icici may 18 issuecontent.icicidirect.com/moneymanagermagazine/may_2018.pdfsuch volatile times are...

Shilpa KumarMD & CEO

ICICI Securities Ltd.

I n d i a n m a r k e t s h a v e b e e n

outperforming the major equity

markets globally with benchmark

indices up 31% in CY17 vs. 18% for US

and 5% for China. In YTD CY18, the

outperformance trend, barring Brazil,

has continued with Indian markets up

2.4% vs. 0.6% for the US and -3.6% for

China. Many factors including the

overall growth in the economy backed

by reforms from the government have

led to this uptrend. Another factor that

is likely to be impacting the markets is

the “TINA” factor (There is no

al ternat ive) .The ' return to r isk '

advantage of equity as an asset class is

changing over assets at this point of

time.

Although FIIs have been the major source of capital for Indian capital markets

traditionally, their recent sell-off was more than offset by DIIs primarily

channelizing strong domestic savings. To put things in perspective, FIIs (

Foreign Institutional Investors) sold equities worth ~Rs 40,000 crore in CY17

while DIIs ( Domestic Institutional Investors) bought equities to the tune of

~Rs 91,000 crore in the aforesaid period. The trend continued in YTD CY18

with FII's outflows at ~Rs 11,000 crore in contrast to DII's inflows at ~Rs 36,700

crore. This is structurally positive as domestic savings are more durable and

address the need for risk capital.

With the structural uptrend in place, some concerns resurfaced recently on

the back of the trade war between the two largest economies, which has the

potential to slow down the global GDP growth rate. The increase in Brent

crude prices (US$75/barrel vs. an average US$58 in FY18) and domestic

political anxiety amid upcoming elections in key states in CY18 followed by

ICICIdirect Money Manager May 20181

the Lok Sabha elections in CY19 has led to some tepidness in investor

sentiment.

Such volatile times are transitory. With the strong domestic macro

environment in place, any such dip should be looked at as a buying

opportunity. Some of the ways to invest in volatile markets is by investing in

quality stocks, investing regularly through a SEP or a SIP and by adhering to

an asset allocation strategy that is aligned to your goals.

Quality stocks depict capital efficiency and possess sustainable growth

prospects. They are businesses that are high on quality and management

pedigree, depicted though consistent performance and return ratios viz. RoE

& RoCE. Quality should be followed by growth trajectory and the moat that the

company possesses, providing sustainable growth prospects, going forward.

Historically, it has been observed that capital efficient businesses have been

the best value creators. Such businesses, are best bought at times of volatility

as prices are a bit suppressed during such periods.

Retail investors can embrace volatility by investing through the Systematic

Equity Plans (SEP in direct stocks) or SIP in Mutual Funds. Investing regularly

instead of putting investments in a lump sum averages out the volatility. It not

just introduces discipline in investing but helps buy at lows. SIP returns in Nifty

50 stocks over a three-year period gave returns of 15.5% vs. lump sum

investment of 10.9% in the same period.

Goal-based investing ensures that your investments tagged to short term

goals are invested in less risk assets. Therefore investors adhering to a goal-

based investing protect their goals from any short term volatility.

The current volatile environment is likely to be short-lived doing no structural

damage to the growth prospects and earnings recovery. Forecast of normal

monsoon 2018 will further aid a demand recovery in rural areas. This is

expected to provide a fillip to corporate earnings with earnings expected to

grow in excess of 20% CAGR in FY18-20E. Therefore, the present time is right

for investors to ride this volatility for long term wealth generation. Through

our website and this magazine we want to make an www.icicidirect.com

earnest attempt to partner with you in setting and achieving your financial

goals. Do walk into any of your Neighbourhood Financial Superstore and talk

to us.

In the light of recent volatility in the markets, many investors seem concerned about their

investments. Few investors who may have made investments recently may be

experiencing minor losses in those investments. Studies show that a loss over two times

more painful than the pleasure that one experiences by making profit of the same amount.

This prompts investors to take irrational decisions like exiting fast or not continuing their

existing investments.

There are a few lessons and realizations that stand out. Amongst the first is our own

comfort in dealing with these movements in the markets. Our ability and willingness to

take risk defines the very core strategy of where we should invest. Do define an asset

allocation plan with a financial planner if you have not done so already.

The second is the discipline of investing. Systematic investments into the markets ensure

that you buy more when prices are low and buy less when prices are high. This averages

your cost and gives you much better returns than timing the market, which is not always

possible. If you have discontinued your systematic investments, we would recommend

that you restart. Remember that equity investments reward the long term holders.

Lastly, volatility in markets provides with great opportunities and valuations to invest.

While our emotions lead us away from investing in these times, smart investors seize the

opportunity to buy undervalued stocks and assets.

Investments based on these principles have stood the test of time over the years. In our

latest edition of ICICIdirect Money Manager, we explore these fundamental principles of

equity investing, which, if followed, will help you sail through all the times.

Further, our cover story answers to the most pressing questions in the current

environment viz., what an individual investor should do now and how to remain invested.

Mr. Vishal Gulechha, Head- Equity, ICICIdirect also shares his insights about managing

equity portfolio in our interview section. He advocates equity saying it is “the only

investment where you can choose which business to invest in and have flexibility to exit

and change the sector at any given point of time due to the high liquidity available.”

I would also like to draw your attention to our revised Equity Model Portfolio and Prime

Numbers – with inclusion of more data points and indicators - to let you have a

comprehensive overview. So read on, stay updated and involved. Do write in with your

feedback and share your thoughts at moneymanager @icicisecurities.com.

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


Editor & Publisher : Abhishake Mathur, CFA

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Research Team

Coordinating Editor : Namrata Lonkar

2


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

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

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

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

Stock ideas: Jubilant Life Sciences & SKF India ................................ 5

Flavour of the Month: Investing in equities? Get some doubts cleared first

It is not unusual for a beginner to worry about timing his first stock

purchase. In fact, timing the market has proved a difficult task for

seasoned investors as well. Research shows that disciplined

investment produce better results than timing the market. Investing

small amount on regular basis helps............................................... 15

Tête-à-tête: In talk with Mr. Vishal Gulechha, Head- Equity, ICICIdirect

In talk with the head of equity product group of ICICIdirect, we

unfold some key insights into equity investing under volatile

circumstances. His take on building an equity portfolio for short and

long term, amid other things, is certainly worth a read ............... 23

Ask Our Planner

Our financial expert answers your personal finance queries........... 29

Mutual Fund Analysis

Which are the top performing mutual funds in current market

scenario? Check these top infrastructure funds recommended by our

research team .................................................................................. 33

This month on iCommunity

Take a look at the latest activities on our unique information platform-

iCommunity (for May 2018) ............................................................. 43

Equity Model Portfolio ..................................................................................... 44

Quiz Time ......................................................................................................... 48

Prime Numbers ................................................................................................ 49


The finance ministry has joined hands with over two dozen e-commerce firms, including major players like Amazon, Flipkart, Ola and Uber, to provide easy finance to small entrepreneurs under the Pradhan Mantri Mudra Yojana (PMMY), a top government official said. The three way partnership between lenders, industry and the government aims to facilitate small business loans.

PMMY is a flagship scheme of the government to provide loans of up to Rs 10 lakh to small entrepreneurs. The loans are being given by banks, small finance banks, non-banking financial companies (NBFCs) and micro finance institutions. The scheme aims to strengthen forward and backward linkages for robust value chains anchored by industries, aggregators, franchisors and associations.

Courtesy: Financial Express

Finance ministry ties up with e-commerce firms to give loans

Higher crude prices threaten govt's dividend income from oil PSUs

Rising crude oil prices are not only bad for India's currency and current account deficit, but could also negatively impact the government's income from central public sector enterprises by drying up the dividend bonanza from oil companies.

In FY17, energy public sector undertakings (PSUs) such as Oil and Natural Gas Corporation (ONGC), Indian Oil, Bharat Petroleum, Hindustan Petroleum and Gail (India) accounted for 46 per cent of all dividend payouts by PSUs, the highest in at least a decade and up from 25 per cent a year ago.

Courtesy: Business Standard

Bank credit grows at 12.64%, deposits at 7.61%

Banks' credit grew by 12.64% year-on-year to Rs8,551,099 crore in the fortnight ended 11 May 2018, according to Reserve Bank of India (RBI) data.In March this year, the non-food bank credit rose by 8.4%, the same rate as in March 2017. Loans to agriculture and allied activities increased by 3.8% in March 2018, against an increase of 12.4% in March 2017. Advances to industry grew by 0.7% in March 2018, compared with a contraction of 1.9% in March 2017.

Courtesy: Livemint

Mobile trading share jumps in 2 years

Latest data from the stock exchanges show that the share of such trading had more than doubled in the last two years as investors, especially retail, become more confident with trading through efficient apps amid growing popularity of discount brokerages and increased use of smartphones.

On the National Stock Exchange (NSE), the share of mobile trading as a percentage of total turnover was pegged at 7.7% in April, which was more than double the 3.3% in April 2016. On the BSE, the share of such trading rose from 1.84% to 4.49% between April 2016 and April 2018.

