icici september 19 issue · an interview with mr. vinod bhat, fund manager managing fof schemes,...

Vijay Chandok, MD & CEO, ICICI Securities Ltd.

Global as well as Indian equities have witnessed sharp volatility over the past few months. The global concern was la rge ly due to slowdown in key Economies like on-going US China trade war. On the other hand, the pain at the domestic equit ies was accentuated by slowdown in certain key sectors such as Auto which witnessed sharp volumes decline, while overall GDP in Q1FY20 dipped to six years' low of 5%. Moreover, Nifty earnings estimates, post Q1FY20 earnings, were revised downward by ~12-13% given the prevailing muted economic sentiment domestically.

However, recent drive of reforms from government is likely to be a key enabler of economic recovery, going ahead. Most importantly, the government announcement of reduction in the corporate tax rate from ~34% to 25.2% is a massive trigger for revving up growth. The immediate benefit is increased cash flows to Corporate India that will be either channelized into debt reduction or incremental investments in increasing capacity. Also, taxing new production facilities (that come up by 2023) at 15% will enable attraction of global capital and spur a beleaguered investment cycle.

On the institutional flows front, during the recent market fall from its peak in July, foreign investors have sold equities worth 35000 crore. `However, domestic institutional investors, particularly mutual funds, have been net buyers of identical quantum during the said period. Clearly, the quantum of buying by domestic mutual funds had increased in last few days indicating their rising confidence in the market at lower levels. Monthly SIP inflows in equity mutual funds since the start of the calendar year 2019 has been consistently above 8000 crore. It is `heartening to see retail inflows continuing with their regular investment in equity market despite market volatility.

Crude which accounts for ~22% of the import bill (as of FY19) is another major factor for overall Indian economic outlook. The outlook for stable crude price, therefore, is another positive catalyst for economy as well as

ICICIdirect Money Manager September 20191

equities outlook. Despite an interim disruption due to attack on Saudi oil fields, with quicker resumption in Saudi oil production by September end, global oil demand-supply scenario is largely balanced in near term. Moreover, increasing US shale oil production and lower demand growth will keep global crude oil prices in the range of US 60-65/barrel in the medium term.

Going ahead, on the domestic front, we are of the view that with benign interest rate scenario (expect more rate cut of 25-50 bps ahead in FY20) with controlled inflation and proactive measures of government to boost the affected sectors, the growth recovery should be back on track. Nifty earnings, given the benefits of tax cuts and improved demand is likely to witness a healthy 20%+ CAGR over the next two years. Globally, also continued expansionary policies by key developments is likely to keep the slowdown concerns at bay.

To encapsulate, India's long term growth story remains intact. The government's resolve to implement tax reforms, stable macro-economic factors such benign inflation & interest rates coupled with continued traction in infrastructure development will be a huge boost to the overall growth.

Under the circumstances, we see value emerging across the market cap spectrum with key filter being quality. We continue to advise investors to utilise equities as a key asset class for long term wealth generation by investing into quality companies with strong earnings growth and visibility, stable cash flows, RoCE.

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

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

Coordinating Editor : Rhea Miranda CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Research Team

2

Over the last 18 months, Large cap Index as represented by Nifty 50 had seen sharp

outperformance against the broader markets. Nifty touched all time high led by handful of

stocks however broader market continued to underperform.

On the positive side, the government had acknowledged the slowdown and had

announced several measures to address growth concerns and boost sentiment. Small

cap index had corrected more than 30%, it has recovered strongly delivered decent

returns to the investors. Soon investors will start watching the September quarter results

and markets will start re-adjusting to earnings numbers and estimates.

On currency front, Rupee depreciation is typically positive for export-oriented sectors

such as IT, Pharma, Metals and Mining, and Autos. However, it is negative for sectors such

as OMCs, Industrials, Consumer, NBFCs, and companies with foreign debt which are

mainly in Infrastructure and Energy.

Stocks Buying decisions in a portfolio is broadly based upon long-term attractiveness of

business, growth, sustainability, quality of governance, valuations, Liquidity, etc.

companies which are strategically well positioned to gain market share from the

competition without diluting profitability and return on capital. Adding and reduction of

stocks happen based on businesses dynamics changing or current valuations capturing

or ignoring the long-term growth potential. Some of the strategies that the fund managers

apply in the portfolio.

This month edition is exploring you towards the market outlook of 2019 and its enabling

you to understand better with the help of the market experts. An interview with Mr. Vinod

Bhat, Fund Manager managing FOF schemes, Aditya Birla Group, Mr. Anand

Radhakrishnan, CFA, Managing Director & Chief Investment Officer - EME India, Franklin

Templeton Asset Management (India) Pvt Ltd, Mr. Pankaj Tibrewal, Sr. Vice President &

Fund Manager (Equity), Kotak AMC, Mr. Yogesh Patil, Fund Manager, LIC Mutual Fund

Asset Management Ltd and Mr. Ravi Gopalakrishnan, Head-Equity, Principal Mutual Fund

where they have not only shared their outlook over the market but have given their

insights on the strategies they have implemented while managing the Funds.

The September edition of Money Manager also offers comprehensive review of mutual

funds recommended by our research team. The top two stock picks of the months are also

selected by some of our finest research analysts. So stay updated, start investing and

keep reading to stay financially fit.

Do write us back at [email protected] for any queries or feedback.

Note: Explorer users, compatible mode should be IE11 for better view of our magazine.


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

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

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

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

Stock ideas: Bharat Electronics and Tata Chemicals 5 ............................

Flavour of the Month: Experts view the market and theirinvestment strategies

Markets fluctuation has seen a drastic change in the economy. The sudden change in the market was noticed post the FM's announcement. Opportunity are seen in Midcaps and small caps funds as they are cheap. This edition comprises of market outlook and fund managers have given their market insights and investment strategies. Read more for better understanding… 15 ...............................

Ask Our Planner

Our financial expert answers your personal finance queries.…. 36 .........

Mutual Fund Analysis

Which are the top performing mutual funds in current market scenario? Check these top midcap funds recommended by our research team. 41 ............................................................................

This month on iCommunity

Look out for an extraordinary financial platform for traders and

investors 59 .................................................................................................

Equity Model Portfolio 60 ..........................................................................

Quiz Time 4 ............................................................................................... 6

Prime Numbers...................................................................................... 65


Soon, lands will have Aadhaar-like unique ID numbers

New Delhi: India will soon start issuing unique numbers for landholdings as part of an

exercise expected to bring transparency and end dubious land ownership. The rural

development ministry has started work on assigning a standardised unique number for

each surveyed plot, a senior government official said. The unique number will have

details of the state, district or zilla, tehsil or taluka, block level and street information,

wherever applicable, and information about the plot including size and ownership

details.

Courtesy: Economic Times

Govt cuts corporate tax rate to 22%, relief on buyback tax

The government on 20th September cut corporate tax rate for companies that do not avail of any tax

incentive to 22%. Effective corporate tax rate after surcharge will be 25.17%. New manufacturing

companies will have to pay an even lower corporate tax rate of 15%. Finance minister Nirmala Sitharaman

told reporters here that an Ordinance has been cleared earlier in the day giving effect to the amendments to

the Income Tax Act. The tax relief is part of steps the government has been announcing after consultations

with the industry, on a weekly basis, to deal with the slowdown, the minister said. She added that listed

companies which had announced share buybacks before 5 July, the day the Union Budget brought share

buybacks under the tax net, will be exempt from buyback tax.

Courtesy: Live Mint

Public Provident Fund: Can you invest Rs 1.5 lakh/year, enjoy tax benefits

after becoming NRI?

Non-Resident Indians (NRIs) are not eligible to open an account under The Public

Provident Fund Scheme, 1968. However, NRIs, who had invested in the PPF before

becoming a non-resident during the maturity period of the account, can continue to

subscribe to the Fund till its maturity on a “Non-Repatriation Basis.” “Provided that if a

resident, who subsequently becomes Non Resident Indian during the currency of the

maturity period prescribed under Public Provident Fund Scheme, may continue to

subscribe to the Fund till its maturity on a Non Repatriation Basis.” Secondly, Non-

Repatriation Basis means funds in such accounts cannot be transferred back to the NRI's

country of residence, or converted to any foreign currency.

Courtesy: Financial Express

RBI cuts repo rate by 25 bps to 5.15%, lowest since March 2010

The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India on 4th

October slashed the short-term lending rate, repo rate, by 25 basis points in its fourth

bimonthly policy review. The domestic stock market saw a sudden fall in response to the

money policy outcome and the BSE Sensex traded 66 points higher at 38,172 after the

policy announcement. The index was up 200 points in early trade. This was the fifth

consecutive rate cut effected by the Shaktikanta Das-led panel, and it was in addition to a

cumulative 110 basis points rate cut that RBI has announced so far this year. The repo rate

now stands at 5.15 per cent, the lowest since March 2010.

Courtesy: Economic Times

STOCK IDEAS


Bharat Electronics (BHAELE) – Maintain long term positive despite short term blip…

Company Background

Bharat Electronics Limited (BEL) is a leading defence electronics company. BEL has core competencies in defence sector in areas of radars & weapon systems, sonars, c o m m u n i c a t i o n , E W S , e lect ro - opt ics and tank electronics. In non-defence sector, BEL's product range includes EVMs, Tablet PCs, ICs, hybrid microcircuits, semiconductor devices, solar cells etc. BEL has a strong manufacturing base with nine factories across India.

Investment Rationale

Solid order book, traction in e x e c u t i o n t o d r i v e performance

BEL has bagged significant

orders in FY19 such as the long

range surface to air missile

systems, smart city business,

home land security system,

etc. The company continues to

witness strong execution and

order wins. Q1FY20 saw wins

of 1,985 crore. BEL witnessed `

bookings during the quarter in

projects l ike upgrade of

communication equipment,

Integrated Air Command and

Control System (IACCS), naval

equipment, Smart City

business, radars and real time

information system. On the

exports front, the company has

set up an office in Vietnam and

is planning offices in Sri Lanka,

Myanmar, etc. At present, the

export order book as on

Q1FY20 is at $162.24 million.

Going ahead, tract ion in

execution and a favourable

product mix is expected to

help BEL maintain robust

EBITDA margins at 20% levels.

Working capital efficiency,

capex, higher tax rate in FY19-

21E

The management's persistent

focus on receivables in FY19

has led to efficient working

capital management, averting

any debt on the books of the

company. Strong execution in

FY19-21E coupled with steady


STOCK IDEAS

6

capex of 600- 650 crore in the `

next two to three years is likely

to keep a tight leash on liquidity

position for BEL. The tax rate

for BEL may also go up as

b e n e f i t s o f s p e n d o n

indigenous R&D are likely to go

down from 150% to 0% in

coming years. This is likely to

result in higher tax outgo over

FY19-21E.

Valuation & Outlook

A healthy order book backlog of 51,715 crore provides `future revenue visibility for the company. Going ahead, BEL is expected to derive higher

revenues from non-defence s e g m e n t l i k e h o m e l a n d security, cyber security and smart cities. The order book from this segment is roughly at ~ 1500 crore. These newer `areas have the potential to contribute ~20% to the topline albeit with lower margins over the next three to five years. Overall, BEL is expected to report topline, EBITDA and PAT CAGR of 14.7%, 5.4%, 1.8%, respectively, over FY19-21E. We value the company at 16x P/E on FY21E earnings to arrive at a target price of 135 per `s h a r e . We h a v e a B U Y recommendation on the stock.


