MD Desk
Anup BagchiMD & CEO
ICICI Securities Ltd.
On the face of it, investing looks
complex to most because of
information overload and the
number of options available.
Thinking long-term-investing
is even tougher. Sometimes
these thoughts themselves are
enough to dissuade us to take
the first step. Some other times it
is also just inertia - just like what
we experience when we adopt
an exercise schedule or a diet
program - that keeps us away.
Getting over that initial inertia and
creating a habit of investing in
early years can be a real blessing.
There is a misplaced belief amongst the young investors that
becoming wealthy through investing requires tremendous skills
and luck. Either of which they feel they do not have. I think
more than anything, great investing takes time, discipline and
patience. The smartest investors I know started out way back
in their early years - twenties and thirties. They had plenty of
time ahead of them to ride the cycles that markets have, to learn
investing and eventually create wealth for themselves and their
families. There is the power of compounding that kicks in with
time and multiplies the investment corpus. But it all starts with
the first step.
ICICIdirect Money Manager 1 May 2014
So what could be this first step for an investor who has
just started with a job. The first step could be as simple as
subscribing to a monthly systematic investment plan (SIP) for
` 500. Once this is done, the next step should be to identify a
target investment amount that should be invested every month.
The amount could depend on one’s personal situation however
it is important to stick to the discipline of investing. Investing
through SIP delegates the skill to a professional fund manager
and embeds discipline in the whole process.
Investing today is really easy, available at just a click of a button.
Investing online brings an element of transparency and control
to your transactions. You are aware of the price at which you
buy and sell shares. With seamless banking and demat as well as
speedy execution, online investing is largely about convenience
and empowering ourselves. You can buy mutual funds, enroll to
a SIP, buy fixed deposits, bonds or even insurance online.
For investors who have experienced it all, it is important to
spread the message to the youngsters we meet. Thinking of
money, investing and long term doesn’t come naturally to us.
It is our responsibility to make our family members, friends and
young colleagues aware and help them inculcate this habit. At
ICICIdirect we are committed to spread this message. Through
this magazine and our web site www.icicidirect.com we want to
make an earnest attempt help investors know more on investing,
make them aware of the options they have and to partner with
them in setting and achieving their financial goals. We welcome
you to write to us or visit our branches to assist you.
ICICIdirect Money Manager May 20142
EDITORIAL
Editor & Publisher : Abhishake Mathur, CFA
Coordinating Editor : Yogita Khatri
Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey
Editorial Team : Azeem Ahmad, Nithyakumar VP, Nitin Kunte, Sachin Jain, Shaboo Razdan, Sheetal Ashar
Money or thinking about money gives a rather unclear picture in our minds. It is difficult to assign a rational, uniform thought to it. For most it is just a means and one which perhaps requires undue attention. And while we know money is important, we still do not place much importance to the whole concept of investing…we don’t talk or discuss. It is known that we spend far more time in buying a refrigerator than investing on the same amount. Buying a refrigerator is typically preceded by more than 2-3 visits to showrooms, discussions with friends and numerous visits to the internet. Investing the same amount is perhaps a distant step cousin of this process.Planning is even harder to think or conceptualize. How many of us would have really documented our financial goals or put a financial plan in place. I think just a handful of us. Now combine the two - investing with planning - and the combination becomes rarest of rare as far as our interest in the subject is concerned.I think the most important step in this entire concept of investing and planning is the first step. Taking the first step is also perhaps the most difficult. Overcoming our inertia and fighting our lack of interest is most important. As rightly put by Lao-tzu: “A journey of a thousand miles begins with a single step.” In our cover story of this month, we look at and demystify some of the common barriers, which hold one back to start their investment journey.We also bring to you an interview with Harish Krishnan, Vice President- Kotak Mutual Fund, who believes equity markets as an asset class are poised for sustainable strong performance ahead. The edition also offers comprehensive information and analysis on diversified equity funds, the best investment option for beginners as well as seasoned investors, who would like to invest in equities for their long-term financial goals.Further, if you wish to get clarity on different aspects of personal finance or any other money-related matter, you may write to us at [email protected]. Read on, stay updated and involved. Do write in with your feedback and share your thoughts.
ICICIdirect Money Manager May 20143
Important: All the contents of ICICIdirect Money Manager are the exclusive property of ICICI Securities Ltd. No article, either in whole or in part, may be published circulated or distributed through any medium without the express consent of ICICI Securities Ltd.