Courtesy: The Hindu

STOCK IDEAS


Company Background

Incorporated in 1978, Jubilant Life

Sciences (JLS; formerly Jubilant

Organosys), is a mid-sized

integrated chemicals turned

pharmaceuticals player. It started

as a full-fledged chemical

company by entering the vinyl

acetate monomer (VAM) business

in 1983. Broadly, the company

operates through two business

segments - pharmaceuticals (55%

of the turnover) and life science

ingredients (45% of turnover). The

pharmaceuticals segment consists

of sub segments like 1) Generics-

APIs and formulations, 2) specialty

pharma - radio pharma, allergy

therapy products and contract

manufacturing (CMO) of sterile

injectables, 3) drug discovery and

development solutions. EBITDA

margins in the pharmaceuticals

segment are normally much

higher due to the presence of

formulations and specialty

pharma. The LSI segment consists

of sub segments like 1) advanced

intermediates and specialty

ingredients, 2) nutrition products

and 3) life science chemicals. This

segment caters to more routine

customers with committed

requirements. Due to the

commodity nature, margins in this

segment are relatively low.

Investment Rationale

Pharmaceuticals business

segment returning to normal

The pharma business has grown

at 8% CAGR in FY13-18 driven by

generics and specialty pharma.

The margin scenario is returning

to normal on the back of launches

in special ty pharma and

successful resolution of two CMO

facilities. Recent long term

contract in the radiopharma

business as well as approval for

Rubyfill in the US will strengthen

the speciality sub-segment

growth. This is likely to grow at

26% CAGR in FY18-20E to 3040 `

crore on the back of strong

growth in the radiopharma

business followed by CMO.

However, steep price erosion in

the US is likely to impact near

term generic segment growth.

Overall, we expect pharma

segment to grow at 23% CAGR in

FY18-20E to 6019 crore. `

Segment margins are expected

to fall to ~24% in FY20 from 32%

5

Jubilant Life Sciences - Maintains growth tempo…


STOCK IDEAS

in FY17 due to consolidation of

US radiopharmacy business

(Triad).

LSI segment showing turnaround in

performance

LSI business has grown at 6%

CAGR in FY13-18. However,

going ahead, the company is

seeing a good demand and

pricing environment, on the

back of a slowdown in Chinese

speciality chemicals exports &

better global petchem prices

(pegging effect), coupled with

de-bottlenecking of facilities.

Hence, the company is seeing

greater capacity utilisation and

improvement in margins (19%

in FY18 from a normal run rate

of 15-16%). LSI is likely to grow

at 14% CAGR in FY18-20E to `

4375 crore.

Debt no more fear factor

In its pursuit of building

capacity and creating multiple

revenue heads, the debt

situation had got complicated

over the years . Wi th an

improvement in operational

performance, the free cash

f low (FCF) s i tuat ion has

improved markedly. As the

capex cycle moderates in the

medium term, the company

expects to utilise maximum

FCF for debt repayment. We

expect the net D/E ratio to

further go down to 0.3x by

FY20E from 0.8x in FY18 and

debt/EBITDA ratio to 1.1x from

2.3x in Fy18.

Firing on all cylinders; maintain

BUY

In FY18, while speciality pharma

continued to show a strong

performance, LSI business

performance was a big positive,

thanks to multiple tailwinds like a

better pricing scenario, lower raw

material prices, higher demand,

especially in the backdrop of a

slower Chinese push, etc.

Structurally, we expect the better

margin scenario in LSI to continue

as the core reason for this is better

operating leverage. For specialty

pharma, we expect the growth

momentum to continue, thanks to

healthy CMO order book and

robust growth in radio pharma.

With improved visibility in both

speciality pharma and LSI, we

expect a continuous improvement

in free cash flow generation and

sustained debt repayment. We

arrive at our target price of ~ `

1080 based on 14x FY20E EPS of

~ 77.`

6


STOCK IDEAS

7

Stock Data

Key Financials

Valuations Summary

` Crore FY17 FY18E FY19E FY20E

Net Sales 6,006.3 7,557.8 9,379.4 10,657.4

EBITDA 1,345.3 1,518.4 1,861.9 2,153.2

Net Profit 575.6 642.8 954.1 1,198.9

EPS (`) 36.9 41.3 61.2 77.0

FY17 FY18E FY19E FY20E

P/E 23.4 21.0 14.1 11.2

Target P/E 29.2 26.2 17.6 14.0

EV / EBITDA 12.7 11.0 8.8 7.2

P/BV 3.9 3.3 2.7 2.2

RoNW 16.8 16.0 19.4 19.8

RoCE 13.8 14.9 18.9 21.1

Stock Data ` crore

Market Capitalization (` Crore) 13,778

Total Debt (FY18) (` Crore) 3,480

Cash & Investments (FY18) (` Crore) 249

EV 17,009

52 week H/L ` 1039 / ` 600

Equity capital `15.9

Face value ` 1


STOCK IDEAS

8

Key risks include:

Increased USFDA scrutiny

The fallout from the impending

patent cliff is the increased

intensity of the USFDA scrutiny.

As increasing number of drugs

were coming out of patent

protection, the inspection

intensity for hitherto unknown

players was bound to increase

to comply with required quality

standards. Even the pattern of

inspection has changed with

more surprises and greater

focus on data integrity besides

quality. With maximum number

of USFDA approved plants

outside the US, Indian players

received maximum number of

import alerts and warning

letters. Even established players

had to contend with the USFDA

embargo besides scores of

other Indian companies.

Delay in approvals for customer

products to impact profitability

T h e c o m p a n y ~ 1 7 % o f

pharmaceut ica l segment

revenues come from the CRAMS

business. Any delay in regulatory

approvals for its clients would

impact our projections.

Consolidation at client to

increase pricing pressure and

may hamper future orders

Currently the US generic

business is facing acute pricing

pressure due to the consolidation

of clients. Also consolidation at

the client's end may hamper

future order flow if the acquirer

has different priorities.


STOCK IDEAS

9

ANALYST CERTIFICATION We /I, Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financialinstruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. �Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securitiesdescribed herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.


STOCK IDEAS

SKF India – Going Strong...

Company Background

SKF is the leader in the Indian

bearing market with ~28%

share . Known for deep

groove ball bearings (forming

~35% of revenues and

~45% market share), SKF is

a lmost equa l ly present

across the industrial (46% of

s a l e s ) a n d a u t o m o t i v e

segments (54% of sales).

Investment Rationale

Decent Q4FY18, positive outlook

in key segments – auto/industrial

SKF's revenue growth looks

m u t e d a t 7 . 6 % Yo Y i n

Q4FY18. However, as clarified

by the management in the

conference call, the same is

much higher at ~11% after

adjusting for import related

countervailing duties. The

m a n a g e m e n t h a s a l s o

ind ica ted a t con t inued

growth in the auto segment

led by newer products and

addition of newer capacity.

For the industrial segment, it

expects growth to pick up led

by segments like mining,

steel, cement, etc. In FY18,

the indus t r i a l segment

reported muted growth of 3%

Yo Y d u e t o a l m o s t n i l

contribution of wind energy

related revenues. However, it

is expecting this segment to

pick up over the next two

quarters, with potential to

cont r ibu te ~5% to the

topline.

Railways, new products to act as

growth drivers

Currently, SKF is major

supplier in LHB coaches.

However, the company was

unable to supply its bearings

to conventional coaches, as

railway policies did not allow

procurement of over 10% of

the requirement from a single

supplier. This is likely to

change from FY19E onwards

as production factories and

railways will now separately

f l o a t t e n d e r s f o r t h e i r

requirements. This will allow

10


STOCK IDEAS

11

players like SKF to supply

higher quantities in both these

segments. Furthermore, the

company has also forayed into

the railway freight segment

that has a market potential of

~ 1000 crore. Other projects `

like Dedicated Freight Corridor

(DFC) and expansion of metro

rail network in a number of

cities are also likely to augur

well for the company. In the

a u t o s e g m e n t , S K F i s

introducing newer products

(like HUB-3 bearings) with the

Indian auto industry moving

from first generation bearing

to third generation bearing.

New products are also likely to

open up export opportunities

for the company.

Maintain BUY on upbeat outlook,

strong capex plans

S K F b e i n g t h e l a r g e s t

bea r ings p l aye r i n the

industry, caters to a wide

range of industr ies l ike

mining, steel, cement, textiles,

construction, energy, etc. As

per management, most of

these industries are now

seeing an up-tick in demand.

Accordingly, we expect SKF's

key segments, auto and

industrial to grow at a healthy

rate of 10.2% and 11.7%,

respectively. SKF has also

outlined strong capex plans of

` 80-120 crore in FY18-20E (2x

c a p e x o f F Y 1 6 - 1 8 ) .

Accordingly, we expect SKF to

deliver sales, EBITDA and PAT

CAGR of 11%, 11.3% and

10.1%, respectively, in FY18-

20E. We continue to value the

company at 32x P/E on FY20E

EPS of 69.8 to arrive at a `

target price of 2225/share. `

We maintain BUY on SKF.


