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The calendar year 2014 has been very interesting for Indian equity markets. Having appreciated 35% this year, markets have been running ahead of an economic recovery, which is expected to follow with a lag. The government has already initiated several confidence building measures and taken key decisions like allowing foreign direct investment (FDI) in several sectors, railway fare hike, online environment and forest clearance, etc. However, an economic recovery is expected only at a gradual pace. After trading around 14x one-year forward earnings per share (EPS) for most of the last five years, the Sensex is now trading at 16.5x one year forward EPS.
Anup BagchiMD & CEO
ICICI Securities Ltd.
At the heart of the change in sentiment is the expectation of an improving business environment amid quick policy actions. Reversing the near term trend, equity mutual funds have witnessed inflows of 37,800 crore after a cumulative outflow of 32,900 crore in the preceding five years, signifying increasing participation of retail investors. The foreign institutional inflows (FIIs) have also poured in $15.8 billion in Indian equities, higher than any other emerging market.
Progressive policy initiatives, coupled with improving macroeconomic factors on both the domestic and global front would help keep markets buoyant. On the domestic front, H1FY15 gross domestic product (GDP) growth has revived to 5.5% from 4.7% in FY14 while inflation continues to slide down. Also, the Reserve Bank of India (RBI) has indicated at a possible reversal in the interest rate cycle in the early part of next year. This could further push the capital investment cycle, which had come to a virtual standstill in the past few years.
``
1ICICIdirect Money Manager November 2014
Secondly, with the slowdown in China, commodity prices have been softening. The London Metal Exchange (LME) index is down 9% over the last six months. Though this may impact earnings of metal companies, the overall economy would benefit from lower input prices, which would give an impetus to infrastructure growth as well. Moreover, crude is down 37% year-on-year (YoY) at $70 per barrel. This will benefit India's current account deficit (CAD) situation. India imports about 80% of its crude requirements. Besides helping lower imported inflation, lower crude prices would also lead to a lower fiscal deficit since oil under-recoveries are expected to decline to ~ 80,000 crore in the current year from ~ 1,40,000 crore in Fy14.
Thirdly, India is relatively lesser impacted by a global slowdown by virtue of high domestic demand. Among major economies, India's export as a percentage of GDP is among the lowest at 24%, which insulates it from a slowdown in other economies in comparison to other countries.
Lastly, the slowdown in world economies has prompted central bankers across the globe to come up with expansive monetary policies to inflate their way out of recession. The enhanced liquidity will, in turn, lead to greater inflows in attractive asset classes. India with relatively higher economic growth, an extremely stable political environment, large domestic consumption led market and favourable demographics, stands out as the most eye-catching investment destination.
Improving sentiments, a stable political environment and a pick-up in economic activity would continue to attract investor towards equities, resulting in a shift in preference towards financial savings from physical savings. Other asset classes including gold and real estate have also shown signs of tiring. Even though the markets have run up in the recent past, equity as an asset class remains attractive for long term goals. There is no better way to benefit from the current and potential up swing of the Indian economy.
I take this opportunity to wish you and your loved ones a very Happy New Year 2015. Do keep investing and stay invested for your life goals. Through this magazine and our website www.icicidirect.com we want to make an earnest attempt to partner with you in setting and achieving your financial goals. Do walk into any of your Neighbourhood Financial Superstore and talk to us.
``
November 2014
2
With the rising cost of almost everything, today's young
generation faces unprecedented challenges to achieve financial
independence.Helping our youth to learn effective management
of personal finances is more important than ever.
Parents can play an important role in this area – helping children
with their first steps, getting the options of investments clear
even underwriting the risk to an extent. The first step can be as
simple as opening their savings, investment and demat account.
It may sound strange with so much talk on investments around
that youngsters do no really know how an investment can be
made. We can use our personal experiences to guide them with
their first investment.
However do remember that our knowledge is mostly be guided
by our own experiences. This can sometimes blind us. Get them
to invest into what is right for them and not where you had a great
experience investing it yourself.
In this edition we cover some important aspects of teaching
finance to your children and youngsters. The edition also offers
comprehensive information and analysis on equity diversified
funds, the ever-green option for young investors to get started
with investing.
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.
Editor & Publisher : Abhishake Mathur, CFA
Coordinating Editor : Yogita Khatri
Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey
CMEditorial Team : Azeem Ahmad, Nithyakumar VP CFP , Nitin Kunte, Sachin Jain, Sheetal Ashar
ICICIdirect Money Manager November 2014
Your magazine is now also available on www.magzter.com, a digital newsstand.
3
MD Desk....................................................................................................1
Editorial......................................................................................................2
Contents.....................................................................................................3
News.........................................................................................................4
Markets Round-up & Outlook........................................................................5
Getting Technical with Dharmesh Shah.........................................................8
Derivatives Strategy by Amit Gupta.............................................................10
Stock Ideas: TV Today and UltraTech Cement............................................ . 15
Flavour of the Month: A parents' guide to help children about money managementHelping our youth to learn effective management of personal finances is today more important than ever. Here wediscuss how you as a parent can mentor your children to becomefinancially secure...................................................................................21
Tête-à-tête: 'Asset allocation offers the best opportunity to balance risk & reward' An interview with Tushar Pradhan, CIO, HSBC Mutual Fund..............27
Ask Our Planner: Your personal finance queries answered…..........................................31
Mutual Fund Analysis: Category - Diversified Equity FundsThe best investment option for beginners as well as seasoned investors to invest in equities for long-term financial goals...................................................................................................... 35
Equity Model Portfolio............................................................................... 41
Mutual Fund Top PicksHere we present our research team's top mutual fund recommendations, across equity and debt categories…....................46
Quiz Time..................................................................................................48
Monthly Trends.........................................................................................49
Premium Education Programmes Schedule..................................................53
Claiming RGESS tax benefits
ICICIdirect Money Manager November 2014
4ICICIdirect Money Manager
Government decides to pay 8.75% interest on PF for 2014-15
Over five crore provident fund subscribers governed by the Employees' Provident Fund Organisation (EPFO) will get 8.75 per cent interest on their deposits for the current fiscal. The Finance Ministry has ratified the rate for 2014-15, after a decision was taken to retain the interest payout at this level by the EPFO Central Board of Trustees of the sources said. As per the practice, EPFO trustees' decision gets implemented after the concurrence of the Finance Ministry.
Courtesy: The Economic Times
Despite the sprouting of green shoots, a robust recovery is still to fully take hold, says the Mid-Year Economic Analysis for the current year, tabled in Parliament by Union Finance Minister Arun Jaitley. The Review projects 2014-15 growth will be 5.5 per cent. India faces challenges that are mostly domestic, says the Review. India grew at sub-5 per cent for the last two years. Growth bounced to 5.7 per cent in the April-June quarter before slipping again to 5.3 per cent in the July-September quarter.
Courtesy: The Hindu
Mid-Year Economic Review projects 5.5 per cent growth
The government is no longer looking to sell Specified Undertaking of UTI's (Suuti's) stake in private-sector companies through the exchange-traded fund (ETF) route, Business Standard has learnt. The Centre had budgeted raising Rs 6,500 crore through part-sale of the Suuti stake in Axis Bank, ITC, and Larsen & Toubro. The capital markets division in the finance ministry was exploring the option of bunching the stakes to be offloaded in these three companies and at least seven public-sector undertakings as one ETF, and listing it on exchanges. In October, the government had floated a request for proposal (RFP) for a Suuti ETF.
Courtesy: Business Standard
Govt scraps proposed Suuti ETF
government moved a Constitutional Amendment Bill in the Lok Sabha to roll out goods and services tax (GST), setting in motion plans to launch this ambitious tax reform from April 1, 2016. The Bill incorporates a number of provisions to get the support of states whose opposition had held back what finance minister Arun Jaitley called 'biggest tax reform since 1947' for almost five years. The previous UPA government had planned to roll out GST — which will replace the plethora of indirect taxes levied by states, Centre and local bodies — on April 1, 2010. The government hopes to get the Bill passed in the Budget session and does not see it being referred to the standing committee on finance.
Courtesy: The Economic Times
Government moves bill to roll out GST; sets in motion plans to launch tax reform from April 2016
November 2014
5ICICIdirect Money Manager
MARKETS ROUND-UP
Sentiments likely to remain upbeat as RBI hints at reversal of rate cycle
Domestic equity benchmarks scaled new highs in November, ending the month 3.2% higher as the market took positive cues from a sharp fall in global commodity prices and positive macroeconomic data. The gross domestic product (GDP) growth came in at 5.3% better than estimates of 5.1% while the fiscal deficit continued to decline. A sequential improvement in Purchasing Managers ' Index (PMI ) manufacturing data and 2.5% year-on-year (YoY) index of industrial production (IIP) growth along with all-time low consumer price index (CPI) of 5.52% further improved s e n t i m e n t s . S e v e r a l government reforms such as deregulation of diesel prices, labour reforms, ordinance on coal block auctioning, easing of foreign direct investment (FDI) norms in the real estate sector and cut in the non-plan government expenditure also helped maintain the upward momentum of the month. Sentiments also remained upbeat as OPEC (Organization of the Petroleum Exporting Countries) members voted to keep their production ceiling
unchanged leading to decline in crude o i l pr ices to ~$68.9/barrel. Positive global sentiments arising out of higher-than-expected GDP growth of 3.9% in the US and quantitative easing signals from the eurozone helped sustain the sentiments.
The markets also followed Q2 earnings, which concluded in mid-November. The consumer discretionary space witnessed a robust performance with both auto and consumer durables sectors showcasing good numbers. The auto ancillary space witnessed the benefits of operating leverage and reported a robust performance. The information technology (IT) and pharmaceutical sectors reported normalcy of earnings on account of normalisation of the base effect. On the infrastructure front, the order book of capital goods major L&T and BHEL witnessed strong inflows as power BTG/EPC (Boiler, Turbine and Generator / Engineering, Procurement and Construction) orders picked up pace. However, the same was not reflected in their topline and bottomline due to lower
November 2014
6ICICIdirect Money Manager
MARKETS ROUND-UP
execution on account of lower order intake in FY12-14. The quality of earnings saw an improvement with SBI reporting asset quality improvement and robust 30% growth in the bottomline. In the fast-moving consumer goods (FMCG) space, the growth was primarily led by price hikes with overall volumes remaining subdued for most companies.
Global markets have been driven by contrasting news flows across the globe. The markets opened on a positive note as the Bank of Japan's Monetary Policy Board unexpectedly decided to raise the monetary base at an annual pace of about 80 trillion yen. However, in the mid-month, the hawkish tone of the Federal Open Market Committee (FOMC) minutes, higher-than-expected US trade deficit and a series of manufacturing activity data from China and eurozone kept sentiments in check. However, the positive trigger emanating from falling crude prices aided by the OPEC stance to maintain the production levels, better-than expected GDP growth in the US and signals towards further stimuli from eurozone outweighed the negative cues.
The markets ended mostly in the green across US, eurozone and Asia.
