icici feb 17 issuecontent.icicidirect.com/moneymanagermagazine/february_2017.pdf · shilpa kumar md...

Shilpa KumarMD & CEO

ICICI Securities Ltd.

The Union Budget is important to us from three perspectives: what it means for the country's long term progress, what it means for corporate India and financial markets and most importantly, for what it means to every one of us f r o m a p e r s o n a l f i n a n c e perspective.

The good news from the long term perspective is that the Finance Minister gave a message of continuing financial discipline as evidenced through a fiscal deficit of 3.2 per cent. This continues the long term path towards reducing the deficit towards a target level of 3.2% in 2017-18 and 3% in the following year. At the same time, cognizant of the current global slowdown as well as need for domestic growth, there is also some emphasis on increasing consumption, increasing social development and encouraging productive capital expenditure. A large part of the effort is directed towards rural India with a focus on boosting livelihoods and enhancing flow of capital into rural infrastructure. The capex effort is also displaying the Government's effort to create critical infrastructure, particularly in the area of transportation which can have a multiplier effect on the economy. Most notable is the fact that the Government has refrained from populist moves that would have strained Government financials and derailed the path of fiscal consolidation.

The Budget also marked an important step towards making the country a tax compliant one through tax administration and digitalization, bringing in more transparency and reducing the burden of a shadow economy. Measures such as a limit on cash transactions beyond Rs.3 lakh and also on political funding were targeted towards this.

The biggest relief for financial markets was the non-imposition of tax on

1ICICIdirect Money Manager February 2017

long term capital gains. This had been widely anticipated prior to the budget and hence the markets' reaction was positive on this count. The demonetization drive was followed up with some critical changes in the taxation of small and midsized companies. Key proposal in this regard is the reduction in corporate tax rate from 30 per cent to 25 per cent for companies with less than Rs.50 crores turnover. This will benefit around 96 per cent of the firms in India. These measures will encourage better tax compliance and significantly improve the balance sheets of these companies, enabling them to access cheaper sources of funding.

From a sectorial point of view, this is positive news for the consumption sector (auto, paints, building materials and media) as it supports the rebound in consumption post demonetization. It is also positive for transportation infrastructure and cement as the Government continues with its infrastructure and affordable housing focus. The theme of formalization of the financial sector, post demonetization, will also be good news for the banking sector.

Coming to the aspect of personal finance, this budget again gave a relief to individuals in the lower tax bracket by lowering their tax rate by 5 per cent. This will benefit a large part of the earning population. Long term savings habits have also been rewarded by changing the base year of indexation for long term capital gains from 1981 to 2001. This in effect will mean any notional capital gain for investments made prior to 1.4.2001, calculated based on the fair market value of that investment as on 1.4.2001 will be tax free up to that point.

In summary, the Government has signaled that it wants to continue on a long term plan that is fiscally good for the country even as it gives a near term boost to growth by encouraging consumption and spearheading the investment push. It has also maintained its focus on areas of social and rural development as it has emphasized livelihoods and infrastructure creation in these sectors. Lastly, it has sought to make tax compliance easier by reducing tax rates both for individuals and smaller firms and encouraged long term savings by changing the base year of indexation of long term capital gains as well as continuing the tax exemption for long term capital gains.

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

2

Mutual fund investments have emerged as an important investment instruments in last few years. But how much do we really know about this investment option? Those who invest in it acknowledge mutual funds for their diversified asset allocation and risk-reward features. However there are many investors who are perhaps still unaware or even misinformed about this dynamic investment instrument.

Understanding details before investing is one of the thumb rules of financial planning; thus it is necessary to debunk the myths associated with these tools. With this in mind, we are uncovering facts behind some common misconceptions about mutual funds in our February issue. Myths like mutual funds are only equity market investments or that they are ideal for short-term goals have restrained many investors from adopting them in portfolio. Although 'mutual fund investments are subject to market risk' their long-term returns have proved to beat inflation and market volatility over the period of time.

February was also the budget month and we have covered a special feature on budget highlights. This includes a brief review of key measures announced and its impact on economy and various market sectors. We also highlight key changes that affect personal finance and explain what will change post budget reforms implementation.

This edition also offers comprehensive information and analysis on mutual funds recommended by our research team along with updated equity model portfolio. So read on, stay updated and financially healthy. Do write in with your feedback at [email protected] and share your thoughts

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

ICICIdirect Money Manager February 2017

Editor & Publisher : Abhishake Mathur, CFA

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

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

Coordinating Editor : Namrata Lonkar


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

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

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

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

Stock ideas: Sagar cements (SCL) & Symphony Ltd....................5

Flavour of the Month

Clarifying most common mutual funds myths that had withheld

many from beginning the investment journey. Read on to

uncover the lesser known facts about these investments and

how it can actually benefit your portfolio..................................16

Budget highlights

The month of budget presents some reforming changes for all

of us. Find out exclusive highlights from Union budget 2017-18

and what announcements will have significant impact on your

investments, personal finance and overall financial status......24

Ask Our Planner

Your personal finance queries answered by

our expert planner...................................................................... 30

Mutual Fund Analysis

It's time to remain constructive in balanced funds and maintain

stability in the portfolio. Check these top three funds

recommended by our research team........................................33

Equity Model Portfolio.....................................................................48

Quiz Time.......................................................................................52

Prime Numbers.............................................................................. 53

4

From March 13, no curbs on cash withdrawal: RBI

The Reserve Bank of India is set to lift completely from March 13 the cash withdrawal limits imposed in the wake of the November 8 demonetization of high-value currency notes. The RBI said the remonetization process was well under way. RBI officials said it would take time to arrive at a figure of the amount of withdrawn currency notes that were deposited and hinted that the final figures would likely be available only after the deposit window for non-resident Indians was closed in June.

Courtesy: The Hindu

Indian telecom industry lost an estimated fifth of its revenue due to the disruptive free services offered by MukeshAmbani-led Reliance JioInfocomm, India Ratings and Research (Ind-Ra) said in a report where it also revised its FY18 outlook for the sector to negative from stable-to-negative. The ratings agency said that consolidation in the industry will help a quicker return of pricing power. The proposed merger of Vodafone and Idea Cellular BSE -2.64 % will be positive for the telecom industry by eliminating duplication of spectrum and infrastructure capex, the agency said, adding smaller telcos may not be able to sustain cash burn by operating independently and are looking for exit options.

Courtesy: The Economic Times

Reliance Jio free services resulted in 20% revenue loss to telecom industry: Report

Online firms bet on regional languages to penetrate into smaller citiesIn order to build a wider customer base, app-based companiesare focusing on tier II and III cities in India. They are adding more partners and new features on their platform to attract new users to further increase the overall volume of the business. Hyderabad-based bus ticketing portal Abhibus had associated with 15 state road transport corporations, apart from 2,000 private bus operators across the country. To gain rural customers, the company is planning to launch bus ticket booking over the phone in a couple of months.

Courtesy: Business Standard


After launching the ambitious e-nivaran facility for online redressal of taxpayers' grievances, the Income Tax Department has now opened these windows at its 60 special offices across the country. The facility will soon be launched at 100 more such special tax offices, called AaykarSamparkKendras (ASKs), as there has been a slight delay in its operalisation at a few centres due to certain infrastructure issues. The department took the initiative and recently was awarded a central government award for disposing a record 96 per cent grievances or over 20,000 complaints last year.

Courtesy: The Financial Express

Online Income Tax grievance redressal facility launched at 60 offices

5

STOCK IDEAS


Sagar Cements– Premium play in south…

Company BackgroundSagar Cements (SCL) has got transformed from a mini cement plant in Andhra Pradesh (AP) with a capacity of 0.06 mt to a major cement plant with a capacity 4.0 mt. SCL's plant is located in Nalgonda (Telangana) and sells cement in Telangana, AP, Tamil Nadu, Karnataka, Maharashtra a n d O d i s h a . S C L h a s successfully integrated BMM acquisition and has been able to ramp up its utilisation to over 60.0% (in line with other industry players) in Q3FY17. With the demand revival in the south, anticipated sharp rise in cement prices coupled with synergy benefits with BMM puts the company in a privileged position to reap these benefits in future.

The company's key markets have witnessed an oversupply situation over the past few y e a r s . H o w e v e r, g o i n g forward, we expect cement demand to improve led by creation of Telangana, political

Investment Rationale Government infrastructure projects and housing demand to drive growth

stability in Andhra Pradesh, Tamil Nadu housing scheme for poor and increase in demand from individual house builders. We expect strong growth in volumes especially in AP & Telangana as both governments of Andhra Pradesh & Telangana are planning to invest heavily in infrastructure projects. Further, the tax exemption given to people holding land in the new capital city of Amravathi will e x p e d i t e i n f r a s t r u c t u r e development thereby boosting cement demand. As majority of company's capacity is in AP and Telangana, we expect the c o m p a n y ' s v o l u m e s t o increase at a CAGR of 20.8% over FY16-18E.

T h e c o m p a n y h a s commissioned railway siding in March 2016, which will enable the company to improve its road: rail mix from 98:2 to 80:20. Further, this will enable the company to reduce freight cost and deepen its presence in the markets with longer distance. In addition,

Focus on cost rationalisation to drive margin expansion


STOCK IDEAS

the company has acquired a grinding unit of 0.18 MT from Toshali Cements Pvt Ltd and further expects to scale it up to 0.3 MT with an overall cost of | 65 crore. The company plans to introduce slag cement at this grinding unit, which will help the company in saving freight and raw material cost. This coupled with 6 MW WHRMS will help the company in improving its overall cost structure and maintain healthy EBITDA/t of over | 900 over the next few years.

