“crossroads” · 2018-05-11 · dec-13 y-14 sep-14 jan-15 y-15 sep-15 jan-16 y-16 sep-16 jan-17...

“Crossroads”

MAY 2018 | ISSUE 65

This document is not valid without disclosure; refer the last page for the disclosure

Alpha Strategist | “Crossroads”

Contents

MAY 2018 | ISSUE 65 2

Executive Summary

Section I………………………………………………………………......................................................………...04-21

ection II…………………………………………………….......................................................………………....22-37

Section III…………………………………………………….........................................................……………….39-67

………………………………………………………………........................................…….......03

(Market through Graphs, Our advisory calls, Model Portfolio & performance, Outlook, Investment

Opportunities & Investment articles)

S

(Detailed views on Equities, Fixed Income, Alternative)

(Advisory approach, 4C Framework, Update on our recommended products)

MAY 2018 | ISSUE 65 3

From a market stand point we are at ”. Markets are witnessing headwinds arising from

concerns over the upcoming state elections, trade spats between major global economies and

spike in global yields. On the other hand, we are witnessing tail winds in the form of increasing

economic traction in the domestic economy resulting in expectation of strong earnings and this

has been complimented by robust domestic flows. Clearly the confluence of the above has

resulted in resurgence of volatility which has been absent for a while now. We see the overall

environment as positive for risky assets, but expect muted returns and higher volatility going

forward.

From a global stand point, optimism appears to be on the rise. A fiscal stimulus for the US economy via tax reform, a

tightening job market combined with substantial increase in Federal borrowing has resulted in a sharp up tick in US

treasury yields. With this development we believe that the tailwind from an accommodative global liquidity condition is

increasingly being challenged, as key central banks tighten monetary policy. This is likely to have a bearing on flows

towards emerging markets.

Growth prospects for the Indian economy continue to look bright. This is evident from various high frequency data

points. Increased economic activity will eventually get reflected in corporate profitability. The building blocks of a

domestic economic recovery seem to be falling in place. This appears to be led by both structural and cyclical factors.

Clearly the visibility of earnings recovery which had been elusive for a while now appears to be turning into reality.

There are early signs of normalization after earnings experienced a subdued trend over the past couple of years. Our

newly launched strategy “Renaissance India Next PMS” aims to capture growth through companies and sectors which

have been head winded in the past but will see good up tick in the coming years. We continue to advise a staggered

approach to investing in equities with a view to commit more during any sharp corrections. In order to capitalize on the

upcoming volatility we are happy to introduce you to “Avendus Enhanced Return Fund” which endeavors to generate

equity like returns while keeping volatility lower than traditional equity strategies. We believe that this proposition

would certainly add value to your portfolio.

Fixed income markets have been quite volatile in the last couple of months with ten year government bond yields

moving between 7.1-7.8%. The government and the RBI have announced a slew of measures to calm the bond markets.

We believe that the RBI will be in an extended state of pause on interest rates. Hence we recommend investors to look at

low maturity high accrual portfolios like short term funds, selected credit portfolios and ultra-short term funds.

At such “ ” it is important to revisit your stated goals as well as asset allocation and stick to it in a disciplined

manner. As usual this edition is rich with several articles to make your investment journey simpler.

Crossroads

Crossroads

“

Happy Investing!

Ashish Shanker

(Head, Investment Advisory – Private Wealth Management)

Executive Summary



MAY 2018 | ISSUE 65 4

Section I

Market through Graphs........................................................................................05

Portfolios Commentary........................................................................................08

Model Portfolios .................................................................................................09

.......................................................10

Succession of a Female - Hindu.............................................................................12

Power of Asset Allocation....................................................................................13

Hind-sight investing ............................................................................................15

Decoding Investment Style..................................................................................16

Temperature Gauge.............................................................................................17

Fixed Income Manager Selection Framework

Investment Grid ..................................................................................................19

Our Recommendations .......................................................................................20


1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2 10-year US Treasury Yield (%)

De

c-1

3

Ma

y-1

4

Se

p-1

4

Jan

-15

Ma

y-1

5

Se

p-1

5

Jan

-16

Ma

y-1

6

Se

p-1

6

Jan

-17

Ma

y-1

7

Se

p-1

7

Jan

-18

Ap

r-1

8

Macro Economy

• The yield on the 10-year Treasury note ended higher in

April, crossing the psychological mark of 3% during the

month

Some encouraging US economic data along with

expectation of more aggressive interest rate hikes

from the US Fed dented sentiment for treasuries

The rise in US treasury yields comes at a time when

there are concerns of widening trade deficit, fiscal

slippage, rising crude prices and the rupee

depreciation in India. This in turn could impact the

foreign flows into India

•

•

• The Indian Meteorological Department (IMD) released

its first forecast for the 2018 southwest monsoon

(June-September) rainfall with expectations of normal

monsoon

It expects monsoon rainfall at 97% of the long period

average (LPA) with very less probability of

experiencing a deficit monsoon

With rising tensions about farmers' distress, general

elections in 2019 and the fact that winter monsoon

(January-February) rainfall in 2018 was the worst in at

least 26 years, 2018 southwest monsoon holds special

significance

•

•

IMD expects normal monsoon in 2018

Source: Indian Meteorological Department (IMD)

MAY 2018 | ISSUE 65 5

Markets through Graphs


Source: Bloomberg

US Treasury yield hits its highest level since 2014

• Oil prices rose over 5.2% in April to close at $74/bbl as

compared to $70.3/bbl at the end of the previous

month

Oil prices were hit by a stronger US dollar and a sharp

increase in US crude inventories. However, support

came from lingering uncertainty over the Iranian

nuclear deal

Rising oil prices could have an adverse impact on

India's current account deficit. However, there would

be limited impact on inflation, given its low weightage

in the inflation measure

•

•

Oil prices continue to surge

Source: Bloomberg

9899

98

9593

106

9697

102

92

106

8785

98

95

2011 2012 2013 2014 2015 2016 2017 2018

(% of LPA)IMD's April forecast Actual rainfall

??

20

35

50

65

80Oil (Brent) $/bbl

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

• Equity markets witnessed a stellar month with Nifty 50

gaining 6.2% in April as compared to decline of 4.9%

and 3.6% in the month of and March,

respectively

Robust domestic flows and healthy start to Q4FY18

earnings season supported market rally amidst FII

selling, currency depreciation and rising crude prices

The current valuation levels are on the back of

depressed earnings growth over the last few years. We

expect earnings to recover supported by demand

recovery in consumption sectors, low base of

demonetization and commodity price inflation

February

•

•

Equities

MAY 2018 | ISSUE 65 6

Source: Bloomberg

Sensex PE (TTM) trades 31% above average


• Both earnings yield to bond yield (EY-BY) and MOVI

which we use to gauge market attractiveness, trades in

the fair value zone

Both indicators suffered on the back of recent market

rally and rise in bond yields. However, even at these

levels investors have made positive returns at least

70% of times for 3-year holding period

Given the current valuations, we suggest investors to

stagger their investments over the next few months

and capitalize on any sharp decline by incremental

deployment

•

•

Valuation indicators trade in fair value zone

Source: MOWM

• The Q4FY18 earnings season has so far been broadly in

line with expectations in terms of revenue. However,

profits have missed estimates, largely dragged by

corporate-focused private banks

Sales, EBITDA and PAT for the 20 Nifty companies have

grown at 19.1%, 14.1% and 2.2%, as against

expectations of 16.0%, 13.6% and 11.9%, respectively

We expect the performance of corporate-focused

private banks and PSU Banks to drag the aggregates in

Q4FY18. However, consumer, cement, autos, private

banks, NBFCs and IT shall provide the necessary

cushion which reinstates our FY19 earnings recovery

story

•

•

Nifty (20 companies) sales growth of 19%

(estimate 16% YoY)

Source: MOSL

Ap

r-0

8

24.1

18.8

5.0

10.0

15.0

20.0

25.0

30.0 Sensex TTM PE 10-year average PE

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

10

1

9

12

17

12 12

14

19

Ma

r-1

6

Jun

-16

Se

p-1

6

De

c-1

6

Ma

r-1

7

Jun

-17

Se

p-1

7

De

c-1

7

Ma

r-1

8

Sales growth (%YoY)

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

80.0

90.0

100.0

110.0

120.0

130.0 MOVI (LHS) EY-BY (RHS)

Ap

r-1

5

Oct

-15

Ap

r-1

6

Oct

-16

Ap

r-1

7

Oct

-17

Ap

r-1

8

MAY 2018 | ISSUE 65 7

Summary

Fixed Income

Consumption, Domestic Cyclicals, Rural

High quality Corporate Bond funds,

Credit Opportunities funds, FMPBullish on accrual strategies

& tactical on dynamic bond funds

Sovereign Gold Bonds, Gold ETFsNeutral Neutral

AlternativesGold prices inches up

• Gold prices (-1.8%) saw a slight fall in April to close the

month at $1,315 per ounce as compared with $1,339

per ounce in the previous month

Gold prices started on a high note due to weakness in

the US dollar and fears of a global trade war, however,

gains were offset after the US Fed raised expectations

of a faster pace of rate hikes and as dollar strengthened

We continue to hold our neutral stance on gold, as we

believe there is merit in having allocation to this asset

class as it acts as a hedge against any major geopolitical

risk

•

•


Source: Bloomberg

6.06.46.87.27.68.08.48.89.29.6

10.010.4

1 Yr 3 Yr 5 Yr

Yie

ld (

%)

Maturity

Gsec AAA AA AGsec (1 year bck) AAA (1 year bck) AA (1 year bck) A (1 year bck)

Source: Bloomberg

Increase in yields across credit curve

• In lieu of the ongoing concerns, yields across the credit

curve at the shorter end have shifted upwards hence

resulting in spreads of 40–170 bps w.r.t different credit

assets

Quantum of rise in yields of AAA segment has not been

accompanied with a similar rise in yield of lower rated

assets owing to spread compression

From a prudent risk reward perspective, short term

AAA assets offers a value proposition to lock in

investments at higher yields which were prevalent in

lower rated assets

•

•

6.2 6.2

6.7

7.3

7.67.8 7.8 7.9 7.8

8.07.9

7.8 7.88.0 8.0 8.0

5.8

6.0

6.26.4

6.6

6.8

7.07.2

7.4

7.67.8

8.0

8.2

3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 11Y 12Y 13Y 17Y

Years

Current 1 mnth back 6 mnths back 1 yr back

Yields remain volatile on confluence of domestic &

global factors

• Indian bond market has kept the stakeholders on toes

due to wide swings in the yields.

While RBI’s dovish stance on inflation, reduced

government borrowing, OMO purchases and easing of

FPI norms supported bond market, hawkish stance

revealed in MPC minutes, rising crude oil prices and

global yields dented market sentiment

In such volatile times, it is prudent to stick to high

quality/credit oriented accrual strategies so as to get a

visibility of risk adjusted returns

•

•

Source: Bloomberg

1000

1050

1100

1150

1200

1250

1300

1350

1400

Ap

r-1

4

Au

g-1

4

De

c-1

4

Ap

r-1

5

Au

g-1

5

De

c-1

5

Ap

r-1

6

Au

g-1

6

De

c-1

6

Ap

r-1

7

Au

g-1

7

De

c-1

7

Ap

r-1

8

GOLD Spot ($/Oz)

MAY 2018 | ISSUE 65 8

Investment Committee


Portfolios CommentaryTactical changes and strategies

� – Replaced Income Funds with Dynamic Bond Funds based on the note released -

– Reduced allocation to Gold by 25% and increased to Dynamic Bond Funds based on discussionin the Investment Committee meeting

– Reduced further allocation to Gold by 25% and increased to Dynamic Bond Funds based on discussionin the Investment Committee meeting

– Exited Gilt Fund’s and moved to Short-term Funds (40%), Income Funds (40%) and Dynamic BondFunds (20%) based on the note released -

– Exited Income Funds and other long duration investments and invested the redemption proceeds inUltra Short-term Funds based on the note released –

– Cash allocation brought back to its strategic weight and invested the balance allocation into giltfunds based on the note released –

– Switched 15% of equity allocation to Information Technology (IT) sector funds from large cap andmulti cap funds, based on the note released –

– Reduced 10% of equity allocation and switched to ultra short term funds based on the notereleased –

– Switched 50% of Short-term Funds allocation to Gilt Funds, to increase duration of theportfolio, based on the note released –

– Deployed Cash in Nifty ETFs, based on the note released –

– Switched all cash positions to gilt funds, to further increase duration of the portfolio

– Reduced allocation to Gilts and moved to Ultra Short term Funds to create liquidity in the portfolio

May 23, 2014 – Switched allocation from IT Sector Funds and Nifty ETFs to Infrastructure Funds and Small cap Fundsrespectively, based on the note released –

– Switched allocation from Cash to Gilt funds, to increase the duration of the portfolio based on thenote

– Switched allocation from Small & Midcap funds to Large Cap funds, on the back of relativelyhigher valuations of midcaps as compared to large cap.

– On the fundamental front, demand side continues to be supportive for gold. We have therebyrevised out short term outlook on gold from underweight to neutral stance.

– Reduced Gilt exposure and allocated the proceeds towards Gold, on the back of better risk rewardscenario for gold & bond yields coming below it long term average

December 15, 2012

February 14, 2013

April 1, 2013

May 17, 2013

July 29, 2013

September 20, 2013

September 27, 2013

September 30, 2013

November 20, 2013

November 25, 2013

December 3, 2013

May 5, 2014

September 6, 2014

September 28, 2015

September 24, 2015

February 29 , 2016

“Interest”ing TimesAhead”

“Yields came tumbling after…to plummet further”

“Ride the Tide”

“The Gilt Edge”

“Information Technology – In a position on strength”

“The Bear-nanke Hug – Underweight Equities”

“Time to Rebuild Duration – A Déjà vu”

“Equity Markets – An Update”

“Good Times Ahead!”

“Way Ahead for Duration”.

�

�

�

�

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�

�

�

�

�

�

�

�

�

�

�

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April 22, 2016 – Switched allocation from Duration strategies to Accrual strategies, based on the note released –

March 31, 2018 – In Fixed Income, we reiterate our stance on accrual strategy, however, given the current valuations,tactical allocation to dynamic bond funds can be considered by investors who can withstand interest rate volatility

March 31, 2018 – Increase allocation towards value oriented multi-cap strategies

“Time toShift Gears”

As on April 30, 2018

Committee Members

Mr.

Mr. Vijay Goel – Private Wealth Management

Mr. Ashish Shanker – Head, Investment Advisory

Mr. Kishore Narne – Head, Commodities & Currency

Mr. Nikhil Gupta, Economist, MOSL

Mr. Pradeep Ashok Kumar – Vice President,

Gautam Duggad – Head of Research, Institutional Equities, MOSL

Managing Director & CEO,

Investment Advisory

Products & Advisory Team, Private Wealth Management

Mr. A Balasubramanian, CEO, Aditya Birla Sun Life AMC Ltd.

External Invitee

MAY 2018 | ISSUE 65 9


Model Portfolios

Note:

Portfolio inception date: October 01, 2012

All ratios calculated for 3 years period. Risk free rate at 6.0%

Performance as on: April 30, 2018

Key Ratios1-year rolling return Max

Drawdown

Draw Down

Period

Jensen's

AlphaInformation

Ratio

Aggressive+

Balanced

Conservative

21.5%

13.3%

9.0%

-12.2%

-4.7%

2.8%

63.2%

34.5%

17.6%

-17.5%

-8.3%

-4.0%

Aug-15 - Feb-16

Aug-15 - Feb-16

Jun-13 - Aug-13

4.1%

1.1%

-0.8%

0.8

1.0

1.4

0.6

0.5

0.4

0.5

0.3

-0.1

Min MaxBeta Sharpe

Average

Client Profile Performance Snapshot

Conservative

55.2%

5.0%

39.8%

Accrual

Gold Fund

Corporate Bond

Balanced

9.0%

12.0%

12.0%

7.0%

26.0%

10.0%

24.0%

Large Cap Funds

Mid Cap Funds

Multi Cap Funds

Balanced Funds

Accrual

Gold Fund

Corporate Bond

Aggressive+

30.0%

22.5%20.0%

27.5%

Equity PMS

Large Cap Funds

Mid Cap Funds

Multi Cap Funds

-0.40.0

0.91.4

5.7

7.3

8.2 8.5

1.4

2.1

5.9

7.58.1 8.0

1 Month 3 Months 6 Months 1 Year 3 Year 5 year Since

Inception

% R

etu

rn

Conservative Portfolio Conservative Index

2.5

-0.3

2.5

9.2 9.3

12.511.6

2.6

-0.2

3.2

10.0

8.3

9.79.2


Inception

% R

etu

rn

Balanced Portfolio Balanced Index


Inception

6.0

-0.1

4.2

14.1 13.5

19.717.8

6.2

-2.6

3.9

15.4

9.5

12.6 12.0

% R

etu

rn

Aggressive+ Portfolio Aggressive+ Index

MAY 2018 | ISSUE 65 10

Adding objectivity to fixed income investing

Fixed Income Manager Selection Framework


In the above graph, we have taken the Average 1 yr rolling return for 5 years for various funds across categories. The result

was that there was a significant difference between the top performer and bottom performer in almost every category,

making a case for choosing fund managers over the funds. The ability to generate enhanced returns varies from manager

to manager within the same category, thus laying emphasis on the skills of a fund manager. But one must also realize that

past performance cannot be the only criteria to judge a fund. It is almost hazardous to do so. Different market cycles

present different opportunities.

So what strategy will help investors so that their investments are relevant for the ongoing market cycle? Even in fixed

income, there are risks associated with interest rates, credit and liquidity. With the numerous funds at one's disposal,

choosing the correct one can be quite a challenge. Before we venture into the framework of choosing a manager let us

take a sneak-peak into the two kinds of strategies adopted for “enhancing” returns – Credit and Duration.

The credit opportunities style looks for companies that have the ability to repay and mitigates risks such as default and

liquidity. This benefits investors via higher coupons, thus enhancing their overall return. However, the duration style

plays on interest rate cycles and requires an intricate macroeconomic understanding as the manager must get the

interest rate cycles right. Both these strategies play out at various points of time. At a time one anticipates interest rates

to peak, duration strategies would be a preferred option as any subsequent decline in interest rates would enhance the

portfolio returns. Likewise, in a rising interest rate scenario, duration strategies would not augur well, calling for

investment in credit strategies.

The battle of objective vs. subjective decision making often makes appearance in investing. To our mind, having an

objective oriented approach gives purpose to investment which helps in avoiding any impulsive calls. Traditionally, equity

has always been viewed as an asset class for capital appreciation while fixed income is seen as an avenue for capital

preservation. Amongst the fixed income instruments, the most commonly accepted investment avenue is fixed deposits.

There is a psychological comfort that investors draw on account of the fixed return provided by such instruments.

However investors must realize that an instrument like a fixed deposit is tax inefficient. As a result, it does not even meet

the core objective preserving the purchasing power. That raises the obvious question – what kind of fixed income options

should investors seek?