With softening inflation, the benchmark 10-year bond yield has fallen to 8.08%, the lowest since September 2013. During the month, crude (Brent) continued the decline and ended at ~$68.9/barrel, aided by the stance of OPEC to stick to their production ceiling. Gold prices remained flat, ending the month at $1167.4/ounce.
Global markets
The US markets ended on a positive note as the market took positive cues from falling crude prices and strong GDP data, which stood at 3.9% vs. expectations of 3.3%. Major indices, Dow Jones, S&P 500 and the Nasdaq gained about 2 . 5 % , 2 . 5 % a n d 3 . 5 % , respectively. European markets also gained in the month with the rising investor confidence data and a hint by the European Central Bank (ECB) to offer further stimulus. The UK FTSE and French CAC gained 2.7% and 3.7%, respectively, while the German Dax extended gains of 7%. Asian markets also gained in the last two sessions to end on a positive note with the Nikkei and Shanghai SSEC
November 2014
7ICICIdirect Money Manager
MARKETS ROUND-UP
gaining 6.4% and 10.9%, respectively, while the Hang Seng remained flat.
Domestic markets
The foreign inst i tut ional investors (FIIs) bought heavily to the tune of ~ 14,302.2 crore on the back of strengthening confidence on the Indian economy vis-à-vis the rest of the emerging markets. Though the domestic institutional investors (DII) investment remained relatively subdued, they continued to be net buyers with a net inflow of ~ 1,676.9 crore.
The Nifty and Sensex ended in the positive territory for the month with most sectoral indices also ending the month in the green. Except the BSE Metal Index (-4.6%) and BSE Oil Index (-2.2%) all other indices ended November on a strong note. BSE Realty, BSE Bankex, BSE Auto, BSE FMCG, BSE Te c h , B S E I T a n d B S E Healthcare saw sharp gains of 8.3%, 8.8%, 3.5%, 3.2%, 3.7%, 4.7% and 4.2%, respectively, while the BSE PSE (0.8%) and BSE Power (0.0%) ended the month flat.
Outlook: Markets to take solace from dovish RBI comments and positive global cues
`
`
Despite the expected status quo stance from the Reserve Bank of India (RBI), the policy signals RBI's resolve to firmly contain inflation and inflationary expectations while responding to positive developments in inflation and fiscal consolidation. By advancing the inflation target of 6% to March 2015, RBI has in fact set out a clear message of a reversal of the rate cycle, sooner than later. With oil prices at historic lows, a stable exchange rate (in the backdrop of global currency downfall vis-à-vis the US$) and strong capital inflows, the feel good factor is likely to stay. Globally, the story remains more or less similar with ECB giving mixed signals for some more stimuli in the backdrop of recessionary trends while the other side of the Atlantic i.e. US has been register ing a marked improvement in most gauges. OPEC's decision to stay away from production cuts despite a request from some member countries was, however, a major posit ive global development. In this backdrop, the market undertone is likely to be upbeat for December on the back of positive domestic and global signals.
November 2014
8ICICIdirect Money Manager
TECHNICAL OUTLOOK
Buying opportunity amid consolidation
Equity benchmarks continued
their record setting spree and
extended the rally for a record
ninth consecutive month. The
benchmarks logged over 2%
gains, with the Sensex and the
Nifty scaling th psychologically
significant levels of 28000 and
8600, respectively, for the first
time ever.
We expect the benchmarks to
e n t e r a s h o r t - t e r m
conso l ida t ion phase in
December, which will provide a
fresh entry opportunity for
participants who have missed
the rally. Stock specific price
action is expected to continue
while the benchmarks digest
the strong gains of over 10%
amassed in the last two
months. The overall price
structure remains positive.
Hence, any cool off towards
27350/8200 (Sensex/Nifty)
should be used as opportunity
to go long to ride the ongoing
uptrend.
The broader markets achieved
important milestones during
November 2014. The BSE
Midcap and Small Cap indices
vaulted past their respective
2 0 0 8 a n d 2 0 1 0 h i g h s .
Strengthening of the broader
markets past multi-year highs
augurs well for the longevity of
the overall uptrend
Limited price correction and
extended time corrections
have been the hallmark of the
current uptrend. We expect
benchmarks to hold fort above
the 27350/8200 levels in case
of any corrective price action
from here on.
November 2014
Source: Bloomberg, ICICIdirect.com Research
21 week EMA
Weekly stochastic is poised at its highest level since 2012 with a reading of 96 indicating highly overstretched conditions and warrants a temporary breather before continuation of the upmove
Breakout area of September 2014 high and 38.2% retracement of current rally project support at 27350 levels
4 weeks
5 weeks
5 weeks
5 weeks
4 weeks
5 weeks
9ICICIdirect Money Manager
TECHNICAL OUTLOOK
BSE Sensex – Weekly Candlestick Chart
Source: Bloomberg, ICICIdirect.com Research
The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.
November 2014
The index is seen approaching our short-term target of 28800 levels being the value of the rising trend line connecting the monthly highs since May 2014. Since August 2013, the index has rallied for a maximum five weeks in a row before undergoing a three to five week consolidation
With five weeks of gains already in place, we expect the index to pause after apprehending the overhead trend line (28800) and enter a consol idat ion mode dur ing December 2014
10ICICIdirect Money Manager
DERIVATIVES STRATEGY
Key support for Nifty placed at 8100
Amit Gupta
Head - Derivatives Research,ICICI Securities
The Nifty options data of the December series should be closely analysed in light of the already existing long dated options. The open interest (OI) in the Call strikes of 8000 and 8500 (shown in blue columns) is mainly the long dated option OI addition, which was already existing since many expiries before. On the Put side, the highest Put base at the 8000 strike (shown in orange column) is again attributable to long dated contracts.
Key additions relevant for the December series started from November 15 onwards. Major additions were seen at 8600 and 8700 Call strikes, which have added 1.1 and 1.5 million shares, respectively. Nifty was also not able to close above 8600 levels and succumbed to profit booking. On the Put side, key additions are seen at the 8300 and 8100 Put strikes which are likely targets in case
of declines.
Ongoing premium in Nifty is high at 51 points which may not bode well for incremental upsides. We expect short positions may be accumulated due to preva i l ing h igh premium in the index.
The Nifty Bollinger band below shows it bounced from the mean-2 sigma band in mid October. Since then, the Nifty has not dipped below volume weighted average pr ice (VWAP) of 8350. Hence move below 8300 may trigger downsides towards 8100 due to liquidation of positions.
November 2014
Nifty Options build up in December series
0
1
2
3
4
5
6
7
8
9
7800
7900
8000
8100
8200
8300
8400
8500
8600
8700
8800
OI i
n M
illio
n Sh
ares
Call OI Put OI
Nifty Bollinger Band …likely to test mean+2 sigma levels
5900
6400
6900
7400
7900
8400
Feb-
14
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep-
14
Oct
-14
Nov
-14
Close UBB(2) BollMA (20) on Close LBB(2)
11ICICIdirect Money Manager
DERIVATIVES STRATEGY
November 2014
Expiry gains in 2014: including November series, nine out of 11 expiries closed with gains during the year
In the November series, the Nifty continued with its trend of closing with strong gains. The November month closed with gains of over 3%, which is the highest monthly gain since June 2014.
In November, the Ni f ty respected its VWAP level of 8350 throughout the month. The dip towards this level in the third week was greeted as a buying opportunity as the Nifty moved up close to 200 points in the next three trading sessions.
Going ahead, the November VWAP of 8390 will be the immediate support for the Nifty’s current momentum.
Looking at the seasonality trend, December has been a month of consistent gains historically. In the trailing decade, the Nifty has closed negative only once in 2011 in December. In all other years, the Nifty closed positive.
December has also been strong for equity markets including S&P, Dax & Nikkei in previous years.
Nifty MoM Expiry gains in 2014
3%3%
-1%
3%3%4%
6%
3%
6%
3%
-3%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
NovOctSepAugJulJunMayAprMarFebJan
Bank Nifty upside target now placed at 19000, key support placed at 17500
The Bank Nifty had a strong run in the last series. It started the November series from near 16800 and moved up to 18900 during December before seeing some profit booking due to global markets.
During the month, the strong move came from private banking heavyweights along with public sector undertaking (PSU) banking heavyweights like SBI and PNB. However, the rest of the PSU banking space remained muted.
December series options build-up is suggesting the Bank Nifty may march towards 19000 as this Call has the highest OI. On the lower side, Put options build-up is seen at the 17500 strike, which is the key support on the lower side.
12ICICIdirect Money Manager
DERIVATIVES STRATEGY
November 2014
F a l l i n g y i e l d s o n t h e b e n c h m a r k 1 0 - y e a r government securities (G-sec) and cooling inflation on the back of falling crude prices is likely to improve macros further. This will also help in fresh upsides in banking stocks. Most PSU banking stocks in such a scenario are throwing up good risk reward opportunities.
Bank Nifty could continue upsides towards 19000
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
1700
0
1720
0
1740
0
1760
0
1780
0
1800
0
1820
0
1840
0
1860
0
1880
0
1900
0
Call OI Put OI
Cyclicals, defensives participating well in current market move
The November up move of the Nifty saw good participation not only on part of cyclicals like banking but also by defensives like IT. However, the major m o v e w a s s e e n i n index/sectoral heavyweights while midcap and small cap stocks lost some ground in the second half.
For the month, the CNX
midcap was up 4% while the Nifty was up over 3%. The Bank Nifty and CNX IT moved up over 7% each.
The NSE advance decline ratio was subdued in the second half of the month. This was mainly attributable to profit booking in small cap stocks as the Nifty remained above 8400. This h e a l t h y p r o f i t b o o k i n g suggests a decline in the CNX Small Cap index towards 5000 (key support) can be used as a buying opportunity in this space.
Sectoral return in November Series
-50510
CNX Bank
CNX IT
CXN Mid Cap
Nifty
Consumer Durable
Metal
% monthly return
Dollar index strength continues amid consolidation. Stimulus in Japan, expectations of same in Europe lead to weakness in JPY, euro
Impor tan t l y, w i th in the currency market, a major move was seen in the Dollar Index, which has moved up over 1.75% to 88.4 during the month and JPY, which has weakened
13ICICIdirect Money Manager
DERIVATIVES STRATEGY
November 2014
over 5.5% to 118.5 on the back of Bank Of Japan (BOJ) increased monetary stimulus. This move has weakened most emerging market currencies. However, the INR was able to limit the weakness as FII flows in the equ i t y segment continued.
Also, falling crude prices could give support to the rupee from a major depreciation and the rupee could consolidate in the range of 61-63.
Brent crude has fallen close to five-year lows below 65 after the comments from Saudi Arabia. We believe Brent crude may cont inue i ts fa l l due to continuous selling pressure.
