icici sep 16 issuecontent.icicidirect.com/.../september_2016.pdficicidirect money manager 1...

Anup BagchiMD & CEO

ICICI Securities Ltd.

A successful investment is a result of detailed homework and keen attention. To achieve this success there are certain things one needs to consider no matter how big or small the amount to be invested is. Sometimes, a seasoned investor may overlook some of the essential factors while investing (in spite of years of experience) and on the other hand, an amateur might make the best investment decisions in the most challenging financial circumstances. The key to investment is to remember f ac to rs tha t a f f ec t one ' s investment and apply a strategy that justifies all these factors. In essence always keeping the basics in mind.

Factors like investor's age, tenure of the investment, risk tolerance, market volatility, national and international markets, liquidity, ability to outpace inflation, asset allocation and similar components are largely responsible for investor's portfolio performance. Each one of this impacts the investment at certain level and plays a crucial role in determining its success.

With cost of living increasing at a rapid pace it is necessary to make your money work for you at the same speed. The sooner you start investing the longer and larger you benefit from it. Investing at an early age maximizes the investment amount by compounding returns over long period of time. If you have given considerable time to your investment, the value is bound to appreciate when returns are averaged out overcoming market highs and lows. The duration for which you stay invested is an essential factor that decides outcome of your investment.

1ICICIdirect Money Manager September 2016

Secondly, the purpose of investing may not be exact same for two individual investors and same goes for their risk appetite. What seems like an aggressive investment avenue to you might be low-risk option for someone else. The reason why risk component is of great significance is that risk and returns are directly proportional to each other. It is important to choose investment that best suits one's risk profile and neither overdoing nor underdoing it.

Another most important point to remember here is asset allocation. Whether you pick equity/stock, debt, real estate or gold or combination of these it makes considerable impact on your investment returns. Sticking to only one particular asset because it performs well today may boomerang if market trend goes against this asset, leaving your investment negated. Thus putting money across diversified assets has proven remarkably lucrative in recent times. While deciding upon an asset, it is advised to monitor long-term consistency of its performance rather than getting lured by recent output.

Let's also not forget investments in equity, mutual funds, commodities, gold etc. are directly affected by market conditions. Movements of foreign stock market are partially or equally responsible for fluctuations in Indian market trends. A wise investor should always take both national and international market scenarios in account while taking the final investment leap.

Ease of liquidity is another important element to remember which is very often overlooked by many investors. Ideally, an investor should always check upon these factors whenever investing, irrespective of the size, time or nature of the portfolio. The ultimate secret of a successful investment lies within the strategy outline behind it. Once that is figured out well, your portfolio will always remain healthy.

Our message remains the same –'Keep investing and stay invested for your life goals.' Through this magazine and our website www.icicidirect.com we want to make an earnest attempt to partner with you in setting and achieving your financial goals. Give us an opportunity to serve you, walk into any of your Neighborhood Financial Superstore and talk to us.

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In order to make most of the opportunity it is important for an investor to understand how his investment works and what exactly influences its overall performance. Starting an investment is more than checking rate of returns and following current financial trends. We are commonly advised to update and enhance our investment portfolio on regular basis. However, some key basics of investment remain same irrespective of these enhancements and modifications.

There are various things which collectively affect the result of an investment and it is necessary to remember them whenever starting an investment. Our cover story highlights some of these important points to follow while making an investments. Questions like where to invest, for how long and through which medium? Are extremely crucial when it comes to investing to achieve your financial goals. We have listed down such things to be remembered while investing.

Since mutual fund investment has emerged as a widely popular and favorite investment vehicle for majority of investors, we have added a special feature about things to consider before investing in mutual funds. In talk with Mr Sunil Singhania, CIO, Equity Investments, Reliance Mutual Fund, this month's Money Manager answers some of the basics but highly important questions rising in mutual fund investor's mind.

We are also providing descriptive analysis of latest top mutual funds recommended by our research team. Through this month's edition we attempt to improve user's investment experience by talking about elements that influence investment decision making process and also the future scenario.

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

ICICIdirect Money Manager September 2016

Editor & Publisher : Abhishake Mathur, CFA

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

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


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

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

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

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

Stock Ideas: Biocon and MRPL.....................................................5

Flavour of the Month: It always a good time to jog back to the basics once in a while to keep the focus as far as investing is concerned...................................................................................11

Tete-a-tete: Understanding Mutual Funds as investments An interviews with Sunil Singhania, CIO, Equity Investments, Reliance Mutual Fund.................................................................22

Ask Our Planner: Rental income on property vs interest income on FD Your personal finance queries answered.......................26

Mutual Fund Analysis: Investing in Mid-cap Funds It's time to remain constructive in equity markets and accumulate for the 2-3 years. Here are three funds to consider..............................30

Mutual Fund Top Picks:...................................................................42

Updated Equity Model Portfolio........................................................43

Quiz Time:......................................................................................49

Prime Numbers..............................................................................50

Premium Education Programmes Schedule.......................................54

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India's economy growth

India's economy grew at its slowest pace in five quarters in the April-June period, falling below expectations amid sluggish investment and farm output. That dents the prospects of hitting the 8 per cent mark for the full financial year but the government is hopeful that a bountiful monsoon and increased pay and pensions along with various structural reforms could still take growth closer to that figure. Gross domestic product (GDP) rose 7.1 per cent in the first quarter, reaffirming India's position as the world's fastest-growing major economy, but sharply lower than 7.9 per cent in the January-March period.

Courtesy: The Economic Times

Canada's Province of British Columbia has become the first foreign government entity to issue a masala bond by floating Rs 500 crore rupee denominated overseas bonds on the London Stock Exchange. The bond raised $75 million (about Rs 500 crore) with 6.62 per cent semi-annual yield, securing high-quality investor support from across Europe, Asia and America. It is a AAA rated bond by the three major rating agencies and will mature on January 9, 2020, The Province of British Columbia said in a statement on Friday.


Canada's Province of British Columbia to issue a masala bond

Over 4 crore EPFO subscribers may get a lower interest at a rate of 8.6 per cent on their PF deposits for current financial year as Labour Ministry is expected to toe the Finance Ministry line to cut the rate. Employees Provident Fund Organisation (EPFO) had provided 8.8 per cent rate of interest on EPF deposits for 2015-16 despite Finance Ministry's ratification for 8.7 per cent. The Board fixes the rate of interest for a financial year and it is approved by its advisory body Finance, Audit and Investment Committee (FAIC).


EPFO subscribers may get a lower interest at a rate

FATCA: Mutual fund accounts would not be closedMutual fund investors who haven't completed the formalities of complying with FATCA or Foreign Account Tax Compliance Act can breathe easy. Your mutual fund accounts would not be closed by the fund houses for now. The government has asked financial institutions to not close accounts which are not FATCA compliant for a while. The deadline to comply with FATCA was August 31. A press release from the government said it will announce the new deadline in due course.



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STOCK IDEAS


Biocon - Biosimilars progress getting momentum

Company Background

Investment Rationale

Small molecules segment likely to get boost from ANDA launches

Biocon was established in 1978 by first generation entrepreneur Dr Kiran Mazumdar-Shaw. Unlike most pharma companies that are chemical based, Biocon has carved out a niche in the morecomplex biotechnology field. Over the decades, the company has successfully evolved into an emerging global biopharma enterprise, serving its partners and customers in over 75 countries. As a fully integrated biopharma company, i t d e l i v e r s i n n o v a t i v e biopharmaceutical solutions, ranging from discovery to d e v e l o p m e n t a n d commercialisation. In 2004, it came out with its maiden IPO.

The small molecules segment accounts for ~42% of the turnover and comprises APIs like statins, immuno suppres- sants and specialty APIs and also includes generic formulati-ons business. This vertical is witnessing pricing pressure in some products. The company is exploring fewer opportunities

but with higher profitability in this segment such as moving into formulations and filing own ANDAs, 505 (b)(2) filings, etc. It has already filed seven or eight ANDAs cumulatively. These include complex generics and injectables. We expect the small molecules segment to grow at a CAGR of 11.6% to 1930 crore in FY16-19E.

The biologics segment includes novel biologics and biosimilars, including rh-insulin, insulin analogs, monoclonal antibodies and recombinant proteins. This segment accounts for ~12% of the turnover. Biocon is mainly focusing on following therapies - diabetology, oncology and immunology. The company has invested heavily in this space over the last two or three years, especially the Malaysian facility. The progress, so far, is encouraging with launches in emerging markets, Glargine launch in Japan and filing arrangements in the EU and US. We expect Biologics togrow at a CAGR of ~50% to 1158 crore in FY16-19E.

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Well poised to capitalise on global biosimilars opportunity


STOCK IDEAS

Research services (Syngene) to maintain growth momentum

Branded formulations growth space

Biosimilars progress getting momentum

Biocon's research arm Syngene contributes ~32% to its turnover. Syngene is the contract research organisation (CRO) arm of Biocon with proven capabil it ies. The company caters to 256 clients including eight out of global top 10 global players. This segment has been consistently growing at 20%+ rate. Recently, it has been the major growth driver for the company as biopharma segment is slowing down. We expect revenues to grow at a CAGR of ~22.4% to 1945 crore inFY16-19E.

The branded formulations business includes the finished dosage business in India and overseas including UAE. It constitutes 15% of the turnover. It comprises Indian domestic formulations. Biocon owns 80+ brands encompassing therapies like diabetology, oncology, nephro logy, card io logy, immunotherapy, comprehe- nsive care and bio-products.

