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Shilpa KumarMD & CEO
ICICI Securities Ltd.
The beauty of our tax system is such that not only does it help you make investments that save tax but also align those investments to help meet your life goals. Just like planning for our financial goals is a continuous process, so is the process of planning investments to save tax. However, many of us overlook the fact that our tax obligations change broadly with our age and changing financial circumstances.
I t is crucial that we invest according to our life stage and are aware of the options available which best suit that life stage. For example taxable income is relatively lower at the start of one career and tends to increase as our career progresses. This stage is also the beginning of establishing an asset base, there is little income from capital gains or interest and fewer deductions.
But most importantly investors here have the advantage of having time on their side. Equity oriented investments make perfect sense at this stage, more importantly products like equity linked savings scheme (ELSS). The three year lock in also ensures discipline and investing for the long term. Additional it also has benefit of tax exemption under section 80C.
As you grow, your income and responsibilities also tend to increase. At this stage usually these is a family and some serious goal planning begins. Tax, at this stage, can be managed while achieving financial goals like buying a house, investing in insurance to safeguard the future of your dependents and also starting to invest to build a kitty for retirement. Tax breaks on home loan repayment combined with
1ICICIdirect Money Manager December 2017
tax concessions on life insurance premiums and contribution to pension schemes like Provident Fund (PF) and National Pension System (NPS) and help increase income and achieve life goals.
Additionally, buying health insurance not only helps in times of a medical emergency but also helps save tax under Section 80D. Taxes on tuition fees of children and education loan are also subject to deduction up to certain limit.
This life stage, also usually signals the peak in expenses and liabilities. Therefore, making optimum use of tax-saving instruments under all permissible sections is a must for assessing tax saving investments. However, it is equally important to factor in your risk appetite and time horizon to achieve the goal before investing in tax-efficient plans.
Moving on, tax-saving portfolio of those moving towards retirement should be focused on the goal of capital protection. Also, in this phase, with debt obligations reduced and the tax bracket being at the highest slab, it is prudent to focus more on tax saving options. While Senior citizen saving schemes (SCSS) is a great tax-saving investment for senior citizens, other opportunities can be discovered depending upon risk profile and life expectancy of the assesse. Individuals can also consider tax saving through non-investment related instruments like charity and donations.
However, tax commitments, financial circumstances, life-stage goals, risk appetite and liquidity requirement of every individual are distinct, no standard tax-planning strategy can be applied to all. Taking professional help to manage taxes is thus highly recommended. The bottom line is to consider taxation before making or revising financial plan at every life stage.
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 help investors know more on investing, make them aware of the options they have and to partner with them in setting and achieving their financial goals. We welcome you to write to us or visit our branches to assist you.
2
Our efforts to invest in tax-saving instruments are at the peak around this time of the year. While this is an ad hoc approach towards tax-planning, treating tax-related investments as other goal-based investments is in fact, a potent financial strategy. All elements considered before making an investment like time horizon, risk-return equation and asset allocation should also be accounted while investing in a tax-saving avenue.
In other words, tax planning should fit into your overall financial goals. For instance, including equity linked tax-saving products like ELSS (equity-linked savings scheme) and NPS (national pension system) in your portfolio can accomplish two goals: tax deduction up to Rs. 2 lakhandaccumulate retirementcorpus. Similarly, investment in tax-saving FDs can be utilized to achieve short-term goals.Insurance, the most popular tax-saving player amongst Indians, should be primarily purchased for the risk coverage. Tax benefit should be an incidental benefit.I suggest, consider investing in ULIP (unit linked insurance plan), to earn a combination of life coverand capital appreciation.
The nature of your tax-efficient portfolioprimarily depends on your risk profile, income, tax-bracket and age. But the most suitable tax-saving plan is the one that is aligned with your life-stage goals and helps you achieve it on time.
There are a host of products that are tax-efficient and would fit into your investment plan. The December edition of Money Manager offers comprehensive information and analysis on these products and the relevant tax-friendly tips for different age groups. We hope this will help you plan your taxes more efficiently and in sync with your financial goals.
The edition also contains a panel interview with mutual fund experts - P. V. K. Mohan (Principal Pnb AMC), Anand Radhakrishnan, Chief Investment Officer (Franklin- Equity India, Franklin Templeton Asset Management), Deepak Gupta, (Kotak Asset Management) and Lalit Nambiar (UTI Mutual Fund), where they share their views on current market scenario.
This edition offers comprehensive information and analysis on equity diversified funds. If you wish to get clarity on different aspects of personal finance or any other money matter through 'Ask our Planner', you may write to us at [email protected]. So read on, stay updated and involved. Do write in with your feedback and share your thoughts.
Your magazine is now also available on www.magzter.com, a digital newsstand.
ICICIdirect Money Manager December 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
3ICICIdirect Money Manager December 2017
MD Desk ...................................................................................................1
Editorial ....................................................................................................2
Contents ...................................................................................................3
News ........................................................................................................4
Stock ideas: MM Forgings & Narayana Hrudayalaya......................................5
Flavour of the Month: Manage taxes at every life stageWe often don't realize that changes in inflow and outflow of our income significantly impacts our tax liabilities, which makes tax planning a dynamic process. There's a tax-saving strategy suitable for every individual, it's just a matter of assessing your current financial health and adopting a product that benefits the most at current life stage. Check out these key takeaways ….........................14
Tête-à-tête:Fund managers discuss current economic scenarioIn talk with P. V. K. Mohan (Principal Pnb AMC), Anand Radhakrishnan, Chief Investment Officer (Franklin- Equity India, Franklin Templeton Asset Management), Deepak Gupta, (Kotak Asset Management) and LalitNambiar (UTI Mutual Fund) ...........................................................25
Ask Our PlannerOur financial expert answers How tax deduction under government-backed schemes works? And your other personal finance queries...33
Mutual Fund Analysis Which are the top performing mutual funds in current market scenario? Check these top three funds recommended by our research team........................................................................................37
This month on iCommunityTake a look at the latest activities on our unique information platform- iCommunity (for December 2017)........................................................47
Equity Model Portfolio ..............................................................................48
Quiz Time ................................................................................................52
Prime Numbers ........................................................................................53
4
Hike Messenger has doubled its wallet transactions to 10 million within a month, and will launch features like cab bookings, movie ticketing, food ordering, bill payments and other in-app offerings in the first quarter of 2018, to stimulate usage of the wallet among users.
The app's founder Kavin Mittal told ET that he was open for more funding, but was slowly using funds from Chinese major Tencent which invested $175 million in August 2016. A quarter of the company's 100 million ..
Mittal feels this move would resonate with smartphone users across all tiers and specially those who have mid-level or entry level phones that offer limited storage, and therefore are not able to download many apps.
Courtesy: Economic Times
Hike wallet transactions touch 10 million
2018-19 budget may focus on rural areas
India's government will likely increase funding for the farm and rural sectors in the budget for the coming fiscal year, finance ministry officials said, to shore up political support in the countryside ahead of a raft of elections.
“The next budget will focus on farmers, rural jobs and infrastructure while making all attempts to follow a fiscal prudence path,” a senior finance ministry official told Reuters.
Annual farm growth dipped to 1.7% in the three months ending September, mainly on lower prices and output, while economic growth accelerated to 6.3% after growing at a three-year low of 5.7% in the previous quarter.
Courtesy: The Hindu
ICICIdirect Money Manager December 2017
The liquidity rush in the financial system since demonetisation has led to "unprecedented
fund flows to both equity and debt mutual funds", which is showing some signs of risk,
according to the Reserve Bank of India's (RBI's) Financial Stability Report
Given the significant increase in the mutual funds (MFs) corpus and an excess monthly
return of almost 250 basis points (annualised) from a representative money market fund,
"there seems to be some risk migration from the banks to the mutual funds", the FSR said.
Courtesy: Business Standard
Risk building up in mutual fund segment: RBI's Financial Stability Report
Hero MotoCorp to hike motorcycle prices from January
Two-wheeler market leader Hero MotoCorp said it will increase prices of its motorcycles across models by about Rs 400 per model on an average from January to partially offset rising input costs.
“The price hike translates to about Rs 400 per model. The exact quantum of the increase will vary, basis the model and the specific market,” Hero MotoCorp said in a statement.
Automobile firms usually announce price hikes in December as they try to woo customers, who usually postpone purchases to acquire vehicles in the new year.
Courtesy: Indian Express
5
STOCK IDEAS
ICICIdirect Money Manager December 2017
MM Forgings– Forging its way ahead…
Company BackgroundMM Forgings (MMF) started its operations in 1974 and is a south-based closed die forging player catering the forging requirement of OEMs. The company manufactures raw, semi-machined and machined forging products (like spindles, knuckles, axle beam, gears, hub, yoke and other t ransmiss ion parts) wi th weight ranging from 0.3- 45/kg. In FY17, its total capacity was at 53,000 MT. In terms of revenue mix, the automotive segment account for 86% of revenue (of which CV & PV account for 60% & 26%, respectively) while the non-automotive segment (off highway, oil & gas and valve) accounts for 14% of revenue. Further, the export, domestic revenue mix is at 63: 37, respectively, for FY17. Its top five customers account for ~65% of its revenue.
Investment Rationale
Cyclical revival to drive revenue growthMMF is expected to post revenue CAGR of 13% in FY17-
20E to | 693 crore, attributable to an upswing in demand of heavy commercial vehicles in both domestic & international market. The North America class 8 truck (~18% of MMF revenue) net order is firmly in the growth territory, up 55.7% YoY a t 220 ,916 un i t s in 10MCY17, a lead indicator of p roduc t ion g rowth . The f a v o u r a b l e l a b o u r c o s t arbitrage will accentuate the demand for imported forged components from India, which will benefit MMF. There are multiple catalysts for domestic M&HCV g rowth , v i z . - 1 ) buoyant outlook on road project awarding/construction & m i n i n g , 2 ) s t r i c t implementation of overloading ban, 3) potential regulatory positives like scrappage policy and 4) CV cycle yet to peak. R a p i d u r b a n i s a t i o n , a favourable macro backdrop & new launches will drive the domestic PV growth, aiding MMF's PV business.
Higher utilisation & value addition to drive margin: MMF manufactures raw, semi-machined & machined forging
6ICICIdirect Money Manager December 2017
STOCK IDEAS
products with weight ranging from 0.3- 45/kg. Over the last 26 years, the company has added capacity 9x, from 15000 T in FY95 to 53000 T in FY17. Every capacity expansion was accompanied by an increase in r e a l i s a t i o n ( A S P s h a v e i n c r e a s e d ~ 1 0 % o n a n average), which gives an insight into MMF's focus on value addition & diversification of products. The company has a forging press in the range of 1600 T to 4000 T. Introduction of 8000 T press in Q4FY18E will take its total capacity to 65000 T. This new press will have the capability to manufacture products weighing 60-100/kg, thereby enhancing MMF's value offering in terms of products & segments. The new press line will produce higher margin machined products, thereby increasing the overall share of machined products (currently at ~25% of sales) in the product mix. MMF's effort in making a transition from hammer to press forging can lead to increase in productivity & profitability by 20% & 10%, respect ive ly. We expect EBITDA margins to improve 151 bps to 20.9% in FY20E.