Dollar strength caused weakness in developed market
96
98
100
102
104
106
108
110
30-
Oct
1-N
ov
3-N
ov
5-N
ov
7-N
ov
9-N
ov
11-N
ov
13-N
ov
15-N
ov
17-N
ov
19-N
ov
21-N
ov
23-N
ov
Dollar Index Euro Australian Dollar Japanese Yen
Rupee outperforming other Emscurrencies
98
100
102
104
106
108
110
112
114
116
30-O
ct
1-N
ov
3-N
ov
5-N
ov
7-N
ov
9-N
ov
11-N
ov
13-N
ov
15-N
ov
17-N
ov
19-N
ov
21-N
ov
Thai Bhat Indonesian Rupiah Indian Rupee
Russian Ruble Zimbabwian Rand Turkish Lira
Malaysian Ringitt Brasilian Real Philippines Peso
India VIX : Likely to rise in the near
term
We have seen a surge in
volatility in the last couple of
t rad ing sess ions . Ind ia
volatility index (VIX) started
reverting from its second
lowest weekly closing of 11.9.
Nifty options implied volatility,
which was quite subdued in
the last couple of months, may
witness a rise in the near term.
Nifty Put IVs (implied volatility)
are generally higher than Call
IVs. However, currently due to
higher optimism in the market,
Nifty Call IVs are higher than
Put IVs. ATM 8300 Put IV is at
10.5% while 8300 Call IV is at
14.5%. Similarly, the 8400 Put
IV is at 8.90% while the 8300
Call IV is at 13.45%.
The crucial 8400-8440 level has
been broken. VWAP of trailing
30 days is at 8440 while the
Nifty has moved below 8400
that is the highest Put base.
There may be some panic
closure of short positions in Put
strikes.
14ICICIdirect Money Manager
DERIVATIVES STRATEGY
November 2014
The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.
India VIX : May move towards 15 levels
FII inflows in equity segment keep
Nifty rally alive
As the Nifty bottomed out at
8000 near October expiry,
foreign institutional investors
( F I I s ) s t a r t e d t o b u y
aggressively in the cash
segment. For the month, they
bought over US$1.5 billion, the
largest inflow since July 2014.
Post the increased stimulus
from BOJ at the start of the
month, most Asian EMs have
seen inflows. Strongest inflows
were seen in Taiwan of US$2.75
billion with Indonesia at US$365
million.
In the derivatives segment, FIIs
bought Nifty Put options worth
over US $1.6 billion to hedge
their cash positions. In the index
futures segment, the flows
remained soft. They created
fresh longs totalling over
US$320 million.
During the month, as the 10 year
G-Sec yield fell from 8.32 to 8.14
some inflows were seen.
However, in the second half of
the month, as yields stabilised
near 8.15 outflows were seen in
the debt segment. For the
month, there was a net outflow
of US 15 million.
FIIs cash activity in (In Rs. crore)
-5000
0
5000
10000
15000
20000
25000
30000
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb-
14
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Nov
-14
INR
is C
r
Debt markets flows 10 year G-Sec yield dips to 8.15
-15000
-10000
-5000
0
5000
10000
15000
20000
Oct-1
3
Nov
-13
Dec-
13
Jan-
14
Feb-
14
Mar
-14
Apr-1
4
May
-14
Jun-
14
Jul-1
4
Aug-
14
Sep-
14
Oct-1
4
Nov
-14
INR
in C
r
15
STOCK IDEAS
TV Today: No. 1 player in Hindi news genre; strong ad growth
ICICIdirect Money Manager
Company Background
TV Today Network (TV Today) incorporated in December, 1999, is a part of the India Today Group and a leading news broadcaster in India. It operates as a subsidiary of Living Media, the holding company of the I n d i a To d a y g r o u p o f publications. The Aditya Birla group also has a 27.5% stake in L i v i n g M e d i a c u r r e n t l y. Chairman of Living Media, Aroon Purie, has a rich lineage in the news disbursement b u s i n e s s . H e h a s b e e n associated with the news business for the past three decades and consistently maintained the company as a leader owing to his vast experience. TV Today is one of the leading news broadcasters in India with four channels viz. Aaj Tak, Headlines Today, Delhi Aaj Tak and Tez distributed by MSM Discovery Pvt. Ltd. TV Today is the first Indian broadcaster to uplink a 24-hour Hindi news channel from India. T h e c o m p a n y h a s a n undisputed leadership position in the Hindi news segment through Aaj Tak. In addition, Radio Today Broadcasting Ltd, a fellow subsidiary, merged with the company extending the
presence of TV Today to the radio segment under the brand Oye 104.8 FM. The company has also made a strategic investment worth 45 crore in FY10 in Mail Today Newspaper Pvt. Ltd., which publishes a news paper called Mail Today in a bid to enter the print segment for business scalability.
TV industry to grow at 16.2% CAGR (FY13-18E); sees 12% CAGR in FY08-13
T h e t e l e v i s i o n i n d u s t r y witnessed 12% compounded annual growth rate (CAGR) in CY08-13 despite the economic slowdown. According to the Federation of Indian Chambers of Commerce and Industry (FICCI)-KPMG report 2014, the industry is expected to grow at 16.2% CAGR in FY13-18E rising from Rs. 417 crore at the end of 2013 to 885 crore by the end of 2018E. The number of TV households in India is also expected to increase to 191 mil l ion from 161 mil l ion current ly. The te levis ion i n d u s t r y d o m i n a t e s t h e d o m e s t i c m e d i a & entertainment industry forming 45% of the total industry. The increase in the channel carrying
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Investment Rationale
November 2014
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STOCK IDEAS
ICICIdirect Money Manager
capacity to over 1000 owing to digitisation and revision of minimum channels to be broadcasted to ~500 is expected to bring in additional subscription revenues to broadcasters.
TV Today - No. 1 player in Hindi news genre; strong ad growth
News segment forming just 7% of TV viewership, garners 21% of total TV advertisement. TV Today, with a leadership position in the Hindi news segment, commands 10.9% of total TV news advertisement. With a viewership share of ~18.5% in the Hindi news segment and ~8.7% of the overall news segment, Aaj Tak commands an impressive 23% (as per FY13) of Hindi news and 9.2% of overall news advertisement revenues. This signifies advertiser's preference for Aaj Tak in a fiercely compet i t i ve segment populated with 392 news and current affair channels. With a gradual recovery in economic activity, we expect the company to post 16.3% CAGR (FY14-16E) in revenues to 526.6 crore.
Operating leverage to kick in, carriage costs reduction - major EBITDA driver
With digitisation, there has been an unprecedented
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increase in the channel carrying capacity of distributors with the total number of channels increasing from about 80 in analogue cable to over 1000 channels in digital. The increase in carrying capacity has brought about a reduction in carriage costs for all broadcasters. This reduction in carriage fees is critical for news broadcasters and would result in EBITDA margin gains going ahead. News broadcasters shell out about 25-30% of their total revenue in the form of carriage and placement fees. English n e w s c h a n n e l s s p e n d approximately 70% of their distribution costs as carriage in the metros and are yet to receive an equivalent benefit in terms of subscription from the metros.
Re-rating on the cards; recommend BUY with target price of 276
With most other costs largely fixed in nature, high degree of operating leverage would accrue to TV Today, resulting in 30.7% EBITDA CAGR (FY14-16E) to 186.6 crore. With a revival in EBITDA margins, v a l u a t i o n m u l t i p l e s a r e expected to inch up to historical levels. We value the company at 15x FY16E EPS of Rs. 18.4 to arrive at a target price of 276. We recommend BUY rating.
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November 2014
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ICICIdirect Money Manager
Key risks include: The implementation of the Telecom Regulatory Authority of India (TRAI) twelve minute ad cap can be a negative for the revenue estimates. Moreover, the news channels also have a threat of reputational risk.
(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; RoNW: Return on net worth; RoCE: Return on Capital Employed; DII: Domestic institutional investors; FII: Foreign Institutional Investors)
Key Financials
Valuations Summary
Stock Data
November 2014
Net sales ( crore) 312.7 389.4 480.3 526.6
EBITDA ( crore) 34.6 109.3 143.1 186.6
Net profit ( crore) 12.2 61.3 80.3 109.6
EPS ( ) 2.1 10.3 13.5 18.4
FY13 FY14E FY15E FY16E
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P/E (x) 108.1 21.5 16.5 12.1
Target P/E (x) 134.6 26.8 20.5 15
Dividend yield (%) 37.8 11.6 8.9 6.3
Price/Sales (x) 4.1 3.5 3 2.5
RoNW (%) 3.8 16.2 18.3 20.9
RoCE (%) 4 22.4 25.2 28.8
FY13 FY14E FY15E FY16E
Market capitalization ( crore) 1,320.6
Total debt (FY14) ( ) 0
Cash and investments (FY14) ( crore) 57
Enterprise value ( crore) 1,263.6
52-week High /Low ( ) 254 / 98
Equity capital ( crore) 29.7
Face value ( ) 5
DII holding (%) 3.4
FII holding (%) 0
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STOCK IDEAS
ICICIdirect Money Manager
Ultratech Cement: Largest and efficient player
Company Background
UltraTech Cement is the largest player in terms of capacity (60.2MT (million tons) including Jaypee plant) with market share of ~17% in India. The company has consistently remained ahead of its peers in terms of capacity expansion with a CAGR (compounded annual growth rate) of 23% vs. peers' CAGR of 13% over the past five years. During FY14, UltraTech increased its capacity by 6% year-on-year (YoY) to 53.9MT by commissioning the 3.3MT clinker plant in Karnataka. The 4.8MT capacity of the recently acquired Gujarat unit of Jaypee Cement has resulted in total current capacity of 60.2MT. The company is aiming to reach its total capacity of 70MT by FY16E. We believe this would help UltraTech to maintain its leadership, going forward. Other than this, the company has commissioned a 25MW (MegaWatt) thermal power plant at Andhra Pradesh and 6.5MW waste heat recovery system (WHRS) at Awarpur, Maharashtra. With this, the total power capacity of the company (including WHRS) stands at
733MW, which is around 80% of the company's power requirement. The company has a dealer network of over 15,000 dealers, which are well spread across the country. In terms of sales mix across the country, it is well distributed, indicating lower volatility in blended realisations. The company currently generates ~30% of sales from non-trade (sales to institutions) and remaining ~70% of sales from trade (retailers) segment, which keeps its average realisations healthy vs. its peers.
To benefit from strong recovery in demand due to pan-India exposure
The cement industry's capacity utilisation bottomed at ~69% in FY14. We believe low capacity addition and demand recovery should lift utilisation levels from hereon, given the cyclical upturn in the economy coupled with an expected policy push to drive investments in the infrastructure sector. By driving increased cement usage in sectors like road, power and irrigation, the industry can achieve the full potential of
Investment Rationale
November 2014
19
STOCK IDEAS
ICICIdirect Money Manager
cement demand growth over the next three years. Further, supply-side bottlenecks, in terms of quality logistics, skilled labour and delays in land and environment clearances, along with high cost of fuel and financing have put pressure on the cost of cement manufacturing. These, in turn, we believe, would lead to lower capacity addit ions going forward.
Operates at healthy EBITDA/tonne vis-à-vis industry
With lower lead distances due to a pan-India presence, captive power plants and higher sales realisations due to a higher trade mix coupled with higher white cement sales realisation, the company generates highest EBITDA/tonne in the industry. It has also been able to reduce its power consumption per tonne gradually through various initiatives. Power requirement of ~80% is met through captive power plants, which helps the company in reducing per tonne cost. Other than this, the company also has coal linkages with Coal India, which helps in lowering dependence on imports.