Encouraging developments on

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the biosimilars front over the last six months have demonstrated the capability in the biosimilars space. What has cemented Biocon's position as perhaps the best placed candidate among Indian companies is the series of posit ive outcomes from developed markets, be they approval and launch of Glargine in Japan or presentation of Trastuzumab data to ASCO or review acceptance from EMA. The launches in emerging markets are also getting momentum. This is likely to improve the share of biosimilars in total revenues from 10% in FY16 to 20% by FY19. With the Malaysian facility getting ready for global filings, we believe the future bodes well for the company on the biosimilars front. It will also provide an extra lever for growth besides S y n g e n e a n d b r a n d e d formulations. Although the actual biosimilar launches in EU (and US) are some distance a w a y, w e b e l i e v e t h e a c k n o w l e d g e m e n t f r o m developed market regulators is likely to improve the valuation perspective. Our SOTP target price is now 1030.`


STOCK IDEAS

Stock Data

Key Financials

Valuations Summary

Key risks include:

Backtracking by Mylan may increase the R&D cost sharplyBiocon entered into a partnership with Mylan for six biosimilar p r o g r a m s ( Tr a s t u z u m a b , Pegfilgrastim, Adalimumab, Bevacizumab, Etanercept and Filgrastim) and three insulin analog programs (Glargine,

Lispro and Aspart). Four of its biosimilar products (Trastuzumab, Pegfilgrastim, Adalimumab and Insulin Glargine) have already reached the critical milestone of global Phase III clinical trials. The company is also planning to start US and EU filings from FY17 with Mylan. In any circumstances backtracking by Mylan may increase the R&D cost sharply.

(YoY Growth) FY16 FY17E FY18E FY19E

Revenues 3,485.4 4,273.6 5,059.2 5,986.3

EBITDA 820.0 1,065.5 1,274.7 1,555.5

Adj. Net Profit 450.3 666.4 767.6 963.8

Adj. EPS ( ) 22.5 33.3 38.4 48.2`

PE(x) 19.6 26.6 23.1 18.4

Target PE (x) 45.7 30.9 26.8 21.4

EV to EBITDA (x) 11.1 14.7 15.0 16.4

Price to book (x) 9.1 13.1 14.8 17.4

RoNW (%) 11.5 8.7 7.0 5.5

RoCE (%) 4.4 3.9 3.5 3.0

(x) FY16 FY17E FY18E FY19E

Market Capitalisation 17709 crore

Debt (Fy16) 2457 crore

Cash (Fy16) 1921 crore

EV 18245 crore

52 week H/L 940/431

Equity capital ( Crore) 100 crore

Face value ( ) 5

MF Holding (%) 3.07

FII Holding (%) 15.2

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STOCK IDEAS

MRPL – Entering the complex league

Company BackgroundM a n g a l o r e R e f i n e r y &

Petrochemicals Ltd. (MRPL), a

standalone refinery with a

capacity of 15 mmtpa, has

completed and commissioned

its Phase III expansion and

upgradation project, to enter

the league of complex

refineries. While the capacity

of MRPL has already increased

from 11.8 mmtpa to 15 mmtpa,

t h e c o m m e n c e m e n t o f

operations at all the secondary

processing units has enhanced

the complexity of the refinery

from 6 to ~10. The operational

efficiencies that have kicked in

due to higher complexity will

boost the refining margins

from US$ 5.3 per barrel in Fy16

to US$ 6.9 per barrel & US$ 6.3

per barrel in FY17E & FY18E,

respectively. We expect MRPL

to grow at a CAGR of 41.5% in

EBITDA over FY16-18E on the

back of higher ref inery

complexity, better crude

sourc ing and increased

operational efficiency. We

expect the company to report

net profit of 1993.9 crore and `

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2105.5 crore in FY17E &

FY18E, respectively against a

loss of 1148.2 crore in Fy16.

We have a BUY rating on the

stock.

H i g h e r c o m p l e x i t y o n

commissioning of Phase III

project is leading to an

increase in distillate yield from

~76.5% to ~80.1%, better

capability to handle heavier &

sourer crude and production of

higher margin value added

products. We have estimated

GRMs of US$6.9/bbl and

US$6.6/bbl for FY17E and

FY18E, respectively against

GRMs of $5.3/bbl in FY16. The

core GRMs premium over

Singapore GRMs benchmark is

expected to average $1.5/bbl

and $0.4 bbl against a discount

of $2.3/bbl in 2016. The core

GRMs for are strengthened

with the flow of products such

as Polypropylene and Pet Coke

from the phase III secondary

u n i t s a n d f r o m t h e

Investment Rationale

Strong GRMs growth will aid future

profitability


STOCK IDEAS

polypropylene unit. We expect

continued improvement in

core GRMs on account of

better crude sourcing mix and

higher efficiency. However, the

overall GRMs going ahead are

dependent on the strength of

the global product cracks.

The throughput for FY16 came

in at 15.7 mmtpa, leading to

capacity utilisation of 104.6%.

The MRPL Phase III has been

operating optimally now, with

i t s n e w 4 4 0 K T P A

p o l y p r o p y l e n e u n i t

commissioned in H1FY16.

H i g h e r c o m p l e x i t y o n

commissioning of phase III

project will lead to an increase

in distillate yield, better

capability to handle heavier &

sourer crude and production of

higher margin value-added

products. The polypropylene

unit continues to contribute to

the improvement seen in the

GRMs. We expect throughput

of 15 mmt and 15.2 mmt for

FY17E & FY18E, respectively.

Expect higher capacity utilisation

in combination with more value

added products

Improvement in global cracks to

remain the keyOverall, MRPL has the lower

policy leverage and lower

gearing on the balance sheet

among PSU refineries. With

t h e i m p r o v e m e n t i n

operational performance, we

e x p e c t t h e s t a n d a l o n e

company to deliver profits and

thus creat ing value for

shareholders in the coming

years. The performance of the

O N G C M a n g a l o r e

Pe t rochemica l s L im i ted

(OMPL) remains crucial in

determining the overal l

company performance. For

FY16, OMPL posted revenue of

4187.6 crore and a loss of

875.4 crore. However, the

management has indicated

that its performance would

improve in the coming years. A

scheme of amalgamation of

MRPL with ONGC Mangalore

Pe t rochemica l s L im i ted

(OMPL) has been proposed for

approval of various regulatory

authorities. We value the stock

at 6x FY18E EV/EBITDA

multiple and OMPL at

7.6/share to arrive at a target

price of 105.

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STOCK IDEAS

Key Financials

Valuations Summary

Stock Data

(` crore)

Key risks include:

Decline in refining marginsThe global economic situation and demand-supply balance plays a very important role in determining the gross re f in ing margins . Any slowdown in the global economy & weaker demand will lead to decline in gross refining margins and will have a negative impact on the profitability of the company.

Volatility in crude oil prices & exchange rateMRPL imports majority of its crude oil requirement and hence, it is exposed to the risk of volatility in prices of international crude oil & petroleum products along with foreign exchange volatility. Although depreciating Indian rupee (|) against the US dollar is beneficial for the refining margins, the exposure to foreign loans (ECB) has a negative impact on the profitability of the company.

(YoY Growth) FY14 FY15 FY16E FY17E

Net Sales 1,120.4 1,530.1 1,896.1 2,341.3

EBITDA 141.9 216.6 255.6 309.7

Net Profit 70.1 100.4 124.7 159.7

EPS ( ) 13.7 19.6 24.3 31.1`

P/E 30.6 21.4 22.2 17.4

Target P/E 35.8 25.1 26.0 20.3

EV / EBITDA 20.8 14.3 11.0 9.0

P/BV 3.4 3.0 2.2 2.0

RoNW (%) 11.2 14.0 9.9 11.3

RoCE (%) 17.6 21.0 17.0 18.8

(x) FY14 FY15 FY16E FY17E

Market Capitalization 2,770.6

Total Debt 211.3

Cash 74.2

EV 2,907.7

52 week H/L (|) 550 / 346

Equity capital 51.3

Face value | 10

FII Holding (%) 6.4

DII Holding (%) 13.8

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FLAVOUR OF THE MONTH

Important points to remember while investing

It always a good time to jog back to the basics once in a while to keep the focus as

far as investing is concerned. In our cover story this month we look at some of the

basics of investing like understanding asset classes, understanding risk and

return and how one should approach investing. This is a relevant read anytime or

any stage of your investment cycle….


Understanding Asset ClassesInvesting is not just about how much you invest, but more importantly, where you invest. And that's where the asset classes come in. It is absolutely important that you know what you are investing in. You need to have a clear understanding of asset classes.

When s im i l a r t ypes o f investments are grouped together, they form an asset class. Investments within asset c l a s s e s h a v e s i m i l a r characteristics and market behaviour. They usually face the same tax rates and are subject to similar laws. The risk-return trade-off is also similar for investments within each asset class. You need to have the right combination of asset classes, to optimally reduce risk and get maximum returns.

There are six main asset classes.Here's a look:Equity (stock or share)

Companies require a lot of funds for growth, expansion, and regular operations. The funds can be gathered in two ways: taking a loan from a financial institution or selling a portion of the company by issuing shares. The shares are issued to the public, people who wish to invest their money. When you buy some of these shares, you hold a certain stake in this company. The stake is equivalent to the amount of shares you buy. This is also called equity.

With these shares, you can share in the profit earned by the company. You also become liable for any loss that it may incur. The more stocks of a company you buy, the more your share in that company increases. To get the maximum benefit from your investment in equity, you should invest for the long term.

Risk-return trade-off: Equity is a high-risk, high-return asset

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class. But investors can expect more returns from this asset class than from any other.

Effect of inflation: Equities are a smart way to mitigate your inflation risk. To earn returns t h a t s a f e g u a r d a g a i n s t inflation, you must invest in equity. Over the long term, the rate of return offered by equity exceeds the rate of inflation. It helps you build wealth for the future.

Earning profit:

o Capital appreciation: when the price of the stocks you purchased increases

o Dividend: payments made per iod ica l ly when the company earns a profit

o Return on investment: the total amount received from capital appreciation and dividends

E q u i t y v e h i c l e s : S t o c k exchange, mutual funds, unit-linked insurance plans, and pension schemes are common vehicles for holding equity.

In debt investments, investors l o a n t h e i r m o n e y t o organisations, banks, or the government. In return, these

Debt

entities promise to pay a specific interest rate in addition to the invested amount after a specified duration. Your funds are in safe hands and you know the expected returns from this investment. You will get the promised returns at the end of the period regardless of how the markets or the entity performs.

Opt for this asset class to meet your short-term financial goals. The assured returns can help you meet your goals, as you are not exposed to any risk.

Risk-return trade-off: This is a low-risk, low-return asset class. Debt investments give you a fixed rate of interest on your principle amount, but this is lower than the equity rate of return. You do not get to cash i n o n a g o o d m a r k e t performance. However, the security offered protects you against the losses you may incur in equity investments.