If the veil of ignorance is done away with and the fixed income market is probed into, one will realize that there are

various market linked investment avenues that investors can invest in. To our mind, fixed income mutual funds are one

example of an efficient investment option that investors can avail of as they have various benefits like diversification,

professional management and tax efficiency. However, the question of prudent selection still remains unanswered.

Liq

uid

UST

Sho

rt T

erm

Cre

dit

Op

ps.

Lon

g I

nco

me

Dyn

am

ic

Bo

nd Gilt

6.6 6.77.4

9.2

7.7

6.7 6.9

8.3 8.6 9.0

9.9

8.9 9.29.88.9

9.3

10.310.8 10.8

11.912.6

Avg. 1 Yr RR of worst performing fund Category Average Avg. 1 Yr RR of best performing fund

MAY 2018 | ISSUE 65 11


Just like a fast bowler cannot bowl spin and vice versa, a manager cannot mimic both approaches simultaneously. A

manager must be clear on his stance and having experienced two to three market cycles will be of huge significance.

To our mind, good performance is an outcome of a robust process. Hence, one needs to be cognizant of the latter at the

time of evaluation. This thought process has given birth to our . By evaluating the

pilot rather than just the plane, each would enable us to unmask the different hues of investment process from the

performance which is the ultimate outcome.

This framework implies a paradigm shift from the industry norm of ranking funds only on the basis of past performance.

This qualitative and quantitative process would enable us to construct for our clients. In line with

our philosophy of providing better insights to you, we hope you find the same informative.

“4C framework of manager selection”

“C”

“winning portfolios”

MAY 2018 | ISSUE 65 12


Succession of a Female - Hindu

Son

Married

Individual

Female

Daughter

Husband

Children of deceasedSon

Children of deceased

daughter

Intestate Succession in case of death of a Female Hindu

On the death of a female Hindu, in case she has a Will, her assets are distributed amongst the persons as specified in the

will. However, in case a Female Hindu dies without leaving a will (i.e. she dies intestate), the assets would be distributed

according to the Hindu Succession Act. The succession of Hindu, Jain, Buddhist and Sikh is governed by the Hindu

Succession Act.

After the amendment of the Act in 2005, females have been given equal rights of inheritance as that of a male. However

the distribution of her property is different from a male.

Any property whether movable or immovable earned or inherited by her will be considered, either before, during or

after the marriage, even before the commencement of the Act is her assets.

Below is the pictorial overview on the intestate succession in case of demise of a Female Hindu:

Conclusion:

By writing a Will, one can bypass the above succession law and bequeath the assets as per her Wish.

Mother

Unmarried

Father

In case of a widow do not have anychildren the assets shall devolve upon

upon the heirs of the husband i.e.(Mother in law etc.)�

�

�

�

If there are no heirs of the husbandthen upon her mother and father

If there are no mother and father,then upon the heirs of her father

If there are no heirs of her fatherthen upon the heirs of her mother

MAY 2018 | ISSUE 65 13


Power of Asset Allocation

Historically equity has been viewed as a wealth creating asset class and debt and gold being inflation beating asset class.

That said, little do people know that both debt and gold have rarely beaten inflation. At the same time while equity offers

superior returns in the long run, it also exposes one to certain volatility inherent to the nature of the asset class. Asset

allocation enables you to maximize your return potential while reduce your risk. Industry research has shown that 92% of

the returns are attributable to the correct asset allocation.

We thought it to be prudent to substantiate it with some data. The table below highlights calendar year performance of

different asset classes such as equity, debt, gold and cash. As you would observe no asset class has been a consistent

winner.

Having said that, it is very clear that if one were to do a very simple asset allocation of equal investing in different asset

classes, there would have been only 1 instance in last 15 years where the strategy would have given negative returns. This

includes period of global financial crisis where most of the markets were battered. Thus there is a clear merit in

diversifying assets across different asset classes as it reduces dependency on single asset classes and protect from

market turbulence.

Performance as on: April 30, 2018

Equity is represented by Nifty 50

Debt is represented by CRISIL Short term bond Index,

Cash is represented by CRISIL

Liquid fund Index and Gold – Bloomberg, MOWM

Average: Equal allocation to each asset class in the calendar year

In our mind while return certainly matters, but so does risk. Based on your risk taking appetite, one should decide on how

much money needs to be allocated to different asset classes.There are multiple factors that define your risk tolerance

level such as investment horizon, liquidity needs, investment goals and so on. An investor with high risk tolerance may be

willing to accept greater volatility in pursuit to generate higher potential returns and may allocate higher percentage of

the portfolio towards higher risk assets. On the other hand, an investor with low risk tolerance may have to forego higher

potential returns for a steadier and less volatile portfolio.

11.3%

CAGREquity

16.1%

Gold

11.4%

Debt

6.8%

Cash

6.8%

CAGR of underlying asset classes

Multi-asset approach tends to deliver smoother returns than what is achieved by investing in just a single asset class

2003

Equity

71.9%

2004 2005 2006 2007 2008 2009 2010 2012 2013 20142011 2015 2016 2017

Average

Equity

10.7%

Gold

24.1%

Gold

31.9%

Equity

27.7%

Cash

9.0%

Equity

31.4%

Debt

8.7%

Gold

12.0%

Equity

28.6%

Equity

75.8%

Equity

36.3%

Equity

39.8%

Equity

54.8%

Gold

30.1%

Gold

13.5%

Cash

4.0%

Gold

22.3%

Gold

20.8%

Gold

16.7%

Debt

9.5%

Gold

19.7%

Equity

17.9%

Cash

8.2%

Gold

10.2%

Debt

8.3%

Debt

10.5%

Cash

8.2%

Debt

9.8%

Cash

6.6%

23.8%

Cash

4.6%

Debt

5.4%

Gold

5.9%

Debt

2.7%

Cash

4.6%

Cash

6.0%

Debt

8.0%

Cash

8.4%

Debt

6.6%

Cash

5.1%

Debt

7.9%

Debt

9.1%

Cash

7.5%

Equity

-4.1%

Cash

9.2%

Equity

6.8%

11.6%8.1%1.7%12.9%1.2%13.9%5.8%13.0%26.7%-0.9%21.7%18.0%17.0%4.5%

Debt

%5.4

Gold

0.5%

Debt

4.5%

Debt

5.5%

Cash

7.5%

Equity

-51.8%

Cash

4.9%

Debt

4.7%

Equity

-24.6%

Equity

3.0%

Gold

-6.2%

Gold

0.6%

Gold

-19.2%

Cash

8.5%

2.6%

2018*

Gold

5.4%

Debt

0.7%

Cash

2.4%

Equity

2.0%

MAY 2018 | ISSUE 65 14


By selecting a portfolio with equity and fixed income, the potential gains that the equity component can give are much

higher and the associated risk can be well taken care of by the fixed investment portfolio. Thus a portfolio invested across

asset classes has the ability to generate superior risk adjusted return.

To prove our hypothesis, we carried out back-testing with just two asset classes, equity and fixed income. We created

three model portfolios with 75:25, 50:50 and 25:75 exposures to fixed income and equity respectively. Over 5-year

holding period, none of these portfolio generated negative returns. Also, it is worth highlighting that over 3-year holding

period, portfolio which has high exposure to equity (75%) gave positive returns 98.7% of time over the last 12 years.

• Multi-asset class strategies smoothen the ride

• Protects on the downside during extreme falls witnessed from a single asset class

• Makes returns more predictable

The above illustration has been carried out for indices which are passively managed. Our experience has been that

actively managed strategies have been able to generate significant alpha. Thereby, we believe the upside benefit is

higher in case of actively managed strategies. Consequently, the same can be depicted from the below table.

Fixed Income 75%; Equity: 25% Fixed Income 50%; Equity: 50% Fixed Income 25%; Equity: 75%

1 year 3 year 5 year 1 year 3 year 5 year 1 year 3 year 5 year

Period of analysis: March 2002 to April 2018

Equity is represented by Nifty 50 & Debt is represented by CRISIL Short term bond Index

10.4%

28.1%

-8.2%

180

9 (5.%)

41 (22.8%)

10.0%

21.7%

5.2%

158

0.0%

13 (8.2%)

9.8%

20.3%

5.6%

132

0.0%

3 (2.3%)

13.6%

48.9%

-22.7%

180

19 (10.6%)

43 (23.9%)

12.3%

35.2%

2.4%

158

0.0%

27 (17.1%)

11.6%

30.2%

3.6%

132

0.0%

14 (10.6%)

16.7%

70.6%

-37.4%

180

30 (16.7%)

45 (25.0%)

14.3%

46.4%

-0.6%

158

2 (1.3%)

32 (20.3%)

13.2%

37.8%

1.4%

132

0.0%

18 (13.6%)

For indices:

Fixed Income 75%; Equity: 25% Fixed Income 50%; Equity: 50% Fixed Income 25%; Equity: 75%

1 year 3 year 5 year 1 year 3 year 5 year 1 year 3 year 5 year

13.7%

38.3%

-6.2%

179

7 (3.9%)

26 (14.5%)

13.5%

33.9%

6.0%

157

0.0%

0 (0.0%)

13.0%

30.6%

6.9%

131

0.0%

0 (0.0%)

19.8%

70.2%

-21.1%

179

17 (9.5%)

34 (19.%)

18.2%

54.1%

2.7%

157

0.0%

9 (5.7%)

16.8%

44.3%

6.0%

131

0.0%

0 (0.0%)

25.9%

102.2%

-36.2%

179

25 (14.%)

40 (22.3%)

22.3%

70.0%

-1.0%

157

2 (1.3%)

14 (8.9%)

20.0%

54.1%

5.2%

131

0.0%

2 (1.5%)

For actively managed strategies:

For active managers, Franklin India Prima Plus, HDFC Equity Fund and Sundaram Select Midcap have been considered for Equity and Aditya Birla SL Short Term

and SBI Magnum InstaCash Cash has been considered for Debt

Portfolio

Holding Period

Average

Max

Min

Number of observation

Number of times below 0%


Portfolio

Holding Period

Average

Max

Min

Number of observation



MAY 2018 | ISSUE 65 15

Hind-sight Investing

We are well aware of the disclaimer “past performance is no guarantee of future results”. Despite this the most common

method of investing in mutual funds remains by looking at the past performance. It’s quite intuitive to assume that

something that was a good investment in the recent past is still a good investment.

However, it’s not that simple. Our study shows that there is a limited probability of getting investment decisions right

which are solely based on historical data. Let us illustrate this with some examples of the recent past.

The below table comprises of last 17 years of data which to our mind is comprehensive. Funds were ranked based solely

on performance for pre-defined time buckets. As you can see, in the 1 year bucket 36% of the funds continued to be top

performers and 64% could not retain their position. Similarly, in the 3 year bucket 68% of the funds could not retain their

position.

If we translate the above numbers in terms of probability, your chance of selecting a top performing fund basis past

performance is lesser than winning a coin toss!

Just like we don't drive a car looking at the rear view mirror, investment decisions too should not be based on mere past

performance. In fact to our mind one needs to go beyond the norm of return based analysis to arrive at investment

decisions.

As the age old adage goes “bet on the jockey, not the horse”, the same holds true for investment wherein you lay your bet

on the manager and not the fund. So how does one go about it? In line with our philosophy of empowering you, we take

this opportunity to provide you an understanding of our “manager selection methodology”.

(Methodology notes: Date range period 2000-2017, calendar year returns, all open-ended equity schemes, AUM cut off

250cr as on 31st Dec 2017)

Review period: 2000 - 2017

Investments in top performing funds based on 1 – 3 yr track record

Top funds basis

1 yr performance

Rank after1 year

Q1 - 36%

Q2 - 24%

Q3 - 20%

Q4 – 20%

Rank after3 year

Q1 - 33% Q1 - 32%

Top funds basis

1 yr performance

Top funds basis

3 yr performance

Q2 - 34%

Q3 - 16%

Q4 – 17%

Q2 - 33%

Q3 - 18%

Q4 – 17%

Rank after3 year

The top 25% of the funds on basis of performance are assigned Q1, next 25% are assigned Q2 and so on.


MAY 2018 | ISSUE 65 16

Decoding Investment Style

Past performance is just the tip of the iceberg - A consistent and a transparent portfolio management approach

contributes to the sustainable long term returns

As investors and advisors, we tend to get swayed by the recent past performance while making our investment

decisions and overlook the underlying philosophy and process which would contribute towards the future returns.

Moreover, history suggests that the process for selecting funds only on the basis of past performance may not be a full

proof procedure in the future. Thus, we believe that in generating sustainable long term performance, skill plays a

major role rather than luck and to assess the skills of a fund manager, it becomes pertinent to understand the

consistency in their fund management approach.

Like any sportsman who demonstrates their styles in different terrains, we are of the view that every manager has a

different style and approach for stock picking and portfolio construction. Through our detailed due diligence process,

we aim to understand the capabilities, consistency and experience of the Fund manager and substantiate their

investment style with their past and current investments.

Through our analysis and research, we have devised a which basically states that an investment style

oscillates between two extremes of investing i.e. and while the other blended

styles of investment like and lies in between the two extremes. When a manager sticks to

picking stocks which are out of favor or below their average valuations and expect these stocks to revert back, then

these managers are demonstrating a mean reversion investment style. For example, ICICI Fund Managers are known for

their value style of investing. On the other hand, if the manager foresees a sustainable growth in the earnings of a

company and is ready to pay a premium for the stock, then the fund manager belongs to growth style of investing. For

example, Motilal Oswal Fund Managers believe in ‘QGLP’ and exhibit earnings momentum investment style.

In an investment world where more choices may lead to more confusion, it is important to understand the style of the

Fund Manager rather than the standalone performance of the funds.

To put into the perspective of quantifiable numbers, we have exhibited the styles of the managers through portfolio

attributes (P/E, P/B and RoE) over a period of three years, as shown in the bubble chart.

For

example, a fund with relatively low P/B and low P/E would represent a mean reversion style of investing, while a fund

with relatively high P/B, high P/E and higher RoE would represent earnings momentum style. Except for a few funds,

most of the funds represent a blended investment style which is a mix of value and growth style

‘Fund Stylometer’

Mean reversion Earnings Momentum

Value, Blended Growth

Also, since different managers exhibit their

strengths in different market conditions, it is viable to construct a portfolio with appropriate combination of

investment styles which in turn would minimize duplication and over diversification.

The bubble chart aims to show

the relative positioning of each fund with respect to their investment style with the peers and benchmark.


Mean

Reversion

Value Blended Growth Earnings

Momentum

Note: Over a period of 3 years, X Axis represents monthly average of P/B , Y Axis represents monthly average of P/E ,

Size of the bubble represents monthly average of RoE

Positioning of Multi Cap Funds

Period: March 2015 - March 2018

20.1

13.1

15.9

17.3

16.6

24.2

21.9

13.8

11.4

16.7

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

3 yrs Average P/B

Aditya Birla SL Equity Franklin India High Growth Cos Franklin India Prima PlusICICI Pru Multicap ICICI Pru Value Discovery MOSt Focused Multicap 35Invesco India Contra L&T India Value Fund Nifty 500

Kotak Select Focus Fund

High P/B

Low P/E

Low P/B

3 y

rs A

vera

ge P

/E

MAY 2018 | ISSUE 65 17

With markets making historical highs there is a lot of time and ink getting consumed giving views on valuations. One of

the views being that valuations are above long term average and the parameter used to arrive at this view is price

earning multiple. To our mind formulating views solely based on this parameter has certain pitfall. For instance

historically higher price earning phases have been backed by high growth momentum which in today’s scenario is

different. Earnings seem to be the missing ingredient over the past couple of years. Thus there is a need to use multiple

parameters rather than confining oneself to a single variable in order to make investment decisions more full proof. In

our view one needs to take into account risk reward in order to arrive at margin of safety which is critical and forms the

basis for any investment decision.

We are cognizant of the fact that investments are tuned to meet your objectives and thus calling for a suitable asset mix

basis your investment objective. In addition we believe that investors should have a disciplined investment approach

with respect to asset allocation and should not get swayed by market sentiments to avoid accidents. Deviation from the

strategic asset mix should be under circumstances having favorable risk reward. Ideally a prudent investment decision

revolves around the principle of increasing equity exposure when markets are cheap and allocate less when markets are

expensive. However the challenge always remains to accurately estimate when the market is cheap or expensive. In

order to arrive at the decision of preferring equity over debt or vice versa, we believe earning yield to bond yield is an

excellent parameter to consider. This ratio indicates the perceived risk differential between equity and bonds.

Historically whenever earnings yield and bond yield spreads are above 0.8, equities are considered to be undervalued.

For instance at the time of demonetization which coincided with U.S election, one witnessed a sharp fall in yields

making investment in equity compelling on the back of relative valuations. Likewise, any number below .6 suggests

merit in having the portfolio tinted towards debt.

The earning yield to bond yield parameter along with our in-house indicator of market valuations named as MOVI – The

Motilal Oswal Valuation Index enables us to arrive at a well-researched and thought through asset class outlook. So

what is MOVI and what are the variables considered? MOVI is basically an index which is calculated based on the Price to

Earnings (PE), Price to Book Value (PB) and Dividend Yield (DY) on the components of Nifty 50. By means of an algorithm

the weighted average PE, PB and DY of the components of Nifty 50, one arrives at index. A higher level on the MOVI

means markets are expensive and hence one should reduce equity exposure while a lower level on the MOVI means

markets are attractive and hence one should overweight equity exposure.

With the above mentioned input variables we have crafted a unique model coined as temperature gauge which help in

making investment choices across asset classes. The objective of the strategy is to reduce volatility and keep investors

shielded from the sharp falls that are sometimes seen after sustained rise in equity prices.

So how has this fared in the past?

Temperature Gauge


MAY 2018 | ISSUE 65 18


In the above graph the earning yield is plotted against the x axis and MOVI on the Y axis. The data considered is

represented from the bottom of the market in 2002 till date which basically encompasses two full market cycles of

boom and bust. It is quite evident from the above graph that as the market tends to move towards top right corner,

there are several instances of negative returns and a cautious approach is recommended. However, as the market

moves towards bottom left corner, there are more instances of 18%+ returns from a 3-year forward perspective and

recommend investors to invest aggressively.

This qualitative and quantitative process would enable us to construct “winning portfolios” for our clients. In line with

our philosophy of providing better insights to you, we hope you find the same informative.