S t a b l e b u s i n e s s , a l l u r i n g valuations: MMF has a track record of stable financials. In the last 10 years, its revenue, EBITDA & PAT have registered CAGR of 10%, 9%, 12%, respectively. With the major capex cycle behind them, MMF is expected to be in a sweet spot in terms of net cash position & FCF yield of ~ 9 % b y F Y 2 0 E . Commissioning of the 8000 T press will propel MMF in a strong growth trajectory with its revenue & profit expected to register CAGR of 13% & 26%, respectively, in FY17-20E. Increasing asset utilisation & margin accretion will lead to increase in RoCE from 12.6% in FY17 to 20.3% in FY20E. On the valuation front, MMF is trading at ~40% discount to the market leader despite having almost a comparable return ratio profile. Hence, we believe there is scope of re-rating in the stock. We value MMF at 19x PE of its FY20E EPS of | 71.6, resulting in a fair of | 1360, with BUY rating on the stock.
7ICICIdirect Money Manager December 2017
STOCK IDEAS
Stock Data
Key Financials
Valuations Summary
` crore FY16 FY17 FY18E FY19E FY20E
Net Sales 502 478 535 609 693
EBITDA 108 93 107 125 145
EBITDA (%) 21.5 19.4 20.0 20.5 20.9
Net Profit 50 43 51 67 86
EPS 41.5 36.0 42.1 55.7 71.6
FY16 FY17 FY18E FY19E FY20E
P/E 24.6 28.4 24.2 18.3 14.3
Target P/E 32.8 37.8 32.3 24.4 19.0
EV / EBITDA 12.0 13.8 12.1 9.8 7.9
P/BV 4.4 3.9 3.4 3.0 2.5
RoNW 17.9 13.8 14.2 16.2 17.6
RoCE 16.0 12.6 13.7 16.4 20.3
Market Capitalization ` 1231.2 Crore
Total Debt (FY17) 182.8
Cash and Investments (FY17) 133.8
EV (FY17) 1280.2
52 week H/L (`) 1063 / 411
Equity capital ` 12.1 Crore
Face value ` 10
FII Holding (%) 0.7
DII Holding (%) 19.2
8ICICIdirect Money Manager December 2017
STOCK IDEAS
Key risks include:
Unable to develop products based
on changing technology – The Evolution of electric
vehicles (EVs) is picking up
pace across the globe. Higher
penetration of EVs worldwide
can pose a risk to forging
companies that predominantly
manufacture engine based
forged products. At present,
the management believes
~10% of its business can be
exposed to the risk of EVs. We
believe if MMF is unable to
develop products based on
changing technology (EVs) it
may impact i ts business
model, going forward.
Under-utilization of its new 8,000
MT capacity – The company is currently in a
pilot phase of its new 8,000 MT
press, which is expected to be
operational in Q4FY18E. The
higher tonnage press has the
capability to produce higher
weight and fully machined
components, which are margin
& RoCE accretive. The market
for machined products is hard
to break into. Vendors need to
establish a long track record.
Hence, a slower ramp up of the
new press entails a downside
risk to our margin and return
ratio assumptions. Historically,
every capacity expansion in
MMF has led to a significant
rise in realizations
9ICICIdirect Money Manager December 2017
STOCK IDEAS
ANALYST CERTIFICATION We /I, Nishit Zota (MBA), and Vidrum Mehta (MBA), 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 full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.
It is confirmed that Nishit Zota (MBA), and Vidrum Mehta (MBA), Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Nishit Zota (MBA), and Vidrum Mehta (MBA), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
10ICICIdirect Money Manager December 2017
STOCK IDEAS
Narayana Hrudayalaya Ltd. – Asset right + Affordable + flexible
Company BackgroundIncorporated by renown cardiac surgeon Dr. Devi P r a s a d S h e t t y i n 2 0 0 0 , Narayana Hrudayalaya Ltd (NH) operates as a chain of mul t ispecia l ty hospi ta ls . Started predominantly in Karnataka and Eastern India, the company is growing footsteps in western and northern India as well. We in i t ia te coverage on the company as we believe NH is well poised to thrive in the domestic healthcare delivery (Hospitals) space on the back of its asset right business model with focus on quality and affordability
Investment Rationale
Blended model of affordable + high-quality servicesNH has a legacy model based on affordability over the years. Because of strict control over costs and capital the company w a s m a k i n g r e a s o n a b l e profits. However, as it looks for scaling up in other regions, where the consideration for quality has more weight than
affordability, the model is likely t o b e m o d i f i e d f r o m ' 'a f fordable ' ' to a mix of a f f o r d a b l e + q u a l i t y a t premium. Cases in point are the recent acquisit ion of Gurugram hospital and buying out of partner in the Cayman Islands hospital internationally where the acquisition costs were optically higher.
''Asset right model'' and likely ARPOB improvement to improve return ratiosUnder this model the company engages with partners who invest in land and building while it takes care of medical equipments and hospital management on a revenue share basis. This is why NH's balance sheet is one of the l i g h t e s t a m o n g p e e r s . However, the management has maintained flexible approach in this regard, thus it also owns some hospitals where the opportunity is right. Due to this focus on balance sheet and likely improvement in Average realisation per operating bed (ARPOB) by optimising case
11ICICIdirect Money Manager December 2017
STOCK IDEAS
mix, we expect improvement in ROCE from 12.5% to 19% during FY17-20E.
After effective cost and capital management focus shifts to improving ARPOBIn a conducive but challenging space of Indian healthcare delivery, plagued by longer g e s t a t i o n p e r i o d s , l o w operating margins, leveraged balance sheets and low return ratios, we believe NH is the best placed candidate among peers to sail through. Its legacy model is based on affordability and hence conscious efforts towards cost and capital control is embedded in the
management 's long term strategy. This becomes even more pertinent in the backdrop of incremental government intervention via schemes and control over procedures and products. On the other hand it is also determined to improve the ARPOB by improving case mix, occupancies thus fine tuning af fordabi l i ty wi th profitability. We value NH on SOTP basis by valuing the matured hospitals at 14x FY20E EV/EBITDA, Cayman Islands hospital at 14x FY20 EV/EBITDA, other hospitals and other businesses at 1.0x FY20E EV/sales. Our SOTP target price arrives at | 365
Valuations Summary FY17 FY18E FY19E FY20E
P/E 69.0 65.5 42.8 28.6
Target P/E 82.3 78.1 51.0 34.2
EV / EBITDA 26.1 24.0 19.3 14.2
P/BV 6.0 5.5 4.9 4.2
RoNW 8.8 8.5 11.5 14.6
RoCE 12.5 11.9 14.4 18.7
Key Financials
` Crore FY17 FY18E FY19E FY20E
Net Sales 1878.2 2269.7 2665.0 3021.5
EBITDA 228.9 254.3 311.4 409.7
EBITDA (%) 12.2 11.2 11.7 13.6
Net Profit 84.4 89.0 136.2 203.4
EPS (`) 4.1 4.4 6.7 10.0
12ICICIdirect Money Manager December 2017
STOCK IDEAS
Stock Data
Market Capitalization (` crore) 5824.3
Debt (` crore) 216.7
Cash and Cash Equivalent (` crore) 116.3
EV (` crore) 5924.7
52 Week High / Low (`) 350/282
Equity Capital 204.4
Face Value 10.0
FII Holding (%) 7.7
DII Holding (%) 6.7
Key risks include:
Government RegulationsIn past six months the government has voluntarily shifted cardiac stents and knee implants under the national list of essential medicines (NLEM) list to cap the prices of both devices. Government has a l so put s ix months o f restriction on hospitals for making any changes to the procedural prices. NH derived 48% of FY17 revenues from cardiac treatment. Although NH's model is low cost, the disturbance in supplies on account of shortage and uncertainty of stent availability has direct impact on the procedural revenues. The management expects |40-45 crore of loss in FY18 due to cardiac stent price regulation. Off late the government also brought knee implants under the NLEM ambit. These kinds of interventions are detrimental to the revenues if the government also starts regulating the procedures. Recently two state governments West Bengal and
Karnataka has recently passed laws capping the prices of select private healthcare services.
The PPP model in healthcare can be unviable with CGHS rates
The NHP 2017 advocates active participation of private healthcare providers with government acting as service purchaser. The Niti Ayog's report on PPP gives details about the rates that can be charged to patients who aren't covered by National Health Protection Schemes (NHPS), Rashtriya Swasthya Bima Yojana (RSBY), Central Government Health Scheme (CGHS) or state insurance schemes. The proposal suggests that where NHPS, RSBY and state insurance schemes aren't applicable, patients cannot be charged over CGHS rates. Note that the CGHS rates are substantially lower than even the average rates for different procedures hence any player entering into these kind arrangements will face substantially longer payback achievement.
13ICICIdirect Money Manager December 2017
STOCK IDEAS
ANALYST CERTIFICATION We /I, Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Harshal Mehta M. Tech (Biotechnology) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.
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ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report.
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Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
14
FLAVOUR OF THE MONTH
Manage taxes at every life stage
ICICIdirect Money Manager December 2017
An ideal tax-management strategy is the one that is adaptable and revised
according to individual's changing financial circumstances. We often don't realize
that changes in inflow and outflow of our income significantly impacts our tax
liabilities, which makes tax planning a dynamic process. Each life stage has its
distinct perks and challenges. But there's a tax-saving strategy suitable for every
individual, it's just a matter of assessing your current financial health and adopting
a product that benefits the most at current life stage.
Why incorporate taxes in financial planning?
Almost all our financial decisions affect taxes. By overlooking them while making any financial plan, one may end up paying more taxes than he would have otherwise. Aligning tax-planning along with our financial goals, can, in fact, enhance the probability of accomplishing these goals. Analyzing current as well as future tax l iabi l i t ies and adopting tax strategies to minimize the payable tax is an effective way to manage our current and future expenses. Thus, tax planning is a key element of establishing a successful financial plan.
Often investors invest in a product just to save taxes and fail to look at other influential aspects of investments such as risk capacity, age and time
h o r i z o n o f i n v e s t m e n t . Unfortunately, this is simply an ad hoc approach towards financial planning.
It is important to focus on f i n a n c i a l g o a l s a n d t a x planning should be a part of your financial planning, and not an end-goal in itself. Tax planning is not a one-time exercise that you should undertake once a year. Essen-tially, it should be a year-round process.
In order to clarify tax-management strategies, we have divided tax-payers into four age groups. Age is taken as a distinguishing criteria mainly because age r isk to l e rance and expec ted returns are closely related– for instance, lower the age, higher the risk tolerance and the potential returns.