Healthy operating cash flow and
low debt/equity to fuel expansions
The company is expected to generate over ~ 3,200 crore of operating cash flows annually during FY15-17E. Further, considering the strong balance sheet of the company with minimal debt (D/E (debt-to-equity) of 0.3:1), we believe, the expansion plans will not add any stress on the balance sheet. This, in turn, will further strengthen the company's position in the industry.
Warrants premium valuations to capture long-term potential
The stock is currently trading at 12.5x and 9.5x EV/EBITDA for FY16E and FY17E, respectively, against last four years' average va lua t ions o f 13 .0x . As mentioned above, we believe low capacity addition and demand recovery should lift utilisation levels from hereon. We forecast a pan-India utilisation at 78% by FY16E that could offer pricing power. Given this scenario, we expect UltraTech, being the industry leader with strong balance sheet, to trade at premium valuations. Hence, we maintain BUY rating with a target price of 3180/share (i.e. at 12.0x FY17E
EV/EBITDA and EV/tonne of $190/tonne.
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November 2014
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Key risks include: Lower than expected recovery in demand and any future acquisitions at expensive valuations posses a key risk to our valuations.
(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; EV: Enterprise value; RoNW: Return on net worth; RoCE: Return on Capital Employed; DII: Domestic institutional investors; FII: Foreign Institutional Investors)
Key Financials
Valuations Summary
Stock Data
November 2014
Net sales ( crore) 20,077.9 24,704.4 28,791.5 34,007.5
EBITDA ( crore) 3,616 4,246 5,563.3 7,283
Net profit ( crore) 2,144.5 2,538.6 3,310.4 4,354.9
EPS ( ) 78.2 92.6 120.7 158.8
FY14 FY15 FY16E FY17E
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P/E (x) 32 27 20.7 15.7
Target P/E (x) 40.7 34.3 26.3 20
EV/EBITDA (x) 19.1 16.5 12.5 9.5
EV/Tonne ($) 203.2 184.8 164.1 148.8
RoNW (%) 12.5 12.9 14.9 16.6
RoCE (%) 11.9 12.3 14.9 18.1
FY14 FY15 FY16E FY17E
Market capitalization ( crore) 68,577
Total debt (FY14) ( crore) 4,496
Cash and investments (FY14) ( crore) 4,007
Enterprise value ( crore) 69,066
52-week High/ Low ( ) 2,872/1,635
Equity capital ( crore) 274.2
Face value ( ) 10
DII Holding (%) 20.6
FII Holding (%) 5.2
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21ICICIdirect Money Manager
FLAVOUR OF THE MONTH
Parents, encourage your children to start investing
One of the most precious gifts you as a parent can give to your children is teaching them about investing at a young age. This almost becomes a responsibility as your child enters into the real world and starts dealing with money himself or herself. Your responsibility actually multiplies as he or she enters into a college or gets his or her first job. Investing or personal finance as a subject is not yet being taught in schools or colleges in India. Hence, the responsibility to guide our children falls primarily on us, the parents. Remember, children learn from watching us. They observe us, listen to us and follow our habits, including money habits. In fact, a recent study reveals that children tend to pick parents' spending habits marginally more than their saving habits. It is therefore important to be aware of the messages that we as parents send and the examples we set. We should try to incorporate good financial habits and teach the same to our next generation. Here we discuss how you as a parent can mentor your children to become financially secure, whether they are still in college or have just got a job.
November 2014
Getting started
Youngsters generally don't
know where to start and what
to do. So the first step is to get
them opened a savings and an
i n v e s t m e n t a c c o u n t .
Assuming that your child
already has a savings bank
account, he needs to open a
demat account.
The demat account can be
opened for free with some
brokers such as ICICIdirect by
d o i n g t h e n e c e s s a r y
paperwork. We offer a three-
in-one account that integrates
banking, trading and demat
account, making it easier for
one to trade and invest.
Once the account is opened,
your child can start investing
online, just as shopping online,
at the click of a mouse. In
earlier days, you may have
seen markets that were not so
efficient and accessible, but
today, things have changed for
good. Investing is really easy
today and just a click away.
Most youngsters feel it is not
worth investing till they have a
large amount available. The
fact is, even 500 a month is a
great amount to start with.
They key is to start investing
early and make it a habit.
As parents, we need to teach
our ch i ldren about the
importance of saving and
investing early and drop by
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22ICICIdirect Money Manager
FLAVOUR OF THE MONTH
November 2014
drop, in order to help secure
their financial future. The
earlier they start, the more they
can benefit from compound
growth.
Say for example, if your child
starts investing 3,000 a
month from the age of 25 in an
investment that provides 10%
return, he would accumulate
1,02,77,680 when he turns 60.
However, if he delays his
investment plans and even if
he starts investing a greater
amount of 5,000 per month at
10% when he is 35, it will
accumulate only 62,15,798
when he is 60. A difference of
over 40,00,000!
Your children have time on
their side, so encourage them
to start investing as soon as
possible and benefit from the
eighth wonder called 'power of
compounding'.
A mutual fund SIP (systematic
investment plan) is the best
way to begin. The trick is to
automate SIP investments.
With this, on a designated day
of the month, the money gets
invested automatically.
A public provident fund (PPF)
or a bank recurring deposit
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(RD) is also a great start. At the
same time, investments into
equity are most suitable as
they have long investment
horizon. Encourage them to fix
a certain sum that they should
save every month before they
start to spend.
Yo u n g i n d i v i d u a l s a r e
generally hesitant to start their
investment journey, especially
when it comes to investing into
equity. The reasons are many.
Whether it is not having
enough time and money,
thinking stock market is too
complex and technical, young
individuals are quick to give up
before they even start.
There is no denying that equity
as an asset class is risky, and so
is to avoiding it. This is because
if a portfolio lacks investments
that carry higher potential
return, such as equity, it may
not achieve sufficient growth
to fund crucial long term
f inancia l goals such as
retirement. This, you as a
parent, may have already
realized that skipping growth
assets such as equity can hurt
one's long-term financial goals.
The potential of equity
23ICICIdirect Money Manager
FLAVOUR OF THE MONTH
November 2014
It is a well established fact that
equity offers the best returns in
the long run as compared to
other asset classes. S&P BSE
Sensex, for instance, has
delivered 17% compounded
annual growth rate (CAGR) in
the last 35 years. Whereas
fixed deposits and gold have
returned only 8.7% and 9.1%,
respectively, during the same
period.
Apart from strong long-term
returns, equity also provides
better inf lat ion-adjusted
returns (also known as real
returns) as compared to fixed
income instruments. Gone are
the days when one could get
12-15% interest on traditional
instruments. Today, in order to
meet goals and create wealth
in the long run, investments
must deliver higher returns
than the rate of inflation. Else,
inflation will eat into returns
and may not help build
sufficient corpus for meeting
financial goals. And equity is
perhaps the only such option
that delivers better return over
inflation.
Further, equity is also a tax
efficient investment. Like
inflation, taxes also reduce the
net rate of return. As long-term
capital gains (> 1 year) from
equity are tax-free, they
p r o v i d e b e t t e r t a x -
adjustedreturns. Dividends are
also tax-free in the hands of
investors.
Yo u s h o u l d t h e r e f o r e
encourage your children to
take some risk and start
investing in equity, to create
wealth in the long run. Risk is
an integral part, and the longer
the time frame is, more risk
they can take. Don't always let
your personal experiences
completely mask what is
optimum risk they can take
with their investments.
G i v e n t h e l e s s e r
responsibilities and greater
capacity to take risks at young
age is the perfect time for your
children to take the plunge in
equity.
In the teaching process, it is
also important to make our
children understand that
equity may turn volatile in the
short term, but it provides the
best returns in the long run
(see the chart below).
24ICICIdirect Money Manager
FLAVOUR OF THE MONTH
November 2014
How SIP of Rs. 5,000 p.m. has grown since April 1, 1979
8,28,07,659
61,61,327
1,38,98,506
0
1,00,00,000
2,00,00,000
3,00,00,000
4,00,00,000
5,00,00,000
6,00,00,000
7,00,00,000
8,00,00,000
9,00,00,000
Equity Gold RD
This is the whole reason to take the effort of investing in equity. Great investing requires time, discipline, and patience.
As parents, you may have had good or bad experiences from investing in the equity. However, it is important to make our children learn not only through our experiences, but also what is right for them. Equity remains the best option for youngsters to achieve their long-term goals.
Apart from investing, there are also other areas of personal finance, which should be taught to children, such as managing debt carefully, getting an insurance, etc. Let's take a look:
In the Managing debt carefully:
current era of flourishing e commerce, it is very easy and tempting for youngsters to use credit cards and loans for everything that they need and want. However, it is important to make them understand the d i f f e r e n c e b e t w e e n d i sc re t iona ry and non -discretionary expenses. For example , en te r ta inment expenses are discretionary, while paying the rent or utility bill is non-discretionary.
This is not to say children shouldn't spend any money on d iscre t ionary expenses . However, there should be a balance between saving and spending. As parents, we should make our children learn the f ine art of delayed
25ICICIdirect Money Manager
FLAVOUR OF THE MONTH
November 2014
gratification, an ability to resist the temptation for discretionary spending in order to receive a much larger reward later.
In order to help our children spend carefully and manage debt diligently, we need to also make them understand the difference between good debt and bad debt.
Rationally, a good debt can be referred to a loan, where the expected return from the asset/purpose is more than the interest cost of the loan. The most common example of a good debt is home loan. Bad debt, on the other hand, can be referred to as borrowing for an asset which depreciates or fall in value over a period of time or may not have an underlying value.
As home loan is a part of good debt, we may get our children take this loan, as this will not only help them build an asset early on, but will also help them increase their savings in the process. This is because there are tax benefits available for home loan. First, there is a tax deduction available of up to Rs. 1.50 lakh under Section 80C for principal repayment of
a self-occupied property and second, under section 24, up to 2 lakh for interest paid. And in
case of a let-out property (not a self-occupied one), one gets a tax deduction for the entire interest paid.
With these tax benefits, the cost of home loan actually comes down.
Suppose your child takes a home loan of 50 lakh at 10% per annum. If he falls under the highest tax bracket of 30%, the effective loan rate would only be 7.90% (for a self-occupied property), and 7% (for a let out property), instead of 10%.
This makes the case of buying a home early on in their career. However, it is important to k e e p e q u a t e d m o n t h l y installment (EMI) outgo not more than 40% of monthly net income.
In case of credit card debt, it is important to get our children clear all the outstanding dues on or before the due date. If one fails to do so, a very high rate of interest is charged, which is anywhere between 30% to 45% p.a. Plus, the penalty is charged for late payment.
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Let's understand this with an example:
26ICICIdirect Money Manager
FLAVOUR OF THE MONTH
November 2014
We should help our children develop a proper plan to pay off debt in a systematic way, from highest interest rate loans (e.g. personal loan) to the lowest (e.g. home loan).