3-yr forward NiftyActive

Manager

Average

Max

Min

% times >0%

10%

46%

-9%

97%

19%

54%

-8%

97%

<0%

0-10%

10-18%

18%+

Current

MOVI

40

60

80

100

120

140

160

0.81.01.21.41.61.8

1.53 1.2 0.62 0.54

68%

95%

Fair Value ZoneAttractive Zone

Expensive

Zone

52% of the

observation

lies in this area

0.6

Temperature Gauge – Our internal market thermometer

0.4

EY-BY 0.4-

0.6-

0.8-

1.0-

1.2-

1.4-

1.6-

-

-

-

-

-

-

140

120

100

80

60

40

EY-BY

0.54

MOVI

115.6

Period of analysis: Jan 2002 to April 2018

MOTILAL OSWAL PRIVATE WEALTH MANAGEMENT (MOPWM) - INVESTMENT GRID (May 2018)

Asset Class Holding Period Theme Strategy Managed Solutions

1 Year

< 3 Years

Equity

Fixed Income

Alternatives

Valuations (TTM) trading slightly above its long term average

Revival in rural economy & consumption, deep value,

cyclical recovery

Growth through diversification

Low duration, taxation benefit

Play on short term rates coming off, Capital Preservation

(low credit risk)

Large caps, Dynamic Equity Funds

Multi-cap

Diversified Strategy

Arbitrage/Ultra Short Term Funds/ Low

Duration Funds Long-short funds

High Quality Shot Term Funds,

Structured Products

> 3 Years Coupon + Capital Appreciation Credit Opportunties Funds

3 Years & above

Accommodative central bank policies and reduced likelihood of

US rate hikeSovereign Gold Bonds, Gold ETFs> 3 Years --

M0 NTDOP PMS, ASK Indian Entrepreneur Portfolio, ASK Select

Portfolio, Renaissance All Cap, Franklin India High Growth Cos, Franklin

India Prima Plus, MOSt Focused Multicap 35, M0 NTDOP PMS, Aditya

Birla Equity

MAY 2018 | ISSUE 65 19

Investment GridAlpha Strategist | “Crossroads”

MO Value PMS, Motilal Oswal F25, Aditya Birla SL Top 100, Aditya Birla

SL Focused Eq, ICICI Pru BlueChip Eq, SBI Bluechip , Motilal Oswal

Dynamic, Avendus Enhanced Return

IDFC Arbitrage, Kotak Equity Arbitrage , Invesco India Arbitrage, ICICI

Pru Equity Arbitrage, ABSL Savings, Franklin India Ultra Short, Franklin

Low Duration, ICICI Pru Savings, UTI Treasury Advantage

BNP Paribas Corporate Bond, IDFC Corprate Bond, Aditya Birla

Corporate Bond, IDFC SSIF-ST, ICICI Pru ST Plan, 1-3 yr Fixed Income

Structured Products, FMPs

IDFC Credit Opps, HDFC Credit Risk Bond, ICICI Pru Credit Risk,Reliance

Credit Risk, Franklin STIP, BOI Axa Credit Risk, ABSL Medium Term, LnT

Resurgent India Bond, Reliance Classic Bond, Franklin India Income Opp

Renaissance India Next, Ashmore India Opportunities Fund, Invesco

RISE & DAWN Portfolio, DHFL Pramerica Deep Value PMS, Invesco India

Contra Fund, L&T India Value Fund, ICICI Pru Value Discovery

10-12 YearsHigh equity upside based Alternative

Investment FundsIndia Business Excellence Fund III

Investment in mid-market enterprises that are typically market

leaders which are generally managed by first-generation

entrepreneurs specially from consumer, financial services,

pharma & niche manufacturing sectors

5 - 7 yearsInvesting in early stage mezzanine/

structured equity transactions with

reputed developers from top 6 citiesIndia Realty Excellence Fund IV

Affordable Housing space

MAY 2018 | ISSUE 65 20

Our Recommendations


Portfolio Management Services (PMS)

* PMS performance are net of all expenses & fees

Absolute

1 Year 3 Years 5 Years

MOPWM

RatingScheme Name

CAGRStd Dev Beta Alpha

Info.

Ratio

Avg 1 yr

rolling

return

Mααα 12.6

14.8

18.8

14.0

10.5

28.9

3.5

Mααα

Mααα

9.4

19.6

15.4

15.4

10.8

—

19.0

PMS Strategies*

16.6

10.8

6.6

12.1

8.7

24.3

12.7

14.6

8.2

14.1

15.3

15.5

19.1

14.6

9.3

11.5

9.2

17.4

17.9

15.9

12.2

21.3

13.5

12.0

—

21.1

22.1

19.5

21.5

24.4

26.5

22.6

18.8

22.4

19.7

15.4

18.6

14.6

10.1

11.7

9.6

17.3

17.9

15.9

12.4

20.6

—

12.2

14.1

13.6

15.6

12.8

13.0

14.9

15.8

14.6

12.9

15.5

—

13.9

0.90

0.95

1.04

0.90

0.89

1.04

1.07

0.99

0.85

1.03

—

1.00

7.0

4.9

-2.3

0.1

-1.9

4.8

5.3

3.7

1.1

8.2

—

—

1.0

1.0

-0.4

-0.2

-0.6

1.3

1.0

0.8

0.0

1.4

—

—

Mααα

Mααα

Mαα

Mαα

Mαα

2.8

14.1

16.2

33.6

12.1

13.0

15.8

11.1

15.8

12.2

Mααα

Mαα

Mαα

Mααα

12.2

18.2

18.6

23.9

15.8

18.4

18.1

19.7

17.1

16.9

—

27.7

27.8

25.8

26.4

27.7

31.0

34.2

27.3

21.0

12.6

17.9

18.3

23.0

15.7

18.4

17.7

19.7

—

16.7

14.5

15.2

15.4

16.7

13.7

16.7

14.3

17.6

—

16.2

0.77

0.89

0.92

0.95

0.80

0.96

0.82

0.98

—

1.00

-1.7

2.4

2.5

6.8

1.1

2.1

3.0

3.2

—

—

-0.5

0.2

0.4

1.0

-0.2

0.3

0.2

0.4

—

—

Mααα

Absolute

1 Year 3 Years 5 Years

MOPWM

RatingScheme Name

CAGRStd Dev Beta Alpha

Avg 1 yr

rolling

return

AUM

(in Rs. Cr.)Info.

Ratio

Mααα 14.3

15.7

10.5

11.3

11.8

12.5

15.4

Mααα

Mαα

Mαα

Large Cap Funds

12.6

12.3

11.2

11.8

11.6

10.5

9.5

18.7

17.1

17.8

—

17.3

15.6

12.6

12.7

12.5

11.5

12.0

11.8

—

9.8

12.5

13.1

13.1

13.0

13.0

—

13.5

0.88

0.94

0.93

0.81

0.94

—

1.00

3.3

2.9

1.9

2.9

2.2

—

—

0.7

0.8

0.4

0.3

0.6

—

—

Mαα

—

—

—

10.1

11.0

9.6

12.0

10.9

12.4

Balanced Funds

Aditya Birla SL Equity Hybrid ’95 Fund

ICICI Pru Equity & Debt Fund

Franklin India Balanced Fund

HDFC Hybrid Fund

Mααα

Mααα

Mαα

Mαα

Category Average

CRISIL Balanced - Agg Index

11.7

12.6

9.5

12.5

10.1

11.2

17.2

18.2

16.2

19.5

15.7

13.5

11.7

12.4

9.5

12.3

—

11.1

10.2

10.3

8.9

10.4

—

9.0

1.10

1.09

0.96

1.14

—

1.00

0.1

0.9

-1.3

0.6

—

—

0.2

0.4

-0.7

0.5

—

—

14,662

28,806

2,087

21,779

—

—

—

—

Mααα

Mα

—

Mααα

Mααα

Mααα

18.0

31.0

27.0

27.4

—

—

22.4

9.9

19.4

15.3

15.3

11.2

—

19.3

13.5

17.8

13.4

13.4

13.7

—

18.1

0.89

0.94

0.75

0.77

0.92

—

0.92

0.5

3.4

4.7

5.8

-0.5

—

3.4

0.0

0.3

0.3

0.5

-0.2

—

0.2Mααα

AUM

(in Rs. Cr.)

Mααα

Mαα

Mααα

Mαα

Arbitrage Funds

Mααα

Mαα

—

—

Mααα

—

MOSt Value Strategy

MOST NTDOP Strategy

ASK IEP Strategy

ASK SELECT Strategy

DHFL DV

RISE Strategy

MOST IOP Strategy

Equity Mutual Funds

2,767

8,012

6,361

3,013

598

447

4,355

15,236

17,142

4,212

1,003

20,451

—

—

Category Average

NIFTY 50

SBI BlueChip Fund

ICICI Pru BlueChip Equity Fund

Aditya Birla SL Focused Equity Fund

Motilal Oswal Focused 25 Fund

Aditya Birla SL Frontline Equity Fund

12,213

17,853

7,602

11,848

16,652

1,450

8,073

9,251

2,856

2,606

—

—

Multi Cap Funds

Motilal Oswal Multicap 35 Fund


Franklin India Focused Equity

Franklin India Prima Plus Fund

ICICI Pru Value Discovery Fund

Invesco India Contra Fund

L&T India Value Fund

Aditya Birla SL Equity Fund

ICICI Pru Multicap Fund

Sundaram Rural & Consumption Fund

Category Average

NIFTY 500

1,279

3,005

21,357

3,647

6,686

6,551

7,517

6,248

—

—

Small & Mid Cap Funds

Motilal Oswal Midcap 30 Fund

Kotak Emerging Opportunites Fund

HDFC Mid-Cap Opportunities Fund

HDFC Small Cap Fund

Franklin India Prima Fund

Sundaram Midcap Fund

Franklin India Smaller Cos Fund

DSPBR Small Cap Fund

Category Average

Nifty Free Float Midcap 100

IDFC Arbitrage Fund

ICICI Pru Equity-Arbitrage Fund

Kotak Equity Arbitrage Scheme

Invesco India Arbitrage Fund

Category Average

Crisil Liquid Fund Index

Mαα

Mααα

Mααα

-3.1

-2.7

-2.7

-2.5—

—

-0.9

-0.9

-0.8

-0.8—

—

2,288

8,686

11,257

347—

—

5.8

5.86.1

5.95.86.9

6.1

6.3

6.4

6.26.37.3

7.2

7.3

7.3

7.07.18.1

6.0

6.1

6.2

6.1—

—

0.4

0.4

0.4

0.5—

—

0.79

0.97

0.92

0.84—

—

MAY 2018 | ISSUE 65 21


IDFC Coporate Bond Fund

BNP Paribas Corp Bond Fund

IDFC SSIF-ST Fund

Aditya Birla SL Corporate Bond

Franklin India IBA-A*

Crisil Composite Bond Fund Index

4.5

1.8

4.0

4.7

5.4

0.8

3.2

2.5

3.0

3.7

4.5

-1.2

5.8

5.5

5.3

6.0

6.8

3.7

—

7.6

7.1

8.0

7.9

7.6

—

7.9

7.8

8.6

8.6

7.9

1.7

3.1

1.6

1.6

2.0

—

8.1

8.3

8.1

8.2

9.1

—

96.3

90.4

96.4

79.2

14.4

—

—

7.7

—

16.4

80.4

—

—

—

—

—

0.8

—

3.7

1.9

3.6

4.5

4.4

—

11,456

91

4,344

17,330

885

—

Accrual Funds - High Quality

M

M

M

M

M

M

M

ααα

ααα

αα

ααα

ααα

αα

αα

M

M

M

ααα

ααα

αα

Category Average


6.3

4.8

7.0

4.5

6.2

4.2

2.3

4.6

5.5

2.8

4.7

0.8

5.0

3.9

6.8

3.2

5.3

3.4

1.4

3.6

4.1

2.0

3.9

-1.2

7.7

6.7

8.3

5.8

7.6

5.9

4.9

5.5

6.4

5.5

6.3

3.7

8.2

8.5

9.7

—

8.3

8.0

8.1

8.1

7.9

8.2

8.3

7.6

9.1

9.5

—

—

9.0

8.6

—

8.5

8.4

—

8.8

7.9

9,769

11,536

1,495

11,456

3,466

10,752

2,495

5,205

10,409

8,131

—

—

Credit Opportunities Fund

Category Average

Dynamic Bond Fund


7,477

1,435

1,970

3,160

—

—

M

M

M

M

ααα

ααα

αα

αα

0.1

4.9

0.9

-0.1

1.1

0.8

2.6

4.0

3.0

1.6

3.4

3.7

-3.5

-0.3

-1.7

-2.8

-1.0

-1.2

6.5

8.1

7.4

6.4

6.5

7.6

8.1

10.6

7.2

7.4

7.3

7.9

48.5

80.1

92.3

98.0

—

—

43.5

12.2

7.6

—

—

—

2.0

—

—

—

—

—

6.0

7.8

0.2

2.0

—

—

Franklin India ST Income Plan *

Aditya Birla SL Medium Term Fund

BOI AXA Credit Risk Fund

IDFC Corp Bond Fund

Franklin India Income Opportunities Fund

Reliance Credit Risk Fund

L&T Resurgent India Corp Bond Fund

HDFC Credit Risk Bond Fund

ICICI Pru Credit Risk Fund

Reliance Classic Bond Fund

Aditya Birla SL Dynamic Bond Fund

UTI Dynamic Bond Fund

SBI Dynamic Bond

IDFC Dynamic Bond Fund

—

—

—

—

Category Average

Ultra Short Term

Crisil Liquid Fund Index

21,053

19,753

5,421

12,880

9,845

—

—

M

M

M

M

M

ααα

ααα

ααα

αα

αα

6.6

6.9

7.5

7.9

6.4

6.4

7.3

6.7

6.9

7.8

7.9

6.6

6.5

6.9

5.7

6.0

6.3

7.1

6.0

5.6

6.9

8.0

8.2

9.0

9.0

7.9

7.5

7.3

8.6

8.7

9.3

9.4

8.9

8.1

8.1

80.4

66.5

24.6

27.1

81.6

—

—

17.5

31.2

68.6

70.2

15.7

—

—

—

—

5.0

—

—

—

—

2.1

2.3

1.9

2.7

2.7

—

—

ICICI Pru Saving Fund

Aditya Birla SL Savings Fund

Franklin India Low Duration Fund

Franklin India Ultra Short Bond Fund

UTI Treasury Advantage Fund

—

—

M

M

—

ααα

αα

M

M

M

αα

αα

αα

9.7

20.8

32.0

96.3

11.9

4.3

78.1

30.8

9.0

16.6

—

—

75.5

66.1

51.6

—

78.2

87.2

19.3

62.1

83.1

80.0

—

—

12.4

8.8

12.9

—

7.6

5.3

—

—

3.8

—

—

—

2.5

4.2

3.5

3.7

2.2

3.3

2.6

5.7

4.1

3.4

—

—

1.9

1.8

1.5

1.7

1.8

1.9

2.8

1.5

1.7

2.5

—

—

10.1

9.9

11.3

8.1

9.8

9.8

8.7

8.8

9.8

9.2

—

—

3.5

2.2

1.9

3.1

—

—

8.9

8.4

7.1

8.0

—

—

0.9

0.7

1.3

0.7

0.7

—

—

8.0

8.0

8.8

8.9

8.0

—

—

Fixed Income Mutual Funds

3 Month 6 Month 1 Year 3 Years 5 YearsMod Dur

Gross

YTM(%)

Sov,

Equivalent

AAA & AA+ &

BelowUnratedScheme Name

MOPWMRating

Simple Annualised CAGRCall & Cash

AUM

(in RS Cr.)

M

M

M

ααα

αα

αα

3.9

4.4

3.7

4.4

5.1

2.7

3.4

2.6

3.4

3.5

5.6

5.5

5.4

5.6

5.5

7.7

7.4

7.8

7.3

7.6

8.8

7.8

8.2

7.8

8.3

—

—

—

—

—

5.0

2.1

2.9

—

—

5,010

5,709

9,123

—

—

Short Term Income

Aditya Birla SL ST Opportunities Fund

Axis Short Term Fund

ICICI Pru Short Term Plan

Category Average

Crisil Short Term Bond Fund Index

60.7

89.6

91.1

—

—

34.3

8.3

6.0

—

—

—

—

1.8

1.5

1.7

—

—

8.6

8.1

8.1

—

—

^Less than 1 year period from date of recommendation; Returns less than or equal to 1 year are absolute return & more than 1 year period calculated by CAGRData as on April 30, 2018

Performance of our equity recommended schemes from the date of recommendation

Benchmark

Value

NTDOP

IOP

ASK IEP

ASK SELECT

Invesco R I S E

Invesco Dawn

DHFL Deep Value

Old Bridge All Cap

Old Bridge Thematic

Ashmore

MO AIF B1

MO AIF B2

FundBenchmark

12.0

18.4

16.9

11.2

24.0

19.5

9.7

15.6

16.8

14.1

19.7

18.4

18.4

01-Oct-12

01-Oct-12

01-May-15

01-Aug-15

01-Jan-17

18-Apr-16

27-Aug-17

01-May-17

30-Aug-16

30-Aug-16

30-Apr-17

01-Mar-17

01-Mar-17

16.0

29.5

19.0

14.9

26.3

28.6

-3.4

10.5

34.7

29.4

7.7

11.9

12.3

Nifty 50

Nifty FF Midcap 100

Nifty FF Midcap 100

S&P BSE 500

S&P BSE 100

S&P BSE 500

S&P BSE 500

Nifty 500

S&P BSE 500

Nifty 50

BSE Small Cap

S&P BSE 200

S&P BSE 200

RecommendationDatePMS

Large Cap Nifty 50

Multi Cap Nifty 500

20.8

16.4

11.7

17.3

12.2

11.9

BenchmarkScheme FundRecommendation

Date

01-Dec-16

01-Apr-15

01-Jan-13

01-Apr-16

01-Apr-14

01-Jan-17

19.7

9.6

15.8

21.1

19.3

24.1


Aditya Birla SL Top 100 Fund

ICICI Pru Focused BlueChip Equity Fund

MOSt Focused 25 Fund

SBI BlueChip Fund-Reg


14.8

18.2

20.5

15.7

11.5

17.3

17.3

26.1

01-Oct-15

01-Oct-13

01-Apr-16

01-Apr-14

01-Apr-15

01-Apr-17

01-Apr-17

01-Jan-17

11.7

22.1

19.2

20.4

16.3

25.2

17.7

24.6

Franklin India High Growth Cos Fund






Sundaram Rural India Fund



MAY 2018 | ISSUE 65 22

Section II

Macro Economy...................................................................................................23

Equities...............................................................................................................29

Fixed Income.......................................................................................................34

Alternatives.........................................................................................................37


MAY 2018 | ISSUE 65 23

Macro Economy


US Fed’s outlook remains

positive and rate hikes

remain on course

The US Fed left rates unchanged in their recent meet but going by their outlook, rate hikes

remain on course. The recent spike in inflation means that the next hike is expected in the

central bank’s June meeting. US GDP data was released recently and it was lower than the

previous quarter. The slowdown is likely caused by the reduced pace of consumer spending

and residential fixed investment. Yet, the economy is growing at a decent pace and looks on

track for continued expansion. Also, the US is expected to receive a substantial amount of

fiscal stimulus this year through tax reform and the passing of another federal bill.

Despite the China trade spat, the Fed remains optimistic on economic growth. A full blown

trade war scenario between the US and China still looks unlikely and negotiations should

prove to be a diffuser but as long as the issue remains unsettled, uncertainty will keep a cap

on global markets. Meanwhile US treasury yields went past the 3% mark and the dollar

rallied subsequently.