Effect of inflation: The inflation rate may eat into the returns e x p e c t e d f r o m d e b t investments. This can happen if the rate of inflation exceeds the interest rate offered by the debt instrument. Thus, it

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affects your purchasing power. Earning profit: Investors earn a profit in the form of interest on the principle amount invested.

Debt vehicles: Fixed deposits, public provident fund, national savings certif icates, and g o v e r n m e n t b o n d s a r e common debt vehicles.

If you are a conservative investor and want to take on a minimal risk, debt is a suitable asset class.

Cash is the most liquid asset class. You can access cash as and when you need the money. But the basic purpose of cash differs from that of other asset classes because it gives negligible or no returns. It is used to carry out transactions, held as a precautionary measure, or used to invest in other asset classes.

Risk-return trade-off: Cash is a low-risk, low-return asset class. It is even called a no-risk, no-return class. You do not invest the funds anywhere. It does not bear capital risk or default risk. Some vehicles in this asset class offer a very low rate of return.

Effect of inflation: Although

Cash

there is no or negligible risk in investing cash, it faces a high inflation risk. If you keep cash with you, it will not earn any interest. Your savings account will pay you interest in the range of four to five per cent. If the inflation rate is higher than this, your real return will be negative. In other words, the real worth of your cash will be lower.

Earning profit: Cash offers zero profit as an asset class. You may earn some small returns from the interest on some cash vehicles.

Cash vehic les: Sav ings accounts, short-term fixed deposits, and liquid funds are common cash vehicles.

As an investor, you must try to keep your cash balance as low as possible based on your need and requirements.

Real estate can inc lude res ident ia l and commercial buildings, or even vacant land. Investors buy real estate from builders or current owners. Other asset classes hold only monetary value for an investor. In contrast, owning real estate involves emotional satisfaction. It is also seen as a

Real Estate

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status symbol in society. The amount of funds required for owning this asset class is the highest amongst all classes.

Risk-return trade-off: Owning a property involves high risk and high return. Considering the amount of funds involved, a decline in the real estate sector can lead to huge losses. This could affect your portfolio. If the market is doing well, however, you could earn good returns. But liquidating this asset is a lengthy and time-consuming process. Usually, a house that you buy for living in is not considered as an investment.

Effect of inflation: If the property is bought on loan, the interest rates can fluctuate due to inflation. This will affect your total outgo.

Earning profit: Profit is earned by selling the property. You could also earn regular rent by leasing the property.

Real estate vehicles: You can invest in real estate by buying property ( res ident ia l or commercial), land, or shares in real estate companies.

Gold is another asset class that Gold

has an emotional aspect for investors. It is a good option for diversifying your portfolio, as it is less volatile.

Risk-return trade-off: The risk and return are both low. One can buy gold in different forms. Historical data shows that gold has given good returns specifically during time of uncertainty. So it is a good option for diversification but not necessarily for growth.

Effect of inflation: Gold as an i n v e s t m e n t p r o v i d e s protection during inflation. The price either remains stable or increases over a certain period.

Earning profit: Profit is earnedin the form of a price difference.

Gold vehicles: Gold can be bought in the form of jewellery, coins, bars, bonds, exchange traded funds, and so on.

A newly introduced asset class that is gaining popularity in India is alternative assets. Old currency, stamps, paintings, and antiques are some of the instruments that come under alternative assets. Other forms of investments, like hedge funds and venture capital, also

Alternative assets

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belong to this class. Products in this class are less liquid than other classes. That is because these products take time to gain value. Hence, they are good long-term investments.

There is a reason why there are so many different assets available. Each asset has its host of benefits and risks. This is why it is important that every investor diversifies their portfolio and invests across multiple assets. This is called asset allocation – distributing your investments among various asset classes—i.e. equity, debt, cash, real estate, and gold. Creating a mix of d i f f e ren t asse t c l asses d e t e r m i n e s h o w y o u r investment portfolio will perform. Every asset class has its own features. Good asset allocation helps investors get m a x i m u m r e t u r n s b y m i n i m i s i n g t h e r i s k s associated with each class.

After creating a portfolio using asset allocation, you must m o n i t o r t h e o v e r a l l performance of this portfolio. Check if you are getting positive returns and if this allocation will help you to meet

Asset allocation

your investment goals.

The best portfolio includes each of these asset classes. However, the weight given to each class may vary from investor to investor. Each of us should diversify our portfolios to protect our investments against various risks.

Understanding Risk v/s ReturnsInvestments always come with their own share of risks – losing the invested money in part or as a whole. In contrast, the risk with savings is lower. In this case, the risk is either that your savings can be stolen or that it may not be enough in future because of inflation.

But what if we told you that the risk is also related to how much profits you earn from your investments? Yes, there is an inherent connection between the two.

This is why experts ask you to do two things before investing – understand how much you can afford to lose (risk appetite) and how much return you need (expected return). A combined a n a l y s i s o f t h e r i s k involvedversus the returns

THE BOTTOMLINE

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expected can help you to make better investment decisions.

Risk-return trade-offIn general, the risk involved in an investment is directly proportional to the returns expected from it. A low-risk investment is likely to give you low returns and a high-risk investment has the potential to yield high returns. This is because risk is not always negative; it simply denotes volatility in value. So if a risky asset, say a company's stock, has the potential to fall 15%, then it also has the capability to rise 15%.

To guard your investments against market uncertainties, you may prefer low-risk investments. But these are not likely to give you lucrative returns. This is why it is important to not be scared of risk. Once you understand that every investment is exposed to risk, you can concentrate on the return potential and not just the inherent riskiness.

As per the risk-return trade-off, an investor always wants to str ike the right balance between the lowest risks and the highest expected returns.

Though the expected returns are not in any investor's control, they can be managed by calculating the risks and investing accordingly.

Factors affecting risk and returnTo find out how much risk you can take to earn maximum profits, you must understand the factors associated with the trade-off. Let us look at some of factors to keep in mind:

I. Risk appetite: This is the level of uncertainty that investors are willing to tolerate to earn a profit on their investment. Investors must calculate their risk appetite realistically to understand how much change in the value of their investments they can bear.

ii.Age: Young investors can begin conservatively in their learning phase and take on more risks in subsequent years. Taking risks early on gives them a chance to offset any losses as they move ahead.

i i i .Responsibi l i t ies: Your responsibilities—and thus, expenses—increase with your age. Middle-aged inves tors have added

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respons ib i l i t i es . Such i n v e s t o r s h a v e l o w e r capability to take risks. If you are one such investor, you shou ld d ivers i fy your portfolio by investing in both high-r isk and low-r isk investment vehicles. As you approach retirement age, investors can play it safe by focusing more on low-risk, low-return investments.

iv.Replace lost funds: When you are young or have lower responsibilities, you have the potential to earn back any losses you may have incurred in the market. You could also bring in other sources of income to fill up the gaps formed due to losses. This translates to higher risk appetite.

v. Period of investment: The duration for which you invest your funds can determine the r isk involved. For example , invest ing in company shares is preferred t o b e a l o n g - t e r m investment. This way, you can get good returns and also reduce the risk involved. This is because stocks may face ups and downs in the short term, but over the long

term it is usually expected to perform well if the company remains to be profitable.

If you invest in a single vehicle, such as only shares or only real estate, you face high risk. That is because non-performance of the investment may lead to a complete loss. Hence, you need to d ivers i fy your investments.

Develop a por t fo l io by investing varying amounts in different vehicles to safeguard against uncertainties linked to a specific vehicle. Though the risk involved in individual investments may be high, a well-designed portfolio can protect you by balancing the loss from one investment with higher profit from another.

As an investor, you are exposed to various kinds of risks. These come in handy when evaluating different investment vehicles, the risks associated, and how it affects your returns. Let us have a look at the types of risks:• Market risk: This occurs when the market is not performing well and that

Singular risk versus portfolio risk

Types of risk

18



brings down stock prices across board.

• : Modifications in laws and the legal framework may affect your investments. For example, tax-related l aws can a f f ec t your investment income while some other rule may affect the profitability of a company whose shares you hold.

• Inflation risk: When the expected rate of return on your investment is lower than the inflation rate, the net worth of your investment reduces in comparison with the rise in prices.

• Interest rate risk: A change in interest rates affects the value of your investment. For example, a rise in interest rates usually leads to fall in bond prices.

• Foreign exchange risk: The value of investments can change with fluctuations in the exchange rate of the foreign currency against the domestic currency. This is because companies earn or import in foreign currency. Plus, foreign investors play in the Indian markets.

Legal risk

•applicable to fixed-income instruments like bonds, which pay a regular interest and repay your entire principle investment at the end of a time period. When the bond fails to make payments, it is called to have 'defaulted'.

• Capital risk: This is the risk that you lose all or part of the p r i n c i p l e m o n e y y o u invested in. It is usually applicable to fixed-income instruments.

To exce l in the ar t o f investments, all investors must understand the concepts of risk and return. The level of risk appetite varies for every investor. Thus, it has an impact on the level of returns as well. To reach your short-term and long-term financial goals, an appropriate balance between risks and returns is required.

Before you start investing already, hold yourself: The first step of any financial plan is creating goals. Have you created yours yet?

Imagine driving a car without

Default risk: This is usually

THE BOTTOMLINE

How to approach investing

19



having a clear route map to reach your destination. You could drive forever and still not reach anywhere. Investing without a goal-based approach is just like that—actually, it is worse. You could end up facing financial distress, despite working hard to save money and invest it.

A financial goal is a future expense for which you build a c o r p u s . I t c o u l d b e anything—your retirement, your child's wedding, buying a new home, or even a dream foreign tour! You would normal ly have mul t ip le financial goals at any given point. You should have a separate investment strategy to achieve each of them. An international study suggests that you have a 50% greater probability of reaching your goals using a goal-based approach than the traditional approach.

This approach suggests that all investors have similar goals. It also believes that you should form a single portfolio to achieve your goals. This is because it assumes that

Financial goals

Traditional approach

market volatility is the greatest risk you face while pursuing your goals. The extent to which you are willing to take this risk to earn higher returns is your 'risk tolerance'. The traditional a p p r o a c h a d v i s e s t h a t managing your risk tolerance and return expectations should be the focus of investing. However, the overemphasis of the traditional approach on managing risks and returns can make you lose sight of your goals. You may be unable to track your progress along each specific goal and, in the end, not achieve any of them.