The company has successfully c o n c l u d e d Q u a l i f i e d Institutional Placement (QIP) for | 172.8 crore by issuing 24 lakh shares at a price of |720 per share. SCL intends to use these proceeds for setting up 15 MW power plant at Mattapally (which will help in insulating the company from fluctuation of power prices) and expanding its grinding unit capacity at Bayyavaram from 0.18 MT to 1.5 MT. The capacity expansion will enable the c o m p a n y t o d i v e r s i f y geographically and penetrate into the eastern markets

Recent QIP to help in expansion plans

Structurally in sweet spot to benefit from cement demand revival, Maintain BuySCL has expanded its capacity by almost 7.0x from 0.6 MT FY08 to 4.0MT in FY17E. The company is planning to further increase its capacity by 50.0% to 6 MT in coming years. This coupled with revival in demand, improvement in realisation and limited capacity addition in southern region puts Sagar Cements in a structurally sweet spot to capture the cement cycle upturn. In addit ion, the c o m p a n y ' s p r a g m a t i c approach towards cos t r a t i o n a l i s a t i o n t h r o u g h improving rail road mix, installation power plant, synergy benefits from BMM and acquisition of grinding unit should help improve margins going forward. Considering this we expect the company's revenues and EBITDA to increase at a CAGR of 23.0% and 39.6%, respectively over FY16-18E. Hence, we have a BUY recommendation on this stock with a target price of |975/share (i.e. valuing at FY18E EV/EBITDA 10.0 and EV/tonne of US$90.0).


STOCK IDEAS

Stock Data

Key Financials

Valuations Summary

Net Sales 445.5 731.4 1,037.7 1,314.9

EBITDA 136.0 222.4 315.5 399.7

Net Profit 118.4 176.3 249.6 314.5

EPS (|/share) 16.9 25.2 35.7 45.0

` crore 9MFY16E FY17E FY18E FY19E

P/E 76.4 51.3 36.2 28.8

Target P/E 90.4 60.7 42.9 34.0

EV / EBITDA 66.1 40.5 28.3 22.2

P/BV 28.4 24.0 16.6 13.9

RoNW 34.3 46.7 45.9 48.4

RoCE 47.5 63.8 62.8 66.2

9MFY16E FY17E FY18E FY19E

Market Capitalization 9,045.0

Total Debt (FY16) 0.0

Cash and Cash Equivalent (FY16) 49.9

Enterprise Value 8,995.5

52 week H/L 196 / 90

Equity Capital 7.0

Face Value | 1

DII Holding (%) 4.9

FII Holding (%) 7.8


STOCK IDEAS

Key risks include:

Weak production discipline/delay in demand recoveryOver the past year, the southern region has seen a significant improvement in cement prices primarily led by production discipline. Going forward, cement prices are expected to be driven by production discipline. As a result , weak production discipline would adversely impact south based cement players. Southern players have been witnessing a demand slowdown over the past few years. However, we expect demand to improve in coming quarters led by political stability, formation of new capital, higher government spending on infrastructure and housing related projects. Any delay in demand recovery

would adversely impact south based cement players.

The company sources power from state grid and power exchanges. Over the past few y e a r s t h e r e h a s b e e n significant increase in power unit cost led by fluctuations in power supply. Any further increase in power cost would n e g a t i v e l y i m p a c t t h e company's profitability. The company sources coal from d o m e s t i c l i n k a g e s a n d imported coal. Imported coal price has risen significantly in past one year. Any significant increase in imported coal price or rise in domestic coal price (led by auctioning of linkage coal and ban of pet coke) will a d v e r s e l y i m p a c t t h e company's profitability.

Rise in power & fuel cost


STOCK IDEAS

ANALYST CERTIFICATION We /I, Rashesh Shah, CA, and Devang Bhatt, PGDBM Research Analysts, authors and the names subscribed to this report, hereby certify

that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify

that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock

brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration

Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its

various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund

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ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in

India. We and our associates might have investment banking and other business relationship with a significant percentage of companies

covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their

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STOCK IDEAS

Symphony Ltd…

Company BackgroundSymphony Ltd (Symphony), promoted by Achal Bakeri, has been in the business of air coolers since 1988. The company which declared as a sick company sixteen years back has now become a market leader in the air cooler segment with ~ 50% market share in the organized category. Under the air cooling s e g m e n t t h e c o m p a n y operates in the residential and industrial cooling segment and has launched ~35 models (residential category) till Fy17. S y m p h o n y h a s b e e n p i o n e e r e d i n t e r m s o f launching new technology high energy efficient products (includes touch screen, voice assist, wash filter, bacteria filter, allergy filter and smell and dust filter for delivering cool and pure air) ranging from 20 litres to 110 litres for cooling areas up to 600 square feet. It has also launched world's first wall mounted air cooler in India d u r i n g F Y 1 6 . R e c e n t l y company acquired China based air cooler company Munters Keruilai Air Treatment

Equipment (Guangdong) Co. Ltd (MKE) for a consideration of meagre 1.55 crore. This acquisition will facilitate Symphony's access into China (second air cooler market after India) and other international markets.

Symphony operates through an asset light model wherein it out sources manufacturing of air coolers to about nine exclusive vendors in India and uses the cash and carry model for sales. However, the company retains the rights for product development, design and marketing function to maintain the exclusivity of products and technologies of Symphony from its vendors. Symphony, together with its subsidiaries, offers more than 87 models (Industrial and residential) of air coolers for almost all categories of cus tomers . We be l i eve outsourcing products to nine different vendors and not

`

Investment Rationale

Asset light business model with zero debt strengthens balance sheet


STOCK IDEAS

sharing intellectual rights creates a strong entry barrier for other players. Also, it helps Symphony to concentrate on its core competence i.e. “ innovat ion” in product development and feature evaluation. The company has maintained its return ratios i.e. RoCE, RoE at 49%, 35%, respectively, in 9MFY16 (last three year's average of 39%, 34%) mainly due to an asset light model and almost debt free status since 2006. We believe the zero debt status provides adequate room to fund Symphony's organic and inorganic growth oppor tunities whenever required.

Symphony operates on a cash and carry model with almost 95% of domestic sales in advance payment terms with dealers and distributors with the remaining (i.e. 5%) through large format stores. In the international business, about 40% is through large format stores while 60% is through dealers and distributors. The receivable days (last three year's average ~45 days) on

Cash & carry business model helps i n l o w e r w o r k i n g c a p i t a l requirement

the books of the company are only a reflection of 5% of the domestic market and 40% in international markets where Symphony has to provide some levy on receivables due to bulk orders. However, trade t h r o u g h d e a l e r s a n d distributors (domestic and international) happens with zero credit. We believe the cash & carry model and higher suppl ier days he lp the company to maintain lower working capital requirements throughout the season

Over the years , i t has e s t a b l i s h e d a r o b u s t d i s t r i b u t i o n n e t w o r k comprising ~750 dealers (152 in 2007), ~16,500 retail dealers (3,308 in 2007) and ~4,500 towns (1430 in 2007). Also, Symphony has consistently invested in brand building t h r o u g h a d v e r t i s e m e n t campaigns (~4% of sales over the last three years and ~6% in FY15), strengthening brand recall. Further, the company plans to grow its network to 40,000 dealers over the medium-term for deeper penetration and a stronger

Leveraging on strong brand recall…


STOCK IDEAS

presence in rural and semi-urban markets

In order to explore the industrial cooling segment, Symphony acquired Mexico based Impco SDERL DE CV (Impco). Currently, Impco contributes ~18% to the consolidated topline with a major chunk of revenues (65% of overall sales) coming from centralised and heavy duty air coolers and the remaining (~35% of sales) from room c o o l e r s . S y m p h o n y ' s acquisition has created a new opportunity in the category of heavy duty air coolers for outdoor applications and industrial coolers, a project-o r i e n t e d , n o n - s e a s o n a l bus iness segment . The company has executed orders to installed industrial cooler for some renowned brands namely Asian Paints, DHL, D i x o n Te c h n o l o g i e s , Swaminarayan Temple, Iskcon Temple etc. Addition to this, acquisition in China's MKE will facilitate Symphony's access into China (second air cooler market after India) and other

Overseas subsidiaries to provide c o m p e t i t i v e p r o d u c t s a n d technologies

international markets. The acquisition will also provide Symphony the benefit of sourcing of raw materials for its OEMs. MKE also has a strong R&D and test centre, which meets the quality standards of t h e U S a n d A u s t r a l i a . Symphony aims to improve its sales to the level it clocked during its peak of 130 crore and turn around its business following various strategic moves

We believe the air cooler industry will grow at ~21% CAGR in FY15-25E due to demand remaining intact in t ier- I I and t ier-I I I cit ies. Currently, the air cooler industry is largely dominated by the unorganised segment (~70-80% volume market share). We believe a shift from the unbranded to the branded category (due to r is ing aspiration level) opens up a h u g e o p p o r t u n i t y f o r organised players to grow at 25% CAGR in FY15-25E. We have modelled sales and earnings CAGR of 26% and 28%, respectively, in FY15-19E, led by strong volume

`

Strong fundamental justifies premium valuations…


STOCK IDEAS

growth in the wake of better monsoon, implementation of Seventh Pay Commission, GST. We use DCF method for valuation, assuming revenue

CAGR of ~26% (Fy15 25E), terminal growth of 5%, WACC of ~11% and maintained our target price to 1530.`

Key Financials

Valuations Summary

Stock Data

(` crore)

Net Sales 337.3 366.8 420.5 443.2

EBITDA 31.4 36.9 45.2 49.6

Adj. PAT 18.3 19.0 22.3 26.7

Adj. EPS (`) 12.3 12.9 15.1 18.1

` Crore FY16 FY17E FY18E FY19E

P/E 21.9 21.0 17.9 14.9

Target P/E 25.5 24.5 20.8 17.4

EV / EBITDA 13.7 12.0 9.5 8.3

P/BV 3.9 3.5 3.1 2.7

RoNW (%) 18.1 16.6 17.1 17.9

RoCE (%) 15.8 14.2 18.1 22.0

(x) FY16 FY17E FY18E FY19E

Market Capitalization 399.0

Total Debt 17.8

Cash 1.7

EV 415.4

52 week H/L (`) 300 / 167

Equity capital 14.8

Face value ` 10

FII Holding (%) 0.1

DII Holding (%) 1.9


STOCK IDEAS

Key risks include:

Seasonality in demand increases inventory risk The air cooler industry is highly seasonal in nature with July to December considered to be the off season for the industry (due to rainy and winter season). Symphony witnesses ~80% of sales in the second half of the financial year and maintains higher inventory level in December. The inventory risk arises when the season does not pan out with expectations (due to an extended winter or early monsoon). However, in order to mit igate seasonal i ty, S y m p h o n y h a s s t a r t e d focusing on the export market and also taken various off season marketing initiatives such as providing incentives to dealers in India.