US expansion remains on track despite lower GDP

GDP YoY

Inflation rate

10yr Gsec

Policy rate

2.90%

2.40%

2.94%

1.75%

2.00%

1.10%

0.05%

-0.10%

6.80%

2.10%

3.68%

4.35%

2.90%

1.60%

0.56%

0.00%

2.10%

1,6%

0.78%

0.00%

1.20%

2.50%

1.43%

0.50%

2.50%

1.30%

-0.44%

0.00%

US Japan China Germany FranceUnited

KingdomEuro Area

Major Economies - Snapshot

Emerging Economies - Snapshot

GDP YoY

Inflation rate

10yr Gsec

Policy rate

7.20%

4.28%

7.76%

6.00%

5.10%

3.41%

6.96%

4.25%

2.10%

2.68%

9.87%

6.50%

1.20%

5.04%

7.54%

7.50%

2.80%

1.60%

2.75%

1.50%

3.40%

2.60%

2.20%

2.00%

0.90%

2.40%

7.27%

7.25%

India Indonesia Brazil Mexico South Korea RussiaHong Kong

US Trade deficit with China continues to balloon

Source: U.S. Bureau of Economic Analysis

0.6

2.2

2.8

1.8

1.2

3.1 3.22.9

2.3

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2016 2016 2016 2016 2017 2017 2017 2017 2018

US GDP (annualized % growth)

After expanding for twenty straight quarters, the Euro zone recorded its slowest growth in a

year and a half, causing concern for investors. A stronger euro currency and slower

economic activity are making investors question if the central bank could stick to their plan.

The cause for the slowdown has not been pinpointed yet but the suspects are lower exports

and bad weather conditions.

Slower Eurozone growth stokes concerns


MAY 2018 | ISSUE 65 24

ECB’s stance in

question in the

face of slowdown

Meanwhile concerns surrounding the impact of the US-China trade spat and Brexit have

bubbled up. The ECB, which was planning to end its bond buying program this year, is

viewing upcoming data with caution. The central bank was relying on growth to eventually

boost inflation. Yet Eurozone’s purchasing managers’ index, which tracks activity such as

order books and inventory, signaled that the slowdown is likely to be temporary and

expansion could return soon.

Despite continued growth, Japan faces testing year ahead

Japan’s recovery continues to remain robust and growth is likely to continue through the

year, albeit at a slower pace. The slowdown was caused by a hit to exports and lower

consumer spending due to increased prices of daily goods. Some important factors will test

the economy’s resilience this year. A potential increase in sales tax is likely to be levied

which could cause the nation’s growth to slow down. Japan will be cautious this time

around because the last time taxes were raised, the country was hit by a recession as a

result. Also, the Bank of Japan is likely to wind down stimulus if it hits its inflation target. It is

already halfway to the target and is showing signs of increased growth.

Meanwhile Japan and China are holding an economic dialogue after eight years on the

back of the US trade threats. This could set the stage for new trade dialogues between

Japan and China at an important time, as they both will be directly or indirectly affected by

the US trade spat.

With inflation increasing,

the BoJ is likely to

withdraw stimulus

China’s service sector shines in April

Amidst trade negotiations with the US, China’s service sector was boosted in April by faster

new business and employment growth. This is a testament to China’s reduced dependency

on their manufacturing sector and rise in their services sector. This will in turn boost the

domestic demand in the country at an important time. Rising wages are giving consumers

more spending power at home. Meanwhile, new business orders accelerated further due

to better market conditions. Both manufacturing and service sectors are showing

increased signs of firming growth.

Concern remains around the US trade talks. After a round of discussions, no substantial

outcome was achieved but discussions are likely to continue. While some undisclosed

trade issues were resolved, disagreement has been mentioned on other matters.

China’s economy shows

signs of firming growth

amidst US trade talks

China’s trade advantage over the US

Source: United States Census Bureau

0

100,000

200,000

300,000

400,000

500,000

600,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

in $ mn US Goods Exports to China US Goods Imports from China


MAY 2018 | ISSUE 65 25

Indian Economy

IMD expects normal monsoon in 2018

The Indian Meteorological Department (IMD) released its first forecast for the 2018

southwest monsoon (June-September) rainfall with expectations of normal monsoon. It

expects monsoon rainfall at 97% of the long period average (LPA) with very less probability

of experiencing a deficit monsoon. Earlier, Skymet, a private weather forecasting agency,

also predicted southwest monsoon rainfall at 100% of LPA.

These, however, are early forecasts. Timely arrival of monsoons, followed by healthy

monthly and regional distribution, would be crucial. Meanwhile, storage levels in

reservoirs are showing faster depletion. As of mid-April, water storage at 91 major

reservoirs in the country stood at 84% of what is considered normal, compared with 90%

for the same period last year.

Importantly though, the IMD's April forecasts for rainfall are not very reliable. The actual

rainfall has deviated significantly from the forecasts in four out of the last five years and the

deviation has been a downward revision during the three years, 2014 to 2016. With rising

tensions about farmers' distress, general elections in 2019 and the fact that winter

monsoon (January-February) rainfall in 2018 was the worst (only ~38% of normal rainfall)

in at least 26 years, 2018 southwest monsoon holds special significance.

Low probability of

a deficient rainfall

Only 14% probability of deficient rainfall Deviation of actual rainfall from initial forecasts

Source: IMD Source: IMD

CRISIL: Credit quality of Indian firms improved in FY18

As per the latest report by CRISIL, debt rating upgrades outpaced downgrades in FY18.

There were 1402 upgrades against 839 downgrades in FY18, leading to a credit ratio of 1.67

times, better than 1.22 times reported in FY17. Also, debt weighted credit ratio for FY18

stands at 2.31 times much higher than 0.88 times recorded in the previous financial year.

The downgrade rate for FY18 stands at 5.9%, the lowest in the past five fiscals, indicating a

sustained recovery in credit quality. This has helped the credit ratio stay above 1 for the

fourth consecutive financial years.

We expect resolution of stressed assets to provide much-needed respite from FY19

onwards as gross NPAs are expected to peak. However, this may be offset by recognition of

new NPAs stemming from recent revisions to the resolution framework for stressed asset

by the RBI. Going forward, with both domestic and global demand expected to improve,

and transitory impact of demonetization and GST fading out, we expect credit quality

improvement to sustain in FY19.

Expect credit quality

to improve further

in FY19

Deficient (<90)

14%

Below Normal

(90-96)

30%Normal

(96-104)

42%

Above Normal

(104-110)

12%

Excess (>110)

2%

-0.1

-19.5

4.3 3.5

-6.7

7.8

-7.7 -7.9 -8.4

-1.3

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Deviation of actual rainfall from IMD’s 1st forecasts


MAY 2018 | ISSUE 65 26

Retail inflation eases to 5-month low

CPI-based retail inflation eased to a five-month low of 4.3% YoY in March 2018, from 4.4% in

the preceding month. After rising continuously for 6-months (July-Dec 2017) and touching

17-month high of 5.2% in Dec 2017, retail inflation has started to ease since January 2018

onwards.

The decline in headline inflation was largely on account of a sharp drop in vegetables

inflation (6.04% weight in CPI), which fell to 11.7% YoY in March 2018 from 17.6% and 27%

in the preceding two months. This alone contributed as much as 32 bps fall in MoM

headline number. Core inflation (all items excluding ‘food & beverages’ and ‘fuel & light’)

inched up to 5.2% in March 2018, touching its highest level in 43 months.

Lower-than-expected inflation over the past few months makes us believe that, although

inflation is set to rise in Q1FY19, it is unlikely to exceed 5.5%. Thereafter, a high base should

pull down CPI inflation closer to ~4% in H2FY19. Our full year FY19 average inflation

estimate is 4.4%, in line with the RBI’s estimate of 4.5%. Consequently, we believe that the

RBI is likely to look through such statistical effects and maintain status quo in 2018.

While retail inflation

eases, core inflation

inches up

Retail inflation eases to 4.3% in March 2018…

Source: CSO

…primarily driven by vegetables

Source: CSO

Wholesale inflation eases slightly

Wholesale inflation eases slightly, touching 8-month low of 2.47% in the month of March.

This was fourth consecutive month where wholesale inflation continued to ease, however,

the extent of easing moderated significantly.

On segment-wise basis, the overall primary goods category inflation eased further to 0.2%

in March from 0.8% in the previous month mainly due to dip in foods articles (-0.3%

compared to 0.9% in February). Manufactured products group inflation was almost the

same at 3.0% as compared to the previous month. However, the inflation in fuel, power and

light group surged to 4.7% in March as against 3.8% in the previous month.

Going ahead, spike in global crude oil prices as well as domestic vegetable prices, would

keep the WPI inflation firm. Also, unfavorable base effect is likely to push up inflation.

Overall, we expect WPI to move up to 3.9% for FY19 as compared to average of 2.9% in FY18

and 1.8% in FY17.

Wholesale inflation

eases slightly,

touches 8-month low

4.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Jul-

13

No

v-1

3

Ma

r-1

4

Jul-

14

No

v-1

4

Ma

r-1

5

Jul-

15

No

v-1

5

Ma

r-1

6

Jul-

16

No

v-1

6

Ma

r-1

7

Jul-

17

No

v-1

7

Ma

r-1

8

CPI (% YoY)0.01

0.13

(0.02)

(0.32)

0.02

0.01

(0.07)

0.01

(0.00)

(0.01)

0.09

Cereals & products

Pulses & products

Sugar & products

Vegetables

Other food & beverages

Pan, tobacco & intoxicants

Fuel & light

Housing

Clothing & footwear

Fuel for vehicles

Other misc. items

Contribution to change in inflation - MoM basis (%)

MAY 2018 | ISSUE 65 27


Industrial output continues to post robust growth

The Index of Industrial Production (IIP) posted surged by a sharp 7.1% YoY in February 2018,

recording fourth straight month of 7%+ growth. IIP growth has witnessed a sharp

improvement over the past few months on account of favourable base, as growth had

slumped following demonetization in November 2016.

At sector level, manufacturing output continued to grow at a robust pace, rising 8.7% YoY in

February 2018, after rising by an average of 9.2% in the previous three months. A favorable

base aided manufacturing growth in the last three months. 15 out of 23 industries within

the manufacturing group witnessed a YoY increase in their output. Growth in electricity

output was lackluster at 4.5%, as compared to 7.6% in the previous month. Also, mining

output declined by 0.3% in February after recording a sluggish growth of 0.1% in January.

As per the use-based classification, capital goods continued to post healthy growth, rising

sharply by 20% YoY, fourth consecutive month of double digit growth. Likewise, output of

consumer durables touched a 17-month high of 7.9%, after rising 7.8% in the previous

month. However, output of consumer non-durables decelerated to a 4-month low of 7.4%,

from 10.5% in the previous month.

Going forward, we expect growth to decelerate slightly in March 2018 as the favourable

base effect wanes off. For the full-year FY18, we expect IIP to rise by 4.4%, slightly lower

than 4.6% growth registered in FY17.

Favorable base aided

industrial growth

over the past

few months

…due to fall in food prices within primary articles

Source: DIPP

Wholesale inflation continues to ease…

Source: DIPP

Trade deficit widened

India’s merchandise exports declined 0.7% YoY, compared to 4.5% growth witnessed in the

previous month. This was the fourth straight month of slowdown in exports growth. The

slowdown in exports was due to base effect and some moderation in global trade.

On the other hand, merchandise imports grew by 7.1% to $43 bn in March from $40 bn in

…on account of strong manufacturing activity

Source: MOSPI

IIP continues to post healthy growth…

Source: MOSPI

2.5

4.7

3.0

0.8

3.8

3.0

0.2

4.7

3.0

Primary articles Fuel & Power Manufactured Products

(% YoY) Jan-18 Feb-18 Mar-18

2.5

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Ma

r-1

4

Jun

-14

Sep

-14

De

c-1

4

Ma

r-1

5

Jun

-15

Sep

-15

De

c-1

5

Ma

r-1

6

Jun

-16

Sep

-16

De

c-1

6

Ma

r-1

7

Jun

-17

Sep

-17

De

c-1

7

Ma

r-1

8

WPI (%YoY)

7.1%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Feb

-15

Ma

y-1

5

Au

g-1

5

No

v-1

5

Feb

-16

Ma

y-1

6

Au

g-1

6

No

v-1

6

Feb

-17

Ma

y-1

7

Au

g-1

7

No

v-1

7

Feb

-18

IIP (%YoY)

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Feb

-17

Ma

r-1

7

Ap

r-1

7

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

De

c-1

7

Jan

-18

Feb

-18

(% YoY) Manufacturing Electricity Mining

MAY 2018 | ISSUE 65 28


Slowdown in both exports and imports growth

Source: Ministry of Commerce and Industry

the same month last year. However, the pace of imports growth has moderated over the last

two months. Oil imports valued at $11.1 bn grew 13.9% higher than the imports bills of

March 2017 on the back of recovery in crude prices. However, gold imports declined by

40.3% YoY to $2.5 bn in March.

Thereby, overall trade deficit, the gap between exports and imports, inched up to $13.7 bn,

which is $1.7 bn higher on-month and $3 bn higher on-year.

Going forward, we do not expect major acceleration in exports momentum owing to

moderating global trade. As for imports, the recent rise in oil prices could keep the import

bills high. Overall, we expect trade deficit at $165 bn for the entire FY19 higher than $156.8

bn registered in FY18.

Trade deficit widens ($ bn)

Source: Ministry of Commerce and Industry

-30

-20

-10

0

10

20

30

40

50

60

Mar

-16

May

-16

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Mar

-17

May

-17

Jul-

17

Sep

-17

No

v-1

7

Jan

-18

Mar

-18

Exports (YoY %) Imports (YoY %)

-25

0

25

50

Mar

-17

Apr

-17

May

-17

Jun-

17

Jul-

17

Aug

-17

Sep-

17

Oct

-17

Nov

-17

Dec

-17

Jan-

18

Feb-

18

Mar

-18

Exports Imports Trade Balance

-0.2

2.7

5.6

-5.0-3.6

6.6

2.0

5.3

-2.6

-4.6-3.6

6.6

3.6

5.5

-2.7 -3.1

-6.3

8.3

Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18

Sensex (%) BSE Mid Cap (%) BSE Small Cap (%)

MAY 2018 | ISSUE 65 29

Equities


Strong rally across market capitalization

Large caps, as represented by S&P BSE Sensex, edged up 6.6% in the month of April 2018,

after retreating for two consecutive months. Among the broader indices, S&P BSE Midcap

also posted strong gains of 6.6%, breaking its three months of negative trend. Even S&P BSE

Small cap edged up 8.3% in April 2018, compared to fall of -6.3% registered in the previous

month.

Small cap outperforms

both large caps and

midcaps in the month

of April

Equity markets edge up in April after two straight retreats

India along with global markets rallied strongly in April as the fears of a global trade war

ebbed. Equity markets, as represented by Nifty 50, posted strong gains of 6.2% in the month

after sliding 4.9% and 3.6% in the month of February and March respectively. Continued

robust domestic flows, improvement in high-frequency data and healthy start to Q4FY18

earnings season has calmed nerves amidst FII selling, currency depreciation and rising

crude prices.

From the valuations perspective, the recent rally in the market has once again fueled

valuation concerns. Sensex's forward P/E at 18.8x (MOSL estimates) is trading above its long

term average of 17.4x. Also, Sensex's forward P/B at 2.8x (MOSL estimates) is trading above

its long term average of 2.6x.

It is important to note that, the current valuation levels are on the back of depressed

earnings growth over the last few years. Earnings recover from here on shall provide the

necessary support to the market. We expect strong earnings recovery supported by

demand recovery in consumption sectors, low base of demonetization and commodity

price inflation. However, investors need to be cognizant of some of the key risk arising from

rising crude prices and upcoming state election results.

Market bounced back

sharply after two months

of continuous volatility

Sensex Forward P/E (x) - Long term average

Source: MOSLSource: MOSL

Sensex Forward P/B (x) - Long term average

Performance across market capitalization

Source: Bloomberg

18.8

7

12

17

22

27

Ap

r-0

8

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

10-Yr Avg: 17.4x2.8

1.2

2.1

3.0

3.9

10-Yr Avg: 2.6x

Ap

r-0

8

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

Data from Apr 13 to Apr 18

PE

Large cap

Midcap

April - 13

17.0

17.3

April - 18

24.1

49.2

27%

-6%

23%

59%

30%

115%

Large cap

Midcap

Earnings growth PE mean reversion PE re-rating/de-rating

Price

growth

168%

Price

growth

80%

MAY 2018 | ISSUE 65 30


Risk-reward continues to favor multi cap strategies

Over the last 5-years, while the earnings (EPS) for the large caps have grown 27%, the EPS

for midcaps have de-grown by -6%. At the same time, large caps (Sensex) delivered 80%

absolute returns, while midcaps delivered a stellar 168% absolute returns. While, there has

been re-rating in both the segments, the extent of re-rating in midcap is relatively high,

implying broad based midcap valuations are relatively stretched compared to its large cap

peers.

Given the above context, from a valuation perspective, large caps offers valuation comfort

as compared to midcaps given the high visibility on earnings provided by large caps. Also,

we believe there are various opportunities in certain companies in the mid & small cap

space which can benefit from broad based recovery in the economy. Thereby, we continue

to favor multi cap and focused midcap strategies.

Prefer multi cap

and focused

midcap strategies

Significant PE re-rating in midcaps

Source: Bloomberg

Midcap to large cap premium continue to remain

elevated

Source: Bloomberg

Fundamental valuation indicators trade in fair value zone

To gauge the investment attractiveness of the markets, we track two indicators viz. Motilal

Oswal Value Index (MOVI) and Earnings yield to Bond yield (EY-BY). Both these indicators

help us understand if the markets are cheap or expensive.

MOVI comprises of price to earnings, price to book value and dividend yield. A low MOVI

level indicates that the market valuation appears to be cheap and vice versa. Based on our

analysis, for a three-year holding period, there has been no instance of negative return

when the entry point in the market based on 90-day average MOVI level is below 100. The

recent rally in the market has led to spike in valuations. Currently, the 90-day moving

average ratio stands at 116.0, indicating that equity markets are trading at fag end of fair

value zone. Investors have made positive returns 70% of times for 3-year holding period

even at these levels.

Also, earnings yield to bond yield is trading at fag end of fair value zone, due to recent rally in

the market and a sharp rise in bond yields. Based on historical data, equity as an asset class

becomes very attractive when EY/BY trades above 0.8. Currently, EY/BY trades at 0.54 below

its 10-year average of 0.72. At current levels, investors have made money 85% of times for a

3-year holding period.

Taking both valuation indicators into consideration, we suggest investors to stagger their

investments over the next few months and capitalize by aggressively deploying in any sharp

decline.

