type of investment tool concentrates on investing into debt and money market instruments like certificate of deposit, commercial papers, government bonds, treasury b i l l s e tc . The s tandard investment period for any liquid fund is up to 91 days.
Since access to cash is one of the primary concerns for most of the short-term investors, liquid funds may seem most
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ICICIdirect Money Manager October 2016
suitable in this respect because there is no lock-in period and one can withdraw any time before the residual maturity of the fund. Another remarkable feature of liquid funds is that they have no or very low entry and exit load which makes the investment decision even more convenient for the investor.
As the focus of the liquid fund is investing in fixed income securities the risk of interest rate volatility affecting returns is relatively low. In fact, returns offered by liquid funds are considered one of the bests during inflation time. This is because, central bank keeps the interest rates high during the inflation. In order to manage national financial stability, liquidity of assets is also squeezed by the RBI which turns out favorable for liquid funds and thereby giving healthy outcomes at the end of the tenure.
Ultra short-term fundsUltra short-term funds are the mutual fund investments that focus upon fixed income securities. The investment period usually ranges between
three to nine months. These are immune to interest rate changes but unlike liquid funds, returns of ultra short-t e r m f u n d s a r e o f t e n significantly affected by market fluctuations.
Short-term debt funds Debt mutual funds which primarily pools money into debt securities with maturity up to 3 years. The average maturity of short-term debt fund is larger than that of liquid and ultra short-term funds. This option is best suitable for t h e i n v e s t o r s s e e k i n g reasonable returns while avo id ing equ i ty market volatility altogether.
Taking in account recent repo rate cuts, accrual funds (debt mutual funds consisting high yielding bonds and securities) can give more than 8 -8.5 % annualized returns. Investors with low risk appetite and short-term horizon orientation make a go for short-term debt funds.
Recurring deposit (RD)It is a term deposit started with the purpose of saving money at frequent intervals to earn
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modest interest at the time of maturity. The rate of return, like fixed deposit, is pre-decided and known to the investor at the beginning of investment. The only difference between an FD and recurring deposit is that RD allows flexibility to put money in small amounts on timely basis rather than investing accumulated funds at one go.
Banks levy 1% - 2% penalty over interest rate upon pre-mature liquidation of the RD. The minimum deposit term to open a recurring account is 6 months and can go up to 10 years. Pledging the balance amount in RD as collateral or claiming loan over the invested amount is another added advantage of this short-term investment tool.
Long-term investment options:Long-term bank FDBank FDs can be an ideal investment tool when one is looking for 'guaranteed returns' over the period of time while ensuring protection of capital as well. This traditional tried-a n d - t r u s t e d m e t h o d o f growing money has been popular among salaried class
especially for its secured and stable returns.
B a n k s p r o v i d e d e p o s i t insurance to an FD above Rs.1, 00,000, making this tool all the more credible for moderate risk takers. Moreover, the interest rate of a long-term FD is higher than short-term fixed deposit.
Corporate FDsLeading corporate firms also provide a similar option- corporate f ixed deposit/ company deposit. Interest rate is decided by the company and does not fluctuate during the t e n u r e . H e r e , p a r t i a l withdrawals are restricted and premature closure can only be availed after paying penalty charges. Their interest rate is usually higher than the bank FDs but security of the fund moves parallel with the performance status of the company.
Public Provident Fund (PPF)Another popular long-term investment tool that has been popular amongst majority of Indians for its reliable returns and consistent affirmative p e r f o r m a n c e i s p u b l i c
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ICICIdirect Money Manager October 2016
provident fund. PPF is a g o v e r n m e n t b a c k e d investment vehicle primarily promoting savings habit and helps to generate wealth by offering reasonable interest rate.
The standard tenure for any PPF account is 15 years. Maximum extension of 5 years is allowed after the fifteen years timeline. Although partial premature withdrawals and overdraft facility can be availed during the PPF tenure, complete amount can be withdrawn only at the time of m a t u r i t y. T h e e x i s t i n g overnment directive suggests annual deposit of at least Rs. 500 in an individual's PPF account.
Post Office Savings Scheme (POSS)This is a fine investment option for small amount savings with long-term horizon. Post offices across India provide various plans like Post Office Time Deposit, Monthly Income Scheme, National Savings Certificate, National Savings Scheme, and Kisan Vikas Patra. National Savings Certificate
(NSC) is considered relatively a better option due to its guaranteed substantial returns over the horizon of ten years.
Unit Linked Insurance Plans (ULIP) ULIP is an investment avenue that aims at the target of wealth creation while providing life cover to the investor. It's an insurance cum mutual fund product where the amount paid in the form of premium is directed towards capital market. Thus, unlike most insurance plans, ULIPs give market-linked returns and help to build corpus along with life protection cover.
Investor can avail both partial and complete withdrawal before the plan matures. If market volatility gives you second thoughts about equity funds, there's an option to switch to the debt instruments and vice versa. This flexibility bridges the gap between risk tolerance and expectant returns. The investor is free to select any type of fund (equity, debt or mixed) based on his/her goals and experience. The investor also has the
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ICICIdirect Money Manager October 2016
liberty to choose method of premium payment i.e. lump sum or regular intervals.
Equity/stock History shows that equity has done exceptionally well over the long period time in Indian as well as international m a r k e t s . D i r e c t s t o c k investment has gradually outperformed returns of other asset classes in the last decade. Although considered high-risk investment vehicle, it has given average annualized returns of around 16% against the benchmark index (Nifty) over the period of last fifteen years which make them an essential part of an investor's portfolio when thinking about a long-term horizon.
Long-term mutual fundFor those of us who want to invest in stock market but are hesitant due to the risk stocks bring along, mutual fund investment is an apt vehicle that pools money in equity while balancing risk and returns. Mutual funds invest into equity, debt, money market instrument or a combination of those. This diversification is essentially
responsible for minimizing the market associated risk.
Professional managers, after detailed study and research, create a portfolio that can best suit an investor's needs. Their experience and knowledge about financial market only adds up to the credibility of fund. A team of research experts constantly works to analyze performance and prospects of the assets and securities available in the market.
There are wide range of mutual fund products available today that can fulfill different goals of investors wi th di f ferent investment profile. Selecting a right mutual fund is a decision based on various factors like purpose of the investment, tenure, risk tolerance of the investor etc. Once all these criteria are gauged, selection of mutual fund becomes a lot m o r e c o n v e n i e n t a n d reasonable.
Equity mutual funds: Also known as growth funds, these funds invest in stock exchange listed companies' shares. They are started mainly with the
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ICICIdirect Money Manager October 2016
p u r p o s e o f c a p i t a l appreciation. Investor's money is directed towards companies that are shor t l i s ted by experienced fund managers and the returns are paid off in proportion with performance of the firms enlisted under that mutual fund.
Debt funds: These invest in fixed income securities like government or corporate b o n d s , t r e a s u r y b i l l s , ce r t i f i ca te o f depos i t s , debentures etc. They provide relatively steadier growth and regular income to the investor. Investing in such funds for the long-term is a way to build wealth at a steady pace without having to deal with volatile equity market.
Balanced funds: Balanced funds invest in both equity and debt funds. These are ideal for investors with moderate risk appetite. Equity and debt together put forth stable yet substantial growth.
G i l t f u n d s : T h e s e a r e government backed funds that invest only in State and Central government's securities. Since the instruments chosen by gilt
fund managers have sovereign guarantee their returns are less likely to get affected by market fluctuations.
Sector funds: As the name explains, these plans invest in one particular sector of the m a r k e t . F o r e x a m p l e , technology sector fund invests in big IT firms listed on stock exchange. Real estate funds, utility funds, precious metal funds, healthcare funds, f inanc ia l funds, natura l resources funds are some of the sector funds commonly known to investors.
Index funds: An index fund tries to replicate security holdings as per selected index proportion. These funds track the performance of a particular index and returns/dividends are reflected by this index outcome.
Tax-saving funds: These type of funds have special tax concessions under Income Tax Act of India. For e.g.: An investor holding ELSS ( Equity Linked Savings Scheme) funds avails tax exemption under section 80C of Income Tax Act of India.
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ICICIdirect Money Manager October 2016
Tax implications Tax is an extremely essential component of our personal f inance and cannot be overlooked while making any investment decision. Returns on short-term and long-term investments have different tax implications and are applicable to each individual separately depending upon which tax bracket he falls in.
The interest earned on fixed depos i t s and recur r ing deposit, both short-term and long-term, is considered as taxable income. The bank
deducts 10% TDS (Tax Deducted at Source) from every deposit holder (who is also a tax payer) if the accrued interest amount exceeds Rs. 10,000 in a financial year.
