ICICI December 18 Issuecontent.icicidirect.com/MoneyManagerMagazine/December_2018.pdf · medical emergency but also helps save tax under Section 80D. Taxes on tuition fees of children

Shilpa KumarMD & CEO

ICICI Securities Ltd.

Our tax saving provisions are

defined not just to save taxes but

make long term investments that

can help meet our life goals.

However it is easy to overlook the

financial planning aspect in tax

planning while investing in tax

saving instruments.

It 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.

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 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.

ICICIdirect Money Manager December 20181

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 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. It is

equally important to factor in your risk appetite and time horizon to

achieve the goal before investing in tax efficient plans.

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 noninvestment related instruments like charity and

donations.

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.

I also take this opportunity to wish you and your family a Happy New

Year 2019. 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.

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


Editor & Publisher : Abhishake Mathur, CFA

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

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

2

Tax planning is an integral part of our overall financial planning. All our

investments, including tax-saving ones, need to reflect our long-term

investment plans. This means to have a financial goal first and then decide

an asset allocation strategy. Once you know how much to invest in an

asset class, start with investing into the most tax-efficient product. By

developing and implementing appropriate investment strategies, we can

improve our prospects of saving taxes as well as meeting our financial

goals. Our cover story of this edition handholds you through the aspects

of efficient tax planning.

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 lakh and accumulate

retirement corpus. 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.

The nature of your tax-efficient portfolio primarily 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.

This, edition also comprises of an interview held with the team of H&R

Block that will be an add-on guide while you plan your tax saving

instruments.

Further, 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.

Team ICICIdirect Money Manager wishes you a happy and prosperous

New Year.


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

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

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

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

Stock ideas: Petronet LNG and The Phoenix Mills

Flavour of the Month: Be prepared for this Tax Season

Very often we take tax planning for granted, though the tax filing

happens once a year we do tax planning last min. Most of us

have tax planning but an effective tax plan could help in reducing

your taxes much more. This edition will ensure you are known to

every tax saving instruments that can help youdesign your

income tax. Learn more……...............................................................14

Tête-à-tête

An interview held with the team of H&R Block India (Pvt) Ltd,

giving their insights on tax planning which will help you have an

effective plan this tax season..............................................................23

Ask Our Planner

Our financial expert answers your personal finance queries …........27

Mutual Fund Analysis

Which are the top performing mutual funds in current market

scenario? Check these top pharma funds recommended by our

research team.......................................................................................34

This month on iCommunity

Take a look at the latest activities on our unique information

platform- iCommunity (for December 2018) ...................................... 4 7

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

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

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


Half of India's ATMs may shut down by March; here's why

Nearly 50 per cent of the Automated Teller Machines (ATMs) in India may be shut down

by March 2019 due to unviability of operations, hitting hard both urban and rural

population, the Confederation of ATM Industry (CATMi) warned on 21st November.

"This would severely impact millions of beneficiaries under the Pradhan Mantri Jan

Dhan Yojana who withdraw subsidies in the form of cash through ATMs, besides urban

centres, resulting in snaky queues and chaos akin to post-demonetisation," said the

spokesperson. He said the CATMi step is forced on account of recent regulatory

guidelines for ATMs hardware and software upgrades, recent mandates on cash

management standards and the Cassette Swap method of loading cash.

Courtesy: Financial Express

Shaktikanta Das appointed as the new RBI Governor

Former economic affairs secretary Shaktikanta Das was named the 25th governor of

the Reserve Bank of India (RBI) to succeed Urjit Patel, who quit abruptly on 10th

December amid a bitter dispute over the regulator's autonomy. The appointment will

be for three years. It has been seeking a special liquidity window for nonbanking

finance companies (NBFCs) that lend to small and medium enterprises (SMEs) and

create jobs in smaller towns. Finance Minister Arun Jaitley told ET in an interview

10th December that while overall liquidity may have improved, some sectors still

face issues.

Courtesy: Economic Times

Provident Fund alert! EPF withdrawal before retirement capped at 75%

A jobless Employees' Provident Fund (EPF) subscriber who hasn't crossed the

retirement age (60 years) will now be able to withdraw only up to 75% of the

accumulated EPF deposits, as against 100% earlier. A month without a job will make a

subscriber eligible to withdraw the deposits. Earlier, pre-retirement withdrawal of EPF

funds required the subscriber to be without job for a continuous period of two months.

EPF scheme does not have provision for advance to members during such kind of non-

employment and the scheme allows only full and final settlement. This compels

members to withdraw entire amount at the cost of their social security.

Courtesy: Financial Express

Cocktail of fears set to make 2019 worse

Rising interest rates around the globe combined with tensions over geopolitics and

trade mean that the start of 2019 in markets might look just as volatile and turbulent as

this year. "Mixed signals from the global economy and the gradual, yet persistent,

tightening of financial conditions triggered the market repricing. Protracted trade

tensions and heightened political uncertainty added to the flight to safety," said Claudio

Borio, the Head of the Monetary and Economic Department at BIS. That misery, sadly,

looks set to continue, with rising inflation, the continued swell of the leveraged loan

market in the US, and a weak European banking sector all set to push markets sharply

lower as 2019 arrives.

Courtesy: Economic Times

STOCK IDEAS


Petronet LNG – Key beneficiary of increasing gas demand…

Company Background

Petronet LNG Ltd, India's

premier company in the

hydrocarbon sector, was set

up by the Government of India

to meet the increasing demand

for natural gas and enhance

the energy security of the

country. Petronet LNG was

incorporated on April 2, 1998

to import LNG and set up LNG

terminals in the country.

Petronet LNG is a joint venture

between GAIL, ONGC, IOC and

BPCL, with each of them

having a 12.5% stake in the

company. Pe t rone t LNG

commissioned India's first LNG

receiving and regasification

terminal at Dahej with a

capacity of 5 mmtpa in April

2004. Currently, Petronet LNG

has regasification capacity of

20 mmtpa; 15 mmtpa in Dahej

and 5 mmtpa in Kochi.

Investment RationaleVolume outlook remains positive Petronet LNG is the beneficiary

of increasing gas demand in

India. With subdued domestic

p roduc t ion , Ind ia ' s LNG

demand has continued to

increase over the last 4-5 years

and Petronet LNG has captured

the opportunity with increase

in volumes from ~500 trillion

british thermal unit (tbtu) in

FY14 to ~850 tbtu in FY18.

With increasing gas demand

from City Gas Distribution,

Fertilisers & Industrial sectors,

etc over the next few years, we

expect Petronet LNG volumes

will continue to grow at steady

pace. We estimate total LNG

volumes of 874.6 tbtu and

948.8 tbtu for FY19E and

FY20E, respectively.

Ramp up in Kochi utilisation &

Increase in Dahej capacity the key

Petronet's Kochi terminal, which is currently under-u t i l i sed (~10% capac i ty utilisation) on account of lack of pipeline connectivity, is expected to witness upside in i t s u t i l i s a t i o n p o s t t h e c o m p l e t i o n o f K o c h i -Mangalore p ipel ine. The execution of the pipeline is


STOCK IDEAS

6

currently under way and the entire stretch is expected to be completed by March 2019. Going forward, the company could receive additional 1–1.5 mmtpa of gas when the pipeline work gets completed. With regards to Dahej terminal, it is booked for 7.5 MMTPA under RasGas long term volumes while an additional 8.25 MMTPA is booked as regasification capacity, taking the count to more than the current nameplate capacity of 15 MMT. On the capacity expansion front, the company expects 2.5 mmtpa Dahej terminal's expansion to get completed by June 2019, which will add to incremental volumes. On the profitability front, we estimate blended margins wil l continue to

remain healthy at 48/mmbtu, `` 50.7/mmbtu in FY19E and FY20E, respectively from `46.1/mmbtu in Fy18.

Primary LNG play in India

Pe t r o n e t L N G p r o v i d e s comfort on the business m o d e l a n d r e m a i n s a structural story of India's increasing gas demand. With I n d i a c o n t i n u i n g t o b e significantly short of natural gas supply, Petronet LNG will benefit as the primary play on increasing usage of LNG. In the long term, we expect volumes to show stable growth and c o n t r i b u t e t o h i g h e r profitability. We value Petronet LNG at 16x FY20E EPS of 17.2 `to arrive at a price target of `275 with a BUY rating.

Key Financials

` crore FY17 FY18 FY19E FY20E

Net Sales 24,616.0 30,598.6 41,796.8 46,841.7

EBITDA 2,592.3 3,312.4 3,533.0 4,119.8

PAT 1,705.7 2,077.9 2,200.5 2,580.9

EPS (`) 11.4 13.9 14.7 17.2


STOCK IDEAS

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Stock Data

Valuations Summary

FY17 FY18 FY19E FY20E

P/E 18.5 15.2 14.3 12.2

Target P/E 24.2 19.9 18.7 16.0

EV / EBITDA 12.9 9.7 9.0 7.3

P/BV 3.9 3.2 3.1 2.7

RoNW (%) 21.1 21.4 21.7 22.1

RoCE (%) 21.4 25.9 28.7 31.5

Particular Amount

Market Capitalization (` Crore) 31,500.0

Total Debt (FY18) (` Crore) 1,496.6

Cash and Investments (FY18) (` Crore) 862.5

EV (` Crore) 32,134.1

52 week H/L 260/202

Equity capital (` Crore) 750.0

Face value (`) 10.0

Key risks include:

Competitiveness of

alternative fuels

LNG competes with alternative

fuels like naphtha, fuel oil and

coal for the supply of fuel to

end-user industr ies l i ke

fertilisers, power, refineries,

etc. A reduction in the price of

alternative fuels could lead to

better competitiveness of

these fuels. This may have an

adverse impact on the future

volumes and profitability of

the company.