Follow staggered

investment approach

6500

7500

8500

9500

10500

11500

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

Ap

r-1

5

Oct-

15

Ap

r-1

6

Oct-

16

Ap

r-1

7

Oct-

17

Ap

r-1

8

Mid to Large Cap Premium Avg. Premium Nifty (RHS)

100

506070

8090

100

110120

130140150

Ap

r-0

8

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

MOVI Base

Current Level: 115.6

90-DMA: 115.3

MAY 2018 | ISSUE 65 31


3-year forward returns

At current

90-DMA

MOVI

level29%

Max

-16%

Min

2%

Average

4%

Median

70%

% oftimes

above 0% At current

EY-BY level

11%

Max

-5%

Min

3%

Average

0%

Median

85%

% oftimes

above 0%

Valuation indicators suggest markets in fair value zone

Source: BloombergSource: MOAMC

Mutual funds continue

to remain net buyers for

21-consecutive months

FIIs turn net sellers

Foreign institutional investors (FIIs) turned net sellers amid global concerns such as the

possibility of a US-China trade tariff war. The net outflow in the month of April 2018 was Rs.

6,210 cr as compared with huge inflow of Rs. 13,114 cr in the previous month.

At the same time, domestic institutional investors (DIIs) continued to further invest in

equities with net inflow of Rs. 8,511 cr as compared with inflows of Rs 6,694 cr witnessed

last month. The DIIs inflow for the current month was due to the buying by domestic mutual

funds. Insurance on the other hand continued to remain turned net seller. Domestic MFs

have continued with their buying spree for 21-consecutive months with net inflow of

Rs.11,294 cr in April 2018.

In the face of protectionism measures, tighter monetary policies, and prospects for rising

commodity prices, net liquidity injection into the global economy may slowdown, which in

turn, could hurt investment interest from foreign investors in India. However, given the

strong fundamentals along with visibility on growth front that India offers, we shall

continue to attract global investors in the long term. Also, domestic liquidity has been

buoyant as there has been a shift from physical assets to financial assets.

Source: Bloomberg, MOSL

DII continues to remain net buyers in equity markets (in Rs. ‘000 crore)

4000

9000

14000

19000

24000

29000

34000

39000

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Ap

r-0

8

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

Earnings:Bond Yield Average Sensex (RHS)

Current EY-BY: 0.54

10-year average: 0.72

7,500

8,500

9,500

10,500

11,500

-30

-20

-10

0

10

20

30

40

Oct

-16

Jan-

17

Apr

-17

Jul-1

7

Oct

-17

Jan-

18

Apr

-18

DII FII Nifty (RHS)

MAY 2018 | ISSUE 65 32


Sectoral performance for the month of April 2018

Source: Bloomberg

Domestic Institutional

Investors (DIIs)

Flows in Rs. cr. April 2018 March 2018

Mutual Fund

Insurance

Total

9,256

6,694

13,114

-2,562

Foreign Institutional Investors (FIIs)*

As on April 30, 2018, *As on April 27, 2018

11,294

8,511

-2,782

-6,210

Except for Telecom & Oil & Gas , all sectoral indices ended in positive in the month of

April 2018. IT was the best performing sector on account of impressive quarterly results and

benefit of rupee depreciation. The sector has been the best performing sector even on

CYTD basis. On the other hand, telecom sector was the worst performing sector as the

department of telecom (DoT) asked major telecom players to clear dues before approving

their mega merger.

sector

IT sector among the

best performing sector

in the month of April

Sectoral Performance

12.1%9.9% 9.0%

7.6% 7.4% 7.2% 5.8% 5.3% 5.3%

0.5%

0.0% -1.3% -1.8%

IT

FM

CG

Re

alt

y

He

alt

hca

re

Au

to

Me

tal

Ca

pit

al

Go

od

s

Ba

nk

Po

we

r

Co

nsu

me

rD

ura

ble

s

PS

U

Oil

& G

as

Tele

co

m

MAY 2018 | ISSUE 65 33


Source: Bloomberg Note: Performance in absolute terms

4.0%

2.9%

3.1%

8.1%

4.4%

-0.4%

2.3%

-7.2%

-3.7%

6.9%

5.4%

4.0%

5.0%

-1.2%

0.1%

5.1%

1.0%

-0.7%

7.5%

2.0%

5.3%

-2.6%

-4.6%

-3.6%

6.6%

-4.5%

6.6%

4.5%

1.1%

5.9%

4.3%

2.8%

1.0%

6.3%

-9.2%

-2.3%

7.4%

5.8%

5.4%

6.5%

-1.9%

2.2%

4.4%

-0.6%

0.8%

9.2%

3.6%

5.5%

-2.7%

-3.1%

-6.3%

8.3%

-4.3%

8.3%

0.1%

4.5%

5.1%

3.2%

1.1%

-4.1%

0.6%

-5.2%

0.7%

5.4%

2.7%

5.3%

1.5%

7.4%

3.2%

-3.2%

0.8%

-3.9%

5.0%

0.6%

3.6%

0.2%

-1.9%

-2.1%

9.9%

5.7%

9.9%

3.9%

5.2%

2.1%

5.6%

4.5%

-2.7%

1.5%

-4.7%

-2.7%

7.5%

5.2%

4.0%

3.7%

4.8%

-1.0%

8.0%

-3.3%

-1.5%

4.7%

1.2%

0.8%

7.4%

-8.6%

-3.9%

5.3%

-0.7%

5.3%

3.6%

-3.0%

0.3%

1.9%

-7.6%

-4.1%

0.3%

1.2%

-6.1%

11.0%

3.9%

-4.0%

3.0%

0.1%

2.1%

10.6%

-0.6%

-4.9%

19.5%

-4.0%

7.0%

-11.8%

-2.9%

-7.9%

-1.8%

-22.5%

-1.8%

2.9%

-2.2%

1.6%

5.2%

-0.8%

0.1%

1.8%

-4.5%

-6.4%

0.5%

4.0%

-0.5%

-1.9%

-9.7%

4.6%

0.0%

-7.4%

2.6%

5.9%

-2.0%

5.8%

-1.6%

-3.1%

-6.8%

7.6%

-4.4%

7.6%

-0.5%

2.2%

-3.2%

-3.5%

-3.5%

-2.0%

-1.9%

-1.8%

3.3%

-5.8%

8.2%

-0.1%

-7.2%

6.3%

-3.9%

6.1%

-3.6%

-1.2%

4.2%

3.6%

5.1%

11.3%

-0.4%

-3.2%

12.1%

20.3%

12.1%

2.1%

-0.4%

4.3%

9.0%

4.5%

2.8%

8.3%

-2.9%

1.6%

5.6%

5.4%

0.2%

6.6%

-1.4%

-7.3%

7.5%

7.0%

-2.2%

11.5%

-3.8%

2.2%

0.5%

-5.3%

-5.7%

-1.3%

-11.4%

-1.3%

2.6%

4.8%

2.0%

6.8%

4.3%

1.0%

-0.2%

-9.2%

0.6%

7.7%

-1.5%

2.5%

3.5%

6.1%

-3.1%

4.5%

-3.2%

2.1%

5.1%

-0.8%

6.1%

-3.0%

-4.3%

-3.1%

7.4%

-3.4%

7.4%

2.7%

9.6%

2.8%

4.1%

-1.7%

-4.1%

2.3%

-5.9%

-2.7%

8.2%

3.7%

7.3%

8.6%

-1.5%

-3.0%

5.3%

-3.6%

-0.9%

7.3%

0.2%

3.7%

6.4%

-6.3%

-3.1%

5.8%

2.1%

5.8%

2.6%

-0.2%

7.3%

7.0%

4.4%

-0.6%

6.3%

-0.7%

-2.4%

8.4%

1.5%

1.6%

4.9%

-3.8%

-6.5%

7.1%

-0.5%

-3.7%

13.0%

-2.3%

-0.1%

-0.6%

-8.6%

-5.7%

0.0%

-14.3%

0.0%

10.4%

4.7%

7.9%

4.8%

-4.0%

-1.9%

2.9%

-17.6%

-1.4%

8.4%

9.1%

7.0%

20.2%

0.4%

5.8%

7.0%

-2.2%

-3.4%

11.4%

6.3%

6.6%

0.0%

-5.4%

-9.7%

9.0%

-6.8%

9.0%

2.7%

-0.2%

1.8%

3.6%

0.6%

0.5%

3.0%

-12.8%

-0.4%

12.4%

9.1%

10.7%

1.4%

-0.5%

4.0%

2.8%

7.5%

-0.8%

5.2%

16.2%

5.7%

-0.9%

-5.7%

5.1%

0.5%

-1.4%

0.5%

5.5%

-0.1%

7.2%

10.4%

5.7%

-1.8%

5.7%

3.4%

-5.2%

15.5%

1.9%

-0.7%

-4.2%

-0.5%

1.1%

9.2%

6.9%

2.1%

8.6%

-5.6%

7.5%

3.3%

-1.6%

-12.2%

7.2%

-4.4%

7.2%

4.0%

1.4%

6.6%

4.0%

1.1%

-5.2%

0.8%

1.1%

-2.0%

9.1%

1.3%

3.6%

2.4%

-4.7%

0.2%

4.4%

-2.7%

-2.4%

6.5%

-1.2%

2.6%

-2.6%

-4.2%

-4.4%

5.3%

-6.0%

5.3%

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

CYTD

FYTD

1.0%

4.1%

1.2%

3.9%

1.4%

-2.1%

0.2%

-4.6%

-0.1%

3.9%

3.9%

3.1%

1.0%

4.1%

-0.7%

5.2%

-2.4%

-1.4%

6.2%

-0.2%

2.7%

5.6%

-5.0%

-3.6%

6.6%

3.2%

6.6%

Date SensexBSE Mid

Cap

BSE Small

CapFMCG Bank Telecome

Health

CareIT Oil & Gas Auto

Capital

GoodsPSU Realty

Consumer

DurablesMetal Power

Outlook

The key trigger that was missing for last few years in an otherwise solid and strong India macro story was earnings

growth. Going forward, we expect earnings recovery to gather pace. The optimism surrounding the upcoming

earnings season is increasing with various lead indicators turning favorable. Also, we expect earnings recover to be

supported by demand recovery in consumption sectors, low base of demonetization and commodity price inflation.

The evidence around recovery in rural Consumption is getting stronger with every passing quarter and early results of

Q4FY18 bolster this view.

However, the recent market rally has once again fueled valuation concerns. Going forward, revival in earnings growth

shall provide the necessary support for markets to rally. Also, investors need to be cognizant of some of the key risk

arising from the rising crude oil prices and upcoming state election results.

Thereby, we continue to suggest investors to stagger their investments over the next few months and capitalize on any

sharp decline by incremental deployment. Also, we continue to favor multi cap and focused midcap strategies.

6.2 6.2

6.7

7.3

7.67.8 7.8 7.9 7.8

8.07.9

7.8 7.88.0 8.0 8.0

5.86.06.26.46.66.87.07.27.47.67.88.08.2

3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 11Y 12Y 13Y 17Y

Years

Current 1 mnth back 6 mnths back 1 yr back

MAY 2018 | ISSUE 65 34

Fixed Income


Indian bond yields rise in April after a rally in March

The month of April was a volatile month for Indian bond market wherein the 10 year GSec

bond yield traded in the range of 7.13% - 7.8%. Such a volatile movement was characterized

by a positive rally in the first week on back of RBI’s dovish stance on inflation projections and

surprise shift in market borrowing policy by the Government, however in the second half of

the month the market participants became nervous and the yields rose due to the hawkish

stance revealed by the minutes of Monetary Policy Committee (MPC), surge in crude oil

prices, muted demand and US yields crossing the psychological mark of 3%.

Thus, going forward, volatility would be prevalent at least for the near term and hence

would be dependent on many factors like any hike in rates by RBI (though the same has

been discounted by the market), stickiness in crude prices, rise in global yields, monsoon,

inflation trajectory etc.

Value opportunities

exists in front

end of the curve

Source: RBI, Bloomberg

A volatile year for the Indian bond market

RBI resorts to OMO to ease liquidity

From Rs 4 trillion in April 2017, the core liquidity in the banking system has fallen to about Rs

400 billion in April 2018, thus keeping the system liquidity close to neutral. Having said,

against the backdrop of rising bond yields, foreign outflows and higher currency in

circulation, RBI announced purchase of Rs 10,000 Crs of bonds through open market

operations so as to ease liquidity in the system and maintain a durable liquidity

management. However, the announcement of recent OMO purchase seems to be a

preemptive step to contain liquidity which would be adversely affected by seasonal factors

towards the end of the current quarter.

We are of the view that RBI would continue to remain on the path of maintaining neutral

liquidity and would resort to such measures as and when required.

RBI expects liquidity to be in moderate surplus mode in first half of 2018 - 19

Source: Bloomberg

(270,000)

(170,000)

(70,000)

30,000

130,000

230,000

330,000

430,000

530,000

Dec-

15

Jan-

16

Mar

-16

May

-16

Jul-1

6

Sep-

16

Oct-1

6

Dec-

16

Feb-

17

Apr-1

7

Jun-

17

Jul-1

7

Sep-

17

Nov-

17

Jan-

18

Mar

-18

Apr-1

8

Rs. C

rs

System Cash Liquidity

RBI to continue

on the path of

neutral liquidity

management

0.5%

-1.1%

1.6%

-1.0% -0.8% -1.1%-1.7%

3.5% 3.6%

7.2%

2.5%

1.2%

-0.4%

4.9%

US

Jap

an

Ch

ina

Ge

rma

ny

Fra

nce

UK

Eu

ro A

rea

Ind

ia

Ind

on

esia

Bra

zil

Me

xic

o

S K

ore

a

Ho

ng

Ko

ng

Ru

ssia

Real Rate of Returns (10 yr G-Sec - Inflation)

MAY 2018 | ISSUE 65 35


Year 2017 witnessed highest foreign inflows of Rs.1.48 lakh crs in Indian bond markets since

2014 on back of improving marcos, firm political mandate, stable currency and Central

Bank’s continued efforts to rein in inflation. However, sentiments became jittery and initial

months of 2018 saw a cumulative net outflow of Rs.10,800 Crs (Jan – April 2018). Some of

the worries that resulted in lower appetite from foreign investors include stickiness in crude

oil prices, concerns regarding widening of fiscal and current account deficit, depreciating

currency and gradual increase in US bond yields.

Being cognizant of the ongoing concerns, the latest measure of increasing FPI limits and

allowing FPIs to invest in short duration securities by RBI may aid in renewing the buying

interest. With respect to government securities and state development loans, the residual

maturity limits have been withdrawn and with respect to corporate bonds, FPI can invest

with residual maturity up to 1 year, relaxed from 3 years earlier. In both the categories, the

relaxation is subject to investments in residual maturity below one year to not exceed 20

percent of the total investment. Although such measures may prove to be beneficial in the

short term in terms of easing pressure on short term yields and rupee, albeit volatility in the

flows, one needs to be aware whether such measures would be beneficial in the long run or

not.

Having said that, the real rate of return of India when compared to most of the developed

economies is quite lucrative barring emerging economies like Brazil & Russia. Hence, the

hunt for the higher yield may drive foreign flows towards India. However, stability of

domestic macros and development on the global factors may decide the quantum and

durability of future foreign flows.

Amidst rising bond yields and macro concerns, RBI eases investment rules

for foreign investors

Foreign investors turn net bond sellers in 2018

Source: Bloomberg Source: Bloomberg

Real rates remain attractive for emerging markets

(20,000)

(15,000)

(10,000)

(5,000)

-

5,000

10,000

15,000

20,000

25,000

30,000

Jan

-16

Fe

b-1

6M

ar-

16

Ap

r-1

6M

ay

-16

Jun

-16

Jul-

16

Au

g-1

6S

ep

-16

Oct-

16

No

v-1

6D

ec-1

6Ja

n-1

7Fe

b-1

7M

ar-

17

Ap

r-1

7M

ay

-17

Jun

-17

Jul-

17

Au

g-1

7S

ep

-17

Oct-

17

No

v-1

7D

ec-1

7Ja

n-1

8Fe

b-1

8M

ar-

18

Ap

r-1

8

FPI/FII Debt Flows (Rs. Crs)

In lieu of the domestic & global uncertainties, yields across the curve, especially on the front

end, have shifted upwards pushing the credit spreads at higher levels. The spreads are

hovering in the range of 40 – 170 bps w.r.t different credit assets across short to medium

end of the yield curve.

To give a perspective, in last one year, AAA yield curve is currently trading at levels above the

levels of AA yield curve prevailing at that time. A case in point is that over the last one year

the quantum of rise in yields of AAA segment has not been accompanied with a similar rise

in yield of lower rated assets, thus leading to spread compression between AAA and high

yielding assets. Such compression has been largely owing to transmission of interest rate

Foreign demand

to be a function of

macro – economic

parameters and

exchange rate

movement

Short to medium term bond funds offer good value in the current

market scenario

Risk reward continues

to remain favorable

towards accrual

strategies

MAY 2018 | ISSUE 65 36


The past one year has been quite volatile for the fixed income investors resulting in almost a 100 bps increase in yields

at different parts of the curve. Going forward, we expect some volatility to continue on back of the ongoing concerns,

both on domestic and global front.

Given this backdrop, we continue to believe that investors should capitalize on the absolute value which is most visible

on the front end of the curve with bond maturities upto 5 years. We reiterate that for capital preservation and

reasonable income accrual, one should consider investing in ultra-short term, short term, high quality corporate bond

and credit oriented funds with duration in the range of 1- 3 years.

Outlook

rise to AAA segment due to its liquid and better price discovery attribute and not owing to

any credit prospects of lower rated bonds.

Thus, from a prudent risk reward perspective, investing in high quality front end strategies

with bond maturities up to 5 years makes imminent sense. Investors who are comfortable

taking credit risk, can allocate funds towards well researched credit oriented short term

strategies so as to benefit from higher carry along with lesser interest rate risk.

Source: Bloomberg Source: Bloomberg

Source: RBI, Bloomberg

Upward shift in yield curve across credit in last 1 year

6.06.46.87.27.68.08.48.89.29.6

10.010.4

1 Yr 3 Yr 5 Yr

Yie

ld (

%)

Maturity

Gsec AAA AA AGsec (1 year bck) AAA (1 year bck) AA (1 year bck) A (1 year bck)

113

37

171

6640

174

58 42

168

020406080

100120140160180200

AAA - Gsec AA - AAA A - AA

Sp

re

ad

in

bp

s

Current Credit spreads

1 Yr Maturity 3 Yr Maturity 5 Yr Maturity

54 48

181

8048

176

7854

175

020406080

100120140160180200

AAA - Gsec (1 yr back) AA - AAA (1 yr back) A - AA (1 yr back)

Sp

re

ad

in

bp

s

Credit spreads (1 Yr back)

1 Yr Maturity 3 Yr Maturity 5 Yr Maturity

Credit spreads (1 Yr back) in different maturity bucketsCurrent credit spreads in different maturity buckets

MAY 2018 | ISSUE 65 37

Alternatives

Volatility was the theme for most asset classes and precious metals was no different, as gold moved by 4%, but closed the

month almost flat at $1,322 Last month, heightened geopolitical tensions, rising US10 year yield apart from sharp rise in

global crude oil prices guided market movement. Global equities, broadly, closed in the green as rising crude oil prices

raised expectation that inflation could start to pick up in the coming months as well as after trade war tensions started to

recede between the US and China. Since the start of the month, gold prices started to gain primarily on back of

heightened geopolitical tensions in Syria, but tensions started to cool-off between US and Russia after US President

Donald Trump said that the attack was intended to as proportional strike aimed specifically at Syria's chemical weapons

facilities rather than a broader set of targets and was a one-time assault to punish Damascus for a suspected gas attack.