An individual investing in Fixed Maturity Plan avails indexation benefit. But since these are debt-oriented investments the capital gains earned through FMPs are taxable. Indexation only helps to lower the tax burden and not eliminate it.
Returns on liquid funds, short term debt funds and ultra short- term funds receive same
Source: jaagoinvestor
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ICICIdirect Money Manager October 2016
tax treatment as all of these are held for not more than 36 m o n t h s a n d t h e r e b y producing short-term capital gains which taxable under Income Tax Act of India.
The government backed long term investment vehicles like Public Provident Fund, Post Off ice Savings Scheme, National Pension Scheme and
ULIPs are widely popular for their tax-efficient returns. Interest earned on PPF is tax free. NPS holder can avail tax deduction up to Rs. 50,000 under section 80 CCD 1 (B) of Income Tax Act. This benefit is exclusive of the existing limit of Rs. 1.5 lakhs tax deduction (u/s 80CCE)
Returns earned on mutual fund investment that is held for less than 36 months are considered short- term capital gains and for the investment held for more than 36 months (except equity) they become long- term capital gains.
An equity mutual fund or a balanced fund with at least 65
Source: Scripbox
per cent equity share, if held for more than 12 months it's taken as a long-term capital asset and its returns long-term capital gains. These returns are absolutely tax-free. If you liquidate equity inves tment be fore 12 months, 15% income tax is levied upon the respective returns.
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ICICIdirect Money Manager October 2016
For non-equity mutual funds, short-term capital gains are taxed as per the investor's tax bracket and long-term capital
gains are charged at base rate of 20% income tax, with indexation benefit.
Gains
Long-Term
Gains Gains
Debt
Funds
At tax slab
rates of the
individual
At 20% with
Indexation At tax slab
rates of the
individual
10% without indexation
or 20% with indexation
whichever is lower
Equity
Funds
15% Nil
15%
Nil
Short-Term Short-Term Long-Term Gains
Source: Cleartax
Goal-oriented tenureTenure of the investment is a
significant factor of the
investment, and the one that is
subjective. An investment
instrument may not serve the
same purpose for two different
investors. The key to right
investment period is in
analyzing the purpose, the goal
of an investment.
Real estate (long-term)Purchasing the dream house or
b u y i n g a p r o p e r t y f o r
investment purpose, both
goals require strong corpus to
get over the down-payment
phase. Making f inancial
arrangement through long-
term investment avenues is the
ideal solution to attain this
goal. Equity mutual funds that
offer considerable returns over
the period of time helps in
building substantial amount by
the time you are ready to apply
for home loan.
Fund protection (Short-term
and long-term)Security of money is the
topmost concern of any
individual and it can be
attained by both short-term
and long-term avenues.
Investments in FDs, PPFs, NPS
and all other government
supported or debt-oriented
vehicles are epitome of
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ICICIdirect Money Manager October 2016
secured investment channels.
A l t h o u g h e q u i t y - b a s e d
instruments are exposed to
m a r k e t r i s k s p r o p e r
diversification and market
research can lead to a wise
inves tment cho ice tha t
balances security and returns.
Rainy day fund (short-term)Emergencies and financial
crisis do not come knocking on
the door. A resourceful
investor is the one who is
considerate of all times and
look after the emergency funds
even during financially wealthy
period. Prepare your rainy day
fund by investing small
amounts on regular basis in
short-term investment tools
that are easy to liquidate and
without penalty or exi t
charges.
Retirement planning (long-
term)Ideally, a person should start
saving and investing for his
retirement right from his early
earning days. It takes number
of years to build wealth that
can suffice to maintain same
l i festyle; even more to
increase it's worth. Thus
investing in a vehicle that
y ie lds inf lat ion-adjusted
returns for a longer period of
time is the wisest solution to
retirement planning.
Child's future (long-term and
short-term)Financial goals like payment of
school fees and small family
vacation are short-term goals
w h i c h c a n b e f u l f i l l e d
conveniently by opting for low-
r i s k , m o d e r a t e r e t u r n s
investment options. Whereas
bigger goals like higher or
abroad studies, marriage need
proper planning and economic
execution. Thus the portfolio
should include investments
that favor capital appreciation
over the period of time.
Depending upon the goal and
object ive per iod of the
investment may differ from
person to person. The key is in
deciding the right term for the
s e l e c t e d g o a l . A w e l l -
catalogued portfolio that has
the perfect balance of risk and
return and the one that suits
investor's needs and available
resources is the ultimate
solution to healthy personal
finance.
26
Tête-à-tête
Indian economy is in the midst of a gradual recovery
We are approaching the earnings season with the expectations of a modest pickup in aggregate earnings. We believe the earnings outlook is improving every quarter and this quarter will be better than the previous one, says Venugopal Manghat, Head Equities, L&T Investment Management, in an interview with ICICI Direct Money Manager. Markets have recovered strongly post the sharp correction seen early this year, he adds. Excerpts:
Venugopal Manghat,
Head Equities,
L&T Investment Management
ICICIdirect Money Manager October 2016
Q.
A.
Can you tell our readers how you approach investing and your investment philosophy?
We follow a bottom up approach to stock selection. In g e n e r a l , g r o w t h a t a reasonable price is what we look for. The Indian market has 5,000 companies listed but not all qualify to become a part of the investment universe. We follow our proprietary process
called GEM - Idea Generation (G), Evaluation of Companies (E) and Portfolio Manufacturing and Monitoring (M). Herein we actively look for new ideas which could come from sources such as investment team meetings, external research, meetings with company management / competitors / suppliers, industry experts, regulators, etc. These ideas are then filtered using various filters such as liquidity, market capitalisation, ownership, etc t o s h o r t l i s t i n v e s t a b l e c o m p a n i e s w h i c h a r e thoroughly evaluated by the analyst , based on their profitability and attractiveness of business, competitive positioning, balance sheet strength, management track record, corporate governance and valuations. The fund m anager has c o m p l e te responsibility for portfolio construction and stocks may
27
Tête-à-tête
ICICIdirect Money Manager October 2016
be bought in d i f fe ren t portfolios depending on the type of stock, objectives of the scheme managed, liquidity etc. The stocks bought in the p o r t f o l i o a r e r e v i e w e d periodical ly and as the portfolio manager, one may decide to exit a stock on achieving the price target or for o ther reasons such as weakening business prospects o r i f t h e r e a r e b e t t e r investment opportunities elsewhere. The portfolios are monitored continuously to ensure that they are positioned to meet their investment objectives.
What are some of the important factors investors should keep in mind before investing in equity mutual funds?
A successful long term portfolio is built with intent to create wealth and not take small profits. Accordingly, an investor should assess his risk profile, his goals and the various time periods that he needs the corpus for. As such, choosing a right investment plan is very critical if you want a lump sum closer to your goals and at a higher rate over inflation. The first step is
Q.
A.
planning; how much is required for the goal which could be chi ld 's school education, higher studies, wedding etc. Start early - the sooner you start saving, the longer your investment has time to grow. Just like the early bird gets the worm, investing early and when you have time on your side, you could benefit f r o m t h e p o w e r o f compounding and the length of time until you need the money either for your child's education or marriage. A key tool which allows you to invest regularly, smoothen out market volatility and benefit from power of compounding is S y s t e m a t i c m o n t h l y investments which could help in building up a sizeable corpus over the years.
What are your expectations from the H1 FY17 results?
We are approaching the earnings season with the expectations of a modest pickup in aggregate earnings.
We believe the earnings outlook is improving every quarter and this quarter will be better than the previous one. Sectors such as autos, cement, metals, consumer durables etc
Q.
A.
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Tête-à-tête
ICICIdirect Money Manager October 2016
are expected to perform relatively better. Revenue growth could continue to improve on a quarter on q u a r t e r b a s i s . T h e improvement in operating profit margins seen over the last few quarters is expected to sustain and this will be further followed up by lower financing costs. Overall, we could expect a modest growth in earnings in the quarter and the second half of the year to be much better.
From here on, which equity segment (large cap, midcap or small cap) do you expect to perform well? How should investors view investments in these segments?
As a fund house, we are market cap agnostic. We see each idea based on the potential that exists. In the last few months, small and mid caps have seen lot of inflows and many of these companies have shown reasonable growth and have moved from small to midcap and from midcap to large cap. In any market, across market caps and across various sectors, you will always find some stocks which are looking expensive and some that are cheap. Instead of being
Q.
A.
o b s e s s e d w i t h m a r k e t capitalization, investors would do well to focus more on assessing businesses on a stock specific basis and /or remain invested in funds which are good at doing that.