STOCK IDEAS

7

Key Financials

Valuations Summary

Stock Data

` Crore FY18 FY19 FY20E FY21E

Revenues 10,006.6 11,789.2 13,157.6 15,513.3

EBITDA 1,999.7 2,862.1 2,763.1 3,180.2

PAT 1,399.3 1,927.3 1,799.6 1,996.2

EPS (`) 5.7 7.9 7.4 8.2

FY18 FY19 FY20E FY21E

PE (x) 19.2 13.9 14.9 13.4

M.Cap/ Revenues (x) 2.6 2.2 2.0 1.7

EV to EBITDA (x) 13.1 9.1 9.2 7.9

P/B (x) 3.5 3.0 2.7 2.5

ROE (%) 18.0 21.4 18.1 18.3

RoCE (%) 25.0 30.0 26.2 27.0

Particulars Amount

Market Capitalisation ̀ 26803 crore

Debt (FY19) ̀ 31 crore

Cash (FY19) ̀ 829 crore

EV ̀ 26005 crore

52 week H/L ̀ 117 /` 73

Equity capital ̀ 243.7 crore

Face value ̀ 1

Key risks include:

1. Delay in new order wins of

significant size

2. Any slowdown or delay in

execution of current order

book

3. A n y d e t e r i o r a t i o n i n

working capital cycle.


STOCK IDEAS

8

ANALYST CERTIFICATION I/We, Chirag Shah, PGDBM and Amit Anwani, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that

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STOCK IDEAS

9

Tata Chemicals – Residual business available at attractive valuations

Company Background

Tata Chemicals (TCL) offers s o l u t i o n s a c r o s s b a s i c chemical, consumer products and spec ia l i ty chemica l s e g m e n t . U n d e r b a s i c chemical, TCL offers soda ash, soda bicarbonate, cement, salt, marine chemicals and crushed refined soda. TCL is a leading global chemical player with around 4.2 million metric tonnes (MMT) of soda ash and 0 . 2 4 M M T o f s o d i u m bicarbonate capacities. Under t h e c o n s u m e r p r o d u c t segment, the company offers salt, pulses, spices, etc, while speciality chemical consists s o l u t i o n t o w a r d s a g r o chemical through Rallis and other specialty solutions such as nutritional products and HDS. Post complete exit from fertiliser business in FY16, TCL witnessed an improvement in the operational performance and working capital. Going ahead, increase in the share of n u t r i t i o n a l b u s i n e s s i s expected to drive return ratios f o r t h e c o m p a n y. T h e

company recently announced a demerger of its consumer business from its portfolio. However, it will continue to manufacture salt & supply to Tata Global Beverages.

Investment Rationale

G l o b a l d e m a n d s u p p l y dynamics likely to support steady base operations

The global soda ash market has been operating at 91% utilisation level, which is the highest in a decade. Further, no new capacity has been coming up except GHCL (~0.1 MMT by FY21E & 0.5 MMT greenfield capacity by FY23/24E) and Tata Chemical (~0.2 MMT). Since new greenfield capacity would take at least four years to be commissioned and given that t h e r e h a s b e e n n o announcement by major players, we expect further de-bott lenecking across the global soda ash market. We believe this should not lead to s i g n i f i c a n t r i s k t o t h e demand/supply trade off. We expect total installed capacity


STOCK IDEAS

10

to reach around 74 MMT by F Y 2 3 - 2 4 E . A s s u m i n g consumption remains at the same level of FY19 in a conservative scenario, the global soda ash market should utilise ~87% of its capacity. Histor ical ly, the average utilisation level at 83-84% showed average US FOB price of $205/MT and China FOB of $240/MT while the prevailing FOB price of the US and China r e m a i n s a t $ 2 2 3 / M T & $265/MT, respectively. Hence, 4-5% cuts in utilisation may not meaningfully impact the realisation/tonne as witnessed in the past. Further, lower input cost along with a change in mix towards value added products along with control on other costs can either maintain or improve its EBITDA/tonne.

Emerging specialty business

to drive performance ahead

TCL spent around 270 crore `

on Nellore facility. Under

Fructo-Oligosaccharide (FOS)

& Galacto-Oligosaccharide

(GOS), the company wil l

market prebiotics dietary fibre

for bakery, dairy, sweets,

health drink supplements,

infant foods, sports nutrition

p r o d u c t s . A c c o r d i n g t o

reports, the neutraceuticals

market in India was valued at `

26,000 crore in 2017 and is

expected to reach 80,800 `

crore by 2023, growing at a

CAGR of around 17%. This

prov ides an immense

o p p o r t u n i t y f o r T C L

neutraceuticals segment over

the long run. The management

already highlighted ~18-20%

R o C E f o r t h i s v e r t i c a l ,

translating into OPM of around

2 2 - 2 5 % . I n c r e a s i n g

c o n t r i b u t i o n f r o m t h i s

segment would result to better

return ratios for the overall

group in the medium to long

run. Apart from this, TCL made

an investment to the tune of `

295 crore for HDS plant in

Cuddalore. The company

currently manufactures food

grade and rubber grade HDS,

while trial run for tyre grade

silica have been commenced.

M a n a g e m e n t e x p e c t s

commercial production for

tyre grade silica to commence

soon. Aksharchem had also

set up 10,000 MTPA capacity

for HDS at a capex of 70 `

c r o r e . A k s h a r c h e m ' s


STOCK IDEAS

11

management estimates 1x

asset turn with OPM of around

15%. Assuming the same run

rate, the HDS business for TCL

should contribute incremental

revenues and EBITDA to the

tune of 295 crore and ~ 44 ` `

crore, respectively, going

ahead.

Residual business available at attractive valuation; Initiate BUY

The management decided to

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

business of Tata Chemical and

merge it with Tata Global

Beverages in May 2019. The

consumer bus iness was

va lued a t 5 ,750 crore `

( E V / E B I T D A 1 8 . 3 x &

EV/Revenue 3.1x FY19). This is

given the exchange ratio

remains at 1.14 shares and

prevailing CMP of Tata Global

is at 259/share. Tata Chemical `

s h a r e h o l d e r s ' v a l u e i n

consumer business is at `

2 9 5 / s h a r e . S i n c e Ta t a

Chemical is trading at `

597 /share , the res idua `

business is available at `

301/share (EV/EBITDA 3.5x

FY21E). We value TCL India's

basic chemical at EV/EBITDA

of 5x FY21E and the ROW basic

chemical at EV/EBITDA of 4x

FY21E, translating into a fair

va lue of bas ic chemica l

business at 272/share. Apart `

from this, other businesses

with investment in group

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

another 123/share leading to `

a residual business target price

o f 3 9 5 / s h a r e . A d d i n g `

consumer business value of `

295/share (1.14 x TGBL CMP),

we arrive at a target of `

690/share, a potential upside

of ~16%. We have a BUY

recommendation on TCL.


STOCK IDEAS

12

Key Financials

Valuations Summary

Stock Data

` Crore FY18 FY19 FY20E FY21E

Revenues 10,006.6 11,789.2 13,157.6 15,513.3

EBITDA 1,999.7 2,862.1 2,763.1 3,180.2

PAT 1,399.3 1,927.3 1,799.6 1,996.2

EPS (`) 5.7 7.9 7.4 8.2

FY18 FY19 FY20E FY21E

PE (x) 11.8 13.1 12.5 10.9

EV/ Revenues (x) 1.6 1.4 1.4 1.4

EV to EBITDA (x) 7.4 7.7 6.9 6.4

P/B (x) 1.4 1.2 1.2 1.1

ROE (%) 11.6 9.4 9.5 10.3

RoCE (%) 8.3 8.4 9.0 9.9

Particulars Amount

Market Capitalisation ` 15200 crore

Debt (FY19) ` 6138 crore

Cash (FY19) ` 4205 crore

EV ` 17133 crore

52 week H/L ` 762 / ` 544

Equity capital ` 254.8 crore

Face value ` 10

Key risks include:

Prolonged slowdown in China

to hurt soda ash demand

T h e o n g o i n g t r a d e w a r between the US and China has b r o u g h t g l o b a l g r o w t h virtually to a standstill. Given China is a dominant player in

the global soda ash industry, a p ro longed s lowdown in construction activity along with lower automobile sales is likely to impact glass demand there, in turn, dampening the growth outlook of the global soda ash market. This can put pressure on realisations of


STOCK IDEAS

13

soda ash manufacturers.

S u b s t i t u t i n g d e t e r g e n t

d e m a n d t o l i q u i d f r o m

powder affects domestic soda

ash market

The India detergent market

size is expected to be 18,000 `

crore of which 98% is from

powder detergent and the rest

from liquid detergent. Given

the preferences of Indian

youth changes towards liquid

detergent, we can expect

lower consumption of soda

ash from powder detergent

manufactures in the medium

to long run. However, any

signs of a ramp up in demand

for automobile and real estate

in India can provide

sentimental relief to the soda

ash market.

Higher input cost, lower soda

a s h d e m a n d i m p a c t s

EBITDA/tonne

In a weak demand scenario,

TCL's operational performance

is negatively correlated with

crude oil largely due to freight

and power costs constituting

~30% of sales. Given the

imminent signs of global

growth s lowdown being

visible, any upside in crude

prices due to production cut by

O p e c c a n i m p a c t

E B I T D A / t o n n e o f Ta t a

Chemical.

ANALYST CERTIFICATION

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STOCK IDEAS

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FLAVOUR OF THE MONTH


Experts view the market and their investment strategies

We caught up with a few market experts for their views on the current

market scenario and what according to them could be some potent

investment strategies. We start off with a gist of their views, do continue

reading their detailed interviews to get the bigger picture.

Mr. Vinod Bhat states that, RBI is continuing its dovish stance and is also

transferring Rs 1.76 trillion to the government which should help to

offset a shortfall in tax revenue and get liquidity flowing back into the

economy. Lastly, the strong progress of the monsoons should help to

revive the rural economy.

Mr. Anand Radhakrishnan views the economy slowdown in

consumption since September 2018. Where it started off from credit

choke up in the NBFC sector. Post budget, Indian markets fell very

meekly and underperformed global markets. But, the corporate tax cut

have reversed the weak market sentiments and removed extreme fear

and negativity. Overall he expects the growth slowdown to bottom-out

in 2QFY20 and gradually improve from there.

In last 18 months, Large cap Index as represented by Nifty 50 has seen

sharp outperformance against the broader markets. Cement, private

sector corporate lenders and early cycle capital good companies can be

interesting investment themes for next 3-5years, says Mr. Pankaj

Tibrewal.

Improvement in global factors, domestic macros, currency will result

into positive outcome, says Mr. Yogesh Patil. In views with international

trading of stocks/ funds, he says it completely depends upon investors

understanding, knowledge and risk appetite but investor should

consider global exposure through mutual funds only.

Mr. Ravi Gopalakrishnan believes market would maintain an upward

trajectory for the rest of 2019 after the recent cut in corporate tax rates

which improved investors sentiments and provided buoyancy to the

markets. They favour Industrial Chemicals, Cement and Construction

sectors as Government spends over these sectors.

Now that you have got the excerpts of the fund managers interview. Go

ahead and read the article for better understanding the markets…



Mr. Vinod Bhat,FM of FOF Schemes,Aditya Birla Group

Education Qualification: -

CFA (USA), MBA Finance –

W h a r t o n U n i v e r s i t y o f

Pennsylvania (USA)

M.S. Industrial Engineering-

Pennsylvania State University

(USA)

B . Te c h & M e c h a n i c a l

Engineering - IIT Bombay

Brief Experience: -

Mr. Bhat has an overa l l

experience of 18 years with

over 12 years in the financial

markets and investment

banking space. He has been

associated with ABSLAMC

since July 2018 as Head of

Investor Communications

(Investments - Equity). He is a

designated Fund Manager

managing ABSL Global Real

Estate Fund, ABSL Asset

Allocator Multi Manager FOF

and ABSL Financial Planning

FOF.

