icici february 16 issue newcontent.icicidirect.com/moneymanagermagazine/february_2016.pdf · simple...

Anup BagchiMD & CEO

ICICI Securities Ltd.

There are two phases to retirement

planning -- the accumulation phase

and the distribution phase. Both are

e q u a l l y i m p o r t a n t . T h e

accumulation phase involves

building up the retirement corpus

through various savings and

investments, and the distribution

phase involves managing the

a c c u m u l a t e d c o r p u s a n d

withdrawing funds from it to meet

regular expenses. It is critical to plan

for both the phases well so you don't

run out of money post retired life

which could last 25-30 years or

more.

Planning for retirement is bogged

by biases and genuine issues.

During the accumulation phase,

most find it difficult to imagine what

retirement really means. We are guided by what we see of the previous

generation and how they could wade through their retirement phase.

Fortunately, many of them could count on their employers through

defined benefit pension plans for regular income. Also, the returns on

simple debt products or fixed deposits were high enough to generate

income. Things are very different today. We are responsible for planning

our own retirement, thanks to gradual shift towards defined contribution

plans. Further, factors such rising inflation (both general and medical),

lowering of returns from fixed deposits or debt products, preference for

nuclear families, etc. make retirement planning even more important

than the previous generations.

The distribution phase has genuine issues. There is a need to get regular

income and choice of such products is limited. In addition, shortfall in

retirement corpus can create genuine concerns. Nearly 74 per cent of

pre-retirees are concerned about having enough money to live

comfortably in retirement, according to a recent survey by HSBC.

1ICICIdirect Money Manager February 2016

Another survey shows that 78 per cent Indians lacks sufficient funds for a

comfortable retirement. Not having enough financial assets in this phase

would mean either extending the working life or looking at monetizing

other assets.

Good retirement planning is all about planning your essential day-to day

income needs, discretionary expenses such as vacations, as well as

planning for any potential unknown major cost such as medical

expenses. One of the surveys for this segment shows that the ability to

afford the medical cost is the top concern among Indians when they

retire. It is a good idea to have a separate corpus for medical expenses

during retirement based on current fitness, family history, and any

existing coverage.

Majority of retirees or near-retirees prefer fixed-income or debt

instruments to meet their post-retirement needs and expenses. India's

working population relies heavily on cash deposits and second domestic

property to generate post retirement income. We need to keep in mind

that over time, inflation can significantly reduce the purchasing power of

retirement income generated through fixed-income instruments such as

deposits and rental income. It is therefore important to include growth

component to your retirement portfolio through equity exposure.

Income generation is a core expectation but growth is also important to

counter the impact of inflation over a period of time.

Effective retirement planning at both accumulation and distribution

phases requires a thorough knowledge and understanding of the

complex rules, regulations, and tax laws surrounding all types of

investments. It is best to work with an experienced financial advisor to

secure your retirement. Our Financial & Retirement Planning Services are

designed to give you a structured approach to managing your finances.

Do talk to your ICICIdirect relationship manager to help you with a

customized plan.

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 Neighbourhood Financial Superstore

and talk to us.

2

Financial constraints are the biggest cause of anxiety among pre-retirees and retirees. One of the latest studies on retirement by HSBC has found that of the 45+ Indian working population who would like to retire in next five years but are unable to due to financial constraints, 53% say this is due to not having saved enough, 42% say it is because they have dependants who rely on their income and 17% cannot retire as they have a lot of debt. This calls for an urgent need to begin planning and laying a solid roadmap for smooth transition into retirement.

From longer life expectancy to rising health care costs, we need to plan and adapt to the new landscape of retirement. Good retirement planning is all about building up adequate assets and turning those assets into a regular income stream to support the desired lifestyle. Creating sustainable retirement income portfolio is both complex and challenging. Two critical decisions are an optimal asset allocation and a prudent withdrawal strategy. In our cover story of this edition, we help you address concerns relating to retirement income planning and lay a process for you to have a comfortable and rewarding retirement.

The edition also covers an interview with Soumendra Nath Lahiri, CIO, L&T Mutual Fund, who believes broader markets are providing an opportunity to handpick quality stocks at reasonable prices.

It is best to stick to quality large-cap stocks through equity mutual funds. In our Mutual Funds Analysis section, we bring to you top three recommended large-cap biased diversified portfolio funds, which you may consider investing into, in the current market scenario.

I would also like to draw your attention to our recently updated Equity Model Portfolio, which we have aligned to capture the new opportunities available in the market. So read on, stay updated and involved. Do write in with your queries, feedback and share your thoughts at [email protected].

Editor & Publisher : Abhishake Mathur, CFA

Coordinating Editor : Yogita Khatri

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Isha Bansal

Your magazine is now also available on www.magzter.com, a digital newsstand.

ICICIdirect Money Manager February 2016

3

MD Desk....................................................................................................1

Editorial..................................................................................................... 2

Contents.................................................................................................... 3

News.........................................................................................................4

Asset Class InsightsA monthly review and outlook on major asset classes – equity,debt/fixed-income and gold…............................................................... 5

Stock Ideas: Bharat Electronics and Supreme Industries.............................. 11

Flavour of the Month: How to generate regular income post retirementRetirement planning is not just about building up the adequatecorpus. The real challenge is deploying that corpus to generateregular income. How do you do that? Here we lay a road map foryou. Read on.........................................................................................20

Tête-à-tête: 'Opportunity to handpick quality stocks at reasonable prices’An interview with Soumendra Nath Lahiri, Chief Investment Officer (CIO), L&T Mutual Fund.........................................................................31

Ask Our Planner: Bank FDs vs. Debt Mutual FundsYour personal finance queries answered….........................................36

Mutual Funds Analysis: Investing in large-cap biased diversified portfolio funds With markets remaining volatile, it is best to stick to quality large-cap stocks through equity mutual funds. Here are our top three recommended funds.............................................................................42

Mutual Fund Top PicksBased on our quarterly rankings, we have updated our mutual fund (MF) top picks recently…......................................................................54

Equity Model Portfolio...............................................................................55

Quiz Time.................................................................................................60

Prime NumbersA revamped section of monthly trends, with inclusion of more data points and indicators............................................................................ 61

Premium Education Programmes Schedule..................................................65


4

EPFO raises 'interim' interest rate to 8.8%

The Employees' Provident Fund Organisation (EPFO) has marginally raised the interest rate by 0.05 percentage points to 8.8 per cent for 2015-16, benefiting its 50-million subscribers' safety net and yet leaving a surplus of 673 crore with itself. However, the interest rate could be revised upwards later. Union labour minister Bandaru Dattatreya said the decision on interest rate was an interim one, leaving the doors open for further revision of the interest rate for the current financial year in the wake of trade unions' demand for 8.95 per cent.

Courtesy: Business Standard

`

Credit Information Bureau (India), or Cibil, in a bid to widen its avenues of collecting details of customer behaviour, especially on payments, is working on the concept of securing data related to telecom and utility services payments, for the purpose of evaluating first-time borrowers. Cibil, the country's one of the largest credit information bureaus, is also planning to roll out a separate vertical for providing services exclusively to micro finance institutions (MFIs) by next quarter.

Courtesy: The Financial Express

Cibil working to secure data on utility bill payment, telecom

Life insurance companies will be required to mandatorily issue an electronic insurance policy for any individual who takes a sum assured of 10 lakh and above, or pays annual premium of 10,000 and above in life insurance. The Insurance Regulatory and Development Authority of India (IRDAI), in its guidelines on issuance of electronic policies, said that an insurer can also discount in the premium rates to the policyholders for electronic insurance policies. In general insurance, for individual health policies of 5 lakh and above, or annual premium of 5,000 and above are required to be offered in e-format. In retail motor as well as individual overseas travel, all policies will be electronic. For other retail general insurance policies, the cut-off is sum assured of 10 lakh and above or annual premium of 5,000 and above.

Courtesy: Business Standard

``

``

` `

IRDAI makes e-format must for 10 lakh-plus life policies`

Returns on small saving schemes like Kisan Vikas Patra,National Savings Certificate to fall from April 1

Interest rates on popular small savings such as Kisan Vikas Patra, National Savings Certificate and post office recurring deposit schemes are set to come down from April 1 as the government rejigs the interest rate framework for these schemes to align it with market rates. Interest rates of these schemes will now be reset every quarter as part of this rejig, a finance ministry statement said.

Source: The Economic Times


5

Equity markets: Global sell-off, weak earnings growth continue to put pressureThe year 2016 started with a sharp decline across asset classes, reminiscent of 2011, 2008 to many. The current decline has strong linkages to the engine for global growth that is China. As China started to slow down, the weakness percolated to commodities and other asset classes. The hardest hit were commodity exporting countries, which saw a sharp decline in their equity and currency markets as w e l l . M a n y o f t h e s e c o m m o d i t y e x p o r t i n g countries were from the Middle East, and dependent on commodity revenues. With the decline in commodity prices, fiscal imbalances grew. These countries adopted fire-fighting mode. Specifically, oil-rich c o m m o d i t y e x p o r t i n g countries that had amassed oil wealth in the form of sovereign wealth Fund (SWF) started to liquidate their holdings (case in point is Abu Dhabi Investment Company).

Out of the total professionally

managed assets globally, SWFs comprise a prominent 9.5% share. With 56% of the SWF origin linked to oil-based economies, any change in their investment pattern can have wide implications. It has been observed that on the back of subdued crude oil prices globally and fiscal imbalances in the domestic economy, oil based SWFs have started exiting some of their positions in the equity markets globally with India being no exception.

O n t h e o n e h a n d , macroeconomic variables like current account deficit (CAD), inflation and a benign interest rate environment augur well for an economic upturn. However, at the same time, a fall in global commodities has made it extremely difficult to gauge the earnings trajectory of BSE Sensex as commodity dependent sectors like metals (2.9% weight) and oil & gas (10.4% weight) will see huge volatility in reported earnings for next few quarters (until commodity prices stabilise), thereby making it extremely c h a l l e n g i n g t o f a t h o m

ASSET CLASS INSIGHTS

Asset Class Insights: Equity, Fixed-income and Gold

Monthly review of the major asset classes - equity, fixed-incomeand gold -- and a snapshot of our outlook.


6


earnings.

From a sectoral perspective, the financials space (26.9% weight in index) will be plagued with recognition of NPAs (non-performing assets) and increased provisioning, which will make predictability of earnings a difficult task, going ahead. Our stance is same on sectors like metals and oil & gas where earnings visibility is still hazy.

In the current extremely volatile global markets, one needs to be careful and not get tempted to catch a falling knife given many chips have corrected sharply over the last few days. We believe volatility will keep rattling risky assets for the next few months as more global news flows with respect to the Fed's direction of interest rates, on the one hand, e v e n t s i n t h e C h i n e s e economy, movement of emerging market currencies and stability/recovery in global commodities come by. Till then, one can take advantage of volatility and start nibbling but not go out aggressively to make commitments.

The Sensex has been a consistent outperformer among emerging market peers

over the last few years. The flight of capital from emerging markets amid a lingering rate hike by the Fed has seen the MSCI Emerging market index register a breakdown below the four year consolidation band. Meanwhile, the Sensex has been on a gradual descent since March 2015, which is seen as a healthy correction within a larger uptrend. We expect the Sensex to continue its relative outperformance vis-à-vis emerging market peers amid heightened volatility, going forward.

Although volatility is likely to persist in the near term, long term investors should start accumulating at every fall in a staggered manner over the next three to six months.

Global economy and markets: Concerns resurfaced in global capital markets on global growth and the slowdown in China coupled with fresh lows in commodity prices, resulting i n o n e o f t h e w o r s t performances of global equity markets in January.

Oil prices continued their decline in 2016 and touched a low of US$26 per barrel on January 20 as higher supply concerns and lower economic


7



growth across major global economies continued to put pressure on commodity prices, including crude oil prices.

The Bank of Japan (BoJ) announced an unexpected cut in interest rates, taking them into negative territory while the European Central Bank (ECB) hinted at further stimulus.

January 's mayhem sent market participants into the shelter of developed market government bonds, which

p u s h e d y i e l d s d o w n . Corporate bond sales slowed to an 11-year low as a result of the market's move away from assets perceived to be more risky.

A s i a n e q u i t y m a r k e t performance declined during the month, as investors reacted to a familiar list of concerns, worries about China adjusting to a lower growth path, efforts by the Chinese authorities to manage the Renminbi and falling oil prices.

Equity markets witness turmoil since start of 2016

-22.4

-15.8-14.3

-11.3-9.8

-8.3 -7.5 -6.7

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

China Japan Germany France India US Brazil UK

YTD 2016

Source: Bloomberg

Emerging market currencies witness significant depreciation last year

-5% -6%

-25% -27%

-32%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Chinese Yuan Indian Rupee Russian Ruble S A Rand Brazilian Real

Source: Bloomberg

8



Fixed income: Long term yields

remain sticky on unfavourable

demand supply dynamicsThe Reserve Bank of India (RBI)

kept the benchmark repo rate

on hold in its monetary policy

meeting on February 2, 2016.