Though your child may already be provided with a health cover by his employer, it is important to make him understand the essentials of getting a separate cover – what if one loses a job or switch to another company or the cover itself is insufficient?
A basic plan, which reimburses hospitalisation expenses, should be your child's first health insurance policy. The cover can be enhanced by taking riders such as critical illness cover, etc.
There are also tax-benefits available for premium paid towards health insurance, under section 80D.
Getting a health insurance:
Did you know…? Your 25-year old child can buy 5 lakh worth of coverage for an annual premium of just about 4,000*.*premium mentioned is indicative in nature
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Getting a personal accident cover: This is another type of
insurance plan youngsters must opt for. A personal accident cover takes care of the e x p e n s e s i f o n e g e t s permanently or temporarily disabled following an accident.
Did you know…? One can get a cover of 25 lakh for an annual premium of just about 3,000*.*premium mentioned is indicative in nature
Teaching sound financial habits to children at an early age gives them the opportunity to be financially healthy in the long run. Remember, even for Warren Buffett, one of the most famous billionaires in the world, the greatest inspiration was his father. “He was my hero when I was 6 and he is still my hero now. He is an inspiration to me in every way. What I learned at an early age from him was to have the right habits early. Savings was an important lesson he taught,” says Buffett as quoted in the media. So parents, be a good financial role model for your children! The earlier your children start investing, the more secure their financial future would be.
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Summing up
Please send your feedback to [email protected]
27ICICIdirect Money Manager
‘Asset allocation offers the best opportunity to balance risk & reward’
Market is trading at 12-month forward PE (price-to-earnings) of 16x versus historical average of 15.6x. On this multiple, markets may seem expensive, says Tushar Pradhan, Chief Investment Officer (CIO), HSBC Mutual Fund. However, this multiple is placed favourably with its history of positioning at the beginning of the growth up-cycle, he adds. He suggests investors to continue to follow a disciplined approach to investing and believes that asset allocation offers the best opportunity to balance risk and reward. Excerpts:
Tushar Pradhan,
Chief Investment Officer (CIO),
HSBC Mutual Fund
Tête-à-tête
Q:
A:
How is the current economic situation, on both global and domestic fronts, looking like?
On the domestic front, reform momentum is quite strong even though there may not have been big-bang announcements. Key contours of the reforms are change in governance s t ruc ture , administrative reforms, tax reforms, realignment of
subsidies, and boost to infrastructure spending.
The Prime Minister's office seems to be the single decision making body and consequently, decision making is faster. Administrat ive reforms like consolidation of ministers, empowering of bureaucracy, and transparency in governance (e.g. putting up c l ea rances l i ke Fo res t , Environment, and Mining on a d i g i t a l p l a t f o r m ) f i s c a l consolidation, realignment of subsidies and streamlining of social spending will release capital, which could be used for l i f t ing infrastructure spends.
On the economic front, the macro indicators are more heartening. Twin deficits (Current Account and Fiscal Deficit) are no longer an overhang, currency is stable, inflation seems to have peaked, and there is a reasonable expectation of a
November 2014
28ICICIdirect Money Manager
Tête-à-tête
November 2014
possible lower trajectory in interest rates. Fiscal consolidation is happening. Tr a j e c t o r y o f f i s c a l consolidation is steep but can be achieved as growth accelerates and tax reforms get implemented. All the major drivers of inflation - food, fuel, f iscal , currency, and commodity - are pointing downwards. Crude prices have fallen over 35% from their near-term peak. Commodity prices have declined rapidly over the last 3 months. Net commodity trade deficit peaked at about 7% of gross domestic product (GDP) in 2012. It had fallen to 5.5% of GDP in the 12 months ending August 2014. At the current commodity price levels, net deficit from commodity could fall by another 1%.
On the global front, the economic situation is mixed. US is growing and accelerating but there has been a slowdown in the European Union (EU) and Japan. Over 2015, it is expected that EU and Japan will have a loose monetary policy but the US and the UK are likely to tighten their monetary policies.
What is your outlook for the Q:
marke ts go ing ahead? Do valuations look expensive?
Market is trading at 12 month forward PE (price-to earnings) of 16x versus historical average of 15.6x. On this multiple, markets may seem expensive. However, this multiple is placed favourably with its history of positioning at the beginning of the growth up-cycle. We should also note that this headline multiple is on back of three years of decelerating economy and falling margins. As growth comes back and margins increase, 2-year forward multiples could shrink to 13x. Forthcoming rate cuts, too, should feed into equity valuations. As of now, markets may perceptibly seem slightly expensive but can be supported due to earnings acceleration and rate cuts. We expect market returns to follow trajectory of earnings growth.
What are the immediate risks to the markets?
Geo-politics continues to be the biggest risk not only for India but for markets globally. On the domestic front, a delay in rate cutting cycle and delay in implementation of key reforms could also act as a
A:
Q:
A:
29ICICIdirect Money Manager
Tête-à-tête
November 2014
have erased three years of underperformance vis-à-vis large caps. At the current valuation levels, small and mid-caps are aligned with average historical discount to large-caps on a 2-year forward earnings basis.
In terms of sectors, where do you see the opportunities for investors in the current scenario?
We remain constructive on F i n a n c i a l s , C o n s u m e r Discretionary, Technology and Materials.
What is your stock-picking strategy?
We have a snapshot of Indian sectors and stocks viewed through valuation and p r o f i t a b i l i t y m e t r i c s i s generated and checked against in-house estimates. Further, fundamenta l bo t tom-up analysis is carried out on the stocks that seem attractive. The goal of stock analysis is to establish a company's current level of profitability and to understand whether it is sustainable over the medium term. The analysis will result in a decision to include or exclude each of the high ranking stocks, and will continue until the portfolio managers have sufficient
Q:
A:
Q:
A:
dampener.
How do you see the markets and currency reacting to the expected Fed action (hike in interest rates) in 2015?
It is widely expected that the US Fed will hike interest rates sometime in 2015. When the event actually happens, it is bound to have some impact on the currency markets, fixed income markets and equity markets across the world. However, in anticipation of that eventuality and having learnt from past experiences, India has been fortifying itself. Over the last 15 months, India's foreign exchange (forex) reserves have gone up from $275 billion to $315 billion, the forward premium has come down, and the currency has stabilized. So, we expect adverse reaction to currency and markets but the impact would be minimised due to mitigating efforts undertaken by the Reserve Bank of India (RBI).
The small and mid-cap space has seen sharp gains in the recent past. Is the space still attractive?
Over the last year, the small and mid-companies have increased more than their large cap peers and therefore
Q:
A:
Q:
A:
30ICICIdirect Money Manager
Tête-à-tête
November 2014
discipl ined approach to investing. We have been and continue to be of the view that i nves to rs shou ld make allocations in keeping with the i r r i sk appet i te and investment horizon. We also believe that asset allocation offers the best opportunity to balance risk and reward.
individual stock ideas to be able to construct a suitably diversified portfolio.
What strategy would you suggest for investors to adopt at this point of time in the market? What according to you is the key to successful investing?
We would suggest investors to continue to follow a
Q:
A:
The views expressed in the interview are personal views of the authors and do not necessarily represent the views of ICICI Securities.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
The article is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. Investors should understand that statements made herein regarding future prospects may not be realised. The views expressed in the article are personal views of the author and do not necessarily reflect the views of HSBC Asset Management (India) Private Limited or any of its associates. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Asset Management (India) Private Limited. HSBC Asset Management (India) Private Limited; 16, V. N. Road, Fort, Mumbai 400 001. Tel: 6614 5000. Email: [email protected].
31ICICIdirect Money Manager
ASK OUR PLANNER
Claiming RGESS tax benefits
Q:
A:
I had invested Rs.50,000 under
section 80 CCG (RGESS) for
financial year 2013-14. Am I eligible
to invest 50,000 each for two
more years and claim deduction?
- Satish G
The Rajiv Gandhi Equity
Savings Scheme (RGESS) tax
benefits can be availed for
three consecutive financial
years, beginning with the
financial year in which the
investment under the scheme
was made for the first time.
Hence, you are eligible to
invest and claim benefits
during FYs 2014-15 and 2015-
16.
The depository would be
automatically locking-in all the
eligible securities which
comes into an RGESS
designated demat account
during the relevant financial
year up to a value of Rs. 50,000.
However, if you wish not to
claim tax benefit for
investments made in any
particular financial year within
the allowable 3-year time
`
period, you need to submit the
general application as
specified by depositories,
before April 15th of the next
financial year.
Also, you have the freedom to
select the stocks to be kept
under lock-in up to 50,000 for
c la iming benef i ts under
RGESS. Since the depository
would be automat ica l ly
locking-in all the eligible
securities, you have to intimate
the depository participant
through Form B within one
month from the date of
transaction, about those
investments which you do not
want to keep as part of RGESS
investment in that year, such
that you have the right to sell /
pledge those securities at any
time.
Once an application is made
through Form B, that particular
security cannot be brought
back under RGESS while
claiming for tax benefit.
I am a defence pensioner (your
account holder). 15 lakh will be
maturing in two months from one of
`
`
Q:
November 2014
32ICICIdirect Money Manager
ASK OUR PLANNER
my existing investments. I want to
invest the amount in a reliable
scheme/mutual fund (MF) which
gives monthly/quarterly return like
debt / monthly income plan (MIP).
Kindly advise.
- Col. Kaushal Chaturvedi
If you are looking at regular
income immediately from the
entire amount, then you can
consider investing into a
combination of Fixed Deposits
(FDs), Senior Citizen Savings
Scheme (SCSS) and Monthly
Income Plans (MIPs) with
dividend payout option.
However, there's no assurance
on the frequency and the
amount of payout in MIPs.
The interest earned from Fds
and SCSS will be added to your
income and taxed as per the
income slab. However, in an
MIP, the dividend paid to you
will be after deducting a
Dividend Distribution Tax
(which is paid by the scheme),
which currently stands at a flat
2 8 . 3 2 5 % ( 2 5 % + 1 0 %
Surcharge + 3% cess).
Alternatively, you can invest
part of the amount into FDs and
A:
SCSS and the balance amount
into MIPs with a growth option.
In such a scenario, you will be
generating regular income
immediately only from FDs &
SCSS. For investment into
MIPs, you can wait for 3 years
and then you may start
withdrawing a fixed amount
every month through
Systematic Withdrawal Plan
(SWP).
This arrangement will be more
tax efficient, as you will be
paying tax only on capital
gains, which is currently 20%
after indexation. Indexation
will bring down the taxable
capital gains to a much lower
level and the effective tax
outgo can be less than 10%.
However, your corpus will keep
coming down in an SWP and
beyond a point of time it will
exhaust.
Fo r knowing ou r
recommended mutual funds,
please refer our MF Top Picks
in this edition or visit our
website www.icicidirect.com.
November 2014
33ICICIdirect Money Manager
ASK OUR PLANNER
November 2014
Q: I am 30 years old. Could you please assess and tell me about investment in mutual funds (MFs) vs. public provident fund (PPF) over 15 years period?