From an investor standpoint, two things matter, the right stocks and the ability to remain invested for a longer term. As I mentioned earlier, a number of mid / small cap stocks have gone up significantly and the mid / small cap indices are at a premium to large cap currently. Logically, therefore, these overvalued mid and small cap stocks can correct if growth expectations are not met. Having said that, liquidity driven rallies are unpredictable and hence the rally may continue for some more time before it fizzles out. In the longer term, mid and small cap stocks have done better than large caps if stock selection has been good.
What according to you are some of the key risk facing the Indian markets?
In the calendar year, both FII and domestic flows have kept t h e m a r k e t m o m e n t u m positive and we have seen
Q.
A.
29
Tête-à-tête
ICICIdirect Money Manager October 2016
these flows across stocks whether large, mid or small cap. We have also been b e n e f i c i a r i e s o f l o w commodity prices. At this point, any change of trend in global equity markets and / or FII flows could be a risk to the markets. In the next two months, there are events in the global landscape that can potentially impact the risk appetite of investors and therefore fund flows, even if temporarily. Also from a valuation point, markets are not cheap. Earnings growth could still take time to come back into the system.
What are the sectors that investors should look at currently and which sectors are a no-no?
We are more positive on cyclical sectors as we believe that the Indian economy is in the midst of a gradual recovery. Within this space, we b e l i e v e c o n s u m e r discretionary could be the first to move given the monsoon, increase in salaries, etc. In the infrastructure basket, the sectors that are beneficiaries of government spending and increased government focus are likely to do well, which
Q.
A.
include construction, urban and rural infrastructure and companies in sectors like railways, defence etc. On the o t h e r h a n d , l o w b e t a , defensive sectors like FMCG, pharmaceuticals etc are seeing slowing growth and are at high valuations. Export oriented sectors are a lso under pressure due to a slowing global economy.
What is your short and long term view of the markets?
Markets have recovered strongly post the sharp correction seen early this year. Global markets have been supportive and have done well in this period. Improvement in commodity prices, more monetary st imulus from various central banks, a belief that the US Federal Reserve will not hike interest rates in this calendar year, have all contributed to a strong recovery in emerging markets, especially in the beaten down commodity producers. This scenario continues even as commodities have stabilised after a rally. But there are now higher expectation of the US economy having a rate hike t h i s y e a r, p r o b a b l y i n
Q.
A.
30
Tête-à-tête
ICICIdirect Money Manager October 2016
December. The scenario around Brexit that will unfold over the next few months may a l s o r e s u l t i n g r o w t h expectations for the world economy being reduced and some increased currency volatility. Hence in the short term, one would advise caution.
The Indian market had more reasons to rally in the last few months compared to global markets given a reasonably good monsoon, the approval
of GST and the expectation of ththe 7 Pay commission dole
out. The macro economic scenario seems to be getting better, with the economy on a g radua l recovery pa th , inflation down meaningfully, interest rate reducing, deficits under control, etc. Earnings growth is also expected to pick up which should support markets going forward. Hence the medium to long term view on the market is positive.
CL03699This article (including views expressed herein) solely provides general information about the markets and comparisons made, if any, are only for illustration purposes. The information in this article should not be construed as providing investment advice and does not seek to address specific investment objectives, financial situations and particular needs of any specific person who may receive this information. The recipient of this article, therefore, should rely on his/her investigations and obtain professional advice (legal, tax and financial) before taking any investment decision, and should understand that statements made herein regarding future prospects may not be realised. Recipient should also understand that any reference to the securities/ sectors / indices/ schemes, etc. in the document is only for illustration purpose. Neither this document nor the units of L&T Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.
31
SPECIAL FEATURE
ICICIdirect Money Manager October 2016
Celebrate your personal finance
As the time to celebrate festival comes near, the dilemma of using festive bonus grows even stronger. So which is the right thing to do with this windfall income- saving or spending? The answer lies in the right balance of both.
Since spending is an inevitable aspect of festivals fair share of bonus must be directed towards it. But there is a very thin line between spending and splurging. As long as the expense is made thoughtfully on only necessary things, the balance is maintained.
However, the lump sum received is an opportunity to improve your personal finance and keeping it aside for saving and investing purpose is the ultimate key to ideal balance. Saving the bonus amount in instruments that can optimize the returns will, in fact, increase your purchasing power in the future.
Best of bonusFestivals are the occasions to bring home prosperity and success. So, here are some choices listed for bonus-
recipients to make good use of this extra money. For those who have not, these still are promising financial options that can give prompt boost to your personal finance.
Prepay loanThe loan EMIs are major eaters of your monthly income and the interest rate that credit card companies and personal loan lenders charge disturbs one's cash flow considerably. So the first thing to do is to get rid of such loans.
If the bonus amount is not e n o u g h m a k e p a r t -prepayment and unload some of the burden. Prepaying the debt also strengthens your credit score. Besides, there's nothing more rejoicing than a debt-free festival.
Set an emergency fundMedical crisis, house repairs, car break down and number of other things can pop in this list. Having an emergency fund set a s i d e t o m e e t t h e s e unexpected problems is the smartest way to tackle financial crunches. There are multiple short-term as well as long-term
32
SPECIAL FEATURE
ICICIdirect Money Manager October 2016
investment options where you can deposit funds on regular basis or even at a go that serves dual purpose of returns over depos i t and easy a c c e s s i b i l i t y w h e n e v e r needed.
Your advanced preparation saves the trouble of liquidating rigid assets at the last moment and paying bulky penalty over their premature withdrawals. Which makes setting an emergency fund more sensible and practical step towards personal finance celebration.
Start gold investmentGold has been the most celebrated investment in almost every Indian household especially during festivals and celebrations. But a lot of us are unaware that there are viable options, other than making jewelry, which maximizes the value of yellow metal by investing via alternate route.
One can invest in Gold Exchange Traded Fund (ETF), a mutual fund that allows systematic investment plan (SIP) mode to invest in gold. Sovereign Gold Bonds is an alternative for holding physical gold initiated by Government
of India. The interest rate they bear of 2.75% is paid semi annually to the bondholder. Gold Monetization Scheme, is a n o t h e r g o l d - b a s e d investment that offers tax benefit along with regular payouts to the investor.
Think of a tax-breakWe are in the middle of a financial year. These are suitable times to start thinking about income tax planning and invest in instruments that can avail you tax benefits by the time tax deadline hits the door. Insurance, PPFs, NSCs are some of the commonly known t a x - s a v i n g i n v e s t m e n t vehicles. Additionally, you can also start an Equity Linked Savings Scheme (ELSS) that comes up with a lock-in period of 3 years but offers pre-tax returns up to 14-16%.
Just remember, whatever financial decision you make it should s t rengthen your personal finance and lift it up a notch higher. Festivals, after all, are supposed to bring joy and welfare in our lives. So take this opportunity to enhance your personal wealth management and spark the festival zeal with it.
33
ASK OUR PLANNER
ICICIdirect Money Manager October 2016
Personal finance choices to make in current economic scenario
Q.
A.
My mother has retired 2 years ago and received a lump sum Rs. 20 lacs at the time of retirement. She wishes to set up a fund for her loved ones. What are the potential options to invest or direct this money so she can pass on her wealth to her family and loved ones?
- Prince Kumar As you have mentioned that
this amount has to be entirely used for generating wealth and passing as an estate, we assume that your mother's regular expenses are taken c a r e o f t h r o u g h o t h e r resources. In such case, your mother can take more risk and look to invest this amount into equity mutual funds, assuming a term of around 20 years (till her expected lifetime).
However, instead of investing the entire amount as a lumpsum into equity mutual funds, she can invest the entire amount into 4 different debt mutual funds for Rs.5 lakh each and then start a Systematic Transfer Plan (STP) around Rs.20,000 p.m. from each fund to a different equity mutual
fund. This will ensure that the investment into 4 equity mutual funds are staggered over a period of next 2-3 years, thereby averaging the cost of investment.
Also, while writing her Will, your mother can specifically mention the names of these funds / folio no. and the details of the beneficiaries to whom she wishes to pass on the money invested into these funds.
I have a pension policy due to mature in 2018. I would like to know how can I purchase annuity from a different insurance company on maturity as the annuity of the company in which I hold my policy is very low for the option return of funds after death whereas the other company is providing more than that.
- Jeffry Fernandes Generally, you have to buy
an annuity from the same insurance company from which you have bought the policy. However, some of the policies issued by insurance companies provide you an
Q.
A.
34
ASK OUR PLANNER
ICICIdirect Money Manager October 2016
open market option to choose the annuity provider at the time of vesting. (For example, some pension policies issued by ICICI Prudential in the past have offered this benefit). Through this option, you can choose a different company other than your existing insurer for buying an annuity. You can refer your policy document for details regarding the same and if such option has been provided, you c o n t a c t y o u r e x i s t i n g i n s u r a n c e c o m p a n y t o understand the process for the same.