Gains were capped after FOMC minutes showed that policymakers at the Federal Reserve expect the growth of the

economy to remain firm and that inflation would rise in the coming months. Policymakers at the central bank expect US

economic outlook has strengthened in the recent past, but at the same time expect that retaliatory trade actions by other

countries as downside risk for the economy. The next FOMC policy meeting is scheduled at the start of the month and

expectation is that the Federal Reserve could keep rates unchanged. This time though no projections for the US economy

will be released and that could keep the event a low key affair. No major impact on the dollar would be seen as most of it is

discounted in the market.

The Dollar on the other hand started to rebound against its major crosses after remaining under pressure for the past few

months. The greenback started to regain after recent economic data released from the US came showed the economy

was coming out of the woods. Except for the non-farm payrolls number which was bit disappointing, most economic

numbers released last month were either in line with estimates or beat estimates.

Apart from central bank meeting that remained in focus and heightened geopolitical tensions increased investment

demand in gold. Last month, gold ETF witnessed buying interest with investment in SPDR saw holdings rise by 25 tonnes

.i.e a rise of over 3% in investment demand in gold, while investments in silver ETF remained subdued.

Gold


Outlook

For the month, we expect that volatility for precious metals could continue to remain high as US 10-year yield would

remain in focus. As it hovers around the psychological mark of 3% market participants will be keeping an eye on how it

starts to move from here on. Rise in inflation has bolstered expectation that the Fed will continue to push rates higher,

thereby adding to gains for the yield. Ahead of the important June meeting, OPEC countries are scheduled to meet this

month and will be important to gauge the committee's stance going forward. Geopolitical tensions could be one of the

important triggers that would restrict any major losses for gold. For the month, we expect gold, on the COMEX, to

quote in the range $1,280 and $1,365 and on the domestic bourses it is expected to quote in the range of Rs.30,400 and

Rs.31,600.

28,000

29,000

30,000

31,000

32,000

33,000 Crisil Gold Index

Apr

-17

May

-17

Jun-

17

Jul-

17

Aug

-17

Sep-

17

Oct

-17

Nov

-17

Dec

-17

Jan-

18

Mar

-18

Apr

-18

Gold (INR) - Neutral stance

Source: CRISILSource: CRISILSource: Bloomberg

Gold prices ended almost flat in the month

1000

1050

1100

1150

1200

1250

1300

1350

1400

Apr

-14

Aug

-14

Dec

-14

Apr

-15

Aug

-15

Dec

-15

Apr

-16

Aug

-16

Dec

-16

Apr

-17

Aug

-17

Dec

-17

Apr

-18

GOLD Spot ($/Oz)


MAY 2018 | ISSUE 65 38

Section III

Advisory Approach..............................................................................................39

Model Portfolios Performance.............................................................................40

4C Framework.....................................................................................................41

Fund llocator.....................................................................................................42

Equity Recommendations....................................................................................43

Managed Strategies.............................................................................................44

Debt Offering ......................................................................................................51

Fund Insight.........................................................................................................53

α

Real Estate Offering.............................................................................................50

Alternative Offering ............................................................................................52


MAY 2018 | ISSUE 65 39

Advisory Process

Advisory Approach

True portfolio of clients and asset allocation is best determined through Financial Planning strategy. If not, the clients

can follow a model portfolio approach. Following steps are followed for Model Portfolio construction:

1) Investors are classified according to their risk profile viz. Aggressive, Moderately Aggressive, Balanced, Moderately

Conservative and Conservative.

2) Asset Allocation is done at two levels:

(a) Static – Based on the risk profile, asset allocation is defined at a broad level:

(b) Dynamic – Asset Allocation based on the market conditions

Our Methodology

Since different clients have different risk return preferences, based on our comprehensive risk profiling process we

have categorized the clients broadly into categories viz.6 Aggressive+, Aggressive, Moderately Aggressive, Balanced,

Moderately Conservative and Conservative

We follow a robust Advisory Process to generate “Alpha” in the client’s portfolio. The entire approach is governed by a

stringent risk management framework.

Conservative

Moderately Conservative

Balanced

Moderately Aggressive

Aggressive

Aggressive+

0.0%

20.0%

40.0%

65.0%

85.0%

100%

85.0%

65.0%

40.0%

20.0%

0.0%

-

10.0%

10.0%

10.0%

5.0%

5.0%

-

5.0%

5.0%

10.0%

10.0%

10.0%

-

Equity Bond Cash Gold

View on asset

classes

Asset Allocation

Alpha

Investment

Committee

Product Selection

across asset classes

Manager Alpha

Product & Advisory

CommitteePortfolio

Construction

Financial Strategy


MAY 2018 | ISSUE 65 40

Model Portfolios Performance


Note:

Portfolio inception date: October 01, 2012

Performance as on :

Static Blended Benchmark (SBB): is an Index that tracks the performance of the strategic asset allocation of the client. It is a blended benchmark for a portfolio

based on benchmarks of each asset class in the portfolio. This index is re-balanced to its original weights after every calendar quarter. No tactical changes or active

asset allocation calls are applied to this index.

April 30, 2018

BalancedModerately Aggressive

Aggressive +

ConservativeModerately Conservative

Aggressive

90

110

130

150

170

190

210

230

Oct

-12

Ap

r-1

3

No

v-1

3

May

-14

De

c-1

4

Jul-

15

Jan

-16

Au

g-1

6

Feb

-17

Sep

-17

Ap

r-1

8

NA

V i

n I

NR

Mod Aggressive Portfolio SBB

90

100

110

120

130

140

150

160

170

180

190

200

Oct

-12

Ap

r-1

3

No

v-1

3

May

-14

De

c-1

4

Jul-

15

Jan

-16

Au

g-1

6

Feb

-17

Sep

-17

Ap

r-1

8

NA

V i

n I

NR

Balanced Portfolio SBB

90

100

110

120

130

140

150

160

170

Oct

-12

Ap

r-1

3

No

v-1

3

May

-14

De

c-1

4

Jul-

15

Jan

-16

Au

g-1

6

Feb

-17

Sep

-17

Ap

r-1

8

NA

V i

n I

NR

Conservative Portfolio SBB

80

110

140

170

200

230

260

290

Oct

-12

Ap

r-1

3

No

v-1

3

May

-14

De

c-1

4

Jul-

15

Jan

-16

Au

g-1

6

Feb

-17

Sep

-17

Ap

r-1

8

NA

V i

n I

NR

Aggressive + Portfolio SBB

80

110

140

170

200

230

260

Oct

-12

Ap

r-1

3

No

v-1

3

May

-14

De

c-1

4

Jul-

15

Jan

-16

Au

g-1

6

Feb

-17

Sep

-17

Ap

r-1

8

NA

V i

n I

NR

Aggressive Portfolio SBB

90

100

110

120

130

140

150

160

170

180

190

Oct

-12

Ap

r-1

3

No

v-1

3

May

-14

De

c-1

4

Jul-

15

Jan

-16

Au

g-1

6

Feb

-17

Sep

-17

Ap

r-1

8

NA

V i

n I

NR

Mod Conservative Portfolio SBB

MAY 2018 | ISSUE 65 41

4C Framework

The 4C Fund Manager Selection Process

Evaluating Manager Expertise


MAY 2018 | ISSUE 65 42

MF Research and Selection Process

Long term portfolio creation through quarterly selection, monitoring and re-balancing of Equity Mutual Funds.

Elimination Criteria

Level I _ Firm Level Filters

Assets under Management or Market Share

Sponsor’s pedigree

Service capabilities

Level II _ Product Level Filters

Assets under Management or Market Share

Scheme’s Age

Level III _ Quantitative Filters

Risk _ adjusted Return Analysis

Level IV _ Qualitative / Subjective Filters

Portfolio Analysis

Deviation from Investment Objective, Strategy, etc

Fund Manager’s Track Record

Fund Houses that have AUM less than 1% of total industry AUM or Rs. 5,000 crore whichever is less are eliminated

Large and Multi Cap Funds _ One per cent of respective Category AUM or Rs. 300 Cr., whichever is less

Small & Mid Cap, ELSS, Balanced Funds and Thematic Funds_ One per cent of respective Category AUM or Rs. 150

Cr., whichever is less

Liquid Funds/ Ultra Short Term Funds _ 1% of category AUM or Rs. 1,000 crore whichever is less

Short Term Funds / MIPs _ 1% of category AUM or Rs. 200 crore whichever is less

Income Funds _ 1% of category AUM or Rs. 100 crore whichever is less

Gilt Funds _ 1% of category AUM or Rs. 50 crore whichever is less


We follow an institutional approach for recommending stocks in client’s portfolios. Below mentioned are our top picks currently:

Direct Equity

Equity RecommendationsAlpha Strategist | “Crossroads”

MAY 2018 | ISSUE 65 43

RationaleCompany SectorCurrent Mkt

Price (INR)

Target Price

(INR)

Net Profit 3

Yr CAGR (%)

Dividend

Yield (%)P/E

Market Cap

(INR Crs)

With a variety of regulatory changes happening across the nation, the domestic 3W market has been on an upswing for the last 2-3 months. Averagemonthly volumes were 24.7k in FY18YTD v/s 21.1k in FY17. Bajaj Auto sees incremental opportunity of ~142k passenger 3Ws in the next 2-3 years (v/sFY17 volumes of 240k passenger 3Ws) in key states like Maharashtra, Karnataka and New Delhi

Bajaj AutoAuto &

Auto ancillaries

Leading Consumer Electrical compnay. Rrecently acquired Lloyds which will help gain stronger foothold in fast growing durable segment. Thecompnay aims to double its revenue in next 3 years through new product launches, expansion of existing product portfolio and increasedchannel pentration.GST rates being cut to 18% from 28% would accelerate the shift from unorganized to organized space

MahindraCIE(MACA)is a multi-technology automotive components supplier,with annual revenue of INR 53 b in CY16. MACA is all primed for growthphase, after three years of consolidation. It has all ingredients in place for sustained growth over the next 2-3 years. i.e.(a)India business high dependence on fast growing segments and players with favourable product lifecycle,(b)Scope to add products/customers inMFE and Metal castello,(c) limited capex,(d)supportive parent,and (e)focused M&Astrategy to access technologies,customers or markets.

The Ramco Cements (TRCL) is one of the top three cement producers in South India with total nameplate capacity of 12.5mtpa (0.95mtpa in WestBengal and the balance in the South). It also has operational wind farm capacity of 159MW and 157MW of CPP capacity Ramco Cement is among thelowest-cost cement producers in south, along with the most premium brands. Strong brand and higher trade segment mix aid superior pricing in coremarkets With more than 10% market share in the south, strong brand/dealer network, superior pricing and industry-leading RoE (18-20% in Fy18),peak parameters are already in place

Strong performance across parameters in a period marred by significant economic challenges. Liability franchise has strengthened significantly, withsustained improvement in CASA ratio to 36.3 % (up 820bp), improving deposit concentration ratios, and more favorable ALM profile. This has alsobenefitted NIM and increased fee income streams. The company also has benefitted from targeting cash rich region. YES Bank remains a good option inthe mid size banking segment on the back of its healthy capitalization, strong capital allocation, and market leading growth rates

Ad growth is expected to remain healthy, despite the expected moderation in FMCG as viewership share gains in regional portfolio and newchannels could aid in cushioning the impact. Telecom ad spend too is expected to pick up in 2H.

HDFC Bank is well positioned with ~40% CASA, growth outlook ~1.3x industry and least qualiity risk.With strong capacity, CET1 ratiof of~13%, strongemphasis on digitization, the bank is well positioned to capitalize on the expected pick up in economic growth cycleHDFC Bank

Banking &

Finance

Mahindra CIE

The Ramco

Cement

Yes Bank

Cement &

Construction

Banking &

Finance

Zee

Entertainmen

Media &

Entertainment

Granules India Pharma

Granules India (GRAN) is a vertically integrated manufacturer of pharmaceutical products. It is among the largest manufacturers of Paracetamol andIboprofen in the world. It derives 63% of its business from Europe and the US. GRAN also has a formulations plant, with a capacity to produce 18btablets per annum. It has its own Abbreviated New Drug Applications (ANDAs) and dossiers. GRAN services more than 300 customers across 60 nations(exports are ~87% ofrevenues) GRAN reported 39% earnings CAGR on improved profitability, higher operating leverage and superior business mix. Itexpanded its finished dosages business at aCAGR of 36% over FY11-16, leading to higher profitability and improved utilization of the existing capacityof 18b tablets. Profitability of the PFI business has also improvedsubstantially, with the implementation of 6MT order capacity. As a result, GRAN hasexpanded its EBITDA margins from 11.8% in FY11 to ~21% in FY17

Market leader with ~32% market share in moulded furniture segment. The plastics generator is largest revenue for the company at ~89% (FY2017). Thecompany has been able to grow this business consistently (8.3% CAGR over FY12-17) on the back of new products, designs and innovation (ex. Hybridchairs combining metal and plastics). Market size of Furniture Industry is ~INR750bn. Of this 85% is unorganized, GST implementation would also aidshift from unorganized to organized, where Nilkamal is a market leader and is best suited to benefit from this shift.

Havells India Capital Goods

KEI Industries Ltd is ranked amongst the top3 power cable companies in India and is also engaged in the EPC business. The institutional segment is thelargest revenue generator for the copany followed by retail segment and exports segment Well positioned to be a key beneficary fri the recentintiatives taken by government in the infrastructure and real estate segment.HW,EHV, EPC segment are expected to drive revenue Has high historicalROE & ROCE Even with high capex the company is expected to maintain the net debt to equity below 1.0x

Nilkamal Ltd Plastics

KEI Inds. Cables

2,948

109

1,945

250

823

362

587

547

1,702

435

4,031

175

2,350

274

847

410

705

640

2,215

537

6

30

20

66

80

28

36

3

38

104

1.87

0.72

0.67

0.00

0.37

0.75

0.43

0.64

0.65

0.14

22

17

27

26

29

20

38

60

21

35

85,305

2,758

505,008

9,458

19,395

83,437

56,365

34,183

2,540

3,405

Reliance Inds.

ICICI Bank

Interglobe Aviat

Infosys

HCL Technologies

KNR Construct.

Cipla

Exide Inds.

L&T Fin.Holdings

Axis Bank

Others

8.9

7.6

6.5

6.0

5.4

4.8

4.7

4.4

4.0

3.7

44.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

DAWN

Nifty 500

21.1 2.8 13.3 1.1

27.8 2.9 10.5 1.4

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

RISE PMS 29.8 4.2 14.2 0.6

Nifty 500 27.8 2.9 10.5 1.4

Balkrishna Inds

Shriram Trans.

M & M Fin. Serv.

K E C Intl.

M & M

L&T Fin.Holdings

Ramkrishna Forg.

APL Apollo

Dixon Technolog.

V I P Inds.

Others

7.5

6.4

6.4

5.9

5.8

4.9

4.9

4.8

4.7

4.7

44.0

Top 10 Holdings

Stocks Allocation

Managed Strategies

• We believe earnings revival for India corporate is finally on the horizon on back of

coordinated improvement in global commodity prices & several cyclical indicators

The markets are in the mid cycle and are yet to reach their peaks when one takes into

consideration factors like private capital expenditure, credit growth, capacity utilization,

growth in rural economy etc.

Having said, rationalization of valuations would be an added advantage for investing in

strategies which are positioned to capitalize on the cyclical recovery

We are of the view that allocation towards value oriented strategies from the stable of

Invesco, Ashmore & DHFL are would benefit from such recovery

•

•

•

MAY 2018 | ISSUE 65 44


Case for investing in Earnings recovery portfolio

Invesco PMS

RISE PMS

DAWN PMS

1.7x

1.4x

9

10

11

12

13

14

15

16

17

18

Ap

r-1

6

Jun

-16

Au

g-1

6

Se

p-1

6

No

v-1

6

Jan

-17

Ma

r-1

7

Ap

r-1

7

Jun

-17

Au

g-1

7

Se

p-1

7

No

v-1

7

Jan

-18

Ma

r-1

8

Ap

r-1

8

RISE BSE 500

1.1x

1.0x

9

10

11

12

Se

p-1

7

Oct-

17

No

v-1

7

De

c-1

7

Jan

-18

Ma

r-1

8

Ap

r-1

8

DAWN BSE 500

MAY 2018 | ISSUE 65 45


St Bk of India

Container Corpn.

ITC

Castrol India

Oracle Fin.Serv.

Cummins India

Indraprastha Gas

Multi Comm. Exc.

O N G C

Sanofi India

Others

6.5

5.0

4.8

4.3

4.3

4.0

4.0

4.0

4.0

4.0

55.3

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Deep Value

Nifty 500

22.1 3.1 13.8 1.6

27.8 2.9 10.5 1.4

Sudarshan Chem.

Dishman Carbogen

Ahluwalia Contr.

South Ind.Bank

Persistent Sys

J Kumar Infra

Intrasoft Tech.

Essel Propack

Ganesh Housing

Sanghi Inds.

Others

5.4

5.4

5.3

5.2

4.9

4.8

4.8

4.7

4.6

4.5

50.5

Top 10 Holdings

Stocks Allocation

39.1 1.8 4.7 0.9

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Ashmore PMS 20.9 2.1 10.3 0.9

8.9%

-4.4%

-0.3%

7.7%

8.3%

-1.7%

4.6%

19.7%

1M 3M 6M Since inception

Ashmore BSE Small Cap

DHFL Pramerica PMS

Deep Value PMS

Ashmore

Ashmore India Opportunities Fund

2.9x

2.1x

5

10

15

20

25

30

35

Ju

l-1

3

De

c-1

3

Ma

y-1

4

Oct-1

4

Ap

r-1

5

Se

p-1

5

Fe

b-1

6

Ju

l-1

6

De

c-1

6

Ju

n-1

7

No

v-1

7

Ap

r-1

8

DHFL Pramerica DV Nifty 500

Nifty Free FloatMid Cap 100

MAY 2018 | ISSUE 65 46


Mean

Reversi on


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Opportunities

Nifty 500

22.0 3.2 14.4 0.7

27.8 2.9 10.5 1.4

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Midcap 22.8 2.6 11.2 0.7


39.1 1.8 4.7 0.9

Investment

Philosophy

• Focus on sustainable and quality growth

• Understanding economic value of a business by employing a fair value approach

• Focus on fundamentals rather than on price momentum

• Risk management is central to Investment management

Managed By

Pankaj Murarka

• Over 2 decades of experience in Equities fund Management

• Ability to leverage his Private Equity experience at RARE Enterprises

• Known for identifying business leaders early and buy them at reasonable valuations

• Emphasis on Risk management and Bottom up stock selection

• Fund Management skill honed through prior stints at UTI AMC, Axis AMC, DSP Merill

Lynch

Renaissance Investment Managers

• Dominant Market players & companies in Industries that have gone through consolidation

Companies with a healthy balance sheet to ensure margin of safety

Beneficiary of earning recovery due to underutilized capacity and operating leverage

Min Investment – Rs. 1 cr

Multi cap fund with bottom up stock selection

Fund will have 4 closing with the last closing on 15th May 2018

Tenure: 3 years+ 1 year extension at Fund Manager’s discretion (15th May 2021+ 1 year)

•

•

•

•

•

•

Renaissance Opportunities Portfolio

Syngene Intl.