15
FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
Life stages and tax structureAge (years) Income source Asset base Risk tolerance Tax bracket
20-30 Wages
None
Highest
Low
31-40 Wages / investment Accumulating High / moderate Higher
41-50 Wages / investment
Growing
Moderate / low
High
51 and above Investment Depleting Lowest High / highest
20- 30
Twenties are usually the start of
our careers, and probably
means relatively lower income
a n d l o w e r t a x l i a b i l i t y.
However, risk tolerance can be
highest at this stage since
longer time can be given to
investments to grow and
overcome losses. Investments
made in this stage can benefit
from the power of
compounding in the long haul.
Here are some tax-saving
strategies for this age group:
- Salaried individuals can
availtax deduction overEPF
(employee provident fund)
contribution under section
80C of Income Tax Act. The
employee's share is subject
t o d e d u c t i o n ( 1 2 % o f
employee's basic salary),
whereas, contribution from
employer is exempt from
tax.
- Another popular tax-saving
instrument under section
80C is public provident fund
(PPF). The current interest
rate of PPF is 7.8%. Though
the return rate varies from
year to year, investors in this
age group should focus on
investments producing
more aggressive returns.
- With time on your side, this is
the idea l t ime to s tar t
investing for long-term
goals. Invest small amount in
equity or equity mutual
funds to build corpus for
goals like property purchase.
E q u i t y l i n k e d s a v i n g s
scheme (ELSS) offer triple
benefits of tax-deduction,
capital appreciation and tax-
free returns.
- Investments in equity related
p r o d u c t s a r e h i g h l y
b e n e f i c i a l f o r y o u n g
investors with long-time
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FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
investment horizon in mind.
Long-term capital gains on
equity are also tax-free.
- If you are repaying the
education loan your parents
had taken, you can claim
deduction on that amount
too. However, this deduction
is only applicable on the
interest paid. There's no
upper limit on this amount.
I n d i v i d u a l s r e p a y i n g
education loan of spouse
can also avail this benefit.
- Investors in this age group
should prioritize equity over
provident funds for tax
saving, unless they have
sufficient equity investments
in their investment portfolio,
over and above tax saving
investments.
- First-time home buyers can
even earn tax deduction of
Rs. 50,000 over and above
Rs. 1.5 lakh of section 80C.
31-40
This is commonly the phase
where we start a family.
F i n a n c i a l l y d e p e n d e n t
members in the family is the
biggest change for most
adults. Increased income,
responsibilities, and liabilities
also mean increased taxes.
Since risk tolerance is still very
strong in thirties, investments
can be started for long-term
horizon.
- Hike in salary will reflect into
EPF contr ibut ion. With
higher contribution you can
save more taxes under
section 80C.
- Invest early in pension plans
to cut down on the premium.
ELSS a long with other
mutual funds can build a tax-
efficient retirement portfolio.
- This is the right time to invest
in NPS (national pension
s y s t e m ) . G o v e r n m e n t
initiated retirement security
avenue while reducing tax
liability of the investor.
- A married person has to look
after his/her spouse and
c h i l d r e n a s w e l l . L i f e
insurance is one way to
protect your family, while
availing tax benefit on its
annual premiums.
- H e a l t h c a r e i s a n o t h e r
important goal at this life
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FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
stage. Remember, health
insurance premiums for self,
spouse, dependent children
and parents are eligible for
tax deduction under Section
80D.Even if one is covered
for medicals by the em
ployer, it is advisable to take
an additional health cover for
self and family.
- Parents of young children
can save tax by deducting
children's tuition fees and
certain school fee expenses
from taxable income.
- If you have a daughter below
10, take advantage of the
Sukanya Samriddhi Yojana
that enjoys same tax break
as provident funds but at
superior interest rate (8.3%).
- Those repaying home loans
have tax advantage over
both principal and interest
amount under sec t ion
80Cand 24 respectively.
41- 50
At this stage of life one should
increase the insurance cover-
age as he has dependent chil-
dren, and there are expenses
like children's education, their
marriage, etc. Further, periodic
cash flow is needed at this
stage and so it is recom-
mended to keep a part of the
investments in bank deposits.
- Investing in children's plan or
ULIP can give higher protec
tion to the child's future even
if you are not around to
w i tness i t . Re t i rement
planning should also feature
prominently.
- Pre-retirees have to increase
their exposure towards pen
sion plan and PPF for their
retirement needs.
- Exposure to equity may be
brought down, but don't
exclude it altogether. Making
equity part of your portfolio
willhelp add some extra
muscle to the saved-up
corpus.
- Tax breaks on home loan
repayments continue to be
part of tax-saving strategy
for people in this age group.
- Parents of children pursuing
higher studies can claim
deduction on the interest
paid on children's education
loan u/s 80E.
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FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
- Those having ten more years
to retirement can continue
investing in ELSS, NPS or
balanced mutual funds and
a c c o m p l i s h g o a l s o f
securing retirement and tax-
saving.
51 and above
Senior citizens get more tax-
breaks. This is also the time
when the investments made in
retirement plans help you
maintain the standard of living.
The health insurance plan
taken earlier gives the comfort
of being insured for medical
expenses at much lower
premium. There is a need for
stable and steady income. So
PPF and bank FD/NSC is rec-
ommended.
- With increased life expectancy
rate, a small equity exposure
is recommended at this stage.
- Invest small amounts in fixed
income instruments covered
under section 80C like NSC,
tax-saving FDs, monthly
income scheme. Along with
tax rebate benefit, these
schemes o f fe r re tu rns
between the ranges of 7 to 8
per cent, for the period of 3
to 10 years.
- An individual of the age of 60
years or more can open
Senior Ci t i zen Savings
Scheme (SCSS) Account
and claim deduction on its
deposits. Their return rate at
8.4% is the highest among
other post office savings
schemes.
Tax- saving investment optionsEmployee provident fund (EPF)
Most companies have EPF for
the benefit of employees. An
employee can contribute 12
percent of the salary towards
EPF. The employer also con-
tributes 12 percent of salary.
This is a good tool to build a
retirement corpus. EPF enjoys
an EEE tax status, meaning,
money in this account is
exempt from taxes at the time
of investment, accumulation
and withdrawal (on maturity
only).
Public provident fund (PPF)This is another tool to build the
retirement corpus. Anyone can
open a PPF account with a
minimum contribution of 500.
Premature closure is not
19
FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
allowed before 15 years. Wit
drawal facility is available after
6 years. This is a good tool for
those who are not covered by
EPF to fund their retirement.
Even those covered under EPF
can also contribute to PPF, for a
larger retirement corpus.
National Saving Certificate (NSC)
Money invested in NSC is de-
ductible u/s 80C. The minimum
investment is Rs. 1 ,000.
Investment up to Rs. 1, 00,000
per annum qualifies for IT
Rebate under section 80C of
Income Tax Act. This is a highly
safe investment as it is backed
by government security and is
best suited for the risk-averse
investor. Further, a bank loan is
available against NSC.
National Pension System (NPS)
This is another government
initiated avenue, but offering
market linked returns. Tax-free
contribution to NPS tier I
account is capped at Rs. 50,000
under section 80 CCD, which is
over and above the existing
limit of Rs. 1.5 lakh. Both
deposits and interest of NPS
account are free of tax burden
but pre-mature withdrawals
are taxed as per investor's tax
bracket. NPS is an opportunity
to invest in equity, government
securities or corporate debt
securities as per our choice.
The investor has liberty to
allocate his money across
these three classes based on
his risk profile.
The NPS falls under EET
taxation, meaning, deposits
and accumulations are tax free,
but not the maturity amount. At
maturity, 40% of withdrawal is
t a x e x e m p t . H o w e v e r,
according to budget 2017, NPS
account holders can with
drawup to 25% of the i r
contributions under certain
circumstances.
Equity Linked Savings Scheme
(ELSS)
Another stock market driven
investment with lock-in period
of 3 years. Its tax deductions
are included in the same cap of
Rs. 1.5 lakh under section 80C.
Lump sum amount invested in
ELSS will be deducted from
taxable income of respective
f inancial year and entire
amount can be withdrawn after
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FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
3 years. But when invested via
Systematic Investment Plan
(SIP), total amount can be
withdrawn only after each
instalment completes the lock-
in period of 3 years.
Senior Citizen Savings Scheme
(SCSS)
Deposits made to Senior
C i t i zen Sav ings Scheme
(SCSS) are deductible but
interest earned on it is taxable
i ncome. SCSS p rov ides
returns at the fixed rate of
8.4%. Eligible only for retirees
above the age of 60, SCSS can
be held for 5 years and
stretched up to 3 years later
that. However, only lump sum
investment, not exceeding Rs.
15 lakh is allowed in one
account.
Unit Linked Insurance Plans
(ULIPs)
This is one of the reliable
i n v e s t m e n t p r o d u c t s
considering protection cover,
hea l thy re tu rns and tax
advantage, all combined in one
product. Insured person's
premiums are invested in a mix
of debt and equity assets to
offer productive returns, while
he enjoys tax deduction under
80C cover at the same time. He
also has liberty to choose asset
classes and switch from one to
another. Both death benefit
and maturity payouts under
ULIP avail tax benefits.
The only condition with ULIPs
is - premium amount should be
less than 10% of the sum
assured. For instance, if the
sum assured is Rs. 10lakh and
annual premium costs less
than Rs. 1lakh, then the entire
premium is subject to tax
deduction. But if the premium
is Rs. 1.5 lakh (more than 10%
of the sum assured) deduction
for only permissible limit i.e.
Rs. 1 lakh can be availed.
Tax-saver fixed deposits
Tax-saving fixed deposits and
post office time deposit with
the lock-in period of 5 years are
also eligible for 80C tax benefit.
Please note that not all fixed
deposi ts qual i fy for th is
concession. Only tax-saving
FDs come under this category.
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FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
Comparison between tax-saving investmentsInvestment Interest rate* (%) Lock-in Period Tax benefit
ELSS 12-15 % expected 3 years Deduction up to Rs. 1.5
lakh under section 80C
EPF 8.65 15 years Deduction up to Rs. 1.5
lakh under section80C
PPF 7.8
15 years
Deduction up to Rs. 1.5
lakh under section 80C
NPS 10-12 expected
Till retirement
Deduction up to Rs. 50,000
under section 80 CCD, over
and above the existing limit
of Rs. 1.5 lakh
NSC 7.8 5 years Deduction up to Rs. 1.5
lakh under section 80C
Tax-saver FD Around 6- 8 %
5 years
Deduction up to Rs. 1.5
lakh under section 80CULIPs 8-10% expected
5 years
Tax exemption under
section 80C and 10 (10D)
SukanyaSamriddhiYojana 8.3% Till a/c holder attains age
of 18 years
Deductionup to Rs. 1.5
lakh under section 80C
SCSS 8.4% 5 years Deduction up to Rs. 1.5
lakh under section 80C
* Interest rates as on December 2017
Mutual fund suitability matrix
Source: Economic times
22
FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
Tax- saving non-investment options
Life insurance
Annual premiums paid for
one's life cover and even for
the policy that covers his/her
family (spouse and children)
are tax exempted. Please note
that the entire amount paid
towards insurance premiums
cannot be deducted while
calculating taxable income. For
the policies issued before
March 31, 2012 amount up to
20% of total sum assured and
for the policies issued on or
after April 1, 2012 maximum of
10% of the sum assured is
e l i g i b l e f o r d e d u c t i o n .