Please note that once you decide on an annuity and start receiving the same, the annuity rate fixed at the beginning will remain constant for your entire lifetime and will not change. The annuity rates are generally fixed based on the prevailing interest rates in the market. If the interest rates are low in the m a r k e t a t t h e t i m e o f purchasing an annuity, it's prudent to wait and watch before finalizing on when to start your annuity, as some companies provide you the option to defer the time from
when you can start your annuity.
I am a 32 year old Indian banker. I have started saving for my retirement since I was 25. I have a PPF, NPS account and a fair amount invested in LIC policy. I have also scheduled small SIPs in diversified mutual funds for ten years. Will this all suffice for a tension-free retirement? If not, what else? Please share your views on the same.
- Reena Patel It's good to note that you
have started investing very early for your retirement. You have also invested into a mix of instruments. You can look to invest more into equity oriented investments, as your retirement is fairly long time away.
To understand whether the quantum of investments you are making is sufficient, you will have to make a financial plan for yourself through a financial planner, who can provide you a detailed plan. If you are fine with a rough figure, you can check out r e t i r e m e n t c a l c u l a t o r s available in the internet.
To give a rough idea -
Q.
A.
35
ASK OUR PLANNER
ICICIdirect Money Manager October 2016
Assuming you are going to retire in the next 25 years, with an expected lifetime of 75 years, you will require a r e t i r e m e n t c o r p u s o f approximately Rs.3.90 crore to fund expenses of Rs.4 lakh p.a. ( i n today ' s va lue ) . Fo r accumulating this amount, you would have to invest around Rs.23,000 p.m. into equity m u t u a l f u n d s t i l l y o u r retirement, if you start afresh.
My monthly income is Rs.50,000 and the net income is around Rs. 20,000 after home loan and personal loan EMIs are deducted. I am 26 years old. I am looking for security of my financial future 20 years down the line without having to cut on my current lifestyle. Kindly suggest how and where I should invest my money to achieve both short-term and long-term goals.
- Mohit Kelkar With the disposable income
of Rs.20,000 p.m. in hand, you will have to manage all your expenses first. After fulfilling the same, if there's any surplus left, you can look at investing the same for your short-term
Q.
A.
goals. For these goals (which are 3-4 years away), you can look at investing largely into debt mutual funds and some part into monthly income plans (growth option).
after 2-3 years, your personal loan repayment would stop and your income also would have increased, thereby increasing your monthly investible surplus. You can then start investing for your long-term goals by investing into equity mutual funds.
We suggest you to make a customized and detailed financial plan for yourself through a financial planner, which will help you understand how you should progress towards all your financial goals. ICICIdirect also offers Financial Planning Services and provides you a customized and comprehensive financial p l a n , b a s e d o n y o u r requirements. You can write to [email protected] to make your financial plan.
Do you also have similar queries to ask our experts? Write to us at: [email protected].
MUTUAL FUND ANALYSIS
36
Equity Savings fund
ICICIdirect Money Manager October 2016
Investing in Equity Savings Fund
Fund Objective:The primary investment objective of this fund is to generate income and capital appreciation by investing in arbitrage opportunities & pure equity investments along with investments in debt securities & money market instruments.
Key Information:
Equity Savings Funds are the hybrid equity oriented funds which have a pre defined asset allocation in equities, equity derivatives & debt. These funds typically invest 20-45% in equities (cash market), 30-50% in equity arbitrage opportunities and remaining portion in debt. Hence with low exposure to direct equities, these funds are suited for conservative investors seeking lower volatility with stable returns. These funds have tax efficiency of equity funds i.e. 15% of short term capital gains if held for 1 year & Nil if held for more than 1 year.
Although the medium term outlook for equity market remains, volatility may increase in the near term as global uncertainty may increase around US Fed rate decision and US election at the end of the year. Equity markets have also rallied significantly in the last 2-3 years and therefore dynamic asset allocation funds are better suited in current market environment. “Equity savings funds” category of mutual fund are better placed for risk-averse investors who want stable returns over medium term with some exposure in equities but with limited volatility.
NAV as on October 14, 2016 ( ) 10.9
Inception Date May 30, 2015
Fund Manager Sanjay Parekh,Jahnvee Shah,
Anju Chhajer
Minimum Investment (`)
Lumpsum 5000
SIP 100
Expense Ratio (%) 2.00
Exit Load 1% on or before 1Y,Nil after 1Y
Benchmark Crisil Liquid (40%), Nifty 50 (30%),
Crisil Short-TermBond (30%)
Last declared QuarterlyAAUM(` cr) 677
`
Product Label:
This product is suitable for investors who are seeking:
• I n c o m e a n d c a p i t a l appreciation over long-term
• Investment predominantly in a r b i t r a g e o p p o r t u n i t i e s between cash & derivative market and in unhedged equity
Performance:The performance of this category is not comparable directly to any pure benchmark because of its hybrid asset
37
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
allocation. The performance of this fund is always likely to be stable. Fund has delivered 7.1% return in the last 6
7.1
6.2
5.2
9.5
9.7
9.3
0
2
4
6
8
10
12
6 Month 1 Year 3 Year 5 Year
Ret
urn%
Performance vs. Benchmark
Fund Benchmark
Reliance Equity Savings Fund
Benchmark
Last Three Years Performance
Fund Name30-Sep-15 30-Sep-14 30-Sep-13
30-Sep-16
9.31 9.90 10.12
30-Sep-15 30-Sep-14
7.03 -- --
months period and 6.2% in the last 1 year. The fund has limited track record of less than 2 year.
Portfolio:The fund parks 65-70% in equity and equity arbitrage opportunities and remaining in debt. The equity exposure is divided into 20-40% in direct equitiesand25-70% in equity arbitrage opportunities. The equity allocation is large cap tilted with 70-75% exposure and 25-30% in mid caps. The fund tracks divergence in valuation between large & midcaps in the same sector & also across sectors. The fund aims to generate alpha through dynamic management of
equity exposure. The arbitrage strategy seeks to generate income through arbitrage opportunities arising out of pricing mismatch. The fixed income portion aims to maintain a f ine balance between liquidity and credit risk. The focus is on accrual through investments in m e d i u m t o l o n g t e r m corporate bonds with optimal liquidity.
Reliance Equity Savings Fund has a pre-determined asset allocation which gives leeway
Our View:
38
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
to fund manager to move between direct equities, arbitrage and fixed income in the given range. The fund has diversified portfolio of 42 stocks with top 10 holdings contributing 34% of the equity portfolio. On the debt side, the fund seeks to capture the credit spreads actively which is
reflected in its portfolio which is a mix of high rated & medium rated securities.
The fund offers an alternative investment option as against aggressive monthly income plan due to favourable tax treatment.
%
7.4
6.9
5.1
5.0
4.1
3.9
3.7
3.7
3.0
3.0
Top 10 Holdings Asset Type
L&T Metro Rail (Hyderabad) Ltd. SR-1 9.81% (18-Jun-35) Corporate Debt
Indian Oil Corporation Ltd. Domestic Equities
Bajaj Finance Ltd. SR-180 08.75% (14-Aug-26) Corporate Debt
Volkswagen Finance Pvt Ltd. SR-A 08.85% (01-Dec-17) Corporate Debt
Renew Power Ventures Pvt Ltd. SR-1 30-Jul-21 Corporate Debt
HDFC Bank Ltd. Deposits (Placed as Margin)
Reliance Power Ltd. SR-II 11.5% (17-Mar-17) Corporate Debt
Infosys Ltd. Domestic Equities
HDFC Bank Ltd. Domestic Equities
Maruti Suzuki India Ltd. Domestic Equities
%12.3
10.0
5.5
5.1
4.9
4.3
3.7
3.5
3.4
2.7
Top 10 Sectors Asset TypeBank - Private Domestic Equities
IT - Software
Domestic Equities
TV Broadcasting & Software Production Domestic Equities
Automobiles-Trucks/Lcv Rights
Engineering - Construction Domestic Equities
Auto Ancillary Domestic Equities
Finance - Housing
Domestic Equities
Refineries Domestic Equities
Automobiles - Passenger Cars Domestic Equities
Pharmaceuticals & Drugs Domestic Equities
6.352.900.020.08-4.03
Risk ParametersStandard Deviation (%)BetaSharpe ratioR SquaredAlpha (%)
39
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
55
58.7
57.4
53
54
55
56
57
58
59
1Yr 3Yrs 5Yrs 10Yrs
SIP Performance (Value if invested 5000 per month (in'000))`
Total Investment Fund Value Benchmark Value
%
0
0.70.6
Whats out
Lupin Ltd.
Oil & Natural Gas Corporation Ltd.Castrol India Ltd.