This approach recognises that investors have different and unique investment goals. You must construct a separate portfolio to achieve each of them. Achieving your financial goals should be the main aim of investment. Mitigating m a r k e t r i s k s , t h o u g h important , should be a secondary goal. The goal-b a s e d a p p r o a c h g i v e s precedence to your 'risk capacity' over your 'risk tolerance'. In other words, it focuses on how much risk you shou ld take , g iven the

Goal-based investing approach

20



importance and proximity of your goal. How 'willing' you are to take more risk to earn an extra buck is not important under this approach. Goal based investing is a more precise and detailed way of investing. It focuses on matching your f inancial resources with your financial goals and liabilities.

Ma in ta in ing i nves tment discipline is the most difficult part. We are always tempted to s p e n d m o n e y o n l e s s important things. This does not leave us with enough money to invest for our long-term goals. The goal-based approach provides a direction to our investments. It tells us exactly what we are trying to achieve and how much we should invest to do it. A clear goal prevents us from wasting money and helps maintain our investment discipline.

With each increment to your portfolio, you see yourself getting closer to your goal. This is a source of tremendous motivation that sharpens your commitment towards the goal. You can resist the temptation

Greater investing discipline

Source of motivation

of diverting money towards discretionary items and reach your goal faster.

When your goal is far away, you can afford to invest in risky assets to generate high returns. If something goes wrong, you always have time to make up. As your goal comes close, you should resist risky investments and hold on to what you have earned. When you follow the goal-based approach, you have a clear goal and a timeline. You know exactly how much risk you can take at a given point. Without a goal, you may be lured into making risky bets to earn higher returns. This may result in big losses.

A portfolio review is a critical part of investing. Following a goal-based approach tells you how far your goal is and how much progress you have made. If you are behind schedule, you can readjust your strategy to ensure that you meet the goal. If you are doing better than expected, you can reduce your portfolio risk and glide towards your goal.

Better risk management

Tracking your progress

21



A good starting pointThink about it: When you plan a travel, do you randomly book a flight ticket you like? No, you first select the destination. This, then, helps you make other decisions – how many days, budget, which time of the year, what to wear, etc. Similarly, the goal becomes your starting point. You cannot

just invest money in anything that chooses your fancy. Rather, when you have a goal in mind, say accumulating a retirement corpus of Rs 5 crore, you can then make a slew of decisions – how much should you invest per month, where to invest, what is the return you expect, how much risk can you take, etc. .

Here's how you can use each assets:

INFOGRAPHICGoal setting - Different investments for different needs

Asset class Utility

Equity ·High risk high return investments are best suited for long term goals.- -

Mutual funds·

You have several options to select from based on your goal.

·

Should constitute a high percentage of your portfolio at all times, but selection of funds can be periodically realigned to your goal.

Retirement plans

·

Require disciplined investment till retirement and give regular

pension or lump sum on retirement. -

·

Lump-sum plans are better if you are confident that you can invest the lump sum in a way that will give you higher regular income than the fixed pension plan.

Bonds

·

These are safe investments, but offer low returns. ·

Best suited for short-term goals, or when long-term goals are close by, provided you have earned a high proportion of your target amount.

·

Also well-suited to immediate regular income goals, as they pay regular dividends.

ULIPs

·Combine the benefits of equity and insurance, but offer mediocre returns and low insurance cover, despite very high premium.

·It is better to build a separate equity portfolio for long term goals and buy term insurance.

THE BOTTOMLINEAn investment without a goal is like an angry bull without direction – it can head off anywhere, leaving behind destruction in its wake. It may

seem like a tedious job to sit down and write down all your priorities and goals, but that's how you can ensure you meet your aspirations. It's easier than it seems.

22

Tête-à-tête

Drawing up a proper asset allocation orfinancial plan is the starting point

In late September, we had an "Ask the Fund Manager" on iCommunity a section on our website icicidirect.com where our customers interact with each other about markets and other personal finance questions.

Ask the Fund Manager is a forum where our customers can ask prominent fund managers questions they may have regarding investments in mutual fund. In one such forum we invited Mr Sunil Singhania, CIO, Equity Investments, Reliance Mutual Fund.

Where he talks about some basics on investing in Mutual Funds. Excerpts:

Mr Sunil Singhania, CIO,

Equity Investments,

Reliance Mutual Fund.


Q:

A:

What would be your advice for beginners in the field of Mutual Funds?

Appropriate asset allocation based on one's investment goals, risk appetite, time horizon along with disciplined investing and regular re-balancing are the key to successful wealth creation.

Hence drawing up a proper asset allocation or financial plan is the starting point.

First time equity investors can c o n s i d e r i n v e s t i n g i n Diversified Equity funds and participate systematically over a long per iod of t ime. Conservative or risk averse investors with a medium to long term horizon can choose accrual focused debt funds, which can potentially provide superior tax adjusted returns as compared to fixed income instruments

As an investor, what are the aspects which we should look for before investing in a Mutual Fund?

Selection of a mutual fund should involve analysis of key parameters like fund house pedigree, track record of fund management team, fund performance across different m ar k e t c yc les , c u r r en t

Q:

A:

23

Tête-à-tête


p o r t f o l i o c o n s t r u c t o r positioning etc. Investors should also consider risk adjusted performance for a holistic comparison.

Since the fund selection involves lot of analysis both historical & forward looking, investor can benefit from availing services of financial advisors, who can assist them in identifying appropriate funds to invest in.

There are various sub-categories of Mutual Funds which are present in the market. What is the ideal strategy to adopt for building a Mutual Fund Portfolio?

The key to portfolio construction is to determine one's investment goals, risk appetite, time horizon and return expectations. Based on the same an investor in consultation with his or her financial advisor can construct a portfolio of funds across asse t ca tegor ies , most appropriate to achieve the t a r g e t e d i n v e s t m e n t objectives.

M u t u a l f u n d s p r o v i d e investment solutions across a s s e t c a t e g o r i e s a n d investment horizons starting

Q:

A:

from as low as one day to goal b a s e d s o l u t i o n s l i k e Retirement. Investors can accordingly construct a suitable portfolio of funds in line with their time horizon & risk profile, best suited to achieve their financial goals.

What are the risks associated with investing in Mutual Funds?

Mutual Funds are market linked offerings hence the returns are subject to market risks or fluctuations. Some of the common risks involved are:

· Marked to Market or Price risks: Decline in the prices of the underlying investments (Equity/ Debt) can lead to lower returns.

· Credit Risk: In case of debt oriented funds the price of underlying investments can be impacted due to a Credit downgrade or in case of a default by the borrower

· Liquidity Risk: Liquidity risk refers to a situation where the underlying security whose cannot be transacted due to lack of volumes leading to a decline in security value.

However, while these risks

Q:

A:

24

Tête-à-tête


cannot be fully eliminated the same can be mitigated to a large extent by having a proper asset allocation plan and investing in appropriate assets based on one's risk appetite and investment horizon.

What are the parameters set by AMCs for selection of specific companies for various mutual funds?

The basic parameter for selection of a Company (Equity or Fixed Income) is the C o r p o r a t e G o v e r n a n c e Standards and Balance Sheet quality. Extensive analysis is carried out involving financial and qualitative data, sector p r o s p e c t s , h i s t o r i c a l performance trends, track record etc.

Thus the attempt is to identify businesses where both the performance (EPS) and the perception (P/E) can improve over a period of time

What is the relevance of Expense Ratio? Is there any c o n n e c t i o n b e t w e e n H i g h Performing Mutual Fund / Low Performing Funds and expense ratio?

Mutual Funds charge e x p e n s e s t o m e e t t h e maintenance costs involved

Q:

A:

Q:

A:

towards market ing and operations. The Net Asset Value (NAV) represents current value of a fund post expenses. While it is logical that a fund with lower expense ratio is likely to outperform a peer fund with higher expense, it is also possible especially in case of certain category of funds like equity, that reverse is true based on the underlying portfolio or stock selection.

Usually the expense ratio within the same category of funds do not have huge variation and hence the performance differential due to charges or expenses is limited.

I have been investing in a couple of Mutual Funds and the returns have not been satisfactory. According to you, how often should one evaluate the Mutual Funds portfolio?

At the outset please evaluate if the funds match your investment goals, risk appetite, time horizon and return expectations. Also check if there is any change in the fund investment strategy or the fund management team for a proper insight.

As a thumb rule you should

Q:

A:

25

Tête-à-tête


regularly track your funds on a quarterly, half yearly or annual b a s i s a n d c o n s i d e r appropriate re-balancing at an asset allocation level. From a fund perspect ive i f the p o r t f o l i o c o n s t r u c t i s appropriate going forward and the fund has demonstrated strong record, then the investments can be held on d e s p i t e n e a r t e r m underperformance.

Suppose if I start a SIP for three years and have X amount as my investment target. So, after three years, if my investment target isn't met due to market volatility. What should I do? Should I continue investing or should I rejig my SIP structure of different Mutual Funds?

Ideally SIPs should be considered from investment horizon of at least 5 – 10 years or even more as they help in creating long term wealth. If the current underperformance is on account of market volatility one should continue with investment as long as the same is line with risk appetite of the investor. Further regular

Q:

A:

disciplined investing can assist investors part ic ipate in markets at different points of time and smoothen out the volatilities over a period of time.

Are gains from Mutual Funds like monthly income plans - Tax-free? And what about equity-based Mutual Funds…are they tax-free if redeemed after one year?

Equity oriented funds redeemed after 12 months from the date of purchase will not be subject to Capital Gains tax, if applicable.

Debt oriented products like Monthly Income Plans are subject to the following capital gains tax structure:

· If the investments are redeemed before 36 months from the date of purchase the gains, if any, will be subject to Short Term Capital Gains tax rates

· If the investments are redeemed after 36 months from the date of purchasethe gains, if any, will be subject to Long Term Capital Gains tax rates

Q:

A:

.

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

26

ASK OUR PLANNER

Rental income on property vs interest income on FD


Q.

A .