High dependency on one product

Increasing competition

Air coolers constitute ~97% of the topline with geysers constituting the rest of the topline. Symphony may face compet i t ion f rom other cooling products (with rapid changing technologies) . I n t r o d u c t i o n o f c h e a p technology by other players in the organised market may hit Symphony's market share.

The air cooler industry is highly fragmented with unorganised players contributing ~80% (in term of volume). Since the industry has a low entry barrier, the company may face competition from domestic organised players as well as new foreign entrants (from China) in the domestic market


STOCK IDEAS

ANALYST CERTIFICATION We /I, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance) Research Analysts, authors and the names subscribed to this report,

hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We

also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in

this report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock

brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration

Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its

various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund

management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in

India. We and our associates might have investment banking and other business relationship with a significant percentage of companies

covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their

relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report

and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way,

transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior

written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is

under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent

ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such

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16

FLAVOUR OF THE MONTH

Uncovering mutual fund investment myths


One common fallacy related to

mutual fund investment is

mutual fund is an expertise

area and common man needs

to understand market in detail

before stepping into its world.

But like we mentioned, it is just

a myth. On the contrary,

mutual funds are exceptionally

suitable for those with no or

little investment knowledge.

Each fund is handled by fund

managersand their resourceful

research team who regularly

study the market and possess

ability to take right investment

decision at the right time.

Mutual fund managers are the

pro fess iona ls who p ick

d i f f e r e n t s t o c k s a n d

investment instruments that

will give optimum returns

during one's investment

period. He, with his expert

ski l ls , draws pric ing-to-

e a r n i n g s r a t i o , a s s e t

performance, sales and other

similar metrics to build a

mutual fund that will pay off

over the period of time.

By investing in mutual funds

investor pools his money in

stocks without studying or

timing the market. Mutual fund

managers pe r fo rm th i s

studying & timing on investor's

behalf. Besides, investing

regularly over the years

gradually develops investor's

financial knowledge and make

him a clever investor instead.

Two important aspects for an investor before selecting an investment option are – higher returns and lower risk. Investing in mutual fund is a strategy to pool money in diversified securities to balance this risk and return ratio. Mutual funds have rapidly become a popular investment vehiclein India primarily because of its qualities like professional management, asset diversification, tax benefits, affordability, transparency and convenient liquidity. But the myths associated with them can withhold an investor from making the right investment choice at some point. This article is an attempt to uncover such prevailing myths. Read ahead to know facts behind them in more detail.

Myth: Only experts can invest in mutual funds

Fact: Mutual funds are operated by fund managers who are finance experts. They guide the investor in his investment journey.

17



Myth: Mutual funds are stock market investments

Fact: Mutual funds are diversified investments that invest across stocks, bonds, money market instruments and combination of these.

Mutual fund investments are very often associated with s tock marke t i nves t ing primarily because a lot of people consider this as a high-risk-high-return instrument. But equity is not the only asset c o v e r e d u n d e r t h e s e instruments. Mutual funds are diversified investment tools which pool investor's money

across diversified holdings such as equit ies/stocks, government bonds, money market instruments, gold and similar securities. Moreover, equity mutual funds which have significant exposure to equ i t y a r e hand led by professional fund managers who understand market thoroughly.

A mutual fund scheme invests in multiple assets.Exposure to varied assets is the central strategy of mutual fund to beat market volatility. Take a look at the following charts and how different funds allocate money in diversifying assets.

Source: ICICIdirect.com

18



An investor, based on his risk

profile and investment tenure,

can select a mutual fund of his

cho ice . A conserva t ive

investor can opt for balanced

or debt oriented mutual fund

which largely invests in

government bonds and debt

securities, thus ensuring

steady returns. Similarly an

aggressive risk profiler is free

to invest in equity fund as long

as he welcomes market

volatility along with higher

returns.

Myth: One can only invest large sum in mutual funds

Fact: An investor can start mutual fund investment via Systematic Investment Plan (SIP) mode and invest regularly with amount as small as 1000. `

First of all, there are two ways

to invest in mutual funds –

lump sum and systematic

investment plan (SIP). Lump

sum method means investing

all amount at one go whereas

latter is a way to invest small

amount at regular intervals.

Investing via SIP mode doesn't

require you to invest a big sum

at the beginning. Most mutual

funds these days al low

investment as small as Rs.

1000, few even Rs. 500 every

month.

One can either invest lump

sum of Rs. 2 lakh at a time or

Rs.5000 every month for three

years through SIP mode. While

first method assigns fixed

number of units only once to

your account, latter averages

cost of units with every

installment (every month) and

sustains stability against

market ups and downs.

Lump sum investment is more

common in the masses as

traditional investment tools

like Fixed Deposits (FD)

favored one time payments.

But with increasing financial

liabilities a periodic payment

method that is both convenient

and high-yielding is gradually

attracting aspiring investors as

well.

All in all, selecting a mode of

payment while buying a

mutual fund is primarily

depended on investor's cash

flow need, risk profile and

investment horizon.

19



Myth: SIP gives positive returns

Fact: Mutual fund SIPs are subject to market risks and there are no guaranteed returns in these tools.

The fact is SIP is only a method of investment and not an investment type in itself. So if a particular mutual fund is not giving healthy returns it's either because of volatility in the market or under performance of that fund (not because the investor chose SIP mode).

Then why chose SIP over lump sum? Because by investing small amount at regular intervals our returns and risks are averaged out. It's a way to ensure that the investor

purchases at different market levels. SIPs work on the pr inciple of rupee cost averaging. Here, the fund managers buy more units when the markets are down and vice versa. This reduces the risk of timing the market, which is the most common concern amongst beginners. In a mutual fund SIP, a fixed amount is invested every month. With bearish market, Net Asset Value (NAV), the per unit value of a fund, is most likely to go down. Thus you end up buying more units and consequently earn more on allocated units when price per unit increases.

Month Amount Invested Unit Price No. of Units Purchased

01-Jan ` 500

` 38

13.16

01-Feb ` 500

` 31

16.13

01-Mar ` 500 ` 29 17.24

01-Apr ` 500

` 32

15.63

01-May ` 500

` 29

17.24

01-Jun ` 500 ` 26 19.23

Total:` 3000 Avg Cost: 30.83` Total:98.63

Rupee-Cost Averaging when Unit Prices Fall

Rupee-Cost Averaging when Unit Prices Fall

Source: Franklin Templeton Investments

Month Amount Invested Unit Price No. of Units Purchased

01-Jan ` 500 ` 22

22.73

01-Feb ` 500

` 26

19.23

01-Mar ` 500 ` 26

19.23

01-Apr ` 500 ` 28 17.86

01-May ` 500

` 31

16.13

01-Jun ` 500 ` 34

14.71

Total: `.3000 Avg Cost: `.27.83 Total: 109.89

(For illustrative purposes only. Not intended to represent any specific Franklin Templeton fund.)

20



There are no guaranteed

positive returns with SIP.

However, given a upward

movement in market returns

earning returns on SIP is much

simpler than timing the market

but it should not be taken as

risk-free investment tool. It

cannot always shield the

invested amount against

market volatility.

Myth: SIPs are beneficial for short-term

Fact: There are different mutual fund options for short-term and long-term goals. SIPs have historically given better returns when invested for long-term.

Ideally, term of any investment

should be based on person's

financial goals. And there are

m u l t i p l e m u t u a l f u n d

investment choices for both

short-term and long-term

horizons. For short-term goals,

mutual fund investments in

liquid funds, short-term debt

funds, ultra short-term funds

and debt oriented hybrid

mutual funds can pay off most

compelling results. But these

same schemes cannot fulfill

one's long-term needs as they

are structured to give healthy

returns in the period of less

than 36 months.However, to attain long-term

benefits investing in equity or

equity oriented balanced funds

via SIP may give the optimum

returns. The longer you stay

invested in these instruments,

the larger benefit you gain

from power of compounding.

M e a n i n g , r e t u r n s o n

investments are added to the

investments and they further

generate bigger returns.

Starting early and staying for

long-term strengthens the

principal amount and makes

rewarding returns out of SIP

investment . Hence cost

averaging works excellent

when investments are given

time to grow and making SIP a

beneficial tool for long-term as

well.

21



For example, a monthly SIP of 5,000 per month growing at 10%

p.a., 15% p.a. and 20% p.a. would grow to:

`

Period (in years) Principal Invested

( ?

lakhs)

Final Amount (?

lakhs) @ 10% p.a.

Final Amount (?

lakhs) @ 15% p.a.

Final Amount (?

lakhs) @ 20% p.a.

10 6.00

10.33

13.93

19.12

15 9.00 20.90 33.84 56.71

20 12.00

38.28

75.80

158.07

25 15.00 66.89 164.20 431.34

As shown above, regular and disciplined investments through SIP for long term even with small amounts helps you to create wealth. Assumed returns for illustration purposes only

Source: ICICIdirect Research

As long as the investor selects

mutual fund SIP that best fits in

the goal's horizon returns are

likely to be positive. One just

has to remember that, right

scheme for the right tenure will

certainly offer opt imum

returns.

Myth: Net Asset Value (NAV) is the performance indicator of a mutual fund.

Fact: NAV is only the price per unit of your invested fund. The decision to select a mutual fund should not be based alone on this factor.

NAV of the fund represents per

unit value of this fund.

Comparing two mutual funds

on the basis of their NAV is not

a good ground to start an

investment. The reason behind

lower NAV is either it's a new

fund or and underperforming

one. In any case, that should

not be the criterion to take a call

on mutual fund choice.

For example, Fund A has Rs. 10

NAV and fund B of Rs. 20. With

Rs. 2000 to invest, an investor

would buy 100 units of fund A

and only 50 of fund B. Will this

make fun B poorer or inferior to

fund A? Not necessarily. If both

funds give similar returns in a

year's time value of investment

in fund A will build larger

corpus than the second fund.