Although the status quo on

rates was on expected lines,

the market was hopeful of

some liquidity measures given

the deficit of almost Rs.

1,50,000 crore. There was

disappointment, to that extent.

However, the Governor has

assured the market that the RBI

will keep call rates close to

repo and deploy all possible

tools to manage the liquidity

deficit.

Yields on longer duration

s e c u r i t i e s , p a r t i c u l a r l y

g o v e r n m e n t s e c u r i t i e s ,

continue to trade in a narrow

range in the last three months

as concerns over higher

supply prevented any meaning

correction in yields.

T h e s u p p l y o f s t a t e

development loans (SDLs) has

also been rising. The concerns

over additional supply from

U D A Y ( U j w a l D i s c o m

Assurance Yojna) bonds (state

discom restructuring bonds) as

and when they come also

remain an overhang for the

market participants.

T h e l i q u i d i t y s i t u a t i o n

remained tight due to RBI's

intervention in forex (foreign

exchange) markets to stabilise

currency and high government

cash balance with the RBI. The

government cash balance with

RBI at around Rs. 1.5 lakh crore

indicating lower government

spending. RBI infused liquidity

via variable rate term repos of

varying tenors ranging from

overnight to 56 days. Further, it

has also conducted purchase

of government securities

under open market operations

(OMO) for Rs. 20,000 crore in

the last month.

Given RBI's commitment to

provide adequate liquidity, we

expect OMOs to continue till

March, albeit sporadically.

Also, starting April liquidity

should improve on account of

government spending given

that most of the deficit today is

on account of government

balances and not a structural

deficit.

Inflation is not a policy concern

9



currently with RBI Governor

stating that inflation remains

on a projected trajectory.

Overall, assuming normal

monsoon and current levels of

oil and exchange rates, the RBI

expects CPI (consumer price

index) to be 'inertial' and be

around 5% by the end of Fy17.

However, it emphasises that

implementation of the Seventh

Pay Commission has not been

factored in these projections

whereas risks remaining

broadly in the balance from

monsoon and geopolitical

events.

Although the outlook on G-Sec

yields remains positive, the

duration strategy should be

played through act ively

managed income or dynamic

bond funds. They will be able

to make swift duration change

within G-secs or switch

between corporate bonds and

G-secs within a specific

duration.

Short-term debt funds remain

a stable performing category,

especially in the current

volatile environment. Credit

funds with reasonable credit

quality should be preferred

over an aggressive credit

portfolio.

Gold: Safe haven demand amid

global uncertainty likely to provide

support at lower levelsThe year 2016 has turned the

wave in favour of safe haven

demand amid extreme global

capital market uncertainty.

Global gold prices rallied

around 18% since the start of

2016 till mid-February before

giving up some of its gains.

The risk, which was initially

confined to the commodity

space, started to spill over to

currencies, equit ies and

recently was also impacting

the credit markets as gauged

by financial conditions and

high yield bond market. The

worsening condition is visible

in rising credit default swap of

countries like Brazil and

companies like Deutsche Bank.

As a result, there is a flight to

safety and safe havens like

developed market sovereign

bonds (even when there is

negative yield) and gold.

The expectation of quantum of

rate hike by the US Fed has

decreased significantly post

recent turmoil in global capital

10



markets. The market is now

factoring in just one rate hike in

the whole of calendar year

2016 especially post the dovish

statement from the US Fed

Chair. Interest rate hikes, in

general, are negative for gold

prices. With rate hike concerns

receding, the overhang on

prices also abates in the near

term.

The steep fall in industrial

commodity prices, including

crude oil led to a sharp fall in

inflation and inflationary

expectations across the globe

and particularly in developed

economies. The same led to

reduced demand for gold as an

inflationary hedge investment.

Medium-term demand will,

however, continue to be

impacted by the overall global

environment, particularly the

US Fed rate hike trajectory.

Heightened global risk aversion increased demand for gold as a safe heaven

1050

1100

1150

1200

1250

1300

Feb

-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb

-16

Price ($/Ounce)

Indian prices follow global prices

24000

25000

26000

27000

28000

29000

30000

Feb

-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Jan-

16

Feb

-16

|

Price (|/10 grams)

Source: Bloomberg

11

STOCK IDEAS

Bharat Electronics: Proxy play on emerging defence sector

Company BackgroundBharat Electronics Limited

(BEL) was established in

Bangalore, India, by the

Government of India under the

Ministry of Defence (MoD) in

1954 to meet the specialised

electronic needs of the Indian

defence services. Over the

years, it has grown into a multi-

product, multi-technology,

multi-unit company servicing

the needs of customers in

diverse fields in India and

abroad. Considered the

bellwether of the defence

electronics sector, i t is

renowned for its strong

execution capabilities and

professional management. In

2002, BEL became the first

d e f e n c e p u b l i c s e c t o r

undertaking (PSU) to get

opera t iona l M in i Ra tna

Category-I status. In June

2007, BEL was conferred the

prestigious Navratna status

based on its consistent

performance.

BEL is a major supplier of

products and turnkey systems

to the Indian defence forces.

Over the years, the company

has also diversified into

manufacturing many civilian

products. Large turnkey

telecommunication solutions

are also being offered to the

civilian market.

The growth and diversification

of BEL over the years mirrors

the advances in the electronics

technology, with which BEL

has kept pace. Starting with the

m a n u f a c t u r e o f a f e w

communication equipments in

1956, BEL has today emerged

as a globally competitive

c o m p a n y i n d e f e n c e

electronics.

Strong moat, best placed to

capitalise on fledgling defence

sectorDefence electronics is one of

the most critical areas for

capability building of armed

forces. Historically, a large part

of defence capital spends (45-

Investment Rationale


12

60%) has been in this segment.

High-end technologies in the

electronics segment, long

gestation periods, heavy

capital requirements, specific

requirements of armed forces

and secrecy related to defence

projects act as key entry

barriers in this segment. This

gives companies like BEL a

strong competitive advantage

over any upcoming local and

foreign competition. With the

central government's strong

commitment on arming

defence forces with state-of-

t h e - a r t e q u i p m e n t a n d

reducing the import bill to at

most 30% (currently 70% of

total expenditure), order

inflows in this segment are set

to embark on a new growth

trajectory. With planned capex

of over 1,500 crore in FY16E-

18E, BEL is well placed to

capitalise on the fledgling

defence sector.

Healthy balance sheet, robust

prospects, quality play!

BEL has a strong balance sheet

with near nil debt and cash

`

balance of 6,038 crore (FY15).

Accelerated order inflow and

BEL's consistent performance

over the past 10 years, gives us

reasonable confidence on the

robust prospects of the

company. With moderate

capital expenditure of 1,500

crore over the next three years

(FY16E-19E), a consistent

dividend payout ratio of 20%,

average RoE (Return On

Equity), RoCE (Return on

Capital Employed) of 19.3%,

37.8%, respectively, over the

past 10 years and no equity

dilution in its history, we

believe BEL is a quality play

and is on a strong footing.

Accordingly, we expect BEL to

deliver sales and PAT (profit

after tax) CAGR (compounded

annual growth rate) of 13.5%

and 8.6% respectively, in FY15-

18E. We value BEL at 1,552

i.e. 25x P/E on FY18EEPS of

62.1 and initiate coverage with

a BUY recommendation.

`

`

`

`


STOCK IDEAS

13

Key Financials

Valuations Summary

Stock Data

Net sales ( crore) 6,842.6 7,490.0 8,863.2 10,002.7

EBITDA ( crore) 1,143.3 1,077.3 1,274.8 1,389.8

Net profit ( crore) 1,167.2 1,214.6 1,401.1 1,489.8

EPS ( ) 48.6 50.6 58.4 62.1

FY15 FY16E FY17E FY18E

`

`

`

`

P/E (x) 24.9 23.9 20.7 19.5

Target P/E (x) 31.9 30.7 26.6 25.0

EV / EBITDA (x) 20.3 20.2 16.6 14.6

P/BV (x) 3.7 3.3 3.0 2.7

RoNW (%) 14.8 13.8 14.3 13.6

RoCE (%) 19.6 17.9 18.4 17.5

FY15 FY16E FY17E FY18E

Market capitalization ( crore) 29,040

Total debt (FY16E) ( crore) 225

Cash and investments (FY16E) ( crore) 7,551

Enterprise value (EV) (FY16E) ( crore) 21,714

52-week High/ Low ( crore) 1,416 / 974

Equity capital ( crore) 240

Face value ( ) 10

MF holding (%) 8.7

FII holding (%) 3.4

`

`

`

`

`

`

`


STOCK IDEAS

14

Key Risks

Change of government or change in stance: Currently, the defence sector has been in the limelight mostly due to the government's strong focus on making defence procurements central to the “Make in India” theme. A strong resolve to build the capability of armed forces indigenously coupled with swift decision making by 'Ministry of Defence' has led to a sentimental boost in this segment. Any deviation from this focus, due to policy inaction, slow decision-making or political instability can lead to a significant de-rating of P/E multiple from here. As shown below, the average premium that the company has received on its two year forward earnings is 13x. BEL is currently trading at a premium valuation of 19.3x FY18E in view of the large upcoming opportunity. Thus, for valuations to sustain or inch higher, it

is necessary that BEL receives sustained order inflows and the 'Make in India' campaign keeps chugging along.

Delay/lumpiness in ordering of defence contracts: The defence market is monopolistic in nature with the Government of India being the sole buyer of equipment. This puts all large and small suppliers at a disadvantage. Further, defence procurement procedures are complex, tedious and time-consuming. Large orders move at an extraordinarily slow pace. This leads to a high degree of lumpiness in the order book. A delay in approvals, changing requirements of armed forces, delay by consortium partners and inadequate or delayed fund disbursements are some key risks that the company faces. Accordingly, we have worked out the sensitivity of FY17E and FY18E PAT to a delay in probable revenues of the company.

(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; EV: Enterprise value; P/BV: Price-to-book value; RoNW: Return on net worth; RoCE: Return on capital employed; FII: Foreign institutional investors; DII: Domestic institutional investors)

Disclaimer: ICICI Securities has received an investment banking mandate from Government of India for disinvestment in Bharat Electronics Limited.

Sensitivity of FY17E PAT to revenue growth

Sensitivity of FY18E PAT to revenue growth

Source: Company, ICICIdirect.com Research

Revenues -15% -10% 0% +10% +15%

FY18E 8502.3 9002.5 10002.7 11003.0 11503.1

PAT 1350.6 1398 1492.8 1587.6 1635

Standalone revenue FY18E at 10002.7 crore (Base case)`

Revenues -15% -10% 0% +10% +15%

FY17E 7533.7 7976.9 8863.2 9749.5 10192.7

PAT 1268.6 1313.6 1403.4 1493.3 1538.2

Stansalone revenue FY17E at 8863.2 crore (Base case)`


STOCK IDEAS

15

Supreme Industries: Supreme in the plastic industry

Company Background

Founded in 1942, Supreme

Industries Ltd. (SIL) is India's

leading plastics processing

company, handling polymer

volumes of over 3,20,000

tonnes annually. SIL also has

t h e w i d e s t a n d m o s t

comprehensive range of

plastic products in India. The

company has a wide range of

plastic products with a variety

of applications in plastic piping

system, storage & material

handling products, moulded

furniture, XF films & products

(agr icu l ture , industr ia l ) ,

p e r f o r m a n c e f i l m s

( indust r ia l s ) , p ro tec t ive

p a c k a g i n g p r o d u c t s ,

composite plastic products

and petrochemicals. Apart

from piping products used in

the housing segment, its

p r o d u c t s a r e u s e d a s

components in automobile

parts, in material handling as

crates/boxes and in furniture

as tables/chairs. In the

refrigeration industry, they are

used as doors/panels and in

the packaging industry for

p a c k i n g e d i b l e a n d

hydrogena ted o i l s . S IL

o p e r a t e s w i t h 2 5

manufacturing facilities (two

are yet to start) covering

almost all regions in India. The

company has five business

segments in the plastic

division, contributing ~97% of

the consolidated topline in

FY15. These are: plastic piping,

p a c k a g i n g , i n d u s t r i a l ,

consumer and composite

p r o d u c t s e g m e n t s t h a t

contribute ~51%, 21%, 15%,

6% and 7% of total plastic

p r o d u c t s r e v e n u e ,

respectively. SIL exhibited

revenue CAGR (compounded

annual growth rate) of 14.7% in

FY11-15 to 4,219 crore led by

~8% volume CAGR in the

same period. The plastic piping

segment recorded revenue

CAGR of ~20% led by segment

volume CAGR of 11% in Fy11

15. In spite of continuous

capacity expansion (average

`


STOCK IDEAS

16

a n n u a l c a p e x ( c a p i t a l

expenditure) of 220 crore),

the debt/equity ratio has

improved from 0.9x in FY11 to

0.3x in FY15 as the company

generated strong cash flow

from operations during the

same period.