STOCK IDEAS

12

Valuations Summary

Key Financials

` crore FY17 FY18 FY19E FY20E

Net Sales 2631 2750 3108 3388

EBITDA 336 435 494 539

Net Profit 244 296 333 358

EPS 46.3 57.6 64.8 69.8

FY17 FY18 FY19E FY20E

P/E 38.9 31.2 27.8 25.8

Target P/E 48.1 38.6 34.3 31.9

EV / EBITDA 26.6 20.3 17.3 15.4

P/BV 5.2 5.0 4.4 3.9

RoNW 13.5 16.1 15.9 15.2

RoCE 20.1 23.7 23.6 22.7

Stock Data

Stock Data ` crore

Market Capitalization (` Crore) 9492.0

Total Debt (FY18) (` Crore) 85.0

Cash and Cash Equivalent (FY18) (` Crore) 743.0

Enterprise Value (` Crore) 8834.0

52 week H/L (`) 2010 / 1490

Equity Capital 51.3

Face Value 10.0


STOCK IDEAS

13

Key risks include: Raw material cost rise could

impact our earnings estimatesSharp rise in key raw material

like steel could adversely

impact the profitability of the

company. This is on the

account of delay, the company

may face in passing elevated

prices.Slowdown in key segment may

derail earnings assumptions

The bearings industry is highly

correlated with economic

growth given the industry

linked usage and demand for

bearings. A slowdown in any of

the key segments (auto – two

wheelers, CV, PV, etc) or

industries could lead to an

overall slowdown in sales

growth and consequently our

earnings estimate


STOCK IDEAS

ANALYST CERTIFICATION We /I, Chirag Shah PGDBM; Sagar Gandhi MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

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14

FLAVOUR OF THE MONTH


Investing in equities? Get some doubts cleared first

What is the current market status?

Cy18 has been full of ups and

downs so far. Early February saw

sharp correction in the global

markets. Now, there are two

possible outcomes for Indian

markets. First, the inflation may

gradually rise in 2018 as a result

of increased Fed rates. This, in

turn, might raise uncertainty in

the Indian market that are already

trading at high valuations.

Second, inflation stays under

control and prompts global

economic recovery to raise

earnings. In either case, these are

interesting times for equity

markets.

According to Mr. Pankaj Pandey,

Head- Research, ICICIdirect, we

have witnessed Indian equities

(as well as global) re-rating

driven by the falling yields

which is behind us as interest

rate improvement cycle has

played over the last couple of

years. The focus now shifts on

macroeconomic factors as well

as corporate earnings, where

we have already seen green

shoots of improvement. For

instance, the growth rate (FY18)

of core sectors such as Auto

(14.5% YoY), Cement (up 5.7%

YoY), Steel (~6% YoY) and

Power (5.2% YoY), amid the

impact of GST, points towards a

sharp upt ick in ensu ing

economic activity.

Similarly, tendering activity

across key infrastructure

segments such as roads (up

23%), railways (up 13.1%), real

estate (96.1%) and irrigation

(55% YoY) have s ta r ted

resulting in strong ordering

trends.

Our research team, therefore,

suggests that Indian equities

remain in a sweet spot. We

have our index targets (Sensex

at 37,600 & Nifty at 11,725),

implying ~17x P/E on FY20E

EPS which is in tandem with

the long period average. There,

could, however be some

volatility on the back of global

factors such as concerns over

tariff war and commodity cycle

reversal.

Market usually seeks stability in

regime and that is why we

recently saw that political



sentiments did play a spoil

sport with the recent defeat of

the ruling party in the UP by-

polls. “The upcoming state

elections can create anxiety and

any adverse results can dent

sentiments on the domestic

front. Having said that, these

sentimental shocks are short

term based and eventually

focus shifts on macroeconomic

factors and corporate earnings,

wherein we are treading an

improvement path”, says Mr.

Pandey

Source: Business Standard

When should I enter in equities?

It is not unusual for a beginner

to worry about timing his first

stock purchase. Timing the

means that an investor is angle

to exit just before the markets

go down and enter the markets

just when it is about to go up.

How much ever exciting the

strategy appears, it is not

possible for the best of the

experts to time the market

always. It is but natural for

anyone, to miss a few of these

timing opportunities (exiting

when markets are likely to go

down and entering when the

markets are to go up). That is

the weak point of timing the

market. Markets reward in

spurts (unlike a fixed deposits

where the growth is uniformly

divided over the horizon). A

few days in a year can at times

define the overall return for

that year.



A study done by ICICIdirect

Investment Advisory Services

in 2017 states that even if an

investor misses 1% of most

critical opportunity to time the

market the overall return is

less than a simple buy and hold

strategy.

Additionally, research shows

that disciplined investment

produce better results than

timing the market. Investing

small amount on regular basis

helps to average out risk and

returns. In other words,

investing systematically in

quality stocks/equity funds for a

longer haul saves you from

timing the market.

What should be my investment horizon?Equity investments are perpetual in nature which means there is no maturity date (as against a deposit or a bond investment). Equity investors benefit from the growth of the business of the company they are invested in. It can take time before the full benefits are transmitted to the price of the stock.

While the expected returns of equity are always high (as compared to other assets) with time, the volatility of returns decreases. Studies show that the vo la t i l i t y o f re tu rns decreases significantly in the 3 -7 years of horizon.

Source: 10xinvesting (an equity research firm)



The practice of buying a stock

and holding it for a long term is

commonly known as 'Buy and

hold' strategy. It is based on the

view that equity markets give

good returns in the long run

despite periods of volatility or

decline. As timing the market is

difficult, it is better to simply buy

and hold the quality stocks for

long term and create wealth.

While this passive approach to

investing sounds easy to

execute, overlooking company

and market performance for an

extended period may adversely

affect one's portfolio. It is, thus,

recommended to monitor your

investments on a regular basis

and exit from underperforming

stocks. Over the years, this

strategy has proved suitable for

both new and veteran investors.

Before investing in stocks

When there a re tens o f

thousands of stocks to select

from, how do you finalize the

most suitable one? Analyzing

every balance sheet and

comparing them to understand

which company has a favorable

position is nearly impossible.

Instead, aspiring stock investors

can take it step-by-step to make

sound investment choices.

What is the objective?

L ike any o ther f inanc ia l

decision, the first step in stock

investment is to determine the

investment purpose. Investors

seeking income generation or

capital preservation are likely to

benefit from steady-growth

companies or b lue ch ip

corporations to gain low-risk

returns. On the other hand,

those focused on capital

appreciation and having a

greater risk tolerance should

invest in growth stocks.

Plus, picking out individual

stocks requires detail study of the

company. Investors should ask

questions such as how is stock's

performance consistency; what

is its growth rate compared to its

competitors; before finalizing the

stock. Ask a professional if the

particular selection of stocks will

perform as per your expectation

in the given period.

How many stocks should I buy?

Diversification is one of the fundamental principles of investing. It helps reduce the overall portfolio risk as you spread your investments across different avenues and asset



classes. Being “adequately” diversified is critical for better risk-adjusted returns. If you under-diversify, say 2-3 stocks in a portfolio, your specific risk would be very high. Conversely, if you over diversify, say 80-100 stocks in a portfolio, you run the risk of complexity - monitoring and managing your holdings become difficult. Further, it doesn't add any incremental diversification benefit to your portfol io. So, how much diversification is enough? What is the optimum number of stocks to hold in a portfolio?

We have seen investors holding as many as 100 stocks and 50 mutual funds in a portfolio. There is a common m i s c o n c e p t i o n a m o n g investors that with every

additional stock or mutual fund in a portfolio, the overall risk gets reduced to that extent. However, this is not true. While increasing the number of stocks in a portfolio helps reduce the specific risk, there is a level beyond which it doesn't benefit much.

Our research has found that

holding 13 to 22 stocks in a

por t fo l io o f fe rs op t ima l

diversification. Beyond 22

s t o c k s , t h e a d d i t i o n a l

diversification benefit starts to

decline. We simulated portfolios

by randomly picking stocks

from 1 to 69 from Nifty 100 and

this was simulated 100 times.

On average, a well-diversified

portfolio is found to contain 13

to 22 randomly chosen stocks.

Source: ICICI Securities Investment Advisory Services



T h e o p t i m u m p o r t f o l i o

diversification is to own not

more than 20-22 stocks to nearly

eliminate specific / unsystematic

risk. You can diversify your stock

portfolio by the size of the

companies (large-, mid-, or

small-cap stocks), by geography

(domestic or international), and

by industry and sector.

Before investing in equity

mutual funds

Investing in equity through

mutual funds sidesteps all the

problems one might face while

directly investing in stocks. The

selection of stocks vetted by a

resourceful team of experts is

the biggest advantage equity

funds have over direct equity.

Nevertheless, it is wiser to

evaluate past performance,

check expense ratio, exit load

and other significant factors

before investing. Remember,

the most suitable mutual fund

is the one that aligns with your

investment goals, horizon and

risk profile.

Should I rely on the fund ratings?

A fund rating is a scale that

measures a mutual fund's risk-

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

compared with other funds in

the same bracket. In other

words, it gives you an idea

about fund's potential to

generate returns for a given

extent of risk. Rating companies

assign stars to mutual funds

based on their rating (1 being

the worst and 5 being the best).

The rating assessment, however,

is done considering past

performance of the mutual fund

and does not guarantee future

returns. Since the ratings are

dynamic, it is recommended to

use fund rating as a starting

point and not a sole benchmark.

Investors must review the

performance of the funds once a

year.

How much should I allocate to

equities?

Equi ty a l locat ion in the

portfolio primarily depends on

the investor's goal and risk

to le rance . S ince equ i ty

generates highest inflation-

beating returns (as compared

to other asset classes), it

should be given fair weightage

in every portfolio.



An investor with a long-term goal has more opportunities to ride out market volatility and thus, should allocate 50- 80% capital to equity.

H o w e v e r, a r i s k - a v e r s e

individual can reduce this

exposure as per his tolerance

level. As equity mutual fund is

diversified by nature, we say,

allocate maximum capital to

this avenue.