And the reason why fund B's

NAV was higher than first fund

might be because it was

bought much earlier which

appreciated its value over the

22



p e r i o d o f t i m e . T h u s ,

subsequent performance of

both NAV will depend on

p e r f o r m a n c e o f t h e i r

underlying securities.

Selecting lower NAV fund

thinking it will buy more units

and increase chances of value

appreciation is as unfair as

picking a high NAV fund

expecting it delivers high

returns. It is true that old funds

with higher NAVs have strong

track records, but there are

other crucial factors to

consider before making a final

mutual fund choice.

Myth: Entire amount invested in Equity linked savings scheme (ELSS) via SIP can be withdrawn after 3 years.

Fact: Every SIP installment of ELSS fund has to complete lock-in period.

As financial year-end comes

nearer large number of

investors turn towards tax

s a v i n g m u t u a l f u n d

investments - ELSS. But

withdrawal terms of these

funds are usually overlooked in

this tax-saving rush. The lock-

in period of 3 years in these

mutual fund is for each

installment. So for those who

have chosen SIP mode to

invest in ELSS, lock-in period

for entire amount is more than

3 years.

For an ELSS investment

started in January 2017, only

first SIP can be withdrawn on

January 2020 after it completes

3 years lock-in period. But the

amount invested in February

2017 can be en-cashed in

February 2020, so on and so

forth. Moreover, to withdraw

the total sum invested in one

year at one go, the investor has

to wait for 48 months from the

latest ELSS contribution until

all instalments complete the

lock-in period of 3 years.

23



There is no thing as a risk-free

mutual fund. The idea of

investing in mutual fund is to

put money across different

assets in the market. And

market volatility is something

that cannot be predicted nor

controlled. The extent of risk

associated with mutual fund is

p r imar i l y depended on

underlying assets of that

mutual fund. Even the most

diversified mutual funds carry

risk.

Every fund ranking company

rates mutual fund based on

their independent assessment

measures. Although these

ratings are more or less same,

higher ranks do not reduce the

risk associated with underlying

instruments. Top-performing

funds are rated superior based

on their recent performances

which makes it crucial for an

investor to check upon

historical record of that fund

before taking the final call.

Achieving financial goals was

never more crucia l yet

complex than today. With

p le thora o f inves tment

opportunities around us it has

become extremely important

to understand each of these

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

thoroughly. If not completely,

one can at least stay clear of

myths linked with them and

make a sound decision while

planning investment journey

to attain goals.

Myth: Star rated / top performing funds are risk free

Fact: Performance of all mutual funds are subject to market risk.

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

24

BUDGET HIGHLIGHTS


Budget 2017-18 highlights

MACRO ECONOMIC INDICATORS:*Targeted fiscal deficit of 2017-18 at 3.2% against earlier target of 3 per cent

*World Bank expects GDP growth rate at 7.6% in Fy18 and 7.8% in Fy19

*Focus will be on energizing youth to reap benefits of growth and employment.

*36% increase in FDI flow; forex reserves at USD 361 billion in January enough to cover 12 months needs

*17% growth in direct tax revenue for the second year in a row in 2016-17 *Actual revenue loss on tax proposals Rs 22,700 crore; gain from a d d i t i o n a l r e s o u r c e mobilization is Rs 2,700 crore

DEMONITIZATION:*Demonet i za t ion was a continuation of series of m e a s u r e s t a k e n b y government in 2 years; it is bold and decisive measure *Pace of remonetisation has picked up; demonetization effects will not spill over to next year

*Only transient impact on

e c o n o m y d u e t o demonetization; long term benefit include higher GDP growth and tax revenue

RAILWAY BUDGET:*Rs 1 lakh crore corpus for railway safety fund over five years

*Raksha coach with a corpus of Rs. 1 lakh crore for five years (for passenger safety)

*By 2019 all trains will have bio-toilets

*No service charge on tickets booked through IRCTC

*The shares of railway CPSCs like IRCTC and IRFC to be listed on various stock exchanges

*Merger of Railways Budget with General Budget brings focus on a mult i -modal approach for development of railways, highways and inland water transport

CUSTOM & EXCISE DUTY:*Customs duty on LNG to be reduced from 5% to 2.5%

*Solar tempered glass used for m a n u f a c t u r e o f s o l a r cells/panels exempted from customs duty

25

BUDGET HIGHLIGHTS


*Excise duty on pan masala containing tobacco (Gutkha) raised to 12% from 10

*Excise duty on non-filter cigarettes of length not exceeding 65 mm raised to Rs 311 per thousand from Rs 215 per thousand

*Import duty on aluminium ores and concentrates raised to 30% from nil presently

CORPORATE TAX:*In order to make MSME companies more viable, propose to reduce tax for small companies of turnover of up to Rs 50 crore to 25%. About 67 lakh companies fall in this category. 96% of companies to get this benefit.

INFRASTRUCTURE:*Rs. 64,000 crore allocated for highways.

*Transport sector allocated Rs 2.41 lakh crore and Bharat Net Project allocated Rs 10,000 crore.

*High speed Internet to be allocated to 1,50,000 gram panchayats.

*New Metro rail policy will be announced with new modes of financing.

*Trade infrastructure scheme

will be launched in 2017-18.

*Second phase of solar power development to be taken up with an aim of generating 20,000 MW

AGRICULTURE:*More steps will be taken to benefit farmers and the weaker sect ions; budget be ing presented during weak global economy

* A g r i c u l t u r a l s e c t o r i s expected to grow at 4.1 per cent this fiscal

*Committed to double farm income in 5 years

*Rs 9,000 cr higher allocation for payment of sugarcane arrears

*Target of agriculture credit fixed at Rs 10 lakh cr in 2017-18

*Government to set up dairy processing fund of Rs 8,000 crore over three years with initial corpus of Rs 2,000 crore

OTHERS:* Income Tax Act to be amended. No transaction above Rs 3 lakh to be permitted in cash.

*Limit of cash donation by charitable trust reduced to Rs 2,000 from Rs 10,000.

26

BUDGET HIGHLIGHTS


*Not possible to remove MAT levied on advance tax for now; carry forward allowed for 15 years instead of 10 years.

*Government will amend the Multi-state Cooperative Act to protect the poor and gullible investors.

*For easier FDI regime, Foreign Investment Promotion Board will be phased out in 2017. This would mean that the foreign companies wanting to invest in India, will not have to wait for the Fore ign Investment Promotion Board's approval.

PERSONAL FINANCE SPECIAL1) Income Tax rate cut to 5 % in the income slab between Rs

2.5 lakh and Rs 5 lakh from 10%

Effect on Tax Payer: Positive. This will reduce the tax liability of all tax payers across slabs. The percentage reduction of tax liability will be greater for tax payers in the lower slabs.

2) Rebate under Section 87A reduced from Rs.5,000 to Rs.2,500 and the applicable limit has been reduced from taxable income of Rs.5 lakh to Rs.3.50 lakh.

Please refer below illustration to understand the effect of both the above changes:Annual Income Rs.5 lakh Rs.6.50 lakh Rs.10 lakh

Particulars Existing Next Year Existing Next Year Existing Next Year

Gross Total Income

500,000

500,000

650,000

650,000

1,000,000 1,000,000

Less: Deduction u/s 80C

150,000

150,000

150,000

150,000

150,000 150,000

Total Income 350,000 350,000 500,000 500,000 850,000 850,000

Tax on Total Income

10,000

5,000

25,000

12,500

80,000 67,500

Less: Rebate u/s 87A

5,000

2,500

5,000

-

- -

Tax Payable incl. cess

5,150

2,575

20,600

12,875

82,400 69,525

Difference in Tax (-2,575) (-7,725) (-12,875)

3) 10% surcharge on individual income above Rs 50 lakh and upto Rs 1 crore to make up for Rs 15,000 cr loss of due to cut in personal I-T rate. The existing surcharge of 15% for total income above Rs 1 crore remains unchanged.

27

BUDGET HIGHLIGHTS


BUDGET HIGHLIGHTS

Effect on Tax Payer:Negative. This will increase the tax liability of tax payers with total income more than Rs.50 lakh and upto Rs.1 crore. The percentage reduction of tax liability will be greater for tax payers in the lower slabs.

Please refer below illustration to understand the effect of this change:

Annual Income Rs.60 lakh Rs.90 lakh Rs.1.20 crore

Particulars Existing Next Year Existing Next Year Existing Next Year

Gross Total Income

6,000,000

6,000,000

9,000,000

9,000,000

12,000,000 12,000,000

Less: Deduction u/s 80C

150,000

150,000

150,000

150,000

150,000 150,000

Total Income 5,850,000 5,850,000 8,850,000 8,850,000 11,850,000 11,850,000

Tax on Total Income

1,580,000

1,567,500

2,480,000

2,467,500

3,380,000 3,367,500

Add: Surcharge -

156,750

-

246,750

507,000 505,125

Tax Payable incl. cess

1,627,400

1,775,978

2,554,400

2,795,678

4,003,610 3,988,804

Difference in Tax 148,578 241,278 (-14,806)

4) First time income tax returns filing will not come under government scrutiny.

Effect on Tax Payer: Positive. This will encourage more income earners to file income tax returns.

5) The holding period for computing long term capital gains (LTCG) on land & building reduced from 3 years to 2 years

Effect on Tax Payer: Positive. Investors can now sell their investments into property quicker than before.

6) For the purpose of computation of capital gains, the Indexation base date has been changed from April 1, 1981 to April 1, 2001.

Effect on Tax Payer: Positive. As the general price increase in capital assets has been more than the cost of inflation index in the last 15 years, this move would benefit all investors who have bought properties between 1981 and 2001 by increasing their indexed cost of acquisition, thereby reducing the capital gains on which tax has to be paid.

28

BUDGET HIGHLIGHTS



Particulars Existing

Purchase price of property (Feb.1990)

1,200,000

Sale price (2016-17)

12,000,000

Indexed purchase price 7,848,837

Capital Gain 4,151,163

As per the revision in this Budget, if the property is sold in the next financial year, then the purchase price can be considered as the Fair Market Value as on April 1, 2001, instead of Rs.12 lakh (the original cost), if it's higher than the same (which is most likely the case)

7) Set-off amount for loss from house property, against other heads of income, capped at Rs. 2 lakh. Any unabsorbed loss can be carried forward for next 8 assessment years and set off against future income from house property. Currently there is no upper limit for let out properties; however, there is a maximum limit of Rs.2 lakh for self-occupied properties.