Piping, packaging segment to drive

future growth

During FY11-15, the piping and

packaging segment (out of four

segments of SIL) recorded a

volume CAGR of ~11% and

~6%, respectively, led by

demand from housing and

industrial segments. Going

forward, with the ramp up in

in f ras t ruc ture ac t iv i t i es

coupled with rising demand for

quality products in India, we

b e l i e v e p l a s t i c p i p i n g ,

packaging products volume

will record a CAGR of ~15%,

~13%, respectively, in FY15-

1 8 E . W i t h t h e s t r o n g

distribution channel (~2500

dealers) in India, we believe

sales of piping, packaging

segment will likely record

`

Investment Rationale

CAGR of 16%, 13% for FY15-

18E.

Valued added products (VAP): Play

on premiumisation

SIL is taking concrete steps to

increase VAP's contribution to

total sales from 31.7% in Fy13

to 35% by FY20. VAPs

commands EBITDA margin of

17% vs. 14.9% (in FY15) at

company level. SIL foresees

strong demand for cross

laminated products, CPVC and

ba th room f i t t i ngs f rom

h o u s i n g a n d i n d u s t r i a l

segments. SIL is further

awaiting government approval

for a full fledged launch of

composite LPG cylinder in

India that would further aid its

revenue and margin. We

believe SIL would partially

pass on the benefit of lower

raw mate r i a l p r i ces to

customers. Hence, EBITDA

margin would see moderate

growth of ~130 bps to ~16%

for FY17E & FY18E.

Composite LPG cylinder: Ready to

use capac i t y, wa i t i ng f o r

government approval


STOCK IDEAS

17

Under the composite products

c a t e g o r y, S I L l a r g e l y

manufactures composite LPG

cylinder and pellets. SIL has

incurred an expense of 70

crore to set up a greenfield

capacity to manufacture LPG

composite cylinders with an

installed capacity of 500,000

cylinders per annum at Halol

(Gujarat) with six variants of

capacity ranging from 5 kg to

14 kg. Currently, there are 16.4

crore LPG consumers in India

who use steel made LPG

cylinders. Steel cylinders have

two major drawbacks: 1) Issue

of leakage, which may lead to

blast in the cylinder and 2)

Checking of quantity to avoid

theft. The new composite

cylinder has been launched to

address these two basic

problems India is the largest

market for LPG cylinders. Oil

companies have recognised

the use of composite cylinders

despite higher cost. Oil

marketing companies are

expected to float a tender for

an education order in two

sizes, 12.5 lakh and 24 lakh. We

`

expect utilisation rates of this

product to pick up gradually

and be a major revenue driver

once the Government of India

permits sale of this product in

the Indian market.

Strong fundamental justifies

premium valuations

At the CMP, SIL is trading at a

PE multiple of 21x FY17E and

17x FY18E earnings. We

expect the company to

maintain high RoE and RoCE

considering 1) Healthy topline

growth backed by capex plan,

2 ) m a i n t a i n i n g h i g h e r

operating margin and 3)

Efficient working capital

management turning lower

debt/equity ratio. We believe

strong brand coupled with

sustained growth justify SIL to

c o m m a n d p r e m i u m

valuations. We ascribe PE

multiple of 21x on FY18E

earnings with target price (TP)

of 842 and BUY rating.`


STOCK IDEAS

18

Key Financials

Valuations Summary

Stock Data

Net sales ( crore) 4,219.5 3,017.1 5,115.6 5,926.9

EBITDA ( crore) 630.5 423.2 798.7 941.0

Net profit ( crore) 322.4 214.1 421.1 504.2

EPS ( ) 25.4 16.9 33.2 39.7

FY15 9MFY16E FY17E FY18E

`

`

`

`

P/E (x) 29.0 43.7 22.2 18.5

Target P/E (x) 33.2 50.0 25.4 21.2

EV / EBITDA (x) 15.1 22.4 11.8 10.0

P/BV (x) 7.7 6.9 5.8 5.0

RoNW (%) 26.6 15.9 26.0 27.2

RoCE (%) 32.4 20.3 33.6 36.1

FY15 9MFY16E FY17E FY18E

Market capitalization ( crore) 9,349.2

Total debt ( crore) 331.5

Cash ( crore) 181.8

Enterprise value (EV) ( crore) 9,498.9

52-week High/ Low ( ) 765/ 520

Equity capital ( crore) 25.4

Face value ( ) 2

FII Holding (%) NA

DII Holding (%) NA

`

`

`

`

`

`

`


STOCK IDEAS

19

Key Risks

Volatility in crude prices: Major raw materials consumed by the company are poly vinyl chloride (PVC), polyethylene (PE) and polypropylene (PP), which are linked to crude prices.

SIL imports 50% of raw materials. Thus, a sharp increase in crude prices could hurt the EBITDA margin of the company as it passes on a rise in crude price with a lag of two to three weeks.

(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; EV: Enterprise value; P/BV: Price-to-book value; RoNW: Return on net worth; RoCE: Return on capital employed; FII: Foreign institutional investors; DII: Domestic institutional investors)

EBITDA margin movement with respect to crude oil price

82 85

70

87

114 111 108

86

0

20

40

60

80

100

120

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

(US

$/ba

rrel

)

0

2

4

6

8

10

12

14

16

(%)

Crude oil price EBITDA margin

Source: Company, ICICIdirect.com Research

Delay in capacity expansion: Being a capital intensive business, it is necessary for the company to continuously invest in the business to sustain growth. Sales of the company may get negatively affected if there is any hurdle (regulatory, environ mental) in the expansion plan.

Influence of government policies in irrigation segment: Use of plastics in agriculture is still in a nascent stage in India. However, rising awareness on micro irrigation and government subsidies helped the industry to get good exposure from the agriculture industry. We believe any change in government policy (in terms of subsidy) could hurt demand for the products and, thus, sales of the company.

Delay in government flagship programmes: Government programmes l ike Housing for All, Swachh Bharat and AMRUT would be a strong boost to the plastic piping industry in India, going forward. However, any delay in execution of such projects could hurt the demand for plastic products in India.

Competition from unorganised players: The plastics industry is considered to be highly fragmented, with a large unorganised segment. Thus, the company has to continuously spend on a brand building exercise and technological innovations to improve its market share.


STOCK IDEAS

20

FLAVOUR OF THE MONTH

How to generate regular income post retirement

Retirement planning is not just about building up the adequate corpus through savings and investments. The real challenge is managing that corpus and withdrawing funds from it to meet regular expenses as you approach and enter retirement. How would you create a regular stream of income from your accumulated savings in order to pay your bills? What would be your withdrawal strategy to ensure that your money lasts lifelong? How much risk should you be taking with your investment portfolio then? How about managing healthcare costs, inflation and taxes? These are some of the important questions to address as you near retirement or are already retired. Here we help you address these questions and lay a road map for you to have a comfortable and rewarding retirement. Read on.


The changing landscapeMore dependence on your retirement corpus:

We are living longer:

It is really great if you have a pension plan sponsored by your employers. Most of the employers have moved away from sponsoring the pension (Defined Benefit) to Defined Contribution. This means that your assets need to be managed so that you get regular income.

The average Indian now lives for up to almost 65 years, compared to 48 years in 1970. The life expectancy is likely to rise further in the coming years, t h a n k s t o m e d i c a l advancements and better healthcare services. It is expected to reach 72 for males and 76 for females by 2025,

according to a planning commission report.

This just means that our investments need to be used for a longer period of time. Tr a d i t i o n a l i n v e s t m e n t strategies of just depending upon fixed deposits and small savings schemes may not always work well.

About 60 years ago, an average middle class person earning 600 a month, could well support his family. Today, it takes about 30,000. Likewise, there will be a continuous price rise over a long period. If you are planning to maintain your current lifestyle even after you retire, you would need to build in an inflation-protected portfolio.

Healthcare costs are on the

Cost of living rising:

Healthcare costs sharply rising:

`

`

21



rise, and they are significantly outpacing consumer inflation averages. In India, medical inflation has been running into double digits -- at the rate of 18-20% every year. As healthcare expenses usually go up in retirement, it is important to have an adequate health insurance cover in place and also build a sufficient medical contingency fund to take care of our needs.

For those of us used to getting a regular salary credit at the end of the month, generating monthly paycheque in the form of retirement income from investments can be a bit different and may appear complex.

There are limited products that can truly replace a salary credit. And many of such products may not give you a pay hike i.e. adjusted to inflation, at the end of the year. The other issue is that we look at an interest payment, dividend payout or a bonus as d i f f e r e n t f r o m c a p i t a l appreciation. We treat an investment which gives an 8% return through a dividend or an

Supplementing monthly paycheque post retirement

interest payout different than an investment that may have appreciated by 8% in the same period. Withdrawing from interest and dividends feels much easier than actually withdrawing the same amount f r o m a n a p p r e c i a t e d investment.

In rea l terms, in terest , dividends, rentals and capital appreciation (How much your investment are all related. It is best to look at a total return from investments instead of individual components. This approach will not only help you earn better returns but will also increase your investment options.

In order to manage and withdraw your accumulated savings and investments more efficiently, you need to have a comprehensive retirement plan in place. Here's how to go about it - a step-by-step approach to your retirement income planning process.

Before you start planning to fund your expenses post retirement, you need to know the type and size of expenses

Have a retirement plan in place

Step 1. Set your retirement expenses worksheet

22



that would occur. Your expenses will vary based on your lifestyle and personal situation. However, to get a general idea of your expenses post retirement, take the 75%-85% of what you spend today. This is because some of your expenses may decrease or disappear post retirement such as housing loan, children education expenses, work-r e l a t e d c l o t h i n g a n d

commuting expenses, etc. However, certain expenses may increase such as medical and entertainment. You may also have to plan for certain unexpected costs such as healthcare related emergency etc.

The following worksheet can help you est imate your month ly expenses post retirement - Essential as well as Discretionary Expenses.

Retirement Expenses Worksheet

Essential expenses Per month Discretionary expenses Per month

Household expenses

`

Entertainment

`

Personal care

`

Dining out

`

Healthcare ` Traveling/Vacations `Transportation ` Leisure & hobbies `

Tax considerations

`

Gifts / Charitable donations

`

Miscellaneous

`

Miscellaneous

`

Total ` Total `

Apart from estimating the above expenses, it is also important to factor in the risk of outliving the expected lifetime. Say for example, whi le planning you are considering your life expectancy to be 80 years, however, there is always a chance that you may outlive by another 5 to 10 years. Hence, to plan for these unexpected years is also very important. This would be a different exercise altogether.

For these years, it is better to factor in only the essential expenses like household, h e l p e r s ' a n d m e d i c a l expenses.

This exercise of estimating your expenses will help you determine your required retirement income.

Once you have estimated the required expenses post retirement, the next step is to

Step 2. Calculate your anticipated income from various sources

23



know what income sources are available to meet those expenses. Post retirement, your income will likely come from a number of sources, such as EPF (employees' p r o v i d e n t f u n d ) , V P F (voluntary provident fund), N P S ( n a t i o n a l p e n s i o n system), other investments, rental income, dividends, interest, part-time work, etc.

Yo u c a n c a l c u l a t e t h e anticipated income from

various sources with a simple FV (Future Value) in excel sheet.

you are currently 50 years of age and have already accumulated 55 lakh in your EPF account and are contributing 24,000 p.m. ( i n c l u d i n g e m p l o y e r ' s contribution). Assuming you are expecting a growth of 8% p.a. in your basic salary, here's how you can calculate the EPF corpus at your retirement age of 55 years.

Let's take for an example

`

`

AgeOpening

Balance (in `)

Contribution per month

(in )`

Return per month (in %)

Closing

balance (in `)

51 55,00,000 24,000 0.007 62,68,595

52 62,68,595 25,920 0.007 71,26,608

53 71,26,608 27,994 0.007 80,83,566

54 80,83,566

30,233

0.007 91,49,962

55 91,49,962 32,652 0.007 1,03,37,345

· Contribution per month has been increased by 8% per annum, every year.· Return per month is calculated as (1+8.50%)^(1/12)-1 (This is because the

compounding will happen annually).· Closing balance every year is calculated using FV formula in excel sheet

where variables will be RATE=0.007, NPER=12 (No. of periods=12 months), PMT= -(contribution p.m.), PV = -(opening balance), TYPE=1 (as investment is in the starting of the month).

Likewise, you can calculate the anticipated income from various sources. Note, the returns that you assume while calculating have to be realistic ones. This is because certain

investment returns are market-linked such as NPS and will vary from time to time based on the performance of the underlying investments. You will also have to take into

24



consideration the taxation part. For example, in case of E P F / V P F / P P F, m a t u r i t y proceeds are exempt from tax as per the current tax laws. However, from NPS, both l u m p s u m a n d a n n u i t y withdrawals are added to your income in the respective years of receipt and are taxed as per your income slab in that year.

Once you have estimated (a) the required expenses and (b) the income resources, the next step is to check if there is any gap/short fa l l or surplus between the two.

What if there is a shortfall? What are the various ways to bridge the gap?