I have a Flat at my home town. I

am planning to sell the flat as the

rent is very less. If I sell the flat and

put the entire amount into a Bank

Fixed Deposit, the monthly interest

which I would get will be more than

the rent I receive now. Is it an

advisable option to look at?Aditya Prakash

Renta l y ie ld f rom a

residential property will be

around 2-3% p.a. of the market

value of the property only in

most of the locations. Hence, it

might not look attractive when

you compare the same with a

Bank Fixed Deposit, which may

yield you around 8% p.a.

However, you need to note that

the value of your property will

also appreciate unlike a Bank

FD. If you calculate the total

return i.e. appreciation and

rental income, then the yield

might be more than your Bank

FD.

One more point to note is while

computing tax on your rental

income, 30% of the income

can be availed as a standard

deduction and you will be

taxed only on the balance 70%

amount; however the entire

interest on your Bank FD will be

added to your income and

taxed as per your income slab.

Also, if you sell your property,

the capital gains arising out of

such sale will be subject to tax

in your hands, if you do not re-

invest the same into a

residential property or into

capital gain bonds. Hence, if

you are looking to invest the

sale proceeds into a Bank FD,

you would be able to invest

only a lesser amount, after

deducting the tax to be paid on

the capital gains.

My age is 53. My retirement age

is 65. At present, my take home

salary is Rs.38,000. I want to take

home loan for 10 years. How much

loan can I get and what would be

EMI ? Is there any tool which could

help me to calculate the EMI?Kishore Kumar

Let's assume your gross

m o n t h l y i n c o m e t o b e

Rs.40,000 and you do not have

any other EMIs currently. To

Q.

A.

27

ASK OUR PLANNER


calculate the eligible home

loan amount, housing finance

companies generally use a

Fixed Obligation to Income

Ratio, which is around 45 to

55% of your gross monthly

income. This is the maximum

amount which you would be

able to pay as EMI from your

income.

Assuming the ratio to be 50%,

then the maximum EMI which

you could pay would be

R s . 2 0 , 0 0 0 . W o r k i n g

backwards, at an interest rate

of 9.50% p.a., you would be

eligible for a home loan of

approximately Rs.15.45 lakh

for a repayment term of 10

years. There are a lot of EMI

calculators available online to

calculate the EMI for your loan.

You can also calculate through

Microsoft Excel using PMT

formula.

I often come across the term

“Power of Compounding” in some

articles / advertisements of mutual

funds. What does this mean? Can

you explain with the help of an

example?Raj Modi

Compounding means that

Q.

A.

the return generated by your

investment gets re-invested

into the same instrument,

unlike a simple interest, where

the return generated is paid out

on a periodical basis to you.

For example, if you invest

Rs.100 in an instrument which

offers a compound interest of

10% p.a. , compounding

annually, then at the end of 1

year, the interest earned from

such investment will be Rs.10

and the same will get re-

invested along with the

principal next year. Hence, for

second year, the interest will be

10% on 110 i.e. Rs.11 and so

on.

Since the return on further

years gets calculated on the

sum of principal and the earlier

generated return, the longer

the tenure of your investment,

the final maturity value will be

substantial. To understand this

through an example, let's

assume person A invests a

lumpsum of Rs.1 lakh into a MF

(Growth option) for 15 years

and person B invests the same

amount into the same fund for

30 years. Assuming the fund

28

ASK OUR PLANNER


provides a compounded

return of 12% p.a., person A

will get Rs.5.47 lakh after 15

years, whereas person B will

get Rs.29.96 lakh. This is the

power of compounding in

longer term; to experience the

compounding magic on your

investments, you need to start

investing early and stay

invested for a long term.

What are the tax implications if

as a mother I have to gift some

money to my children?Elizabeth Joseph

As per the Income Tax Act,

any sum of money received by

a n i n d i v i d u a l w i t h o u t

consideration from persons, if

it exceeds Rs.50,000 during a

year, is chargeable tax, subject

to certain exclusions. The

exclusions include money

rece ived f rom re la t ives

(including spouse, siblings,

parents and children), money

received on the occasion of the

marriage of the recipient,

money received under a will or

inheritance, etc.

Hence, if you gift some money

to your children, this would

come under the exclusions

Q.

A.

and accordingly, will not be

chargeable to tax.

I read through the Money

Manager August '16 Issue with

great interest. The general

direction and investment advice is

to continue investing in India

equities for the next 2-3 years. You

m e n t i o n t h a t o n e s h o u l d

accumulate shares on “dips”. Can

you elaborate what is considered a

“dip”? Can we assign some sort of

percentage decline in value either

to the stock price or the index that

can be reasonably considered to be

a dip?

I will also appreciate if you can

advise whether an individual

investor can invest directly in GOI

G-Sec's, if so is this available

through the ICICIdirect platform.Ravi Kashyap

A 'dip' referred to is

subjective in nature and its

quantum depends upon

individual investors. The

thought process behind

writing the word 'dip' is to

convey the message that

whenever market witnesses

some correction, investors

should utilize it to buy rather

than expecting a trend reversal

Q.

A.

29

ASK OUR PLANNER


or deep correction. For

instance, for an individual who

is a long-term equity investor,

e v e n a 1 0 0 - 2 0 0 p o i n t

correction in Nifty could be a

'dip' which should be utilized to

invest further. For another

investor who is risk-averse and

invests mainly into a mix of

debt and equity instruments,

even a higher correction could

be irrelevant as his risk

appetite would be lower and

he would remain invested in

fixed income unless equity

market witnesses meaningful

correction.

Regarding your second query

on G-Secs (Government

securities) - Currently, the

option to invest directly in G-

Secs is only available to

institutional players like banks,

primary dealers, insurance

companies, mutual funds,

foreign portfolio investors and

high net worth individuals.

However, the Reserve Bank of

India (RBI) has recently come

up with guidelines to further

ease the framework for

individual investors to invest

directly. There are a few banks

that currently provide this

facility. However, it may take

some time for the process to

become smoother. ICICIdirect

currently does not provide the

option to invest directly in

government securities for

retail investors.

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

MUTUAL FUND ANALYSIS

30

Investing In Mid-Cap Equity Funds


HDFC Mid-Cap Opportunities Fund

Fund Objective:The aim of the fund is to generate long-term capital appreciation from a portfolio that is substantially constituted of equity and equity related securities of small and mid-cap companies.

Key Information:

Product Label:

Fund Manager: Chirag Sitalvad

Mr. Chirag

Performance:

is a B.Sc. and MBA from University of North Carolina. He has been working with HDFC AMC since 2007. Prior to joining HDFC AMC, he has worked with New Vernon Advisory

Fund has outperformed the benchmark in 6 months, 1 year, 3 year and 5 year returns. It has beaten its benchmark over three periods by double-digit margins. It delivered returns of 24.9% for 1 year period as against the benchmark return of 22.9%. For a period of 5 years, its CAGR return has b e e n 2 4 % a s a g a i n s t benchmark return of 16%. In 2008, 2011 and 2013, this was a rare mid-cap fund to contain losses to levels far lower than peers as and the benchmark.

NAV as on September 09, 2016 ( ) 45.8

Inception Date June 25, 2007

Fund Manager Chirag Setalvad

Minimum Investment (`)

Lumpsum 5000

SIP 500

Expense Ratio (%) 2.14

Exit Load 1% on or before 1Y, NIL after1Y

Benchmark Nifty Free FloatMidcap 100

Last declared QuarterlyAAUM(` cr) 12997

`

This product is suitable for investors who are seeking:

• long-term capital growth

•equity related securities of small and mid cap companies

investments in equity and

HDFC Mid-Cap Opportunities Fund

Benchmark

30-Jun-15 30-Jun-14

8.60 26.72 70.10

Last Three Years Performance

Fund Name30-Jun-15 30-Jun-14 30-Jun-13

30-Jun-16

6.20 17.24 51.13

31



Portfolio:

Our View:

The fund usually parks 75% in mid cap companies with a flexibility to invest 25% in large cap funds. Its philosophy is to invest in businesses with good fundamentals and that are run by sensible management. The style is growth at a reasonable price, with the fund filtering companies that are growing at about 15-20% with good cash-f low generation and an acceptable return on equity.

HDFC Mid-Cap Opportunities fund provides a heavily diversified portfolio. The

average allocation to a stock is only 5 per cent, resulting in a portfolio of 77 stocks. The fund has outperformed its category during the crash of 2008 and the market slowdown in 2011. It has lower exposures to large cap and small cap companies than its peers. The fund has conservative style of investing hich makes it suitable for risk averse investors. The good performance has seen its corpus exceed |10,000 crore in 2015. This is a good choice for higher returns that mid caps can provide, without undue shocks in choppy markets. The

2015 2014 2013 2012 2011

38.2 36.1 20.4 18.6 13.4

5.8 76.6 9.6 39.6 -18.3

6.5 55.9 -5.1 39.2 -31.0

10915 9161 3049 2756 1593Net Assets (| Cr)

Return (%)

Calendar Year-wise Performance

NAV as on Dec 31 ( )`

Benchmark (%)

Performance vs. Benchmark

Fund Benchmark

32.7

24.9

40

23.9

26.9

22.9 30.7

16

0

10

20

30

40

50

6 Month 1 Year 3 Year 5 Year

Retu

rn%

32



low expense ratio, stable management and ability to

curtail losses in a tough market make it a good investment.

%

3.1

2.8

2.6

2.5

2.4

2.2

2.2

2.2

2.2

2.2

Bajaj Finance Ltd. Domestic Equities

Sundram Fasteners Ltd. Domestic Equities

Divis Laboratories Ltd. Domestic Equities

Yes Bank Ltd. Domestic Equities

Axis Bank Ltd. Domestic Equities

Aurobindo Pharma Ltd. Domestic Equities

Hindustan Petroleum Corporation Ltd. Domestic Equities

Voltas Ltd. Domestic Equities

Cholamandalam Investment & Finance Company Ltd. Domestic Equities

Tube Investments Of India Ltd. Domestic Equities

Top 10 Holdings Asset Type

%8.9

8.4

6.3

4.8

4.7

4.3

4.1

4.0

3.8

3.2

Printing And Publishing Domestic Equities

IT - Software Domestic Equities

Engineering - Industrial Equipments Domestic Equities

Pesticides & Agrochemicals Domestic Equities

Tyres & Allied Domestic Equities

Top 10 Sectors Asset TypeBank - Private Domestic Equities

Pharmaceuticals & Drugs Domestic Equities

Bank - Public Domestic Equities

Finance - NBFC Domestic Equities

Air Conditioners Domestic Equities

12.820.800.090.872.30

Sharpe ratioR SquaredAlpha (%)

Risk ParametersStandard Deviation (%)Beta

32.346.217.4Small

Market Capitalisation (%)LargeMid

55

175

295

63.2

247.6

558.7

62

232.4

470.7

0

100

200

300

400

500

600

1Yr 3Yrs 5Yrs 10Yrs

SIP Performance (Value if invested 5000 per month (in'000))`

Total Investment Fund Value Benchmark Value

33



Performance of all the schemes managed by the fund manager

30 -Jun-15 -14 -13

30 -Jun-16 30 -Jun-15 30 -Jun-14

30 -Jun 30 -JunFund Name

Data as on September 09, 2016 ;Portfolio details as on Aug -2016Source: ACE MF, ICICIdirect Research

%

0.8

0

Whats In

Atul Ltd.