Effect on Tax Payer:Negative. Hitherto, investors have been using this provision of no upper limit for let out properties to a great extent to save more tax. These investors will now have to shell out more tax. The carry forward provision might not be of use in the initial years of the loan, as there might not be any income from house property to set off, in these years.


Particulars Existing Next Year

Rental Income 300,000 300,000

Less: Standard Deduction (30%)

90,000 90,000

Less: Interest on home loan

750,000 750,000

Loss from House Property (-540,000) (-540,000)

Loss to be set off against other heads (-540,000) (-200,000)

Unabsorbed loss to be carried forward - (-340,000)

29

BUDGET HIGHLIGHTS


8) Partial withdrawal from NPS tax - exempt up to 25% of employee's contribution

Effect on Tax Payer: Positive. Till now, only at maturity, 40% of the withdrawals were exempt from tax. This move will help investors to fund any emergencies without getting much of a bite.

9) Exemption on Long-term capital gains tax on sale of equity investments will now be available, only if Securities Transaction Tax (STT) is paid both at the time of sale & purchase. Earlier, the requirement of STT was only at the time of sale of the shares.

10) The time limit for filing your income tax return and revising the return filed has been reduced and has to be done before end of the respective assessment year. The budget also provides for levy of mandatory fee if you delay filing of your income tax return beyond the due date.

30

ASK OUR PLANNER


Safeguarding your financial balance

Q.

A.

I want to invest in mutual fund

which has monthly income as I am

71+ of age. So which scheme is

suitable for me?- Anjan Gupta

If you are looking to

generate a steady income,

then you may look at investing

into short-term debt mutual

funds (growth option) and start

withdrawing the monthly

required amount from the fund

t h r o u g h S y s t e m a t i c

Withdrawal Plan (SWP).

Selecting dividend option

might not yield you the desired

steady income, as dividends

may be irregular.

Be prepared to pay tax on the

capital gains earned on the

units being withdrawn – for the

first 3 years, such gains will be

added to your income and

taxed as per your income slab.

After 3 years, such gains will be

taxed at 20% after indexation.

The quantum of investment

into the mutual fund will be

based on the monthly amount

you would require & the time

period for which you require

the same. For example, if you

require say Rs.40,000 p.m.

(which would increase every

year due to inflation) for

another 10 years, then you

have to invest around Rs.44.25

lakh, assuming an average pre-

tax return of 8% p.a.

Please let me know how much I

can claim due to NPS under

following scenario:If my employer deduct 10% of Basic

and deposit to NPS account which

is amounting to 40,000 per annum

+ I additionally deposit 50000 to

NPS account. Can I get a Tax

deduction on 50000+40000 i.e.

90,000 towards NPS(Please do not consider 1.5 lac

deduction as per 80C. My query is

on NPS category only.)- Subrata Banerjee

If Rs.40,000 p.a. is your

employer's contribution, then

such contribution can be

claimed as deduction from

Q.

A.

31

ASK OUR PLANNER


your income under Section

80CCD(2) upto 10% of your

basic salary. The amount of

Rs.50,000 p.a. which you

would contribute can be

claimed as deduction from

your income under Section

80CCD(1b) (the maximum limit

b e i n g R s . 5 0 , 0 0 0 p . a . ) ,

assuming you have already

exhausted Rs.1.50 lakh of

deduction under the combined

heads of Section 80C, Section

80CCC & Section 80CCD(1).

My question is regarding a

short-term investment plan. I have

to purchase car in November 2017.

How much monthly amount should I

invest and in which instrument to

build corpus of at least 5 lakhs by

November. I can invest in

aggressive fund schemes but need

good returns in this tenure. Please

suggest a financial plan for this

goal.- Ajeet Shetty

Your goal of buying a car is

just 9 months away and hence,

it's prudent to choose low-risk

instruments, rather than

investing aggressively. Ideally,

Q.

A.

you shouldn't be investing into

equity / equity funds, even

though you are an aggressive

investor, as the goal is less than

1 year away. You can look to

invest into ultra-short term

debt funds. These funds have

yielded an average return of 8-

9% for the past 1 year. You will

have to invest an amount of

around Rs.55,000 p.m. into

these funds for the next 9

months, assuming a post-tax

return of 6% p.a.

If I invest Rs. 5,000 in ELSS every

month what tax benefits I will be

able to avail in FY16-17 and Fy17

18? What other tax-saving mutual

fund schemes I can invest in which

have no lock-in-period? Please

answer this.- Rohini Shah

If you have invested

Rs.5,000 p.m. into ELSS for all

the 12 months in FY 2016-17,

then you can claim deduction

of Rs.60,000 from your income

under Section 80C of the

Income Tax Act. If you need

deduction for FY 2017-18 too,

then you have to make fresh

Q.

A.

32

ASK OUR PLANNER


investments in that year.

Please note that there will be a

lock-in period of 3 years for

your investments into ELSS.

This lock-in period will be

calculated for each installment stseparately i.e. the 1 month

installment can be withdrawn

only after 36 months from now, nd

2 month installment after 37 rdmonths from now, 3 month

installment after 38 months

from now and so on.

Any tax-saving mutual fund

will have a minimum lock-in

period of 3 years. There are

open-ended equity mutual

funds which do not have any

lock-in period. These funds do

not offer any tax benefits on

investment; however, if you

redeem such investments after

holding for a year or more,

then the gains made from

these investments are exempt

from tax as per the current tax

laws.

I have invested in small cap Q.

mutual fund and am looking at a 10

year horizon, but its NAV is around

500 already. Should I invest in funds

with lower NAV or higher than 500?

How does this amount play a role

while choosing a fund? Please

clarify.- Mahesh Bansali

If a fund's NAV (Net Asset

Value) is higher, it generally

means that the fund has been

in existence for a longer

period. NAV shouldn't be a

factor while choosing a mutual

fund for investment. It doesn't

matter whether the NAV of a

fund is high or low. If there are 2

mutual funds – one with a NAV

of Rs.50 and another with a

NAV of Rs.500, and both the

funds grow by 10%, then the

first fund's NAV would become

Rs.55 and the second fund's

NAV would become Rs.550.

The growth % of the both the

funds remains the same.

A.

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

MUTUAL FUND ANALYSIS

33

Investing in Balanced funds


With the demonetization leading to cash crunch in the system and the volatility surrounding the market, which is assessing the effect of this move on the economy, equity markets have been on tenterhooks in the last few weeks. Add to that the global events like Fed rate hike, US president election, unfolding of Brexit has only added to the uncertainty in the equity markets. Given this backdrop, a conservative investor who is wary of risk but do not want to forego returns should look at balanced funds to ride out the choppy markets.

Balanced Funds are hybrid funds that invest in a mix of equity and debt instruments. Balanced funds maintain around 65-70% exposure to equities while the rest is maintained in fixed income instruments. Balanced funds are less volatile than pure equity funds due to the cushion of debt proportion in the fund. Hence, these funds do well when stock markets are going through a difficult phase. They are better equipped to withstand shocks in falling markets. However, when stock markets are rising, they may not do as well as funds with 100% equity component but perform better than debt funds. Capital gain tax on balanced funds is similar to equity funds viz. exempt after one year and 15% if sold before one year, plus applicable surcharge if any. Debt portfolio is mainly comprised of Government securities or good credit quality corporate bonds. Therefore credit risk is very low in the debt portfolio.

In the current market scenario, where volatility seem to be continuing in the near term, investors should use balanced funds to ride out the volatile markets and create long term wealth.

Investors can look to invest in the following funds: HDFC Balanced Fund, ICICI Prudential Balanced Fund, and SBI Magnum Balanced Fund.

HDFC Balanced Fund

Fund Objective:The primary objective of the Scheme is to generate capital appreciat ion along with current income f rom a combined portfolio of equity & equity related and debt & money market instruments.

Key Information:NAV as on February 14, 2017 (|) 125.6

Inception Date September 11, 2000

Fund Manager Chirag Setalvad

Minimum Investment (|)

Lumpsum 5000

SIP 500

Expense Ratio (%) 2.03

Exit LoadNIL upto 15%

of investment and1% in excess

of 15% ofinvestment on or

before 1Y,NIL after 1Y

Benchmark CRISIL Balanced Fund- Aggressive Index

Last declared Quarterly

AAUM(| cr) 8983

34



Product Label:

This product is suitable for investors who are seeking:

•

with current long term

• investment predominantly in equity and equity related instruments with balance exposure to debt and money market instruments

capital appreciation along

Fund Manager: Chirag Setalvad

Mr. Chirag is a B.Sc. and MBA

from University of North

Carolina. He has been working

with HDFC AMC since 2007.

Prior to joining HDFC AMC, he

has worked with New Vernon

Advisory

Performance:The fund has consistently

outperformed the category

and the benchmark. It has

generated CAGR returns of

21.9% in last 3 years vs. 12.9%

returns by benchmark. In 2014

market rally, the fund has

generated absolute returns of

51% as compared to 25%

returns generated by the

benchmark. The fund has not

only participated in the rally but

also managed to contain the

downside well. In 2011, when

the Sensex was down 24% and

the Benchmark (CR IS IL

Balanced Fund Index) has

fallen by 14%, the fund has was

fallen to a lesser extent at 10%.

Fund has outperformed the

benchmark on 6 months, 1

year, 3 year and 5 year returns

basis.