A better way is to align the investments to goals. Short term goals need to be aligned to much lesser portion of equities and long term should have a health allocation of equities.

Large-cap, mid-cap or small-

cap?

S e l e c t i n g a m o n g t h e s e

ca tegor ies i s a ba lance

between returns and risk.

While all three offer generous

returns in the long run,

investors should weigh risk

associated with each type.

Generally, Large-cap funds are

cons idered su i tab le fo r

conservative and moderate

risk takers while mid and small

cap funds for risk-tolerant

indiv iduals . Again, your

willingness to face volatility is

the prime criterion. It is also

recommended to change this

allocation in line with market

movements. Research has

shown that a dynamic strategy

synced with major market

fluctuation produces optimum

returns.

Ground rules of equity investing to be a better investor

Know yourself:

The first and foremost thing before investing in equities is to understand

yourself. Understand your financial objectives, risk taking capacity and time

horizon. These three paramount factors are essential to bear in mind for

taking any investment decision. Knowing these factors will guide you in your

financial journey and help you achieve goals.

Understand the inherent nature of markets:

An equity investor needs to understand the inherent volatile nature of markets. He needs to understand that markets go through various phases such as bull-run, bear-run, volatility, extreme volatility, lackluster mode, etc.



As rightly said by a legendary investor Peter Lynch: “You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets.”

Understand the company and its business model:

Before investing in a company's shares, make a point that you are aware of its fundamentals and business model. It is also important to have a confidence in company's founders and leaders.

Delve into financial nitty-gritty:

Dig into company's income statement and balance sheet and look for revenues and income trends (historical as well as future forecasts). The future earnings guidance given by a company management can help you take better investment decision. Go for a clean balance sheet with low debt levels in relation to equity.

Invest regularly and systematically:

This is the piece of advice given by all the experts. And it does work. Making investments in a regular and systematic manner pays off well. A systematic investment plan (SIP) in equity mutual fund is the most appropriate and disciplined way of investing to ride out market volatility. Regular entries in the market ensure averaged returns on your investment. In fact, a dip in the market allows you to buy more number of shares if you invest on a regular basis.

Start early:

Start early on. The sooner you start investing, the more time you will have for your money to grow. For example: Rs. 5000 monthly index fund SIP at the age of 25 would give approximately Rs. 1.65 crore by the age of 50.

Keep your emotions away:

Emotions generally overwhelm your investment decisions to buy or sell a particular stock. While investing in markets, it is always prudent to do thorough research. Be diligent and take investment decisions wisely.

Long-term pays:

Stock markets go down but they don't stay down. They go up in the long run. Invest in equities for long term and you will be surprised to look at the returns it generates in the long haul.

Stick to your plan and review it periodically:

Lastly, stick to your asset allocation plan and monitor it regularly as circumstances keep changing.

Tête-à-tête


Choose the company by its merit and build your portfolio with multiple stocks

23

Vishal Gulechha, Head- Equity, ICICIdirect.

Just 10 years ago, when the stock markets crashed, the Indian equity investor went into a tizzy, selling stocks and exiting mutual fund SIPs in a hurry. Then in 2015, when the markets witnessed volatility following global cues, there was very little knee-jerk reaction, indicating growing maturity on the part of the Indian investor. This gradual evolution of equity investors has been evident during the dips in the past few years, and is clearly on display during the current market volatility as well, says Vishal Gulechha - Head- Equity, ICICIdirect. The approach of investing early and on a regular basis helps the customer to generate wealth from Equity markets, he adds. Excerpt:

Q. Can you tell us why is investment

in equities important in a portfolio?

A. Firstly, we are living in an

environment where inflation has

been high and expected to

remain high on the average in the

coming years. If you invest in

assets which cannot beat inflation

then you are losing purchasing

power of your wealth. On the

other hand history has shown that

equities can be great investments

over the long term. Equities have

historically delivered annualized

returns of over 15% despite

factors like recession, war, natural

disasters, corporate scandal and

other financial crises. There has

been a significant growth in size

and value in Indian stock markets

since the financial liberalization in

1990's . With the progress in India

economy and with Government's

focus on sustainable development

the re w i l l be max imum

participation from almost all

sections of the society. Equity

markets provide higher risk

adjusted returns and tend to

outperform other asset classes in

the long run.

Equity in fact is the only

investment where you can

become a part owner of the

company by investing small


Tête-à-tête

amounts. So by investing in a

Blue Chip company it is like

making the best of management

and minds work towards your

wealth creation. Equity is the

only investment where you can

choose which business to invest

in and have flexibility to exit and

change the sector at any given

point of time due to the high

liquidity available. You can reach

your financial goals with the

right mix on investment because

equity allows you to diversify

your investment with a relatively

lesser cost. Investing in Equity is

easy on your pocket. Anyone

and everyone can start investing

in equity through small SIPs and

benefit from the compounding

returns to generate wealth over

a long term.

Q. What factors should investors

cons ider whi le invest ing in

equity for a long term?

A. It has been seen that investors

often get perturbed when the

price of the stocks in their

portfolio starts falling. In case if

the fall is steep and if the time for

the price to recover is longer,

then the investor, out of

frustration sells it at a loss or for

a low profit when his stock

comes back to his buy price. In

an in-house study on successful

investment principles where we

tried to analyze our customer

behavior, it has been seen that

investors who have bought

fundamentally good, large cap

stocks and held it for long term

have made higher returns.

Fundamentally good companies

with strong management &

steady earnings give better

return on investment in the

longer run.

Even large cap stocks go

through a rough patch when the

markets are weak. The prices of

these stocks also fall. But if there

is no change in the character of

the stocks fundamentally, the

large cap stocks recover when

markets turn positive & give

good returns if held for a long

term. ICICIdirect study on

successful investment practices

has shown that investing into

large cap stocks from the top

100 stocks in the country by

way of market capitalization i.e.

Nifty 100 stocks have given

higher returns when held across

3 years

The longer you invest, the

higher are chances of better

re turns . But choose the


Tête-à-tête

company by its merit and build

your portfolio with multiple

stocks.

Q. And what advice would you

give to those investing for a short-

term?

A. An investor's time horizon is

a critical element to consider

when looking at how to put

money to work. Investing for

short-term needs requires a

different approach than when

investing for long-term goals,

such as retirement or a child's

future education. While most

investment plans are designed

to grow an investor's wealth

over extended periods of time,

there may be occasions, like

saving for a short term goal,

when there is only a short

window of time to reach a goal.

Given such an abbreviated

time period, it is prudent to

reduce the level of risk in an

investment plan or portfolio. A

business or market cycle

usually lasts more than three

years, so there typically isn't

enough time to recover from a

loss that may occur if choosing

higher risk assets such as

equities. If one gets into the

wrong cycle of growth then

there is risk of capital loss in

shor t te rm. Invest ing in

equities need patience and

investors have to give enough

time for their stocks to perform

and grow.

So it may be wise to invest in

lesser riskier investment with

lesser fixed returns for short

term.

A. Do you see a tangible shift in

investor interest from equity to

other asset classes because of the

recent volatility?

A .Market t ra jec tory i s a

function of what happens

globally and what happens

with Indian macro economy.

T h e g l o b a l o u t l o o k h a s

weakened a little bit because

we are looking at rate hikes and

tightening by various global

central banks.

Just 10 years ago, when the

stock markets crashed, the

Indian equity investor went

into a tizzy, selling stocks and

exiting mutual fund SIPs in a

hurry. Then in 2015, when the

markets witnessed volatility

following global cues, there

was very l i t t le knee- jerk


Tête-à-tête

reaction, indicating growing

maturity on the part of the

Indian investor. This gradual

evolution of equity investors

has been evident during the

dips in the past few years, and

is clearly on display during the

current market volatility as well

Equity markets are designed to

perform over a longer term and

with more and more investors

becoming aware of this fact, the

maturity level of investors have

increased over the years. In

India, household saving is

shifting from physical to financial

assets. Share of financial savings

as a proportion of household

has increased to 41pc in 2016

from 31pc in 2012. Expected to

rise further. Investment in equity

is witnessing a multitude of

changes with rising retail

participation, increasing share of

internet and mobile trading,

institutional investment into

equities, etc

Q . What are the key r isks

associated with equity investments?

What strategy should one adopt to

manage these risks?

A. The stock markets have a lot

to offer. Many avoid investing in

stocks, because they are afraid of

the many associated risks. The

confidence of potential investors

is eroded due to news about the

occasional market recession or

slump and consequently, they're

excluded from this market of

opportunities.

If you're a potential investor, it's

possible to rid yourself of this fear

and make good returns from

stocks. Be aware of your appetite

for risk and invest accordingly.

Generally, you can evaluate a

potential investment by analyzing

risks like Market risk associated

with market bubbles and crashes,

inflation risk and liquidity risks by

investing into stocks of well-known

fundamentally good companies.

Nifty 50 stocks are a good

example. Only fundamentally

good companies find their place in

top nifty companies and

underperforming companies are

eventual ly replaced with

performing companies. So there is

a level of filtration already done by

exchanges itself. Many investors

invest in mid and small cap stocks

with the expectation that it will

double or triple in short period of

time. A year later, many times


Tête-à-tête

these investors feel disappointed.

If you are an experienced investor

with time to understand the

business models of mid and small

companies, then you should

continue investing in it as its return

potential are definitely higher. For

new investors as well as investors

with less risk appetite, investing in

the best companies in India, in

terms of market capitalization, has

proven to be successful.