42.045.722.5
4.1
Portfolio AttributesTotal StocksTop 10 Holdings (%)Fund P/E RatioBenchmark P/E RatioFund P/BV Ratio
67.527.9
4.6
Asset AllocationEquityDebtCash
47.510.9
7.9
Market Capitalisation (%)LargeMidSmall
40
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
Data as on October 14,2016;Portfolio details as on Sept-2016Source: ACE MF, ICICIdirect Research, AMC factsheet
Performance of all the schemes managed by the fund manager
30 -Sep-15 -14 -13
30 -Sep-16 30 -Sep-15 30 -Sep-14
30 -Sep 30 -SepFund Name
Reliance Banking Fund(G) 16.81 13.24 73.48
NIFTY BANK 12.02 11.85 60.04
Reliance US Equity Opp Fund(G) 13.81 -- –
S&P 500 12.93 -- –
Reliance Reg Savings Fund-Balanced Plan(G) 11.82 10.71 55.23
CRISIL Balanced Fund - Aggressive Index 9.68 4.38 28.89
Reliance Retirement Fund-Income Generation(G) 10.56 -- –
Crisil MIP Blended Index 11.17 -- –
Reliance Banking & PSU Debt Fund(G) 9.73 -- –
Crisil Short Term Bond Fund Index 9.31 -- –
Reliance Japan Equity Fund-(G) 5.22 1.70 –
Reliance Dual Adv FTF-IV-E(G) 6.43 5.59 –
Crisil MIP Blended Index 11.17 10.72 –
Reliance Liquid-Treasury-Ret(G) 6.96 7.63 8.45
Crisil Liquid Fund Index 7.69 8.56 9.49
Reliance Equity Savings Fund(G) 7.03 -- –
NIFTY 50 8.33 -- –
Reliance Dual Adv FTF-V-G-(G) 7.03 7.00 –
Crisil MIP Blended Index 11.17 10.72 –
Reliance Dual Adv FTF-V-A-(G) 7.12 6.89 –
Crisil MIP Blended Index 11.17 10.72 –
Reliance Liquid-Cash(G) 7.12 7.93 8.63
Crisil Liquid Fund Index 7.69 8.56 9.49
Reliance Inv II-2(G) 7.21 9.26 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
Reliance Inv II-1(G) 7.41 8.88 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
Reliance MIP(G) 9.08 12.63 21.31
Crisil MIP Blended Index 11.17 10.72 15.45
41
MUTUAL FUND ANALYSIS
HDFC Equity Savings Fund
Fund Objective:The investment objective of the scheme is to provide capital appreciation and income distribution to the investors using arbitrage opportunities, investment in equ i ty / equ i ty re la ted instruments and debt / money market instruments.
ICICIdirect Money Manager October 2016
Key Information:
Product Label:
Performance:The fund has given benchmark
beating returns in the category.
One, three and five-year show
of the fund remains very good
with a decent margin of out
performance over and above
the benchmark. The fund has
relatively higher allocation to
large cap stocks providing
stability of returns. The fund
has delivered 10.2% CAGR
returns over five years vs
benchmark return of 9.3%.
NAV as on October 14, 2016 ( ) 30.3
Inception Date September 17, 2004
Fund Managers Vinay R. Kulkarni,Anil Bamboli,
Krishan Kumar Daga
Minimum Investment (`)
Lumpsum 5000
SIP 500
Expense Ratio (%) 2.45
Exit Load NIL upto 15% ofinvestment and 1%
in excess of 15%of investment on
or before 1Y,NIL after 1Y
Benchmark Crisil Short TermBond Fund Index
(30%), Nifty 50(40%). Crisil LiquidFund Index (40%)
Last declared Quarterly AAUM(` cr) 279
`
This product is suitable for investors who are seeking*:
• Capital appreciation while generat ing income over medium to long term
• provide capital appreciation and income distribution to the investors by using equity andequity related instruments, arbitrage opportunities, and investments indebt and money market instruments
42
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
13.7
15.4
4
12.0
6
10.2
5.2
8.3
6
12.1
9.3
02468
1012141618
6 Month 1 Year 3 Year 5 Year
Retu
rn%
Performance vs. Benchmark
Fund Benchmark
HDFC Equity Savings Fund
Benchmark
30-Sep-15 30-Sep-14
15.44 3.31 18.02
Fund Name30-Sep-15 30-Sep-14 30-Sep-13
30-Sep-16
8.36 3.52 10.12
Last Three Years Performance
Portfolio:The fund re-balances the portfol io between asset classes based on market c o n d i t i o n s a n d a s s e t valuations. The fund maintains 65%+ allocation in the mix of equity & equity arbitrage and remaining portion in debt. Of the equity portion, it invests 15-40% in direct equity and 0-50% in equity derivatives. On equity side, it invests in companies which trade below their intrinsic values with a focus on capital appreciation. It has 25% allocation in debt. The
investment strategy involves investing in a range of debt and money market instruments of various credit ratings with a view to maximizing income while maintaining an optimum balance of yield, safety and liquidity. Majority portion of the debt portfolio is invested in G-Sec & High rated papers.
HDFC Equity Savings Fund has consistently outperformed its peers and benchmark across the time frame. Though the fund has flexibility to move across the market cap, it
Our View:
43
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
t y p i c a l l y k e e p s ~ 7 5 % allocation to large caps which is higher as compared to its peers. The fund minimizes the
credit and liquidity risk with a well- diversified, portfolio of debt.
%
5.5
5.3
4.8
4.3
3.8
3.7
3.6
3.6
3.6
3.1
Sun Pharmaceutical Industries Ltd. Domestic Equities
State Bank of India SR-II 8.75% Corporate Debt
Quess Corp Ltd. Domestic Equities
HDFC Bank Ltd. Domestic Equities
LIC Housing Finance Ltd. TRCH 235 OPT 2 08.72% (28-Nov-19) Corporate Debt
HDFC Bank Ltd. Deposits
Housing Development Finance Corporation Ltd. SR-P-021 8.38% (15-Jul-19) Corporate Debt
State Bank Of India Domestic Equities
Repco Home Finance Ltd. SR-4 (06-Sep-18) Corporate Debt
Mahindra & Mahindra Financial Services Ltd. SR-AA2015 (16-Jan-20) Corporate Debt
Top 10 Holdings Asset Type
%10.9
10.7
8.6
5.5
3.1
3.1
2.5
2.0
1.9
1.9
Miscellaneous Domestic Equities
Metal - Non Ferrous Domestic Equities
Engineering - Industrial Equipments Domestic Equities
Automobiles - Passenger Cars Domestic Equities
Steel & Iron Products Domestic Equities
Top 10 Sectors Asset TypeBank - Public Domestic Equities
Bank - Private Domestic Equities
Pharmaceuticals & Drugs Domestic Equities
Finance - Housing Domestic Equities
Engineering - Construction Domestic Equities
7.222.620.080.07
-10.18
Sharpe ratioR SquaredAlpha (%)
Risk ParametersStandard Deviation (%)Beta
49.88.87.2Small
Market Capitalisation (%)LargeMid
%
1.3
1.4
0.5Wockhardt Ltd.
Whats In
The Federal Bank Ltd.
VIP Industries Ltd.
%
2.9
01.5
Whats out
Infosys Ltd.
Zee Entertainment Enterprises Ltd.Indian Oil Corporation Ltd.
44
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
SIP Performance (Value if invested 5000 per month (in'000))`
Total Investment Fund Value Benchmark Value
120 360 600
1200
133.
92
428 7
86.9
9
2031
132.6
6
420
890.
7
1736.