Regulatory risk

Currently, Petronet LNG's

regasification charges are

beyond the purview of the

regulator. Any regulatory

change on regasif ication

charges or returns front would

adversely impact Petronet

L N G ' s p r o f i t a b i l i t y a n d

valuations.


STOCK IDEAS

8

ANALYST CERTIFICATION We /I, Mayur Matani, 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 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 Limited Sebi Registration is INZ000183631 for stock broker. 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 financialinstruments. 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 Mayur Matani, 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 Mayur Matani, 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 securitiesdescribed 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.


STOCK IDEAS

9

The Phoenix Mills Ltd. – Quasi play on retail growth story!!!

Company Background

Headquartered in Mumbai,

Phoenix Mills (PML) is a market

leader and an active owner,

developer and manager of

prime retail assets in key Indian

cities. Established in 1905,

PML began operations as a

t e x t i l e m a n u f a c t u r i n g

company in Mumbai and got

listed on the BSE in 1959. Later

on, PML exited its textile

business and forayed into the

real estate sector with its iconic

High Street Phoenix (HSP) mall

in Mumbai in 1996. Since then,

the company has grown its

a s s e t p o r t f o l i o a c r o s s

segments like retail (malls),

residential, commercial &

hospitality, thus diversifying its

product portfolio. PML has a

unique city-centric retail-led

mixed-use deve lopment

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

profitability and growth of its

business. Such a model has

enabled PML to cross-sell its

se rv i ces . Cur ren t l y, the

company has a gross asset

portfolio of 17.5 million square

feet (msf)

Investment Rationale

Retail assets to double over

the next 4-5 years; rental

income to grow 14.4% CAGR

in FY18-23E

PML enjoys a quality retail

a sse t po r t fo l i o o f e igh t

operational assets across top

cities aggregating 5.9 msf.

What makes it a unique player

in this space is that it not only

leases space to retailers in its

malls but also participates

with retailers over the entire

life-cycle of malls. PML enters

into lease agreements as per

which, retailers need to pay a

minimum guarantee (MG) rent

or revenue share (percentage

of consumption), whichever is

higher to PML. The company

generated rental income of `

867.8 crore in FY18. It plans to

double its retail portfolio to

10.6 msf over next four to five

years leading to next leg of

growth. Hence, we expect

rental income to grow at 14.4%

CAGR to 1702.4 crore in `

FY18-23E.


STOCK IDEAS

10

Commercial portfolio to grow to ~3 msf

PML has four operational commercial assets (GLA: 1.16 msf). Also, it has two under construction assets at Pune, Chennai with GLA of 1.12 msf. a n d p l a n s t o d e v e l o p commercial asset at PMC Hebbal with GLA of 0.65 msf. These expansions would augment PML's commercial portfolio to ~3 msf in next four to five years. Once operational, we expect the commercial portfolio rentals to grow at 23.5% CAGR to 223.4 crore in `FY18-24E.

Current valuations do not factor-in value for expansion portfolio; recommend BUY…

At the CMP, PML is trading at 13.6x FY20E EV/EBITDA. Going ahead, expansion of its retail and commercial assets would lead its next leg of growth. Given the asset-light nature of expansion, we also

expect the balance sheet to remain lean. While its retail & commercial portfolio are set to double, it would take four to five years for this expansion to be completed. Hence, we expect revenues to grow moderately at 10.4% CAGR to ` 1973.1 crore in FY18-20E. This growth would improve significantly, once all assets become operational. EBITDA margins are expected to improve from 48.0% in FY18 to 50.4% in FY20E on the back of a margin revival in the retail division. Consequently, we expect the bottomline to grow robustly at 15.5% CAGR to `323.2 crore in FY18-20E. In our view, PML's current valuation reflects only operational retail & commercial asset valuation and does not assign any value to its expansion portfolio (~24% of our valuation). H e n c e , w e h a v e a B U Y recommendation on the stock with SOTP-based TP of `775/share


STOCK IDEAS

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Key Financials

Valuations Summary

Stock Data

` Crore FY18 FY19E FY20E FY21E

Revenue 1,620 1,713 1,973 2,228

EBITDA 777 853 994 1,134

Net Profit 242 252 323 413

EPS (`) 15.8 16.5 21.1 27.0

(x) FY18 FY19E FY20E FY21E

P/E 37.6 36.1 28.2 22.0

Target P/E 49.0 47.1 36.8 28.7

EV / EBITDA 15.9 15.5 13.6 12.1

P/BV 3.2 2.5 2.3 2.1

RoNW (%) 8.5 7.0 8.2 9.4

RoCE (%) 8.6 7.8 8.5 9.1

Particular

Market Capitalization (` Crore) 9,096.6

Total Debt (` Crore) 4,012.1

Cash and Investments (` Crore) 44.9

EV (` Crore) 13,063.8

52 week H/L (`) 725 / 492

Equity capital 30.6

Face value (`) ` 2

Key risks include:

Failure to generate sufficient footfalls at malls

PML is expanding its retail portfolio aggressively where it is increasing from 6 msf to 10.6 msf. However, with multiple malls in same cit ies and increasing competition from other malls operating in the neighbourhood, footfalls may

get impacted. Also, with higher competition and aggressive e x p a n s i o n b y p e e r s , occupancy could also take a hit or renta ls may fa l l w i th oversupply in a particular area. If PML is unable to generate enough footfalls or attract reasonable rentals, it would impact its entire investment in the expansion of its retail business.


STOCK IDEAS

12

November

Delay in execution of new projects to hinder growth

P M L i s g o i n g t h r o u g h significant expansion in its r e t a i l a n d c o m m e r c i a l portfolio, which would drive its n e x t p h a s e o f g r o w t h . H o w e v e r, a n y d e l a y i n execution of these projects would not only lead to cost escalations but also hamper PML's next leg of growth.

Rise in interest rates

Currently, the cost of debt for

PML is at ~9%. However, with

every 1% increase in interest

rates, profitability would be

i m p a c t e d b y 8 - 1 0 % .

Furthermore, it would not only

impact profitability as interest

rates would a lso have a

bearing on WACC and cap rate,

which would ultimately impact

the valuations of assets. We

have also run the sensitivity of

WACC and cap rate on PML.

For every 1% change in cap

rate & WACC, it would impact

our fair value by 11-15%

ANALYST CERTIFICATION We /I, Deepak Purswani, CFA MBA (Finance), Harsh Pathak, MBA (Finance); Research Analysts, authors and the names subscribed to this report,

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

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

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock

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

INH000000990. ICICI Securities Limited Sebi Registration is INZ000183631 for stock broker. 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


STOCK IDEAS

13

November

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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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 Deepak Purswani, CFA MBA (Finance), Harsh Pathak, MBA (Finance); 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 Deepak Purswani, CFA MBA (Finance), Harsh Pathak, MBA (Finance); Research Analysts do not serve as an officer,

director or employee of the companies mentioned in the report.

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this report.

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Analysis activities.

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document may come are required to inform themselves of and to observe such restriction.

FLAVOUR OF THE MONTH


Be prepared for Tax Season: Everything you need to know to plan your taxes.

In a recent poll that we conducted it was heartening to learn that over 70 per cent

of our customers plan for their taxes at the beginning of the year or through the

year. Tax planning is an important part of overall financial planning and should not

be started towards the last few months before filing returns.

And more so because our tax system is not only designed to help us reduce taxes

but in turn also help achieve our life goals. Just name a goal you have in life and

there is an appropriate investment for it which will also help you save taxes.

Need for tax planning:

The main advantage of having

a tax plan helps to inculcate

ways to investments, where

different schemes enable your

money to grow as well as be

protected till your retirement.

At every life stage there are tax

saving instruments available

like every age as its advantage

inves tments fo r equ i t y -

oriented tax saving schemes

and debt-oriented tax savings

schemes like ELSS, ULIP, PPF,

NPS, etc. Likewise there are

insurance products like health

insurance and life insurance,

etc. and retirement products

for senior namely senior citizen

saving schemes and Bank FDs,

etc.

Tax slabs:

The income tax s labs is

applicable to the assessment

year is 2019-20. The tax

charged are as per the ages, its

income and accordingly the

tax slabs is designed.

Individual and HUF(less than 60 years)

Income tax slabs Income Tax rate and Cess

upto 2,50,000 Nil

2,50,001-5,00,000 5%(Total income-2,50,000)

5,00,001-10,00,000

12,500+20%(Total income-

5,00,000)

10,00,001 and above

1,12,500+30%(Total income-

10,00,000)



Senior Citizen(between 60-80 years)


upto 3,00,000 Nil

3,00,001-5,00,000 5%(Total income-3,00,000)

5,00,001-10,00,000

10,000+20%(Total income-

5,00,000)

10,00,001 and above


10,00,000)

Super Senior Citizen (above 80 years)


upto 5,00,000 Nil

5,00,001 -10,00,000 20%(Total income-5,00,000)

10,00,001 and above


10,00,000)

Note:· The education cess applied here is 4%.· Surcharge of 10% on income ranging Rs. 50 lakhs and below 1 crore and 15% on the income above Rs. 1 Crore.· NRIs tax slab is same as the Individuals tax slab.

As per the above tax slabs you will need to pay taxes for your incomes. In order to avoid paying off such taxes the best way is to save those taxes with a few tools that comes under section 80 of the Income Tax Act.