2016 2015 2014 2013 2012

119.0 108.5 105.3 69.5 63.9

9.7 3.0 51.5 8.8 26.6

6.7 0.5 25.3 6.1 21.3

8313 4911 3087 1208 1101Net Assets (| Cr)

Return (%)

NAV as on Dec 31 ( )`

Benchmark (%)

Calendar Year-wise Performance

35



Fund Benchmark

Performance vs. Benchmark

5.6

29.8

21.9

16.6

2.3

21.1

12.9

10.1

0

10

20

30

40

6 Month 1 Year 3 Year 5 Year

Retu

rn%

HDFC Balanced Fund

Benchmark

31-Dec-15 31-Dec-14

9.72 3.01 51.47

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

31-Dec-16

6.66 0.48 25.34

Last Three Years Performance

Portfolio:The fund is an ideal long term balanced fund. It is aggressive in nature among its peers and makes the most of bull markets. The fund maintains 65-70 percent allocation to equities and remaining portion in debt. The equity portfolio of the fund has stocks across the market cap. The fund has large cap allocation of 40% and 25% in the mix of mid and small cap companies. Top holdings among the consistently held stocks include Infosys, ICICI Bank, HDFC Bank, Reliance Industries and State Bank of India. The debt portfolio is dynamically managed by the fund manager based on the interest rate scenario. The fund has more than 75% of the debt allocation in the mix of AAA

r a t e d s e c u r i t i e s a n d Government Securities.

The fund maintains s l i g h t l y h i g h e r e q u i t y allocation as compared to its peers and does not take cash calls. This makes the fund slightly more aggressive as compared to its peers. The value investment approach for equity investment makes it good long term balanced fund. The debt portion does not take any credit risk and is therefore less risky. The performance may be volatile during a short period of time but is likely to be among better performers over a longer period of time. The fund, therefore, is best for those willing to take on a little risk for higher returns.

Our View:

36



%

5.2

3.4

3.2

3.0

2.8

2.7

2.7

2.6

2.5

2.2

Tube Investments Of India Ltd. Domestic Equities

Power Grid Corporation Of India Ltd. Domestic Equities

HDFC Liquid Fund(G)-Direct Plan Domestic Mutual Funds Units

State Bank Of India Domestic Equities

ITC Ltd. Domestic Equities

Infosys Ltd. Domestic Equities

HDFC Bank Ltd. Domestic Equities

Larsen & Toubro Ltd. Domestic Equities

ICICI Bank Ltd. Domestic Equities

Reliance Industries Ltd. Domestic Equities

Top 10 Holdings Asset Type

%

13.3

5.1

4.8

4.8

4.4

3.6

3.4

2.6

2.5

2.3

Pharmaceuticals & Drugs Domestic Equities

Cigarettes/Tobacco Domestic Equities

Cycles Domestic Equities

Power Generation/Distribution Domestic Equities

Oil Exploration Domestic Equities

Top 10 Sectors Asset Type

Bank - Private Domestic Equities

Refineries Domestic Equities

Bank - Public Domestic Equities

Engineering - Construction Domestic Equities

IT - Software Domestic Equities

9.771.020.130.885.75

Sharpe ratioR SquaredAlpha (%)

Risk ParametersStandard Deviation (%)Beta

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

Total Investment Fund Value Benchmark Value

60 1

80 300

600

64.8 218.

5 462.

8

1422

63.3 202.

4

385.

1

967.7

0

500

1000

1500

1Yr 3Yrs 5Yrs 10Yrs

%

0.1

Whats In

BSE Ltd.

37



Data as on February 14, 2017; Portfolio details as on January-2017Source: ACE MF, ICICI Direct Research

69.030.121.1

--3.6

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

Portfolio AttributesTotal StocksTop 10 Holdings (%)

67.2

26.1

6.8Cash

Asset Allocation

Equity

Debt

Dec-29-2015 5Sep-29-2015 5

Sep-27-2016 5Jun-28-2016 5Mar-29-2016 6

Dec-27-2016 5

Dividend History

Date Dividend (%)

Performance of all the schemes managed by the fund manager

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

31 -Dec-16 31 -Dec-15 31 -Dec-14

Fund Name

HDFC Long Term Adv Fund(G) 13.02 -2.40 44.68

S&P BSE SENSEX 1.95 -5.03 29.89

HDFC Mid-Cap Opportunities Fund(G) 11.35 5.81 76.63

Nifty Free Float Midcap 100 7.13 6.46 55.91

HDFC Multiple Yield Fund 2005(G) 8.91 4.67 20.43

Crisil MIP Blended Index 11.56 6.79 16.83

HDFC Small Cap Fund-Reg(G) 5.43 6.42 51.48

NIFTY SMALL 100 2.26 7.21 54.95

38


ICICI Prudential Balanced Fund

Fund Objective:The primary investment objective of the Scheme is to seek to generate long term capital appreciation and current income f rom a portfolio that is invested in equity and equity related securities as well as in fixed income securities.


Key Information:

This product is suitable for investors who are seeking*:

• long-term wealth creation solution

Fund Managers: Sankaran Naren

Mr. Naren

Atul Patel:

Mr. Patel

Manish Banthia:

Mr. Banthia

has rich experience of around 23 years in almost all spectrum of the financial services industry. He has done B. Tech degree from IIT Chennai and MBA in finance from IIM Kolkota. He has worked with financial service organizations like Refco Sify Securities India Pvt. Ltd., HDFC Securities Ltd. and Yoha Securities in various positions prior to joining ICICI Prudential AMC.

is a B.Com (H), Chartered Accountant and CWA. Mr. Atul Patel has been a Fund Manager a t IC IC I Prudential Asset Management Company L imi ted s ince August 21, 2013.

has extensive experience including as a fixed income dealer. He is a C.A. Mr. Banthia holds an M.B.A. and B.Com. Previously, he worked at Aditya Birla Nuvo Ltd. and at

Product Label:

• A balanced fund aiming for long term capital appreciation and current income by investing in equity as well as fixed income securities

NAV as on February 14, 2017 ( ) 111.1

Inception Date November 3, 1999

Fund Manager Sankaran Naren,Atul Patel,

Manish Banthia

Minimum Investment (`)

Lumpsum 5000

SIP 1000

Expense Ratio (%) 2.30

Exit LoadNil on 10% of

units within 1Yand 1% for

more than 10%of units within

1Y, Nil after 1Y.


Last declared QuarterlyAAUM(` cr) 6081

`

39



Aditya Birla Management Corporation Ltd.

The fund has been a star performer in the balanced fund category. The three- and five-year show of the fund remains very good with a 7-8% margin of out-performance over and above the benchmark. The fund has delivered 17.9%

Performance:

CAGR returns over five years vs benchmark return of 10.1%. The fund has consistently beaten the benchmark in last 6 calendar years from 2010 to 2016. In the choppy markets of 2015 when the markets have remained flat, the fund has managed to generate positive returns.

2016 2015 2014 2013 2012

104.6 92.1 90.2 61.9 55.7

13.7 2.1 45.6 11.2 29.4

6.7 0.5 25.3 6.1 21.3

5098 2569 1515 630 410

Return (%)


NAV as on Dec 31 (|)

Benchmark (%)

Net Assets (| Cr)

8.8

34.6

21.9

17.9

2.3

21.1

12.9

10.1

0

10

20

30

40


Retu

rn%

Fund Benchmark


ICICI Prudential Balanced Fund

Benchmark

31-Dec-15 31-Dec-14

13.66 2.10 45.56



31-Dec-16

6.66 0.48 25.34

Portfolio:The fund typically has a mix of 70:30 in equity and debt. The equity portfolio of the portfolio has large cap tilt with 60% allocation which is higher than

the peers; the remaining portion of 10% is allocated in the mix of mid and small cap companies. The fund manager invests in the theme which plays out in the long term. The

40



debt portion is invested mainly in good-quality bonds. The fund has maintained balance of duration across debt instruments right from govern ment bonds to corporate.

The equity portion of the fund is managed as a large-cap biased diversified portfolio. The stock selection by the fund manager is key here. The fund

Our View:

manager does not hold typical large-cap holding as is common in many diversified schemes. The fund hold high potential large-cap stocks with the objective for long term wealth creation. Balanced funds in general are ideal funds for conservative investors who want equity participation with low volatility.

%

13.8

5.1

4.9

4.4

3.9

3.8

3.4

3.3

3.3

2.9


CBLO Cash & Cash Equivalents

Bharti Airtel Ltd. Domestic Equities

State Bank of India SR-III 8.39% Corporate Debt

ICICI Bank Ltd. Domestic Equities

Tata Chemicals Ltd. Domestic Equities


Axis Bank Ltd. SR-26 8.75% Corporate Debt


Power Grid Corporation Of India Ltd. Domestic Equities

Coal India Ltd. Domestic Equities

%

10.3

9.7

7.6

5.7

5.1

3.9

3.3

3.3

2.5

2.2

Power Generation/Distribution Domestic Equities

Pharmaceuticals & Drugs




Mining & Minerals Domestic Equities

Consumer Food Domestic Equities

Household & Personal Products Domestic Equities

Domestic Equities

Telecommunication - Service Provider Domestic Equities

Fertilizers Domestic Equities

Engineering - Construction Domestic Equities

9.821.050.150.875.30

Risk ParametersStandard Deviation (%)BetaSharpe ratioR SquaredAlpha (%)

49.0

48.8

23.8

--

4.8

Portfolio Attributes

Total Stocks

Top 10 Holdings (%)

Fund P/E Ratio

Benchmark P/E Ratio

Fund P/BV Ratio

41



52.89.23.4

Market Capitalisation (%)LargeMidSmall



60 1

80 300

600

66.8 224.9 471.

9

1352.

4

63.3 202.4

385.1

967.

7

0

500

1000

1500

1Yr 3Yrs 5Yrs 10Yrs

%

0.4

0

0Britannia Industries Ltd.

Whats In

Reliance Industries Ltd.

JK Lakshmi Cement Ltd.

%

0.3

1.20.3

Whats outThermax Ltd.

ITC Ltd.Maruti Suzuki India Ltd.