One can further reduce their risk

by diversifying. In the study that

ICICIdirect conducted on

successful investment principles,

we saw that there are 2 kinds of

divergent patterns investors,

when it comes to diversification

of stocks. (a) Concentrated

Portfolio & (b) Over Diversified

Portfolio,

In a Concentrated Portfolio:

We s e e s o m e i n v e s t o r s

accumulate very large quantity

in a single stock expecting

significant returns. They feel it

is that stock itself which can

change the fortunes of their

lives.

Now, in an Over-diversified

Portfolio: The investor we see

is the one who keeps adding

stocks in their portfolio with

expectation that one of them

would do better. This largely

happens when their existing

portfolio is not performing well

and they hope that the newly

added stocks would help in

balancing the losses. With this

kind of approach of adding

many stocks, the portfolio size

increases beyond a limit where

the investor is not able to track

and manage

A diversified portfolio having 10

to 12 good quality stocks tends

to yield higher positive returns

than por t fo l ios tha t a re

concentrated or over diversified.

A rightly diversified portfolio

also reduces the r isk by

balancing the losses, if any,

made in few stocks with the

profits from the others. The

study shows this is true across

large, mid and small cap stocks.

Even if, your preference is to

invest in small companies

anticipating higher future

returns, it would be a wiser idea

to diversify them into 10-12

stocks, so that even if 1 or 2

stocks don't perform, there are

others who make up for it. So it's

a smart investor's strategy to

diversify well in 10-12 good


Tête-à-tête

stocks. Even if you like small

caps, don't invest fully in one

stock. However if you still want

to invest in concentrated

portfolios, pick from NIFTY 50

or Nifty 100 stocks.

Q. What message will you give to

those who are just entering into

equities?

A. Not everyone who invests in

the stocks market is successful.

As a new investor you must

make decisions carefully so as

to avoid loss associated with

the market risks. Profit or loss

in the stock market largely

depends upon the decision-

making ability and choose the

right stock at the right time.

However a new investor may

not have the abi l i ty and

experience to do so. In

ICICIdirect our objective has

always been to guide and

educate new customers to

invest regularly in equities with

a longer term objective. This

approach of investing early

and on a regular basis helps the

customer to generate wealth

from Equity markets. We have

launched a scheme called

Pehal for our new customers.

Through Pehal we encourage

new customers to invest into

equity through ETFs and

Mutual funds. ETFs like Nifty

ETF can help spreading your

investments r isks over a

number of securities and

reduce stock specific risks. The

customer can choose an

option of investing a certain

amount of money into stocks

through our Equity SIPs on

regularly and can select an

option of investing monthly,

weekly, daily basis. In fact over

60% of or new customers

choose the option of investing

into equities through the SIP

route in ETFs which helps them

in not only reducing the risk but

by providing them with higher

chances of wealth creation

over long term.

ASK OUR PLANNER


Take sound financial decisions based on thorough knowledge and professional help

Q. I have investments in two of the

funds through SIP and I see them

not even beating their benchmark

since last 1 year, both funds are

from Franklin Templeton, can you

please advice if I should continue

with them, if they hold promise for

future performance, or should I

stop SIPs in them and move to some

other funds? If so, which funds?

The two funds are:

1. Franklin Build India Fund - Direct

(G)

2. Franklin India Prima Plus - Direct

(G)

- Sailesh Damani

A. Both these funds have a

'Hold' view by our Research.

You can hold the investments

which you have accumulated till

now. For fresh investments, you

can refer ICICIdirect.com >

Research > Mutual funds for

our list of recommended funds.

Q. With the introduction of LTCG on

equity shares from 1st April, my

query is – how to calculate value of

shares for bonus and demerger

cases?

- A I patel

A. The fair market value of the bonus shares as on January 31, 2018 will be taken as cost of acquisition, and hence, the gains accrued upto January 31, 2018 wil l continue to be exempt. If you sell such shares post April 1, 2018, then the c a p i t a l g a i n s w o u l d b e calculated as sale price less fair market value price as on January 31, 2018. However, if the sale price is less than the fair market value as on January 31, 2018, then the long-term capital gain will be NIL.For shares which were unlisted on January 31, 2018, but listed on the date of sale, then the cost of acquisition would be indexed, to calculate long-term capital gains. This will also apply for unlisted shares which are substituted in tax neutral transfers (like amalgamation, demerger, gift, succession, etc) for shares which are listed on date of sale.Q. I understand that there are certain IT provisions under which income earned from the money given to my wife is taxable as if it is my income. I also understand that the income generated by her will

ASK OUR PLANNER


not be taxable as my income in case I give a loan to her. It is also mentioned that I should charge a reasonable interest from her. My doubt i s regard ing what i s reasonable interest. I earn less than 7%PA on the FDs in bank and which I am paying tax now and just 3.5% pa in case of SB balances. Assuming my average annual balance in the bank is 10 lakhs in the last year and I earned about 50 thousand as interest, can I loan 5 lakhs and charge an interest of say 26000 per annum without needing to add (to my income) any income she earns on investing that 5 lakhs or claiming any deduction in case she incurs a loss?Although there will be saving of income tax for me, the main motive is to make her understand and get the ability to stand on her own.

- HVS Sastri A. The amount is considered loaned and is planned to be re turned and in terest i s charged as well. In case you are charging a reasonable interest and also showing this as your income in your return, income earned by your wife may not be clubbed. There's no c l e a r a n s w e r t o w h a t a reasonable interest is. It will be the tax authorities who would

judge whether the interest charged is reasonable or not.However, in cases where amount is shown as loaned to your wife and she is investing that money in shares to earn an income, and thereby you end up saving significant tax by avoiding clubbing of income (gains) on shares, it may be hard to convince the tax authorities about the lender borrower arrangement, given the close relationship of the parties and the tax saved involved. Usually in most cases – it's misused as a tax saving avenue and that is what the tax authorities want to be careful of.Q. I'm trying to lower my monthly payments to save to buy a house. What should I pay off first: my credit card debt or my car loan?

- Nikunj Ghedia A. You should pay off your c red i t ca rd ou ts tand ing amount first, without a doubt, given that the interest rate you would be paying on the same would be much higher than your car loan. Q. I am 55 years old, still working but don't think I have enough saved for retirement. I have saved 5 lakhs in fixed deposit account. The

ASK OUR PLANNER


amount in my PF account will not suffice for my later years. Should I invest in NPS now and save it up for my retirement? Which other investment or savings options would you suggest?

- Nilima Mahade A. Now that you are nearing your retirement, you would need to act quickly & invest more to build up the shortfall in the required corpus. First of all, you can look at getting a customized financial plan done through a financial planner, which would help you in es t imat ing the requ i red retirement corpus for fulfilling all your post-retirement needs. Once you get to know the shortfall, the financial planner would guide you as to how you can bridge up the shortfall and where you would have to invest to build the shortfall. As you have mentioned that you have invested into FD & have accumulated corpus in PF for retirement, you can now look at investing into equity mutual funds to have some exposure into equity asset class as well. The debt portion of your corpus could help you in fulfilling your post-retirement

needs in the initial years, whereas the equity portion could help you in accumulating the shortfall and could be used to fulfill your post-retirement needs in the later years of your retired life.

Q. I want to start a SIP, or Systematic Investment Plan, in an index fund. What are the risks associated with these funds and what are the factors I should consider before I invest? I've heard that it offers diversification. Which ones would be my best options?

- Kavin S

A. Index funds try and mirror the portfolio of the underlying index with the stocks held in the same weightages as in the underlying index. There are index funds for almost all the major indices available. Depending on your risk appetite, you can choose the index fund. For example, if you are looking to invest only into large-cap companies, you can look at Nifty / Sensex / BSE 100 funds. You can also look at diversifying by investing into funds which track different indices. Before choosing the fund, you can look at the performance of the funds with

ASK OUR PLANNER


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

respect to their peers & the underlying index. As these funds are not actively managed, the expense ratios for these f u n d s w o u l d b e l o w e r compared to actively managed

funds. While comparing similar index funds, you can look at this ratio and opt for the ones which have a lower ratio compared to its peers.

MUTUAL FUND ANALYSIS

Investing in infrastructure funds


Equity markets have been

volatile since the start of 2018.

After having declined sharply in

February and March, markets

have recovered almost all of its

losses since then. However,

infrastructure stocks have

lagged in the recent rally and

still offer a better investment

opportunity.

Within equities, the infrastructure

segment remains well placed to

offer a better investment

opportunity. Various segments

like roads, railways, ports, oil &

gas, defence and housing have

been key thrust areas of the

government. Policy measures to

create a favourable environment

for private investment along with

the government's own huge

expenditure on the infrastructure

segment have started to result in

order inflows and execution on

the ground.

Tendering activity in infra and

capex segments is a lead

indicator of a pick-up in

economic activity. Tendering is

followed by actual awarding of

contracts, which later leads to

ground level execution. Large

scale tendering for mega infra

projects is beneficial for larger,

stronger companies that are

more typically found in the

organised space. Whi le

tendering activity was dominated

by the government, participation

of private players in tendering

activity was very limited in the

last three to four years due to

high leverage and an elevated

interest rate scenario along with

uncerta inty over pol icy

framework. However, we believe

private investment could see an

uptick in investment possibly,

going forward, as there are early

signs of corporate balance sheet

repairs. Overall, we believe

execution activity would be

boosted over the next few

months as tendering activity,

which has already picked up

(and is highest since 2012), will

ultimately translate into action.