Tax Terminology: Previous year: refers to the period where the tax has to be paid. Financial year: refers to the period you are earning your incomes.Assessment year: refers to the following year in which the income is assessed and taxed.

st st(Here, currently 1 April 2017-31 March 2018 is my previous st st st

year, 1 April 2018-31 March 2019 is my financial year and 1



stApril 2019-31 March 2020 is my assessment year)Deductions: the amount subtracted from the tax to be paid. (Tax deducted)Exemptions: excluding certain incomes that is exempt from tax. (Tax free)

Tax Saving Investments:There are various schemes that can be availed to avoid or reduce the tax. Specifically, section 80 will be or is the best tool to be used to save on tax.

Below are the types of section 80 that gives you tax benefit. The most often used section is 80C that is commonly used by the tax payers.

Section 80 deduction the tax amour:

Eligible deduction available under section 80C:

Investments Interest or

return

Investment

amount

(Rs.)

Lock-in

period

Feature

Fixed Deposits

(FDs)

Rate fixed

by the

bank

Min: 1,000

Max: No

Limit

5 years Interest earned is taxable as per

the tax slabs. Income below the

slab need to submit 15G or 15H

form to avail tax benefit.

Public Provident

Fund(PPF)

8%(as per

quarter

Oct-Dec

’18)

Min: 500

Max:

1,50,000

15 years

Principal and interest are tax -

free

National

Savings

Schemes(NSC)

8%(as per

quarter

Oct-Dec

’18)

Min: 100

Max: No

Limit

5 years

Interest is taxable but tax free

within the lock-in period.

Equity-linked

savings

schemes(ELSS)

No fixed

returns Min: 500

Max: No

Limit

3 years Gains received more than 1 lakh

would be taxed at 10% without

any indexation benefits.

National

Pension System

(NPS)

No fixed

returns

Min: 500 –

Tier I; 1,000

–

Tier II

Max: No

Limit

Till

Retireme

nt

Tax free

and regular monthly

income streams after

retirement.

The withdrawal is

made 100% tax free.



Senior Citizen

Savings

Scheme(SCSS)

8.7%

Min: 1,000

Max:

15,00,000

5 years

Availed only to senior citizen

(55-60 plus). Maturity amount is

tax free

and account can be

extended for 3 years . Interest is

charged

if the amount is above

Rs. 10,000 p.a.

Unit-linked

Insurance

Plans(ULIPs)

No fixed

returns

Depends on

the plan

5 years The surrender value will be tax

free post lock in period but if it is

surrendered before the lock in

period then it gets added to yourincome, tax to be paid accordingto your tax slab.

Life Insurance No fixed

returns

Depends on

the plan

Till the

maturity

Tax-free on maturity sum

subject to certain conditions.

Premium should not exceed

15% of the sum assured.

EPF 8.55%(as

per quarter

Oct-Dec

’18)

Up to 12%

of basic

salary by

employee

and

employer +

D.A.

5 years

Tax-free on maturity sum.

Sukanya

Samriddhi

Yojana

8.50%(as

per quarter

Oct-Dec

’18)

Min: 1,000 Max: 1,50

,000

21 years

from the

account

opening

Availed only to girl child until

age 10 . Maturity amount is tax

free.

Partial withdrawal up to

50% can be availed by the girl

when she turns

18 years.

Tuition Fees

nil

nil

nil

Eligible for 2 children. Payment

made to school, college, and

institute. No development or

donation will be counted here.

· The eligibility deduction under section 80C comprises up to Rs. 1,50,000

Section 80CCC:

The deduction is the premiums

paid on Annuity Plan of LIC and

other insurers. It's a plan stated

under Section 10(23AAB)

where the person receives

pension from that fund. Here,

the pension received is from

annuity, amount received upon

surrender of the annuity,

including interest or bonus

accrued on the annuity, is

taxable in the year of receipt.

Section 80CCD:

This section comprises of

contribution made by the



individual income tax assesses

towards the National Pension

Scheme (NPS) and A ta l

Pension Yojana (APY).

Tax benefit for Salaried

An employee is eligible for tax

deduction up to 10% of (Basic

Salary +DA) under Section 80

CCD(1) within the overall

ceiling of Rs. 1,50,000 under

Sec 80 CCE with additional tax

deduction up to Rs. 50,000

under Section 80CCD(1B)

Tax benefit for Self-employed

Self-employed is eligible for

tax deduction up to 20 % of

gross income under Sec 80

CCD (1) within the overall

ceiling of Rs. 1,50,000 under

Sec 80 CCE with additional tax

deduction up to Rs. 50,000

under Section 80CCD(1B)

Employer's contribution to an

individual's account under

National Pension Scheme for

an amount up to 10% of (basic

salary + DA) is eligible for

deduction. This deduction is

over and above the limit of Rs.

150,000.

Note: The limit for aggregate of

deductions available under

sections 80C, 80CCC and

8 0 C C D ( i n d i v i d u a l ' s

contribution to NPS account) is

Rs. 1, 50,000/-

Section 80CCG:

This section is related to the

investments made on equity

saving schemes, where the

deduction is based on 50% of

the amount invested in the

equity shares and a maximum

o f R s . 2 5 , 0 0 0 a n n u a l

exemption is allowed for the

investors. However, at least 3

y e a r s l o c k i n p e r i o d o f

investment should be made

from the date of scheme

acquisition. This deduction is

available for the assesses who

have acquired listed equity

shares or listed units of an

equity oriented fund with

respect to the Rajiv Gandhi

Equity Savings Schemes.

Assesse has to be a resident

individual and should have a

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

exceeding Rs. 12 lakhs.

Section 80D:

This section allows the tax

payer exempt ion on the

premiums paid for Medical

Insurance. Accordingly it is

extended to the dependents

and parents. The maximum

limit of deduction under this



section is Rs. 30,000/- for

senior citizens and upto Rs.

2 5 , 0 0 0 / f o r o t h e r s . T h e

premium should be paid for

hea l th insurance o f the

ind iv idua l o r h i s f ami ly

members.

E x p e n s e s i n c u r r e d o n

preventive health check-up for

se l f, spouse, dependent

children / parents are also

deductible within the overall

limit of Rs. 30,000 for Senior

citizen and Rs. 25,000 for other

than senior citizen, However

total deduction for expenditure

on preventive health check-up

is restricted to Rs. 5,000.

Also any payment made on

a c c o u n t o f m e d i c a l

expenditure in respect of a

very senior citizen (80 years or

more), if no payment has been

made to keep in force an

insurance on the health of such

person, as does not exceed

thirty thousand rupees shall be

allowed as deduction.

Section 80E:

This section has deduction in

respect of Interest on Loan for

H i g h e r S t u d i e s . H e r e ,

deduction is allowed only for

the interest on loan taken for

h i g h e r e d u c a t i o n o f

self/spouse or child. The loan

shou ld be taken f rom a

financial institution or an

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

organization.

Capital Gains:

Capital gains is referred to the

sale of the non-inventory asset

that is the profit earned on the

sale. This could be sale of

stocks, bonds, precious metal,

property, etc. normally there is

a rate of tax charged on these

gains but if you reinvest or

invest in government NHAI

bond it could reduce the capital

gains up to 50 lakh that enables

you to save tax on capital

gains.

STCG (Short term capital

gains):

The gains that you hold less

than a year to 3 years is termed

as the short term capital gains.

About 15% + 4% cess is the

tax rate charged on the short

term capital gains. If you fall

under the 10% tax bracket you

need to pay more than the

individual but if you fall under

the 20-30% tax bracket 15%

rate is beneficial.



LTCG (long term capital

gains):

It comprises of capital assets

( s t o c k s , b o n d s , l a n d ,

residential property, etc.) sold

after 3years from the date it's

acquired, the profits earned

from the sale of those assets is

termed to be long term capital

gains.

As per the Union Budget, the

s a l e o n t h e s e c u r i t i e s

exceeding Rs. 1 lakh has a tax

implication of 10% on it.

Instead of 36 months, it is

r e d u c e d t o 1 2 m o n t h s

considered as a period for

holding Equity shares which

are listed on the recognized

stock exchange, units of equity

oriented mutual funds, listed

debentures and government

securities, units of UTI and

Zero Coupon Bonds, etc.

On Debt oriented Funds, Gold

ETFs and Gold Funds, Bullion,

Jewelry and Real Estate about

20% is the indexation charged.

Alok, aged 35, is working in a

private sector firm in Delhi.

His family includes his wife

(aged 33, and home maker)

and 2 kids. Alok's parents,

who are senior citizens, also

stay with him. Alok's father is a

retired banker from a private

sector bank and mother is a

home maker.

Alok 's salary detai ls are

provided below. Alok has

been paying a total tax of

Rs.1.83 lakh. He wants to

know if there's a scope of

reducing the tax outgo.

Particulars

Monthly

Annual

Basic Salary

50,000

600,000

House Rent Allowance 25,000 300,000

Professional Allowance 40,000 480,000

Leave Travel Allowance 5,000 60,000

Medical Reimbursement 1,250 15,000

Travel Allowance 1,600 19,200

Annual Bonus

400,000

Total Income 1,874,200



Currently, Alok is claiming below deductions:

Total Income

1,874,200

Less:

HRA exemption & professional tax 272,500

Less: Standard Deduction

(applicable from FY 2018-19) 40,000

Less: S.80C deductions 150,000

1) EPF contribution 72,000 2) Home Loan principal payment 86,000

Less:

S.24(b) deduction -

Int. on home loan

200,000

Taxable Income 1,211,700

And, his tax outgo currently is:

Income slab

Tax Rate

Amount

Upto 2.5 lakh

0%

0

2.5 to 5 lakh 5% 12,500

5 to 10 lakh 20% 100,000

Above 10 lakh 30% 63,510

Total 176,010

Cess

4%

7,040

Total tax to be paid incl. cess 183,050

Suggestion:

Alok can look at the below options to save some more tax:

1) If Alok travels on a holiday individually / with family within India, he can claim deduction for the travel cost, subject to the maximum amount of Leave Travel Allowance being paid to him. This can be claimed in two years in every block of four years (the current block is 2018-2021). Let's assume if he has traveled and incurred cost of Rs.48, 000 on air tickets; this can be claimed as deduction.