Prior to joining ABSLAMC, he

was the Vice President -

C o r p o r a t e S t r a t e g y a n d

Business Development with

Aditya Birla Management

Corporation Pvt. Ltd. He had

also worked with Ocean Park

Advisors (USA) as a Senior

A s s o c i a t e - I n v e s t m e n t

Banking. He was also an

A s s o c i a t e - I n v e s t m e n t

Banking with Credit Suisse

(USA).

Q. A s p e r t h e c u r r e n t

situation, where do you see

the market to reach by end of

2019? Also, give an overview

of the market's performance

so far.

A. Indian equity markets are

enduring high volatility over

the past few months due to

domestic developments such

as the liquidity tightening,

s l o w i n g e c o n o m y, a n d

subdued Q1FY20 earnings, as

well as global events such as

the heightened geopolitical

risk in the Middle East and the

ongoing US-China trade war.

On the positive side, the



g o v e r n m e n t h a s

acknowledged the slowdown

and has announced several

measures to address growth

concerns and boost sentiment.

The RBI is continuing its dovish

stance and is also transferring

R s 1 . 7 6 t r i l l i o n t o t h e

government which should

help to offset a shortfall in tax

revenue and get liquidity

flowing back into the economy.

Lastly, the strong progress of

the monsoons should help to

revive the rural economy.

As we start seeing some green

shoots of recovery in the

economy, particularly in the

festive season ahead it could

lead to improvement in market

sentiment and performance.

The resolution of a few key

stressed NBFCs and large

corporates could be the key to

chang ing equ i ty marke t

sentiments going forward and

next few months are crucial in

this regard.

If we look at valuations, for the

headl ine Ni f ty 50 index,

valuation seems reasonable

with the Yield Gap Ratio close

to its long-term average and

the Price to Earnings (PE) ratio

at a slight premium to its long-

term average. Overall, the risk-

reward for Equities seems to

be fairly balanced. Market

performance and returns could

be modest in the near term,

even as valuat ions have

potential to offer reasonable

returns to long-term investors.

Q. As the mid and small cap

funds are giving negative

returns. What would be your

recommendation on holding

these funds and will these

funds bounce back?

A. Over the past 18 months,

many mid -and - sma l l cap

companies have seen a fall of

40-50% which is reflected in

the performance of the mid-

and-smallcap funds. However,

in quite a few cases, the fall has

o c c u r r e d w i t h o u t a n y

signif icant change in the

business fundamentals of

these companies and they

should bounce back as we start

seeing initial signs of recovery

in the economy.

I n t e r m s o f v a l u a t i o n ,

considering the significant fall

in the midcap and smallcap

indices over the past 18

months, their valuations are



attractive. Their PE ratios are

close to or below their long-

term average and are at a 20-

25% discount to the largecap

Nifty 50 index. This segment is

showing signs of having

bottomed out and in a market

upturn can outperform the

largecaps. We suggest that

existing investors should

continue holding on to these

funds and investors who do

not have any exposure to mid-

and-smallcap funds currently

can start building up their

exposure through SIPs with a

3 - t o - 5 - y e a r t i m e f r a m e .

Investors may allocate 20% of

their equity corpus to mid-and-

small cap funds.

Q. We see the sales of auto

mobile company's dropping

month by month. What is your

view of this fall and does it

have any impact on other

sectors?

A. The Auto sector has seen a

slowdown across segments

and is facing a host of issues

such as tightened liquidity due

to the NBFC crisis, an increase

in prices due to better safety

norms, higher insurance cost,

and perceived threat from

Electric Vehicles, etc. This has

ended up creating uncertainty

regarding the demand outlook.

Profitability has been impacted

due to short-term concerns

and the sector may continue to

see some volatility due to the

uncertainty created by the

upcoming BS VI transition in

Apri l 2020. However, we

believe that the issues are

cyclical and not structural in

nature and we should see

revenue and earnings growth

f o r t h e A u t o s e c t o r

normalizing. Consequently,

any impact on other sectors

such as banks and NBFCs

w h i c h f i n a n c e v e h i c l e

purchases should also be

s h o r t - t e r m a n d s h o u l d

stabilize.

Q. Which is your favourite

sector in the present market?

and Why?

A. The small-ticket Consumer

Discretionary sector shows

potential as it has a number of

tailwinds in its favor. Per-capita

income in India is steadily

increasing leading to increased

affordabil i ty. In addit ion,

government pol ic ies are

focused on a transfer of wealth



from rich to the Bottom of the

Pyramid. Penetration of small-

ticket consumer durables is

currently low as they were not

widely available in Tier III

towns and rural areas earlier.

However, ava i l ab i l i t y i s

improving, and eCommerce is

also helping in that regard.

Also, India has achieved 100%

Electrification which increases

the attractiveness of these

products.

With GST, the shift from

unorganized to organized is

also happening. Companies in

this space which have an

establ ished distr ibut ion

network will consolidate their

market share. Hence growth

for these companies will be

much higher than the overall

GDP growth and they should

be able to generate good cash

flow and returns.

Q. What's your opinion on

international stocks? Is it

advisable, to invest in these

stocks through mutual fund or

direct equity?

A. Investing in international

s tocks can p rov ide

d ivers i f i ca t ion ac ross

geographies and economies,

exposure to themes such as

emerging technologies that

are not available in India, as

well as a hedge against Rupee

depreciation. However, it is

difficult to do the required

diligence on international

companies for an individual

sitting in India. Hence it is

advisable to invest in these

stocks through mutual funds.

At the same time, an investor's

primary focus should still be on

domestic equity considering

India's tremendous growth

potential and international

equity should not constitute

more than 10% of the equity

allocation.

Q. With the weakening of

Indian currency by 3.5 percent

against the US dollar in the

month of August. What is your

expectation of the rates to be,

will it further depreciate?

Does it have any significant

impact on our equity market?

Please elaborate.

A. With the escalation in the

US-China trade war in August,

the Chinese Renminbi had

d e p r e c i a t e d b e l o w t h e

psychological threshold of 7 to

the USD and the Indian Rupee



h a s f o l l o w e d s u i t b y

depreciating to a level of 72 to

the USD. While it is always

difficult to predict currency

movements, we do not expect

the Rupee to depreciate

significantly from here on.

A depreciation in the Rupee is

typically positive for export-

oriented sectors such as IT,

Pharma, Metals and Mining,

and Autos. However, it is

negative for sectors such as

OMCs, Industrials, Consumer,

NBFCs, and companies with

foreign debt which are mainly

in Infrastructure and Energy.

Overall, Rupee depreciation is

marginally positive for Nifty

earnings.

Mr. Anand Radhakrishnan,CFA

Managing Director & Chief Investment Officer – EME India,Franklin Templeton Asset Management

(India) Pvt Ltd.

Mr. Anand Radhakrishnan is

MD & Chief Investment Officer -

Equity for Franklin Templeton

Asset Management (India) Pvt

Ltd. Mr. Radhakrishnan is

responsible for overseeing all

the local equity funds. His

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

mentoring all the portfolio

m a n a g e r s a p a r t f r o m

continuing to be the Portfolio

Manager for some of the key

products. He manages Franklin

India Equity Fund, Franklin

India Technology Fund and

Templeton India Value Fund.

A l s o h e i s c o - p o r t f o l i o

manager for Franklin India

Focused Equity Fund and

Franklin Build India Fund.

Mr. Radhakrishnan has been in

the investment management

industry since 1994. He started

his career with FT in 2004. His

past assignments include Fund

Manager, with Sundaram

Mutual Fund for 8 years;

Deputy Manager, Equ i ty

Research with SBI Funds

Management Ltd.

Mr. Radhakrishnan earned his

Post Graduate Diploma in

Management from Indian

Institute of Management,



Ahmedabad in 1994. He

e a r n e d h i s B a c h e l o r o f

T e c h n o l o g y d e g r e e ,

specia l i z ing in Chemical

E n g i n e e r i n g f r o m A n n a

University, Chennai in 1990. He

is a CFA charter holder.

Q . A s p e r t h e c u r r e n t situation, where do you see the market to reach by end of 2019? Also, give an overview of the markets performance so far.

A. The economy is going t h r o u g h a s l o w d o w n i n consumption since September 2018. This primarily started with the credit choke up in the NBFC sector. The credit growth driver which used to be NBFCs is now moving back into the banking system. This may lead to some disruption in lending. This has affected the demand in the sectors where credit plays a role in consumer purchase decis ions. The muted government spending in the last quarter of FY19 also affected the overall growth.

The recent stimulus provided by the government to NBFCs and banks should provide

some relief. A good monsoon coupled with the fest ive season is a positive for the rural d e m a n d . T h e f u l l - y e a r government expenditure is budgeted to grow by about 21%, so a boost in expenditure in the H2FY20 is expected. Fiscal support coupled with monetary stimulus should support growth in H2FY20. Structural reforms along with the stimulus are required by the government to revive the p r i v a t e c a p e x a n d t h e economy.

The recent corporate tax cut announcement helped in a reversing the weak market sentiments. Post budget, Indian markets fell very meekly and underperformed global markets. The negativity was specific to India. There was fear and panic that demand was c o l l a p s i n g a n d t h a t t h e government may not do anything about it. So, these cuts have helped remove the extreme fear and negativity.

Soon investors wil l start watching the September quarter results and markets will start re-adjusting to earnings



numbers and estimates. We will have to wait and watch if the market's reaction matches with the reality of company earnings. Our view is it will be bit of a mixed bag.

Overall, we expect the growth slowdown to bottom-out in 2QFY20 and gradually improve from there.

Q. If the repo rate continues to drop in future, how will it impact the interest rates and the bond yields?

A. With a benign inflation forecast and growth projection rev i sed downwards , we expect further 25bps rate cuts in FY20. The current measure of reduction in corporate tax announced by the Finance Minister saw the yields moving up as this measure may cost the exchequer INR 1.45 trillion annually. Market is concerned about fiscal deficit targets.

However, going forward the interest rates of banks are expected to reflect the primary interest rates. Therefore, we expect interest rates will eventually soften for the end-borrowers.






funds bounce back?

A. The under-performance of

midcaps since Jan 2018 was

b r o u g h t a b o u t b y i t s

o v e r v a l u a t i o n v i s - à - v i s

largecaps. The correction over

the past year in the midcap

segment has moderated the

premium commanded by the

midcap index over large cap.

The risk of overvaluation in

midcaps has largely been

corrected. The effect of overall

slowdown is felt more in the

small and midcap segment as

compared to the large caps.

While it is common for the

investors to feel cautious in

such times. Historical data

shows as that investing during

difficult and uncertain times

proves to be rewarding. We

have seen that whenever the

small cap index has corrected

m o r e t h a n 3 0 % , i t h a s

recovered strongly delivered

decent returns to the investors.



The earnings recovery is the

f u n d a m e n t a l d r i v e r f o r

s u s t a i n a b l e g r o w t h i n

domestic equities. We expect

the recovery in consumption

and a pick-up in private capex

to drive the next round of

domestic growth. Once the

t r e n d b e g i n s t o u n v e i l ,

especially in the corporate

earnings, we can expect the

midcap equities to stage a

meaningful recovery.

Q. We see the sales of auto

mobile company's dropping

month by month. What is your

view of this fall and does it

have any impact on other

sectors?

A. As a significantly large ticket

discretionary consumption

item the auto sector is naturally

expected to get hit hard when

there is an overall

consumpt ion s lowdown.

Besides this, some industry

specific issues are hurting the

auto industry harder than other

sectors.

Given that almost 80% of vehicles are purchased using loans the crisis in the shadow

banking sector has adversely affected auto sales. Regulatory i s s u e s l i k e c h a n g e s i n insurance policy, BS6 emission norms have also affected the s e c t o r. I n t h e c u r r e n t environment we bel ieve, volume recovery is unlikely to be as sharp unless there is strong stimulus support.