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CONTENTS
MD Desk ......................................................................................................... 01
Editorial .......................................................................................................... 02
Contents ......................................................................................................... 03
News ............................................................................................................... 04
Markets Round-up & Outlook ....................................................................... 05
Getting Technical with Dharmesh Shah ...................................................... 07
Derivatives Strategy by Amit Gupta ............................................................ 09
Stock Ideas: Bajaj Auto and Bharti Airtel ..................................................... 14
Flavour of the Month: Overcoming Roadblocks to Investing
Here we look at and demystify some of the common barriers and
misconceptions one has which hold them back from participating in the
market and be part of the emerging economy .............................................. 20
Tête-à-tête
An interview with Harish Krishnan, Vice President- Kotak Mutual Fund ...... 28
Ask Our Planner
Your personal finance queries answered ....................................................... 32
Your Financial Health Check
Here we analyze Pune-based one family’s finances and suggest a suitable
way forward ..................................................................................................... 35
Mutual Fund Analysis: Category – Diversified Equity Funds ...................... 38
Equity Model Portfolio .................................................................................. 44
Mutual Funds Model Portfolio ...................................................................... 48
Quiz Time ....................................................................................................... 50
Monthly Trends .............................................................................................. 51
Premium Education Programmes Schedule ................................................. 54
ICICIdirect Money Manager May 20144
NEWS
SEBI raises cash transaction limit in MFs to ` 50,000Investors without Permanent Account Number (PAN) can now put as much as ` 50,000 in mutual funds in cash every year. The Securities and Exchange Board of India (SEBI) said it was increasing the limit for cash investments to ` 50,000 from ` 20,000. The move is aimed at helping mutual funds sell products in small towns and rural areas, where transactions happen in cash rather than through banks.
Courtesy: The Economic Times
Regulator okays draft norms to develop pension sectorThe pension regulator PFRDA (Pension Fund Regulatory and Development Authority) has given its nod for putting in place several regulations that could help in institution building, developing market infrastructure besides customer protection in the pension sector. The PFRDA board approved the drafts of as many as five regulations, which are being framed for the first time since the pension regulator got statutory backing last year. The draft regulations relate to points of presence (POP), aggregators, grievance redress, subscribers’ education and protection fund, and pension fund advisory committee.
Courtesy: The Hindu Business Line
IRDA plans to make it mandatory for life insurance companies to issue policies in demat formThe Insurance Regulatory and Development Authority (IRDA) is considering making it mandatory for life insurance companies to issue policies in dematerialized form from later this year. In the short term, it will make it mandatory for life companies to link up their systems to insurance repositories and provide policyholders with an option to hold policies in electronic form. Last year, the insurance regulator had licensed five companies to provide insurance repository services. These were NSDL Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, CAMS Repository Services Limited and Karvy Insurance Repository Limited.
Courtesy: The Economic Times
Now, independent bank a/c for minorsThe Reserve Bank of India (RBI) has allowed minors above the age of 10 to open a savings bank account independently. Till now, minors could open such accounts only with their mothers as guardian. "Minors above the age of 10 years may be allowed to open and operate savings bank accounts independently, if they so desire," the central bank said. RBI said banks were free to offer additional banking facilities such as internet banking, ATM/debit card, cheque book facility, etc, subject to the safeguards that minor accounts were not allowed to be overdrawn and that these always remain in credit.
Courtesy: Business Standard
ICICIdirect Money Manager May 20145
MARKETS ROUND-UP
Markets sensing NDA victory backed by exit poll outcomes
In April, the Indian indices remained flattish. While foreign institutional investors (FIIs) continued to bet on the Indian markets, the domestic institutional investors (DIIs) were net sellers. Continuing the series of gains last month the Indian markets commenced the month’s trading on a positive note. The Reserve Bank of India (RBI) left its key interest rates unchanged and signalled that further policy tightening in the near term is unlikely if inflation continues along the intended glide path. However, a weak service sector activity dampened investors’ sentiment. Thereafter weak global cues also impacted the Indian indices negatively. The rupee depreciated 0.6% to close the month at 60.3.
For March 2014, the trade deficit widened to US$ 10.5 billion from US$ 8.1 billion in February 2014. Exports marginally de-grew to US$ 29.6 billion (down 3.2%) while imports dipped 2.1% year-on-year (YoY) to US$ 40.1 billion. The index of industrial
production (IIP) dipped 1.9% in February mainly led by a sharp decline in the manufacturing sector output. The consumer price index (CPI), also known as retail inflation increased from 8.0% in February to 8.3% owing to increased prices of fruits and vegetables. The wholesale price index (WPI) too rose from 4.7% in February to 5.7% in March 2014, snapping an easing trend. The RBI left the key interest rates unchanged. The markets remained largely lacklustre thereafter due to uncertainty over the elections.
The global markets commenced the month on a mixed note with the US markets gaining on the back of positive economic data, while the European markets opened weak despite mounting speculation that the European Central Bank (ECB) will offer stimulus to combat low inflation. However, on further confirmation regarding policy easing from the ECB chief led to some gains in the European markets. For the US markets, a steep fall in technology stocks led to a
ICICIdirect Money Manager May 20146
MARKETS ROUND-UP
correction in the Nasdaq. In the meanwhile European stocks continued to gain on the back of encouraging economic data.