4
0
500
1000
1500
2000
2500
1Yr 3Yrs 5Yrs 10Yrs
50.041.324.9
--3.4
Fund P/E RatioBenchmark P/E RatioFund P/BV Ratio
Portfolio AttributesTotal StocksTop 10 Holdings (%)
65.825.09.3Cash
Asset AllocationEquityDebt
Performance of all the schemes managed by the fund manager
30 -Sep-15 -14 -13
30 -Sep-16 30 -Sep-15 30 -Sep-14
30 -Sep 30 -SepFund Name
HDFC Gold Fund(G) 18.94 -4.50 -12.30
Gold-India 19.71 -3.37 -11.08
HDFC Gold ETF 18.34 -1.87 -11.99
Gold-India 19.71 -3.37 -11.08
HDFC Equity Savings Fund(G) 15.44 3.31 18.02
NIFTY 50 8.33 -0.20 38.87
HDFC Gilt-Long Term Plan(G) 13.73 16.13 11.98
I-Sec Li-BEX 13.80 15.70 12.85
HDFC High Interest Fund-Dynamic Plan(G) 12.04 13.51 10.95
Crisil Composite Bond Fund Index 11.51 12.56 11.61
HDFC CPO Fund-I-36M-Oct13-Reg(G) 5.67 6.72 –
Crisil MIP Blended Index 11.17 10.72 –
HDFC Debt Fund for Cancer Cure-Reg-100 per Div Don 5.71 7.57 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
HDFC Debt Fund for Cancer Cure-Reg-50 per Div Don 5.71 7.57 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
HDFC CPO Fund-I-36M-Sep13-Reg(G) 5.76 6.18 –
Crisil MIP Blended Index 11.17 10.72 –
HDFC CPO Fund-III-1207D-Dec14-Reg(G) 5.80 -- –
Crisil MIP Blended Index 11.17 -- –
HDFC CPO Fund-II-36M-June14-Reg(G) 5.87 6.81 –
45
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
Crisil MIP Blended Index 11.17 10.72 –
HDFC CPO Fund-II-36M-Jan14-Reg(G) 5.89 5.98 –
Crisil MIP Blended Index 11.17 10.72 –
HDFC CPO Fund-II-36M-Feb14-Reg(G) 6.09 5.55 –
Crisil MIP Blended Index 11.17 10.72 –
HDFC CPO Fund-III-1173D-Jan15-Reg(G) 6.26 -- –
Crisil MIP Blended Index 11.17 -- –
HDFC CPO Fund-II-36M-May14-Reg(G) 6.32 6.54 –
Crisil MIP Blended Index 11.17 10.72 –
HDFC CPO Fund-III-1100D-Oct14-Reg(G) 6.35 -- –
Crisil MIP Blended Index 11.17 -- –
HDFC Arbitrage Fund(G) 6.47 7.55 8.35
Crisil Liquid Fund Index 7.69 8.56 9.49
HDFC Cash Mgmt-Call(G) 6.59 7.63 8.26
Crisil Liquid Fund Index 7.69 8.56 9.49
HDFC Dual Advantage Fund-I-Reg(G) 7.08 -- –
Crisil Debt Hybrid (75:25) 9.27 -- –
HDFC FMP-XXVII-370D-Sep 2013(3)-Reg(G) 7.46 9.94 9.41
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXVII-1143D-July 2013(1)-Reg(G) 7.55 9.49 10.78
Crisil Composite Bond Fund Index 11.51 12.56 11.61
HDFC FMP-XXVII-370D-Sep 2013(2)-Reg(G) 7.63 10.05 9.62
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXVII-370D-Sep 2013(4)-Reg(G) 7.71 10.12 9.65
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXVI-370D-July 2013(3)-Reg(G) 7.72 9.89 9.78
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXIX-369D-Dec 2013(1)-Reg(G) 7.72 9.19 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
HDFC FMP-XXVII-370D-Sep 2013(1)-Reg(G) 7.73 10.07 9.53
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC Cash Mgmt-Savings(G)
Crisil Liquid Fund Index 7.69 8.56 9.49
HDFC FMP-XXIX-371D-Dec 2013(2)-Reg(G) 7.75 9.11 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
HDFC FMP-XXVII-370D-Aug 2013(4)-Reg(G) 7.76 10.08 9.43
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXVI-371D-July 2013(1)-Reg(G) 7.79 9.89 9.12
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXVII-370D-Aug 2013(3)-Reg(G) 7.80 10.06 9.64
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXIX-372D-Dec 2013(2)-Reg(G) 7.80 9.14 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
HDFC FMP-XXVII-371D-Aug 2013(1)-Reg(G)
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
HDFC FMP-XXIX-840D-Jan 2014(1)-Reg(G) 7.87 9.98 –
Crisil Short Term Bond Fund Index 9.31 9.90 –
HDFC FMP-XXVIII-370D-Oct 2013(1)-Reg(G) 7.90 9.95 –
Data as on October 16,2016 ;Portfolio details as on Sep-2016
HDFC FMP-XXVI-370D-Aug 2013(1)-Reg(G) 7.93 9.88 9.71
Crisil Short Term Bond Fund Index 10.12
Data as on October 14,2016;Portfolio details as on Sept-2016Source: ACE MF, ICICIdirect Research, AMC factsheet
NAV as on October 17, 2016 ( ) 11.6
Inception Date December 5, 2014
Fund Manager Sankaran Naren,Chintan Haria,
Manish Banthia
Minimum Investment (`)
Lumpsum 5000
SIP 1000
Expense Ratio (%) 1.38
Exit LoadNIL upto 20% of
investment and 1% for remaining
investment on orbefore 1Y,
NIL after 1Y
Benchmark Crisil Short TermBond Fund Index
(30%), Nifty 50 (40%).Crisil Liquid
Fund Index (40%)
Last declared Quarterly AAUM(` cr) 583
`
46
MUTUAL FUND ANALYSIS
ICICI Pru Equity Income Fund
Fund Objective:The investment objective of the scheme is to generate income by investing in arbitrage opportunities in the cash and derivatives segment of the equity market, and capital appreciation through a moderate exposure in equity.
ICICIdirect Money Manager October 2016
Key Information:
Product Label:
Performance:The fund has a track record of 1.8 years where i t has generated double digits returns outpacing benchmark and peers. It has generated 10.4% as compared to 7.7% in one year period.
This product is suitable for investors who are seeking*:
• long-term capital appreciation
*An equity scheme that seeks to generate regular income through investments in fixedincome securities, arbitrage and other derivative strategiesand aim f o r l o n g t e r m capitalappreciationby investing in e q u i t y a n d e q u i t y r e l a t e d instruments.
9.87 10
.4
3.7
7.7 8.
5
8.6
0
2
4
6
8
10
12
6 Month 1 Year 3 Year 5 Year
Ret
urn
%
Performance vs. Benchmark
Fund Benchmark
47
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
ICICI Prudential Equity Income Fund
Benchmark
Last Three Years Performance
Fund Name30-Sep-15 30-Sep-14 30-Sep-13
30-Sep-16
7.70 -- --
30-Sep-15 30-Sep-14
10.40 -- --
Portfolio:
Our View:
The fund invests 65% of its portfolio in equities and remaining portion in fixed income. Within the equities, it maintains 20-40% in direct equities (cash market) & 30-50% in equity derivatives. It invests predominantly in large caps with 90% allocation. On the debt side the fund has high quality debt instruments with allocation in AAA, G-sec and short term deposits.
The fund decidesallocation based on the market valuations parameters such as price-to-earnings and price-to-book value. Hence, if the markets are expensive, then considerable equity exposure will be
hedged based on the asset allocation provided. When the markets are attractively valued, then net long equity exposure will be higher. This strategy of the fund provides. The fund ident i f ies f ixed income securities which offer a superior level of yield at lower level of risks. The risk will be controlled through in-depth credi t evaluat ion which i n c l u d e s t h e o p e r a t i n g environment of the issuer and the short as well long-term financial health of the issuer. This fund is a good bet for conservative investor as it has flexible asset allocation which seeks to limit the downside along with providing stable returns.
%
34.2
8.7
5.7
5.2
5.2
4.8
4.5
4.4
4.3
4.0
Top 10 Holdings Asset Type
Hindalco Industries Ltd. 9.55% (25-Apr-22)
Net Current Asset Cash & Cash Equivalents
08.24% GOI - 10-Nov-2033 Government Securities
Aurobindo Pharma Ltd. Domestic Equities
Domestic Equities
Housing Development Finance Corporation Ltd. SR-P-022 8.15% (22-Jul-18) Corporate Debt
LIC Housing Finance Ltd. TRCH 305 OPT 2 8.05% (01-Feb-18) Corporate Debt
HDFC Bank Ltd. Deposits (Placed as Margin)
Corporate Debt
Coal India Ltd.
Power Grid Corporation Of India Ltd. Domestic Equities
Axis Bank Ltd. Domestic Equities
48
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
%14.6
8.7
6.2
6.1
4.7
3.9
3.1
3.0
3.0
3.0
Top 10 Sectors Asset Type
IT - Software Domestic Equities
Power Generation/Distribution
Domestic Equities
Fertilizers Domestic Equities
Telecommunication - Service Provider Domestic Equities
Refineries Domestic Equities
Domestic Equities
Mining & Minerals Domestic Equities
Oil Exploration Domestic Equities
Lubricants Domestic Equities
Pharmaceuticals & Drugs Domestic Equities
Bank - Private
5.462.840.060.013.96
Risk ParametersStandard Deviation (%)BetaSharpe ratioR SquaredAlpha (%)
60.86.40.3
Market Capitalisation (%)LargeMidSmall
SIP Performance (Value if invested 5000 per month (in'000))`
Total Investment Fund Value Benchmark Value
60
64.9
62.1
56
58
60
62
64
66
1Yr 3Yrs 5Yrs 10Yrs
%
3.1
0.2
Whats In
Castrol India Ltd.