- Pavithra Gayathri
A: The table below outlines the basic difference between PPF & equity MFs:
Feature s PPF Equity MFs
TenureFixed Term -15 years; Lock-in
for 5 years
No fixed term or lock-in(except Equity Linked
Savings Schemes (ELLS), where there is 3-
year lock-in
Asset Class Debt Equity
ReturnFixed return as decided by the
Government of India every year No fixed return
Tax benefit on principal
As per current tax laws, Rs.1.50
lakh p.a. exempt under section
80C
No exemption (exceptELSS funds, where investment up to
Rs.1.50 lakh p.a. is exempt under section
80C, currently)
Tax on return Exempt from taxExempt from tax, if held for 12 months or more
Capital protectionGuaranteed by the Government
of IndiaNo guarantee
Comparing PPF with Equity
MFs may not be correct, as
both these instruments fall
under different asset classes,
debt and equity, respectively.
Both have their own pros &
cons.
If you had invested Rs. 10,000
into PPF & Sensex in April 1988,
PPF would have fetched you
Rs. 1,08,911 at the end of 15
years, whereas Sensex would
have fetched you 4,73,241.
Looking at the past
`
performance of PPF & Sensex
for 23 years (from April 1980 to
March 2013), PPF has given an
annualized return of 9.68%,
while Sensex has given an
annualized return of 15.27%.
Q: I have three mutual fund
schemes through SIP (systematic
investment plan) by monthly
installment of 1,000 each for the
period of 60 months. These are:
1. Reliance small cap fund (G)2. F r a n k l i n I n d i a s m a l l e r
`
34ICICIdirect Money Manager
ASK OUR PLANNER
November 2014
companies fund (G)3. Birla sun life top 100 fund (G)
All schemes taken through
online mode.
I have some doubts about mutual
funds (MFs) as I am a new investor.
1. Can I increase my monthly
installment in the existence
scheme?
2. If no, then, if again I am
investing the same scheme by
new folio then what will
happen? Is it the right decision?
3. Can I increase my installment
months i.e 60 months to 120
months or more later?
4. Can I withdraw with my
scheme any time?
5. Can I get only one Folio for all
schemes? If yes then w h a t i s
the benefit of this?
- Aqeeq Akhter
The installment amount as
well as the investment period
can be changed by modifying
the SIP from the 'Modify SIP'
link in the SIP book, provided
www.icicidirect.com,
A:
the SIP has completed 6
months.
You have the complete
freedom of withdrawing the
scheme at any time. However,
SIPs in mutual funds are
beneficial if held and run for
longer period.
You can have the single folio
for all schemes of on Fund
house. You cannot hold funds
from different fund houses in
one folio. However, since you
hold the investments through
ICICIdirect.com, it gives you all
the benefits of holding
investments in one account.
T h e b e n e f i t s b e i n g
consolidated account
statement, consolidated
portfolio, consolidate capital
gain statement, etc.
Do you also have similar queries to
ask our experts? Write to us at:
35
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager September 2014
Category: Diversified Equity Funds
Key Information:
Fund Objective:
To generate long-term capital appreciation from a portfolio of equi ty and equi ty re lated securities, generally focused on a few selected sectors.
Product Label:
This product is suitable for investors seeking*:
• long term capital growth
• Investment in por t fo l io of
predominantly equity & equity related securit ies general ly focussed on a few selected sectors
• High risk
Fund Manager : Harsha UpadhyayaHarsha Upadhyaya heads the
equity management team at
Kotak Asset Management
Kotak Select Focus
NAV as on November 28, 2014 ( ) 22.2
Inception Date September 11, 2009
Fund Manager Harsha Upadhyaya
Minimum Investment (`)
Lumpsum 5000
SIP 1000
Expense Ratio (%) 2.23
Exit Load 1% on or before 1Y,
Nil after 1Y
Benchmark CNX 200
Last declared Quarterly AAUM(| cr) 1220
`
Company (AMC). He has 18
years of rich experience spread
over equity research and fund
management. His prior stints
have been with companies
such as DSP BlackRock, UTI
Asset Management, Reliance
Group and SG Asia Securities.
Harsha is a Bachelor of
Engineering (Mechanical) from
N a t i o n a l I n s t i t u t e o f
Technology, Suratkal, a Post
Graduate in Management
(Finance) from Indian Institute
of Management (IIM), Lucknow
and a Chartered Financial
Analyst from the CFA Institute.
The fund performance has
picked up after Mr Upadhyaya
joined Kotak AMC and started
managing the fund. In the last
six months, the fund has
delivered 31% return almost
double (1.7x) that of its
benchmark CNX 200 return of
17.8%. In the last year, the fund
h a s o u t p e r f o r m e d i t s
benchmark by a whopping 20
percentage points.
Performance:
36
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager September 2014
Performance vs. Benchmark
Fund Benchmark
30-Sep-13 30-Sep-12
30-Sep-13 30-Sep-12 30-Sep-11
30-Sep-14
Last Three Years Performance
Fund Name
2013 2012 2011 2010 2009
Calendar Year-wise Performance
`Date
Fund 19809
Benchmark 16219
CNX Nifty 16489
* As on Sep 30, 2014
Note: Investors should note that past performance may or may not be repeated in future
31
63.3
29.1
16.3
17.8
44.6
21.5
11
010203040506070
6 Month 1 Year 3 Year 5 Year
Retu
rn%
NAV as on Dec 31 ( ) 14.1 13.3 9.9 12.8 10.6
Return (%) 6.1 33.5 -22.3 20.1 6.4
Benchmark (%) 4.4 31.6 -27.0 14.2 86.6
Net Assets (` Cr) 325 368 359 122
`
Fund 58.04 1.66 16.40
CNX200 42.81 -1.26 14.04
CNX Nifty Index 38.87 0.56 15.38
Current Value of Standard Investment of ` 10000 in the
Portfolio:The fund has 90% large-cap stocks in the portfolio with all heavyweights like ICICI Bank and State Bank of India (SBI) in
the banking sector, Infosys in the information technology (IT) space and Tata Motors & Maruti Suzuki in the auto sector. The fund manager has been bullish on private banks, which constitute about 19% of the t o t a l a s s e t s u n d e r management (AUM). Among export driven companies, exposure to pharmaceutical companies has gradually been reduced while exposure to technology companies has been maintained at 13% of the portfolio.
The top 3 sectors (banks, automotive and technology) cumulatively account for 60% of the portfolio, which is in line with its objective of being focused on a few selected sectors. Overall, the fund is su i t ab le fo r l ong te rm ho ld ing/S IP (sys temat ic investment plan).
Top 10 Holdings Asset Type %
ICICI Bank Ltd. Domestic Equities 6.3
Infosys Ltd. Domestic Equities 5.3
Tech Mahindra Ltd. Domestic Equities 5.2
State Bank Of India Domestic Equities 4.4
Tata Motors Ltd. Domestic Equities 3.5
HDFC Bank Ltd. Domestic Equities 3.4
Axis Bank Ltd. Domestic Equities 3.2
Reverse Repo Cash & Cash Equivalents 3.2
Ultratech Cement Ltd. Domestic Equities 3.1
Maruti Suzuki India Ltd. Domestic Equities 3.0
37
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager September 2014
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
(Blue) Investors understand that
their principal will be at low risk
(Yellow) Investors understand that
their principal will be at meduim risk
(Brown) Investors understand
that their principal will be at high
risk
Top 10 Sector Asset Type %
Market Capitalisation (%)
Large 90
Mid 8.5
Small --
Portfolio Attributes
Total Stocks 52.0
Top 10 Holdings (%) 40.6
Fund P/E Ratio 23.7
Benchmark P/E Ratio –
Fund P/BV Ratio 4.6
Asset Allocation
Equity 98.6
Debt 0.0
Cash 1.4
Dividend History
Sep-29-2014 10
Oct-18-2010 12.5
Date Dividend (%)
Performance of all the schemes managed by the fund manager
Fund Name30-Sep-13
30- -14Sep
30- -12Sep
30- -13Sep
31- -11Sep
31- -12Sep
Data and Portfolio Details as on November 28, 2014Source: ICICIdirect.com Research, Accord Fintech
Bank - Private Domestic Equities 19.0
IT - Software Domestic Equities 13.5
Cement & Construction Materials Domestic Equities 7.6
Refineries Domestic Equities 7.4
Bank - Public Domestic Equities 5.7
Auto Ancillary Domestic Equities 4.8
Industrial Gases & Fuels Domestic Equities 3.9
Automobiles-Trucks/Lcv Domestic Equities 3.5
Pharmaceuticals & Drugs Domestic Equities 3.4
Automobiles - Passenger Cars Domestic Equities 3.0
Kotak Select Focus Fund(G) 58.04 1.66 16.40
CNX 200 42.81 -1.26 14.04
Kotak Opportunities Fund(G) 49.86 0.05 15.25
CNX 500 Index 46.08 -2.49 13.22
38
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager September 2014
ICICI Prudential Dynamic Plan
Fund Objective:
To g e n e r a t e c a p i t a l appreciation by actively investing in equity and equity related securities and for defensive consideration in d e b t / m o n e y m a r k e t instruments and derivatives
Key Information:
Product Label:
NAV as on November 28, 2014 ( ) 188.4
Inception Date October 31, 2002
Fund Manager Sankaran Naren
Minimum Investment (`)
Lumpsum 5000
SIP 1000
Expense Ratio (%) 2.13
Exit Load 1% on or before 12M,Nil after 12M
Benchmark CNX Nifty Index
Last declared QuarterlyAAUM (` cr) 5446
`
This product is suitable for investors seeking*:
• Long term wealth creation solution
• A diversified equity fund that aims for growth by investing in equity and debt ( for defensive considerations)
• High risk
Fund Manager: Sankaran NarenS. Naren has rich experience of
around 23 years in almost all
spectrums of the financial
services industry ranging from
investment banking, fund
management, equity research
and stock broking operations.
He is the Chief Investment
Officer (CIO) – Equity at ICICI
Prudential Asset Management
Company (AMC).
The fund performance can be
attributed to its agility in
limiting the downside via cash
calls/hedging stock positions,
etc. In 2011, when the CNX
Nifty dipped 25%, the fund
managed to limit the downside
for its investors to 20% despite
having higher equity allocation
(~90%). The fund has not just
e m e r g e d a s a s t e a d y
p e r f o r m e r i n m a r k e t
downturns but also managed
to deliver above average
returns during rallies. The
fund, as on November 30, 2014
h a s d e l i v e r e d 1 6 %
compounded annual ised
return for a period of five years
as against 12% compounded
annualised return delivered by
the benchmark CNX Nifty
Index for the same period. The
fund has been a steady
performer and has weathered
many market cycles.