Furthermore, opening up of

various financing options like

InvITs, REITs along with Budget

focus on promoting the bond

market for lower rated companies

33



wil l make the business

environment conducive to private

investment in infrastructure.

In its Budget announcements,

the government has underlined

its commitment to provide a

continued thrust to the infra

space. Budgetary allocation to

roads, highways and transport

was increased 16.3% YoY while

that to urban development was

increased 11.2% YoY. Railways

received a bumper push, with

budgetary allocation increasing

32.7% YoY. Consequently,

a l loca t ion towards key

development related schemes

was increased 14.1% YoY.

Over the past few years, the

government has been working

on providing the much needed

groundwork that can see the

infrastructure sector take off in

coming years. The removal of

sectoral bottlenecks like land

acquisition, environmental

approvals, allocation of mining

resources along with measures

for ease of doing business may

lead to timely completion of

infrastructure projects. As

infrastructure projects involve

high capital expenditure, a

sharp fall in interest rates has

significantly added to the

profitability of the sector.

Infrastructure funds focusing on

specific companies capitalising

on growth potential in the

sector are offering good

investment options to investors.

Aggressive investors may

consider investing in the

recommended infrastructure

funds as a part of their thematic

allocation.

We recommend the following

f unds : Ad i t ya B i r l a SL

Infrastructure Fund, L&T

Infrastructure Fund and Reliance

Diversified Power Sector Fund.

Inves tors shou ld avo id

allocating more than 10% of

their equity mutual fund corpus

in any sector or thematic fund.



Product Label:

This product is suitable for investors who are seeking:

· Long term capital growth ·

Investments in equity and equity related securities of companies that are participating in the growth and development of infrastructure in India

Investors understand that their principal will be at high risk

Performance:

The fund has outperformed the

benchmark and has been among

the top two quartiles over the

five-year time frame (as of April

30). It has generated CAGR of

12.2% and 19.9% in the last three

years and five years vs. 10.9%

and 14% returns by benchmark,

respectively (as of April 30, 2018).

However, this comparison is not

strictly comparable because the

fund has chosen Nifty 50 as its

benchmark. Looking at the

scheme's performance vis-à-vis

the category average would be

more appropriate. Here, the fund

has marginally underperformed

its peers in recent times but has

outperformed over a five-year

timeframe.

Aditya Birla Sun Life Infrastructure Fund

Fund Objective:

An open-end growth scheme

with the objective of providing

for medium to long-term capital

appreciation by investing

predominantly in a diversified

portfolio of equity and equity

related securities of companies

that are participating in the

growth and development of

Infrastructure in India.

NAV as on April 30, 2018 ( )` 36.5Inception DateFund Manager Vineet MalooMinimum Investment ( )` Lumpsum 1000

SIP 1000Expense Ratio (%) 2.68Exit Load 1% on or before 1Y, Nil after 1YBenchmark NIFTY 50 - TRILast declared Quarterly AAUM( cr)` 671

Key Information

March 17, 2006

Performance vs. Benchmark (CAGR Returns %)

9.5 12

.2 19.9

11.317

10.9 14 11.8

05

10152025

1 Year 3 Year 5 Year SinceInception

Fund Benchmark

Portfolio:The fund has tradit ionally invested heavily in financials and industrials with these two sectors regularly constituting

~50-55% of the portfol io. However, over the last two to three years it has consistently cut exposure to these sectors while increasing allocation to



%

5.1

4.1

3.8

3.7

3.6

3.5

3.1

2.7

2.4

2.4

KEC International Ltd. Domestic Equities

NTPC Ltd. Domestic Equities

Hindustan Petroleum Corporation Ltd. Domestic Equities

Asset Type

Cash & Cash Equivalents and Net Assets

PNC Infratech Ltd. Domestic Equities

Vedanta Ltd. Domestic Equities

Indraprastha Gas Ltd. Domestic Equities

Honeywell Automation India Ltd. Domestic Equities

Carborundum Universal Ltd. Domestic Equities

Bharat Electronics Ltd. Domestic Equities

Clearing Corporation Of India Ltd.

Top 10 Holdings

%15.4

5.9

5.3

5.1

5.1

4.4

4.2

4.1

3.8

3.7

Industrial Gases & Fuels Domestic Equities

Finance - NBFC Domestic Equities

Abrasives Domestic Equities

Engineering - Industrial Equipments Domestic Equities

Air Conditioners Domestic Equities

Domestic Equities

Bank - Private Domestic Equities

Metal - Non Ferrous Domestic Equities

Consumer Durables - Electronics Domestic Equities

Top 10 Sectors Asset TypeEngineering - Construction Domestic Equities

Refineries

%

1.9

Whats In

Voltas Ltd.

%

2.6

0.70.2

Whats out

Housing Development Finance Corporation Ltd.

Steel Authority Of India Ltd.Hindustan Zinc Ltd.

materials. The portfolio displays a significant midcap bias with the portfolio seeing allocation of ~40% in large caps and ~60% in midcap and small cap stocks. At the stock level, the fund tries

t o m i t i g a t e t h i s r i s k b y diversifying heavily. It currently holds 63 stocks with the top 10 bets making up around a third of the portfolio.

Our View:T h e f u n d h a s w o r k e d o n

diversifying its portfolio by

moving away f rom highly

concentrated posi t ions in

financials and industrials. Having

reduced exposure to sectors

such as consumer discretionary

and financials the fund is now

truer to the infrastructure theme.

Investors can consider this fund

from a three-year perspective.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://mutualfund.adityabirlacapital.com//media/bsl/files/resources/factsheets/2018/empower-april-2018.pdf

Data as on April 30, 2018; Portfolio details as on March-2018� �Source: ACE MF, ICICI Direct Research



L&T Infrastructure Fund

Fund Objective:

The scheme seeks to generate c a p i t a l a p p r e c i a t i o n b y investing predominantly in equity and equity related

NAV as on April 30, 2018 ( )` 18.0Inception DateFund Manager

Soumendra Nath Lahiri

Minimum Investment ( )` Lumpsum 5000SIP 500

Expense Ratio (%) 2.22Exit Load 1% on or before 1Y, Nil after 1YBenchmark NIFTY INFRA - TRILast declared Quarterly AAUM( cr)` 1934

Key Information

September 27, 2007

Product Label:

This product is suitable for investors who are seeking• Long term capital appreciation• Investment predominantly in equity and equity-related instruments of companies in the infrastructure sector

Investors understand that their principal will be at high risk

Performance:

The fund has been a top quartile performer over the last one year, three year and five-year time frames (as on April 30, 2018), indicating its relative outperformance over its peers. It has also comfortably and cons i s ten t l y bea ten the benchmark Nifty Infra by ~10% (one year), ~14% CAGR (three years) and ~6% CAGR (five years) (as of April 30, 2018).

instruments of companies in the infrastructure sector.


19.4

19.1

24.5

5.79.1

4.9 9.

1

-1.3-10

0

10

20

30


Fund Benchmark

Portfolio:

The portfolio has undergone a

significant change in character over

the years. Till 2012, the holdings

were dominated by financial,

energy and industrial stocks.

However, post 2012 it started

shedding financial stocks in favour

of materials sector and post 2015,

the holdings in financial stocks has

been cut, to a large extent. As a

result, now the fund truly resembles

an infrastructure fund with the

portfolio predominantly comprising

appropriate constituent sectors, viz.

industrials, materials, energy and

telecom. Currently, there are 57

stocks in the fund with the top 10

holdings making up close to 36% of

the portfolio. The fund also has ~8%

of the portfolio in cash currently.



%

7.6

7.2

4.4

3.7

3.6

3.5

3.2

3.0

2.8

2.8

Carborundum Universal Ltd. Domestic Equities

Bharat Electronics Ltd. Domestic Equities

Hindustan Zinc Ltd. Domestic Equities

Asset Type

Domestic Equities

Graphite India Ltd. Domestic Equities

Shree Cement Ltd. Domestic Equities

Lakshmi Machine Works Ltd. Domestic Equities

Cash & Cash Equivalent Cash & Cash Equivalents and Net Assets

Larsen & Toubro Ltd. Domestic Equities

The Ramco Cements Ltd. Domestic Equities

Bharti Airtel Ltd.

Top 10 Holdings

%13.1

11.6

8.0

7.2

5.9

5.5

5.4

5.2

4.3

3.6

Construction - Real Estate Domestic Equities

Diversified Domestic Equities

Metal - Non Ferrous Domestic Equities

Logistics Domestic Equities

Steel & Iron Products Domestic Equities

Domestic Equities

Engineering - Industrial Equipments Domestic Equities

Telecommunication - Service Provider Domestic Equities

Electrodes & Welding Equipment Domestic Equities

Top 10 Sectors Asset TypeCement & Construction Materials Domestic Equities

Engineering - Construction

%

1.3

Whats In

HG Infra Engineering Ltd.

%Whats out

Our View:The fund is on the aggressive side with higher allocation to midcaps than large caps. However, the portfolio is well

const ruc ted in te rms o f diversification. Investors looking for a true-blue infra fund can consider L&T Infrastructure Fund.