Wipro Ltd.
%
0.4
Whats out
Grasim Industries Ltd.
49
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager October 2016
Data as on October 14,2016;Portfolio details as on Sept-2016Source: ACE MF, ICICIdirect Research, AMC factsheet
38.080.920.7
--4.9
Portfolio AttributesTotal StocksTop 10 Holdings (%)Fund P/E RatioBenchmark P/E RatioFund P/BV Ratio
67.523.88.7
Asset AllocationEquityDebtCash
Performance of all the schemes managed by the fund manager
30 -Sep-15 -14 -13
30 -Sep-16 30 -Sep-15 30 -Sep-14
30 -Sep 30 -SepFund Name
ICICI Pru Regular Gold Savings Fund(G) 23.54 -4.19 -11.06
Gold-India 19.71 -3.37 -11.08
ICICI Pru Top 100 Fund(G) 19.43 -1.93 48.25
NIFTY 50 8.33 -0.20 38.87
ICICI Pru Gold iWIN ETF 18.77 -2.01 -11.98
Gold-India 19.71 -3.37 -11.08
ICICI Pru Dynamic Plan(G) 16.83 -0.49 50.04
NIFTY 50 8.33 -0.20 38.87
ICICI Pru Indo Asia Equity Fund(G) 16.72 6.64 49.30
NIFTY 50 8.33 -0.20 38.87
ICICI Pru Infrastructure Fund(G) 5.19 6.05 63.22
NIFTY INFRA -1.13 -6.48 41.45
ICICI Pru Short Term Plan(G) 9.93 10.39 10.56
Crisil Short Term Bond Fund Index 9.31 9.90 10.12
ICICI Pru Income Opportunities Fund(G) 10.37 12.99 11.78
Crisil Composite Bond Fund Index 11.51 12.56 11.61
ICICI Pru Growth Fund-8(DP) 10.41 -- –
NIFTY 50 8.33 -- –
ICICI Pru Balanced Advantage Fund(G) 10.85 10.22 35.70
CRISIL Balanced Fund - Aggressive Index 9.68 4.38 28.89
ICICI Pru Value Fund-1(D) 10.92 6.31 –
S&P BSE 500 11.45 3.19 –
ICICI Pru Income(G) 11.75 13.45 11.65
Crisil Composite Bond Fund Index 11.51 12.56 11.61
ICICI Pru Long Term Plan-Ret(G) 12.18 15.14 13.59
Crisil Composite Bond Fund Index 11.51 12.56 11.61
ICICI Pru Value Fund-6(G) 12.89 -- –
S&P BSE 500 11.45 -- –
ICICI Pru Gilt-Invest-PF(G) 13.12 15.90 13.52
I-Sec Li-BEX 13.80 15.70 12.85
ICICI Pru Equity Income Fund(G) 13.33 -- –
NIFTY 50 8.33 -- –
ICICI Pru Value Fund-2(D) 15.79 7.43 –
S&P BSE 500 11.45 3.19 –
ICICI Pru Balanced Fund(G) 15.96 8.70 50.38
CRISIL Balanced Fund - Aggressive Index 9.68 4.38 28.89
ICICI Pru Value Fund-3(D) 16.09 2.05 –
S&P BSE 500 11.45 3.19 --
50
Our indicative large cap equity model portfolio has continued to
deliver an impressive return (inclusive of dividends) of 86% since
its inception (June 21, 2011) vis-à-vis the benchmark index (S&P
BSE Sensex) return of 59.3% during the same period, an
outperformance of 26.7%. This validates our thesis of selecting
companies with sound business fundamentals that form the core
theme of our portfolio. Our midcap portfolio of 16 stocks also
continues to outperform, delivering 163% (inclusive of
dividends) vis-à-vis the benchmark index (CNX Midcap) return of
106.9%, outperformance of 56.1%. Our consistent
outperformance demonstrates our superior stock picking ability
as markets in the first half of CY17 aligned to our view of
favourable risk reward, good franchisee vs. reward-at-any-risk
businesses. Some key performers of our portfolio are Bajaj
Finance, Lupin, Axis Bank and HDFC Bank in the large cap
portfolio while Natco Pharma, Bajaj Finserv and UltraTech have
delivered stupendous returns in the midcap portfolio.
We have always suggested the SIP mode of investment and still
find a lot of merit in it as the preferred mode of deployment given
the market conditions and volatility associated since the
inception of the portfolio. We highlight that the SIP return of our
portfolio has consistently outperformed the indices. This affirms
our belief in the staggered and systematic approach of
investment amid market volatility.
Following the same pace and opportunities in the market, we
have not changed much in our portfolio. Among large caps, we
have maintained the weight of Bajaj Finance (2%) and Maruti,
UltraTech and Marico by 1% as earlier. Affirming our view on
consumption demand, Dabur continues to be part of our large
cap portfolio. We believe that as the softness in commodities
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager October 2016
51
EQUITY MODEL PORTFOLIO
continues oil & gas and metal sectors would continue to remain
under pressure. Following this, we have exited Reliance
Industries from Large caps.
In the large cap space we continue to remain positive on auto
infrastructure & cement. Relative to the benchmark index, we are
underweight on BFSI. With the exclusion of Reliance Industries,
we affirm our underweight stance on metals and oil & gas. With
the recent cleanup drive in PSU banks, we continue to believe the
underperformance would continue. In the private banking space,
we prefer large banks with a strong brand name and a pan India
retail presence. We remain overweight to neutral on pure play
defensives (IT, FMCG) as secular earnings coupled with sector
rotation could lead to consolidation in near term valuations and
offer stock specific opportunities. We remain positive on auto,
pharma, capital goods and infrastructure.
Among individual names, we continue to recommend Infosys
and TCS in the IT space. A revival in the capex cycle coupled with
lower interest rate scenario would benefit the BFSI and
construction space (UltraTech, L&T, HDFC, HDFC Bank).
ICICIdirect Money Manager October 2016
52
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager October 2016
Name of the company
Largecap Portfolio
Weightage(%)
Auto 15.0
Tata Motor DVR 4.0
Bosch 3.0
Maruti 5.0
EICHER Motors 3.0
BFSI 25.0
HDFC Bank 8.0
Axis Bank 3.0
HDFC 8.0
Bajaj Finance 6.0
Capital Goods 4.0
L & T 4.0
Cement 4.0
UltraTech Cement 4.0
FMCG/Consumer 18.0
Dabur 5.0
Marico 4.0
Asian Paints 5.0
Nestle 4.0
IT 18.0
Infosys 10.0
TCS 8.0
Media 2.0
Zee Entertainment 2.0
Pharma 14.0
Lupin 6.0
Dr Reddys 5.0
Aurobindo Pharma 3.0
Total 100.0
53
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager October 2016
Name of the company
Diversified Portfolio
Weightage(%)
Auto 12
Tata Motor DVR 3
Bosch 2
Maruti 4
Eicher Motors 2
Bharat Forge 2
Consumer Discretionary 16
Symphony 2
Supreme Ind 2
Kansai Nerolac 2
Pidilite 2
Asian Paints 4
Arvind 2
Interglobe Aviation 2
Rallis 2
BFSI 19
HDFC Bank 6
Axis Bank 2
HDFC 6
Bajaj Finance 4
Bajaj Finserve 2
Power, Infrastructure & Cement 12
L & T 3
UltraTech Cement 3
Ramco Cement 2
NBCC 2
Container Corporation of India 2
FMCG 9
Nestle 3
Marico 3
Dabur 4
Pharma 16
Lupin 4
Dr Reddys 4
Aurobindo Pharma 2
Natco Pharma 2
Torrent Pharma 2
Biocon 2
IT 13
Infosys 7
TCS 6
Media 1
Zee Entertainment 1
Total 98.2
54
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager October 2016
Name of the company
Midcap Model Portfolio
Weightage(%)
ICICI Securities Ltd has received an investment banking mandate from group company of Larsen and Toubro Ltd. The report is prepared based on publicly available information.
Aviation 6.0
Interglobe Aviation 6.0
Auto 6.0
Bharat Forge 6.0
BFSI 6.0
Bajaj Finserve 6.0
Cement 6.0
Ramco Cement 6.0
Consumer 30.0
Symphony 6.0
Supreme Ind 6.0
Kansai Nerolac 6.0
Pidilite 6.0
Rallis 6.0
Infrastructure 8.0
NBCC 8.0
Logistics 6.0
Container Corporation of India 6.0
Pharma 20.0
Natco Pharma 6.0
Torrent Pharma 6.0
Biocon 8.0
Textile 6.0
Arvind 6.0
Total #REF!