The consumption slowdown in t h e a u t o i n d u s t r y h a s p e r c o l a t e d t o t h e l o c a l economies that it supports. We do see businesses that supply parts or services like logistics b e i n g i m p a c t e d b y t h e slowdown. The slowdown in the auto sector has led to some job losses especially in the c o n t r a c t a n d c a s u a l employment areas, not just at the auto factories but through the up and downstream supply chain and adjacent services. In regions where the industry and its suppliers are the mainstay employer the cascad ing impact on other business, is creating negative multiplier effect.

Q. Whi le manag ing the portfolio, what is your buy and sell strategy?



A. Stock Buy decisions are

decided based on long-term

attractiveness of business,

growth, sustainability, quality

of governance, valuations,

Liquidity, etc. Suffice to say

that higher a stock ranks in the

aforesaid parameters, better

w o u l d b e t h e e x p o s u r e

weights and vice versa. Intra-

s e c t o r, r e g i o n a l , g l o b a l

comparisons are done to

ensure that the framework is

robust in the evaluation of the

businesses.

As far as selling a stock is

concerned, it happens due to

t w o f a c t o r s . W h e n t h e

valuation becomes expensive,

we try to reduce the exposure

to that stock. We consider both

absolute valuation as well

relative valuation. We also

want to reduce the exposure

when there is a fundamental

deterioration in the underlying

business. While valuation

related decisions are never

enforced in absolute totality,

business deterioration related

sell downs require careful

evaluation and calibration.

Q. Which is your favorite

sector in the present

market? and Why?

A. For a variety of reasons, the ongoing developments in China have opened up a handful of opportunities where I n d i a d o e s h a v e s o m e compet i t ive advantages. Apparels and chemicals show up as two potentially large o p p o r t u n i t i e s . I n d i a n companies with scalable business models and good balance sheet should be able to ride this wave.

The sharp increase in smart-phone penetration and wide a v a i l a b i l i t y o f m o b i l e broadband has changed and will further change the buying behavior of the country. Online bus inesses /aggregators , logistics companies and other allied categories are likely to s e e l a r g e g r o w t h opportunities. The investor's challenge is to balance the long term potential with the likely short term cash burns. The other challenge is to skip businesses that are unable to c o p e w i t h t h i s d i g i t a l disruption.



Healthcare is another segment

that is likely to see strong and

sustained growth. Deeper

p e n e t r a t i o n o f m e d i c a l

insurance, State sponsored

healthcare programs and

increasing incidence of non-

communicable diseases are

the key drivers of this growth.

This being a capital intensive

business, the challenge for

i n v e s t o r s i s t o i d e n t i f y

business models that can

deliver satisfactory growth

without compromising the

balance sheet.





direct equity?

A. The global financial markets

had a strong start to CY19 after

a sharp fall last year. The

dovish stance by the US Fed

and other major central banks

b o o s t e d t h e i n v e s t o r

sentiments and contributed to

much of the rally in 2019. The

e a r n i n g s o f m a j o r U S

companies were also decent

this year. Whereas the major

d o w n s i d e r i s k s a r e t h e

uncertainty over global trade

due to trade tensions between

US and China, the political

uncertainties in Europe and

Brexit.

It would be difficult for an

individual investor to track all

the relevant information, be

able to do comprehensive

research and spot attractive

v a l u a t i o n s t o m a k e a n

informed decision. Therefore,

it is advisable to invest in the

global equities through mutual

funds with the help of experts

rather than through direct

equity.


Indian currency by 3 .49

percent against the US dollar

in the month of August. What

is your expectation of the

rates to be, will it further

depreciate? Does it have any

significant impact on our

e q u i t y m a r k e t ? P l e a s e

elaborate.

A. Emerging market currencies



overall has been weak and the

Indian Rupee has been hurting

in th is process as we l l .

Escalation in the U.S.-China

t rade war, s lowdown in

consumption and net outflows

from FII have hurt the Rupee. A

lot will depend on how these

issues evolve over the next few

months. For a meaningful

reversal in the Rupee we need

to see positive movement in

the above issues or fresh

announcements reform or

stimulus measures that will

boost investor confidence.

Overall stable FX is better for

equities but in general IT

services and Pharma generally

benefit from a weaker Rupee,

while sectors that import

components like the auto or

capital goods sector could see

their margins hurt. Commodity

sector will also likely benefit

due to linkages with global

pr ic ing. Companies wi th

unhedged exposure to foreign

debt like some utilities, and

telecoms companies can see

balance sheet liabilities going

up.

Mr. Pankaj Tibrewal,Sr. Vice President & Fund Manager

(Equity),Kotak AMC

Pankaj Tibrewal manages s c h e m e s s u c h a s Ko t a k Emerging Equity, Kotak Small Cap (Erstwhile Kotak Midcap Fund) and Kotak Equity Hybrid (Erstwhile Kotak Balance) at Kotak AMC. In his earlier stint at Principal Mutual Fund, Pankaj managed schemes like Principal Emerging Bluechip, Principal Tax Saver and MIPs. Pankaj has been featured in the top 10 fund managers in India for four consecutive years from 2016 to 2019 as per Outlook Business. He also featured in the top 10 fund managers in Economic Times (Morning Star) in 2016 and 2017. A commerce graduate from St. Xavier's College, Kolkata, Pankaj also holds a Master's degree in Finance from Manchester University. His hobbies include listening to Hindi music, travelling and reading



Q . A s p e r t h e c u r r e n t

situation, where do you see

the market to reach by end of

2019? Also, give an overview

of the markets performance

so far.

A. Over the last 18 months,

L a r g e c a p I n d e x a s

represented by Nifty 50 has

seen sharp outperformance

against the broader markets.

Nifty touched all time high led

by handful of stocks however

broader market continues to

underperform. In Nifty, the

index is driven by top 15 stocks

whereas if one constructs an

index of the rest 35 stocks,

Nifty is trading at sub 9k levels.

This polarization of the market

is also demonstrated by the

rising share of market-cap of

the top 15 companies as a

percentage of market-cap of

the top-100 companies. This

ratio – currently at 51.9% in

Aug'19 – is substantially higher

than the lowest mark it reached

in the last 15 years (44.5% in

Dec'17) and the highest since

Dec'08.

Though it's difficult to gauge

market levels for 2019. Lot of

pessimism seems to be priced

in and panic seems to be

ove rdone . However, we

believe volatility continue to be

remain at elevated levels.

Things on economic side may

get little worse before they get

better. If one takes 18-24 month

investment call, our view is that

b roader marke ts shou ld

outperform Nifty.

Q. If the repo rate continues to

drop in future, how will it

impact the interest rates and

the bond yields?

A. Normally price will rise and

yields will fall. The reaction will

not be symmetric across the

curve it will depend on lots of

other factors such as demand

and supply of bonds and

further expectat ions and

liquidity accordingly curve will

steepen or flatten. As a fund

manager we take decisions

accordingly and try to optimize

risk vs returns






funds bounce back?



A. Post sharp correction in mid-small cap stocks over the last 18 months, we believe the performance between mid-small caps vis a vis Nifty is at historical extremes. History s u g g e s t s t h a t s u c h divergences don't exist for too l o n g . P o s t s u c h l a r g e underperformances, mid-small caps tend to outperform large caps over the next 12-18 months. We are using this correction and volatility as an opportunity to own quality businesses available at decent valuations from a medium to long term perspective.

Q. We see the sales of auto mobile company's dropping month by month. What is your view of this fall and does it have any impact on other sectors?

A. Automobile is one of the leading sector for Indian economy, more than 45% of manufacturing GDP comes from automobile and its entire value chain and employs more than 30mn people. Slowdown in sector will have impact on the entire economy. Currently inventory across (4 Wheeler/2

Wheelers/Tractors/Commercial Vehicles) continues to be on the higher side. A set of wide ranging factors from industry specific challenges relating to demand, costs relating to BSVI transition, poor consumer sentiments and other factors have impacted sales of most of the automobile companies.

Stocks have corrected by 30-

50% from peak levels but

valuations have not corrected

accordingly. We still feel there

is some more time before the

sector sees the bottom.

Q. Whi le manag ing the

portfolio, what is your buy and

sell strategy?

A. We follow our philosophy of

growth at reasonable price. We

focus on investing in quality

b u s i n e s s e s w i t h s t r o n g

competitive edge, run by

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

management, generating high

return on capital & offering

sustainable growth with high

market potential and available

at reasonable valuations. We

are excited by companies

which are strategically well

positioned to gain market



d e l i v e r s t r o n g e a r n i n g s growth.

Ear ly cycle capi ta l good companies: Expect capacity utilisations to start improving leading to increased demand for short cycle products like bearings, pumps, abrasives etc.

Q. With the weakening of Indian currency by 3 .49 percent against the US dollar in the month of August. What is your expectation of the rates to be, will it further depreciate? Does it have any significant impact on our e q u i t y m a r k e t ? P l e a s e elaborate.

A. Baring the month of August, rupee against dollar has been fairly stable. Generally, we have seen that currency reflects inflation differential between India v/s US over the medium to long term view. Hence we believe that gradual deprec ia t ion i s the way forward. Any which ways, the sudden depreciation doesn't bode well for both Equity and Debt markets but the gradual depreciation should not be a cause of concern.

share from the competition

without diluting profitability

and return on capital.

We decide to sell on following

occasions:

1 . When there i s be t te r

opportunity on a relative basis.

2. When we see corporate

governance or f inancials

issues in any company.

3. When our investment thesis doesn't seem to be working

4. Stocks seems overpriced.

Q. Which is your favourite sector in the present market? and Why?

A. We believe cement, private sector corporate lenders and ear ly cycle capi ta l good companies can be interesting investment themes for next 3-5years.

Cement: We expect over the next 3-5years incremental demand to exceed supply, giving more pricing power in the hands of manufacturers.

Pr ivate sector corporate lenders: Expect credit costs to be meaningfully lower over the next few years helping them to



Yogesh is with LIC Mutual Fund

since last year Sept & he comes

from Canara Robeco Mutual

Fund, he has more than 15

years of experience in Equity

Market & currently manages

our Multicap, Large Cap &

Equity Hybrid Fund.

Q . A s p e r t h e c u r r e n t situation, where do you see the market to reach by end of 2019? Also, give an overview of the markets performance so far.

A. Markets are never easy to predict. Normally we do not try to predict market, only sticking to our investment process of identifying good business with scalable business model but market largely driven by global factors, domestic macros, cu r rency. However, any

improvement in these variable w i l l r esu l t i n to pos i t i ve outcome.


A. Repo rate is more of indicative but large part of i n t e r e s t r a t e m o v e m e n t depends upon demand supply situations, but long term bond yields depends on inflation, economic outlook etc.

Q. As the mid and small cap funds are giving negative returns. What would be your recommendation on holding these funds and will these funds bounce back?

A. In the last few months, we have seen a significant price correction in the mid as well as small caps. We don't have Mid and Small cap funds, so I can't comment on these funds.


Mr. Yogesh Patil,FM managing Multicap, Large Cap &

Equity Hybrid Fund,LIC Mutual Fund

Asset Management Ltd.



A. All macro lead indicators are

reflecting GDP slow down,

auto is not different. I think

liquidity crunch in system,

increased cost of ownership,

lack of income confidence,

change in priorities of

millennials are few major

reasons for current slowdown

in auto sector but If it continues

for some more time then it has

negative impact on other

sectors like consumption, BFSI

etc.


portfolio, what is your buy

and sell strategy?

A . A s i n d i c a t e d i n o u r

investment framework, when

we either see businesses

dynamics changing or current

v a l u a t i o n s c a p t u r i n g o r

ignoring the long-term growth

potential we accordingly

reduce or add our exposure in

the stock. we typically stay

away from stocks which do not

fit in our investment

framework.