Meaning, if you have taken an
insurance cover of Rs. 1 lakh in
2013 you can claim deduction
up to Rs. 10,000 (10% of Sum
Assured) and not on the
premium above this limit.
Home loan repaymentsEquated Monthly Instalment
(EMI) paid towards repayment
of home loan is one of the
eligible deductions under Rs.
1.5 lakh limit of section 80C.
This benefit can be availed only
for self-occupied or rented
property and not for the under
construction home. However,
pre-EMI paid in the same
financial year can also be
claimed if the construction is
completed before the end of
financial year. Interest paid
towards home loan up to Rs. 2
lakh is also eligible for tax
deduction under section 24 of
Income Tax Act.
B o t h b o r r o w e r a n d c o -
borrower can claim tax-benefit
for the same home loan. In
addition to principal and
i n t e r e s t a m o u n t o t h e r
expenses l ike home loan
insurance premium, stamp
duty cost, registration fee,
processing fee can also avail
tax benefit.
First time home buyers enjoy
Rs. 50,000 deduction benefit
for the interest on home loan
over and above section 80C
and Section 24 home loan tax
deductions. Home loan that is
sanctioned in FY 2016-17 and
doesn't exceed Rs. 35 lakh is
eligible for this category.
House rent allowance (HRA)Sa la r ied ind iv idua l who
r e c e i v e s H R A f r o m h i s
employer and live in a rented
23
FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
accommodation, can utilize tax
exemption under section 10.
Even if one doesn't get such
allowance from the employer,
he can claim deduction up to
Rs. 60,000 under section 80
GG. A person living in a rented
place but repaying a home
loan of his/her own, can claim
tax deduction/ exemption for
both expenses.
Health insuranceThe premium paid towards
health insurance is exempt u/s
80D of the Income Tax Act.
Premium paid towards a health
insurance policy of spouse, de-
pendent children and depend-
ent parents is tax-free. The
maximum limit of deduction is
`15,000 and `20,000 in case of
senior citizens. One can claim
maximum up to Rs. 25,000 for
t h e p r e m i u m s p a i d f o r
insurance payee himself,
his/her spouse, dependent
children and parents. Senior
citizens (above 60 years) can
claim deduction up to Rs.
30,000 and even children
paying insurance premiums
for their senior citizen parents
can avail maximum of Rs.
30,000 deduction.
Moreover, sect ion 80DD
p r o v i d e s b e n e f i t t o t h e
taxpayer who is paying for
treatment of his/her disabled
family member. This is capped
at Rs. 75,000. However, the
limit for severe disability is set
at Rs. 1, 25,000
Education loanInterest paid during repayment
of education loan is eligible for
tax deduction under section
80E. This benefit is not implied
for principal amount. An
individual can claim this
concession over education
loan taken for higher studies of
self, spouse and children.
Higher studies include any
regular or vocational course
pursued after completion of
senior secondary examination
or equivalent exam from any
school or board or university.
This benefit is also applicable if
an individual is the legal
guardian of a student.
Charity and donations Contribution made towards
donations and charity are
acknowledged for absolute or
partial tax deduction, as per
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FLAVOUR OF THE MONTH
ICICIdirect Money Manager December 2017
given rules, under section 80G
of Income Tax Act. Individual,
HUF (Hindu Undivided Family)
and company can avail this
benefit irrespective of their
source of income.
Bottom line:Tax-management is a financial
goal in itself. With a little
homework and advance
planning one can not only save
taxes but make appropriate
investment choices that can
help him meet major life-stage
goals. However, it is wiser to
invest with the clarity and
foresight of long term capital
growth and protection rather
than investing with the short-
term advantage of only saving
taxes. Pay attention while
interpreting various provisions
under different sections of the
Income Tax Act. Better yet,
consult an expert to avoid
impulsive decisions.
The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities
25
Tête-à-tête
ICICIdirect Money Manager December 2017
Fund managers on current economic scenario, rupee changes and state elections
In talk with ICICIdirect Money Manager, P. V. K. Mohan (Principal Pnb AMC), Anand Radhakrishnan, Chief Investment Officer (Franklin- Equity India, Franklin Templeton Asset Management), Deepak Gupta, (Kotak Asset Management) and Lalit Nambiar (UTI Mutual Fund) share their views on latest market trends. Excerpt:
Q. Can you tell our readers about
current economic situation, on
both global and domestic fronts?
A. P.V.K Mohan- Global growth
cont inues to be s t rong,
according to IMF global
growth in CY 18 is expected
3.7% which is a new high in
recent times, the growth is
broad based & covering Euro
zone, Japan, Emerging Asian &
European countries & Russia.
On domestic front, with GST &
demonetization behind us,
clear signs of uptake in growth
is visible which was even
endorsed by Moody's upward
revision of growth rate from
6.7% in current year to 7.5% in
FY 18
Anand R - An upswing in global economic activity, positive macroeconomic developments and conduc ive f inanc ia l conditions favor global growth a c c e l e r a t i o n . P o s i t i v e macroeconomic data, strong corpora te ea rn ings and optimism over tax reform with prospects of lower corporate tax rates have been supporting the US equity markets. Eurozone economic momentum has also started to accelerate however political uncertainty in Germany and Brexit related negotiations would be keenly watched. Lower US inflation has prompted expectations of a milder pace of rate hike by the US Federal Reserve. That said, most
P. V. K. Mohan
Principal Pnb AMC
Lalit NambiarUTI Mutual Fund
Deepak Gupta,
Kotak Asset Management
Anand Radhakrishnan,Chief Investment Officer
Franklin- Equity India,Templeton Asset Management
26
Tête-à-tête
ICICIdirect Money Manager December 2017
economies are in the process of interest rate tightening. The Bank of England recently announced its first rate hike in a decade. China's industrial and trade activity has been moderating though new economy related sectors remain strong. Chinese government has opened access to the financial services sectors and will gradually remove the limit of foreign ownership in the next 3-5 years.
A slew of sentiment-boosting events have taken the domestic equity markets to new life highs. India rose 30 notches higher to the 100th rank in the World Bank's Ease of Doing Business� rankings. Acknowledging the po l icy re form measures undertaken by the Indian government in the recent years, M o o d y ' s r a t i n g a g e n c y upgraded India's sovereign rating one notch up to Baa2 from Baa3 (lowest investment grade) with change in outlook to p o s i t i v e f r o m s t a b l e . Simplification of compliance procedure under GST and amendments to the insolvency and bankruptcy code are some recent examples of policy measures. Government is
attempting to push growth t h r o u g h s p e n d i n g o n infrastructure projects and housing sector. This could potentially lead to improvement in credit offtake growth as well a s h i g h e r e m p l o y m e n t generation over the next few years. Sustained momentum in consumption and exports is expected to lift corporate revenue and capacity utilization. Improvement in balance sheets of banks on account of recent recapitalization measures, resolution of stressed assets and improv ing capac i ty utilization as demand picks up should contribute to private capex recovery going forward.
Deepak Gupta- On the global front, economic growth and employment are picking up in US with inflation remaining lower than expectations. The rest of the developed world is still fighting for growth. In India, the growth in the last one year has been impacted because of demonitisation and imp lementa t ion o f GST. Though these have disrupted the growth in the short term, these are very, very positive measures from medium to
27
Tête-à-tête
ICICIdirect Money Manager December 2017
long term. We expect the formalization of economy to pick up pace which will result in buoyancy in tax revenues and fair competition amongst the industry participants.
Lalit Nambiar- Liquidity is a major force globally as well as locally and cannot be ignored. Global central banks led by the US Fed may gradually begin tightening even as the RBI has decided to stay neutra l . Several Wall Street economists believe that 2018 may see the biggest tightening of monetary policy in more than a decade. Against this there is a r i s ing r isk o f complacence setting into global equity markets as exhibited by the VIX which shows global risk aversion to be at multi-decade lows. Closer home in India, partly due to growing investor awareness as well as education and partly due to the paucity perceived or otherwise of alternative investment avenues, money continues to flow into equities raising v a l u a t i o n s , e v e n a s a n earnings pickup continues to e l u d e u s . T h e f a c t t h a t
domestic credit is showing signs of a pickup may well mean that the flow of money to equities may slow a bit but h o p e f u l l y i t w i l l b e compensated by the ensuing earnings growth. The silver lining for India is that it has wea thered two mass ive disruptions in a short period, demonetisation and GST, and has emerged stronger for it, underlining the economy's resi l ience. Hence from a medium term view of say 3-5 years, I would think India is bet ter p laced than most economies even if there were to be a slight tightening at the global level.
Q. In terms of sectors, where do you see the opportunities for investors in the current scenario?
A. P.V.K Mohan - Domestic & Global cyclicals like Auto, Cements, Metals ,Chemicals & Financials will through huge g r o w t h o p p o r t u n i t i e s . Consumption driven sectors will benefit from increase in Agri income domestically.
Anand R - Positive trends from the rural sector should bode well for consumer oriented
28
Tête-à-tête
ICICIdirect Money Manager December 2017
s e c t o r s i n Q 3 F Y 1 8 . Recapitalization in PSU banks should provide visibility of asset quality clean-up with enhanced provisioning. This could bring the focus back on growth and drive a cyclical recovery in the medium term. Bottoming out of asset quality and decl ine in sl ippages should support private bank earnings going forward.
Deepak Gupta- Some of the themes that investors can focus on are:
1. F o r m a l i s a t i o n o f t h e economy i.e. sectors where the informal sector was a major player will benefit as the informal sector will become uncompetitive.
2. Financia l isat ion of the economy. With money coming out of cupboards and mattresses into the banking system because of demonitisation, the financial sector benefits
3. Rural economy is looking upt h
b e c a u s e o f 7 p a y commission, farm loan waiver, good monsoon, MSP hikes
4. Focus on clean energy could
benefit sectors like gas utilities
L a l i t N a m b i a r - T h e r u r a l economy is expected to get an impetus from government policy tailwinds which are likely to boost rural incomes and thus rural consumption is likely to be up sharply over the next several years. This should benefit auto, consumer white a n d b r o w n , F M C G , construction and agri-related industries. At the same time there are nascent signs of a possible credit revival round the corner supporting an investment- led recovery. Sectors such as capital goods, industrial manufacturing and cement are well placed when the investment recovery picks up pace.
Q. What is your view on the rupee going ahead?
A. P.V.K Mohan - It may mildly depreciate.
Anand R – The INR has seen an uptrend from the start of CY2017, gaining about 6% YTD t i l l Nov. Improv ing macroeconomic data, benign crude prices, policy reforms and weakness in the USD have
29
Tête-à-tête
ICICIdirect Money Manager December 2017
contributed to this rise so far this year. Currently, trade and f i sca l de f i c i t r i sks have emerged on account of rising crude prices and expectations of f iscal sl ippage due to incrementa l government spending and a possibility of stimulus to boost growth. These risks around rising twin deficit are likely to turn foreign portfolio investors cautious in the near term and could weigh on INR. The INR could see a moderate weakening from current levels over the 3-12 month period.