2) Alok can also consider investing into National Pension Scheme (NPS) towards retirement. He can claim a deduction of upto Rs.50, 000 under Section 80CCD (1B), over and above Section 80C. With the Government now announcing tax exemption on the entire lumpsum amount of 60% to be received at maturity, this investment looks a good option for retirement.

3) If Alok has not availed medical insurance for self & immediate family and relying only on employer cover, it's better to take one



separately now. If medical cover is taken at a later age, it could prove costly or he might not get, if he has any disorder at that age. Let's assume he takes a Rs.5 lakh cover for an annual premium of Rs.20, 000. He can avail deduction under Section 80D for the premium upto Rs.25, 000; which also includes health checkup expenditure of Rs.5, 000. This also can be used by Alok to complete his annual health check-up and claim a further deduction of Rs.5, 000.

4) Alok can also consider taking medical insurance for his parents who are senior citizens, to cover against any medical emergencies. Let's assume he takes a Rs.5 lakh cover for an annual premium of Rs.35, 000. Alok can avail deduction under Section 80D for the premium upto Rs.50, 000 for senior citizens; which also includes health checkup expenditure of Rs.5, 000. This also can be used by Alok to complete his parents' annual health check-up and claim a further deduction of Rs.5, 000.

With the above steps, Alok can claim deductions & save tax further upto:

Deduction Amount

Leave Travel Allowance

48,000

S.80CCD (1B) -

NPS

50,000

S.80D -

Medical insurance - Self

20,000

S.80D - Health checkup - Self 5,000

S.80D - Medical insurance - Parents 35,000

S.80D -

Health checkup -

Parents

5,000

Total Deductions-Additional

163,000

Tax to be saved 50,856

Net tax to be paid now 132,194

Hence, with the above steps, Alok could save tax of Rs.50, 856 and pay only Rs.132, 194, instead of Rs.183, 050.

Summing Up:

As the above stated example

has given you a pure idea of

how effectively you can save on

tax if planned wisely. Further

that it's the most essential tool

of financial planning and delay

in preparing can damage your

earnings of investments and

o t h e r i n c o m e s o u r c e s .

Remember to not only take

measures to build the corpus

but also take measures to save

the build corpus.

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


Tête-à-tête

Reducing the tax liability by contributing to the right investments

The purpose of a tax planning is to ensure tax efficiency where all the elements of financial plan are worked out well. Planning enables to get a detailed record about your earnings and you can plan investments and expenditure accordingly. Further, an interview set with the team of H&R Block India (Pvt) Ltd, will give you a broad view of the things to be considered while planning for tax this season. Especially to make sure no income is missed out while filing tax returns and suggest to look beyond Section 80C and 80D for tax saving purpose. One of the most common used term is the Tax loss/gain harvesting, to know the concept read on….

Q. What are the factors one should

keep in mind when planning for

taxes? Can you highlight the

different investment options that

can be used for tax planning?

A. Tax planning is the analysis

of a financial situation or plan

from a tax perspective. The

purpose of tax planning is to

ensure tax efficiency. Through

tax planning, all elements of

t h e f i n a n c i a l p l a n w o r k

together in the most tax-

efficient manner possible.

Reduction of tax liability and

maximizing the abil ity to

contribute to retirement plans

are crucial for success. Tax

planning includes timing of

income, size, and timing of

purchases, and planning for

other expendi tures. Few

factors to be kept in mind are as

follows:

1. Submit tax saving proofs to

your employer on time to avoid

paying excess tax as TDS.

2. Claim your LTA is applicable.

3. Check on HRA - If you are

l i v i n g i n a r e n t e d

accommodation or living with

your parents and paying them

rent, then you can claim an

exemption from your total

taxable income,

4. Checking on the limits of

80C is not exhausted.

5. Tax free avenues like, ELSS,

SCSS PPF, EPF, ULIP, Sukanya

Samruddhi, NSC, etc.

6. Check on NPS, hea l th Insurance etc.


Tête-à-tête

Q. What are some of the mistakes we make while planning for our taxes?

A. Some common mistakes which we make while planning our taxes are as follows:

1. Health insurance should be an essential component of your tax plan

2. Failing to mention all income sources like FD interest, saving interest, etc. If you fail to mention all your credible income sources while filing returns, it is deemed as an act of concealment of income and could cause troubles later

3. Not looking beyond Section 80C and Section 80D.

4. Health insurance premium in cash: The report says, "In the last-minute rush, people often make the mistake of paying through cash and so end up paying higher tax despite buying a health policy,"

5. N o n - Ta x S a v i n g Instruments: Sometimes in rush of allocating your funds you tend to invest in such instruments where there is no tax saving. For e.g. investing in a mutual fund, like ELSS wins

as a tax saving bet over an investment in SIP in an equity fund.

a. Ignoring the expenses that are exempt. Like HRA, LTA, etc.

Q. What are the pros and cons of clubbing the incomes while filing returns of spouse and minor child?

A. Both the husband as well as the wife should take due care of the aforesaid provis ions relating to clubbing of income so that by taking care of the above clubbing provisions the income of the husband as well as the wife is not clubbed.

The biggest disadvantage of clubbing of the income of husband and wife is that the tax burden increases because the income accruing or arising to both of them are taxed as one tax entity. Hence the slab rate of tax goes up so also the exemptions and deductions get further narrowed down.

Thus, from the point of view of tax planning it is strongly recommended that one should avoid the clubbing of incomes of husband as well as the wife so as to achieve ful l tax benefits to both of them.


Tête-à-tête

Q. Can you explain about tax loss

harvesting and tax gain harvesting

in simple terms?

A. Tax loss harvesting is used

to reduce tax liability on

investments.

In tax loss harvesting, you sell

your stocks/fund units at a loss

in order to reduce your tax

liability on capital gains. It is a

method to offset the capital

gains made on equity against

the capital loss suffered to pay

lesser amount of tax.

Previously, the long-term

capital gains (LTCG) made on

sale of equity shares and

equity funds were completely

t a x- f r e e i n y o u r h a n d s .

However, the amendment

made in the union budget 2018

has totally changed the tax

treatment of LTCG on sale of

listed equity shares and equity

funds.

Beginning from 1 April 2018, LTCG made in excess of Rs 1lac will be taxed at the rate of 10% w i t h o u t t h e b e n e f i t o f indexation. Compared to that, shor t- term capi ta l ga ins (STCG) are taxed at the rate of

15%. In this case, you can employ tax loss harvesting to reduce the tax liability on both LTCG and STCG. Usually, investors use it for STCG because the tax rates on short-term capital gains are higher than that of long-term capital gains.

The basic idea behind tax-loss harvesting is that you sell i n v e s t m e n t s t h a t h a v e decreased in value and then use the losses to decrease your income taxes.

Tax gain harvesting, as o p p o s e d t o t a x - l o s s harvesting, is the process of turning unrealized long-term capital gains into realized capital gains at a specific time for tax purposes. Not found much in India yet. With tax-gain harvesting, you strategically sell winning investments in years where your tax rates are relatively lower than what you expect it will be in the future.

Q. What is the difference between an exemption and deduction under tax?

A. Income Tax is a compulsory

obligation which is levied on


Tête-à-tête

every citizen, based on their

paying capacity and age. To the

relief of the assessee from

payment of taxes, the tax law

has certain provisions for

deduction and exemptions,

which decreases the overall

tax liability. In deduction, the

amount is first included in the

income of the taxpayer and

then the deduction is allowed

as per the rules, i.e. in full or

part or when certain conditions

are satisfied. An exemption, on

the other hand, is the income

which is not charged to tax.

While deduction is a part of Gross Total Income (GTI), but any person can avail its benefit b a s e d o n a p p l i c a t i o n . Conversely, the exemption is not a part of GTI. The article provided below explains the s u b s t a n t i a l d i f f e r e n c e s b e t w e e n d e d u c t i o n a n d exemption.

BASIS FOR COMPARISON

DEDUCTION EXEMPTION

Meaning

Deduction means subtraction i.e. an amount that is eligible to reduce taxable income.

Exemption means exclusion, i.e. if certain income is exempt from tax then it will not contribute to the total income of a person.

What is it?

Concession

Relaxation

Concept

The amount o f deduction is first included in the gross income and then deducted from it to arrive at the net income.

The exempted income is not considered as a part of total income, the whole amount is an exemption for the taxpayer.

Income is Tax deductible Tax free

Objective To promote savings and investments of the general public.

To boost that particular section in which tax is exempted.

Sections Section 80 C to 80 U deals with deduction

Section 10 deals with exemptions

Allowable to Specific persons All the persons

Conditional Yes No

ASK OUR PLANNER


Can we gift a security which is a loan collateral?

Q. I have purchased bond security

and used it as collateral for loan.

Now that I want to transfer the

bond as a gift to a relative. What

happens to my loan collateral?

- Lenin Miranda

A. When you apply for a loan

by using your existing asset(s)

as collateral, a lien is created

against these asset(s) which

will remain till the time all

outs tanding l iab i l i t ies &

charges have been paid off. A

lien gives lender the right to

liquidate the security if the

borrower does not discharge

h i s o b l i g a t i o n s ( t i m e l y

payment, adhering to margin

call etc.). In this case, a lien is

created on your bond security.

The ownership of the security

remains in your name and you

are entitled to receive any

income accrued from the

security i.e. interest payouts.

But you cannot transact or

transfer the asset before

releasing the lien.