RBL Bank Ltd.

77.0

24.4

25.8

--

4.6

Fund P/E Ratio

Benchmark P/E Ratio

Fund P/BV Ratio

Portfolio AttributesTotal Stocks

Top 10 Holdings (%)

95.9

1.3

2.8Cash

Asset AllocationEquity

Debt

Feb-23-2012 15

Mar-25-2015 20

Feb-28-2014 17.5

Feb-28-2013 11.5

Mar-28-2016 15

Dividend History

Date Dividend (%)

HDFC Small and Mid Cap Fund-Reg(G) 10.10 20.32 40.58

NIFTY SMALL 100 9.195240376 -1.21 85.40

HDFC Mid-Cap Opportunities Fund(G) 8.60 26.72 70.10

Nifty Free Float Midcap 100 6.201550388 17.24 51.13

HDFC Multiple Yield Fund 2005(G) 7.81 7.59 20.59

Crisil MIP Blended Index 8.626207588 11.05 8.24

HDFC Long Term Adv Fund(G) 4.53 11.08 48.59

S&P BSE SENSEX -2.811687052 9.31 31.03

34


SBI Magnum Global Fund

Fund Objective:To provide the investors maximum growth opportunity through well researched investments in Indian equities, PCDs and FCDs from selected industries with high growth potential and Bonds.

This product is suitable for

investors who are seeking*:

• long-term growth opportunities

• investments in Indian equities,


Key Information:

Product Label:

Fund Managers: R SrinivasanMr. Srinivasan

Performance:

is M.com and MFM. He has been working with SBI AMC since 2009. Prior to joining SBI he has worked with Principal PNB AMC, Motilal oswal, etc

The fund has been a star performer in the mid cap category. The three- and five-year show of the fund remains v e r y g o o d w i t h a 3 - 5 percentage point margin of out performance over and above the benchmark. The fund has recently underperformed as many quality stocks did not rallied as much as many of the sub optimal quality stocks in the midcap index. The fund has delivered 20.4% CAGR returns over five years vs benchmark return of 15.7%.

PCDs and FCDs from selected

industries with high growth

potential to provide investors

maximum growth opportunities


Inception Date September 22, 1994

Fund Manager R. Srinivasan


Lumpsum 5000

SIP 1000


Exit Load 1% on or before12M, Nil after 12M

Benchmark S&P BSE Mid-Cap

Last declared QuarterlyAAUM (`cr) 2959

`

2015 2014 2013 2012 2011

49.8 50.9 35.1 32.0 23.5

7.9 66.6 9.7 36.0 -14.2

7.4 54.7 -5.7 38.5 -34.2

2474 1738 910 959 899

Return (%)



Benchmark (%)

Net Assets ( Cr)`

35



Portfolio:This is a stringently mid-cap focused fund. Three-fourths of the portfolio is invested in mid-cap stocks, while peers retain a lower than 50 per cent a l locat ion. The fund is underweight both on giant and large caps relative to the category. The stock selection is bottom-up and this fund's portfolio features several unconventional picks which have long-term potential, from the mid-cap space. The market is screened for stocks which have competitive advantage, return on capital of 18-20 per cent and growth of 18-20 per cent. As can be expected, this leads to a fairly growth-

oriented portfolio and a high portfolio P/E.

Consistency in the mandate and the strategy has been evident from 2009-10 and this has paid off by way of a good show across bear markets as well. In the last one year, the fund has managed marginal gains, while the category has slumped into the red. The fund manager picks unconventional stocks with long term potential and this strategy has paid off well in the past. The fund has been a star performer and fund manager track record makes t h e f u n d a n a t t r a c t i v e inves tment in mid cap category.

Our View:


Fund Benchmark

17.8

10.4

32.4

20.42

9.9

26.9

33.6

15.7

0

10

20

30

40


Retu

rn%

SBI Magnum Global Fund - 1994

Benchmark

30-Jun-15 30-Jun-14

-6.43 35.70 32.69



30-Jun-16

9.71 13.87 57.25

36



%

4.5

4.3

4.3

3.9

3.7

3.7

3.5

3.5

3.4

3.3


Divis Laboratories Ltd. Domestic Equities

MRF Ltd. Domestic Equities

Procter & Gamble Hygiene & Health Care Ltd. Domestic Equities

Sundaram Finance Ltd. Domestic Equities

CBLO Cash & Cash Equivalents

Dr. Lal Pathlabs Ltd. Domestic Equities

United Breweries Ltd. Domestic Equities

Page Industries Ltd. Domestic Equities

Solar Industries (India) Ltd. Domestic Equities

Whirlpool Of India Ltd. Domestic Equities

%7.7

7.5

7.0

5.8

5.5

5.4

5.2

5.1

3.7

3.4


Household & Personal Products

Chemicals Domestic Equities

Pharmaceuticals & Drugs Domestic Equities

Top 10 Sectors Asset Type

Tyres & Allied Domestic Equities

Hospital & Healthcare Services Domestic Equities

Consumer Durables - Domestic Appliances Domestic Equities

Domestic Equities

Bearings Domestic Equities

Textile Domestic Equities

Finance - Housing Domestic Equities

9.580.620.040.761.69



15.162.119.6Small




55 175

295 5

95

58.7 227.4 506.6

1511.9

63.5 240.1

484.8

1147.3

0

500

1000

1500

2000

1Yr 3Yrs 5Yrs 10Yrs

37



%2.2

0.8

Whats InThermax Ltd.

Balkrishna Industries Ltd.

%2.6

Whats out

Pidilite Industries Ltd.

39.037.937.9

--9.5

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

Portfolio AttributesTotal StocksTop 10 Holdings (%)

96.7

0.0

3.3Cash


Debt

Dividend History

Date Dividend (%)Oct-30-2015 51

Jun-06-2014 57

May-31-2011 50

Mar-26-2007 50

Jul-01-2005 42.5

Mar-12-2010 50


30 -Jun-15 -14 -13

30 -Jun-16 30 -Jun-15 30 -Jun-14


SBI Small & Midcap Fund-Reg(G) 11.53 53.22 62.84

S&P BSE Small-Cap 6.55482671 8.55 80.79

SBI Emerging Businesses Fund-Reg(G) 8.90 22.46 37.46

S&P BSE 500 1.154855354 11.36 36.67

SBI Magnum Balanced Fund-Reg(D) 5.59 23.63 37.28

CRISIL Balanced Fund - Aggressive Index 3.118784442 10.58 20.99

SBI Magnum Equity Fund-Reg(D) 3.56 20.87 32.56

NIFTY 50 -0.964928004 9.95 30.28

SBI Contra Fund-Reg(D) 3.54 19.83 31.04

S&P BSE 100 -0.403232952 9.32 33.44

SBI Magnum Global Fund 94-Reg(D) 3.12 35.70 52.56

S&P BSE Mid-Cap 9.711900479 13.87 57.25


38


Franklin India SmallerCompanies Fund

Fund Objective:An open end diversified equity fund that seeks to provide long term capital appreciation by investing in mid and small cap companies.


Key Information:

Product Label:

Fund Manager: R Janakiraman

Mr. Janakiraman

Performance:

is B.E. and PGDM. He has been with Franklin Templeton fund since 2008 and has been managing various funds since then.

Launched in the frothy markets of 2006, the fund delivered erratic returns until 2008, but has pulled up its socks thereafter. The fund took a bad knock in the 2008 meltdown but has weathered the last two bear phases (2011 and 2013) extremely well, doing far better than the benchmark and the peers. It has outperformed benchmark across time period by giving CAGR return of 28.9% (benchmark : 16%) and 45.2% (benchmark: 30.7%) for 5 year and 3 year period respectively.

This product is suitable for investors who are seeking*:• long-term capital appreciation

*primarily a large cap fund with some allocation to small/mid cap stocks


Inception Date January 13, 2006

Fund Manager R. Janakiraman


Lumpsum 5000

SIP 500


Exit Load 1% on or before 1Y

Benchmark Nifty Free FloatMidcap 100

Last declared Quarterly AAUM(` cr) 3734

`

2015 2014 2013 2012 2011

40.2 36.7 19.3 17.1 11.3

9.6 89.9 13.2 51.7 -25.9

6.5 55.9 -5.1 39.2 -31.0

2740 1774 369 344 307Net Assets ( Cr)`

Return (%)



Benchmark (%)

39



Portfolio:The fund invests 83% of its portfolio in small and mid cap stocks. This fund invests in stocks with a market cap below that of the 100th stock in the CNX 500 index. Like all Franklin equity schemes, the style is bottom-up and hunts for growth at a reasonable price. The manager looks for 'quality compounders' - companies which can compound their earnings at a high rate, with good return on capital, low capital intensity and capable management. Businesses that do not have the ability to generate free cash flows over a business cycle are avoided. So are those with poor return on capital and limited entry

barriers.