D e e p a k G u p t a - The fo rex reserves are at a comfortable level now. Because of this, we don't expect much volatility in INR unless there is some big adverse global event. At the same time, the central bank won't be comfortable with steep appreciation in INR as it hurts export competitiveness. So, the view is that INR should be in 64-68 range over next one year
Lalit Nambiar- I do not claim to be an expert but the broad hypothesis would be, that given Crude oil is at a long term disadvantage due to structural
factors in the energy market including electric vehicles and solar tech prices, the scenario is favourable for the INR. Our twin deficits seem to well u n d e r c o n t r o l , g i v e n a responsible government and level headed policies from the RBI. Overall there should only b e a s t e a d y a n d s m a l l depreciation over the next few years in line with inflation differentials with the USD.
Q. How likely will the outcomeof the state elections influence the direction of our fiscal policies?
A . P. V. K M o h a n - F i s c a l consolidation will continue & will have no Impact of state elections.
Anand R – While the possibility o f p re - e lec t ion popu l i s t measures stoking inflation h o v e r s , w e e x p e c t t h e government to focus on bringing about amendments and enhancements to existing p o l i c y r e f o r m s a l r e a d y undertaken rather than pursue new structural reforms. Thrust on rural expenditure will continue to remain key with fiscal allocation to affordable housing, rural roads and
30
Tête-à-tête
ICICIdirect Money Manager December 2017
electr i f icat ion. Increased efforts are expected to be taken to t ransfer power subsidy through the Direct B e n e f i t Tr a n s f e r ( D B T ) m e c h a n i s m . H e a l t h y budgetary allocation to road projects should likely continue in the coming year. In case of relaxation of fiscal deficit target from 3.2% to 3.5%, we may see the incremental allocation being channelized to the rural schemes.
Deepak Gupta- A thumping majority for the NDA would mean that the voters have given a thumbs up to the central government's policies which wil l embolden the government to continue on the reforms path. A loss would mean that the government might have to go slow on big reforms
Lalit Nambiar- I think state elections occupy market fancy only for a few days before and after the event. Hence it is more a focus for traders than for long term investors; after all one cannot extrapolate these to predict broader pol i t ica l events such as general election results in
2019. Historically, the ability of forecasters and pol i t ica l pundits to predict outcomes a c c u r a t e l y h a s p r o v e n somewhat inadequate and strong business fundamentals have usually been able to trump short term whims and fancies of the market.
Q. Can you tell us something about your stock-selection process?
A. P.V.K Mohan - We follow a multi-cap strategy with focus on identifying stocks which are dominant or niche players in t h e i r s e c t o r, w i t h g o o d earnings growth prospects and available at attractive valuations. Our portfol io construction is typically more of a bottom-up approach as we b e l i e v e s u p e r i o r s t o c k selection leads to sustainable out performance.
A n a n d R – A b o t t o m - u p approach to stock selection is followed at FT, although sector weight ings are reviewed regularly. After identifying the stock universe, our research analysts analyse the financial data, visit companies, meet management and evaluate future potential of companies.
31
Tête-à-tête
ICICIdirect Money Manager December 2017
Once the team identif ies certain investment ideas, a rigorous quantitative and qualitative analysis of the business is done to determine p o t e n t i a l , c o m p e t i t i v e position, risks and catalysts for value recognition.
Typical ly the analysis of businesses involves meetings with competition, distributors, c l i e n t s , e x - e m p l o y e e s whenever possible and also tracking of relevant global trends & standards. During this p h a s e , t h e d e e p understanding of various businesses and industries built over the past decade or so helps us in taking a long term view and ignoring the short-term distractions. From this investible universe, based on investment objectives of the respective funds stocks are shortlisted for constructing the portfolios.
As part of the investment process, our research analysts are encouraged to constantly look out for new ideas in their respective sectors and present it to the team. The investment team is compulsive about understanding companies so
as to look beyond traditional measures such as size, in terms of assets and revenues, EPS, P/Es, Lynch ratios (P/E to Growth Rates), and price to book values. Likewise, heavy emphasis is placed on value c r e a t e d b y i n n o v a t i v e m a n a g e m e n t s w h o a r e f o c u s e d o n t h e r i g h t businesses, are agile and adapt/position themselves.
Deepak Gupta- We follow the GARP approach to investing which we believe helps one to deliver better performance across market cycles. We have an in house team of research analysts who cover more than 300 companies with detailed models on those companies and regular management meetings and ground checks. This helps us to be ahead of the curve.
Lalit Nambiar- The business model of the company is very important, in that there should be a reasonable case for achieving a strong growth trajectory to become a great business or the current state of affairs are suppressing the l o n g t e r m u n d e r l y i n g fundamentals of the business.
32
Tête-à-tête
ICICIdirect Money Manager December 2017
marke t . We recommend investments be staggered to benefit from the intermittent volatility in the markets.
Deepak Gupta- The valuations are rich based on historical e a r n i n g s . I n s u c h a n e n v i r o n m e n t , i n v e s t i n g through SIPs is the best approach. Alternatively, one can invest in conservative products like equity savings where the allocation to equity is lower and then if markets correct, move to products with higher equity allocation.
Lalit Nambiar- Irrespective of the point in time, retail investors have to start with financial objectives including post-re t i r ement goa l s . Asse t allocation is perhaps the most impor tan t s tep towards achieving these objectives. Within that allocation when it comes to equity, if they are even a little bit unsure or do not have the inclination to study stocks in detail, it is safer for them to invest via Mutual Funds and in order to reduce volatility they should use the SIP route.
I believe in owning companies which can withstand difficult business conditions and are l ikely to enjoy profitable operations for many years in the future. This ability to survive could be because of the strength of its brands, a strong business advantage in i t s p r o c e s s e s o r i n i t s m a n a g e m e n t c u l t u r e o r leadersh ip in a product segment.
Q. What should be the investment approach of retail investors at this point of time?
A. P.V.K Mohan - Investors should be in the market for the long term & should avoid speculative investment & strictly no leveraged investing.
Anand R - Markets appear to be trading at above average premium levels. From an investor's perspective, a long term investment approach will be prudent. Equity funds with core exposure to large caps and prudent risk-taking in mid/small cap space may be well positioned to capture the m e d i u m t o l o n g t e r m opportunity presented by the
33
ASK OUR PLANNER
ICICIdirect Money Manager December 2017
How tax deduction under government-backed schemes works?
Q. I have claimed Rs.50,000
deduction under Rajiv Gandhi
Equity Savings Scheme (RGESS) in
FY 2016-17 for the first time.
However, I came to know that this
scheme has been scrapped in the
Budget during February, 2017. Can I
claim for 2 more years under
RGESS, or it is not possible? Please
throw some light on this.- Moorthy
A. Under the provisions of
section 80CCG, deduction for
three consecutive assessment
years was allowed upto Rs.
25,000 to a resident individual
for investment made in listed
equity shares or listed units of
an equity oriented fund subject
to fu l f i l lment o f cer ta in
conditions.
I n B u d g e t 2 0 1 7 , t h e
government had announced
that no deduct ion under
sec t ion 80CCG sha l l be
allowed from assessment year
2018-19 (financial year 2017-
18). This is applicable only for
assessees who want to claim
for the first time. However,
investors who have invested in
the past (less than three years
ago) and who are eligible for
benefits for next 1-2 years, will
be a l lowed to ava i l th is
scheme. For example , a
taxpayer who has taken the
benefits of the scheme last
year, i.e. FY 2015-2016, or who
has invested under the RGESS
in FY 2016-2017 will be able to
claim the benefits for next
three years starting from the
year when the benefits started.
This can be taken till the FY18-
19.
If you have invested in this
scheme, you can continue to
avail the benefit for three years
from the year of investment. If
you were looking forward to
investing in RGESS as a first-
time equity investor, this is no
more available.
2. I had taken a policy from ICICI
Prudential which was a Pension
Plan. The premium was Rs 50,000
per Annum for a period of 10 years
effective January 2007. I paid
premium for 10 years, last being in
january 2017. The policy matures in
January 2018. I will have to
exercise my option of the pension
plan. I can delay vesting the policy
34
ASK OUR PLANNER
ICICIdirect Money Manager December 2017
you had not claimed deduction
on the premiums paid, then the
entire surrender value would
be added to your income in the
year of receipt and taxed as per
your income slab. The Income
Tax Act does not clearly state
how it's taxed, if you have
claimed deduction on the
premiums paid. Logically, only
the gains (i.e. surrender value
less premiums paid) should be
added to your income and
taxed as per your income slab.
Q. I have a pension policy taken in
2009 with no sum assured for 10
years. Every year I am paying a
premium of Rs.3,00,000. Could you
please advise me;
1. How will the tax be calculated on
maturity in 2019?
2. How to avoid and/or reduce the
impact of tax on maturity in 2019?- Kalaichelvan Pakkirisamy
A. On maturity of a pension
policy, you would be able to rd
withdraw a maximum of 1/3
of the matur i ty value as
lumpsum, which would be
exempt from tax. The balance rd
2/3 would be converted into
annuity and you would start
receiving pension, which
would be added to your
but once vested no change will be
allowed. As per the terms, 33.33%
of the annuity amount can be
withdrawn, option for which will
have to be exercised before vesting
the policy. I can exercise the option
of withdrawing the entire Annuity
when no pension will be paid. I am
now 72 years of age.
QUERY:
A. Will this amount of 33.33 % will
be FREE of Income Tax?. I HAVE
CLAIMED INCOME TAX REBATE ON
Rs 50,000 EVERY YEAR FROM MY
TAXABLE INCOME.
B. If I choose to withdraw the entire
Annuity amount which would be
about Rs 10 lacs, what amount will
attract income tax? ( Rs 10 lakhs
minus Rs 5 lakhs which is my
contribution).- C. P. Joshi
A. The lumpsum amount of rd1/3 would be exempt from
income tax, at maturity. The rd
balance amount of 2/3 has to
be taken as annuity only.
However, if you choose to
surrender the policy before its
maturity, then you would be
able to withdraw the entire
amount as lumpsum; however,
such lumpsum withdrawal on
surrender would be taxed. If
35
ASK OUR PLANNER
ICICIdirect Money Manager December 2017
income every year and taxed
as per your income slab every
year. The only way to reduce
the tax outgo in the years in
which you receive pension is
by way of invest ing the
pension or part of it again in
any instruments which provide
deduction under Section 80C
of the Income Tax Act.