The lien can be removed once

you pay off the outstanding

loan balance by informing the

lender. Partial holdings shall be

freed in case of part payments.

Alternatively, you can request

t h e l e n d e r t o s w a p t h e

collateral wherein you provide

another asset to the lender to

create a lien on, which allows

you to transfer your existing

bond security. However, this

may mean that the amount of

loan sanctioned to you will

change depending on the

nature of security.

Q. I had brought ICICI Life stage

pension policy term 13. Years in

2008. The amount is now approx.

10 lakhs. I have been told by an

agent that if I surrender the policy,

the amount will be taxable but if I

switch to ULIP then after 5 years, if

I surrender the ULIP the amount

will be tax free. Please advice. !!

- Shashikant Kirkole

A. As per the Section 80CCC(2)

of Income Tax Act, if any

amount available in a pension

policy, in respect of which

deduction has been allowed,

together with interest or

bonus, is received on account

o f sur render, then such

ASK OUR PLANNER


amount is added to your

income and taxed as per your

i n c o m e s l a b . T h u s t h e

taxability of the redeemed

amount will be based on

whether you had availed the

80C tax benefits towards

deduction for the annual

premiums paid in the previous

years:

a) If you had availed 80C

benefits for all the premiums

paid: Entire surrender value

will be added to your income

and taxed as per the tax slab

b) If you did not avail 80C

benefits for the premiums paid

in any year: The accumulated

gains (Surrender Value less

Total Premiums Paid) will be

added to your income and

taxed as per the tax slab

The end use of surrender

proceeds does not change the

taxability. Hence, even if you

switch the surrender proceeds

to any other pol icy, the

surrender proceeds will still be

taxable as above.

On the other hand, if you hold a pension policy till its maturity, then you can withdraw a

r dmaximum of 1/3 of the maturity value as lumpsum, which will be exempt from tax.

rdThe remaining 2/3 of the m a t u r i t y v a l u e w i l l b e converted into annuity and you will start receiving pension from the same. Such pension received will be added to your income and taxed as per your income slab.

Q. What is the tax on premature surrender of LIC market plus 1? Is full amount taxable or only the gain part?

- Vineet Sarin

A. LIC Market Plus I is an unit-linked pension policy. As it's a pension policy, surrendering the policy would attract tax. T h e t a x a b l e a m o u n t o n surrender will be based on whether you had availed Section 80C deduction for the annual premiums paid in the previous years, as below:

a) I f you had not avai led deduction under Section 80C for premiums paid in any year: Only the gains will be added to your income and taxed.

b) If you had availed deduction under Section 80C for the

ASK OUR PLANNER


premiums paid in previous yea rs : En t i re su r render proceeds will be added to your income and taxed.

Q. What are arbitrage funds? How do they work? I have invested lump sum of Rs. 1, 00, 000 in ICICI Prudential Equity Arbitrage Fund – Regular Plan and I intend to invest similar amount every year in top performing arbitrage fund. Is it a good idea or should I start an SIP in this fund?

- Amol Singh

A. The term 'Arbitrage' refers to the simultaneous buying and selling of a security in two different markets, with an aim t o g a i n f r o m t h e p r i c e difference. For e.g., an equity share may trade at different prices in Spot Market & Futures Market. Since the transactions are in either direction, the posit ions are completely hedged. Hence, pure arbitrage transactions are virtually risk-free. Arbitrage Funds are a category of mutual funds that endeavor to take advantage of mispricing of stocks (or a stock index) in different market segments. These are short-

term opportunities that spring up due to lack of information to a set of market participants in one of the markets. The fund manager is responsible for e v a l u a t i n g s u c h p r i c e differences and take positions accordingly. These funds may also allocate a minor portion (15%- 30%) in money market and /or short term debt securities.

By its investment strategy,

Arbitrage Funds have a risk-

return profile comparable to a

Debt oriented mutual fund,

with the taxation of an Equity

oriented mutual fund. These

funds are suitable for 1-3 year

horizon holding period. If you

plan to invest for longer time

horizon, it makes sense to opt

for pure Large-cap & Multi-cap

category of equity oriented

mutual funds and Medium &

Long duration category of debt

oriented mutual funds, based

on the criticality and tenure of

your financial goals. The

arbitrage category mutual

funds have delivered between

6%-8% annualized returns

over 3-year and higher time

ASK OUR PLANNER


horizon. It has also to be

understood that arbitrage

opportunities provide limited

returns. Over longer horizon,

returns potential may be

impacted as increased fund

inflows will end up chasing

limited opportunities.

We suggest you to invest your

savings for longer time horizon

by starting a SIP instead of

lumpsum investments. SIP will

help in averaging your cost

over a period of time, which

works well with volatile assets

l i ke equi ty. Chas ing top

performing funds each year

w i l l o n l y c l u t t e r y o u r

investment portfolio with too

many funds. You must select

f u n d s w i t h a g o o d a n d

consistent track record of risk-

adjusted performance, in

commensurate with your risk

profile and financial goals.

A c u s t o m i z e d a n d

comprehensive financial plan

will take into consideration

your needs & provide optimal

investment strategies. To know

more about this, you may write

to us at

[email protected].

Q. I have a life-stage pension policy

taken in 2010 with no sum assured

for 10 years. I have been paying a

premium of 3000/- per month. It will

mature in 2020. I want to know: A)

what are the tax implications if I

surrender the policy now? B) As per

IRDA guidelines, is it essential to

buy annuity plan for 2/3rd of

surrender value?

- Kamlesh Malviya

A. As per the Section 80CCC(2)

of Income Tax Act, if any

amount available in a pension

policy, in respect of which

deduction has been allowed,

together with interest or

bonus, is received on account

o f sur render, then such

amount is added to your

income and taxed as per your

income slab.

Thus the taxability of the

surrendered amount will be

based on whether you had

availed the 80C tax benefits

towards deduction for the

annual premiums paid in the

previous years:

c) If you had availed 80C

benefits for all the premiums

paid: Entire surrender value

ASK OUR PLANNER


process is the same as that of a

n o r m a l d e m a t a c c o u n t

o p e n i n g w i t h t h e o n l y

difference being that the

guardian has to provide his/her

i n f o r m a t i o n a n d K Y C

documents as well. Age proof

of the minor is mandatory. This

account will be operated only

by the guardian, till the time

minor turns major.

Once minor turns major, a fresh

set of KYC documents has to

be provided and fresh account

opening form has to be filled.

You can update the same

account by following required

procedure, entering into a new

a g r e e m e n t w i t h t h e

depository. Details of the

guardian will be deleted.

Alternatively, you can open a

new account in the name of the

major, where the holdings in

the old account shall be

transferred to the new account.

There are no issues other than

providing a fresh set of KYC

documents again once minor

turns major and following the

required paperwork. It is to be

noted that only demat account

can exist in a minor's name.

will be added to your income

and taxed as per the tax slab

d) If you did not avail 80C

benefits for the premiums paid

in any year: The accumulated

gains (Surrender Value less

Total Premiums Paid) will be

added to your income and

taxed as per the tax slab

If you opt for surrender, there is

no need to annuitize any part of

the surrender proceeds. You

are eligible to receive the

lumpsum amount as is. If you

wish for, you can purchase an

a n n u i t y p l a n f r o m t h e

surrender proceeds, which will

be a separate transaction. As

per current laws, pension

income is taxable as per

individual's tax slab.

Q. Can a demat account be opened

in the name of the minor? What is

the process and are there any

issues faced when the minor turns

major?

- Bharat Kataria

A. Demat account can be

opened in the name of a minor

child only by the natural

guardian (parents) or court-

appointed guardians. The

ASK OUR PLANNER


You cannot open a trading

account in the name of a minor.

Q. I need to set a good corpus for

my 1 year old child. I am ready to

contribute Rs. 1,000 per month for

building the corpus. Assuming my

child's education expenses to be 40

lakhs till 20 years from now. What

do you suggest should be my

investment tools and how much

s h o u l d b e t h e p e r m o n t h

contribution in the corpus. Guide

me as to the appropriate MF/ Child

gift for long term wealth creation.

- Megha Chauhan

A. It is a good thing that you are

planning for your child's higher

education at an early stage.

Starting early will help you in

ensuring that your corpus

grows in a manner that

outpaces inflation. Firstly you

need to estimate the exact

corpus required for your

child's Graduation & Post-

Graduation needs – whether

Rs. 40 lakh is in today's cost or

at future cost. Say you require

Rs. 10 lakh each for Graduation

& PG in today's cost. Estimating

inflation at 8% p.a., you will

require about Rs. 34.26 lakh for

graduation at your child's age

of 17 years, and Rs. 46.61 lakh

at your child's age of 21 years

(assuming a 4 year course for

Graduation). Assuming you

are able to achieve a post-tax

return of 10% p.a. from your

investments, you will need to

invest Rs. 7,500 p.m. for

Graduation & Rs. 6,500 p.m. for

PG. This amount is much more

than what you had initially

planned for.

As you have a long time

horizon for your investments,

you can take more risk and

invest majorly into Equity asset

class. You can opt to invest

your surplus in a mix of Large-

cap, Multi-cap & Mid-cap

category of equity oriented

mutua l funds . I t i s a lso

suggested that you invest a

minor portion in Debt asset

class, by choosing Medium &

Long Duration category of debt

oriented mutual funds. The

rationale for investing in Debt

even for a longer time frame is

to reduce the volatility of your

overall portfolio (due to volatile

nature of Equity) and also

provide an opportunity to

invest more in Equity during

period of low or negative

ASK OUR PLANNER


returns, by shifting funds from

Debt to Equity at opportune

times. An asset allocation of

75:25 (Equity: Debt) can be

considered.