The fund has outperformed its benchmark (CNX Midcap Index) and its category across various time frames. An ability to navigate volatile markets well and keep up a quality stock bias has helped this fund ascend from a four-star to a five-star rating in the last couple of years. Fund's recent p e r f o r m a n c e h a s b e e n outstanding and has been n o t e d f o r c o n s i s t e n t management . The fund contains good quality stocks with positive outlook in the current economic scenario. The fund manager has churned the portfolio well and has

Our View:


Fund Benchmark

30.9

27.1 4

5.2

28.9

26.9

22.9 30.7

16

0

10

20

30

40

50


Retu

rn%

Franklin India Smaller Companies Fund

Benchmark

30-Jun-15 30-Jun-14

14.74 34.89 73.66



30-Jun-16

6.20 17.24 51.13

40



added quality stocks at the right time to match the current economic trend. The fund,

therefore, is best for those willing to take on a little risk for higher returns.

%

9.7

4.6

4.2

3.1

2.5

2.4

2.3

2.2

2.1

2.1

Deepak Nitrite Ltd. Domestic Equities

HDFC Bank Ltd. Domestic Equities

Atul Ltd. Domestic Equities

eClerx Services Ltd. Domestic Equities

Repco Home Finance Ltd. Domestic Equities

Voltas Ltd. Domestic Equities

Call Money Cash & Cash Equivalents

Finolex Cables Ltd. Domestic Equities

Equitas Holdings Ltd. Domestic Equities

Yes Bank Ltd. Domestic Equities


%

12.2

5.2

4.6

4.4

4.4

4.2

4.1

3.2

3.0

3.0

Chemicals Domestic Equities

Air Conditioners Domestic Equities

Printing And Publishing Domestic Equities

IT - Software Domestic Equities

Engineering - Industrial Equipments Domestic Equities

Top 10 Sectors Asset Type

Bank - Private Domestic Equities


Cable Domestic Equities

Bearings Domestic Equities

Cement & Construction Materials Domestic Equities

12.420.770.100.825.76



10.842.035.5Small




55 175

295 5

95

62.8 259.8 6

32.9

1891.2

62 2

32.4

470.7

1211.2

0

500

1000

1500

2000

1Yr 3Yrs 5Yrs 10Yrs

41




%0.2

Whats In

FDC Ltd.

%0.7

Whats out

Century Plyboards (India) Ltd.

26.0Fund P/E Ratio

--Benchmark P/E Ratio

4.4Fund P/BV Ratio

Portfolio Attributes71.0Total Stocks

35.2Top 10 Holdings (%)

88.3

0.0

11.7Cash


Debt

Aug-09-2007 9

Feb-23-2015 20

Feb-17-2014 15

Feb-25-2013 25

Feb-22-2016 20

Dividend History

Date Dividend (%)


30 -Jun-15 -14 -13

30 -Jun-16 30 -Jun-15 30 -Jun-14


Franklin India Smaller Cos Fund(G) 14.74 34.89 73.66

NIFTY 50 -0.964928004 9.95 30.28

Franklin India Prima Fund(G) 10.45 33.23 59.01

NIFTY 50 -0.964928004 9.95 30.28

Franklin India Flexi Cap Fund(G) 2.38 26.10 49.90

NIFTY 50 -0.964928004 9.95 30.28

Franklin India Opportunities Fund(G) 2.00 31.59 39.95

S&P BSE 200 0.408342882 12.01 34.45

42

MUTUAL FUND TOP PICKS

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

Mutual Fund Top Picks

Equity

Largecaps

Midcaps

Diversified

ELSS

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

HDFC Midcap Opportunities FundFranklin India Smaller Companies FundSBI Magnum Global Fund

Franklin India Prima PlusReliance Equity OpportunitiesICICI Prudential Value Discovery Fund

Axis Long Term EquityICICI Prudential Tax PlanFranklin India Tax shield

Liquid Funds

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

Ultra Short Term

Birla Sunlife Savings FundReliance Medium Term FundICICI Pru Flexible Income Plan

Short Term

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

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

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

Gilts Funds

ICICI Pru Gilt Inv. PF PlanBirla Sunlife Constant Maturity 10 year gilt plan

MIP Aggressive

Birla Sunlife Savings 5ICICI Prudential MIP 25DSP Blackrock MIP

Debt


43

Our indicative large cap equity model portfolio has continued to deliver an impressive return (inclusive of dividends) of 108.5% since its inception (June 21, 2011) vis-à-vis the index return of 62% during the same period, an outperformance of 47%. This validates our thesis of selecting companies with sound business fundamentals that form the core theme of our portfolio. Our midcap portfolio of 16 stocks outperformed the benchmark by 2x (since June 2011), posting returns of 153.2%. Our consistent outperformance demonstrates our superior stock picking ability as markets in the first half of CY17 aligned to our view of favourable risk reward, good franchisee vs. reward-at-any-risk businesses. Some key performers of our portfolio are Bajaj Finance, Lupin, Axis Bank and HDFC Bank in the large cap portfolio while Natco Pharma, Bajaj Finserv and UltraTech have delivered stupendous returns in the midcap portfolio.

We continue to advocate the SIP mode of investment as the preferred mode of deployment given the volatile market conditions. We highlight that the SIP return of our portfolio has consistently outperformed the indices. This affirms our belief in the staggered and systematic approach of investment amid market volatility.

The Q1FY17 performance of Sensex companies ex-banks & commodity space (oil & gas, metals & mining) was robust on the topline front but largely flat on the profitability front. Total sales for Sensex companies rose 10 6% YoY marking Q1FY17 as thesecond consecutive quarter of double digit topline growth, depicted a progressive up-tick in demand prospects. Furthermore, India's manufacturing activity grew at the fastest clip in 13 months in August with a PMI of 52.6, representing an eighth straight month of expansion. Auto volumes for September continue to positively surprise indicating strong support from good monsoons and the Seventh Pay Commission.

Given the last revamp in the portfolio we have made minimal changes in portfolio, the current edition, to capture the new opportunities available in the market. Following the same, we

EQUITY MODEL PORTFOLIO


44


have reshuffled the weights of some companies. Among large caps, we have increased the weight of Bajaj Finance by 2%. We have also increased the weight of Maruti, UltraTech and Marico by 1% each. Affirming our view on consumption demand, we have added Dabur to our large cap portfolio. We believe that as the softness in commodities continues oil & gas and metal sectors would continues, continue to remain under pressure. Following this, we have exited Reliance Industries from Large caps.

In the large cap space we continue to remain positive on auto infrastructure & cement. Relative to the benchmark index, we are underweight on BFSI. With the exclusion of Reliance Industries, we affirm our underweight stance on metals and oil & gas. With the recent cleanup drive in PSU banks, we continue to believe the underperformance would continue. In the private banking space, we prefer large banks with a strong brand name and a pan India retail presence We remain overweight to neutral on pure play defensives (IT, FMCG) as secular earnings coupled with sector rotation could lead to consolidation in near term valuations and offer stock specific opportunities. We remain positive on auto, pharma, capital goods and infrastructure.

Among individual names, given the steep discount to historic valuations, we are strongly overweight on Infosys and TCS in the IT space. A revival in the capex cycle coupled with lower interest rate scenario would benefit the BFSI and construction space (UltraTech, L&T, HDFC, HDFC Bank).

House view on Index: Following the subdued monsoon and weak global scenario, Sensex earnings for two consecutive years remained subdued. However, a revival of the same would lead the Sensex EPS to grow by 12% to Rs 1542 in FY17E and 18% to Rs 1816 in FY18E.


45



Name of the company

Largecap Portfolio

Weightage(%)

Auto 15.0

Tata Motor DVR 4.0

Bosch 3.0

Maruti 5.0

EICHER Motors 3.0

BFSI 25.0

HDFC Bank 8.0

Axis Bank 3.0

HDFC 8.0

Bajaj Finance 6.0

Capital Goods 4.0

L & T 4.0

Cement 4.0

UltraTech Cement 4.0

FMCG/Consumer 18.0

Dabur 5.0

Marico 4.0

Asian Paints 5.0

Nestle 4.0

IT 18.0

Infosys 10.0

TCS 8.0

Media 2.0

Zee Entertainment 2.0

Pharma 14.0

Lupin 6.0

Dr Reddys 5.0

Aurobindo Pharma 3.0

Total 100.0

46



Name of the company

Diversified Portfolio

Weightage(%)

Auto 12

Tata Motor DVR 3

Bosch 2

Maruti 4

Eicher Motors 2

Bharat Forge 2

Consumer Discretionary 16

Symphony 2

Supreme Ind 2

Kansai Nerolac 2

Pidilite 2

Asian Paints 4

Arvind 2

Interglobe Aviation 2

Rallis 2

BFSI 19

HDFC Bank 6

Axis Bank 2

HDFC 6

Bajaj Finance 4

Bajaj Finserve 2

Power, Infrastructure & Cement 12

L & T 3

UltraTech Cement 3

Ramco Cement 2

NBCC 2

Container Corporation of India 2

FMCG 9

Nestle 3

Marico 3

Dabur 4

Pharma 16

Lupin 4

Dr Reddys 4

Aurobindo Pharma 2

Natco Pharma 2

Torrent Pharma 2

Biocon 2

IT 13

Infosys 7

TCS 6

Media 1

Zee Entertainment 1

Total 98.2

47



Name of the company

Midcap Model Portfolio

Weightage(%)

Aviation 6.0

Interglobe Aviation 6.0

Auto 6.0

Bharat Forge 6.0

BFSI 6.0

Bajaj Finserve 6.0

Cement 6.0

Ramco Cement 6.0

Consumer 30.0

Symphony 6.0

Supreme Ind 6.0

Kansai Nerolac 6.0

Pidilite 6.0

Rallis 6.0

Infrastructure 8.0

NBCC 8.0

Logistics 6.0

Container Corporation of India 6.0

Pharma 20.0

Natco Pharma 6.0

Torrent Pharma 6.0

Biocon 8.0

Textile 6.0

Arvind 6.0

Total #REF!

ICICI Securities Ltd has received an investment banking mandate from group company of Larsen and Toubro Ltd. The report is prepared based on publicly available information.