Yo u m a y c o n s i d e r t h e following options:

- Reducing expenses

- Extending retirement / working part-time for few years post-retirement

- Investing aggressively

Note, these options are more viable at the start of your post retirement phase. However,

Step 3. Mind the gap

Total projected income – total projected expenses = Shortfall / Surplus

you may not be able to implement some of these if you encounter a shortfall sometime during the later part of your post-retirement phase. Some of the options then you could think of are:

There's a growing trend of senior citizens opting for a h o m e i n r e t i r e m e n t communities, especially in South India, where all the basic necessities are taken care of, including food.

You may also consider an option of reverse mortgage to make up a shortfall. This will ensure you stay in your house and at the same time get a regular income to fund the shortfall. However, in such case, the house will be sold off to settle the loan amount after your lifetime, unless your legal heirs / beneficiaries pay off the loan.

Gone are the days when investing in fixed-income instruments ensured having sufficient regular income to meet retirement needs and expenses. In the past, interest rates were higher and many

- Shifting to a smaller house / joining retirement communities:

- Reverse mortgage:

Step 4. Investing in retirement

25



salaried were covered under the pension system. Today, with interest rates coming down and pension from employer restricted only to selective workforce, it has become imperative for the retirees and near-retirees to diversify their retirement corpus and invest into different investment avenues to ensure safety (principal protection), income (regular returns) and

Optimal asset allocation for age groups: 60-70, 70-80 and 80+

Asset allocation at the age of 60 years:



There is no single asset allocation which will fit for all. Asset allocation will depend on one's cash flows i.e. the projected expenses and the timeframe available for accumulating the required funds for the same. Hence, asset allocation might not be the same for an individual over the entire retired life.

Let's take an example to understand the same. Let's say Mr. A is 60 years old and Mrs. A is 55 years old and both are expecting to live till 85 years of age. They require Rs. 6 lakh p.a. towards their post-retirement expenses, growing at an inflation of 7% p.a. After the expected lifetime of Mr. A, Mrs. A requires 70% of the expenses till her expected lifetime. Keeping their requirements in mind, following is the suggested asset allocation for Mr. A at his various age brackets:

Assuming Mr. A has just about sufficient corpus at his age of 60 years to fund his post-retirement expenses, the optimal asset allocation for him at his age of 60 years will be Equity – 35% & Debt – 65%. However, the asset allocation over the next 30 years will keep changing.

At his age of 70 years, the optimal asset allocation for Mr. A, assuming he has just about sufficient corpus to fund his post-retirement expenses, will be Equity – 20% & Debt – 80%.

At his age of 80 years, the optimal asset allocation will be Equity – 8% & Debt – 92%.

However, in case Mr. A has much more corpus than what is required, he can consider a conservative asset allocation for his regular expenses. The balance corpus can be used for tactical asset allocation and can shift around in asset classes based on the opportunities available or be invested largely into equity asset class.

growth (inflation protection) of the portfolio. You would also have to make sure that your portfolio is tax-efficient.

Your retirement investment portfolio needs to have both income and growth component. Income genera tion is a core expectation but growth is also important through equity exposure to counter the impact of inflation over a period of time.

26



A bucket approach for deploying your retirement corpus

Bucket 1 - Expenses for the first 3 years:

Bucket 2 - Expenses from 4th to 9th year:

You can adopt a bucket approach to deploy your retirement corpus more efficiently

For the expenses to be incurred in the first 3 years of your retired life, you can invest the money into liquid funds and shift the funds into savings bank account every month t h r o u g h a S y s t e m a t i c Withdrawal Plan (SWP). Partly, you can consider investing into an immediate annuity scheme / senior citizen saving scheme (SCSS) / tax-free bonds, which will give you a regular income.

For these expenses, you can continue to use the regular income generated f rom annuity / SCSS / tax-free bonds. Apart from that, you can invest into short-term / long-term debt mutual funds from which you can start withdrawing regularly through SWP opt ion. S ince the investment would have completed 3 years, long term capital gain taxes will apply and the same will be much lesser after indexation.

Bucket 3 - Expenses from 10th to 15th year:

Bucket 4 – Expenses after 15 years:

Important considerations about annuities

Here, you can continue to use regular income from annuity. You can redeem the principal amount invested in SCSS / tax-free bonds on maturity and shift them to short-term debt mutual funds and start withdrawing through SWP opt ion a f ter such investment completes 3 years. Part of the investments can be made into Monthly Income Plans (MIPs) / balanced mutual funds as well and can be withdrawn regularly to utilize here.

Since these expenses are required after a long term, you can consider investing mostly into large-cap / diversified equity mutual funds. This will give the required growth to your portfolio. You can start withdrawing from these investments through SWP option, in addition to receiving regular income from annuity.

An annuity is a financial product which helps you provide with regular income through investments made – lump sum or regular for a

27



certa in per iod of t ime. Annuities can be broadly categorized into two parts: Immediate annuities and deferred annuities (pension plans)

Here, you invest a lump sum amount as the premium and the insurance company starts paying you back annuity immediately. These a re su i t ab le fo r retirees/near retirees as they need steady income from the accumula ted re t i rement corpus.

Here, you invest systematically for a number of years, allow the investments to grow with time till retirement, and then start getting annuity. Most of the insurers provide deferred annuity plans in India. Very few offer immediate annuity plans.

There are various annuity payment options that you can opt for. You should select the options that suit to your specific needs the best. Some of the popular options are:

This option pays you annuity for life. The p a y m e n t s t o p s w h e n policyholder dies. Thus, it is

Immediate annuities:

Deferred annuities (Pension plans):

Annuity payout options

Option 1. Life annuity:

suitable someone who does not have any f inanc ia l dependants.

This option pays you annuity for life and on death, the initial purchase price ( p r e m i u m p a i d i n t h e beginning) is returned back to the nominee.

This option pays an annu i t y fo r a guaranteed period of 5, 10 or 15 years (as chosen by you) and thereafter as long as you are alive. This option is ideal for someone who needs money for a fixed period after which dependency on pension money will come down.

Annuity is paid to the investor till his/her death and post that to his/her spouse t i l l spouse's death. The principal amount (purchase price) is retained by the company.

Annuity is paid to the investor till his/her death and post that to his/her spouse t i l l spouse's death. The purchase price is returned to

Option 2. Life annuity with return of purchase price:

Option 3. Life annuity for fixed period guarantees:

Option 4. Joint life annuity without purchase price:

Option 5. Joint Life Annuity with purchase price:

28



the nominee after spouse's death.

The returns from all these options vary depending on the age at which the annuity starts and how long the insurer has committed to pay. The rate of return is generally fixed and assured for the lifetime but

varies across companies and plans. For example, one of the pension policies in India offers the below annuity amount on a yearly basis for a lumpsum investment of 1 lakh for the above options when the investor invests at his age of 60 years:

`

Option 1 Option 2 Option 3

(15 years certain)

Option 4

Option 5

` 9,350 ` 7,110

` 8,790

` 8,030

` 7,010

Tax implications on annuity

income: Annuity income is

taxable. Though investments

in annuity schemes are eligible

for tax deduction under

S e c t i o n 8 0 C C C , t a x i s

a p p l i c a b l e o n a n n u i t y

payments if they exceed the

income tax exemption limit. In

case, it is being received as an

a r r a n g e m e n t f r o m t h e

employer's side (like pension

f r o m c o m p a n y a f t e r

retirement), it can be treated as

salary income, otherwise, it

may be taken under the head of

income from other sources.

One of the biggest advantages

of annuity is that it pays you

regular income at fixed rate

throughout life. The rate gets

fixed at the time when you start

receiving annuity from the

plan, which in turn, depends on

the prevailing interest rates

then. Hence, it is prudent to

always start receiving annuity

when the interest rates are

high. Till then, you may defer.

The return from annuities

might be less compared to a

senior citizen fixed deposits /

Sen io r C i t i zen Sav ings

Scheme, but the la t ter

instruments will mature after a

fixed period of time and after

which they may carry re-

investment risk (probability of

interest rates coming down

during re-investment period)

29



This risk is not there with

annuity products as they pay

regular income at fixed rate

and are completely certain in

nature.

Apart from investing to

generate regular income, it is

also important to plan for

healthcare expenses as these

expenses generally go up post

retirement. You need to have

adequate health insurance in

place and also build sufficient

medical contingency fund to

take care of your needs.

These days most of the general

insurance companies offer

medical covers for retired

people / senior citizens.

However, it is always better to

take it when you are around 35-

40 years of age and completely

fit.

Most companies

have a limit on the maximum

entry age. Hence, the earlier

you avail, the better it is.

Generally, if

Managing healthcare expenses /

emergencies

Some factors to consider while

opting for medical insurance cover:

Age-limit:

Medical check-ups:

you opt for a medical insurance

cover when you are 45 years

old or more, the insurance

company asks you to take up a

medical check-up test. The

results of this test can affect the

premium or in worst case, it

may decline your proposal

itself.

If the

c o m p a n y a c c e p t s y o u r

proposal, it would cover pre-

existing diseases after a

waiting a period of 2 to 4 years.

Pre-existing diseases:

The approximate cost for 4 lakh

medical cover for a 60-year old

male is ` 17,000 p.a. if you are

taking it post retirement.

`

In addition to a normal medical

insurance policy, it is advisable

to take a top-up / super top-up

policy as well. These policies

will ensure you get a higher

sum assured at a lower cost.,

Since medical costs, specially

costs related to surgeries are

increasing rapidly, the basic

cover of Rs.4 to 5 lakh might

not be sufficient; in such cases,

these top-up/super top-up

policies can come in very

handy.

30


Please send your feedback to [email protected]


Note, there are a lways

e x c l u s i o n s i n m e d i c a l

insurance policies. These

exclusions can sometimes

amount to even 10% of your

total medical bill during

surgeries. To fund such

amounts, you should always

create a medical contingency

fund by the time you retire. You

may set aside a specific

amount - say at least Rs. 10 lakh

from your available corpus if

you are already retired.

Re t i rement p lann ing i s

complex. There is a lot of

dependence on how well the

i n v e s t m e n t c o r p u s i s

deployed. The decisions you

make about your retirement

savings and investments are

important. Our Retirement

Planning Service can provide

you with a personalized plan

that can go a long way in

achieving your retirement

objectives of safety, income

and growth.

As a first step, we spend time

with you to understand your

How we can help you

risk profile, preferences and

collect information that would

help us design a customized

plan. Once the plan is ready, it

is then incorporated on your

ICICIdirect.com account so

you can execute and track

your plan online, at your

convenience and at all points

of time. Our intelligent 24X7

'Track&Act™' robo-advisory

platform will help you give

triggers if you are maintaining

your asset allocations right,

wi l l he lp t rack i f your

withdrawals are as per the

plan, and even advice you

where to invest into and/or

withdraw from. You can speak

w i t h y o u r I C I C I d i r e c t

relationship manager for more

details.

31

Tête-à-tête

‘Opportunity to handpick quality stocks at reasonable prices'

Given that markets have seen a healthy correction since the start of the year, valuations are now pretty reasonable. This has created a good opportunity to pick up stocks with sound and scalable businesses. Broader markets are providing an opportunity to handpick quality stocks at reasonable prices, says Soumendra Nath Lahiri, Chief Investment Officer (CIO), L&T Mutual Fund in an interview with ICICIdirect Money Manager. As we see earnings growth coming back into the system, we would expect it to start reflecting in terms of prices, he adds. Excerpts:

Q:

A:

The start of 2016 has been a

difficult time in global stock

markets. What lies ahead for 2016

and beyond?

Indeed markets globally

have been volatile since the

last few months and this

situation will not change in a

hurry. The key factors or risks

driving the markets have been

Soumendra Nath Lahiri,

Chief Investment Officer (CIO),

L&T Mutual Fund

fairly the same – China's

economic slowdown and its

implications on global growth,

the notable decline in crude

prices and commodities and

the diverging monetary policy

across economies.

One of the key concerns we

see in this year is the direction

of flows and the currency. In

the last few months, emerging

markets have seen outflows in

favour of developed markets

against a backdrop of the much

anticipated interest rate hike by

the US Federal Reserve which

eventually did happen. We

expect the US dollar to

strengthen more against other

currencies. If China continues

to weaken its currency, we

could see an impact on overall

global trade.


32

Tête-à-tête

Q:

A:

How does the broad economic

picture look like currently, from

bo th g loba l and domes t ic

perspective?

We expect volatility to

continue for some time

globally. Most of the countries

are lacking growth and the

steep correction in prices has

further impacted growth.

Barring the US, countries in

Europe and Asia are grappling

with poor growth. At a

domestic level, we can see an

economic recovery underway

although it is much slower than

expected. We have had good

news on the macroeconomic

front particularly the twin

deficits, fiscal and current

account, being under control

and inflation much below the

trend line. The currency had

remained stable in relative

terms; but given the global

scenario we have seen a

depreciating bias. We believe

that the investment cycle

should start picking up this

year; the government is

focusing on infrastructure

investments and the private

sector is looking at increasing

capital spend. We also expect a

boost to consumption aided by

the recommendations of the

seventh pay commission. Two

years of bad monsoons

impacted rural consumption. If

monsoons are good this year,

rural demand will automa

tically get a natural push.