It is also important to review and monitor the performance of your investments. Any deviat ion from expected performance should be acted upon e.g. moving some part from Debt to Equity during negative returns in Equity; booking profits by shifting some part of Equity into Debt during above average positive returns in Equity. This act is known as re-balancing. Also you need to identify whether you are able to manage the

required investible surplus as per your actual costs, and also whether you're near term financial responsibilities can b e m e t w i t h e x i s t i n g investments & unutilized part of future investible surplus. It is also important to analyze your cash flow situation to assess the possible impacts while planning for your immediate, short term & long term financial targets. A customized and comprehensive financial plan will take into consideration these inputs and provide optimal strategies to achieve your needs. To know more about this, you may write to us at

[email protected].

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

MUTUAL FUND ANALYSIS


Investing in pharma funds

Indian benchmark equity indices have been choppy after scaling an all-time high in late August 2018. A confluence of factors such as tight liquidity in debt markets, volatile crude oil p r i c e s , s h a r p c u r r e n c y movements and a global trade war have weighed on equity markets. Midcap and small cap stocks, in particular, have been affected even more.

Amid the volatility, defensive sectors like pharma and IT have prevented the downside and, thus, done well. We b e l i e v e t h i s c o u l d b e s y m p t o m a t i c o f s e c t o r rotation that is a regular market phenomenon. While the IT sector had started outperforming since early 2017, the pharma sector witnessed increased investor interest in the last few months. We have been positive on the pharma sector for the last few months due to suppressed valuations, a smart recovery in t h e d o m e s t i c m a r k e t , normalisation of US market related issues like compliance and pricing pressure along

w i t h c u r r e n t t a i l w i n d . A l t h o u g h t h e g r o w t h trajectory has come down from 20-25% to 10-15% (on a n o r m a l i s e d b a s i s ) , t h e correction in prices of most stocks has turned the risk-reward favourable. Since near term news flows remain n e g a t i v e , s t a g g e r e d investment over the next 12 months through SIP mode with an investment horizon of three years would be an ideal investment strategy.

T h e t o p l i n e o f p h a r m a companies is likely to be driven by normalised growth in key geographies and favourable currency movement. However, on the margins front, issues like 1 ) Ch inese sourc ing, 2 ) imported raw materials and other expenditure like R&D, employee cost spend in US$ or € can still be some stumbling blocks. On the geographical front, US generics, which has been the Achilles heel for almost all players due to acute base business pricing pressure, is witnessing comparatively softer price erosion. There are instances of volume growth in



the base business as well. S i m i l a r l y , p o s i t i v e developments on the regulatory front and new launches, including speciality approvals, m a y r e k i n d l e i n v e s t o r s sentiments. We expect overall visibility in the US generics front to improve gradually on the back of a changed product mix ( t i l t i ng towards non-US franchisee), a leaner US portfolio driven by incremental product launches largely in the speciality, biosimilar and injectables space. Another interesting development is the geographical diversification as companies are increasingly expanding or evaluating other geographies such as Europe and emerging market and more recently China. We expect companies to remain measured on the US front and expand in the ex-US exports markets besides growing at a steady pace in India. This expansive strategy is likely to improve free cash flows and return ratios. We believe the recent case of alleged corporate governance related lapses is a company s p e c i f i c i s s u e a n d n o t

symptomatic of the sector as a whole.

The pharma sector (NSE Pharma) traded between 30x and 35x one year forward PE band consistently during 2012-16. However, in FY16-18, as the U S s i t u a t i o n b e c a m e increasingly difficult due to c o m p l i a n c e i s s u e s a n d persistent pricing pressure, there was a sharp de-rating of the sector PE. While the Nifty PE currently is still trading at 25x one year forward, many stocks are trading below their 10-year average PE multiples.

We believe the pharma space offers a favourable risk-reward proposition. Investors can consider investments into pharma funds from a medium to long term perspective. However, being a thematic allocation, it should not exceed more than 5-10% of the overall equity allocation. Our preferred funds in this sector are Reliance Pharma Fund, UTI Healthcare Fund and SBI Healthcare Opportunities Fund.



Reliance Pharma Fund

Fund Objective:The pr imary inves tment objective of the scheme is to generate consistent returns by investing in equity/equity re la ted or f i xed income securities of pharma and other associated companies.

NAV as on November 30, 2018 ( )` 152.8Inception DateFund Manager Sailesh Raj BhanMinimum Investment ( )` Lumpsum 5000

SIP 500Expense Ratio (%) 2.30Exit Load 1% on or before 1Y, Nil after 1YBenchmark S&P BSE Health Care - TRILast declared Quarterly AAUM( cr)` 2752

Key Information

June 5, 2004

Product Label:This product is suitable for investors who are seeking:

• Long term capital growth

• Investment in equity and equity related securities of pharma & other associated companies

Investors understand that their principal will be at high risk

Performance:

The fund has been among the

best performing pharma funds

across time frames. It has

d e l i v e r e d a c o n s i s t e n t

outperformance by a large

margin compared to the index

as well as its peers (as of

N o v e m b e r 3 0 ) . I t h a s

generated CAGR of 1.5% and

14.2% in the last three years

and five years vs. -3.6% and

9.2% returns by benchmark,

respectively (as of November

30).

Performance vs. Benchmark (CAGR Returns %)

11.9

1.5

14.2 20.7

3

-3.6

9.2

0

-10

0

10

20

30

1 Year 3 Year 5 Year SinceInception

Fund Benchmark

(Note - The benchmark was not in existence at the time of the fund's inception)



Portfolio:

The portfolio comprises 21

stocks. Currently, the portfolio

is tilted towards large caps

(~60%) while midcap and

small cap stocks make up the

r es t . The f und d i s p l ays

conviction in its picks and

allocation is concentrated.

Companies held by the fund

have a s t rong domest ic

business profile and some US

exposure as well, with some

companies having higher US

g e o g r a p h y e x p o s u r e

compared to others. The fund

also holds some MNCs as well

as companies into CRAMS and

biosimilar business. It has

diversified some part of the

port fol io into heal thcare

companies as well.

%

10.6

10.2

9.5

9.3

6.9

6.5

5.9

5.8

5.8

5.2

Top 10 Holdings

Divis Laboratories Ltd. Domestic Equities

Dr. Reddys Laboratories Ltd. Domestic Equities

Aurobindo Pharma Ltd. Domestic Equities

Sun Pharmaceutical Industries Ltd. Domestic Equities

Cipla Ltd. Domestic Equities

Syngene International Ltd. Domestic Equities

Asset Type

Sanofi India Ltd. Domestic Equities

Abbott India Ltd. Domestic Equities

Biocon Ltd. Domestic Equities

Lupin Ltd. Domestic Equities

%79.1

11.3

7.4

1.6

Miscellaneous Domestic Equities

Finance - Investment Domestic Equities

Top 10 Sectors Asset TypePharmaceuticals & Drugs Domestic Equities

Hospital & Healthcare Services Domestic Equities

%Whats In

%

1.2

Whats out

Glenmark Pharmaceuticals Ltd.



Our View:

The fund's strong performance since inception and a long history are comforting factors even though the fund holds concentrated positions and has

considerable midcap exposure. The fund management team is able and has managed to d e l i v e r a c o n s i s t e n t performance. We feel that investors can consider the fund from a three-year perspective

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/Factsheets

Documents/Fundamental-October-2018.pdf

Data as on November 30, 2018; Portfolio details as on October-2018 Source: ACE MF, ICICI Direct Research

NAV as on November 30, 2018 ( )` 85.3Inception DateFund Manager V. SrivatsaMinimum Investment ( )` Lumpsum 5000

SIP 0Expense Ratio (%) 2.82Exit Load 1% on or before 1Y, Nil after 1YBenchmark S&P BSE Health Care - TRILast declared Quarterly AAUM( cr)` 441

Key Information

August 1, 2005



UTI Healthcare Fund

Fund Objective:

The primary objective of the

scheme is to generate long

term capital appreciation by

investing predominantly in

equity and equity related

secur i t ies o f companies

/institutions engaged in the

healthcare services sector.

However, there can be no

assurance or guarantee that

the investment objective of the

scheme would be achieved.

Product Label:This product is suitable for investors who are seeking

• Long term capital appreciation

• Investment predominantly in equity and equity related securities in the Healthcare Services sector


Performance:

The fund performance has been subdued in recent times b u t i t s l o n g e r t e r m performance continues to remain encouraging. It has delivered -2.6% CAGR and 8 . 6 % C A G R r e t u r n s , respectively, for three and five-year time frames vs -3.6% C A G R a n d 9 . 2 % C A G R performance of the benchmark over these time frames (as of November 30).


-1.2

-2.6

8.6

17.4

3

-3.6

9.2

0

-10

0

10

20


Fund Benchmark




Portfolio

The portfolio features companies

that are relatively more focused

on domestic formulations, which

is the fastest growing segment in

current scenario. The US generics

business forms a comparatively

lower portion of these companies'

overall business. The portfolio has

more unique picks compared to

some other funds. Currently, there

are 23 stocks in the portfolio,

m a k i n g i t s l i g h t l y l e s s

concentrated than some other

funds. Overall, the portfolio is well

placed with respect to current

growth opportunities in the

pharma sector.

%

9.6

8.6

7.1

6.6

6.5

6.4

6.2

6.2

4.7

4.5

Sanofi India Ltd. Domestic Equities

Pfizer Ltd. Domestic Equities

Alkem Laboratories Ltd. Domestic Equities


Cipla Ltd. Domestic Equities


Cadila Healthcare Ltd. Domestic Equities

Ipca Laboratories Ltd. Domestic Equities

Torrent Pharmaceuticals Ltd. Domestic Equities


Top 10 Holdings Asset Type

%85.5

5.8

3.1

2.5

Domestic Equities

Miscellaneous Domestic Equities

Finance - Investment Domestic Equities

Pharmaceuticals & Drugs Domestic Equities

Hospital & Healthcare Services

Top 10 Sectors Asset Type

%

2.6

Whats In

Biocon Ltd.