Q. Which is your favorite

sector in the present market?

and Why?

A. India is one of the fastest

growing economy in the world

with highest proportion of

millennials, there are lot of

structural changes happening

after reforms which makes our

stance very positive on

domestic consumption,

Private banks, logistics and we

also like IT due technology

transformation globally.





direct equity?

A. It's completely depend upon

investors understanding,

knowledge and risk appetite

but investor should consider

global exposure through

mutual funds only.










elaborate.



A. Rupee is now stabilizing

but further movement

depends upon Global factors,

domestic factors, crude oil

prices and US Fed decision on

fiscal policy. Depreciation of

Indian rupee has positive

impact on IT sector, selected

export companies etc. but our

imports are ~60% higher than

expor t , bu t i t inc reases

inflation which is slightly

negative for selected stocks in

equity market.

Mr. Ravi Gopalakrishnan,Head-Equity,

Principal Mutual Fund.

Mr. Ravi Gopalakrishnan has

m o r e t h a n 2 5 y e a r s o f

experience across mutual

funds, portfolio management

services and equity research.

Most recent ly, Rav i was

a s s o c i a t e d w i t h C a n a r a

Robeco Asset Management

Company as Head-Equity

Q. As per the current situation,

where do you see the market

to reach by end of 2019? Also,

give an overview of the

markets performance so far.

A. We believe the market would maintain an upward trajectory for the rest of 2019. The recent cut in corporate tax rates has improved investor sent iment and prov ided buoyancy to the markets. The markets have been declining on the back of several factors b o t h d o m e s t i c a n d international. Slowdown in manufacturing – most visible in

Investments, where he was

responsible for managing their

equity investment strategies,

research and funds.

Prev ious ly, he was C IO -

Equities at Pramerica and has

worked as Portfolio Advisor at

Hudson Fairfax Group (USA).

He also has previous work

experience with Principal

where he was responsible for

m a n a g i n g i n d i v i d u a l

investment portfol ios for

corporate and non-corporate

clients.



the automobile sector, continuing stress in the NBFC sector, the trade war between the US and China etc. Select companies have continued to do well despite the overall volatility in the equity markets. The corporate tax cuts and the direct impact on earnings of this move would provide p o t e n t i a l i n v e s t m e n t opportunities in the markets. There would always be stock picking opportunities in such markets, and we continue to pursue these ideas and opportunities.


A. We believe that the RBI w o u l d m a i n t a i n i t s accommodative stance for the near future as inflation is well within its targeted range and the requirement to support growth in the economy. As such, we think the RBI may cut rates at the next policy though the scope of deep cuts now is not there and most of the rate reduction seems to be behind us. However, government

bond yields may not go down much given the quantum of potential borrowing from the centre, states and from quasi sovereign/ other government entities.

Q. As the mid and small cap funds are giving negative returns. What would be your recommendation on holding these funds and will these funds bounce back?

A. The Mid and Small Cap segments of the markets have seen significant volatility in the last few quarters. However, select stocks in these segments are providing a t t r a c t i v e i n v e s t m e n t opportunit ies. Investors should allocate a portion of their equity investments into mid and small cap funds based on their risk appetite as well as investment horizon. I t is advisable to invest in equity funds through STPs and / or SIPs.




A . T h e a u t o i n d u s t r y

downtrend is more of a cyclical

downturn as opposed to a

structural one. The last few

years has witnessed significant

volume growth primarily due

to increase rural income and

availability of easy finance

options from NBFCs and

banks. The current slowdown

is largely due to large scale

inventory corrections at the

dea le r ' s end due to the

economic slowdown which is

affecting retail sales. The NBFC

crisis is also having its impact

o n d e m a n d . F u r t h e r ,

expectation of lower GST rates

and introduct ion of new

emission norms (leading to

discounts on older models) is

r e s u l t i n g i n c o n s u m e r s

delaying their purchases. The

industry is hoping normal

monsoons and recovery in

rural sentiments will drive

growth in the upcoming

festival season.

The overal l s lowdown is

impacting all segments of the

economy and as explained

earlier is a cyclical slowdown

which happens once every few

years.


portfolio, what is your buy and

sell strategy?

A. Our buy and sell calls are fundamental driven and we follow a disciplined approach to investing. Every stock is analysed thoroughly, Stocks are bought or sold based on internal valuation matrix. We determine the base case, Optimistic and Pessimistic case of every stock based on which fund managers decide when to buy or sell a particular stock.

Q. Which is your favourite sector in the present market? and Why?

A . C u r r e n t l y , w e a r e overweight in Indust r ia l C h e m i c a l s , C e m e n t a n d C o n s t r u c t i o n . T h e G o v t s p e n d i n g h a s b e e n a significant support for the economy and we believe Cement and Construction sectors would benefit from continued Govt expenditure.

Q. What's your opinion on international stocks? Is it advisable, to invest in these stocks through mutual fund or direct equity?



A. Investors may make an allocation to international mutual funds as part of their over-all asset allocation and por t fo l io d ive rs i f i ca t ion s t r a t e g y. Fo r i n d i v i d u a l investors, it is always advisable to invest through mutual funds rather than investing in stocks d i r e c t l y. M u t u a l f u n d s managed by institut ional mangers have the resources and expertise for research, fund management and stock selection – something that is d i f f i c u l t f o r i n d i v i d u a l investors.










elaborate.

A . A dec l in ing rupee i s beneficial to certain sectors of the economy, especially export o r i e n t e d s e c t o r s l i k e Information Technology and Pharma. The IT index has posted positive returns for the month of August. However, a declining rupee adds to the pressure on imports like oil and thereby adding pressure to the domestic economy as well as Govt finances, given India i m p o r t s b u l k o f i t s o i l requirements.

Disclaimer from Principal Mutual Fund:

The views / opinions/ beliefs/ expectations contained herein are the independent views of the

investment manager and are not to be taken as an advice or recommendation to buy or sell any

investment or interest thereto. The views and strategies described may not be suitable for all

investors. The sectors referred above should not be construed as recommendation from

Principal Asset Management and/or Principal Mutual Fund. The scheme may or may not have

any present or future positions in these sectors. The views given above may change from time

to time without any notice.

The Sponsor, Trustee, AMC, Mutual Fund, their directors, officers or their employees shall not

be liable in any way for any direct, indirect, special, incidental, consequential, punitive or

exemplary damages arising out of the information contained in this document.

Mutual Fund investments are subject to market risks, read all scheme related documents

carefully.

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

ASK OUR PLANNER


Taken precaution in the current market scenario?

Q. Can recession come in future (within 1 or 2 quarter)? How much money I should keep as an emergency fund?

- Krishna Khandelwal

A. Recession refers to a period of general economic decline, def ined usua l ly as a contraction in the GDP for six months (two consecutive quarters) or longer. India, being a developing economy, has not faced negative growth in GDP in the past 2-3 decades. However, in the past decade, there have been a slowdown in the GDP growth twice, one began in June 2008 and another in March 2011. In US, t h e l a s t t i m e r e c e s s i o n happened was between 2007 and 2009. Irrespective of whether recession may come or not, it's always advisable to have a t leas t a round 3-6 m o n t h s o f e x p e n s e s a s contingency fund in the form of liquid/ultra short-term funds.

Q. I had taken ICICIPrulife lifestage pension advantage plan in August 2010 and paid four premiums without any

break (in the years 2010, 2011, 2012 & 2013), though there was a lock in period of three years, after four years i.e. after 2013 I did not pay premiums and surrendered this policy in September 2018 at 99% surrender value. My query is whether amount received is taxable. Please help me only few days are left to file IT return. My age is 62 plus.

- Rajesh Verma

A. If the policy had a life cover, then under Section 10(10D), the surrender proceeds is exempt from tax, if the sum assured was atleast 5 times of the annual premium, during the entire duration of the policy. If the policy did not have a life cover, then the entire surrender proceeds shall be added to your income and taxed as per the income slab, if y o u h a v e c l a i m e d a n y deduction on the premiums paid for the policy. The Income Tax Act only says that if any amount available in a pension policy, in respect of which deduction has been allowed, together with interest or

ASK OUR PLANNER


interest. But Banks/Post office FDs are not paying good i n t e r e s t . M y m o n t h l y expenses may grow and cross the interest I earn from Banks. I cannot take much risk during these days. What is the best way to invest this amount to get maximum returns per month with minimum risk?

b . I am th inking not to withdraw my EPF money for next 3-4 years. Is it good move? If not what is the safest way to invest this money and get maximum benefits?

Please advise, Thanks in advance for your help.

- Anand Ronad

A. Instead of bank FDs, you can consider investing some funds into ultra-short term debt mutual funds. These funds can give you a slightly higher returns than bank FDs. You can withdraw the required amount t h r o u g h S y s t e m a t i c Withdrawal Plan (SWP).

You will be able to retain the amount in EPF only for 3 years, without any contribution. Also, the interest earned in these 3

bonus, is received on account o f sur render, then such amount is added to your income and taxed as per your income slab. It does not explicitly say how it is taxed, if deduction was not claimed. Our interpretation is that if deduction was not claimed for the premiums paid, then the accumulated gains (Surrender Value less Total Premiums Paid) will be added to your income and taxed as per the tax slab. However, we suggest you to h i re a Char tered Accountant to understand the intricacies of the section and how it would be taxed.

Q. 47 years old and I worked for a MNC Last month I lost my job and there is thin chance of getting immediate employment. But I was well paid during my service and I was able to make good amount of savings. As of now I have around 80 Lakhs as savings and around 60 lakhs in my EPF account.

a. I have kept all 80 Lakhs as FD in nationalized Banks and Post office (in my and my wife's name) and maintaining m y e x p e n s e s w i t h t h e

ASK OUR PLANNER


years will be taxable in your hands.

The answer to how much and how long you can rely on the corpus can come only after looking at your expected expenses and the amount of risk you can take. It's a good idea to get a financial plan done for yourself to understand your future cash flows and if the corpus would be sufficient to take care of them and invest as per the plan. If you wish to make a customized plan for yourself and want to know what we offer, you can write to us at [email protected].

Q. I recently sold a property and I would like to invest in Capital Gain Bonds. Can someone tell me the details of it and the tax implication on Bonds and property.

- Sabitha G

A. If you have sold a property (land / building) and have earned long-term capital gains (i.e. sold after 2 years from purchase), then such gains are taxed at 20% post indexation. However, under Section 54EC of the Income Tax Act, you can invest such long term capital

gains in capital gain bonds to avoid paying such tax. You need to reinvest the gains in these bonds within six months of the sale. Also, the exemption is proportionate to the LTCG invested. If the investment is less than the LTCG realized, only proport ionate gains would be tax-exempt. The tenure of these capital gain bonds is 5 years. The interest earned from these bonds are taxable.

Pls do consult your CA for any tax advice.

Q. Portfolio reorganization: My portfolio is spread over 20 stocks. I am planning to reorganize and make it a portfolio of about 10-12 stocks mainly catering to banking, pharma, auto, fmcg stocks. The idea is to monitor easily and closely. My intention is to accumulate and hold for around 5-6 years. Is that a good plan?

- Kedar

A. There are various studies on the ideal number of stocks to be held in a portfolio and the number varies from one study to another. It is recommended

ASK OUR PLANNER


to have at least 12-17 stocks in the portfolio to reduce un systematic risk. Even 20 odd stocks are fine in a portfolio, provided you are able to regularly monitor each of them. If that's not the case, as you have mentioned, pruning down the number of stocks or investing into mutual funds, which would be managed by a fund manager are some of the options available. If you invest into stocks, please ensure to diversify the same across different sectors & stocks.