65.4

20.0

14.6

Asset AllocationEquity

Debt

Cash

Oct-17-2016 1.5Sep-19-2016 1.5

Jan-09-2017 2.3Dec-05-2016 2Nov-07-2016 2.5

Dividend History

Date Dividend (%)Feb-06-2017 2.4

42



Data as on February 14, 2017; Portfolio details as on January -2017Source: ACE MF, ICICI Direct Research


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

31 -Dec-16 31 -Dec-15 31 -Dec-14

Fund Name

ICICI Pru Gilt-Invest-PF(G) 17.79 5.48 20.53

I-Sec Li-BEX 16.76 7.48 19.74

ICICI Pru Long Term Plan(G) 16.86 5.74 19.39

Crisil Composite Bond Fund Index 12.94 8.63 14.31

ICICI Pru Income(G) 15.75 5.08 16.92


ICICI Pru Balanced Fund(G) 13.66 2.10 45.56

CRISIL Balanced Fund - Aggressive Index 6.66 0.48 25.34

ICICI Pru Value Fund-3(D) 12.63 -0.42 –

S&P BSE 500 3.78 -0.82 –

ICICI Pru Infrastructure Fund(G) 1.99 -3.36 56.19

NIFTY INFRA -2.05 -8.91 22.71

ICICI Pru Value Fund-6(G) 4.74 -- –

S&P BSE 500 3.78 -- –

ICICI Pru Indo Asia Equity Fund(G) 5.99 0.45 50.64

NIFTY 50 3.01 -4.06 31.39

ICICI Pru Balanced Advantage Fund(G) 7.35 6.70 29.04


ICICI Pru Value Fund-2(D) 8.80 0.35 69.05

S&P BSE 500 3.78 -0.82 36.96

ICICI Pru Value Fund-1(D) 8.85 2.50 61.54

S&P BSE 500 3.78 -0.82 36.96

ICICI Pru Regular Gold Savings Fund(G) 8.93 -5.08 -9.18

Gold-India 11.23 -7.19 -6.13

ICICI Pru Top 100 Fund(G) 10.27 -0.64 38.29

NIFTY 50 3.01 -4.06 31.39

ICICI Pru Value Fund-7(D) 10.42 -- –

S&P BSE 500 3.78 -- –

ICICI Pru Gold iWIN ETF 10.62 -8.15 0.84

Gold-India 11.23 -7.19 -6.13

ICICI Pru Short Term Plan(G) 11.13 7.99 11.55

Crisil Short Term Bond Fund Index 9.85 8.66 10.47

ICICI Pru Income Opportunities Fund(G) 11.32 8.53 14.54


ICICI Pru Equity Income Fund(G) 11.42 3.99 –

NIFTY 50 3.01 -4.06 –

ICICI Pru Dynamic Plan(G) 12.50 -1.41 37.05

NIFTY 50 3.01 -4.06 31.39

43


SBI Magnum Balanced Fund

Fund Objective:To provide investors long term capital appreciation along with the liquidity of an open-ended scheme by investing in a mix of debt and equity. The scheme will invest in a diversified portfolio of equities of high g rowth compan ies and balance the risk through investing the rest in a relatively safe portfolio of debt.


Key Information:NAV as on February 14, 2017 ( ) 26.9

Inception Date December 31, 1995

Fund Manager R. Srinivasan,Dinesh Ahuja

Minimum Investment (`)

Lumpsum 5000

SIP 1000

Expense Ratio (%) 1.99 ExitLoad Nil for

10% of investments and 1% for

remaining investment on or before

12M, Nil after 12M


Last declared QuarterlyAAUM(` cr) 8321

`

Product Label:

This product is suitable for investors who are seeking*:

• long-term capital appreciation

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

Fund Manager: R SrinivasanR Srinivasan

Dinesh AhujaMr, Ahuja

Performance:

is a Senior Fund Manager since May 2009. He has an experience of more than 22 years in equities having worked with Future Capital Hold ing, Pr inc ipa l PNB, Oppenheimer & Co (later Blackstone), Indosuez WI Carr and Motilal Oswal, among others. Srinivasan is a post graduate in Commerce and has done his MFM from the University of Mumbai.

is a Fund manager in SBI since 2010. Prior to joining SBIFM, he was a fund manager w i t h L & T I n v e s t m e n t Management and Reliance Group for four years. Dinesh is a Commerce graduate and holds his Masters degree in F i n a n c e f r o m M u m b a i University.

In three and five year time frames, the fund has beaten its benchmark returns by a huge margin of 7-8% points. The fund has generated 17.6% CAGR in past 5 year vs. 10.1% returns by benchmark. In the

1.8

19 20

17.6

2.3

21.1

12.9

10.1

0

5

10

15

20

25


Retu

rn%


Fund Benchmark

44



sideways market of 2015 when the benchmark has remained flat the fund has been able to generate 7.4% returns. The fund has managed to beat the benchmark in last 6 out of 7 calendar years. An investment of 5,000 per month via Systematic Investment Plan in

`

this fund over past 5 years, totalling 3 lakh would have grown to 4.52 lakh by

thFebruary 14 , 2017 at 16.22% a n n u a l i s e d r e t u r n s . I n comparison, a similar amount invested in the benchmark would have returned 3.89 lakh at 10.19%.

``

`

2016 2015 2014 2013 2012

25.6 27.2 28.7 22.8 25.3

3.7 7.4 43.2 11.9 35.0

6.7 0.5 25.3 6.1 21.3

7547 3242 1226 456 364Net Assets ( Cr)`

Return (%)

NAV as on Dec 31 ( )`

Benchmark (%)


SBI Magnum Balanced Fund

Benchmark

31-Dec-15 31-Dec-14

-5.79 -5.13 25.77


31-Dec-16

6.66 0.48 25.34


Portfolio:It maintains a 75-25 equity-debt mix. The equity part is multi cap, with 40-50% of the equity portion, in large caps (defined as the top 100 companies by market cap) and the rest in mid and small caps. Some offbeat mid-cap picks

are used to spice up returns. The equity portion features a mix of large- and mid-cap stocks, with a mix of both defensives and cyclicals. About 40 to 50% of the debt portion is deployed in high-yielding credits to improve income. The balance is

45



managed using G-Secs and liquid AAA bonds, while keeping in mind the overall view on interest rates. The fund rebalances on a daily basis and caps cash calls at 7.5 per cent.

Consistency in the mandate and the strategy has been evident from 2009 and this has paid off by way of a good show

Our View:

across market phases. The multi-cap approach to equity portfolio offers a good blend of stability and growth to the portfolio. SBI as an AMC has improved significantly over the last few years in its investment processes and approach. The performance of most of the funds across category has improved significantly over the last few years.

%

7.1

7.0

5.5

5.3

4.7

3.8

3.1

2.7

2.6

2.4

Sundaram-Clayton Ltd. Domestic Equities

Gruh Finance Ltd. Domestic Equities

Sundaram Finance Ltd. Domestic Equities

Kotak Mahindra Bank Ltd. Domestic Equities


Divis Laboratories Ltd. Domestic Equities


CBLO Cash & Cash Equivalents

06.97% GOI 06-Sep-2026 Government Securities

State Bank Of India Domestic Equities


%

12.6

8.1

6.8

5.3

5.3

3.3

2.6

2.4

1.7

1.6

Auto Ancillary Domestic Equities

Finance - Housing Domestic Equities

BPO/ITeS Domestic Equities

Cement & Construction Materials Domestic Equities

Household & Personal Products Domestic Equities




Finance - NBFC Domestic Equities

Pharmaceuticals & Drugs Domestic Equities

Bank - Public Domestic Equities

8.770.890.080.826.32

Sharpe ratioR SquaredAlpha (%)

Risk ParametersStandard Deviation (%)Beta

46



37.724.46.6Small

Market Capitalisation (%)LargeMid



60 1

80 300

600

62.6 209.

9 444

1190.

5

63.3 202.

4

385.

1

967.7

0

200

400

600

800

1000

1200

1400

1Yr 3Yrs 5Yrs 10Yrs

%

1.1

0.1

Whats In

Reliance Industries Ltd.

Bharti Airtel Ltd.

%

0.6

Whats out

Tata Power Company Ltd.

47.044.027.0

--5.3

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

Portfolio AttributesTotal StocksTop 10 Holdings (%)

68.724.56.9Cash

Asset AllocationEquityDebt

Sep-30-2016 7

Jun-24-2016 6

Mar-23-2016 6.5

Dec-30-2016 6

Dividend History

Date Dividend (%)

Dec-23-2015 7

Sep-24-2015 9

47



Data as on February 14, 2017; Portfolio details as on January -2017Source: ACE MF, ICICI Direct Research


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

31 -Dec-16 31 -Dec-15 31 -Dec-14

Dec DecFund Name

SBI Magnum Gilt-LTP-Reg(G) 16.28 7.35 19.90

I-Sec Li-BEX 16.76 7.48 19.74

SBI Dynamic Bond(G) 15.34 5.83 12.84


SBI Tax advantage Fund-II(G) 13.87 2.21 69.88

S&P BSE 500 3.78 -0.82 36.96

SBI Magnum Income(G) 13.45 5.99 12.38


SBI Magnum Gilt-STP(G) 12.82 9.08 12.62

I-Sec Si-BEX 9.12 9.02 9.37

SBI Magnum Global Fund 94-Reg(D) -2.00 7.92 66.55

SBI Small & Midcap Fund-Reg(G) 1.29 20.56 110.66

S&P BSE Small-Cap 1.77 6.76 69.24

SBI Emerging Businesses Fund-Reg(G) 2.22 4.33 58.01

S&P BSE 500 3.78 -0.82 36.96

SBI Contra Fund-Reg(D) 2.40 -0.09 47.65

S&P BSE 100 3.57 -3.25 32.28

SBI Magnum Balanced Fund-Reg(D) 3.70 7.36 43.23


SBI Magnum Equity Fund-Reg(D) 4.51 2.43 42.65

NIFTY 50 3.01 -4.06 31.39

SBI Tax Advantage Fund-III-Reg(G) 5.36 5.93 –

S&P BSE 500 3.78 -0.82 –

SBI Tax Advantage Fund-I(G) 5.47 5.25 64.91

S&P BSE 500 3.78 -0.82 36.96

SBI LT Advantage Fund-I-Reg(G) 8.44 -- –

S&P BSE 500 3.78 -- –

SBI LT Advantage Fund-II-Reg(G) 10.90 -- –

S&P BSE 500 3.78 -- --

48

EQUITY MODEL PORTFOLIO


Name of the company

Largecap Portfolio

Weightage(%)