You can view performance of other schemes being managed by

the fund manager of this scheme on the following link:

https://www.ltfs.com/content/dam/lnt-financial-services/lnt-

mutual-fund/downloads/factsheets/2017-18/LT%20Factsheet%20Mar%202018.pdfData as on April 30, 2018; Portfolio details as on March-2018� �Source: ACE MF, ICICI Direct Research



Reliance Diversified Power Sector Fund

39

Fund Objective:The pr imary inves tment objective of the scheme is to generate long term capital appreciation by investing

NAV as on April 30, 2018 ( )` 116.6Inception DateFund Manager Sanjay DoshiMinimum Investment ( )` Lumpsum 5000

SIP 100Expense Ratio (%) 2.11Exit Load 1% on or Before 1Y, Nil After 1YBenchmark NIFTY INFRA - TRILast declared Quarterly AAUM( cr)` 1853

Key Information

May 8, 2004

Product Label:

This product is suitable for investors who are seeking• Long term capital growth• Investment in equity and equity related securities of companies in power sector

Investors understand that their

principal will be at high risk

Performance:The fund has outperformed its benchmark BSE Power Index strongly over the years. The one year, three years and five-year performance (as of April 30) is 14.5%, 16.7% CAGR and 18.3% CAGR, respectively compared to BSE Power Index' 9.1%, 4.9% CAGR and 9.1% CAGR. When compared to its category peers, the performance has picked up over the last three years but over five years' time frame it has underperformed.


14.5

16.7

18.3

19.2

9.1

4.9 9.

1

9.5

05

10152025


Fund Benchmark

predominantly in equity and equity related securities of companies in the power sector.

PortfolioI ndus t r i a l s and u t i l i t i e s consistently make up ~75-80% of the scheme portfolio. The scheme has taken outsized positions on these sectors over the years. In recent times, exposure to materials has also increased. It is now the third largest holding in terms of

sectors. The fund likes to take large bets on its top holdings, with the top five stocks all individually constituting 5% or more of the portfolio and the top 10 stocks constituting ~52% of the portfolio. Overall, the fund currently has 33 stocks in the portfolio and has a pronounced midcap tilt.



%

8.2

8.0

6.2

5.5

5.0

4.5

4.3

4.1

4.0

3.6

Top 10 Holdings Asset Type

Apar Industries Ltd. Domestic Equities

PTC India Ltd. Domestic Equities

KSB Pumps Ltd. Domestic Equities

KEC International Ltd. Domestic Equities

Larsen & Toubro Ltd. Domestic Equities

GE Power India Ltd. Domestic Equities

Thermax Ltd. Domestic Equities

Jindal Stainless (Hisar) Ltd. Domestic Equities

Torrent Power Ltd. Domestic Equities

NTPC Ltd. Domestic Equities

%27.9

22.4

16.5

10.7

4.3

3.4

3.3

3.2

3.2

1.3

Top 10 Sectors Asset Type

Electric Equipment Domestic Equities

Engineering - Industrial Equipments

Engineering - Construction Domestic Equities

Power Generation/Distribution Domestic Equities

Cable Domestic Equities

Diesel Engines Domestic Equities

Bank - Private Domestic Equities

Domestic Equities

Steel & Iron Products Domestic Equities

Transmission Towers / Equipments Domestic Equities

Compressors / Pumps Domestic Equities

%Whats In

%

1.4

0.80.4

Whats out

Exide Industries Ltd.

Jindal Saw Ltd.JMC Projects (India) Ltd.

Our View:

The fund is more suited to savvy,

experienced & aggressive

investors due to factors like

significant midcap bias of ~80%

and heavily concentrated calls in

terms of stocks as well as

sectors.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://www.reliancemutual.com/InvestorServices/FactsheetsDocuments/Fundamentals-April-2018.pdf




Performance of other schemes managed by these fund managers:

1. Aditya Birla Sun Life Infrastructure Fund

18.23 3.04 8.7217.01 10.89 14.0311.16 9.83 13.6617.01 10.89 14.039.49 12.16 19.9019.00 10.71 14.15

4.43 -- --5.73 8.48 9.224.03 5.70 --

5.73 8.48 9.223.89 11.98 12.9112.45 11.20 13.50

CRISIL Hybrid 85+15 - Conservative IndexAditya Birla SL Balanced Advantage Fund(G)

Fund Name 1 Year 3 Years 5 Years

Top 3 Performing Schemes Aditya Birla SL Intl. Equity Fund-A(G)NIFTY 50 - TRI

CRISIL Hybrid 35+65 - Aggressive Index

Performance of other schemes managed by the fund manager - Vineet Maloo

Aditya Birla SL Intl. Equity Fund-B(G)NIFTY 50 - TRIAditya Birla SL Infrastructure Fund(G)S&P BSE Sensex - TRI

Bottom 3 Performing SchemesAditya Birla SL CPO Fund-Sr 29CRISIL Hybrid 85+15 - Conservative IndexAditya Birla SL CPO Fund-Sr 22

Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 10 other schemes of the concerned Mutual Fund

2. L&T Infrastructure Fund

27.49 27.60 --20.53 19.89 --19.38 19.08 24.549.11 4.89 9.0619.21 21.31 30.3913.35 18.34 22.54

16.04 11.89 18.4317.14 12.83 16.2412.22 12.39 19.18

17.14 12.83 16.248.28 5.81 15.6017.14 12.83 16.24

S&P BSE 200 - TRIL&T Dynamic Equity Fund-Reg(G)


Top 3 Performing Schemes L&T Emerging Businesses Fund-Reg(G)S&P BSE Small-Cap - TRI

S&P BSE 200 - TRI

Bottom 3 Performing Schemes

Performance of other schemes managed by the fund manager - Soumendra Nath Lahiri

L&T Infrastructure Fund-Reg(G)NIFTY INFRA - TRIL&T Midcap Fund-Reg(G)Nifty Midcap 100 - TRI

L&T Equity Fund-Reg(G)S&P BSE 200 - TRIL&T India Prudence Fund-Reg(G)





42

14.52 16.67 18.349.11 4.89 9.06

Performance of other schemes managed by the fund manager - Sanjay Doshi


Top 3 Performing Schemes Reliance Power & Infra Fund(G)NIFTY INFRA - TRI

3. Reliance Power & Infra Fund



This month on iCommunity

Q & A SessionQ& A Session with Derivatives Head: Mr. Amit GuptaBelow mentioned questions were asked during the event -

a) We have observed huge movement in bank nifty

on Expiry day. Is there any way to pre-empt the

same?

b) I am new to F&O market. As I see on the "F&O on

your fingertip" many things are popping up. Let me

know simple rules to start trading in F&O?

43

Discussion

Your voice matters!

Voice your opinions on: Should you invest in stocks/mutual funds in

times of volatility?

What is iCommunity?iCommunity is ICICIdirect's interactive platform where one can answer and get answered as well. With extensive range of forums, events & discussions iCommunity serves as an opportunity to learn more about financial world.

What's more?

EQUITY MODEL PORTFOLIO


Our indicative large-cap equity model portfolio is delivering an

impressive return (inclusive of dividends) of 128.60% till date (as on

April 30, 2018) since its inception (June 21, 2011) vis-à-vis the

benchmark index (S&P BSE Sensex) return of 103.15% during the

same period, an outperformance of 25.45. This validates our thesis

of selecting companies with sound business fundamentals that

forms the core theme of our portfolio. We have revised stocks in our

midcap portfolio. It continues to outperform, delivering 382.09%

(inclusive of dividends) till date (as on March 28, 2018) vis-à-vis the

benchmark index (CNX Midcap) return of 163.57%, outperformance

of 218.52. Our consistent outperformance demonstrates our

superior stock picking ability as markets aligned to our view of

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

businesses.

We have always suggested the SIP mode of investment and still find

a lot of merit in it as the preferred mode of deployment given the

market conditions and volatility associated since the inception of the

portfolio. We highlight that the SIP return of our portfolio has

consistently outperformed the indices.

Following the same pace and opportunities in the market, our latest

portfolio (large caps) remains overweight on BFSI sector – HDFC

Bank (10%), HDFC (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI

(6%). ITC is the latest addition to the large-cap portfolio, given6%

weightage. Affirming our view on consumption demand, Dabur

(5%) and Marico (4%) continue to be part of our large cap portfolio.

We remain positive on auto, IT and pharma. However, please note

that the weightage for Tata Motor DVR, Maruti and EICHER Motor is

revised. We remain overweight to neutral on pure play defensives

(IT, FMCG) as secular earnings coupled with sector rotation could

lead to consolidation in near term valuations and offer stock specific

opportunities.

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

only pick being Gail Ltd., which has a better risk reward opportunity.

Among individual names, we recommend TCS in the IT space, HDFC

and HDFC Bank in the BFSI space, ITC in consumer space and NBCC

in the infra space.

44



Name of the company

Largecap Stocks

Model Portfolio

Largecap(%)

Midcap(%)

Diversified(%)

45

Auto 17.0 11.9

Tata Motor DVR 3.0 2.1

Maruti 6.0 4.2

EICHER Motors 4.0 2.8

Mahindra & Mahindra (M&M) 4.0 2.8

BFSI 37.0 25.9

HDFC Bank 10.0 7.0

Axis Bank 6.0 4.2

HDFC 9.0 6.3

Bajaj Finance 6.0 4.2

SBI 6.0 4.2

Capital Goods 6.0 4.2

L & T 6.0 4.2

Cement 4.0 2.8

UltraTech Cement 4.0 2.8

FMCG/Consumer 19.0 13.3

Dabur 5.0 3.5

Marico 4.0 2.8

ITC 6.0 4.2

Nestle 4.0 2.8

IT 6.0 4.2

TCS 6.0 4.2

Metals 6.0 4.2

Hindustan Zinc 6.0 4.2

Oil and Gas 5.0 3.5

GAIL Ltd. 5.0 3.5

Largecap share in diversified 100.0 70.0



ICICI Securities has received an Investment Banking mandate from Mahindra & Mahindra, Oil and Gas and Indian Bank.