Q. I have taken a pension policy
from ICICI in 2010. I have paid three
yearly premium of 15000 RS. Now I
want to surrender my policy. While
surrender ing, the insurance
company suggests me to shift
money to tax free plans. Is it
possible? Please confirm.- Prashant Meshram
A. You can choose to utilize the
surrender amount the way you
want, including investing into a
new policy, whose maturity
proceeds could be exempt
from tax. However, please note
that the surrender proceeds
from your pension policy
would be taxed.If you have not
claimed deduction on the
premiums paid, then the entire
surrender value would be
added to your income in the
year of receipt and taxed as per
your income slab. The Income
Tax Act does not clearly state
how it's taxed, if you have
claimed deduction on the
premiums paid. Logically, only
the gains (i.e. surrender value
less premiums paid) should be
added to your income and
taxed as per your income slab.
Q. I have an ICICI Direct account
and have been investing in ELSS
and NPS through ICICI Direct.I'm
planning to invest 25000/- extra
every month but need to withdraw
amount after 5 years were planning
to construct a house.So please let
me know which are the best funds
to invest for a horizon of 5 years.- Ashok Nrupal
A. As the time horizon is 5
years, you can look at investing
largely into large-cap equity
mutua l funds and some
portion into diversified equity
mutual funds. For knowing our
recommendations, you can
v i s i t I C I C I d i r e c t . c o m >
Research > Mutual Funds >
Top picks.
Q. I had a LIC Pension Policy
which was due to mature in Dec
2017, and the annuity was to
commence from Jan 2018. The
yearly premium amount towards
this policy was Rs.10,000/- paid
36
ASK OUR PLANNER
ICICIdirect Money Manager December 2017
annually, the policy was with a
term of 15 years. I paid premium for
15 years. Being in need of money I
had surrendered this policy in June
2017. I have received a lump sum
surrender value of Rs. 2.44 L from
LIC, no TDS has been effected. Is
this surrender Value Taxable??
Further do I also need to reverse the
Deductions I claimed in previous
years u/s 80CCC for premium paid
towards this Policy?? If yes then
how can I do it?? Kindly explain.- Ketan Shah
A. Yes, if you surrender any
pension policy before its
maturity, then the surrender
value is taxable. You need not
r e v e r s e t h e d e d u c t i o n s
claimed in the previous years;
instead you will have to pay tax
o n t h e s u r r e n d e r v a l u e
received. Logically, as you
have claimed deductions for
the premiums paid, you should
be paying tax on the difference
between the surrender value
and the sum of all premiums
paid.
Do you also have similar queries to ask our experts? Write to us at: [email protected].
MUTUAL FUND ANALYSIS
37
Investing in ELSS funds
ICICIdirect Money Manager December 2017
Equity linked savings schemes (ELSS) are diversified equity mutual fund schemes that are eligible for tax benefits under Section 80C of the Income Tax Act. It is the only fully equity investment option available under Section 80C. ELSS gives aggressive investors an ideal option to utilise tax benefit to invest in equity oriented funds. Effectively, ELSS are multicap mutual funds with similar return profile. The lock-in period of three years is lowest among other investment options available under Section 80C of the Income Tax Act.
Advantages of ELSS
§ Investment in ELSS is eligible for tax benefits under section 80C. Maximum tax savings up to | 46,350 on an investment of | 1.5 lakh in a financial year
§ ELSS invests in equity stocks, which has greater potential for long term capital appreciation. Professional, experienced fund managers another positive.
§ Capital gains at the end of the lock-in period are completely tax free
§ The lock-in period of three years curtails panic selling in case of interim volatility in e q u i t y m a r k e t s . H e n c e , investments reap the benefit of long term investing in equities
§ Systemat ic mode of investment (regular monthly investment) available
ELSS category nature
ELSS funds are the only fully equity-based investment option under Section 80C. As such, the performance potential of ELSS funds is superior compared to
alternatives like National Pension Sys tem (NPS) , Emp loyees Provident Fund (EPF)/Voluntary Provident Fund (VPF), Public Provident Fund (PPF) and tax-saving fixed deposits (FDs). ELSSfunds have displayed consistentperformance.
Historically, the ELSS fund performance has not deviated d i rect ional ly f rom the performance of other equity fund categories. This is because ELSS funds have tended to invest across market caps – large, mid and small, thus keeping performance in line with the general performance of the wider equity markets, as a whole. This lack of market cap bias enables comparison of ELSS fund performance with that of multi-cap funds (also known as diversified equity funds). In recent times, ELSS funds have delivered returns in line with multicap funds.
Under this background, we recommend the following funds: L&T Tax Advantage Fund, Franklin India Taxshield Fund and Reliance Tax Saver Fund
38
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
L&T Tax Advantage Fund
Fund Objective:To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities.
Key Information:
Product Label:
Investors understand that their principal will be at moderately high risk
This product is suitable for investors who are seeking:• Long term capital growth• Investment predominantly in equity and equity related securities
Performance:The fund has been among the top two quartiles performance wise over the last one, three and five year periods (as of November 30). It has managed to outperformed the category and the benchmark across these time frames. The margin of outperformance over its benchmark has increased in recent times. It has generated CAGR of 15% and 18.7% in the last three years and five years vs. 8.8% and 13.6% returns by benchmark, respectively (as of November 30, 2017.
Portfolio:Financial and consumption stocks have led to out performance of the scheme recently. Additionally, the fund
manager has demonstrated good stock picking ability in the commodities space as well as some turnaround opportunities by identifying gainers quite
NAV as on November 30, 2017 (`) 55.3
Inception Date February 27, 2006
Fund Manager Soumendra Nath Lahiri
Minimum Investment (`)
Lumpsum 500
SIP 500
Expense Ratio (%) 2.08
Exit Load Nil
Benchmark S&P BSE 200
Last declared Quarterly AAUM(` cr) 2762
Fund Benchmark
Performance vs. Benchmark
34.3
15 1
8.7
15.7
27.2
8.8 1
3.6
11.3
0
10
20
30
40
1 Year 3 Year 5 Year Since Inception
39
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
early on. The scheme is s ign i f i cant ly overweight consumption stocks when compared to its benchmark a l t h o u g h e x p o s u r e h a s reduced recently in favour of f inancia ls . The fund has recently added names from the newly listed insurance players. There are more than 60 stocks in the portfol io with the
weightage to no stock being much above 4%. This reduces concentration risk at the portfolio level. However the top four picks in terms of sectors cont r ibute ~66% of the portfolio. The fund is slightly tilted towards large cap stocks but sti l l holds significant amount of midcap stocks.
%
4.4
4.2
4.0
3.9
3.1
3.1
3.0
2.9
2.6
2.3
Top 10 Holdings Asset Type
Domestic Equities
ICICI Bank Ltd. Domestic Equities
Larsen & Toubro Ltd. Domestic Equities
Axis Bank Ltd. Domestic Equities
Net Current Asset Cash & Cash Equivalents and Net Assets
HDFC Bank Ltd. Domestic Equities
Graphite India Ltd. Domestic Equities
Housing Development Finance Corporation Ltd.
ITC Ltd. Domestic Equities
Future Lifestyle Fashions Ltd. Domestic Equities
Kotak Mahindra Bank Ltd. Domestic Equities
%17.0
6.0
4.5
4.2
4.0
3.9
3.5
3.2
3.1
3.1
Top 10 Sectors Asset TypeBank - Private Domestic Equities
Engineering - Construction Domestic Equities
Pharmaceuticals & Drugs Domestic Equities
Cement & Construction Materials Domestic Equities
Electrodes & Welding Equipment Domestic Equities
Insurance Domestic Equities
IT - Software Domestic Equities
Finance - Housing Domestic Equities
Retailing Domestic Equities
Automobiles - Passenger Cars Domestic Equities
%
0.8
0.1
1Navkar Corporation Ltd.
Whats In
General Insurance Corporation of India Ltd.
HDFC Standard Life Insurance Co Ltd
40
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
Our View:Investors with a slightly higher risk appetite can consider the fund f r o m a t h r e e - f i v e y e a r perspective.
Data as on November 30,2017 ;Portfolio details as on Oct-2017Source: ACE MF, ICICI Direct Research
You can view performance of other schemes being managed by the fund manager of this scheme on the following link:
https://www.ltfs.com/content/dam/lnt-financial-services/lnt-mutual-fund/downloads/ fac tsheets /2017-18 /LT%20Factsheet% 20November%202017.pdf
%
0.9
0.11.3
Whats out
Grasim Industries Ltd.
Reliance Industries Ltd.Idea Cellular Ltd.
41
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
Franklin India Taxshield Fund
Fund Objective:To provide medium to long term growth of capital along with income tax rebate.
Key Information:
This product is suitable for investors who are seeking*:
• Long term capital appreciation
• An ELSS fund offering tax benefits under Section 80C of the Income Tax Act
Product Label:
Performance:The fund has outperformed its benchmark over most periods, however the performance has suffered over the last year. It has beaten the benchmark Nifty 500 Index by ~1.2% CAGR (three years) and ~4% CAGR (f ive years) (as of November 30, 2017).
Fund Benchmark
Performance vs. Benchmark
Investors under-stand that their principal will be at moderately high risk
Portfolio:The portfolio over the last year has reduced exposure to financials, healthcare and technology stocks in favour of energy and utility stocks. In t e r m s o f p o r t f o l i o
construction, the fund has a significant large cap bias, with ~80% of the portfolio invested in such stocks with midcap stocks making up the rest. The proportion of large cap stocks in the portfolio has increased
NAV as on November 30, 2017 (`) 547.1
Inception Date April 10, 1999
Fund Manager Lakshmikanth Reddy
Minimum Investment (`)
Lumpsum 500
SIP 500
Expense Ratio (%) 2.35
Exit Load Nil
Benchmark NIFTY 500
Last declared Quarterly AAUM(` cr) 3367
22.5
11
18.1 23.929.3
9.8 1
4.4
0
0
10
20
30
40
1 Year 3 Year 5 Year Since Inception
42
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
over the last month or so. This has contributed to the recent underperformance to some ex ten t , espec ia l l y when compared to peers which are more multicap in nature.
Currently there are ~60 stocks in the portfolio with some of the top picks being fairly concentrated positions. The fund currently has ~9% cash in the portfolio as well.
Data as on November 30,2017 ;Portfolio details as on Oct-2017Source: ACE MF, ICICI Direct Research
Our View:Putt ing as ide the recent u n d e r p e r f o r m a n c e , t h e scheme is one of the few ELSS offerings with a long term track record of performance. We
der ive comfort f rom the presence of an experienced and pedigreed fund manager. Investors with a slightly longer term horizon can consider this fund within the ELSS category.