What are some of the risks

investors should be aware of in the

near future?

Today global economies are

interlinked and anything that

happens in one country

definitely impacts the others.

The same goes for Indian

markets which have seen

spillover effects of China's

economic slowdown amongst

other things. Having said that,

India is better placed than most

other countries and there is no

reason to panic. We do not

expec t much f rom the

upcoming Union Budget and

b e l i e v e r e f o r m s a r e a

ontinuous process through the

year. We need to be mindful of

the direction of capital flows

and the movement of crude

prices.

Q:

A:


33

Tête-à-tête


Q:

A:

The Q3 earnings announced so

far have largely been muted. What

is the road ahead for India Inc?

The third quarter has been

very disappointing with very

few pockets of good growth.

The fourth quarter too could be

similar as the demand has

been very weak. The next

financial year should turn out

to be much better aided by

earnings growth around 10

12%. This growth will be

driven by beaten down sectors

which have bore the brunt of

the correction which should

h e l p i m p r o v e o v e r a l l

sentiment. Given that markets

have seen a healthy correction

since the start of the year,

valuations are now pretty

reasonable. This has created a

good opportunity to pick up

stocks with sound and scalable

businesses. Broader markets

are providing an opportunity to

handpick quality stocks at

reasonable prices. As we see

earnings growth coming back

into the system, we would

expect it to start reflecting in

terms of prices.

Q:

A:

Q:

A:

What are some of the sector

opportunities available in the

current market environment?

We believe this is a year of

stock picking than taking

sector calls. Some of the

beaten down sectors should

see an improvement. We

expect the infrastructure

sector to do better than last few

years and within the space,

infrastructure roads, rail,

defense, power transmission

and logistics are some of the

areas where we are seeing

s o m e i m p r o v e m e n t .

Consumer d iscre t ionary

sec tor, pa r t i cu la r ly the

automobile sector should be

the beneficiary of lower

ownership costs as borrowing

costs have come down and

lower operating costs. Clearly,

there are a lot of areas which

are showing promise at this

point in t ime. Bui ld ing

products is another area we

believe can have a good upside

over the next 3 to 5 years.

How will the low price of oil and

other commodities benefit India?

India is large consumer and

34

Tête-à-tête


net importer of commodities.

In the last one year, the big fall

in crude oil was a windfall gain

for India as it helped us cut the

oil import bill into half and

improved macro variables like

the fiscal deficit. However

going forward the incremental

impact could be limited from

here.

A fund manager not only has to

manage investor expectations in

terms of returns, but also risks.

Could you explain how do you

manage that? How do you find

ideas to generate returns/ alpha

and at the same time control

portfolio risk?

We follow a bottom up

approach to stock selection.

Growth at a reasonable price is

what we look for. We have

5,000 companies listed in the

market but not all qualify to

b e c o m e a p a r t o f t h e

investment universe. We

follow our proprietary process

called GEM - Idea Generation

(G), Evaluation of Companies

( E ) a n d P o r t f o l i o

Manufacturing and Monitoring

(M). Herein we actively look for

Q:

A:

new ideas which could come

f r o m s o u r c e s s u c h a s

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 based on

t h e i r p r o f i t a b i l i t y a n d

attractiveness of business,

compet i t ive posi t ioning,

balance sheet strength,

management track record,

corporate governance and

valuations. The analysts'

r e c o m m e n d a t i o n s a r e

subsequently incorporated in

the portfolio. The stocks

bought in the portfolio are

reviewed periodically and as

the portfolio manager, we may

decide to exit a stock on

achieving the price target or for

o ther reasons such as

weakening business prospects

or if we find better investment

opportunity elsewhere. The

35

Tête-à-tête


portfolios are monitored

continuously to ensure that

they are positioned to meet

their investment objectives.

in the backdrop of the current

market scenario, what is your

advice to new and existing

investors?

M a r k e t s h a v e b e e n

significantly volatile in the last

few months. We expect this

volatility to continue in the

medium term. Investors

should not lose focus of their

long term goals and remain

i n v e s t e d t h r o u g h S I Ps

(systematic investment plans)

in mutual funds. Most markets

are volatile over the short term,

hence ignore the noise and

look over the long term. Also

another point to stress is it is

almost impossible to catch a

b o t t o m a n d t h i s l a r g e

correction has provided

investors with an opportunity

to add to or begin to invest in

equities.

What are the key fundamental

principles of building a successful,

Q:

A :

Q:

long-term investment portfolio?

A successful long term

portfolio is built with intent to

create wealth and not take

small profits. An investor's first

step should be determining his

need, his goals and the time

period to achieve those goals.

Accordingly, an investment

instrument should be chosen

based on the investor's risk

profile and return requirement.

Almost all life goals such as

marriage, child's education,

higher studies, retirement etc

require planning and the first

step to planning is to start early

and be regular. Mutual Funds

allow you to do so. Through

mutual fund SIPs, you can

invest small amounts regularly

towards a particular goal to be

achieved in a specific time

period. The thumb rule for

investing is just one – start

early, invest systematically and

stay invested.

A:

The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.

36

ASK OUR PLANNER

Bank FDs vs. Debt Mutual Funds


Q: I am trying to find out mutual fund categories which have same safety level and returns higher than bank fixed deposits (FDs). Can you please answer the following specific things on liquid funds?

1. Returns Difference: For a person in 30% tax bracket, how much more or less % post-tax returns (e.g. +/- 1%) can be expected as compared to an FD of a government bank.

2. Safety: Even a government bank carries certain risk (e.g. bank going default or bankrupt) of losing principal amount. If we consider

the safety in a government bank FD to be 99%, what would be the safety level in fund? If possible, please mention the potential scenar ios a lso tha t cou ld contribute to increased risk in fund.

It would be great if you can answer the above questions for arbitrage fund, ultra short term debt and short term debt funds as well.

- Shubh S

To start with, let's take a look at the recent performance of all these categories of mutual funds:

A:

Fund Category

3-month return(in

%)

6-month return(in %)

1-year return(in %)

3-year return(in %)

Liquid Funds

Average 7.00

7.13

7.66 8.28

Maximum 8.11

8.27

8.69 9.29

Minimum 4.65

4.66

4.86 5.59

Ultra Short Term Funds

Average 6.36

6.82

7.86 8.52

Maximum 8.25 8.55 9.39 9.31

Minimum 2.63 -10.86 -1.50 5.07

Short Term Income Funds

Average 4.79

5.96

7.21 9.26

Maximum 8.38

9.47

9.74 10.75

Minimum -5.71

-27.35

-10.03 2.45

Arbitrage Funds (Equity-Oriented)

Average 3.73 4.29 6.06 9.00

Maximum 5.94 6.14 7.42 12.38

Minimum -20.00 -18.19 -7.01 8.18Returns as on Feb. 18, 2016; Source: ACE MF

37

ASK OUR PLANNER


Now, let's compare bank Fds with these various categories of mutual funds on returns and safety parameters:

Returns:

The interest income from bank FDs is taxed at marginal rate. Taxation for all these funds, except arbitrage funds is same. That is, liquid funds, ultra short term funds and short term income or debt funds follow

the taxation of debt mutual funds; whereas arbitrage funds follow the taxation of equity mutual funds.

Taking the average return of each category from the above table, let's compare the pre-tax and post-tax returns of these funds with that of bank FDs for a person in 30% income-tax bracket:

Investment Avenue

1-year return(in %) 3-year return (in %) Pre-tax

Post-tax

Pre-tax Post-tax

Liquid Funds 7.66

5.29

8.28 8.28

Ultra Short Term Funds 7.86 5.43 8.52 8.47

Short Term Funds

7.21

4.98

9.26 9.06

Arbitrage Funds (Equity-Oriented) 6.06

6.06

9.00 9.00

Bank Fixed Deposits 8.50 5.87 8.75 6.05

Interest income from Bank Fds

is added to your income and

hence 30% is straightaway is

knocked out from the income,

irrespective of the duration. In

debt mutual funds, capital

gains for investments less than

3 years are added to your

income and taxed as per your

income slab. Hence, for 1-year

duration, 30% is reduced from

the returns. However, for

investments for 3 years or

more, capital gains are taxed at

2 0 % a f t e r i n d e x a t i o n .

Indexation reduces the capital

gain significantly and the

effective tax comes down to

less than 3% (based on the

returns generated by the

funds). Arbitrage funds being

taxed as an equity fund, the

capital gains earned from them

for investments for 1 year or

more are exempt from tax as

per current tax laws.

Safety / risk level:

Bank fixed deposits are

generally safe investments

because FDs upto 1 lakh are

insured by Deposit Insurance &

Credit Guarantee Corporation.

`

38

ASK OUR PLANNER


The limit of 1 lakh is per

customer per bank.

The two prime risks in debt

mutual funds are the interest

rate risk and credit risk.

The interest rate risk refers to a

change in the price of a bond

due to the change in the

prevailing interest rate. As

interest rates rise, bond prices

fall and vice versa. The higher

the maturity profile of a fund's

portfolio, the more prone it is

to interest rate risk.

Credit risk refers to the credit

orthiness of the issuer of

paper-- either a corporate or

financial institution. Credit risk

takes into account whether the

bond issuer is able to make

timely interest payments and

repay the principal amount on

maturity.

Another type of risk to which

debt funds are exposed to is

liquidity risk. If the fund

manager invests in poorly

rated paper, this could turn into

a liquidity risk should the need

arise for an emergency sale.

The objective of each category

o f f u n d s i s d i f f e r d n t .

` Accordingly, the avenues

where these funds park the

money are also different and

the associated risks vary.

Liquid Funds: The investment

objective of a liquid scheme is

to provide investors an

opportunity to earn returns

through investments in debt &

money market securities such

as treasury bills, certificate of

d e p o s i t s ( C D s ) a n d

commercial papers (Cps),

without compromising the

liquidity. These funds invest in

securities that have a residual

maturity of less than or equal to

91 days. Liquid funds are ideal

for parking money for a few

days to weeks. Since the

instruments in such a portfolio

have a maturity period of less

than 91 days, the interest rate

risk does not exist to the tune it

does in other debt funds.

Moreover, the fund managers

tend to stick to a high credit

rating to maintain a very high

quality portfolio which makes it

less susceptible to default risk.

Ultra-Short Term Funds: An Ultra

Short Term fund invests in

fixed-income instruments that

39

ASK OUR PLANNER


h a v e v e r y s h o r t - t e r m

maturities. The investments

will go into money market

i n s t r u m e n t s a n d d e b t

instruments with a maturity

period of 90 days upto 1 year.

The average maturity period of

the investments is around 3 to

6 months. Owing to the very

low durations, the rate of

interest volatility has very little

effect on the returns of these

funds, vis-a-vis a medium or

long-term bond fund. The risk-

return tradeoff for an Ultra

Short Term Bond Fund would

be higher than liquid funds but

lower than a short term fund. In

addition, here, the Principal

will be at low risk.

Short-Term Funds: The primary

investment objective of these

funds is to generate stable

returns for investors with a

short term investment horizon

by investing in fixed income

securities of a short term

maturity i.e. 1 to 3 years. These

funds can be little volatile in the

short-term, but you may come

out without unscathed if you

have a longer investment

horizon. These funds can and

do give negative returns on

some days. Negative returns

on a weekly basis are also not

u n c o m m o n . T h e

recommended holding period

is one year. Over this period,

returns can only be negative if

the fall in bond prices exceeds

the coupon income from the

bond. In theory, this is always a

possibility. This has not

happened till now and the

chance of it happening is

remote.

Arbitrage Funds: These really are

not debt funds although their

risk profile may mimic low-risk

debt funds. These funds

leverage the price differential

in the cash and derivatives

market to generate returns.

The returns are directly

dependent on the volatility of

the asset class. These funds

take advantage of the Equity

market inefficiencies and

secure profits. In the process, if

they generate some profit as a

result of mis-pricing, you

benefit more. Else you benefit

about the same as you would

with liquid or ultra short-term

funds. As mentioned above,

the tax treatment of these

funds is same as equity mutual

40

ASK OUR PLANNER


funds. Factors l i ke the

avai labi l i ty of arbi t rage

opportunities, their perfect

execution and also the liquidity

in the stock/cash and futures

segments are some of the

factors that contribute to the

uncertainty, and therefore risk,

with respect to this investment

avenue.

To summarize, any debt

mutual fund will not provide

guarantee to your capital.

However, if you choose the

right type of fund, taking the

time horizon and credit rating

of the instruments, there is a

very low probability of your

capital getting reduced. As a

thumb rule, if your investment

time horizon is less than 3

months, liquid funds would be

a good option. If it's 3 months

to 1 year, ultra-short term

funds can be considered. For

time horizons over 1 year,

arbitrage funds can give a

decent return, as after 1 year,

returns will be exempt from

tax. Short-term funds will be

ideal for 2-3 years.

I have a trading account with

ICICI Direct. I have started SIP in

Q:

Mutual fund 3 years before. Now I

would like to increase the SIP

amount. I have tried to check the

option in ICICI Direct, but could not

find it. Please help me the steps to

do the needful.