%

1.8Narayana Hrudayalaya Ltd.

Whats out

Our View:The fund is on the aggressive side with higher allocation to midcaps than large caps. However, the portfolio is well

cons t ruc ted in te rms o f diversification. Investors can consider the fund from a three-year perspective.





https://docs.utimf.com/v1/AUTH_5b9dd00b-8132-4a21-a800-

711111810cee/UTIContainer/UTI%20Fund%20Watch

%20November%20201820181115-213003.pdf

Data as on November 30, 2018; Portfolio details as on October-2018Source: ACE MF, ICICI Direct Research



SBI Healthcare Opportunities Fund

Fund Objective:

To provide investors with the opportunity of long-term c a p i t a l a p p r e c i a t i o n b y investing in a diversified portfolio of equity and equity related securities in healthcare space.

NAV as on November 30, 2018 ( )` 122.6Inception DateFund Manager Tanmaya DesaiMinimum Investment ( )` Lumpsum 5000

SIP 0Expense Ratio (%) 2.23Exit Load 0.50% on or before 15D, Nil after 15DBenchmark S&P BSE Health Care - TRILast declared Quarterly AAUM( cr)` 1076

Key Information

July 14, 1999

Product Label:This product is suitable for investors who are seeking• Long term capital appreciation • Equity investments in stocks of

companies in the healthcare sector


Performance:

The fund has outperformed its

benchmark over longer time

p e r i o d s b u t h a s

underperformed heavily in the

last year. The one year, three

y e a r s a n d f i v e - y e a r

performance (as of November

30) is -3.7%, -5.7% CAGR and

11% CAGR, respectively,

compared to benchmark index'

3%, -3.6% CAGR and 9.2%

CAGR. Nevertheless, decent

outperformance over longer

holding periods provides

comfort.


-3.7

-5.7

11 14

.8

3

-3.6

9.2

0

-10-505

101520


Fund Benchmark




PortfolioThe portfolio has 20 stocks with a near equal split between large cap stocks and midcap/small cap stocks. It has some differentiated stock picks. Recent additions indicate a play towards US

markets. Overall portfolio stocks feature a decent mix of domestic facing and US facing businesses. In terms of portfolio construct, it is less concentrated than our other picks, with lesser weights to its top picks as well.

%

11.3

9.4

9.2

9.0

8.6

6.6

6.2

4.6

4.6

4.3Alkem Laboratories Ltd. Domestic Equities

Domestic Equities

Torrent Pharmaceuticals Ltd. Domestic Equities

Strides Pharma Science Ltd. Domestic Equities


Lupin Ltd. Domestic Equities

Top 10 Holdings Asset Type

Aurobindo Pharma Ltd. Domestic Equities



Tri-Party Repo (TREPS) Cash & Cash Equivalents and Net Assets

Biocon Ltd.

%91.3

2.9

Pharmaceuticals & Drugs Domestic Equities

Hospital & Healthcare Services Domestic Equities

Top 10 Sectors Asset Type

%Whats In

%

2.1

0.3

Whats out

Apollo Hospitals Enterprise Ltd.

Laurus Labs Ltd.

Our View:

The fund is more suited to

investors who do not prefer heavy

c o n c e n t r a t i o n a m o n g t o p

holdings or in general. However,

the significant midcap bias makes

the fund slightly more prone to

volatility.





https://www.sbimf.com/en-us/lists/schemefactsheets

/december%202018.pdf




Performance of other schemes managed by these fund managers:

1. Reliance Pharma Fund

11.03 1.65 14.122.45 -4.44 8.632.71 12.34 18.124.71 13.30 15.030.46 8.60 16.652.11 12.94 15.23

-6.45 9.55 --3.34 11.82 13.49-7.08 3.56 10.75

3.92 13.14 15.56-- -- --

3.34 11.82 13.49

Fund Name 1 Year 3 Years 5 Years

Top 3 Performing Schemes Reliance Pharma Fund(G)S&P BSE Health Care - TRI

S&P BSE 200

Reliance Close Ended Equity Fund-B(G)S&P BSE 200

Reliance Large Cap Fund(G)S&P BSE 200 - TRIReliance Multi Cap Fund(G)S&P BSE 500 - TRI

Reliance Consumption Fund(G)NIFTY CONSUMPTION - TRIReliance India Opp Fund-Sr-A(G)

Performance of other schemes managed by the fund manager - Sailesh Raj Bhan

Bottom 3 Performing Schemes

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

inception

Note : The concerned Fund Manager manages 8 other schemes of the concerned Mutual Fund

18.01 13.29 --11.27 13.60 13.3311.03 1.65 14.122.45 -4.44 8.638.55 7.56 8.107.48 7.24 7.84

-- -- --3.34 11.82 13.49

-- -- --3.34 11.82 13.49

-- -- --3.34 11.82 13.49

Crisil Liquid Fund Index

Bottom 3 Performing SchemesReliance Capital Builder Fund-IV-C(G)

Top 3 Performing Schemes Reliance US Equity Opp Fund(G)S&P BSE SENSEX - TRIReliance Pharma Fund(G)S&P BSE Health Care - TRIReliance Inv-Qrtly-II(G)

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


Reliance India Opp Fund-Sr-A(G)S&P BSE 200

S&P BSE 200Reliance Capital Builder Fund-IV-D(G)S&P BSE 200

Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 49 other schemes of the concerned Mutual Fund



2. UTI Healthcare Fund

3. SBI Healthcare Opportunities Fund

4.25 -- --4.18 8.38 10.034.15 -- --4.18 8.38 10.033.89 -- --4.18 8.38 10.03

-4.13 8.64 13.54-0.96 13.46 18.17

-- -- --

-- -- ---- -- --

4.18 8.38 10.03

UTI Dual Adv FTF-III-III(G)CRISIL Hybrid 85+15 - Conservative IndexUTI CPO-VII-V(1281D)(G)CRISIL Hybrid 85+15 - Conservative Index

CRISIL Hybrid 85+15 - Conservative Index

Bottom 3 Performing SchemesUTI Core Equity Fund-Reg(G)Nifty LargeMidcap 250 Index - TRIUTI Equity Savings Fund-Reg(G)Crisil Equity Savings IndexUTI CPO-X-II(1134D)(G)

Performance of other schemes managed by the fund manager - V. Srivatsa


Top 3 Performing Schemes UTI Dual Adv FTF-III-II(G)CRISIL Hybrid 85+15 - Conservative Index

Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 30 other schemes of the concerned Mutual Fund

-5.82 -6.40 10.600.32 -4.41 8.64

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


Top 3 Performing Schemes SBI Healthcare Opp Fund-Reg(D)S&P BSE Health Care - TRI

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

Note : The concerned Fund Manager manages 0 other schemes of the concerned Mutual Fund



This month on iCommunity

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opportunity to learn more about financial world.

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

In the upcoming New Year, what challenges and opportunities,

you foresee for the domestic markets?

With election results of five states out, the nation is

gearing up for the big national event - the central

election. Populist policies, last minute strategies and

political rhetoric will be the order of the day. On the flip

side, better macros like low inflation (retail inflation fell to

a 17-month low in November 2018 to 2.33%) and strong IIP (October 2018 IIP at

8.08% vs. 1.83% YoY), where do you see the markets heading?

Share your thoughts on ICICIdirect exclusive knowledge sharing platform -

iCommunity.

Link to join the discussions: http://community.icicidirect.com/service_forum

2. Exclusive Q&A Session with Mutual Fund Product

Manager - December 17, 2017

Some questions asked by customers were:

a) If I want to invest some surplus funds for some

time in Short term Liquid fund, say for two

months, and then redeem it, will it attract

Capital gain tax?

b) Is Aadhaar linking to mutual fund folio mandatory or not? How to link

aadhaar to folios?

c) How can I modify dividend option?

3. Q & A Forum

Seek answers to your queries regarding investments and market updates for

free. Questions like:

> Recommend me some small cap companies to invest for growth, can hold for

8 to 10 years.

> Should I continue my SIP in XXX fund? I can hold for 5 years.

> What is the future of XXX? Can it be bought at current levels?

Login to ask questions, give your comments on the questions asked before or

browse through the various segments.

EQUITY MODEL PORTFOLIO


Our indicative large-cap equity model portfolio is delivering an impressive return (inclusive of dividends) of 142.59% till date (as on November 30, 2018) since its inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex) return of 106.16% during the same period, an outperformance of 36.43. This validates our thesis of selecting companies with sound business fundamentals that forms the core theme of our portfolio. We have revised stocks in our midcap portfolio. It continues to outperform, delivering 238.06% (inclusive of dividends) till date (as on November 30, 2018) vis-à-vis the benchmark index (CNX Midcap) return of 127.38%, an outperformance of 110.68. Our consistent outperformance demonstrates our superior stock picking ability as markets aligned to our view of favourable risk reward, good franchisee vs. reward-at-any-risk businesses.

We have always suggested the SIP mode of investment and still find a lot of merit in it as the preferred mode of deployment given the market conditions and volatility associated since the inception of the portfolio. We highlight that the SIP return of our portfolio has consistently outperformed the indices.

Following the same pace and opportunities in the market, our latest portfolio (large caps) remains overweight on BFSI sector – HDFC Bank (10%), HDFC Limited (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI (6%). Affirming our view on consumption demand, Dabur (5%) and Marico (4%) continue to be part of our large cap portfolio.