You can view performance of other schemes being managed by the fund manager of this scheme on the following link:
https://www.franklintempletonindia.com/downloadsServlet?docid=jaytocqq
%
9.4
9.4
6.1
4.4
3.5
3.1
3.1
2.9
2.9
2.8
Top 10 Holdings Asset Type
HDFC Bank Ltd. Domestic Equities
Call Money Cash & Cash Equivalents and Net Assets
Axis Bank Ltd. Domestic Equities
Yes Bank Ltd. Domestic Equities
Hindustan Unilever Ltd. Domestic Equities
IndusInd Bank Ltd. Domestic Equities
Mahindra & Mahindra Ltd. Domestic Equities
State Bank Of India Domestic Equities
Bharti Airtel Ltd. Domestic Equities
NTPC Ltd. Domestic Equities
%28.0
15.7
7.0
6.1
6.1
5.8
5.8
3.9
3.6
3.1
Utilities Domestic Equities
Materials Domestic Equities
Energy Domestic Equities
Information Technology Domestic Equities
Consumer Staples Domestic Equities
Financials Domestic Equities
Consumer Discretionary Domestic Equities
Top 10 Sectors Asset Type
Health Care Domestic Equities
Industrials Domestic Equities
Telecommunication Services Domestic Equities
43
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
Reliance Tax Saver Fund
Fund Objective:To generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments.
Key Information:
Product Label:
This product is suitable for investors who are seeking*:
• Long term capital growth
* Investment in equity and equity related securities.
Performance:The fund has consistently outperformed the category and its benchmark over the last year, 3 years and 5 years. It has been a top quartile performer in the last one year period and 5 year period and a second quartile performer in the last 3 year period (as of November 30). The one year, three years and five-year performance (as of November 30) is 36%, 12.4% CAGR and 22.4% CAGR, respectively, as compared to BSE Sensex's 24.4%, 4.9% CAGR and 11 .4% CAGR respectively (as of November 30).
Performance vs. Benchmark
Fund Benchmark
Investors under-stand that their principal will be at moderately high risk
PortfolioThe fund demonstrates a bias towards high growth and scalable businesses, which has helped it deliver well during the
good run for equity markets beginning from mid-2013. The portfolio earlier was multicap in nature with an almost equal split between large cap and
NAV as on November 30, 2017 (`) 65.9
Inception Date September 21, 2005
Fund Manager Ashwani Kumar
Minimum Investment (`)
Lumpsum 500
SIP 500
Expense Ratio (%) 1.98
Exit Load Nil
Benchmark S&P BSE SENSEX
Last declared Quarterly AAUM (` cr) 9983
36
12.4
22.4
16.72
4.4
4.9 1
1.4
11.8
0
10
20
30
40
1 Year 3 Year 5 Year Since Inception
44
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
mid cap stocks. However recently it has added some more large cap stocks giving it a slightly greater large cap tilt. W h e n c o m p a r e d t o i t s benchmark, the scheme is underweight on financials and significantly overweight on automobiles. It has exited
some financial stocks over the last month. While some of the top stock picks have fairly healthy allocations, at the overall portfolio level the scheme seeks to mitigate concentration risk with a fairly large number of holdings (60+ currently).
%
7.8
6.9
5.4
5.1
4.6
4.3
3.2
3.2
3.0
2.9
Top 10 Holdings Asset Type
TVS Motor Company Ltd. Domestic Equities
State Bank Of India Domestic Equities
ICICI Bank Ltd.
Honeywell Automation India Ltd. Domestic Equities
Bharat Forge Ltd. Domestic Equities
Ambuja Cements Ltd. Domestic Equities
Domestic Equities
Tata Steel Ltd. Domestic Equities
Infosys Ltd. Domestic Equities
Tata Motors Ltd. Domestic Equities
ABB India Ltd. Domestic Equities
%24.9
20.0
14.8
14.7
9.1
4.3
3.3
2.4
2.3
0.9
Top 10 Sectors Asset Type
Industrials Domestic Equities
Materials Domestic Equities
Information Technology Domestic Equities
Others Domestic Equities
Health Care Domestic Equities
Consumer Discretionary Domestic Equities
Financials Domestic Equities
Others Domestic Equities
Telecommunication Services Domestic Equities
Consumer Staples Domestic Equities
%
0
0.2
2.4SBI Life Insurance Company Ltd.
Whats In
ITD Cementation India Ltd.
Ashoka Buildcon Ltd.
%
1.4
0.50.1
Whats out
ITC Ltd.
Shriram Transport Finance Company Ltd.Vijaya Bank
45
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
Our View:The fund is slightly on the aggressive side with significant midcap holdings. However, the
portfolio is well constructed in terms of sector-level and stock-level diversification.
You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://www.reliancemutual.com/InvestorServices/FactsheetsDocuments/Fundamentals-December-2017.pdf
Performance of other schemes managed by these fund managers:
Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 8 other schemes of the concerned Mutual Fund
2. Franklin India Taxshield Fund
1. L&T Tax Advantage Fund
Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 5 other schemes of the concerned Mutual Fund
58.53 27.13 --49.63 18.20 19.8153.85 22.93 22.9626.59 5.37 6.1646.38 22.79 28.6035.99 18.03 18.99
30.36 11.45 16.5729.83 10.53 13.6825.30 13.44 18.17
6.38 8.27 8.7311.11 6.24 13.756.38 8.27 8.73
Fund Name 1 Year 3 Years 5 Years
Top 3 Performing Schemes L&T Emerging Businesses Fund-Reg(G)S&P BSE Small-Cap
Crisil Short Term Bond Fund Index
Bottom 3 Performing SchemesL&T Equity Fund-Reg(G)S&P BSE 200L&T India Prudence Fund-Reg(G)Crisil Short Term Bond Fund IndexL&T Dynamic Equity Fund-Reg(G)
Performance of other schemes managed by the fund manager - Soumendra Nath Lahiri
L&T Infrastructure Fund-Reg(G)NIFTY INFRAL&T Midcap Fund-Reg(G)Nifty Free Float Midcap 100
25.18 10.06 17.5325.48 5.97 11.4623.57 10.45 18.0025.48 5.97 11.4617.41 10.01 16.1525.48 5.97 11.46
10.28 8.61 12.271.08 8.12 7.516.96 7.99 10.44
1.08 8.12 7.51
Fund Name 1 Year 3 Years 5 Years
Top 3 Performing Schemes Franklin India Flexi Cap Fund(G)NIFTY 50
Bottom 3 Performing SchemesFranklin India Pension Plan(G)Crisil 10 Yr Gilt IndexFranklin India MIP(G)Crisil 10 Yr Gilt Index
Performance of other schemes managed by the fund manager - Lakshmikanth Reddy
Franklin India Taxshield(G)NIFTY 50Franklin India Balanced Fund(G)NIFTY 50
46
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager December 2017
Data as on November 30,2017 ;Portfolio details as on Oct-2017Source: ACE MF, ICICI Direct Research
Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 6 other schemes of the concerned Mutual Fund
3. aReliance Tax Saver Fund
Note: The schemes may or may not have been managed by the same Fund Manager since its inception
Note: The concerned Fund Manager manages 4 other schemes of the concerned Mutual Fund
35.97 18.84 29.7125.48 5.97 11.4632.11 15.95 24.9425.48 5.97 11.4628.79 11.08 17.8125.48 5.97 11.46
25.18 10.06 17.5325.48 5.97 11.4624.86 11.14 18.2125.48 5.97 11.46
23.57 10.45 18.0025.48 5.97 11.46
NIFTY 50
Bottom 3 Performing SchemesFranklin India Flexi Cap Fund(G)
Top 3 Performing Schemes Franklin India Smaller Cos Fund(G)NIFTY 50Franklin India Prima Fund(G)NIFTY 50Franklin India Opportunities Fund(G)
Performance of other schemes managed by the fund manager - R. Janakiraman
Fund Name 1 Year 3 Years 5 Years
Franklin India Taxshield(G)NIFTY 50
NIFTY 50Franklin India Prima Plus Fund(G)NIFTY 50
38.50 11.50 21.9827.42 7.30 12.3337.63 10.27 17.5027.42 7.30 12.3333.75 10.52 17.4628.45 8.58 13.28
-- -- --28.45 8.58 13.28
Reliance Vision Fund(G)S&P BSE 100Reliance Top 200 Fund(G)S&P BSE 200
Fund Name 1 Year 3 Years 5 Years
Top 3 Performing Schemes Reliance Tax Saver (ELSS) Fund(G)S&P BSE 100
Bottom 3 Performing SchemesReliance Capital Builder Fund-IV-B(G)S&P BSE 200
Performance of other schemes managed by the fund manager - Ashwani Kumar
47ICICIdirect Money Manager December 2017
What is iCommunity?iCommunity is ICICIdirect's interactive platform where one can answer and get answered as well. With extensive range of forums, events & discussions iCommunity serves as an opportunity to learn more about financial world.
This month on iCommunity
Buzz in the market
Is staggered buying approach a right approach
to invest in current bull market??
The government outlined the thrust being put on
infrastructure development as a matter of policy,
with roads, railways, housing, power and digital
infrastructure key focus areas involving capital
expenditure. The same is likely to keep investors
interest upbeat. So, despite the sharp rally in
recent months, it is better to continue with the
staggered buying approach.
So, according to you, is staggered buying a right
approach?
Come and be a part of this discussion with fellow traders and investors on iCommunity.
Join the discussion here:http://community.icicidirect.com/service_forum
Q&A Session with Research Head:Mr. Pankaj Pandey - December 18, 2017
Majority of questions were asked on topics ranging from equity, derivatives & mutual funds. Have a look at some questions which were asked by customers during the event:
1. Bought Infosys at average price of Rs. 1070 around one year back, should I sell or hold? Visit our webpage to find out the answer and more.
2. Is there any strategy to fix stop loss for daily, weekly and monthly trading? Also suggest method to fix trailing stop loss.
3. I am planning to invest a lump sum amount of 1.5Lacs on ELSS MFs. Can I invest in 3 MFs given under the ELSS research recommendations?
Log onto iCommunity to find answers to these above mentioned questions.
48
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager December 2017
Our indicative large-cap equity model portfolio has continued to deliver an impressive return (inclusive of dividends) of 117.06% till date (as on December 18, 2017) since its inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex) return of 95.4% during the same period, an outperformance of 21.66. This validates our thesis of selecting companies with sound business fundamentals that forms the core theme of our portfolio. Our midcap portfolio of 16 stocks continues to outperform well, delivering 352.1% (inclusive of dividends) till date (as on December 18, 2017) vis-à-vis the benchmark index (CNX Midcap) return of 161.1%, outperformance of 191%. Our consistent outperformance demonstrates our superior stock picking ability as markets aligned to our view of favourable risk reward, good franchisee vs. reward-at-any-risk businesses.
We have always suggested the SIP mode of investment and still find a lot of merit in it as the preferred mode of deployment given the market conditions and volatility associated since the inception of the portfolio. We highlight that the SIP return of our portfolio has consistently outperformed the indices.
Following the same pace and opportunities in the market, our portfolio (large caps) remain overweight on BFSI sector – HDFC Bank (10%), HDFC (9%), Bajaj Finance (6%) and SBI (6%). Affirming our view on consumption demand, Dabur (5%) and Asian Paints (5%) continue to be part of our large cap portfolio. However, there's an addition of metal sector- Hindustan Zinc (6%) in the revised portfolio.