Q. I have a personal loan of Rs 4 5 0 0 0 0 @ 1 1 . 8 5 % w i t h monthly EMI of Rs 11848 for 4 years. If I close the loan I will have to pay a penalty of Rs 13,500 (3% on Rs 4.5 lakh) incase of pre-closure of loan. It has completed a period of two years and 5 months, should I prepay the loan or I was thinking to open an FD. Which is the better option?

- Pratham

A. Generally, prepayment penal ty is lev ied on the outstanding amount and not on the loan amount. Your current outstanding amount would be closed to Rs.2.04

lakh, which means the penalty would be around Rs. 6,120.

Now, let's compare both the scenarios. If you pre-close the loan now, the EMI of Rs.11848 c a n b e r e - d i r e c t e d t o investments, which can grow to around Rs.2.38 lakh in next 19 months, if it provides a return of 7% p.a. On the other h a n d , i f y o u i n v e s t t h e l u m p s u m a m o u n t o f Rs.2,10,120 (i.e. outstanding amount of Rs.2.04 lakh plus the penalty amount of Rs. 6,120), it will fetch around Rs.2.34 lakh at the end of 19 months from now. Hence, it's better to prepay the loan.

Q. I am 26-year-old now. I am investing in mutual funds and some shares currently. I earn 50K per month, my expenses are 20K around per month. After tax and PF deduction per month I am able to invest 25K per month. How should I allocate the funds to debt, equity and gold and for 3 year, 5 year, 10 year, 20 year and for retirement.

- Saurabh Joshi

A. For your retirement and long

ASK OUR PLANNER


term goals, you can look to invest more into equity asset class and have an allocation of 7 5 - 8 0 i n t o E q u i t y a n d remaining into Debt. For 3 year goals, if they are critical, you can invest more into debt. For 5 year goals, if they are critical, you can invest around 10% into Equity and the remaining into Debt. If these goals are

discretionary, then you can increase the Equity exposure. It's a good idea to get a financial plan done for yourself to u n d e r s t a n d y o u r f u t u r e cashflows and invest as per the plan. If you wish to make a customized plan for yourself and want to know what we offer, you can write to us at [email protected].

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

Note: The above few queries are asked during the Ask Market Expert event on iCommunity.

MUTUAL FUND ANALYSIS


Investing in midcap funds

The Government of India in a surprised move announced a reduction in the corporate tax rate from ~34% to 25.17% thereby fulfilling its key agenda of implementing the Direct tax Code (DTC).

The measures announced is a massive trigger for revving up growth and, more importantly, resurrecting sentiments that were down in the dumps. The immediate benefit is increased cash flows to Corporate India that will be either channelised i n t o d e b t r e d u c t i o n o r incremental investments in increasing capacity. Also, taxing new production facilities (that come up by 2023) at 15% will enable attraction of global capital and spur a beleaguered investment cycle.

Our back of the envelope

analysis of Nifty earnings

suggests an EPS upgrade of

6% each for FY20E and FY21E.

We now expect Nifty EPS to

grow at a CAGR of 20.3% in

FY19-21E vs. 16.9% earlier.

However, from a granular

perspect ive, sectors l ike

b a n k i n g a n d F M C G a r e

expected to grow at a CAGR of

48.2% and 18%, respectively

vs. earlier CAGR of 42.2% and

12.2%. On the flip side, sectors

like IT and pharma are not

expected to see any upgrades

on account of existing lower tax

rates, which is making the Nifty

EPS upgrade optically look to

be in single digit.

While the benefit of tax cut will

a c c r u e t o m a n y l a r g e

companies, many midcap and

smallcap companies which

were earlier paying higher tax

are also likely to benefit. The

same along with reasonable

valuations make them an

attractive investment option.

Source: ACE MF, ICICI Direct Research



Fund name: L&T Midcap FundFund Manager’s name: Soumendra Nath Lahiri

% Holding

Aug-19Company Name

Scheme Name: L&T Midcap Fund-Reg(G)

Bank - Private 10.3638

Pharmaceuticals & Drugs 7.3039

Finance - NBFC 5.6552

Chemicals 5.5985

Engineering - Industrial Equipments 5.0838

Cement & Construction Materials 5.0454

Bearings 4.3178

Pesticides & Agrochemicals 3.7537

Plastic Products 3.7530

Fertilizers 3.0815

Household & Personal Products 2.8490

Batteries 2.5800

Ceramics/Marble/Granite/Sanitaryware 2.3149

Retailing 2.2322

Diversified 2.1504

Tea/Coffee 2.0453

Textile 1.9336

Hospital & Healthcare Services 1.7376

Steel & Iron Products 1.6856

Industrial Gases & Fuels 1.6833

Air Conditioners 1.5642

Tyres & Allied 1.4691

Consumer Durables - Domestic Appliances 1.3687

Cable 1.3644

Castings/Forgings 1.2961

Electric Equipment 1.2568

Bank - Public 1.2560

Consumer Food 1.2502

Refineries 1.2076

Construction - Real Estate 1.1600

Portfolio



Sector

Aug-19Industry

% Holding

Scheme Name: L&T Midcap Fund-Reg(G)





Chemicals 4.4354



Hotel, Resort & Restaurants 3.6505

Finance - Stock Broking 3.0459


Retailing 2.7249

IT - Software 2.3025


Batteries 2.1697

Textile 2.1492



Paints 1.7692

Engineering 1.7061

Auto Ancillary 1.1169

Gas Transmission/Marketing 0.8728

Finance - Investment 0.8540


Steel/Sponge Iron/Pig Iron 0.8185

Finance - Others 0.6635

Printing And Publishing 0.6580

Engineering - Construction 0.5887


Forgings 0.2760

Compressors / Pumps 0.0894

95.4631

Scheme Portfolio Sector Wise : As on - 27-Sep-2019




Diversified 1.5727


Diesel Engines 1.4805

Miscellaneous 1.4351


Lubricants 1.3002



Fertilizers 1.2041




Trading 1.1176

Cigarettes/Tobacco 1.0662


Port 0.8937

Insurance 0.8376

Logistics 0.7089

Aluminium & Aluminium Products 0.7032

Telecommunication - Equipment 0.6961

Courier Services 0.5774


Ratings 0.4535

Bearings 0.3510


Unspecified 0.0479

92.5817

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/2019-20/L&T%20Factsheet%20August%202019.pdf




Fund name: Kotak Emerging Equity SchemeFund Manager’s name: Pankaj Tibrewal

Portfolio

% Holding

Aug-19Company Name

Scheme Name: Kotak Emerging Equity Scheme(G)

Tri-Party Repo (TREPS) 4.0954

PI Industries Ltd. 3.7537

Supreme Industries Ltd. 3.7530

Atul Ltd. 3.1777

Schaeffler India Ltd. 3.1668

AU Small Finance Bank Ltd. 3.1577

The Ramco Cements Ltd. 3.1465

Coromandel International Ltd. 3.0815

Thermax Ltd. 2.7280

Solar Industries (India) Ltd. 2.4208

Kajaria Ceramics Ltd. 2.3149

Torrent Pharmaceuticals Ltd. 2.2307

SRF Ltd. 2.1504

IndusInd Bank Ltd. 2.0988

Mahindra & Mahindra Financial Services Ltd. 2.0521

Tata Global Beverages Ltd. 2.0453

RBL Bank Ltd. 1.9665

Shree Cement Ltd. 1.8988

Apollo Hospitals Enterprise Ltd. 1.7376

Sheela Foam Ltd. 1.7337

The Federal Bank Ltd. 1.7319

APL Apollo Tubes Ltd. 1.6856

Indraprastha Gas Ltd. 1.6833

Cadila Healthcare Ltd. 1.5736

Voltas Ltd. 1.5642

Shriram City Union Finance Ltd. 1.5169

MRF Ltd. 1.4691

Sundaram Finance Ltd. 1.4479

City Union Bank Ltd. 1.4088

Exide Industries Ltd. 1.4043



Finolex Cables Ltd. 1.3644

Ratnamani Metals & Tubes Ltd. 1.2961

V-Guard Industries Ltd. 1.2568

State Bank Of India 1.2560

Godrej Agrovet Ltd. 1.2502

Hindustan Petroleum Corporation Ltd. 1.2076

Future Retail Ltd. 1.1844

Amara Raja Batteries Ltd. 1.1757

Oberoi Realty Ltd. 1.1600

SKF India Ltd. 1.1510

Bharat Electronics Ltd. 1.1395

Motherson Sumi Systems Ltd. 1.1169

Emami Ltd. 1.1152

Bata India Ltd. 1.0478

Divis Laboratories Ltd. 0.9968

Lux Industries Ltd. 0.9170

Gujarat State Petronet Ltd. 0.8728

Cholamandalam Financial Holdings Ltd. 0.8540

Persistent Systems Ltd. 0.8485

Jindal Steel & Power Ltd. 0.8185

Alkem Laboratories Ltd. 0.8149

Kewal Kiran Clothing Ltd. 0.7490

BEML Ltd. 0.7470

Laurus Labs Ltd. 0.7210

Hawkins Cookers Ltd. 0.7209

Max Financial Services Ltd. 0.6635

Navneet Education Ltd. 0.6580

Whirlpool Of India Ltd. 0.6478

Edelweiss Financial Services Ltd. 0.6384

PNC Infratech Ltd. 0.5887

Eris Lifesciences Ltd. 0.5529

Kirloskar Oil Engines Ltd. 0.4693

Abbott India Ltd. 0.4141

ICICI Securities Ltd. 0.3150

Ramkrishna Forgings Ltd. 0.2760

Page Industries Ltd. 0.2677

HDFC Bank Ltd. 0.2213



Net Current Asset 0.2198

WPIL Ltd. 0.0894

Blue Dart Express Limited SR-III 9.50% (20-Nov-19) 0.0004

Sector

Aug-19Industry

% HoldingScheme Portfolio Sector Wise : As on - 27-Sep-2019

Scheme Name: Kotak Emerging Equity Scheme(G)




Chemicals 5.5985



Bearings 4.3178



Fertilizers 3.0815


Batteries 2.5800


Retailing 2.2322

Diversified 2.1504

Tea/Coffee 2.0453

Textile 1.9336







Cable 1.3644





Refineries 1.2076













Forgings 0.2760


95.4631

You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://assetmanagement.kotak.com/documents/19/aef7a857-32ac-427d-8d70-89516ac0a530




Fund name: Reliance Small Cap FundFund Manager’s name: Samir Rachh

Portfolio

% Holding

Aug-19Company Name

Scheme Name: Reliance Small Cap Fund(G)