Performance:
39
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager September 2014
Performance vs. Benchmark
Fund Benchmark
30-Sep-13 30-Sep-12
30-Sep-13 30-Sep-12 30-Sep-11
30-Sep-14
Last Three Years Performance
Fund Name
2013 2012 2011 2010 2009
Calendar Year-wise Performance
`Date
Fund 176426
Benchmark 83716
19.5
45
26.2
16.7
17.2
41
21
11.7
0
10
20
30
40
50
6 Month 1 Year 3 Year 5 Year
Retu
rn%
NAV as on Dec 31 ( 135.1 116.1 88.9 111.6 92.0
Return (%) 16.3 30.6 -20.3 21.3 79.9
Benchmark (%) 6.8 27.7 -24.6 18.0 75.8
Net Assets (` Cr) 3666 3953 3962 2785 1822
`)
Fund 50.04 5.53 16.33
CNX Nifty Index 38.87 0.56 15.38
Current Value of Standard Investment of ` 10000 in the
* As on Sep 30, 2014
Portfolio:Asset allocation of the fund is determined based on market valuations. The fund manager has the discretion to take aggressive or defensive asset ca l ls , based on market conditions. Therefore, the equity allocation fluctuates between 70% and 90%
depending on the broader market scenario. Currently, allocation is closer to 75% indicating the fund manager has a neutral view on equities and mildly positive on debt market to give better risk-adjusted returns.
This fund adopts a "bottom-up" fundamental analysis strategy across market capitalisations for picking its investments. The fund manager, especially for his mid-cap holdings in the fund, follows a buy and hold strategy without much churn. For stocks available in the fu ture & opt ions (F&O) category, the fund manger does not shy away from hedging the exposure, thereby limiting the interim downside.
Overall, this fund is best suited in a volatile environment where profits in equities are booked at rich valuation and the downside is limited via hedging and cash calls.
Top 10 Holdings Asset Type %Short Term MMI Cash & Cash Equivalents 11.3
Power Grid Corporation Of India Ltd. Domestic Equities 9.8
HDFC Bank Ltd. Domestic Equities 7.4
Wipro Ltd. Domestic Equities 6.3
1.44% GOI IIB 2023 Government Securities 5.1
08.30% GOI - 31-Dec-2042 Government Securities 4.5
Reliance Industries Ltd. Domestic Equities 4.3
ICICI Bank Ltd. Domestic Equities 3.4
Infosys Ltd. Domestic Equities 3.4
Mahindra & Mahindra Ltd. Domestic Equities 2.7
40
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager September 2014
Top 10 Sectors Asset Type %
Whats In % %Whats Out
Portfolio Attributes
Total Stocks 60
Top 10 Holdings (%) 58
Fund P/E Ratio 19.5
Benchmark P/E Ratio –
Fund P/BV Ratio 3.2
Risk Parameters
Standard Deviation (%) 10.68
Beta 0.69
Sharpe ratio 0.21
R Squared 0.79
Alpha (%) 3.02
Market Capitalisation (%)
Large 66.1
Mid 9.8
Small 1.7
Asset Allocation
Equity 75.2
Debt 13.2Cash 11.6
IT - Software Domestic Equities 13.5
Bank - Private Domestic Equities 11.9
Power Generation/Distribution Domestic Equities 11.0
Refineries Domestic Equities 4.3
Oil Exploration Domestic Equities 3.3
Bank - Public Domestic Equities 2.9
Automobiles-Tractors Domestic Equities 2.7
Shipping Domestic Equities 2.2
Pharmaceuticals & Drugs Domestic Equities 2.1
Finance - Investment Domestic Equities 2.0
CESC Ltd. 0.7
Crompton Greaves Ltd. 1
Reliance Capital Ltd. 1
Tata Steel Ltd. 0.2
Motherson Sumi Systems Ltd. 1
Gujarat State Petronet Ltd. 0
Dividend HistoryDate Dividend (%)
Oct-13-2014 20
Oct-28-2013 15
Nov-05-2012 22.83
Sep-02-2011 5
Feb-28-2011 10
Aug-23-2010 10
Performance of all the schemes managed by the fund manager
Fund Name30-Jun-13
30-Jun-14
30-Jun-12
30-Jun-13
31-Jun-11
31-Jun-12
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
(Blue) Investors understand that
their principal will be at low risk
(Yellow) Investors understand that
their principal will be at meduim risk
(Brown) Investors understand
that their principal will be at high
risk
ICICI Pru Dynamic Plan-Reg(G) 50.04 5.53 16.33
CNX Nifty Index 38.87 0.56 15.38
ICICI Pru Top 100 Fund-Reg(G) 48.25 5.05 21.51
CNX Nifty Index 38.87 0.56 15.38
Data and Portfolio Details as on November 28, 2014Source: ICICIdirect.com Research, Accord Fintech
41ICICIdirect Money Manager
EQUITY MODEL PORTFOLIO
Our indicative large-cap equity model portfolio has continued to deliver an impressive return of 82.4% (inclusive of dividends) till date (as on December 8, 2014) since its inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex) return of 60.1% during the same period, out-performance of over 22%. Our portfolio approach towards high-quality stocks aided us in outperforming the Sensex with continued success. We continue to trust our philosophy of choosing stocks where the risk reward is favourable and not just the reward aspect. We feel “Quality-21” large-cap portfolio will continue to be aligned to the same philosophy.
Our “Consistent-15” mid-cap portfolio also continues to outperform, delivering 93.1% (inclusive of dividends) till date (as on December 8, 2014) vis-à-vis the benchmark index (CNX Midcap) return of 62.8%, as we continued to identify fundamentally strong stocks. Some key performers of our portfolio are Sun Pharmaceuticals, Lupin, Tata Consultancy Services (TCS), Tata Motors, Info Edge and Dabur India delivering 97%-190% returns since inception.
We have always suggested the systematic investment plan (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. It has outperformed other portfolios, thus, reinforcing our belief in a plan of investment. However, now we are also advising clients to look at lump-sum investments at any possible dips.
In the last few years, anxiety stemming from weak economic health and unstable policy environment has resulted in defensive sectors commanding high scarcity premium while debt-ridden cyclicals witnessed a de-rating. However, the recent decisive election verdict has given investors optimism over the overall growth prospects of the economy. Thus, the current rally has totally reversed the penchant for defensives (like information technology (IT), pharmaceuticals and fast-moving consumer goods (FMCG)), which have underperformed in 2014 year-to-date (YTD). On the other hand, old economy sectors, including capital goods, realty, metals, power and oil & gas have been
November 2014
42ICICIdirect Money Manager
EQUITY MODEL PORTFOLIO
topping the charts this year, signifying changing investor preference.
Thus, from a portfolio perspective, we have now leaned forward towards inclusion of stocks with more real economy, domestic discretionary exposure viz. GAIL, JK Cement, Arvind, etc. We have, thus, taken a strategic call of including stocks that possibly have a larger opportunity size either via reforms push or via revival in the discretionary demand from domestic consumers. Thus, we exit Page Industries and Nestlé with minimal returns.
Hence, we have made a significant shift in our portfolio stance to play the recovery cycle. In terms of relative weightage of the sector vis-à-vis the Sensex, we have changed our stance and gone overweight on financials (raising weights of public sector banks), oil & gas, the infrastructure space (cement, infrastructure and power). This has been primarily triggered by the possibility of decisive action in the infrastructure and real economy space by the new government. We have maintained our overweight stance on telecom considering the reducing regulatory hurdles and relatively better earnings growth profile. We are also overweight on sunrise sectors like media via Zee Entertainment.
We have, thus, positioned away from pure play defensives like the pure play mature exporter- IT and the expensive FMCG space. We feel both these sectors may have normalised earnings growth but the sectoral churning would cause them to de-rate on valuation terms.
For other equal weight sectors we are playing consumer discretionary sectors like autos (pent up demand, strong franchises) and the metals and mining space (high infrastructure demand expected), pharmaceuticals (large global generic opportunity yet to be tapped).
On individual names, we are strongly overweight on companies like L&T and UltraTech Cement in the infrastructure space while in public sector banks we like State Bank of India (SBI).
We believe we now have a better balance to our portfolio going into a recovery cycle and possibly a longer-term Bull Run.
November 2014
43ICICIdirect Money Manager
EQUITY MODEL PORTFOLIO
Name of the company
Largecap Stocks
Model Portfolio
Largecap(%)
Midcap(%)
Diversified(%)
November 2014
Consumer Discretionary 10 7
United Spirits 2 1.4
Tata Motors DVR 4 2.8
Bajaj Auto 2 1.4
Titan 2 1.4
BFSI 27 18.9
HDFC 6 4.2
HDFC Bank 6 4.2
SBI 8 5.6
Axis Bank 7 4.9
Power, Infrastructure & Cement 13 9.1
L & T 8 5.6
Ultratech Cement 5 3.5
FMCG 10 7
ITC 10 7
Metals & Mining 4 2.8
NMDC 4 2.8
Oil and Gas 14 9.8
Reliance 11 7.7
Gail 3 2.1
Pharma 5 3.5
Lupin 2 1.4
Sun Pharma 3 2.1
IT 12 8.4
Infosys 3 2.1
TCS 6 4.2
Wipro 3 2.1
Telecom 3 2.1
Bharti Airtel 3 2.1
Media 2 1.4
Zee Entertainment 2 1.4
Largecap share in diversified 70
44ICICIdirect Money Manager
EQUITY MODEL PORTFOLIO
Midcap Stocks
Content source: ICICIdirect.com Research
ICICI Securities Ltd. has been assigned an advisory mandate by Ranbaxy Laboratories Limited with regard to Sun Pharmaceutical Industries Limited's acquisition of Ranbaxy Laboratories Limited. This report is prepared on the basis of publicly available information.
ICICI Securities Limited has received an advisory mandate from Natco Pharma. This report is prepared based on publicly available information.