We remain positive on auto, IT and pharma. We remain overweight to neutral on pure play defensives (IT, FMCG) as secular earnings coupled with sector rotation could lead to consolidation in near term valuations and offer stock specific opportunities.
Among individual names, we continue to recommend TCS in the IT space. A revival in the capex cycle coupled with lower interest rate scenario would benefit the BFSI and construction space (UltraTech, L&T, SBI, Asian Paints).
49
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager December 2017
Name of the company
Largecap Stocks
Model Portfolio
Largecap(%)
Midcap(%)
Diversified(%)
Auto 16.0 11.2
Tata Motor DVR 4.0 2.8
Maruti 5.0 3.5
EICHER Motors 3.0 2.1
Mahindra & Mahindra (M&M) 4.0 2.8
BFSI 37.0 25.9
HDFC Bank 10.0 7.0
Axis Bank 6.0 4.2
HDFC 9.0 6.3
Bajaj Finance 6.0 4.2
SBI 6.0 4.2
Capital Goods 4.0 2.8
L & T 4.0 2.8
Cement 4.0 2.8
UltraTech Cement 4.0 2.8
FMCG/Consumer 18.0 12.6
Dabur 5.0 3.5
Marico 4.0 2.8
Asian Paints 5.0 3.5
Nestle 4.0 2.8
IT 6.0 4.2
TCS 6.0 4.2
Media 4.0 2.8
Zee Entertainment 4.0 2.8
Metals 6.0 4.2
Hindustan Zinc 6.0 4.2
Oil and Gas 5.0 3.5
GAIL Ltd. 5.0 3.5
Largecap share in diversified 100.0 70.0
50
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager December 2017
ICICI Securities has received a mandate from Indian Bank'.
Auto 6.0 1.8
Bharat Forge 6.0 1.8
BFSI 20.0 6.0
Bajaj Finserve 8.0 2.4
J&K Bank 6.0 1.8
Indian Bank 6.0 1.8
Capital Goods 6.0 1.8
Bharat Electronics 6.0 1.8
Cement 6.0 1.8
Ramco Cement 6.0 1.8
Consumer 36.0 10.8
Symphony 6.0 1.8
Supreme Ind 6.0 1.8
Kansai Nerolac 6.0 1.8
Pidilite 6.0 1.8
Tata Chemicals 6.0 1.8
Bata 6.0 1.8
Metals 6.0 1.8
Graphite India 6.0 1.8
Infrastructure 8.0 2.4
NBCC 8.0 2.4
Logistics 6.0 1.8
Container Corporation of India 6.0 1.8
Textile 6.0 1.8
Arvind 6.0 1.8
Total 100.0 30.0
Midcap share in diversified 30
TOTAL 100 0 100.0
51
Performance* so far since inception
*Returns (in %) as on Dec 18, 2017
Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio
Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination
of BSE Sensex and CNX Midcap
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: June 30, 2011; *Value as on Dec 18, 2017
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager December 2017
117.5787761
352.1380188
168.5689601
95.39454915
161.059619
108.1541373
0255075
100125150175200225250275300325350375
Large Cap Midcap Diversified
%
80
00
00
0
80
00
00
0
80
00
00
0
11
59
04
22
.66
13
29
25
05
.43
10
54
30
26
.27
13
64
18
08
.68
11
58
17
57
.22
3500000
4500000
5500000
6500000
7500000
8500000
Largecap Midcap Divesified
QUIZ TIME
1. ______________ is a key element of establishing a successful financial plan.
2. Young investors should prioritize _____________ over provident funds for tax saving.
3. Entire amount paid towards insurance premiums cannot be deducted while calculating taxable income.True/ false
4. __________________ offers investor the liberty to allocate his money across three asset classes based on his risk profile.
5. Parents of children pursuing higher studies can claim deduction only on the __________ paid on education loan.
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 November2017 quiz are:
1. The smaller the exposure of risk, the _______________ insurance premium payable. A. Higher
2. The benefit of no claim bonus can only be availed in the form of bonus on sum assured. True/FalseA. False
3. __________ are the unique insurance products offering market-linked returnsalong with life cover.A. ULIP
4. The facility where the insured bears a certain percentage of the claim amount and the rest is paid by the insurance company is called as _______________ .A. Co-payment
5. Every vehicle in public space in India has to have ___________ as per IRDA guidelines.A. third party insurance
52ICICIdirect Money Manager December 2017
53
PRIME NUMBERS
Equity Markets
ICICIdirect Money Manager December 2017
Domestic Equity Indices
Global Equity Indices
Sectoral Indices
30-Nov-17 31-Oct-17 Change (%)
CNX Nifty 10227.0 10335.0 -1.0%
CNX Midcap 19895.2 19578.4 1.6%
S&P BSE Sensex 33149.4 33213.1 -0.2%
S&P BSE 100 10705.4 10776.5 -0.7%
S&P BSE 200 4527.4 4541.3 -0.3%
S&P BSE 500 14,493.6 14,485.6 0.1%
30-Nov-17 31-Oct-17 Change (%)
Dow Jones 24,272.4 23,377.2 3.8%
S&P 500 2,647.6 2,575.3 2.8%
Nasdaq 6,874.0 6,727.7 2.2%
FTSE 7,326.7 7,493.1 -2.2%
DAX 13,024.0 13,229.6 -1.6%
CAC 40 5,372.8 5,503.3 -2.4%
Nikkei 22,725.0 22,011.6 3.2%
Hang Seng 29,177.4 28,245.5 3.3%
Shanghai Composite 3,317.2 3,393.3 -2.2%
Taiwan Weighted 10,560.4 10,793.8 -2.2%
Straits Times 3,433.5 3,374.1 1.8%
30-Nov-17 31-Oct-17 Change (%)
S&P BSE Auto 25,205.4 25,414.8 -0.8%
S&P BSE Bankex 28,631.4 28,284.0 1.2%
S&P BSE FMCG 10,321.2 10,263.7 0.6%
S&P BSE Healthcare 13,990.3 14,281.6 -2.0%
S&P BSE Metals 13,902.3 14,730.3 -5.6%
S&P BSE Oil & Gas 15,927.9 16,552.4 -3.8%
S&P BSE Power 2,320.7 2,349.2 -1.2%
S&P BSE Realty 2,445.7 2,301.3 6.3%
S&P BSE Teck 6,080.6 5,974.7 1.8%
54
PRIME NUMBERS
ICICIdirect Money Manager December 2017
Debt Markets
Government Securities (G-Sec) Yields (in %) Nov-17 Oct-17 Change (bps)
Corporate Bond Yields (in %) Nov-17 Oct-17 Change (bps)
Commercial Paper (CP) Rates (in %) Nov-17 Oct-17 Change (bps)
Treasury Bill (T-Bills) Yields (in %) Nov-17 Oct-17 Change (bps)
Volatility Index (VIX)
30-Nov-17 30-Oct-17 Change (%)
VIX 13.55 12.44 0%
10 year 7.05 6.86 19
5 year 6.90 6.75 15
3 year 6.59 6.48 11
1 year 6.20 6.17 3
AAA 10 year 7.91 7.79 12
AAA 5 year 7.37 7.18 18
AAA 3 year 7.29 7.24 5
AAA 1 year 6.93 6.92 1
AA 10 year 8.34 8.21 14
AA 5 year 8.00 7.93 7
AA 3 year 7.76 7.63 13
AA 1 year 7.37 7.32 5
12 Months 7.19 7.13 6
6 Months 7.00 6.97 3
3 Months 6.80 6.79 1
1 Month 6.58 6.55 3
91D TB 6.12 6.10 2
182D TB 6.22 6.19 4
364D TB 6.27 6.23 4
55
PRIME NUMBERS
10-year benchmark yields (%) across countries
ICICIdirect Money Manager December 2017
Macro-economic Indicators
Consumer price index (CPI)
Wholesale price index (WPI)Month
*WPI numbers are based on new series with 2011-12 as the base year'
Countries 30-Nov-17 30-Oct-17 Change in bps
US 2.410 2.379 3
UK 1.330 1.332 (0)
Japan 0.039 0.071 (3)
Spain 1.438 1.453 (2)
Germany 0.367 0.363 0
France 0.680 0.753 (7)
Italy 1.748 1.827 (8)
Brazil 10.364 9.877 49
China 3.917 3.894 2
India 7.059 6.862 20
MF Investment Nov-17 Oct-17 YTD
Equity 12080 9990 110238
Debt 41978 29088 362128
FII Investment Nov-17 Oct-17 YTD
Equity 19180 1923 57632
Debt -1426 17961 146049
Items Weights(%) Sep-17 Oct-17 Nov-17
Food&bev. 45.86 1.76 2.26 4.41
Pan,tob& intox. 2.38 6.95 6.84 7.75
Cloth & Foot 6.53 4.63 4.76 4.96
Housing 10.07 6.10 6.68 7.36
Fuel & light 6.84 5.56 6.44 7.92
Misc. 28.31 3.83 3.57 3.63
CPI 100 3.36 3.58 4.88
Weights Sep-17 Oct-17 Nov-17WPI 100.0 3.14 3.59 3.93Primary Articles 22.6 0.69 3.33 5.28Fuel & Power 13.2 10.46 10.52 8.82Manufactured Goods 64.2 2.99 2.62 2.61
56
PRIME NUMBERS
Commodities
Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com Research
ICICIdirect Money Manager December 2017
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 November 30, 2017
Debt Funds Returns (in %)
Returns as on November 30, 2017
Tenure Liquid Funds
Index of industrial production (IIP) Sector-wise growth rate (%)
Currencies and CommoditiesCurrencies
*IIP numbers are based on new series with 2011-12 as the base year'
Debt ST Ultra ST Debt LT
Categories 30-Sep-17 30-Aug-17 30-Jul-17 Weight(%)Mining 2.2 0.1 -6.5 14.4Manufacturing 1.5 3.9 -1.2 77.6Electricity -3.2 2.3 3.1 8.0Overall 1.2 3.2 -1.3 100.0
30-Nov-17 30-Oct-17 Change (%) StatusUSDINR 64.5 64.9 -0.6% AppreciatedEURINR 76.3 75.5 1.1% DepreciatedGBPINR 86.6 85.5 1.3% DepreciatedAUDINR 48.8 49.7 -2.0% AppreciatedCHFINR 65.4 65.0 0.6% DepreciatedJPYINR 0.6 0.6 0.6% DepreciatedCNYINR 9.8 9.8 0.0% Appreciated
30-Nov-17 30-Oct-17 Change (%)Crude ($/barrel) 62.8 60.6 3.5%Gold ($/ounce) 1,274.9 1,276.4 -0.1%
6 months 11.40 16.20 8.13 11.571 year 29.28 37.16 25.91 29.623 year 12.26 18.48 9.13 12.105 year 17.95 25.35 14.83 17.66
6 months 6.22 6.64 6.76 5.50
1 year 6.18 5.62 6.32 3.16
3 year 7.22 8.12 7.83 8.21