46

Midcap Stocks

Auto 6.0 1.8

Bharat Forge 6.0 1.8

BFSI 20.0 6.0

Bajaj Finserve 8.0 2.4

J&K Bank 6.0 1.8

Indian Bank 6.0 1.8

Capital Goods 12.0 3.6

Bharat Electronics 6.0 1.8

Kalpataru Power transmission 6.0 1.8

Cement 6.0 1.8

Ramco Cement 6.0 1.8

Consumer 30.0 9.0

Symphony 6.0 1.8

Kansai Nerolac 6.0 1.8

Pidilite 6.0 1.8

Tata Chemicals 6.0 1.8

Bata 6.0 1.8

Metals 6.0 1.8

Graphite India 6.0 1.8

Infrastructure 8.0 2.4

NBCC 8.0 2.4

Logistics 6.0 1.8

Container Corporation of India 6.0 1.8

Textile 6.0 1.8

Arvind 6.0 1.8

Total 100.0 30.0

Midcap share in diversified 30

Value of Rs 1,00,000 invested via SIP at end of every month

Start date of SIP: June 30, 2011; *Value as on 30, 2018April



Performance so far since inception*

128.6083748

382.0960796

181.1560721

103.1530464

163.5771397

119.3757708

0255075

100125150175200225250275300325350375400425

Large Cap Midcap Diversified

%

Performance since inception

Portfolio Benchmark

*Returns (in %) as on April 30, 2018

84

00

00

0

84

00

00

0

84

00

00

0

12

62

45

13

.76

11

11

23

54

.06

13

08

93

61

.12

12

61

35

80

.93

3500000

4500000

5500000

6500000

7500000

8500000

Largecap Midcap Divesified

|

Investment Value of Investment in Portfolio Value if invested in Benchmark

QUIZ TIME


Quiz Time1. Even if an investor misses ________ of most critical

opportunity to time the market the overall return is less than a simple buy and hold strategy.

2. With time, the volatility of returns on equity investment _____________

3. Select companies (stocks) with a clean balance sheet & ________ debt levels in relation to equity.

4. ICICIdirect Research study shows that beyond 25 stocks, the additional diversification benefit starts to decline. True/False

5. Over diversification runs the risk of complexity 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 April 2018 quiz are:1. Each index provider may not have its own construction

methodology, resulting in wide variations in turnover and other portfolio characteristics. False

2. Expense ratio of an index fund is usually lower than traditional mutual funds, but slightly higher than ETFs.

3. When underlying stocks are doing well, the value of

corresponding index rises. 4. The authorized participant acquires securities from

the open market/secondary market to create ETF units.

5. In an ETF, the details of fund's holdings under management are disclosed on a daily basis.

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

49

30-Apr-18 28-Mar-18 Change (%)

CNX Nifty 10739.0 10114.0 6.2%

CNX Midcap 20290.3 18757.0 8.2%

S&P BSE Sensex 35160.4 32968.7 6.6%

S&P BSE 100 11153.0 10502.6 6.2%

S&P BSE 200 4723.5 4432.6 6.6%

S&P BSE 500 15047.7 14125.5 6.5%


Dow Jones 24,163.2 24,163.2 0.0%

S&P 500 2,648.1 2,648.1 0.0%

Nasdaq 7,066.3 7,066.3 0.0%

FTSE 7,509.3 7,509.3 0.0%

DAX 12,612.1 12,612.1 0.0%

CAC 40 5,520.5 5,520.5 0.0%

Nikkei 22,467.9 22,467.9 0.0%

Hang Seng 30,808.5 30,808.5 0.0%

Shanghai Composite 3,082.2 3,082.2 0.0%

Taiwan Weighted 10,657.9 10,657.9 0.0%

Straits Times 3,613.9 3,613.9 0.0%


S&P BSE Auto 25,833.8 24,057.3 7.4%

S&P BSE Bankex 28,651.9 27,197.9 5.3%

S&P BSE FMCG 11,305.7 10,290.1 9.9%

S&P BSE Healthcare 14,153.6 13,157.6 7.6%

S&P BSE Metals 14276.9 13322.03 7.2%

S&P BSE Oil & Gas 14,429.5 14,614.4 -1.3%

S&P BSE Power 2,238.1 2,125.8 5.3%

S&P BSE Realty 2,420.2 2,229.9 8.5%

S&P BSE Teck 7,097.4 6,513.3 9.0%

PRIME NUMBERS


Debt Markets

Government Securities (G-Sec) Yields (in %) Apr-18 Mar-18 Change (bps)

Corporate Bond Yields (in %) Apr-18 Mar-18 Change (bps)

Commercial Paper (CP) Rates (in %) Apr-18 Mar-18 Change (bps)

Treasury Bill (T-Bills) Yields (in %) Apr-18 Mar-18 Change (bps)

Volatility Index (VIX)

50

30-Apr-18 28-Mar-18

VIX 12.36 15.76

10 year 7.75 7.40 35

5 year 7.78 7.40 38

3 year 7.59 7.09 50

1 year 6.70 6.45 25

AAA 10 year 8.59 8.18 41

AAA 5 year 8.27 7.89 38

AAA 3 year 8.17 7.72 45

AAA 1 year 7.81 7.62 18

AA 10 year 9.05 8.64 41

AA 5 year 8.78 8.48 31

AA 3 year 8.63 8.25 38

AA 1 year 8.20 8.06 13

12 Months 7.48 7.475 0

6 Months 7.33 7.15 18

3 Months 7.10 6.93 18

1 Month 7.74 -774

Note : Data not available on Bloomberg for 1 month CP post 3/28/18

91D TB 6.11 -611

182D TB 6.33 -633

364D TB 6.42 -642

Note : Data not available on Bloomberg for 3,6 and 12 month Tbill post 3/28/18

PRIME NUMBERS

10-year benchmark yields (%) across countries


Macro-economic Indicators

Consumer price index (CPI)

Wholesale price index (WPI)Month

*WPI numbers are based on new series with 2011-12 as the base year’

51

Countries 30-Apr-18 30-Mar-18 Change in bps

US 2.953 2.739 21

UK 1.418 1.350 7

Japan 0.055 0.043 1

Spain 1.274 1.164 11

Germany 0.559 0.497 6

France 0.784 0.718 7

Italy 1.785 1.782 0

Brazil 9.835 9.492 34

China 3.648 3.751 (10)

India 7.767 7.396 37

MF Investment Apr-18 Mar-18 Fy18

Equity 11293 9255 141769

Debt 20165 37977 370716

FII Investment Apr-18 Mar-18 Fy18

Equity -13950 13114 22272

Debt -6209 -5216 120388

Items Weights(%) Feb-18 Mar-18 Apr-18

Food&bev. 45.86 3.46 3.08 3.00

Pan,tob& intox. 2.38 7.27 7.72 7.91

Cloth & Foot 6.53 4.93 4.91 5.11

Housing 10.07 8.28 8.31 8.50

Fuel & light 6.84 6.88 5.73 5.24

Misc. 28.31 3.85 4.16 4.96

CPI 100 4.44 4.28 4.58

Weights Jan-18 Feb-18 Mar-18WPI 100.0 2.84 2.48 2.47 Primary Articles 22.6 2.37 0.79 0.24 Fuel & Power 13.2 4.08 3.81 4.70 Manufactured Goods 64.2 2.78 3.04 3.03

PRIME NUMBERS

Commodities

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


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 April 30, 2018

Debt Funds Returns (in %)

Returns as on April 30, 2018

Tenure Liquid Funds

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

Currencies and CommoditiesCurrencies

*IIP numbers are based on new series with 2011-12 as the base year'

Debt ST Ultra ST Debt LT

52

Categories Mar-18 Feb-18 Jan-18 Weight(%)Mining 19.3 -3.9 -0.8 14.4Manufacturing 6.7 -2.8 1.3 77.6Electricity 15.1 -9.0 3.9 8.0Overall 9.0 -3.6 1.2 100.0

27-Apr-18 27-Mar-18 Change (%) StatusUSDINR 66.7 65.0 2.6% DepreciatedEURINR 80.5 80.5 0.1% DepreciatedGBPINR 91.8 91.6 0.2% DepreciatedAUDINR 50.4 50.1 0.6% DepreciatedCHFINR 67.3 68.6 -1.9% AppreciatedJPYINR 0.6 0.6 -0.6% AppreciatedCNYINR 10.5 10.3 1.8% Depreciated

30-Apr-18 30-Mar-18 Change (%)Crude ($/barrel) 74.9 69.1 8.3%Gold ($/ounce) 1,315.0 1,325.0 -0.8%

6 months 2.28 4.98 2.52 2.931 year 13.57 16.14 13.22 14.633 year 12.76 16.81 10.45 12.885 year 19.00 27.22 15.61 18.99

6 months 6.43 3.34 5.24 -0.23

1 year 6.44 5.64 6.30 3.85

3 year 6.95 7.37 7.39 6.71

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