- Hitesh Shah

An SIP amount cannot be

i n c r e a s e d f o r e x i s t i n g

portfolios. You will have to start

a fresh SIP with additional

amount in the same folio.

Alternatively, if you want to

have a single SIP, you can stop

your existing SIP and then start

a new SIP for the total amount.

I am 25 years old. I started

working only a year back. I recently

started investing into shares after

looking at the good returns

generated. However, all my savings

have reduced significantly after the

recent market crash. I have lost

confidence in my ability to invest in

equities. What should I do now with

these investments? How do I invest

further? I do not have any

dependants and can invest around

10,000 p.m.

- Ankit Jain

It is good to note that you

have started investing into

A:

Q:

A:

`

41

ASK OUR PLANNER


equity at the early stages of

y o u r c a r e e r. H o w e v e r,

investing in equity markets

requ i res p rec i s ion and

research and the portfolio

s h o u l d b e a d e q u a t e l y

diversified. Considering your

age and that you have no

dependants, you can take risk

at this stage of your life. We

suggest you not to panic and

stay invested if you do not

require the funds in the near

future.

To start with, instead of

investing into direct equity,

you can look into equity mutual

funds every month through

Systematic Investment Plan

(SIP). This will provide you the

required diversification and

there is a fund manager who

will do the required research

and manage your investments.

Investing into mutual funds

regularly will also give you an

opportunity to understand

how equity markets work.

After a few years, you can then

start investing into stocks

directly.

Q:

A:

I am investing in the Franklin

Build India Fund via SIP since last

20 months now. I understand the

basics of investing in MF and

staying invested for long. However,

this being a sector fund I want to

understand that should I continue

with this fund? Why? If so, for how

long?

- Sailesh Damani

The Franklin Build India Fund

is the diversified fund with

current allocation to sectors

like Banking at 34%, Auto at

15%, Telecom at 8%, etc. Many

of the stocks in the portfolio

have corrected significantly

and therefore it is better to

continue to keep on investing

in those stocks. You may

continue your SIPs (systematic

investment plans) at least for

the next 1-2 years or till the

n e x t m a r k e t u p m o v e .

Investment at lower levels is

always a better investment

strategy.

Do you also have similar queries to ask our experts? Write to us at: [email protected].

MUTUAL FUND ANALYSIS

42

Investing in large-cap biased diversified portfolio funds

Franklin India High GrowthCompanies Fund

Fund Objective:To achieve capital appreciation through investments in Indian companies/sectors with high growth rates or potential.

NAV as on February 04, 2016 ( ) 25.4

Inception Date July 26, 2007

Fund Manager R. Janakiraman

Minimum Investment ( )

Lumpsum 5000

SIP 500

Expense Ratio (%) 2.29

Exit Load 1% on or before 2Y

Benchmark NIFTY 500

Last declared Quarterly AAUM ( cr) 4086

`

`

`

Key Information:

Product Label:

This product is suitable for investors who are seeking*:

• long-term capita l appre-

Fund Manager: R Janakiraman,

Roshi Jain

Performance:

Mr. Janakiraman holds an M.B.A.

from the IIM-B and is also a

CFA. He has managed diverse

set of funds in Franklin

Templeton since 2008. Ms. Jain

earned her post graduate

diploma in management from

IIM-A and is also a CFA. She

has been in the investment

industry for the past 11 years.

Fund's performance in the past

has been significantly superior

leading to better than industry

AUM growth. The fund has

delivered 16% compounded

annualised return (CAR) in the

5-year period compared with


Markets may remain volatile in the near future; however, stock-specific investment opportunities persist across the market segments, irrespective of the market capitalization. As earnings visibility exists in selected broader market stocks, investors should focus on funds with quality stocks that have higher growth potential. Investors should be selective while investing and should focus on parameters such as visibility of revenues, balance sheet strength, cash-flow profile and management quality. Here are our top three recommended funds based on these parameters.

ciation

• A fund that invests in stocks of companies / sectors with high growth rates or above average potential

43


Franklin India High Growth Companies Fund

Benchmark

31-Dec-14 31-Dec-131.49 79.58 9.22

Fund Name31-Dec-14 31-Dec-13 31-Dec-1231-Dec-15

-0.72 37.82 3.61

Last Three Years Performance


Portfolio:The fund started with small and

mid-cap fund but has moved

towards multi-cap fund by

increasing share of large-cap

stocks. Share of large-cap

stocks has increased from 27%

in Dec'10 to 57% now. The

portfolio consists of 35 odd

stocks. The fund manager

f o l l o w s c o n c e n t r a t e d

approach i.e. despite growing

AUM, he has not diluted its

mandate.

Our View:The fund has a concentrated

p o r t f o l i o w i t h m a j o r

concentration towards few

sectors which the fund

b e l i e v e s a r e g o i n g t o

outperform going forward.

Those are the sectors which

are expected to perform well

once the economy heads

towards revival mode. The

stocks in these sectors have

already undergone corrections

and hold value going ahead.

With markets having corrected

more than 15% from the highs,

the risk-reward ratio for

investment is favorable. It is

difficult to build a portfolio at

precise market bottoms.

However, with a favorable

reward to risk ratio, we believe

this is an opportune time for

portfolio construction from a

long-term perspective.

7% CAR delivered by its

benchmark. For the period of 3

years, the fund has given 20%

CAR as compared to the

benchmark which delivered

only 9% returns.

2015 2014 2013 2012 2011

28.9 28.5 15.9 14.5 10.2

1.5 79.6 9.2 42.5 -25.0

-0.7 37.8 3.6 31.8 -27.2

4086 1452 518 592 522Net Assets ( Cr)`

Return (%)

NAV as on Dec 31 (`)

Benchmark (%)

Calendar Year-wise Performance

-18.2

-14.3

20

16.2

-13.3

-13

9.1

7.3

-30-20-10

0102030

6 Month 1 Year 3 Year 5 Year

Retu

rn%

Performance vs. Benchmark

Fund Benchmark

44



%23.1

9.6

6.9

6.6

5.8

5.4

5.0

4.2

4.2

4.1

Bank - Private Domestic Equities

Bank - Public Domestic Equities

Engineering - Construction Domestic Equities

Cement & Construction Materials Domestic Equities

Bearings Domestic Equities

Top 10 Sectors Asset Type

Telecommunication - Service Provider Domestic Equities

Automobiles-Trucks/Lcv Rights

IT - Software Domestic Equities

Automobiles - Passenger Cars Domestic Equities

Automobile Two & Three Wheelers Domestic Equities

15.440.86-0.090.8212.57

Sharpe ratioR SquaredAlpha (%)

Risk ParametersStandard Deviation (%)Beta

56.129.63.9Small

Market Capitalisation (%)LargeMid

%

0.6

0.1

0.2KEI Industries Ltd.

Whats In

The Federal Bank Ltd.

ITD Cementation India Ltd.

%

7.9

7.5

7.4

7.0

6.7

6.6

5.0

4.4

4.1

3.4Aditya Birla Fashion and Retail Ltd. Domestic Equities

TVS Motor Company Ltd. Domestic Equities

Idea Cellular Ltd. Domestic Equities

Larsen & Toubro Ltd. Domestic Equities

ICICI Bank Ltd. Domestic Equities

State Bank Of India Domestic Equities

Tata Motors - DVR Ordinary Rights

HDFC Bank Ltd. Domestic Equities

Axis Bank Ltd. Domestic Equities

Call Money Cash & Cash Equivalents

Top 10 Holdings Asset Type

45


Performance of all the schemes managed by the fund manager

31 -Dec-14 -13 -12

31 -Dec-15 31 -Dec-14 31 -Dec-13

31 -Dec 31 -DecFund Name

Data as on February 04, 2016, Portfolio details as on December 31,2015Source: ACE MF, ICICIdirect Research


Sep-28-2010 6

Aug-25-2014 10Aug-26-2013 6Jul-25-2011 5

Dividend History

Date Dividend (%)Aug-31-2015 20

Franklin India Smaller Cos Fund(G) 9.56 89.92 13.22

NIFTY MIDCAP 100 6.46 55.91 -5.10

Franklin India Feeder -Franklin U.S. Opportunities Fund(G) 8.76 8.37 55.24

– -- – –

Franklin India Prima Fund(G) 6.81 78.14 7.40

NIFTY 500 -0.72 37.82 3.61

Franklin India Opportunities Fund(G) 2.30 58.58 2.14

S&P BSE 200 -1.48 35.47 4.38

Franklin India Flexi Cap Fund(G) 1.96 55.90 7.07

NIFTY 500 -0.72 37.82 3.61

Franklin India High Growth Cos Fund(G) 1.49 79.58 9.22

NIFTY 500 -0.72 37.82 3.61

Franklin Asian Equity Fund(G) -4.59 9.18 12.36

34.060.024.3

--4.1

Fund P/E RatioBenchmark P/E RatioFund P/BV Ratio

Portfolio AttributesTotal StocksTop 10 Holdings (%)

86.00.0

14.0Cash

Asset AllocationEquityDebt

46


SBI Bluechip Fund

Fund Objective:To provide investors with opportunities for long-term growth in capital through an a c t i v e m a n a g e m e n t o f investments in a diversified basket of equity stocks of companies whose market capitalization is at least equal to or more than the least market capitalised stock of BSE 100 Index.


• long-term capital growth

• Investment in equity shares of companies whose market capitalization is at least equal to or more than the least market



Inception Date January 20, 2006

Fund Manager Sohini Andani

Minimum Investment (`)

Lumpsum 5000

SIP 1000


Exit Load 1% on or before 1Y, Nil after 1Y

Benchmark S&P BSE 100

Last declared Quarterly AAUM(` cr) 3624

`

Key Information:

Product Label:

capitalized stock of S&P BSE 100 index to provide long term capital growth opportunities.

*Investors should consult their financial advisors, if in doubt about whether the product is suitable for them.

Fund Managers: Sohini Andani

Performance:

Ms Sohini Andani is fund

manager at SBI Mutual Fund

and managing the fund since

2010. She is a B.Com (H) and a

C.A.

This fund put up a middle of the

road performance in the first

four years of its existence with

returns from 2007 to 2010 just

about keeping pace with the

benchmark and lagging the

category. But, with the fund

altering its both investment

strategy and stock selection

process from 2011, the

improvement in performance

has been dramatic. The fund

has convincingly beaten both

benchmark and category in the

last three years. Its 3-year

annualized return stands at

17% outper forming the

headline benchmark (7%

return) and 1-year annualized

47



return stands at -3.3% vis-à-vis

benchmark which was down -

15%.

2015 2014 2013 2012 2011

28.5 26.3 17.8 16.6 12.0

8.0 47.9 7.6 38.2 -24.2

-3.3 32.3 5.9 30.0 -25.7

3624 1371 753 747 693

Return (%)


NAV as on Dec 31 ( )`

Benchmark (%)

Net Assets ( Cr)`

-8.5 -3

.3

17

14.2

-13.6

-15.1

7.4

6.5

-20

-10

0

10

20


Retu

rn%


Fund Benchmark

SBI Blue Chip Fund

Benchmark

31-Dec-14 31-Dec-13

7.99 47.86 7.58


Fund Name31-Dec-14 31-Dec-13 31-Dec-12

31-Dec-15

-3.25 32.28 5.87

Portfolio:The fund is predominantly a

large-cap fund with the

flexibility to invest up to 20 per

cent of its assets in midcap

stocks. The fund also restricts

risk by monitoring tracking

error. The fund can take up to 8

percent additional weight in a

sector against its benchmark

and up to 4 per cent on a stock.

These constraints impose both

sector and stock discipline on

the fund which helps to reduce

risk. In practice, the fund has

maintained about 70 per cent

exposure to large-cap stocks

and rest in midcaps in the last

one year. The fund has kept

a w a y f r o m s m a l l - c a p s .

Currently overweight on

consumer discret ionary,

pharma and technology sector

viz a viz the benchmark and is

underweight private sector

banks on account of lower

exposure to one of the large

private sector banks.

SBI Bluechip Fund has become

one of the most consistent

performing funds in the recent

years. The fund runs a fairly

diversif ied portfol io not

limiting to large-cap. It has a

sizeable mid-cap allocation.

The fund has maintained about

70% exposure to large-cap

stocks and rest in midcaps in

the last one year. Flexible

investment opt ion wi th

c o n s i s t e n c y i n f u n d ' s

performance makes it an ideal

portfolio fund.

Our View:

48



%

12.5

6.9

5.7

5.4

4.5

3.7

3.0

2.7

2.7

2.6


CBLO Cash & Cash Equivalents


Sun Pharmaceutical Industries Ltd. Domestic Equities

Tata Consultancy Services Ltd. Domestic Equities


The Ramco Cements Ltd. Domestic Equities

Reliance Industries Ltd. Domestic Equities

Infosys Ltd. Domestic Equities

Maruti Suzuki India Ltd. Domestic Equities

Mahindra & Mahindra Ltd. Domestic Equities

%11.9

11.3

7.5

6.3

6.0

4.5

4.5

4.0

3.0

3.0


Automobiles - Passenger Cars Domestic Equities

Refineries Domestic Equities

Cement & Construction Materials Domestic Equities

Finance - NBFC Domestic Equities

Pharmaceuticals & Drugs Domestic Equities




Pesticides & Agrochemicals Domestic Equities

Bearings Domestic Equities

14.480.83-0.040.9011.52

R SquaredAlpha (%)

Risk ParametersStandard Deviation (%)BetaSharpe ratio

64.521.4

--Small


%

2

Whats In

PI Industries Ltd.