Federal Bank

DCB Bank

Info Edg.(India)

Just Dial

Bank of Baroda

S Chand & Compan

Sanghvi Movers

Sun TV Network

Mahindra Holiday

Others

9.0

8.0

8.0

7.0

7.0

5.0

5.0

5.0

5.0

5.0

36.0

Top 10 Holdings

Stocks Allocation

Renaissance Midcap Portfolio

St Bk of India

HDFC Bank

Kotak Mah. Bank

Federal Bank

Sun Pharma.Inds.

Axis Bank

Info Edg.(India)

Larsen & Toubro

Tata Motors

Sanghvi Movers

Others

7.0

6.0

6.0

6.0

6.0

5.0

5.0

5.0

5.0

5.0

44.0

Top 10 Holdings

Stocks Allocation

Renaissance Opportunities Portfolio

MAY 2018 | ISSUE 65 47

Motilal Oswal


Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

IOP PMS 27.2 3.7 13.7 0.7


39.1 1.8 4.7 0.9

DCB Bank

Aegis Logistics

AU Small Finance

Birla Corpn.

Quess Corp

Gabriel India

Dishman Carbogen

Can Fin Homes

TTK Prestige

Blue Star

Others

10.3

8.0

7.9

7.3

5.9

5.7

5.3

4.9

4.8

4.7

35.4

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

NTDOP PMS 35.2 5.6 15.9 0.6


39.1 1.8 4.7 0.9

Kotak Mah. Bank

Voltas

Bajaj Fin.

Page Industries

Eicher Motors

City Union Bank

Max Financial

Bosch

Bharat Forge

Godrej Inds.

Others

12.3

9.7

8.7

8.6

6.6

4.5

4.3

4.1

4.1

4.0

33.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Value PMS 24.9 4.7 18.8 0.9

Nifty 50 23.3 3.1 13.4 1.6 0

50

100

150

200

250

300

26.5x

10.6x

Ma

r-0

3

Ju

n-0

4

Se

p-0

5

De

c-0

6

Ma

r-0

8

Ju

l-0

9

Oct-1

0

Ja

n-1

2

Ap

r-1

3

Ju

l-1

4

Oct-1

5

Ja

n-1

7

Ap

r-1

8

Value Nifty 50

HDFC Bank

Kotak Mah. Bank

AU Small Finance

Bharat Forge

Eicher Motors

B P C L

Larsen & Toubro

Bajaj Finserv

H D F C

Sun Pharma.Inds.

Others

10.3

8.8

7.1

6.7

6.6

6.4

5.7

5.7

5.6

5.1

37.1

Top 10 Holdings

Stocks Allocation

Value PMS

NTDOP PMS

IOP PMS

5.9x

2.4x

0

10

20

30

40

50

60

70D

ec-0

7

De

c-0

8

De

c-0

9

Ja

n-1

1

Ja

n-1

2

Fe

b-1

3

Fe

b-1

4

Ma

r-1

5

Ma

r-1

6

Ma

r-1

7

Ap

r-1

8

NTDOP Nifty Midcap 100

3.5x

2.8x

0

5

10

15

20

25

30

35

40

45

Fe

b-1

0

Se

p-1

0

Ma

r-1

1

Oct-1

1

Ap

r-1

2

No

v-1

2

Ma

y-1

3

De

c-1

3

Ju

n-1

4

Ja

n-1

5

Ju

l-1

5

Fe

b-1

6

Au

g-1

6

Ma

r-1

7

Oct-1

7

Ap

r-1

8

IOP Nifty Midcap 100

MAY 2018 | ISSUE 65 48


Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

IEP PMS

Nifty 500 27.8 2.9 10.5 1.4

41.7 6.9 16.6 0.3

Cholaman.Inv.&Fn

Bajaj Fin.

IndusInd Bank

Bajaj Finserv

Britannia Inds.

Page Industries

MRF

Havells India

Motherson Sumi

Astral Poly

Others

7.5

6.9

6.9

6.6

6.3

5.8

5.4

5.4

5.3

5.1

38.9

Top 10 Holdings

Stocks Allocation

ASK PMS

IEP PMS

Motilal Oswal Focused Multicap Opportunities Fund (AIF)*

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

MO AIF 37.1 4.3 11.7 0.5

Nifty 500 27.8 2.9 10.5 1.4

Quess Corp

Voltas

Kotak Mah. Bank

DCB Bank

Asian Paints

Godrej Inds.

Federal Bank

Birla Corpn.

Colgate-Palm.

AU Small Finance

Others

12.0

10.4

9.7

8.8

7.5

6.6

6.3

6.1

6.0

5.3

21.3

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

IOP 2 PMS 36.4 5.4 14.9 0.4


39.1 1.8 4.7 0.9

Cholaman.Inv.&Fn

Godrej Agrovet

GRUH Finance

Coffee Day Enter

Bajaj Electrical

Avanti Feeds

HEG

Ipca Labs.

Century Ply.

JK Lakshmi Cem.

Others

8.3

7.3

7.3

6.8

6.5

6.4

6.2

5.8

5.5

5.3

34.6

Top 10 Holdings

Stocks Allocation

IOP 2 PMS

4.9x

2.3x

0

10

20

30

40

50

60

Ja

n-1

0

De

c-1

0

No

v-1

1

Oct-1

2

Se

p-1

3

Ju

l-1

4

Ju

n-1

5

Ma

y-1

6

Ap

r-1

7

Ma

r-1

8ASK IEP BSE 500

Performance (since March 1, 2017)

11.9% 12.3%

18.4%

MO AIF B1 MO AIF B2 BSE 200

12.7%

2.9%

IOP V2 Nifty Midcap FF100

Performance (since Feb 05, 2018)

MAY 2018 | ISSUE 65 49


*The Portfolio data and Fundamental attributes As on March 31, 2018

The Portfolio data and Fundamental attributes As on April 30, 2018

Fund Stylometer

Mean

Reversion


Momentum

Kaveri Seed Co.

Tata Chemicals

Escorts

Chambal Fert.

Jain Irrigation

Coromandel Inter

T.V. Today Netw.

Zuari Agro Chem.

-

-

Others

11.0

10.5

9.0

8.6

8.2

7.7

6.9

6.5

-

-

31.6

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

Graphite India

Coromandel Inter

Kaveri Seed Co.

United Spirits

Escorts

Arvind Ltd

Power Mech Proj.

A B B

Sun TV Network

-

Others

9.3

6.2

5.2

4.9

4.0

3.9

3.8

3.5

3.3

-

56.0

Top 10 Holdings

Stocks Allocation

Old Bridge PMS

Old Bridge Thematic PMS

All Cap PMS

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

India Select 31.8 5.9 18.6 0.6

Nifty 500 27.8 2.9 10.5 1.4

GRUH Finance

Bajaj Fin.

HDFC Bank

MRF

Bajaj Finserv

Motherson Sumi

IndusInd Bank

Page Industries

Maruti Suzuki

Eicher Motors

Others

7.1

6.9

6.8

6.6

6.4

6.3

6.0

6.0

5.6

5.4

37.0

Top 10 Holdings

Stocks Allocation

India Select PMS

4.4x

2.1x

0

5

10

15

20

25

30

35

40

45

50

Ja

n-1

0

De

c-1

0

No

v-1

1

Oct-1

2

Se

p-1

3

Au

g-1

4

Ju

l-1

5

Ju

n-1

6

Ma

y-1

7

Ap

r-1

8

ASK Select BSE 100

6.4%

0.4%

11.3%

40.1%

32.2%

6.5%

-2.0%

3.9%

15.9% 16.7%

1M 3M 6M 1Y Since inception

Old Bridge All Cap BSE 500

-0.9%

19.6%

28.8%

3.9%

15.4% 14.2%

6M 1Y Since inception

Old Bridge Thematic Nifty 50

Real Estate Offering

MAY 2018 | ISSUE 65 50


India Realty Excellence Fund IV

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Supply had

overtaken demand

Inventory levels peaked

and average price

growth slowed down

Demand expected to

outpace supply leading to

fall in inventory level

Inventory expected to

bottom-out and prices

expected to rise

Higher demand &

rising prices will lead

to more supply

Fund’s Investment

Period

Fund’s Exit

Timeline

Investment Strategy

City Strategy• City focus: MMR, Delhi NCR,

Bengaluru, Pune, Chennai &

Hyderabad

• City concentration (except MMR &

Bengaluru): <30% of fund

size

Project Strategy• Residential segment with focus on

affordable segment

• Commercial projects (selectively)

• Single project concentration: <20% of

fund size

Developer Strategy• Established & dominant players in

each micro-market having good

execution capability

• Investment with a developer group not

to exceed 20% of Fund Size

Investment Structure Strategy• Mezzanine Investments (~50%):

Downside protection with regular

coupon along with equity kicker

• Structured equity (up to 50%):

Enhanced returns by undertaking

equity investments with reputed

developers

iref IV

Target Fund Size Rs. 1500 cr (incl. green-shoe option of Rs. 500 cr)

Hurdle Rate 10% IRR (pre-tax)

Target Return 22-24%

Minimum Commitment Rs. 1 cr

Sponsor & team Commitment 10% of aggregate Capital Commitments received by the Fund, subject to a minimum Capital

Commitment of Rs. 50 cr and maximum of Rs. 100 cr

Tenure 5 Y from the date of the final closing subject to two additional 1 year extensions

Commitment Period 2 Y from final closing (extendable by 1Y)

Management Fees• Rs. 1 cr to 10 cr: 2.0% p.a.

• > Rs. 10 cr to 25 cr: 1.75% p.a.

• > Rs. 25 cr: 1.50% p.a.

Carried interest (with catch up) • Rs. 1 cr to 10 cr: 15.0% p.a.

• > Rs. 10 cr to 25 cr: 12.50% p.a.

• > Rs. 25 cr: 10.0% p.a.

Key Terms

Capturing the real estate recovery cycle

MAY 2018 | ISSUE 65 51

Debt Offering


BOI AXA Corporate Credit Spectrum

A niche opportunity for seasoned investors to participate in open ended high yield debt fund which aims to provide

superior risk adjusted returns by investing in structured corporate credit & vanilla issuances across the credit spectrum.

Expertise of global

investment firm

Niche

Opportunity

Skin in the

game

Quality &

Security

• Returns linked to at time of

maturity

• as compared to plain vanilla credit oriented and real estate

debt funds

pre determined coupons plus equity premium

Attractively positioned

• for identification, evaluation, diligence and

structuring of opportunities

• The firm has expertise in managing assets across multiple asset classes

• In India, the firm has

Tie up with global investment firm

5 yr track record in structured credit & private lending

• The global investment firm in the deals through NBFC /AIF

platform which is USD 2.5 Bn

• BOI AXA fund gets to participate in the deal through water fall mechanism.

• of Rs. 75 Crs in BOI AXA fund

invests its own capital

AXA has a seed capital

• The global investment firm provides to companies

whose underlying business is strong & thus

• like real estate/infrastructure

• to the company , thus would have ‘ ’

holistic financial solutions

the firm has the confidence of owning

the equity

Focus on promoter quality & avoid stressed sectors

Major lender pari passu to the pledged assets

AUM Rs. 1495

Average Maturity 2.4 yrs

Modified Duration 1.5 yrs

YTM 11.3%

Portfolio as on 30th April 2018AAA/A1+

32%

AA/AA-

22%

A & Below

29%

Unrated

13%

Cash

4%

Alternative Offering

MAY 2018 | ISSUE 65 52


Equity like return with lower volatility

Portfolio construct

Alpha strategy70% Long only

portfolioRisk mitigation = Low Beta

30% Long-Short

portfolio

• Investment committee decides on market outlook and reviews it on monthly basis• Committee consist of CEO, 3 fund manager and the research team

Endeavors to generate superior returns to Nifty 50 while limiting downside

through hedgingStrategy

Team with a successful track record in the long-short spaceConsistency

Lock-in of 15 months, thereafter monthly liquidity availableLiquidity

Low correlation to traditional equity products, hence improving risk adjusted

returns of the portfolioDiversification

Well articulated strategy in managing both long-only and long-short portfolioClarity of

Philosophy

• Over a decade of experience in managing long-short space

• Comfort on manager’s capabilities & their risk management system

Class &

Capabilities

Investment Rationale

Terms & Conditions

Parameter Description

Type of scheme Close ended, AIF Cat III

Lock-in 15 months from the date of allotment

Sponsor commitment 5% or 10 cr whichever is less

Minimum Investment Rs. 1 cr

Set-up fees Up to 2.0%

Management fee Rs. 1 cr < Rs. 10 cr – 2.5%

Rs. 10 & above – 2.0%

Performance fees Nil

Exit Load Nil post the lock-in period

Redemption frequency Monthly

Avendus Enhanced Return Fund

Event / Market

Outlook

Long-only

portfolio

Long-short portfolio Net exposure Rationale

Bullish 70% Net long – Max 80% Max 150%

Bearish 70% Net Short – Max 40% Min. 30%

Range-bound 70% Net long – Max 10% Max. 80%

Event risk 70% Net Short – Max 40% Min. 30% No directional call

Hedge part of

the portfolio

Derive benefit from

directional markets

Take opportunistic

positions

MAY 2018 | ISSUE 65 53

Fund InsightLarge Cap Funds


Positioning of Large Cap Funds

Period : Apr 2015 - Mar 2018

Top 5 Sector

Top 5 Sector

23.3 3.1 13.4 1.6

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

23.3 3.1 13.4 1.6

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

HDFC Bk

ICICI Bk

Infosys

ITC

L & T

Maruti

Yes Bk

HCL

M & M

HDFC Ltd

Others

7.4

5.0

4.7

4.6

2.8

2.8

2.5

2.2

2.2

2.2

63.6

Top 10 Holdings

Stocks Allocation

HDFC Bk

ICICI Bk

Infosys

ITC

L & T

Maruti

Yes Bk

HCL

M & M

HDFC Ltd

Others

7.4

5.0

4.7

4.6

2.8

2.8

2.5

2.2

2.2

2.2

63.6

Top 10 Holdings

Stocks Allocation

Aditya Birla SL Focused Equity Fund - Mahesh Patil)

Aditya Birla SL Frontline Eq Fund (Fund Manager - Mahesh Patil)

21.4 3.0 13.8 1.3

20.4 3.1 15.4 1.4

34.7

12.4

10.4

9.1

8.2

Financial Cons GoodsIT Energy Auto

34.7

12.4

10.4

9.1

8.2

Financial Cons GoodsIT EnergyAuto

19.9

18.8

17.6

22.8

17.7

14.3

18.0

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

3 yrs Average P/B

Aditya Birla SL Frontline Equity Aditya Birla SL Top 100 ICICI Pru Focused Bluechip Equity

MOST Focused 25 SBI BlueChip Nifty 50

3 y

rs A

vera

ge

P/E

Bubble size

3 yrs Average RoE

High P/B

Low P/E

Low P/B

28.4

14.7

11.9

9.0

7.8

Financial EnergyAuto IT Cons Goods

MAY 2018 | ISSUE 65 54


Top 5 Sector

ICICI Pru Focused BlueChip Eq Fund (Fund Manager – Sankaran Naren)

Most Focused 25 Fund* (Fund Manager – Siddharth Bothra)

SBI BlueChip Fund (Fund Manager – Sohini Andani)

ICICI Bk

HDFC Bk

Infosys

SBI

Motherson

ITC

L & T

Maruti

Power Grid

NTPC

Others

6.8

6.1

4.4

3.9

3.8

3.7

3.6

3.3

3.3

3.1

58.0

Top 10 Holdings

Stocks Allocation

HDFC Bk

L & T

M & M

ITC

Nestle

Chola Invest & Fin

IndusInd Bk

Kotak Bk

Ultratech Cement

HDFC Ltd

Others

8.0

5.6

4.1

3.8

3.4

2.7

2.6

2.6

2.5

2.5

62.3

Top 10 Holdings

Stocks Allocation

Top 5 Sector

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

23.3 3.1 13.4 1.6

23.3 3.1 13.4 1.6

22.2 2.9 13.2 1.3

24.8 3.8 15.3 1.0

32.0

11.4

9.1

7.5

6.9

Financial Auto Cons GoodsConstruction Pharma

Top 5 Sector

HDFC Bk

Maruti

HDFC Ltd

HDFC Life Insur

ICICI Lombard

ABB

Britannia

Container Corp

Kotak Bk

Eicher

Others

9.3

9.0

7.3

6.6

6.1

5.4

5.4

5.2

4.8

4.2

36.8

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50 23.3 3.1 13.4 1.6

29.7 5.4 18.0 0.9

41.6

15.9

12.8

5.45.4

Financial AutoCons Goods Cap Goods IT

MAY 2018 | ISSUE 65 55


Multi Cap Funds

Top 5 Sector

Top 5 Sector

Aditya Birla SL Equity Fund (Fund Manager - Anil Shah)

Franklin India Prima Plus Fund (Fund Manager - Anand Radhakrishnan)

HDFC Bk

ICICI Bk

ITC

Maruti

Tata Chemicals

Infosys

Tata Steel

Bharat Forge

Dabur

Hindalco

Others

6.1

4.8

3.9

3.6

3.4

3.2

3.2

2.7

2.4

2.4

64.2

Top 10 Holdings

Stocks Allocation

HDFC Bk

Infosys

Bharti

Yes Bk

L & T

ICICI Bk

M & M

Kotak Bk

Axis Bk

HCL

Others

8.7

5.2

4.6

4.3

3.9

3.8

3.7

3.3

3.1

2.8

56.6

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

20.8 2.8 13.7 1.0

22.2 3.4 15.2 1.0

20.1

13.1

15.9

17.3

16.6

24.2

21.9

13.8

11.4

16.7

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

3 yrs Average P/B

Aditya Birla SL Equity Franklin India High Growth Cos Franklin India Prima PlusICICI Pru Multicap ICICI Pru Value Discovery MOSt Focused Multicap 35Invesco India Contra L&T India Value Fund Nifty 500


High P/B

Low P/E

Low P/B

3 y

rs A

vera

ge P

/E

Positioning of Multi Cap Funds


26.9

10.5

10.0

10.0

7.9

Financial IT AutoPharma Cons Goods

15.4

12.910.4

9.9

6.5

Cap Goods TextilesChemicals Others Metal

MAY 2018 | ISSUE 65 56


Top 5 Sector

Top 5 Sector

Top 5 Sector

Franklin India Focus Equity Fund (Fund Manager - Roshi Jain)

ICICI Pru Value Discovery Fund (Fund Manager - Mrinal Singh)

ICICI Prudential Multicap Fund (George Heber Joseph, Atul Patel)