During the month, Crude (Nymex) closed 1.8% lower at $ 99.7/barrel.
Global markets
The global indices traded mixed in the month of April. The Dow Jones, S&P 500 and Dax gained marginally, closing 0.7%, 0.6% and 0.5% up, respectively. On the other hand, the FTSE and French CAC gained 2.8% and 2.2%, respectively. The Nasdaq lost 2.0% during the month. Among Asian indices, the Nikkei, Shanghai SSEC and Hang Seng fell 3.5%, 0.3% and 0.1%, respectively.
Domestic markets
FIIs were net buyers to the tune of ~ ` 12,600 crore while DIIs were net sellers to the tune of ~ ` 7,470 crore.
The Nifty and Sensex remained flat closing 0.1% lower and higher, respectively. The BSE Midcap and BSE Small cap indices gained 3.4% and 5.9%,
respectively. Among sectoral indices, major gainers were BSE Healthcare, BSE PSU, Bankex, BSE Auto and BSE Oil indices which gained 6.7%, 2.2%, 0.9%, 0.7% and 0.7%, respectively. Among losers were BSE Realty, BSE FMCG, BSE Power, BSE Metals, BSE Technology and BSE IT indices which lost 4.9%, 3.0%, 2.2%, 0.8%, 0.5% and 0.4%, respectively.
Outlook- Markets in party mood; Results, economy can wait...
The euphoria caused by the expectation of NDA victory (fuelled by the outcome of various exit polls) simply refuses to die down. The markets are in no mood to listen to some what weak economic numbers or even the scary Public Sector Banks (PSB) Q4 numbers. We expect the optimism to persist as markets are expected to continue to ride on the pre-election rally. Robust FII buying activity suggests that the foreigners are in no mood to take the foot off the gas as the country enters the election-outcome phase.
ICICIdirect Money Manager May 20147
TECHNICAL OUTLOOK
Index at crossroads
Dharmesh ShahHead - Technical Analysis, ICICIdirect
Domestic equity benchmarks
extended gains for a third
consecutive month although
a larger part of the month
was spent in consolidation
mode to digest the strong
gains amassed during March
2014. As envisaged in the
April edition, the Sensex
achieved our earmarked target
of 22800 in the early part of
April. Thereafter, it witnessed
a range bound consolidation
on expected lines.
The consolidation near 22800
is on expected lines as the
index has apprehended the
upper band of the major rising
channel (parallel lines marked
in blue in the chart below),
which encompasses the entire
up move since December 2011
till date. The upper and lower
bands of this bullish trend
channel have acted as key
turning points for the index
over the last two years.
Therefore, from a technical
perspective, the index is at an
important crossroad ahead
of the key event. A sustained
weekly close above 20800 will
ICICIdirect Money Manager May 20148
TECHNICAL OUTLOOK
result in violation of the upper
band of the rising channel.
If the index supersedes the
higher boundary of an already
bullish trend channel that will
see the current rally from the
February 2014 low of 19963
extend further to achieve
price parity with the August-
December 2013 rally (17448 to
21483 =4035 points) projecting
upsides towards 24000.
during last months trade
Sustained weekly close above 22800 will result in violation of the upper band of major rising channel in place since Dec’11 and propel the index towards 24000 levels
Weekly RSI remains in rising mode after breaking out of its own consolidation band of 65-40 levels
2008 high@ 21206
Aug’13 low 17448
Feb’14 low 19963
52 week EMA
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.
ICICIdirect Money Manager May 20149
DERIVATIVES STRATEGY
Highest Put base of 7000 remains important support in current uptrend
Amit GuptaHead - Derivatives Research, ICICI Securities
In the ongoing May series, the
markets rallied on expectations
of an NDA-led government.
Even before the verdict, Indian
equities surged towards 7200
from 6650 in just three sessions.
After a better-than-expected
performance by the NDA in the
Union elections, the Nifty tested
7500 and witnessed some profit
booking.
Major movement was seen in
the Bank Nifty, which was the
primarily leader in the current
move. After making life-time
highs, the Bank Nifty surpassed
almost 15500 levels on May 16.
Gains in the Bank Nifty exceeded
20% in the same time frame.
Under-owned public sector
undertaking (PSU) stocks from
banking, metals and power
witnessed a sharp run up
during the period. We expect
a continuous outperformance
from this space even if the Nifty
exhibits range bound behaviour.
Post event, the volatility index
(VIX) has declined considerably
in the last two sessions.
Selling among index options,
particularly of the May series
is clearly visible in anticipation
of range bound movement.