55
Performance* so far Since inception
*Returns (in %) as on
Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio
Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination
of BSE Sensex and CNX Midcap
Aug 17, 2016
Value of 1,00,000 invested via SIP at the end of every month `
Portfolio Benchmark
Investment Value of Investment in Portfolio Value if invested in Benchmark
Start date of SIP: , 2011; *Value as on June 30 Aug 17, 2016
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager October 2016
86.06695682
163.0844815
99.26243478
59.36157127
106.9907314
72.98821953
0255075
100125150175
%
6500000
6500000
6500000
8786894.8
39 1
3261985.1
8
9727627.8
89
6173090.6
88
5299863.4
91
7723864.2
98
3500000
4500000
5500000
6500000
7500000
8500000
|
QUIZ TIME
1. The standard investment period for any liquid fund is up to __________ days.
2. Bank FDs offer interest rate that usually ranges from _______ to ______
3. __________________ funds invest only in State or Central government backed securities and debentures.
4. For non-equity mutual funds, ____% income tax is levied upon the investor (including indexation benefit) over long-term capital gains.
5. The government of India allows account continuance beyond maturity for _____ years at every renewal for public provident fund account holder.
Note: All the answers are in the stories that have appeared in this edition of ICICIdirect Money Manager. You may send in your answers at: [email protected]. The answers will be published in our next edition. The names of the earliest all correct entries will be published too. So jog your grey cells and be quick to send in your entries.
Correct answers for the September 2016 quiz are:1. Equity is a high-risk, high-return asset class. But investors
can expect more returns from this asset class than from any other. True or false
A: True
2. Gold can be bought in the form of jewellery, coins, bars, bonds, ______________ and so on.
A: Exchange traded funds
3. In general, the risk involved in an investment is directly proportional to the ________ expected from it.
A. Returns
4. _____________ is the level of uncertainty that investors are willing to tolerate to earn a profit on their investment.
A: Risk appetite5. It is important to have a ______ before you start investing. A. Goal
56ICICIdirect Money Manager October 2016
57
PRIME NUMBERS
Equity Markets
ICICIdirect Money Manager October 2016
Domestic Equity Indices
Global Equity Indices
Sectoral Indices
30-Sep-16 31-Aug-16 Change (%)
CNX Nifty 8611.2 8786.2 -2.0%
CNX Midcap 15413.1 15370.9 0.3%
S&P BSE Sensex 27866.0 28452.2 -2.1%
S&P BSE 100 8863.7 9021.5 -1.7%
S&P BSE 200 3719.6 3768.6 -1.3%
S&P BSE 500 11700.7 11834.9 -1.1%
30-Sep-16 31-Aug-16 Change (%)
Dow Jones 18,308.2 18,400.9 -0.5%
S&P 500 2,168.3 2,171.0 -0.1%
Nasdaq 5,312.0 5,213.2 1.9%
FTSE 6,899.3 6,781.5 1.7%
DAX 10,511.0 10,592.7 -0.8%
CAC 40 4,448.3 4,438.2 0.2%
Nikkei 16,449.8 16,887.4 -2.6%
Hang Seng 23,297.2 22,976.9 1.4%
Shanghai Composite 3,004.7 3,085.5 -2.6%
Taiwan Weighted 9,166.9 9,068.9 1.1%
Straits Times 2,869.5 2,820.6 1.7%
30-Sep-16 31-Aug-16 Change (%)
S&P BSE Auto 22,231.7 22,008.2 1.0%
S&P BSE Bankex 22,045.6 22,656.6 -2.7%
S&P BSE FMCG 4,597,564 4,747,204 -3.2%
S&P BSE Healthcare 16,181.1 16,161.7 0.1%
S&P BSE Metals 9,763.7 9,939.7 -1.8%
S&P BSE Oil & Gas 11,377.6 11,072.7 2.8%
S&P BSE Power 1,989.6 2,098.4 -5.2%
S&P BSE Realty 1,512.2 1,542.1 -1.9%
S&P BSE Teck 5,630.8 5,753.3 -2.1%
58
PRIME NUMBERS
ICICIdirect Money Manager October 2016
Debt Markets
Government Securities (G-Sec) Yields (in %) Sep-16 Change (bps)Aug-16
Corporate Bond Yields (in %) Change (bps)Sep-16 Aug-16
Commercial Paper (CP) Rates (in %) Change (bps)Sep-16 Aug-16
Treasury Bill (T-Bills) Yields (in %) Change (bps)Sep-16 Aug-16
Volatility Index (VIX)
30-Sep-16 31-Aug-16
VIX 17.18 13.24 0%
Change (%)
10 year 6.82 7.11 -29
5 year 6.77 7.00 -22
3 year 6.73 6.88 -16
1 year 6.69 6.82 -14
AAA 10 year 7.69 7.80 -11
AAA 5 year 7.50 7.68 -18
AAA 3 year 7.49 7.60 -11
AAA 1 year 7.37 7.50 -13
AA 10 year 8.21 8.37 -16
AA 5 year 8.03 8.23 -20
AA 3 year 7.98 8.17 -19
AA 1 year 7.86 8.07 -21
12 Months 7.56 7.71 -15
6 Months 7.18 7.34 -16
3 Months 6.78 7.00 -23
1 Month 6.69 6.84 -15
91D TB 6.42 6.55 -13
182D TB 6.51 6.64 -13
364D TB 6.55 6.68 -13
59
PRIME NUMBERS
10-year benchmark yields (%) across countries
ICICIdirect Money Manager October 2016
Macro-economic Indicators
Consumer price index (CPI)
Wholesale price index (WPI)Month
Countries 30-Sep-16 31-Aug-16 Change in bps
US 1.59 1.58 1
UK 0.75 0.64 10
Japan (0.09) (0.06) (3)
Spain 0.88 1.01 (13)
Germany (0.12) (0.07) (5)
France 0.18 0.18 1
Italy 1.19 1.15 4
Brazil 11.58 12.08 (50)
China 2.74 2.81 (7)
India 6.82 7.11 (29)
MF Investment Sep-16 Aug-16 YTD
Equity 3841 1320 73951
Debt 52876 12119 274086
FII Investment Sep-16 Aug-16 YTD
Equity 9336 9786 50005
Debt 10577 -2949 1360
Items Weights(%) Jul-16 Aug-16 Sep-16
Food&bev. 45.86 7.96 5.83 4.12
Pan,tob& intox. 2.38 6.83 6.94 6.82
Cloth & Foot 6.53 5.23 5.30 5.19
Housing 10.07 5.42 5.29 5.18
Fuel & light 6.84 2.75 2.57 3.07
Misc. 28.31 4.01 4.18 4.51
CPI 100 6.07 5.13 4.31
Weights Sep-15 Aug-16 Sep-16
WPI 100.0 -4.59 3.74 3.57
Primary Articles 20.1 -2.29 7.47 4.76
Fuel & Power 14.9 -17.71 1.62 5.58
Manufactured Goods 65.0 -1.73 2.42 2.48
60
PRIME NUMBERS
Commodities
Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com Research
ICICIdirect Money Manager October 2016
Mutual Funds: Category Average Returns
Equity Funds Returns (in %)Tenure Diversified Funds Mid-cap &
Small-cap Funds
Large-capFunds
ELSS (Tax-
savingfunds)
Returns as on July 29, 2016
Debt Funds Returns (in %)
Returns as on August 31, 2016
Tenure Liquid Funds Short-termincome funds
Ultra short-term funds
Long-termincome funds
Gilt funds
Index of industrial production (IIP) Sector-wise growth rate (%)
Currencies and CommoditiesCurrencies
Categories 16-Aug-16 16-Jul-16 16-Jun-16 Weight(%)Mining -5.6 0.9 5.3 14.2Manufacturing -0.3 -3.5 0.7 75.5Electricity 0.1 1.6 8.3 10.3
30-Sep-16 31-Aug-16 Change (%) StatusUSDINR 66.61 66.96 0.5% AppreciatedEURINR 74.42 74.58 0.2% AppreciatedGBPINR 86.43 87.98 1.8% AppreciatedAUDINR 50.76 50.35 -0.8% DepreciatedCHFINR 68.41 68.10 -0.5% DepreciatedJPYINR 0.66 0.65 -1.5% DepreciatedCNYINR 9.98 10.03 0.4% Appreciated
30-Sep-16 31-Aug-16 Change (%)Crude ($/barrel) 49.1 47.0 4.3%Gold ($/ounce) 1,315.8 1,309.0 0.5%
6 months 17.64 22.91 14.94 17.231 year 12.84 16.83 10.84 11.853 year 25.19 37.93 20.03 24.285 year 16.66 23.37 14.56 16.46
6 months 7.31 11.12 9.18 14.35 16.79
1 year 7.48 9.37 8.62 9.73 11.2
3 year 8.26 9.46 8.82 10.46 11.50
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