Name of the company Model Portfolio
Largecap(%)
Midcap(%)
Diversified(%)
November 2014
Consumer Discretionary 20 6
Bosch 6 1.8
Cox & Kings 6 1.8
Arvind 8 2.4
IT 6 1.8
Info Edge 6 1.8
BFSI 16 4.8
DCB 8 2.4
IndusInd Bank 8 2.4
FMCG 14 4.2
Kansai Nerolac 8 2.4
Tata Global Beverages 6 1.8
Pharma 6 1.8
Natco Pharma 6 1.8
Media 8 2.4
PVR 8 2.4
Capital Goods 6 1.8
Cummins 6 1.8
Realty/Infrasturcture/Cement 24 7.2
JK Cement 6 1.8
Container Corporation of India 6 1.8
Oberoi Realty 6 1.8
Shree Cement 6 1.8
Midcap share in diversified 30
Total of all three portfolios 100 100 100
45ICICIdirect Money Manager
EQUITY MODEL PORTFOLIO
Performance* so far Since inception
*Returns (in %) as on , 2014
Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio
Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination
of BSE Sensex and CNX Midcap
December 08
Value of ` 1,00,000 invested via SIP at the end of every month
Portfolio Benchmark
Investment Value of Investment in Portfolio Value if invested in Benchmark
Start date of SIP: June 30, 2011; *Value as on December 08, 2014
November 2014
82.4
93.1
82.9
60.1 62.858.3
0
20
40
60
80
100
Large Cap Midcap Diversified
%
4,3
00,0
00
4,3
00,0
00
4,3
00,0
00
6,0
93,5
80
7,1
56,3
25
6,3
64,9
52
5,8
90,2
96
6,6
32,1
12
5,1
07,0
23
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
Largecap Midcap Divesified
46ICICIdirect Money Manager
MUTUAL FUND TOP PICKS
Wth over thousand of mutual fund schemes available in the market, selecting the right ones may become too complex. To make it easy for you, we present our research team’s top recommendations, across equity and debt categories
Mutual Fund Top Picks
November 2014
Equity
Category Top Picks
Largecaps Axis Equity FundBirla Sunlife Frontline equity FundICICI Pru Focussed Bluechip Equity FundUTI Opportunities Fund
Midcaps HDFC Midcap Opportunities FundICICI Prudential Value Discovery FundFranklin India Smaller Companies FundSBI Magnum Global Fund
Diversified Franklin India Prima PlusICICI Prudential Dynamic PlanReliance Equity Opportunities
ELSS Axis Long Term EquityICICI Prudential Tax PlanFranklin India Tax shield
Sector - Banking ICICI Prudential Banking Reliance BankingUTI Banking
47ICICIdirect Money Manager
MUTUAL FUND TOP PICKS
November 2014
Short Term Birla Sunlife Short Term FundHDFC Short Term Opportunities FundICICI Pru Short Term Plan
Credit Opportunities Fund
Birla Sunlife Medium Term PlanFranklin India Short term PlanICICI Prudential Regular Savings
Income Funds ICICI Prudential Dynamic Bond FundBirla Sun Life Income Plus - Regular Plan IDFC Dynamic Bond Fund
Gilts Funds ICICI Pru Gilt Inv. PF PlanBirla Sunlife Gilt Plus
MIP(Aggressive)
Birla Sunlife Savings 5ICICI Prudential MIP 25DSP Blackrock MIP
Debt
Category Top Picks
Liquid Funds HDFC Cash Mgmnt Saving Plan ICIC Pru Liquid PlanReliance Liquid Treasury Plan
Ultra Short Term Birla Sunlife Savings FundFranklin India Ultra Short Term Bond FundICICI Pru Flexible Income Plan
QUIZ TIME
1. In case of a monthly income plan (MIP), the fund house currently
pays dividend distribution tax (DDT) of ______%.
2. The Rajiv Gandhi Equity Savings Scheme (RGESS) tax benefits can
be availed for ______ consecutive financial years.
3. If you do not want to keep some eligible securities as a part of
RGESS investment, you need to submit Form ______ to the
depository within one month from the date of transaction.
4. The interest earned from Senior Citizen Savings Scheme (SCSS)
is added to your income and is taxed as per the income slab.
True / False
5. Expand SWP.
Note: All the answers are in the stories that have appeared in this edition
of ICICIdirect Money Manager. You may send in your answers at:
The answers will be published in our next edition. The names of the
earliest all correct entries will be published too. So jog your grey cells
and be quick to send in your entries.
Correct answers for the November 2014 quiz are:
1. When a domestic company pays dividend, it pays dividend
distribution tax (DDT) at ______ per cent currently.A: 17.65%
2. If an assessee invests in Equity Linked Savings Scheme (ELSS)
mutual funds, the investment is eligible for deduction from his
taxable income to the extent of Rs. ______ under section 80C.A: 1,50,000
3. There are no tax-incentives for investment in bank and
corporate fixed deposits (FDs). True/ FalseA: True; except 5-year FD with a scheduled bank
4. The interest earned on savings bank account in excess of Rs.
______ p.a. is taxable in the hands of the individual.A: 10,000
5. Expand EET (it's a taxation regime).A: Exempt-Exempt-Tax
Congratulations to the following winners for providing correct answers!
Satish Chirmure; Mahesh S Newalkar; Neelakandan Eswaran
48ICICIdirect Money Manager November 2014
49ICICIdirect Money Manager
MONTHLY TRENDS
2.70
0.63
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Oct-14 Nov-14
(%)
80.54
66.15
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
$ pe
r ba
rrel
1458.782455.67
-268.50
235.00
-1000
-500
0
500
1000
1500
2000
2500
3000
3500
3-Nov 8-Nov 13-Nov 18-Nov 23-Nov 28-NovFII DII
.
WPI INFLATION (FOOD)
(The figures are in %)
CRUDE OIL
NYMEX crude oil prices ($/barrel)
FII & DII INVESTMENTS
(Foreign institutional investors (FIIs) and domestic institutional
investors (DII) net equity investment ( ` in crore)
November 2014
50ICICIdirect Money Manager
MONTHLY TRENDS
27865.83
28693.99
27400
27600
27800
28000
28200
28400
28600
28800
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
8322.20
8588.25
8150
8200
8250
8300
8350
8400
8450
8500
8550
8600
8650
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
DOMESTIC INDICES BSE Sensex
NSE Nifty
3.20%
2.97%
November 2014
13.7412.90
10.0
11.0
12.0
13.0
14.0
15.0
16.0
3-Nov 8-Nov 13-Nov 18-Nov 23-Nov 28-Nov
VIX
VOLATILITY INDEX (VIX)
51ICICIdirect Money Manager
MONTHLY TRENDS
November 2014
17390.52
17828.24
17100
17400
17700
18000
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
GLOBAL INDICES
2.52%
Dow Jones
4,630.74
4791.63
4500
4600
4700
4800
4900
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
NASDAQ
3.47%
61.39
62.20
60.8
61.0
61.2
61.4
61.6
61.8
62.0
62.2
62.4
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
US
D /
INR
EXCHANGE RATES USD-INR
1.31%
52ICICIdirect Money Manager
MONTHLY TRENDS
November 2014
98.19
97.31
95.5
96.0
96.5
97.0
97.5
98.0
98.5
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
£/
INR
76.89
77.43
76.0
78.0
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
€/
INR
1173.92 1167.04
1100
1175
1250
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
$ pe
r O
unce
16.14
15.41
15.0
17.0
31-Oct 4-Nov 8-Nov 12-Nov 16-Nov 20-Nov 24-Nov 28-Nov
$ pe
r O
unce
POUND-INR
EURO-INR
BULLION GOLD
(The prices are in $ per ounce).
SILVER
(The prices are in $ per ounce). (Source for all indicators: Bloomberg, Reuters)
0.90%
0.71%
ICICIdirect Centre for Financial Learning (ICFL) imparts quality education on financial markets to beginners and amateurs, student, housewives, working professionals and self employed. ICFL's broad objective is to make participant feel confident to start investing in stock market.
Here is the list of our programmes scheduled for the month of December, 2014.
Schedule for Beginners' programme on Futures and Options (F&O) TradingSr.No
City Dates For More Information & Registration call:
53ICICIdirect Money Manager
Premium Education Programmes Schedule
November 2014
1 Hyderabad Dec 06 and 07, 2014 Ruchi on 8297362323
2 Faridabad 07 Dec, 2014 Vishal on 07838290143, Harneet on 09582158693
3 Pune Dec 13 and 14, 2014 Kusmakar on 7875442311
4 Nagpur Dec 13 and 14, 2014 KUsmakar on 7875442311
5 New Delhi Dec 20 and 21, 2014 Vishal on 07838290143, Harneet on 09582158693
6 Kolkata Dec 27 and 28, 2014 Sumit on 08017516187
7 Bangalore Dec 27 and 28, 2014 Subrata on 9620001478
Sr.No
City Dates For More Information & Registration call:
Schedule for Chartered Financial Analyst (CFA) Level 1
Sr.No
City Dates For More Information & Registration call:
Schedule for Fast-Track Programme on Futures & Options (F&O)
8 New Delhi Dec 07 and 14, 2014 Vishal on 07838290143, Harneet on 09582158693
9 Jamnagar 07 Dec, 2014 Yogesh on 8238053563
10 Ahmedabad 14 Dec, 2014 Yogesh on 8238053563
11 Vapi 21 Dec, 2014 Yogesh on 8238053563
Sr.No
City Dates For More Information & Registration call:
Schedule for Fast-Track Programme on Stock Investing
12 Bikaner 07 Dec, 2014 Harneet on 09582158693
13 Ajmer 07 Dec, 2014 Harneet on 09582158693
14 Surat 14 Dec, 2014 Yogesh on 8238053563
15 Ahmedabad 28 Dec, 2014 Yogesh on 8238053563
16 Jamshedpur 30 Dec, 2014 Sumit Sarkar on 8017516187
Sr.No
City Dates For More Information & Registration call:
Schedule for Fast-Track Programme on Technical Analysis
17 Ranchi 07 Dec, 2014 Sumit Sarkar on 8017516187
18 Patna 14 Dec, 2014 Sumit Sarkar on 8017516187
54ICICIdirect Money Manager November 2014
Sr.No
City Dates For More Information & Registration call:
Schedule for Technical Analysis
21 Hyderabad Dec 06 and 07, 2014 Ruchi on 8297362323
22 Hyderabad Dec 06 and 07, 2014 Ruchi on 8297362323
23 New Delhi Dec 13 and 14, 2014 Vishal on 07838290143, Harneet on 09582158693
24 Bangalore Dec 20 and 21, 2014 Subrata on 9620001478
25 Hyderabad Dec 20 and 21, 2014 Ruchi on 8297362323
Sr.No
City Dates For More Information & Registration call:
Schedule for Foundation Programme on Stock Investing
26 Mumbai-Andheri Dec 06 and 07, 2014 Vidhu on 9619716146
27 New Delhi Dec 06 and 07, 2014 Vishal on 07838290143, Harneet on 09582158693
28 Pune Dec 06 and 07, 2014 Kusmakar on 7875442311
29 Thane Dec 13 and 14, 2014 Vidhu on 9619716146
30 Kolkata Dec 13 and 14, 2014 Sumit on 08017516187
31 Bangalore Dec 13 and 14, 2014 Subrata on 9620001478
32 Mumbai-Andheri Dec 20 and 21, 2014 Vidhu on 9619716146
33 Thane Dec 20 and 21, 2014 Vidhu on 9619716146
34 New Delhi Dec 20 and 21, 2014 Vishal on 07838290143, Harneet on 09582158693
35 Hyderabad Dec 20 and 21, 2014 Ruchi on 8297362323
36 New Delhi Dec 27 and 28, 2014 Vishal on 07838290143, Harneet on 09582158693
37 Pune Dec 27 and 28, 2014 Kusmakar on 7875442311
Sr.No
City Dates For More Information & Registration call:
Schedule for Advanced Derivatives Trading Strategies
38 Bangalore Dec 06 and 07, 2014 Subrata on 9620001478
39 Hyderabad Dec 13 and 14, 2014 Ruchi on 8297362323
40 Pune Dec 20 and 21, 2014 Kusmakar on 7875442311
Sr.No
City Dates For More Information & Registration call:
Schedule for MarketMaster Programme
19 Chandigarh Dec 06 and 07, 2014 Vishal on 07838290143, Harneet on 09582158693
20 Mumbai-Andheri Dec 13 and 14, 2014 Vidhu on 9619716146