SBI

HDFC Bk

Axis Bk

ICICI Bk

Bharti

IOC

Whirlpool

NTPC

BPCL

Sanofi

Others

9.0

8.9

8.2

7.5

6.2

4.1

3.4

3.4

3.2

2.9

43.4

Top 10 Holdings

Stocks Allocation

Sun Pharma

Wipro

Infosys

NTPC

M & M

Power Grid

HDFC Bk

ITC

SBI

IOC

Others

10.4

5.8

5.6

5.2

5.0

4.7

4.6

4.0

3.0

3.0

48.6

Top 10 Holdings

Stocks Allocation

Infosys

HDFC Ltd

Sun Pharma

ICICI Bk

SBI

GAIL

ITC

Dabur

Cummins

Motherson

Others

5.2

5.1

5.1

4.9

4.9

4.2

4.1

3.9

3.7

3.6

55.3

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

27.8 2.9 10.5 1.4

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500

Earnings

Momentum

Mean

ReversionValue GrowthBlended

27.8 2.9 10.5 1.4

21.5 2.7 12.5 1.3

18.9 3.0 15.7 1.4

22.7 3.9 17.0 1.4

19.8

13.911.2

9.9

8.8

Financial Auto Cons Goods

Cap Goods Others

17.1

14.914.7

8.9

8.7

Financial Cap GoodsCons Goods Others Auto

15.4

12.910.4

9.9

6.5


Top 5 Sector

Invesco India Contra Fund (Fund Manager - Taher Badshah, Amit Ganatra)

HDFC Bk

RIL

HDFC Ltd

ITC

ICICI Bk

M & M

Infosys

Cipla

Cyient

HCL

Others

7.0

5.2

5.0

4.5

4.2

3.8

3.8

3.7

3.3

3.3

56.1

Top 10 Holdings

Stocks Allocation

23.1 3.3 14.3 1.0

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

13.9

12.9

12.6

12.6

6.8

Financial ConstructionCap Goods Others Cons Goods


MAY 2018 | ISSUE 65 57

Top 5 Sector

L&T India Value Fund (Fund Manager - Venugopal M)

RIL

HDFC Ltd

L & T

DiviS Lab

ITC

HCL

Ramco Cements

Future Retail

Federal Bk

Jindal Steel & Power

3.8

3.5

3.3

2.8

2.7

2.2

2.1

2.1

2.1

2.0

73.5

Top 10 Holdings

Stocks Allocation

22.3 2.9 13.0 1.2

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

Top 5 Sector

MOSt Focused Multicap 35 Fund* (Fund Manager - Gautam Sinha Roy)

HDFC Ltd

Maruti

HDFC Bk

IndusInd Bk

Interglobe Aviation

HPCL

BPCL

Eicher

Bajaj Finance

United Spirits

Others

9.2

7.7

7.7

5.1

4.7

4.7

4.5

4.3

4.0

4.0

44.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

23.4 4.9 20.7 1.1

23.2

21.0

13.4

9.2

9.2

Financial Others Construction

Cap Goods Cons Goods

Top 5 Sector

Kotak Select Focus Fund* (Fund Manager - Harsha Upadhyaya)

HDFC Ltd

HDFC Bk

L & T

RIL

ICICI Bk

IndusInd Bk

Infosys

Hero Moto

Maruti

SBI

Others

9.6

7.4

5.5

4.9

3.9

3.3

3.3

3.3

3.0

2.9

52.9

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

24.9 3.8 15.4 0.9

20.0

18.0

12.0

8.7

5.6

Financial Cap GoodsCons Goods Others Chemicals

14.1

12.7

8.1

7.0

5.6

Cap Goods OthersIT Services Auto

Top 5 Sector

Sundaram Rural & Consumption Fund* (Fund Manager: S. Krishnakumar; S. Bharath)

M & M

HUL

ITC

UPL

NCC

Heritage Foods

SBI

Britannia

Ujjivan Fina

Maruti

Others

4.7

4.6

3.5

3.5

2.5

2.4

2.2

2.2

2.1

2.1

70.1

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 27.8 2.9 10.5 1.4

28.1 4.0 14.3 0.9

15.4

12.910.4

9.9

6.5


Midcap Fund

Positioning of Midcap Funds


16.6

16.5

14.5

18.9

20.3

7.3

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

46.0

1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.53 yrs Average P/B

HDFC Mid-Cap Opportunities Fund Franklin India Prima Fund Sundaram Select Midcap

Kotak Emerging Equity Scheme Motilal Oswal Midcap 30 Fund Nifty Free Float Midcap 100

High P/B

Low P/B

High P/E

Low P/E

Bubble size : 3 yrs Average RoE

3 yr

s Av

erag

e P/

E

MAY 2018 | ISSUE 65 58


Top 5 Sector

Top 5 Sector

39.1 1.8 4.7 0.9

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty Free Float

Mid Cap 100

39.1 1.8 4.7 0.9

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

HDFC Bk

Infosys

Bharti

Yes Bk

L & T

ICICI Bk

M & M

Kotak Bk

Axis Bk

HCL

Others

8.7

5.2

4.6

4.3

3.9

3.8

3.7

3.3

3.1

2.8

56.6

Top 10 Holdings

Stocks Allocation

Sundram Fasteners

Chola Invest & Fin

Balkrishna

Voltas

Hexaware Tech

City Union Bk

TI Financial

Aarti

RBL Bk

Exide

Others

.1

4.1

3.6

3.4

2.8

2.6

2.5

2.5

2.2

2.1

70.1

Top 10 Holdings

Stocks Allocation

Franklin India Prima Fund* (Fund Manager: R. Janakiraman; Hari Shyamsunder)

HDFC Mid-Cap Opportunities Fund* (Fund Manager: Chirag Setalvad; Rakesh Vyas)

16.8 2.5 14.9 0.7

25.7 3.6 14.0 0.8

26.9

10.5

10.0

10.0

7.9

Financial IT AutoPharma Cons Goods

19.8

13.911.2

9.9

8.8

Financial AutoCons Goods Cap Goods

Others Nifty Free Float

Mid Cap 100

Top 5 Sector

Top 5 Sector

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

HDFC Bk

Infosys

Bharti

Yes Bk

L & T

ICICI Bk

M & M

Kotak Bk

Axis Bk

HCL

Others

8.7

5.2

4.6

4.3

3.9

3.8

3.7

3.3

3.1

2.8

56.6

Top 10 Holdings

Stocks Allocation

4RBL Bk

Voltas

AU Small Bk

Astral Poly

IndusInd Bk

Nerolac Paints

Bajaj Finance

Indraprastha Gas

Kajaria Ceramics

Quess Corp

Others

6.0

5.3

5.3

5.3

5.3

5.2

5.2

4.8

4.7

4.4

48.5

Top 10 Holdings

Stocks Allocation

Kotak Emerging Equity Fund* (Fund Manager: Pankaj Tibrewal)

Motilal Oswal Midcap 30 Fund* (Fund Manager: Chirag Setalvad; Rakesh Vyas)

43.5 6.9 15.8 0.4

31.4 4.7 15.0 0.6

20.0

18.0

12.0

8.7

5.6

Financial Cap GoodsCons Goods Others Chemicals

23.2

21.0

13.4

9.2

9.2

Financial Others ConstructionCap Goods Cons Goods

MAY 2018 | ISSUE 65 59


Top 5 Sector Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Ramco Cements

Sundaram-Clayton

Trent

Quess Corp

Schaeffler

Honeywell Auto

Arvind

Wabco

SRF

Chola Invest & Fin

Others

3.9

3.5

3.0

2.6

2.5

2.5

2.3

2.2

2.2

2.1

73.2

Top 10 Holdings

Stocks Allocation

Sundaram Midcap Fund* (Fund Manager: S. Krishnakumar)

28.6 3.7 12.9 0.7

17.1

14.914.7

8.9

8.7

Financial Cap GoodsCons Goods Others Auto

Nifty Free Float

Mid Cap 10039.1 1.8 4.7 0.9

Nifty Free Float

Mid Cap 10039.1 1.8 4.7 0.9


39.1 1.8 4.7 0.9

Small Cap Fund

Positioning of Small cap Funds


MAY 2018 | ISSUE 65 60


Top 5 Sector

Top 5 Sector

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Finolex

Aarti

SRF

APL Apollo Tubes

Atul

Eveready

Ipca

Siyaram Silk Mills

Sharda Cropchem

KPR Mill

Others

5.5

4.1

3.5

3.3

3.2

3.0

2.8

2.6

2.5

2.5

67.0

Top 10 Holdings

Stocks Allocation

Finolex

Repco Home Fin

HDFC Bk

Voltas

eClerx Services

Music Broadcast

Nesco

Cyient

Shankara Building

Deepak Nitrite

Others

5.1

2.7

2.4

2.2

2.2

2.2

2.2

2.2

2.0

2.0

74.8

Top 10 Holdings

Stocks Allocation

DSPBR Small Cap Fund* (Fund Manager: Vinit Sambre; Jay Kothari)

Franklin India Smaller Cos Fund* (Fund Manager: R. Janakiraman; Hari Shyamsunder)

22.9 3.3 14.6 0.8

21.9 3.5 16.0 0.7

15.4

12.910.4

9.9

6.5

Cap Goods Textiles

Chemicals Others Metal

13.9

12.9

12.6

12.6

6.8

Financial ConstructionCap Goods Others Cons Goods

15.0 18.3

17.7

7.3

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

1.5 2.5 3.5 4.5 5.5 6.5

3 yr

s A

vera

ge P

/E

3 yrs Average P/B

Bubble size : 3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

Franklin India Smaller Cos Fund DSPBR Small Cap Fund

HDFC Small Cap Fund Nifty Free Float Midcap 100


39.1 1.8 4.7 0.9


39.1 1.8 4.7 0.9

MAY 2018 | ISSUE 65 61


Top 5 Sector Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Sonata Software

Redington

Carbor Unive

SKF

Chambal Ferti

LG Balakrishnan

PNC Infratech

Atul

TV Today

Sharda Cropchem

Others

3.5

3.2

3.1

3.0

2.3

2.3

2.1

2.0

2.0

2.0

74.5

Top 10 Holdings

Stocks Allocation

HDFC Small Cap Fund* (Fund Manager: Chirag Setalvad; Rakesh Vyas)

20.5 2.9 14.1 0.9

14.1

12.7

8.1

7.0

5.6

Cap Goods Others ITServices Auto


39.1 1.8 4.7 0.9

Balanced Fund

17.8

17.9

16.5

17.9

14.3

18.0

20.0

22.0

24.0

26.0

28.0

30.0

32.0

2.0 3.0 4.0 5.0 6.03 yrs Average P/B

Aditya Birla SL Balanced '95 Franklin India Balanced HDFC Balanced ICICI Pru Balanced Nifty 50

3 y

rs A

vera

ge

P/E

Bubble size

3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

Positioning of Balanced Funds


Top 5 Sector

HDFC Bk

ICICI Bk

Infosys

L & T

Maruti

Yes Bk

Eicher

Eris Lifescie

ITC

Whirlpool

Others

5.3

3.2

2.5

2.5

1.9

1.7

1.7

1.5

1.5

1.4

76.9

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Aditya Birla SL Balanced '95 Fund (Fund Manager - Mahesh Patil, Dhaval Shah)

23.3 3.1 13.4 1.6

23.8 3.5 14.9 1.1

22.3

10.0

6.5

5.8

5.7

Financial Cons Goods

IT Energy Auto

MAY 2018 | ISSUE 65 62


Top 5 Sector

Kotak Bk

HDFC Bk

Axis Bk

M & M

Power Grid

Grasim

Hotels Com

Hindalco

SBI

Infosys

Others

5.5

5.0

4.3

3.4

3.3

3.1

2.8

2.8

2.5

2.2

65.2

Top 10 Holdings

Stocks Allocation

Franklin India Balanced Fund (Fund Manager - Lakshmikanth Reddy, Sachin Padwal-Desai)

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50 23.3 3.1 13.4 1.6

21.6 2.9 13.5 1.1

19.3

9.8

8.1

8.0

3.7

Financial Energy AutoCons Goods Metal

Top 5 Sector

Top 5 Sector

HDFC Bk

Infosys

HDFC Ltd

ITC

L & T

ICICI Bk

Auro Pharma

IndusInd Bk

Axis Bk

Voltas

Others

6.5

3.8

3.4

3.3

3.1

3.0

1.9

1.8

1.8

1.8

69.8

Top 10 Holdings

Stocks Allocation

ICICI Bk

NTPC

Power Grid

ITC

SBI

Infosys

ONGC

Bharti

Hindalco

Tata Steel

Others

4.8

3.9

3.7

3.6

3.5

3.3

3.0

2.7

2.5

2.5

66.5

Top 10 Holdings

Stocks Allocation

HDFC Balanced Fund (Fund Manager - Chirag Setalvad, Rakesh Vyas)

ICICI Pru Balanced Fund (Fund Manager - Sankaran Naren, Atul Patel)

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Mean

Reversion


Momentum

23.3 3.1 13.4 1.6

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50 23.3 3.1 13.4 1.6

18.2 2.3 12.4 1.7

21.4 3.3 15.2 1.3

22.9

7.2

6.4

6.0

5.5

Financial EnergyConstruction IT Cons Goods

15.2

13.5

6.3

6.2

5.5

Energy FinancialCons Goods Metal IT

MAY 2018 | ISSUE 65 63

The Portfolio data and Fundamental attributes As on April 30, 2018

*The Portfolio data and Fundamental attributes As on March 31, 2018


Portfolio Details

77.0

88.4

86.5

83.0

80.1

76.5

79.5

62.6

71.5

70.7

66.9

38.0

60.1

72.0

41.8

18.6

12.6

2.0

1.8

17.7

2.3

9.2

—

51.0

57.6

53.1

46.1

Scheme Name Large Cap

Equity

Midcap Small cap Sov & AAA AA &equivalent Cash Others

Fixed Income Cash & Others

SBI BlueChip Fund

ICICI Pru BlueChip Equity Fund

Aditya Birla SL Focused Equity Fund

Motilal Oswal Focused 25 Fund




Franklin India Focused Equity




L&T India Value Fund



Sundaram Rural & Consumption Fund

Motilal Oswal Midcap 30 Fund

Kotak Emerging Opportunites Fund

HDFC Mid-Cap Opportunities Fund

HDFC Small Cap Fund

Franklin India Prima Fund

Sundaram Midcap Fund

Franklin India Smaller Cos Fund

DSPBR Small Cap Fund

Aditya Birla SL Equity Hybrid ’95 Fund

ICICI Pru Equity & Debt Fund

Franklin India Balanced Fund

HDFC Hybrid Fund

15.2

2.6

6.3

15.9

16.4

22.3

15.1

19.6

25.5

13.3

25.0

49.9

30.1

21.3

41.7

80.8

75.7

90.0

42.3

75.2

91.6

53.3

51.4

21.4

7.3

12.5

19.3

—

—

—

—

0.1

—

0.1

5.8

—

0.9

4.6

3.0

0.9

—

12.2

—

8.5

3.3

40.0

3.2

28.1

45.8

2.1

0.5

1.1

1.4

—

5.4

2.4

9.0

1.1

4.8

1.2

2.3

6.9

3.1

0.5

3.5

8.0

8.5

6.7

1.1

0.6

2.2

2.5

15.8

5.9

0.7

8.0

2.3

3.5

5.6

1.8

4.1

1.7

4.7

0.0

—

0.0

—

2.7

—

—

5.0

-

—

—

—

—

—

0.5

1.8

—

—

—

—

—

11.8

14.8

11.8

24.0

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

0.0

0.5

—

—

—

—

—

9.2

11.5

19.7

3.9

in % terms

5.4

2.4

9.0

1.1

4.8

1.2

2.3

6.9

3.1

0.5

3.5

8.0

8.5

6.7

1.1

0.6

2.2

2.5

15.8

5.9

0.7

8.0

2.3

3.5

5.6

1.8

4.1

MAY 2018 | ISSUE 65 64

Notes


MAY 2018 | ISSUE 65 65

Notes


MAY 2018 | ISSUE 65 66

Notes


MAY 2018 | ISSUE 65 67

Motilal Oswal Wealth Management Limited

CIN: U67110MH2002PLC135075

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road,

Opposite Parel ST Depot, Prabhadevi, Mumbai 400 025

Tel No.: 022 3980 4263; Website: www.motilaloswal.com

Registration details: SEBI PMS Regn No: INP000004409; AMFI Regn No: ARN87554

Please read disclosure document as issued by company from time to time.

Ashish Shanker

Head – Investment Advisory

[email protected]

91 22 3982 5549+

Pradeep Ashok Kumar

Vice President - Financial Strategy

[email protected]

91 22 3010 2353+

Kumarpal Jain

Manager

[email protected]

91 22 3010 2327+

The information, data or analysis does not constitute investment advice or as an offer or solicitation of an offer to purchase or subscribe for any investment or a recommendation and is meantfor your personal information only and suggests a proposition which does not guarantee any returns. Motilal Oswal Wealth Management Ltd (hereinafter referred as MOWML) or any of itsaffiliates is not soliciting any action based upon it. This information, including the data, or analysis provided herein is neither intended to aid in decision making for legal, financial or otherconsulting questions, nor should it be the basis of any investment or other decisions. The historical performance presented in this document is not indicative of and should not be construed asbeing indicative of or otherwise used as a proxy for future or specific investments. The relevant product offering documents should be read for further details. MOWML does not takeresponsibility for authentication of any data or information which has been furnished by you, the entity offering the product, or any other third party which furnishes the data or information.The above mentioned assets are not necessarily maintained or kept in custody of MOWML. The information contained in this statement are updated as and when received as a result of whichthere may be differences between the details contained herein and those reflected in the records of the respective entities or that of yours. In the event where information sent through anyelectronic Media (including but not limited to Net Banking or e-mail) or print do not tally, for whatever reason, with the records available with the entity offering the product or the third partymaintaining such information in each of the foregoing cases, the information with the entity offering the product or third party maintaining such information shall be considered as final. Thebenchmarking shown in document above is a result of the choice of benchmark MOWML uses for the various products. It is possible that some investments offered by the third parties haveother benchmarks and their actual relative under- or out-performance is different from that provided in the statement. The recipient should seek appropriate professional advice includingtax advice before dealing with any realized or unrealized gain / loss reflecting in this statement. The above data, information or analysis is shared at the request of the recipient and is meant forinformation purpose only and is not an official confirmation of any transactions mentioned in the document above. Service related complaints may be acceptable for rectification ofinaccurate data. You should notify us immediately and in any case within 15 days of receipt of this document date if you notice any error or discrepancy in the information furnished above,failing which it would be deemed to have been accepted by you. 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All recipients of this Information should conduct their own investigation andanalysis and should check the accuracy, reliability and completeness of the Information .This Information is distributed upon the express understanding that no part of the information hereincontained has been independently verified. Further, no representation or warranty expressed or implied is made nor is any responsibility of any kind accepted with respect to thecompleteness or accuracy of any information as may be contained herein. Also no representation or warranty expressed or implied is made that such information remains unchanged in anyrespect as of any date or dates after those stated herein with respect to any matter concerning any statement made herein above. 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