48

Performance* so far Since inception

*Returns (in %) as on

Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio

Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination

of BSE Sensex and CNX Midcap

Aug 17, 2016

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

Portfolio Benchmark

Investment Value of Investment in Portfolio Value if invested in Benchmark

Start date of SIP: , 2011; *Value as on June 30 Aug 17, 2016



87.3

124.8

94.6

63.1

100.6

72.9

0

25

50

75

100

125

150

%

6400000

6400000

6400000

8749049.1

68

12630236.6

9

9338760.9

92

6213745.3

06

5429103.7

01

7618754.4

23

3500000

4500000

5500000

6500000

7500000

8500000

|

QUIZ TIME

1. Equity is a high-risk, high-return asset class. But investors can expect more returns from this asset class than from any other. True or false

2. Gold can be bought in the form of jewellery, coins, bars, bonds, ______________ and so on.

3. In general, the risk involved in an investment is directly proportional to the ________ expected from it.

4. _____________ is the level of uncertainty that investors are willing to tolerate to earn a profit on their investment.

5. It is important to have a ______ before you start investing.

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 August 2016 quiz are:

1. The Income Tax Act allows you to carry forward your Capital losses for the next _______ financial years.

A: 8 Eight

2 India has figure among the top 10 wealthiest countries in the word with a total individual wealth of USD _______ billion

A: 5600 billion

3. Which Section of Income Tax Act allows an additional deduction of Rs.50,000/ towards NPS (National Pension System) contribution?

A: 80 CCD (1B)

4. The Government is likely to ban cash deals over Rs._____ lakhA: Rs.3 Lakh

5. As per Section 80CCE of the Income Tax Act, the aggregate amount of deduction under Section 80C, Section 80CCC and Section 80 CCD (1) shall not exceed Rs ______ lakh

A: Rs.1.50 lakh

Congratulations to the following winners for providing correct answers!

BSR Murthy


50

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

31-Aug-16 29-Jul-16 Change (%)

CNX Nifty 8786.2 8638.5 1.7%

CNX Midcap 15370.9 14772.8 4.0%

S&P BSE Sensex 28452.2 28051.9 1.4%

S&P BSE 100 9021.5 8856.0 1.9%

S&P BSE 200 3768.6 3692.1 2.1%

S&P BSE 500 11834.9 11586.0 2.1%


Dow Jones 18,400.9 18,432.2 -0.2%

S&P 500 2,171.0 2,173.6 -0.1%

Nasdaq 5,213.2 5,162.1 1.0%

FTSE 6,781.5 6,724.4 0.8%

DAX 10,592.7 10,337.5 2.5%

CAC 40 4,438.2 4,439.8 0.0%

Nikkei 16,887.4 16,569.3 1.9%

Hang Seng 22,976.9 21,891.4 5.0%

Shanghai Composite 3,085.5 2,979.3 3.6%

Taiwan Weighted 9,068.9 8,984.4 0.9%

Straits Times 2,820.6 2,868.7 -1.7%


S&P BSE Auto 22,008.2 21,091.1 4.3%

S&P BSE Bankex 22,656.6 21,678.5 4.5%

S&P BSE FMCG 4,747,204 4,694,964 1.1%

S&P BSE Healthcare 16,161.7 16,299.2 -0.8%

S&P BSE Metals 9,939.7 9,406.2 5.7%

S&P BSE Oil & Gas 11,072.7 10,595.2 4.5%

S&P BSE Power 2,098.4 2,076.6 1.1%

S&P BSE Realty 1,542.1 1,607.1 -4.0%

S&P BSE Teck 5,753.3 5,951.1 -3.3%

51

PRIME NUMBERS


Debt Markets

Government Securities (G-Sec) Yields (in %) Aug-16 Change (bps)Jul-16

Corporate Bond Yields (in %) Change (bps)Aug-16 Jul-16

Commercial Paper (CP) Rates (in %) Change (bps)Aug-16 Jul-16

Treasury Bill (T-Bills) Yields (in %) Change (bps)Aug-16 Jul-16

Volatility Index (VIX)

31-Aug-16 29-July-16

VIX 13.24 14.92 0%

Change (%)

10 year 7.11 7.17 -6

5 year 7.02 7.05 -3

3 year 6.88 6.91 -3

1 year 6.82 6.82 0

AAA 10 year 7.80 8.10 -30

AAA 5 year 7.68 7.95 -27

AAA 3 year 7.60 7.82 -22

AAA 1 year 7.50 7.64 -14

AA 10 year 8.37 8.69 -32

AA 5 year 8.23 8.48 -25

AA 3 year 8.17 8.36 -19

AA 1 year 8.07 8.18 -11

12 Months 7.71 8.01 -30

6 Months 7.34 7.70 -36

3 Months 7.00 7.28 -28

1 Month 6.84 7.00 -16

91D TB 6.55 6.53 2

182D TB 6.64 6.69 -5

364D TB 6.68 6.73 -5

52

PRIME NUMBERS

10-year benchmark yields (%) across countries


Countries 31-Aug-16 29-Jul-16 Change in bps

US 1.58 1.45 13

UK 0.64 0.69 (4)

Japan (0.06) (0.19) 13

Spain 1.01 1.02 (0)

Germany (0.07) (0.12) 5

France 0.18 0.10 8

Italy 1.15 1.17 (2)

Brazil 12.08 11.81 27

China 2.81 2.80 1

India 7.11 7.17 (6)

MF Investment Aug-16 Jul-16 YTD

Equity 1428 557 10216

Debt 19793 14251 228884

FII Investment Aug-16 Jul-16 YTD

Equity 9786 11339 40668

Debt -2949 6965 -9217

Macro-economic Indicators

Consumer price index (CPI)

Items Weights(%) Jun-16 Jul-16 Aug-16

Food&bev. 45.86 6.29 7.20 7.46

Pan,tob& intox. 2.38 8.04 7.66 7.35

Cloth & Foot 6.53 5.56 5.37 5.01

Housing 10.07 5.37 5.35 5.46

Fuel & light 6.84 3.03 2.94 2.92

Misc. 28.31 4.26 3.96 3.85

CPI 100 5.77 6.07 5.13

Wholesale price index (WPI)Month

Weights Aug-15 Jul-16 Aug-16WPI 100.0 -5.06 3.55 3.74Primary Articles 20.1 -4.21 9.38 7.47Fuel & Power 14.9 -16.21 -1.00 1.62Manufactured Goods 65.0 -1.99 1.82 2.42

53

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 July 29, 2016

Debt Funds Returns (in %)

Returns as on August 31, 2016

Tenure Liquid Funds Short-termincome funds

Ultra short-term funds

Long-termincome funds

Gilt funds

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

Currencies and CommoditiesCurrencies

Categories 16-Jul-16 16-Jun-16 16-May-16 Weight(%)Mining 0.8 5.3 1.4 14.2Manufacturing -3.4 0.7 0.6 75.5Electricity 1.6 8.3 4.7 10.3

31-Aug-16 29-Jul-16 Change (%) StatusUSDINR 66.96 67.00 0.0% AppreciatedEURINR 74.58 74.44 -0.2% DepreciatedGBPINR 87.98 88.28 0.3% AppreciatedAUDINR 50.35 50.37 0.0% AppreciatedCHFINR 68.10 68.70 0.9% AppreciatedJPYINR 0.65 0.65 -0.3% DepreciatedCNYINR 10.03 10.10 0.7% Appreciated

31-Aug-16 29-Jul-16 Change (%)Crude ($/barrel) 47.0 42.5 10.8%Gold ($/ounce) 1,309.0 1,351.0 -3.1%

6 months 30.92 35.41 28.59 30.661 year 13.17 15.68 11.34 11.933 year 27.53 40.68 22.17 26.465 year 16.53 22.86 14.35 16.30

6 months 7.52 11.52 9.39 15.48 18.74

1 year 7.56 9.09 8.39 10.34 12.17

3 year 8.38 9.74 9.07 10.40 11.18

54

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

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

Schedule for Advanced Portfolio Management ProgrammeSr.No

City Dates For More Information & Registration call:

Premium Education Programmes Schedule


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


Schedule for CFP Certification training through Virtual class Sr.No City Dates For More Information & Registration call:

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

Schedule for Fast Track Program on Technical AnalysisSr.No City Dates For More Information & Registration call:

Sr.No


Schedule for Foundation Programme on Stock Investing

1 New Delhi 17th Sept to 19th Sept 2016 Harneet on 9528152693

2 Mumbai 24th Sept & 25th Sept 2016 Kusmakar on 7875442311

3 New Delhi 24th Sept & 25th Sept 2016 Harneet on 9528152693

4 Bangalore 21st Sept to 29th Sept 2016 Subrata on 9620001478

5 Chennai 10th Sept to 17th Sept 2016 Abdul on 8939930837

6 Ajmer 25th Sept 2016 Yogesh on 8238053563

7 Jodhpur 18th Sept 2016 Harneet on 9528152693

8 Pondicherry 25th Sept 2016 Abdul on 8939930837

9 Bhubaneshwar 4th Sept 2016 Jayeeta on 9007391920

10 Vijaywada 4th Sept 2016 Ruchi on 8297362323

11 Vijaywada 18th Sept 2016 Ruchi on 8297362323

12 Bangalore 24th Sept & 25th Sept 2016 Subrata on 9620001478

13 Chennai 3rd Sept & 4th Sept 2016 Abdul on 8939930837

14 Chennai 25th Sept & 26th Sept 2016 Abdul on 8939930837

15 Hyderabad 17th Sept & 18th Sept 2016 Ruchi on 8297362323

16 Jaipur 24th Sept 2016 Harneet on 9528152693

17 Nagpur 17th Sept & 18th Sept 2016 Kusmakar on 7875442311

18 Navi Mumbai 17th Sept & 18th Sept 2016 Kusmakar on 7875442311

19 New Delhi 24th Sept & 25th Sept 2016 Harneet on 9528152693

20 Pune 24th Sept & 25th Sept 2016 Kusmakar on 7875442311

21 Thane 17th Sept & 18th Sept 2016 Manish on 8451057943

55

Contact us

Email:

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

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

SMS:

SMS EDU to 5676766 for more details


Sr.No


Schedule for Technical Analysis

Sr.No


Schedule for Professional Trader & Investor Programme

22 Ahmedabad 23rd Sept to 27th Sept 2016 Yogesh on 8238053563

23 Bangalore 16th Sept to 20th Sept 2016 Subrata on 9620001478

24 Chennai 3rd Sept to 7th Sept 2016 Abdul on 8939930837



27 Hyderabad 10th Sept & 11th Sept 2016 Ruchi on 8297362323

28 Pune 10th Sept & 11th Sept 2016 Kusmakar on 7875442311

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