49



84.10.0

15.9Cash


Dividend History

Date Dividend (%)Jul-17-2015 25Mar-21-2014 18Nov-04-2010 15Nov-30-2007 20

Data as on February 04, 2016, Portfolio details as on December 31, 2015Source: ACE MF, ICICIdirect Research


31 -Dec-14 -13 -12

31 -Dec-15 31 -Dec-14 31 -Dec-13

31-Dec 31 -DecFund Name

SBI Magnum MidCap Fund-Reg(G) 14.92 71.94 13.57

S&P BSE Mid-Cap 7.43 54.69 -5.73

SBI BlueChip Fund-Reg(G) 7.99 47.86 7.58

S&P BSE 100 -3.25 32.28 5.87

47.049.630.7

--5.4



50


Reliance Equity Opportunities Fund

Fund Objective:T o g e n e r a t e c a p i t a l appreciation & provide long term growth opportunities by invest ing in a portfol io constituted of equity securities & equity-related securities and the secondary objective is to generate consistent returns by investing in debt and money market securities.

Key Information:

Product Label:


L o n g - t e r m c a p i t a l appreciation

Investment in equity and equity related securities.

*Investors should consult their financial advisers if in doubt about

•

•



Inception Date March 28, 2005

Fund Manager Sailesh Raj Bhan

Minimum Investment (`)

Lumpsum 5000

SIP 500


Exit Load 1% on or Before 1Y, Nil after 1Y

Benchmark S&P BSE 100

Last declared Quarterly AAUM(`cr) 11651

`

whether the product is suitable for them

Fund Manager: Sailesh Raj Bhan

Performance:

Mr. Bhan is an MBA and CFA. Prior to joining Reliance AMC, he has worked with multiple organizations like ICFAI, Emkay B r o k i n g . H e h a s b e e n managing the fund since 2005.

The fund's performance has been consistent with 5 year compounded annual ized growth at 14% viz. a viz. benchmark return of 6.5%. The fund has delivered 14.4% compounded annual ized growth for a period of 3 years viz. a viz. benchmark which delivered 7.4% during the same time. During bear phase also it has contained the downslide by delivering -14.4% returns in past 1 year as compared to -15.1 returns of the benchmark.

2015 2014 2013 2012 2011

74.4 74.0 46.4 44.3 30.1

0.5 59.7 4.6 47.4 -21.6

-3.3 32.3 5.9 30.0 -25.7

11651 10670 5291 4990 3159

Return (%)


NAV as on Dec 31 ( )`

Benchmark (%)

Net Assets ( Cr)`


Fund Benchmark

-15.4

-14.4

14.4

14.1

-13.6

-15.1

7.4

6.5

-20

-10

0

10

20


Retu

rn%

51



Reliance Equity Opportunities Fund

Benchmark

31-Dec-14 31-Dec-130.51 59.67 4.56


Fund Name31-Dec-14 31-Dec-13 31-Dec-12

31-Dec-15

-3.25 32.28 5.87

Portfolio:The fund started off with a

large-cap bent but has moved

m o r e t o w a r d s s m a l l e r

companies. This does give it a

risky tilt when compared to

other equity diversified funds.

But the fund also invests in

large-cap companies and

bluechips which other mid-

small cap funds doesn't do.

The portfolio is risk-adjusted

and well-diversified. Fund

Manager has penchant for

emerging/niche themes and

sunshine sectors and invests

roughly 20% in them as he

believes they have significant

upside potential. Another 10%

i s i n v e s t e d i n v a l u e

propositions to balance the

portfolio's growth bias with a

v a l u e t i l t . Ta k i n g b i g

sector/thematic bets also

forms an integral part of the

strategy.

The portfolio is well-diversified

with the fund betting on a

variety of sectors. Since the

portfolio is diversified, the risk

decreases specially in this time

of volatility of markets. The

fund manager adopts a free-

flowing and multi-pronged

approach to stock selection. He

scouts for issues that exhibit

strong growth prospects and

have healthy or rising Return

on Equity (ROE). So the fund

poses to be a safe bet in this

volatile and risky market

scenario where appropriate

stock selection is very crucial.

Our View:

%

5.7

5.6

4.5

4.4

3.9

3.9

3.9

3.9

3.4

3.2


Divis Laboratories Ltd. Domestic Equities

Abbott India Ltd. Domestic Equities

The Indian Hotels Company Ltd. Domestic Equities


State Bank Of India Domestic Equities

ICICI Bank Ltd. Domestic Equities


Trent Ltd. Domestic Equities

Cummins India Ltd. Domestic Equities

Tata Motors Ltd. Domestic Equities

52



%14.0

11.3

8.0

6.7

6.5

6.1

5.9

4.4

3.9

3.7


Bank - Public


Pharmaceuticals & Drugs Domestic Equities


Electronics - Components Domestic Equities

Diesel Engines Domestic Equities


Domestic Equities

Electric Equipment Domestic Equities

Retailing Domestic Equities

Hotel, Resort & Restaurants Domestic Equities

16.130.89-0.080.799.64

Sharpe ratioR SquaredAlpha (%)

Risk ParametersStandard Deviation (%)Beta

44.335.019.6Small


%

0.3

1

Whats out

Sun Pharmaceutical Industries Ltd.

Maruti Suzuki India Ltd.

55.042.333.0

--4.9




31 -Dec-14 -13 -12

31 -Dec-15 31 -Dec-14 31 -Dec-13

31 -Dec 31 -DecFund Name

Reliance Pharma Fund(G) 19.37 49.46 20.87

S&P BSE Health Care 15.06 47.43 22.55

Reliance Media & Entertainment Fund(G) 8.27 41.24 -1.52

– -- – –

Reliance Capital Builder Fund-C(G) 1.45 -- –

S&P BSE 200 -1.48 -- –

Reliance Equity Opportunities Fund(G) 0.51 59.67 4.56

S&P BSE 100 -3.25 32.28 5.87

Reliance Capital Builder Fund-B(G) -0.25 -- –

S&P BSE 200 -1.48 -- –

Reliance ELSS Fund-I(G) -4.41 56.81 1.37

S&P BSE 100 -3.25 32.28 5.87

53



Data as on February 04, 2016, Portfolio details as on December 31, 2015Source: ACE MF, ICICIdirect Research

98.80.60.6Cash


Dividend History

Date Dividend (%)Mar-23-2015 40

Mar-14-2011 20Jul-27-2009 20

Mar-18-2014 20Mar-04-2013 25Mar-30-2012 15

54

MUTUAL FUND TOP PICKS

Based on our quarterly rankings, we have updated our mutual fund (MF) top picks recently

Mutual Fund Top Picks

Equity

Largecaps

Midcaps

Diversified

ELSS

Birla Sunlife Frontline equity FundICICI Pru Focussed Bluechip Equity FundSBI Bluechip Fund

HDFC Midcap Opportunities FundFranklin India Smaller Companies FundSBI Magnum Global Fund

Franklin India Prima PlusReliance Equity OpportunitiesICICI Prudential Value Discovery Fund

Axis Long Term EquityICICI Prudential Tax PlanFranklin India Tax shield

Liquid Funds

HDFC Cash Mgmnt Saving Plan ICIC Pru Liquid PlanReliance Liquid Treasury Plan

Ultra Short Term

Birla Sunlife Savings FundReliance Medium Term FundICICI Pru Flexible Income Plan

Short Term

Birla Sunlife Short Term FundHDFC Short Term Opportunities FundICICI Pru Short Term Plan

Credit Opportunities FundBirla Sunlife Short Term Opportunities PlanReliance Regular Savings FundICICI Prudential Regular Savings

Income FundsICICI PrudenIncome FundBirla Sun Life Income Plus - Regular Plan UTI Bond Fund

Gilts Funds

ICICI Pru Gilt Inv. PF PlanBirla Sunlife Constant Maturity gilt plan

10 year

MIP Aggressive

Birla Sunlife Savings 5ICICI Prudential MIP 25DSP Blackrock MIP

Debt


55

Our indicative large-cap equity model portfolio (“Quality-21”) has

continued to deliver an impressive return of 73.8% (inclusive of

dividends) till date (as on February 12, 2015) since its inception

(June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex)

return of 30.9% during the same period, out-performance of

~43%. This validates our thesis of selecting companies with

sound business fundamentals that forms the core theme of our

portfolio. Our “Consistent-15” mid-cap portfolio also continues

to outperform, delivering 107.2% (inclusive of dividends) till date

(as on February 12, 2015) vis-à-vis the benchmark index (CNX

Midcap) return of 52.5%, out-performance of 54.7%. Our

consistent outperformance demonstrates our superior stock

picking ability as markets in H1CY15 aligned to our view of

favourable risk reward, good franchisee vs. reward-at-any-risk

businesses. Some key performers of our portfolio are Lupin, Axis

Bank and TCS in the large-cap portfolio while Natco Pharma and

Shree Cement have delivered stupendous returns in the mid-cap

portfolio.

We have always suggested the systematic investment plan (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. It has

outperformed other portfolios, thus, reinforcing our belief in a

plan of investment. However, now we are also advising clients to

look at lump sum investments on any possible dips.

On a year-to-date (YTD) basis, the markets have been

consolidating in a broad range of 8,000-8,800 on the Nifty. This is

owing to: a) markets awaiting a turnaround on the ground and,

hence, corporate earnings and b) taking a breather post a

stupendous rise witnessed in CY14, wherein valuations in some

areas were ahead of fundamentals. Going ahead, in the medium

term, stocks with reasonable earnings visibility and valuations

should do well and will find flavour among investors.

EQUITY MODEL PORTFOLIO


56


On the back of this run up in stock prices and valuations running

ahead of fundamentals, we have aligned our portfolio to capture

the new opportunities available in the market. We have replaced

Bajaj Auto with Maruti and Titan Company with Asian Paints.

Furthermore, we have transferred Bosch which was earlier a part

of the mid-cap portfolio to the large-cap portfolio. Apart from

shuffling stocks, we have also increased/reduced the allocation

weights of some companies.

In the large-cap space as compared to broader indices we

continue to remain overweight on Pharma & IT, following which

FMCG forms the major portion of the asset allocation. We

continue to remain underweight on metals and oil & gas with our

only pick being ONGC and Tata Steel, which have a better risk-

reward opportunity. We believe that return on investment (RoI)

for these sectors would continue to remain stressed due to a

subdued pricing environment and discreet trade activities. We

continue to remain over-weight 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 are strongly overweight on Infosys,

TCS in the IT space, HDFC and HDFC Bank in the BFSI space, ITC

and PVR in consumer space and L&T and NBCC in the infra space.

House view on Index: Factoring in the fall in inflation, comfortable

CAD (current account deficit), improved sentiments and pick-up

in GDP (gross domestic product) growth, we expect Sensex EPS

(earnings per share) to grow 13.2% and 19.4% to 1,539 and

1,838 during FY16E and FY17E, respectively (CAGR of 16% in

FY15-17E). We assign a P/E (price-to-earnings) multiple of 16.5x

on FY17E EPS to arrive at a fair value of 30,300 for the Sensex by

end CY15 with the Nifty estimated to reach 9,100.

` `


57

Name of the company

Largecap Stocks

Model Portfolio

Largecap(%)

Midcap(%)

Diversified(%)

Auto 14 9.8

Tata Motor DVR 4 2.8

Bosch 3 2.1

Maruti 4 2.8

EICHER Motors 3 2.1

BFSI 23 16.1

HDFC Bank 8 5.6

Axis Bank 3 2.1

HDFC 8 5.6

Bajaj Finance 4 2.8

Capital Goods 5 3.5

L & T 5 3.5

Cement 3 2.1

UltraTech Cement 3 2.1

FMCG/Consumer 14 9.8

ITC 7 4.9

United Spirits 2 1.4

Asian Paints 5 3.5

IT 21 14.7

Infosys 10 7.0

TCS 8 5.6

Wipro 3 2.1

Meida 2 1.4

Zee Entertainment 2 1.4

Metal 2 1.4

Tata Steel 2 1.4

Oil & Gas 4 2.8

Reliance Industries 4 2.8

Pharma 12 8.4

Lupin 5 3.5

Dr Reddys 4 2.8

Aurobindo Pharma 3 2.1

Largecap share in diversified 100 70



58



Aviation 6.0 1.80

Interglobe Aviation 6.0 1.80

Auto 6.0 1.80

Bharat Forge 6.0 1.80

BFSI 6.0 1.80

Bajaj Finserve 6.0 1.80

Capital Goods 6.0 1.80

Bharat Electronics 6.0 1.80

Cement 6.0 1.80

Ramco Cement 6.0 1.80

Consumer 24.0 7.20

Symphony 6.0 1.80

Supreme Ind 6.0 1.80

Kansai Nerolac 6.0 1.80

Pidilite 6.0 1.80

FMCG 8.0 2.40

Nestle 8.0 2.40

Infrastructure 8.0 2.40

NBCC 8.0 2.40

Oil & Gas 6.0 1.80

Castrol 6.0 1.80

Logistics 6.0 1.80

Container Corporation of India 6.0 1.80

Pharma 12.0 3.60

Natco Pharma 6.0 1.80

Torrent Pharma 6.0 1.80

Textile 6.0 1.80

Arvind 6.0 1.80

Midcap share in diversified 100 30

TOTAL 100 100 100

5,7

00,0

00

5,7

00,0

00

5,7

00,0

00

6,1

94,6

63 8,6

81,6

41

6,8

04,7

17

6,0

08,1

75

6,2

60,1

73

6,2

38,9

18

3,500,000

4,500,000

5,500,000

6,500,000

7,500,000

8,500,000

|

59

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

February 12, 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 February 12, 2016

73.8

107.2

87.6

30.9

52.5

34.2

0

25

50

75

100

125

%



QUIZ TIME

1. The Employees' Provident Fund Organisation (EPFO) has raised the 'interim' interest rate to _____ for 2015-16.

2. In debt mutual funds, capital gains for investments less than 1 year are added to your income and taxed as per your income slab.