Auto 15.0

Tata Motor DVR 4.0

Bosch 3.0

Maruti 5.0

EICHER Motors 3.0

BFSI 32.0

HDFC Bank 8.0

Axis Bank 4.0

HDFC 8.0

Bajaj Finance 6.0

SBI 6.0

Capital Goods 4.0

L & T 4.0

Cement 4.0

UltraTech Cement 4.0

FMCG/Consumer 18.0

Dabur 5.0

Marico 4.0

Asian Paints 5.0

Nestle 4.0

IT 14.0

Infosys 8.0

TCS 6.0

Media 4.0

Zee Entertainment 4.0

Pharma 9.0

Lupin 6.0

Aurobindo Pharma 3.0

Total 100.0

49



Name of the company

Diversified Portfolio

Weightage(%)

Auto 12Tata Motor DVR 3Bosch 2Maruti 4Eicher Motors 2Bharat Forge 2Consumer Discretionary 16Symphony 2Supreme Ind 2Kansai Nerolac 2Pidilite 2Asian Paints 4Arvind 2Interglobe Aviation 2Rallis 2BFSI 24HDFC Bank 6Axis Bank 3SBI 4HDFC 6Bajaj Finance 4Bajaj Finserve 2Power, Infrastructure & Cement 13L & T 3UltraTech Cement 3Ramco Cement 2NBCC 2Bharat Electronics 2Container Corporation of India 2FMCG 9Nestle 3Marico 3Dabur 4Pharma 12Lupin 4Aurobindo Pharma 2Natco Pharma 2Torrent Pharma 2Biocon 2IT 10Infosys 6TCS 4Media 3Zee Entertainment 3Total 100.0

50



Name of the company

Midcap Model Portfolio

Weightage(%)

Aviation 6.0

Interglobe Aviation 6.0

Auto 6.0

Bharat Forge 6.0

BFSI 6.0

Bajaj Finserve 6.0

Capital Goods 6.0

Bharat Electronics 6.0

Cement 6.0

Ramco Cement 6.0

Consumer 30.0

Symphony 6.0

Supreme Ind 6.0

Kansai Nerolac 6.0

Pidilite 6.0

Rallis 6.0

Infrastructure 8.0

NBCC 8.0

Logistics 6.0

Container Corporation of India 6.0

Pharma 20.0

Natco Pharma 6.0

Torrent Pharma 6.0

Biocon 8.0

Textile 6.0

Arvind 6.0

Total 100.0

51

Performance* so far Since inception

*Returns (in %) as on

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

Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination

of BSE Sensex and CNX Midcap

Feb 16, 2017

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

Portfolio Benchmark

Investment Value of Investment in Portfolio Value if invested in Benchmark

Start date of SIP: , 2011; *Value as on June 30 Feb 16, 2017



98.14436041

179.2911729

112.9329636

57.49138682

100.2286293

69.78929128

0255075

100125150175200

%

6900000

6900000

6900000

8902011.9

7

14576451.5

8

9984140.6

07

6884044.9

88

5658657.5

21

8547520.6

64

3500000

4500000

5500000

6500000

7500000

8500000

Largecap Midcap Divesified

|

QUIZ TIME

1. Exposure to varied assets is the central strategy of mutual fund to beat_____________.

2. The extent of risk associated with mutual fund is primarily depended on ___________of that mutual fund.

3. To attain long-term benefits investing in equity or equity oriented balanced funds may give the optimumreturns.True or False

4. Investor should select lower NAV fund as it will buy more units and increase chances of value appreciation. True or False

5. There is no thing as a risk-free mutual fund.True or False

Note: All the answers are in the stories that have appeared in this edition of ICICIdirect Money Manager. You may send in your answers at: [email protected]. The answers will be published in our next edition. The names of the earliest all correct entries will be published too. So jog your grey cells and be quick to send in your entries.

Correct answers for the January 2017 quiz are:

1. NSE arm ___________ periodically rebalances Nifty in line with their pre specified criteria.

A: IISL

2. We expect INR to trade broadly within ___________range in 2017.

A: 66-71

3. Experts expect growth to improve steadily over the next few quarters. True or false

A: True

4. Any economic slowdown would be very positive for ___________bonds.

A: Long

5. In 2017, the yield curve is expected to move down______________

A: marginally


53

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

31-Jan-17 30-Dec-16 Change (%)

CNX Nifty 8561.3 8185.8 4.6%

CNX Midcap 15413.7 14351.5 7.4%

S&P BSE Sensex 27656.0 26626.5 3.9%

S&P BSE 100 8831.7 8386.7 5.3%

S&P BSE 200 3701.1 3511.1 5.4%

S&P BSE 500 11659.9 11036.4 5.6%


Dow Jones 19,864.1 19,762.6 0.5%

S&P 500 2,279.0 2,238.8 1.8%

Nasdaq 5,614.8 5,383.1 4.3%

FTSE 7,099.2 7,142.8 -0.6%

DAX 11,535.3 11,481.1 0.5%

CAC 40 4,748.9 4,862.3 -2.3%

Nikkei 19,041.3 19,114.4 -0.4%

Hang Seng 23,360.8 22,000.6 6.2%

Shanghai Composite 3,159.2 3,103.6 1.8%

Taiwan Weighted 9,448.0 9,253.0 2.1%

Straits Times 3,046.8 2,885.8 5.6%


S&P BSE Auto 21,809.2 20,257.4 7.7%

S&P BSE Bankex 22,312.0 20,748.7 7.5%

S&P BSE FMCG 14,783 13,665 8.2%

S&P BSE Healthcare 14,797.0 14,727.6 0.5%

S&P BSE Metals 11,672.3 10,109.3 15.5%

S&P BSE Oil & Gas 12,838.2 12,151.6 5.6%

S&P BSE Power 2,167.7 1,987.6 9.1%

S&P BSE Realty 1,369.7 1,263.9 8.4%

S&P BSE Teck 5,338.1 5,498.5 -2.9%

54

PRIME NUMBERS


Debt Markets

Government Securities (G-Sec) Yields (in %) Jan-17 Change (bps)Dec-16

Corporate Bond Yields (in %) Change (bps)Jan-17 Dec-16

Commercial Paper (CP) Rates (in %) Change (bps)Jan-17 Dec-16

Treasury Bill (T-Bills) Yields (in %) Change (bps)Jan-17 Dec-16

Volatility Index (VIX)

31-Jan-17 30- -16

VIX 16.83 15.47 0%

Dec Change (%)

10 year 6.41 6.51 -11

5 year 6.52 6.57 -5

3 year 6.35 6.38 -3

1 year 6.27 6.41 -13

AAA 10 year 7.80 7.73 7

AAA 5 year 7.49 7.40 10

AAA 3 year 7.20 7.26 -6

AAA 1 year 6.85 7.09 -23

AA 10 year 8.15 8.12 3

AA 5 year 7.87 7.93 -6

AA 3 year 7.60 7.83 -23

AA 1 year 7.39 7.63 -24

12 Months 7.50 7.34 16

6 Months 7.31 7.05 26

3 Months 7.08 6.71 37

1 Month 6.73 6.63 10

91D TB 6.20 6.20 0

182D TB 6.19 6.28 -9

364D TB 6.17 6.33 -15

55

PRIME NUMBERS

10-year benchmark yields (%) across countries


Macro-economic Indicators

Consumer price index (CPI)

Wholesale price index (WPI)Month

Countries 31-Jan-17 30-Dec-16 Change in bps

US 2.45 2.44 1

UK 1.42 1.24 18

Japan 0.09 0.06 3

Spain 1.60 1.38 21

Germany 0.44 0.20 23

France 1.03 0.68 35

Italy 2.25 1.81 44

Brazil 10.92 11.40 (48)

China 3.37 3.06 31

India 6.41 6.51 (11)

MF Investment Jan-17 Dec-16 YTD

Equity 4759 9055 4759

Debt 30249 25884 30249

FII Investment Jan-17 Dec-16 YTD

Equity -1460 -8495 -1460

Debt -3941 -18907 -3941

Items Weights(%) Nov-16 Dec-16 Jan-17

Food&bev. 45.86 2.56 1.98 1.29

Pan,tob& intox. 2.38 6.21 6.47 6.36

Cloth & Foot 6.53 4.98 4.88 4.71

Housing 10.07 5.04 4.98 5.02

Fuel & light 6.84 2.80 3.77 3.42

Misc. 28.31 4.83 4.73 5.06

CPI 100 3.63 3.41 3.17

Weights Jan-16 Dec-16 Jan-17WPI 100.0 -1.07 3.39 5.25Primary Articles 20.1 4.30 0.27 1.27Fuel & Power 14.9 -9.89 8.65 18.14Manufactured Goods 65.0 -1.17 3.67 3.99

56

PRIME NUMBERS

Commodities

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


Mutual Funds: Category Average Returns

Equity Funds Returns (in %)Tenure Diversified Funds Mid-cap &

Small-cap Funds

Large-capFunds

ELSS (Tax-

savingfunds)

Returns as on December 30, 2016

Debt Funds Returns (in %)

Returns as on December 30, 2016

Tenure Liquid Funds Short-termincome funds

Ultra short-term funds

Long-termincome funds

Gilt funds

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

Currencies and CommoditiesCurrencies

Categories 16-Dec-16 16-Nov-16 16-Oct-16 Weight(%)Mining 5.2 3.9 -1.1 14.2Manufacturing 0.2 5.5 -2.4 75.5Electricity 6.3 8.9 1.1 10.3

31-Jan-17 30-Dec-16 Change (%) StatusUSDINR 67.87 67.92 0.1% AppreciatedEURINR 73.53 71.52 -2.8% DepreciatedGBPINR 84.92 83.82 -1.3% DepreciatedAUDINR 51.16 48.95 -4.5% DepreciatedCHFINR 68.24 66.67 -2.4% DepreciatedJPYINR 0.5988 0.581 -3.1% DepreciatedCNYINR 9.807 9.787 -0.2% Depreciated

31-Jan-17 30-Dec-16 Change (%)Crude ($/barrel) 54.7 55.4 -1.3%Gold ($/ounce) 1,210.7 1,152.3 5.1%

6 months 3.58 4.48 1.53 3.191 year 20.63 22.53 18.37 20.183 year 21.88 31.47 16.86 20.575 year 16.55 24.21 13.76 16.19

6 months 6.50 9.81 8.02 12.37 14.73

1 year 7.21 10.11 8.70 12.67 15.62

3 year 7.98 9.33 8.61 10.70 11.97

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