Tri-Party Repo (TREPS) 6.4056

Deepak Nitrite Ltd. 2.8402

Zydus Wellness Ltd. 2.1283

Navin Fluorine International Ltd. 2.0988

Orient Electric Ltd. 2.0093

CreditAccess Grameen Ltd. 1.9914

Tube Investments of India Ltd. 1.9287

VIP Industries Ltd. 1.8922

ICICI Bank Ltd. 1.6394

Tata Global Beverages Ltd. 1.4864

Kalpataru Power Transmission Ltd. 1.4824

Affle (India) Ltd. 1.4423

Fine Organic Industries Ltd. 1.3842

Cyient Ltd. 1.3649

Thermax Ltd. 1.3478

Security And Intelligence Services India Ltd. 1.2980

West Coast Paper Mills Ltd. 1.2610

NIIT Ltd. 1.2132

FDC Ltd. 1.2037

Carborundum Universal Ltd. 1.1752

Bajaj Electricals Ltd. 1.1748

Birla Corporation Ltd. 1.1689

Multi Commodity Exchange Of India Ltd. 1.1620

JK Cement Ltd. 1.1560

Radico Khaitan Ltd. 1.1546

Raymond Ltd. 1.1370

The Indian Hotels Company Ltd. 1.1304

HDFC Bank Ltd. 1.1132

Intellect Design Arena Ltd. 1.1036

Vindhya Telelinks Ltd. 1.1019



Balrampur Chini Mills Ltd. 1.0724

Seya Industries Ltd. 1.0588

Tata Steel Long Products Ltd. 1.0198

Elantas Beck India Ltd. 1.0101

Rallis India Ltd. 1.0070

KPIT Technologies Ltd. 1.0014

Cadila Healthcare Ltd. 0.9682

Atul Ltd. 0.9618

Apar Industries Ltd. 0.9392

LG Balakrishnan & Brothers Ltd. 0.9363

Bajaj Consumer Care Ltd. 0.9282

Polyplex Corporation Ltd. 0.9114

Mahindra Logistics Ltd. 0.8936

Dixon Technologies (India) Ltd. 0.8866

HG Infra Engineering Ltd. 0.8781

Honda Siel Power Products Ltd. 0.8662

Karur Vysya Bank Ltd. 0.8647

Axis Bank Ltd. 0.8552

ICRA Ltd. 0.8491

Voltamp Transformers Ltd. 0.8061

Kirloskar Pneumatic Company Ltd. 0.7972

The Federal Bank Ltd. 0.7364

Maruti Suzuki India Ltd. 0.7357

Somany Home Innovation Ltd. 0.7316

Sterlite Technologies Ltd. 0.7291

Kirloskar Brothers Ltd. 0.7151

Astrazeneca Pharma India Ltd. 0.7099

KEC International Ltd. 0.7099

Steel Authority Of India Ltd. 0.6988

Galaxy Surfactants Ltd. 0.6978

GAIL (India) Ltd. 0.6931

Johnson Controls - Hitachi Air Conditioning India Ltd. 0.6776

Honeywell Automation India Ltd. 0.6627

Ashoka Buildcon Ltd. 0.6613

Sheela Foam Ltd. 0.6589

IDFC Bank Ltd. (21-Jan-20) 0.6509

Cochin Shipyard Ltd. 0.6425



ISGEC Heavy Engineering Ltd. 0.6418

PSP Projects Ltd. 0.6372

Sterling and Wilson Solar Ltd. 0.6262

Orient Cement Ltd. 0.6228

Future Supply Chain Solutions Ltd. 0.6176

Magma Fincorp Ltd. 0.6145

Hindustan Aeronautics Ltd. 0.6060

JTEKT India Ltd. 0.6044

The India Cements Ltd. 0.6042

State Bank Of India 0.5885

Central Depository Services (India) Ltd. 0.5802

Sundaram Finance Holdings Ltd. 0.5797

Timken India Ltd. 0.5784

INEOS Styrolution India Ltd. 0.5630

Ion Exchange (India) Ltd. 0.5320

Tejas Networks Ltd. 0.5215

KPR Mill Ltd. 0.5187

EIH Ltd. 0.5155

Apex Frozen Foods Ltd. 0.5116

Garden Reach Shipbuilders & Engineers Ltd. 0.4677

Entertainment Network (India) Ltd. 0.4529

Automotive Axles Ltd. 0.4406

Emami Ltd. 0.4405

Navkar Corporation Ltd. 0.4206

Texmaco Rail & Engineering Ltd. 0.4100

Akzo Nobel India Ltd. 0.4066

Srikalahasthi Pipes Ltd. 0.4020

Indoco Remedies Ltd. 0.3963

Siyaram Silk Mills Ltd. 0.3879

TD Power Systems Ltd. 0.3638

Tata Coffee Ltd. 0.3594

Genus Power Infrastructures Ltd. 0.3401

Orient Paper & Industries Ltd. 0.3355

Advanced Enzyme Technologies Ltd. 0.3241

Arvind Ltd. 0.3066

Gujarat Alkalies & Chemicals Ltd. 0.2724

Cash & Cash Equivalent 0.2536



Shoppers Stop Ltd. 0.2430

Arvind Fashions Ltd. 0.2357

Pokarna Ltd. 0.2320

KCP Ltd. 0.2240

Indian Terrain Fashions Ltd. 0.2228

Ramco Systems Ltd. 0.2133

Shree Pushkar Chemicals & Fertilisers Ltd. 0.1927

LT Foods Ltd. 0.1719

HSIL Ltd. 0.1652

Heritage Foods Ltd. 0.1077

Jamna Auto Industries Ltd. 0.1037

Sandhar Technologies Ltd. 0.0951

Net Current Asset 0.0871

Rites Ltd. 0.0851

Camlin Fine Sciences Ltd. 0.0763

Jagran Prakashan Ltd. 0.0760

Digicontent Ltd. 0.0058

Sector

Aug-19Industry

% HoldingScheme Portfolio Sector Wise : As on - 27-Sep-2019

Scheme Name: Reliance Small Cap Fund(G)

Chemicals 10.2657












Logistics 1.9318

Cycles 1.9287

Tea/Coffee 1.8458



Hotel, Resort & Restaurants 1.6459

Paper & Paper Products 1.5965

Consumer Durables - Electronics 1.5493

Textile - Weaving 1.5249

Transmission Towers / Equipments 1.4824

Telecommunication - Equipment 1.4423

Miscellaneous 1.2980

IT - Education 1.2132

Abrasives 1.1752


Diversified 1.1689


Breweries & Distilleries 1.1546

Ship Building 1.1102

Sugar 1.0724

Textile 1.0481




Ratings 0.8491


Automobiles - Passenger Cars 0.7357

Unspecified 0.7316

Cable 0.7291





Airlines 0.6060



Bearings 0.5784

IT - Hardware 0.5215

Aquaculture 0.5116

Retailing 0.4787

TV Broadcasting & Software Production 0.4529

Railways Wagons 0.4100



Paints 0.4066



Dyes & Pigments 0.1927

Engineering 0.0851


Printing & Stationery 0.0058

92.6028

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-September-2019.pdf




Returns (%) Kotak Emerging Equity - Growth L&T Midcap Fund - Growth Reliance Small Cap Fund - Growth

1 Month 8.07 7.97 9.87

2 Months 5.38 4.28 5.18

3 Months -0.15 -1.85 -3.19

6 Months 1.79 -2.65 -3.26

1 Year 4.92 -3.23 -7.15

2 Years 2.04 -2.57 -0.90

3 Years 6.98 7.74 8.09

5 Years 13.06 12.41 12.13

10 Years 15.10 14.90 NA

MIDCAP FUNDS

Scheme Name




Performance of other schemes managed by these fund managers:

1. L&T Midcap Fund

2.24 5.53 6.12

-4.92 7.81 7.85

-4.7 5.14 8.17

-4.92 7.81 7.85

-6.8 4.46 6.54

-6.32 7.23 7.56

-14.03 5.9 8.02

-3.22 3.38 0.26

-17.16 6.92 11.06

-20.67 1.15 3.88

-- -- --

-6.34 7.15 7.49

1 Year 3 YearsFund Name

S&P BSE 500 - TRI

Bottom 3 Performing Schemes

L&T Infrastructure Fund-Reg(G)

NIFTY INFRA - TRI

L&T Equity Fund-Reg(G)

S&P BSE 200 - TRI

L&T Balanced Advantage Fund-Reg(G)

S&P BSE 200 - TRI

L&T Hybrid Equity Fund-Reg(G)

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

L&T Emerging Businesses Fund-Reg(G)

S&P BSE Small-Cap - TRI

L&T Focused Equity Fund-Reg(G)

NIFTY 500 - TRI

5 Years

Top 3 Performing Schemes

Note : The schemes may or may not have been managed by the same Fund Manager

since its inception

Note : The concerned Fund Manager manages 9 other schemes of the concerned

Mutual Fund

-6.16 -- --

-20.67 1.15 3.88

-10.76 -- --

-20.67 1.15 3.88

-12.8 5.89 10.39

-16.6 1.86 7

-- -- --

-6.34 7.15 7.49

Performance of other schemes managed by the fund manager - Vihang Naik

Nifty Midcap 100 - TRI


L&T Focused Equity Fund-Reg(G)

NIFTY 500 - TRI


L&T Midcap Fund-Reg(G)

1 Year 3 Years

L&T Emerging Opp Fund-I-Reg(D)

Fund Name 5 Years


L&T Emerging Opp Fund-II-Reg(D)


Note : The schemes may or may not have been managed by the same Fund Manager

since its inception

Note : The concerned Fund Manager manages 2 other schemes of the concerned

Mutual Fund



2. Kotak Emerging Equity Scheme

Kotak Equity Hybrid Fund(D) -1.91 4.23 7.04

NIFTY 50 Hybrid Composite Debt 70:30 Index -- -- --

Kotak Emerging Equity Scheme(G) -7.09 5.01 11.48

Nifty Midcap 100 - TRI -18.03 1.75 7.35

Kotak Small Cap Fund(G) -10.57 2.03 8.52

Nifty Smallcap 50 - TRI -28.52 -7.18 -0.62

Fund Name 1 Year 3 Years


Performance of other schemes managed by the fund manager - Pankaj Tibrewal

5 Years

Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 2 other schemes of the concerned Mutual Fund



3. Reliance Small Cap Fund

-6.6 8.25 11.86

-11.19 1.91 5.99

-12.68 -- --

1.63 8.02 8.27

-14.59 -- --

1.63 8.02 8.27


Reliance Capital Builder Fund-IV-D(G)

S&P BSE 200

Reliance Capital Builder Fund-IV-C(G)

S&P BSE 200

Performance of other schemes managed by the fund manager - Samir Rachh

Fund Name 5 Years


Reliance Small Cap Fund(G)

1 Year 3 Years


20.4 -- --

-- -- --

16.17 8.38 10.57

-- -- --

14.48 6.73 8.74

-- -- --

-12.68 -- --

1.63 8.02 8.27

-14.59 -- --

1.63 8.02 8.27

-- -- --

1.63 8.02 8.27

Performance of other schemes managed by the fund manager - Kinjal Desai

Reliance Gilt Securities Fund(G)

1 Year 3 YearsFund Name 5 Years


Reliance Nivesh Lakshya Fund(G)

Crisil Long Term Debt Index

S&P BSE 200

CRISIL Dynamic Gilt Index

Reliance Income Fund(G)

NIFTY Medium to Long Term Debt Index


Reliance Capital Builder Fund-IV-D(G)

S&P BSE 200

Reliance Capital Builder Fund-IV-C(G)

S&P BSE 200

Reliance India Opp Fund-Sr-A(G)



Disclaimer:

ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre,

H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288

2470. AMFI Regn. No.: ARN-0845. Please note that Mutual Fund Investments are subject to

market risks, read the scheme related documents carefully before investing for full

understanding and detail. Investors can view regulatory disclosures in reports issued for

respective funds which can be accessed on www.icicidirect.com.


ICICIdirect Community (iCommunity)

Pathway: Login to your account > Customer Service > iCommunity

1. Buzz in the market discussion – Your voice matters!

Are the corporate tax reforms enough to bring back

growth?

On 20th September, the Finance Minister announced

corporate tax rate cuts for domestic companies and also

introduced significantly lower taxes for new companies

setting up their manufacturing facilities in India. This

move has spurred optimism in the markets with indices

posting strong up move. While this is a significant move

taken by the government to revive the Capex cycle and

attract new investments, do you think It will help in addressing the issue of consumption

slowdown which has been seen in the recent past? Also, the government would be losing

out on ~| 1.45 lakh crore of revenues, would it lead to a widening of the fiscal deficit?

Share your thoughts on ICICIdirect exclusive knowledge sharing platform – iCommunity.

2. Exclusive Q&A Session with Mr. Sachin jain, Mutual Fund Research Analysts -

September 20 - 21, 2019

> Guidance required to choose Equity and Hybrid funds: I am planning to invest Rs.

5000/month with an investment origin of 10 years. Please suggest few funds on Equity and

hybrid category.