We remain positive on auto, IT and pharma. We remain overweight to neutral on pure play defensives (IT, FMCG) as secular earnings coupled with sector rotation could lead to consolidation in near term valuations and offer stock specific opportunities.

We continue to remain underweight on metals and oil & gas with our only pick being Gail Ltd., which has a better risk reward opportunity. Among individual names, we recommend TCS in the IT space, HDFC and HDFC Bank in the BFSI space and ITC in consumer space.



Name of the company

Largecap Stocks

Model Portfolio

Largecap(%)

Midcap(%)

Diversified(%)

Maruti Suzuki 6.0 4.2

EICHER Motors 4.0 2.8

Mahindra & Mahindra (M&M) 4.0 2.8

HDFC Bank 10.0 7.0

Axis Bank 6.0 4.2

HDFC Limited 9.0 6.3

Bajaj Finance 6.0 4.2

SBI 6.0 4.2

Larsen & Toubro 6.0 4.2

UltraTech Cement 4.0 2.8

Dabur 5.0 3.5

Marico 4.0 2.8

ITC 6.0 4.2

Nestle India 4.0 2.8

TCS 6.0 4.2

Hindustan Zinc 6.0 4.2

Divis Laboratories 3.0 2.1

GAIL Ltd. 5.0 3.5

Largecap share in diversified 100.0 70.0



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

Bharat Forge 6.0 1.8

Exide Industries 6.0 1.8

Bajaj Finserve 8.0 2.4

Indian Bank 6.0 1.8

AIA Engineering 6.0 1.8

Kalpataru Power transmission 6.0 1.8

Ramco Cement 6.0 1.8

Kansai Nerolac 6.0 1.8

Pidilite Industries 6.0 1.8

Tata Chemicals 6.0 1.8

Bata India 6.0 1.8

Graphite India 6.0 1.8

Firstsource Solutions 6.0 1.8

Container Corporation of India 6.0 1.8

Syngene International 8.0 2.4

Arvind 6.0 1.8

Total 100.0 30.0

Midcap share in diversified 30

TOTAL 100 0 100.0



Performance so far since inception*

*Returns (in %) as on November 30, 2018

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

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

Start date of SIP: June 30, 2011; *Value as on November 30, 2018

142.5853615

238.0632958

170.2326596

106.1610925

127.377063110.3555153

0

100

200

300

Large Cap Midcap Diversified

%

Portfolio Benchmark

9000000

9000000

9000000

13900839.8

4

20956417.6

9

15172026.0

4

11999915.6

3

12944330.9

7

12387860.7

3

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Largecap Midcap Divesified

|

Investment Value of Investment in Portfolio Value if invested in Benchmark

QUIZ TIME


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A H Y U O L V A A O L C U

T G E G R A H C R U S R P

Word Search:

1. Income Tax 2. Surcharge 3. Quarter 4. Capital gains 5. Cess

6. Tax slabs 7. Deductions 8. Exemptions 9. Assessment 10.

Previous

Correct answers for the November 2018 quiz are:

1. A trust acts as a third party who technically owns the cash,

stocks, bonds, life insurance or real estate of the testator.

2. The most important requirement is to register a nominee for

your property, investments and bank related matters.

3. You can have an original and duplicate copy of a Will? True.

4. A document that enables you to appoint someone to take

decisions on your behalf?

Power of Attorney.

5. When a Will isn't drafted it is said to be intestate succession.

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

53

30-Nov-18 31-Oct-18 Change (%)

CNX Nifty 10877.0 10386.6 4.7%

CNX Midcap 17503.6 17189.2 1.8%

S&P BSE Sensex 36194.3 34442.1 5.1%

S&P BSE 100 11119.2 10681.7 4.1%

S&P BSE 200 4626.5 4440.2 4.2%

S&P BSE 500 14429.0 13881.7 3.9%


Dow Jones 25,538.5 25,115.8 1.7%

S&P 500 2,760.2 2,711.7 1.8%

Nasdaq 7,330.5 7,305.9 0.3%

FTSE 6,980.2 7,128.1 -2.1%

DAX 11,257.2 11,447.5 -1.7%

CAC 40 5,003.9 5,093.4 -1.8%

Nikkei 22,351.1 21,920.5 2.0%

Hang Seng 26,506.8 24,979.7 6.1%

Shanghai Composite 2,588.2 2,602.8 -0.6%

Taiwan Weighted 9,888.0 9,802.1 0.9%

Straits Times 3,117.6 3,018.8 3.3%


S&P BSE Auto 20,900.2 19,881.1 5.1%

S&P BSE Bankex 29,949.0 28,359.6 5.6%

S&P BSE FMCG 18,639.4 17,488.6 6.6%

S&P BSE Healthcare 14,332.7 14,726.6 -2.7%

S&P BSE Metals 11831.86 12524.55 -5.5%

S&P BSE Oil & Gas 13,246.2 13,246.9 0.0%

S&P BSE Power 1,911.3 1,958.1 -2.4%

S&P BSE Realty 1,791.7 1,679.8 6.7%

S&P BSE Teck 7,170.2 7,234.6 -0.9%

PRIME NUMBERS


Debt Markets

Volatility Index (VIX)

30-Nov-18 31-Oct-18

VIX 19.16 19.79

Government Securities Yield (in %) Nov-18 Oct-18 Change (bps)

10 year 7.61 7.85 -24

5 year 7.47 7.83 -36

3 year 7.32 7.64 -32

1 year 7.10 7.38 -29

Corporate Bond Yields (in %) Nov-18 Oct-18 Change (bps)

AAA 10 year 8.77 8.90 -13

AAA 5 year 8.64 8.90 -26

AAA 3 year 8.60 8.73 -13

AAA 1 year 8.41 8.60 -19

AA 10 year 9.23 9.40 -17

AA 5 year 9.25 9.48 -23

AA 3 year 9.19 9.28 -9

AA 1 year 9.00 9.11 -11

Commercial Paper (in %) Nov-18 Oct-18 Change (bps)

12 Months 8.80 8.80 0

6 Months 8.10 8.10 0

3 Months 7.83 7.75 8

1 Month 0

Note : Data not available on Bloomberg for 1 month CP post 3/28/18

T-Bills Yields (in %) Nov-18 Oct-18 Change (bps)

91D TB 0

182D TB 0

364D TB 0

Note : Data not available on Bloomberg for 3,6 and 12 month Tbill post 3/28/18

54

PRIME NUMBERS

10-year benchmark yields (%) across countries


Macro-economic Indicators

Consumer price index (CPI)

Wholesale price index (WPI)Month

55

Countries 30-Nov-18 31-Oct-18 Change in bps

US 2.988 3.144 (16)

UK 1.364 1.437 (7)

Japan 0.092 0.127 (4)

Spain 1.500 1.545 (4)

Germany 0.313 0.385 (7)

France 0.683 0.749 (7)

Italy 3.213 3.427 (21)

Brazil 9.894 10.210 (32)

China 3.380 3.536 (16)

India 7.607 7.853 (25)

MF Investment Nov-18 Oct-18 Fy18

Equity 5236 24047 141769

Debt 51392 27364 370716

FII Investment Nov-18 Oct-18 Fy18

Equity 6223 -27622 22272

Debt 6467 -10019 120387

Items Weights(%) Sep-18 Oct-18 Nov-18

Food&bev. 45.86 1.08 -0.14 -1.69

Pan,tob& intox. 2.38 5.57 6.13 6.14

Cloth & Foot 6.53 4.64 3.55 3.53

Housing 10.07 7.07 6.55 5.99

Fuel & light 6.84 8.47 8.55 7.39

Misc. 28.31 5.65 6.73 6.15

CPI 100 3.77 3.31 2.33

Weights Sep-18 Oct-18 Nov-18WPI 100.0 5.13 5.28 4.64 Primary Articles 22.6 2.97 1.79 0.88 Fuel & Power 13.2 16.65 18.44 16.28 Manufactured Goods 64.2 4.22 4.49 4.21

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

PRIME NUMBERS

Commodities


Mutual Funds: Category Average Returns

Equity Funds Returns (in %)

Debt Funds Returns (in %)

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

Currencies and Commodities

Currencies

56

Categories Oct-18 Sep-18 Aug-18 Weight(%)Mining 14.1 2.7 -3.6 14.4Manufacturing 1.6 0.8 2.2 77.6Electricity 1.9 -2.6 3.1 8.0Overall 3.0 0.6 1.7 100.0

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

30-Nov-18 31-Oct-18 Change (%) StatusUSDINR 69.6 74.0 -5.9% AppreciatedEURINR 79.2 83.9 -5.7% AppreciatedGBPINR 88.7 94.5 -6.1% AppreciatedAUDINR 50.8 52.5 -3.2% AppreciatedCHFINR 69.8 73.6 -5.2% AppreciatedJPYINR 0.6 0.7 -6.0% AppreciatedCNYINR 10.0 10.6 -5.7% Appreciated

30-Nov-18 31-Oct-18 Change (%)Crude ($/barrel) 58.4 73.9 -20.9%Gold ($/ounce) 1,222.5 1,214.8 0.6%

Multicap Midcap Large Cap Small cap ELSS6 months -4.26 -8.63 -0.44 -14.66 -5.531 year -4.80 -11.39 0.35 -17.57 -6.303 year 9.70 8.64 9.77 8.64 10.085 year 15.85 20.60 14.59 22.43 16.33

Returns as on November 30, 2018

Liquid Debt ST Ultra ST Debt LT

6 months 6.49 6.42 5.96 5.46

1 year 6.80 5.08 6.13 2.17

3 year 6.95 6.92 7.07 6.05Returns as on November 30, 2018

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

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