3. The interest income earned from bank fixed deposits is tax-free. True/False

4. Debt funds come with guarantee of returns. True / False

5. The higher the maturity profile of a debt fund's portfolio, the more prone it is to interest rate risk. True / False

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 January 2015 quiz are:

1. The tax deduction on NPS (National Pension System) is available for both Tier-I and Tier-II accounts. True / False

A: False, it is available only for Tier I account.

2. Recently, the government discontinued one of the small-savings instruments. That instrument is_____.

A: 10-year National Savings Certificate (NSC) or NSC issue IX.

3. On surrendering a pension policy, the entire surrender proceeds are tax-free. True / False

A: False, the entire surrender proceeds are added to income and taxed as per policyholder's income slab.

4. The additional tax deduction of Rs. 50,000 under section 80CCD (1B) for NPS investments is available for all, including central government employees irrespective of their joining date. True / False

A: True

5. Pension fund regulatory body PFRDA has started using _____instead of Aadhaar for online enrolment under NPS.

A: PAN (permanent account number).

60ICICIdirect Money Manager February 2016

61

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

29-Jan-16 31-Dec-15 Change (%)

CNX Nifty 7563.6 7946.4 -4.8%

CNX Midcap 12469.1 13396.7 -6.9%

S&P BSE Sensex 24870.7 26117.5 -4.8%

S&P BSE 100 7651.7 8097.6 -5.5%

S&P BSE 200 3191.1 3377.5 -5.5%

S&P BSE 500 10014.0 10634.2 -5.8%

Global Equity Indices29-Jan-16 31-Dec-15 Change (%)

Dow Jones 16,466.3 17,425.0 -5.5%

S&P 500 1,940.2 2,043.9 -5.1%

Nasdaq 4,614.0 5,007.4 -7.9%

FTSE 6,083.8 6,242.3 -2.5%

DAX 9,798.1 10,743.0 -8.8%

CAC 40 4,417.0 4,637.1 -4.7%

Nikkei 17,518.3 19,033.7 -8.0%

Hang Seng 19,683.1 21,914.4 -10.2%

Shanghai Composite 2,737.6 3,539.2 -22.6%

Taiwan Weighted 8,145.2 8,338.1 -2.3%

Straits Times 2,629.1 2,882.7 -8.8%

Sectoral Indices


S&P BSE Auto 17,046.0 18,519.1 -8.0%

S&P BSE Bankex 17,603.9 19,328.7 -8.9%

S&P BSE FMCG 4,020,513 4,254,715 -5.5%

S&P BSE Healthcare 16,305.0 16,905.2 -3.6%

S&P BSE Metals 6,894.0 7,398.0 -6.8%

S&P BSE Oil & Gas 9,258.1 9,555.6 -3.1%

S&P BSE Power 1,838.4 1,957.7 -6.1%

S&P BSE Realty 1,209.0 1,344.3 -10.1%

S&P BSE Teck 5,928.3 6,052.9 -2.1%

62

PRIME NUMBERS


Debt Markets

Government Securities (G-Sec) Yields (in %) Jan-16 Dec-15 Change (bps)10 year 7.78 7.76 2

5 year 7.58 7.69 -10

3 year 7.35 7.98 -63

1 year 7.25 7.30 -4

Corporate Bond Yields (in %) Jan-16 Dec-15 Change (bps)AAA 10 year 8.43 8.42 1.0

AAA 5 year 8.37 8.40 -2.2

AAA 3 year 8.30 8.34 -3.1

AAA 1 year 8.20 8.23 -3.0

AA 10 year 8.89 8.88 1.3

AA 5 year 8.92 8.68 24.1

AA 3 year 8.85 8.63 22.4

AA 1 year 8.68 8.61 6.7

Commercial Paper (CP) Rates (in %) Jan-16 Dec-15 Change (bps)

12 Months 9.04 8.23 81

6 Months 8.99 8.14 85

3 Months 8.88 7.75 113

1 Month 7.93 7.59 34

Treasury Bill (T-Bills) Yields (in %) Jan-16 Dec-15 Change (bps)91D TB 7.24 7.15 9.1

182D TB 7.22 7.21 1.5

364D TB 7.18 7.23 -4.3

Volatility Index (VIX)


VIX 17.24 13.87 24.3%

63

PRIME NUMBERS

10-year benchmark yields (%) across countries

Inflows In Equity and Debt Markets

Macro-economic Indicators

Consumer price index (CPI)

Wholesale price index (WPI)


Countries 29-Jan-16 31-Dec-15 Change in bps

US 1.92 2.27 (35)

UK 1.56 1.96 (40)

Japan 0.10 0.27 (17)

Spain 1.51 1.77 (26)

Germany 0.33 0.63 (30)

France 0.64 0.99 (35)

Italy 1.42 1.60 (18)

Brazil 16.19 16.51 (33)

China 2.89 2.86 3

India 7.78 7.76 2

MF Inflows Jan-16 Dec-15 YTD(in crore)`

Equity 6703 4629 68273

Debt 6603 36672 270146

FII Inflows Jan-16 Dec-15 YTD(in crore)`

Equity -11471 206 -30180

Debt 1545 -4190 7256

Items Weights(%) Nov-15 Dec-15 Jan-16

Food & beverages 45.86 6.08 6.31 6.66

Pan, tobacco and intoxicants 2.38 9.50 9.27 9.03

Cloth & Foot 6.53 5.76 5.74 5.71

Housing 10.07 4.95 5.06 5.20

Fuel & light 6.84 5.28 5.45 5.32

Misc. 28.31 3.78 3.95 3.95

CPI 100 5.41 5.61 5.69

Month

Weights Nov-15 Dec-15 Jan-16 WPI 100.0 -2.04 -0.73 -0.90 Primary Articles 20.1 2.15 5.48 4.63 Fuel & Power 14.9 -10.99 -9.15 -9.21 Manufactured Goods 65.0 -1.42 -1.36 -1.17

64

PRIME NUMBERS

Index of industrial production (IIP) Sector-wise growth rate (%)

Currencies and CommoditiesCurrencies

Commodities

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 Jan. 31, 2016

Debt Funds Returns (in %)

Returns as on Jan. 31, 2016

Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com Research


Categories Dec-15 Nov-15 Oct-15 Weight (%)

Mining 2.9 1.9 5.2 14Manufacturing -2.4 -4.7 10.6 76Electricity 3.2 0.7 9 10Total -1.3 -3.4 9.9 100

29-Jan-16 31-Dec-15 Change (%) StatusUSDINR 67.79 66.15 -2.5% DepreciatedEURINR 74.01 72.12 -2.6% DepreciatedGBPINR 97.02 97.99 1.0% AppreciatedAUDINR 48.04 48.40 0.8% AppreciatedCHFINR 66.53 66.62 0.1% AppreciatedJPYINR 0.56 0.55 -2.0% DepreciatedCNYINR 10.31 10.19 -1.2% Depreciated

29-Jan-16 31-Dec-15 Change (%)Crude ($/barrel) 34.7 37.3 -6.8%Gold ($/ounce) 1,118.2 1,061.4 5.3%

6 months -8.96 -8.08 -10.23 -9.791 year -9.29 -3.25 -12.88 -10.343 year 14.96 24.27 11.18 14.705 year 11.23 18.05 8.91 10.97

6 months 7.34 7.12 7.18 6.46 6.22

1 year 7.91 7.38 8.01 5.05 4.34

3 year 8.55 8.46 8.70 7.79 7.81

Tenure Liquid Funds Short-termincome funds

Ultra short-term funds

Long-termincome funds

Gilt funds

65

ICICIdirect Centre for Financial Learning (ICFL) imparts quality education on financial markets to beginners and amateurs, student, housewives, working professionals and self employed. ICFL's broad objective is to make participant feel confident to start investing in stock market.

Here is the list of our programmes scheduled for the month of February, 2016.

Schedule for Beginners' programme on Futures and Options (F&O) TradingSr.No

City Dates For More Information & Registration call:

Premium Education Programmes Schedule

Schedule for Fast-Track Programme on Futures & Options (F&O)Sr.No City Dates For More Information & Registration call:


1 Hyderabad 6th and 7th Feb 2016 Ruchi on 8297362323

2 Bangalore 20th and 21st Feb 2016 Subrata on 9620001478

3 Mumbai 6th and 7th Feb 2016 Nihal on 9619359592

4 Kolkata 13th and 14th Feb 2016 Subrata on 9620001478

5 Thane 13th and 14th Feb 2016 Manish on 8451057943

6 Chennai 27th and 28th Feb 2016 Rajat on 9962294867

7 New Delhi 20th and 21st Feb 2016 Vishal on 07838290143, Harneet on 09582158693

8 Pune 20th and 21st Feb 2016 Kusmakar on 7875442311


10 Rajkot 21st February 2016 Yogesh on 8238053563

11 Bhopal 7th February 2016 Kusmakar on 7875442311

12 Ajmer 7th February 2016 Yogesh on 8238053563

13 Ahmedabad 21st February 2016 Yogesh on 8238053563

14 Vadodara 14th February 2016 Yogesh on 8238053563

15 Surat 14th February 2016 Yogesh on 8238053563

Sr.No


Schedule for Technical Analysis Programme

16 Hyderabad 13th and 14th Feb 2016 Ruchi on 8297362323

17 Pune 27th and 28th Feb 2016 Kusmakar on 7875442311

18 Chennai 20th and 21st Feb 2016 Rajat on 9962294867

19 Bangalore 13th and 14th Feb 2016 Subrata on 9620001478

20 Pondicherry 6th and 7th Feb 2016 Rajat on 9962294867

21 New Delhi 13th and 14th Feb 2016 Vishal on 07838290143, Harneet on 09582158693


Sr.No


Schedule for Foundation Programme on Stock Investing

23 Hyderabad 20th and 21st Feb 2016 Ruchi on 8297362323

24 Bangalore 6th and 7th Feb 2016 Subrata on 9620001478


26 Thane 20th and 21st Feb 2016 Manish on 8451057943

27 New Delhi 6th and 7th Feb 2016 Vishal on 07838290143, Harneet on 09582158693

28 Chandigarh 13th and 14th Feb 2016 Vishal on 07838290143, Harneet on 09582158693

66

Contact us

Email:

Send us an email at [email protected] mention the name, date and venue of the programme you have

attended or wish to attend, for faster resolution of your queries.

SMS:

SMS EDU to 5676766 for more details


29 Nagpur 13th and 14th Feb 2016 Kusmakar on 7875442311

30 Nagpur 6th and 7th Feb 2016 Kusmakar on 7875442311

31 Pune 13th and 14th Feb 2016 Kusmakar on 7875442311

32 Mumbai 6th and 7th Feb 2016 Manish on 8451057943

Sr.No City Dates For More Information & Registration call:

Schedule for Fast-track Programme on Stock Investing

33 Ahmedabad 7th February 2016 Yogesh on 8238053563

34 Ranchi 7th February 2016 Sumit Sarkar on 8017516187

35 Bikaner 7th February 2016 Vishal on 07838290143, Harneet on 09582158693

36 Ahmedabad 7th February 2016 Yogesh on 8238053563


Schedule for Fast-track Programme on Technical Analysis

37 Patna 7th February 2016 Sumit Sarkar on 8017516187


Schedule for Techno Derivatives Programme


39 New Delhi 21st and 22nd Feb 2016 Vishal on 07838290143, Harneet on 09582158693

Printed by jasmine Art Printers Pvt. Ltd., A-737/3, TTC Ind. Area, MIDC, Navi Mumbai - 400 710.

icici february 16 issue newcontent.icicidirect.com/moneymanagermagazine/february_2016.pdf · simple...

Documents