> I was having about 5 mutual fund SIP for the past few years. These funds were performing

well those days, but not now-a-days. So I stopped by SIPs. Is it a right decision?

> Do you think world is heading towards recession and FII money is seriously looking for

some save heavens.

3. Exclusive Q&A Session with Mr. Abhishake Mathur (Head – Investment Advisory

Services) on September 10 – 11, 2019

> How do debt funds differ? E.g. Short term debt fund vs constant maturity fund vs income

fund vs Gilt fund?

> What is short term investment? Where should one invest for a shorter period?

> Investing in Gold ETF – how to select the best gold ETF? Which factors one should look

for?

How to join iCommunity? - Login to your ICICIdirect account > Customer Service >

iCommunity.

Find support for your Financial journey online. Quick reply, in-depth expertise, and

everything in between: The ICICIdirect community has it all. The ICICIdirect community will

unlock your curiosity and unleash the expert in you. From market updates to Research

advice, there are lots of ways to take your skills to the next level.

EQUITY MODEL PORTFOLIO


Our indicative large-cap equity model portfolio is delivering an impressive

return (inclusive of dividends) of 139.64% till date (as on September 17, 2019)

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

Sensex) return of 105.04% during the same period, an outperformance of

34.60. 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 229.39%

(inclusive of dividends) till date (as on September 17, 2019) vis-à-vis the

benchmark index (CNX Midcap) return of 102.14%, an outperformance of

127.25. 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

Limited (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI (6%). Large cap

portfolio remains unchanged while we made fresh changes to our midcap

portfolio. Reliance Nippon Life Asset Management and Mahanagar Gas are the

latest addition to the mid-cap portfolio, both given 6% weightage. Please note

that Somany Ceramics and Arvind Fashions have been removed from the mid-

cap and diversified model portfolio. The weightage for State Bank of India and

Divis Laboratories have been revised. 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. 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 and ITC in consumer space.



Name of the company

Largecap Stocks

Model Portfolio

Largecap(%)

Midcap(%)

Diversified(%)

Mahindra & Mahindra (M&M) 4.0 2.8

HDFC Bank 10.0 7.0

Axis Bank 6.0 4.2

HDFC Limited 9.0 6.3

Bajaj Finance 6.0 4.2

State Bank of India 8.0 5.6

Larsen & Toubro 6.0 4.2

UltraTech Cement 4.0 2.8

Dabur India 5.0 3.5

Marico 4.0 2.8

ITC 6.0 4.2

Nestle India 4.0 2.8

Tata Consultancy Services 6.0 4.2

Tech Mahindra Limited 6.0 4.2

Hindustan Zinc 6.0 4.2

GAIL Ltd. 5.0 3.5

Divis Laboratories 5.0 3.5

Total 100.0

Largecap share in diversified 70.0



Bharat Forge 6.0 1.8

Bajaj Finserve 8.0 2.4

Indian Bank 6.0 1.8

AIA Engineering 6.0 1.8

Kalpataru Power transmission 6.0 1.8

Ramco Cement 6.0 1.8

Kansai Nerolac 6.0 1.8

Pidilite Industries 6.0 1.8

Tata Chemicals 6.0 1.8

Bata India 6.0 1.8

Brigade Enterprises 6.0 1.8

Reliance Nippon Life Asset Management 6.0 1.8

Firstsource Solutions 6.0 1.8

Container Corporation of India 6.0 1.8

Syngene International 8.0 2.4

Mahanagar Gas Ltd 6.0 1.8

Total 100.0

Midcap share in diversified 30

TOTAL 100.0

ICICI Securities has received an Investment Banking mandate from Mahindra & Mahindra.



Performance so far since inception*

139.6385475

229.3881285

163.5863843

105.0399462 102.1384046 104.6571536

0

100

200

300

Large Cap Midcap Diversified

%

Portfolio Benchmark

*Returns (in %) as on September 17, 2019

Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination of BSE Sensex and CNX Midcap

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

10000000

10000000

10000000

14443420.5

3

20945774.0

7

15182764.2

7

12956940.4

6

12777862.7

4

12052283.5

5

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Largecap Midcap Divesified

|

Investment Value of Investment in Portfolio Value if invested in Benchmark

Start date of SIP: June 30, 2011; *Value as on September 17, 2019

QUIZ TIME


There are a few key factors that have been impacting the economy or

rather the reason for economic slowdown. Let's see how many

factors can you decode from the below word search. Total words: 12

A A C R U D E P R I C E S S T E G

T U

P

G

O

D

L

K

B

M

P

J L

T

A

C

F

I T

M

T

F

G

G

M

I

O

N

I J

O

L

R

I

D O E S Q W P I R B T O K A A W I

E S R U P E E D E P R E C I A T E

R A G K A E P C P P A B X U W S X

C L E X T D O A O U D P O T S G I

C E

R

E

G

K

M

P

R

C

E

T J

I

O

I

T

F S

S

I

T

Z

Q

P

A

Q

W R

J

K

P

F

P

B S

F

I

S

E

C

T

O

R

A

A K

O

R

L

E

N T H B L A R E G P R D G P D F O

Note: 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 2019 Quiz is:

1. The current rate of Senior Citizen Savings Scheme (SCSS) is 8.60%

for Q2 of FY 2019-20 (July-sept).

2. What is the age criteria for reverse mortgage? - 60 for single owner,

58 for joint owners.

3. Distribution is that phase of retirement where you no longer build

wealth but utilize it.

4. Returns received from which scheme is 7.6 % for Q2 of FY 2019-20

(July-sept) - Post Office Monthly Scheme.

5. Debt investors are not subject to taxation. - False

6. Loan approved in a reverse mortgage is max 20 years from the time

of application.

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

65

30-Aug-19 31-Jul-19 Change (%)

CNX Nifty 11023.3 11118.0 -0.9%

CNX Midcap 15652.2 15921.2 -1.7%

S&P BSE Sensex 37332.8 37481.1 -0.4%

S&P BSE 100 11139.8 11210.8 -0.6%

S&P BSE 200 4609.1 4634.7 -0.6%

S&P BSE 500 14234.1 14324.1 -0.6%


Dow Jones 26,403.3 26,864.3 -1.7%

S&P 500 2,926.5 2,980.4 -1.8%

Nasdaq 7,962.9 8,175.4 -2.6%

FTSE 7,207.2 7,646.8 -5.7%

DAX 11,939.3 12,189.0 -2.0%

CAC 40 5,480.5 5,511.1 -0.6%

Nikkei 20,704.4 21,521.5 -3.8%

Hang Seng 25,724.7 27,565.7 -6.7%

Shanghai Composite 2,886.2 2,932.5 -1.6%

Taiwan Weighted 10,618.1 10,823.8 -1.9%

Straits Times 3,106.5 3,300.8 -5.9%


S&P BSE Auto 15,768.4 15,472.0 1.9%

S&P BSE Bankex 30,949.7 32,689.4 -5.3%

S&P BSE FMCG 16,941.8 17,555.9 -3.5%

S&P BSE Healthcare 12,875.4 12,704.4 1.3%

S&P BSE Metals 8,524.3 9,685.5 -12.0%

S&P BSE Oil & Gas 13,163.7 13,237.0 -0.6%

S&P BSE Power 1,888.0 1,888.0 0.0%

S&P BSE Realty 2,047.7 2,067.1 -0.9%

S&P BSE Teck 7,853.1 7,686.8 2.2%

PRIME NUMBERS


Debt Markets

Volatility Index (VIX)

66

30-Aug-19 31-Jul-19

VIX 16.28 13.59

Government Securities Yield (in %) Aug-19 Jul-19 Change (bps)

10 year 6.56 6.37 19

5 year 6.25 6.30 -5

3 year 6.04 6.21 -17

1 year 5.68 5.87 -19

Corporate Bond Yields (in %) Aug-19 Jul-19 Change (bps)

AAA 10 year 7.90 7.91 -1

AAA 5 year 7.56 7.73 -16

AAA 3 year 7.20 7.41 -21

AAA 1 year 6.97 7.27 -30

AA 10 year 8.35 8.29 6

AA 5 year 7.96 8.07 -10

AA 3 year 7.69 7.89 -20

AA 1 year 7.50 7.71 -21

Commercial Paper (in %) Aug-19 Jul-19 Change (bps)

12 Months 0

6 Months 0

3 Months 0

1 Month 0

Note : Data not available on Bloomberg for 3,6 and 12 month CP post 1/15/19 and for 1 month CP post 3/27/18

T-Bills Yields (in %) Aug-19 Jul-19 Change (bps)

91D TB 0

182D TB 0

364D TB 0

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

67

Countries 30-Aug-19 31-Jul-19 Change in bps

US 1.496 2.014 (52)

UK 0.479 0.611 (13)

Japan (0.269) (0.153) (12)

Spain 0.100 0.280 (18)

Germany (0.700) (0.440) (26)

France (0.406) (0.186) (22)

Italy 0.998 1.542 (54)

Brazil 7.430 7.229 20

China 3.061 3.160 (10)

India 6.559 6.369 19

MF Investment Aug-19 Jul-19 Fy19

Equity 17407 15084 87667

Debt 50316 52799 389356

FII Investment Aug-19 Jul-19 Fy19

Equity -15552 -13316 9722

Debt 11414 8418 -39425

Items Weights(%) Jun-19 Jul-19 Aug-19

Food&bev. 45.86 2.37 2.33 2.96

Pan,tob& intox. 2.38 4.11 4.89 5.00

Cloth & Foot 6.53 1.52 1.65 1.23

Housing 10.07 4.84 4.87 4.84

Fuel & light 6.84 2.32 -0.36 -1.70

Misc. 28.31 4.45 4.65 4.71

CPI 100 3.18 3.15 3.21

Weights Jun-19 Jul-19 Aug-19WPI 100.0 2.02 1.08 1.08 Primary Articles 22.6 6.72 5.03 6.40 Fuel & Power 13.2 -2.20 -3.64 -4.00 Manufactured Goods 64.2 0.94 0.34 0.00

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

PRIME NUMBERS

Commodities


Mutual Funds: Category Average Returns

Equity Funds Returns (in %)

Debt Funds Returns (in %)

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

Currencies and Commodities

Currencies

68

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

Categories 30-Jun-19 31-May-19 30-Apr-19 Weight(%)Mining -3.3 2.2 -18.7 14.4Manufacturing -4.3 6.2 -8.3 77.6Electricity -2.2 8.6 1.7 8.0Overall -3.9 5.9 -8.8 100.0

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

30-Aug-19 31-Jul-19 Change (%) StatusUSDINR 71.4 68.9 3.7% DepreciatedEURINR 78.8 76.8 2.7% DepreciatedGBPINR 86.9 83.7 3.8% DepreciatedAUDINR 48.0 47.4 1.4% DepreciatedCHFINR 72.2 69.6 3.8% DepreciatedJPYINR 0.7 0.6 6.1% DepreciatedCNYINR 10.0 10.0 -0.2% Appreciated

30-Aug-19 31-Jul-19 Change (%)Crude ($/barrel) 60.4 65.2 -7.3%Gold ($/ounce) 1,520.4 1,413.8 7.5%

Multicap Midcap Large Cap Small cap ELSS6 months 0.46 -2.37 2.94 -4.85 -0.561 year -9.83 -14.63 -5.92 -18.56 -11.283 year 5.67 2.83 6.46 1.76 5.835 year 8.20 8.96 7.86 8.68 8.44

Returns as on August 30, 2019

Debt Funds Returns (in %) Liquid Debt ST Ultra ST Debt LT

6 months 6.59 3.46 6.91 23.05

1 year 6.67 5.06 6.17 19.49

3 year 6.75 5.79 6.54 8.56

Returns as on August 30, 2019

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