Volatility has declined to 21
levels after making highs near
38. We do not expect any
immediate upside in volatility in
the days to come. Nifty C a ll P ut C oncentra tion (MAY )
2.8
5.9
4.2
7.7 22
.0
19.6 27
.0
24.2
43.8
36.7
51.5 56
.9
27.2
26.5
25.4
27.6 40
.1
32.2
49.0
30.2
16.4
8.3
10.1
1.723
.1
20.4
0
10
20
30
40
50
60
70
6400
6500
6600
6700
6800
6900
7000
7100
7200
7300
7400
7500
7600
OI i
n La
cs
Call Put
Bank Nifty outperforms Nifty.
Immediate support for banking
index at 14500
ICICIdirect Money Manager May 201410
DERIVATIVES STRATEGY
The Bank Nifty has outperformed the Nifty in the current rally. The index after surpassing life high of 13414, has not looked back and moved up further more than 2000 points from there. Now, it is close to 14800.
Out of both indices, Bank Nifty futures had gained quite significant open interest before the election verdict. Near 40% open interest was added in this index.
The maximum Put base for the index is at 14000, which would remain a major support on declines. However, the increasing Put open interest at 14500 also indicates immediate support at 14500 levels.
The noticeable Call open interest is placed at 15400, which would be a hurdle on upsides in the coming weeks.
0
50000
100000
150000
200000
250000
300000
1450
0
1460
0
1470
0
1480
0
1490
0
1500
0
1510
0
1520
0
1530
0
1540
0
1550
0
Call OI Put OI
S&P 500: Level of 1850 remains
important support in current
uptrend
The Bank Nifty has outperformed
the Nifty in the current rally. The
index after surpassing life high
of 13414, has not looked back
and moved up further more than
2000 points from there. Now, it
is close to 14800.
Out of both indices, Bank
Nifty futures had gained quite
significant open interest before
the election verdict. Near 40%
open interest was added in this
index.
The maximum Put base for
the index is at 14000, which
would remain a major support
on declines. However, the
increasing Put open interest at
14500 also indicates immediate
support at 14500 levels.
The noticeable Call open interest
is placed at 15400, which would
be a hurdle on upsides in the
coming weeks.
ICICIdirect Money Manager May 201411
S&P500 options open interest for June Series
0
10000
20000
30000
40000
50000
60000
70000
8000018
00
1825
1850
1870
1900
1920
1950
1975
2000
Call OI Put OI
DAX: Fresh up move likely to
be seen above 9700. Immediate
support lies at 9500
As expected, the German index
also hovered in a narrow range
of 9450-9700 last month where
selling pressure was evident
at higher levels. Despite many
attempts and trading at its all-
time high levels, the Dax failed
to surpass its highest Call base
at the 9800 strike.
For the June series, options
concentration for the Dax has
shifted to ITM strikes where
highest Call and Put base is
placed at 9500 strike. We expect
a fresh up move to be seen if
the Dax is able to move above
its previous highs of 9700.
Currently, the highest Call base
is present at 9600 strike.
Sharp depreciation of Euro
against dollar also went against
equities and if Euro sustains
below 1.37, extended selling
pressure may be seen.
Both 50 DMA and 100 DMA for
the German Index are placed
in the vicinity of 9500, which
also holds the highest Put
option concentration. Hence,
downsides towards these levels
remain a buying opportunity.
DAX option open interest for June Series
0
5000
10000
15000
20000
25000
30000
9300
9400
9500
9600
9700
9800
9900
1000
0
1010
0
1020
0
Gold: 1320 levels to remain
crucial resistance. Upsides
remain selling opportunity for
target of 1270/1250
Precious metals continue to
witness selling pressure from
higher levels last month and
gold failed to surpass 1320.
However, the 100 DMA levels
continue to act as support for
DERIVATIVES STRATEGY
ICICIdirect Money Manager May 201412
the commodity and it remained
in a narrow range of 1280-1320
for the entire month.
For the June series, significant
Put writing is visible at the 1250
strike indicating major support
for the safe haven. We expect
these levels to remain crucial
support for gold in the near
term. Moreover, the 61.8%
retracement of the entire up
move seen from 1180 to 1390 is
also placed near 1250.
Both Call and Put options
concentration is placed at the
ATM 1300 strike. Hence, a move
above 1320 may extend gains
towards 1350 levels.
As per Commodity Futures
Trading Commission (CFTC)
data reported for the Chicago
Mercantile Exchange (CME),
significant portion of open
interest in gold has negative
bias. Hence, any short covering
should be expected only above
1320 levels.
Golds option open interest for June Series
0
2000
4000
6000
8000
10000
12000
1175
1200
1225
1250
1275
1300
1325
1350
1375
1400
Call OI Put OI
Brent Crude: Level of 112 to act
as major resistance. May slip
towards 105
Brent crude continued to
consolidate in the narrow range
of $105-110 last month. Selling
pressure in the commodity was
evident at higher levels of $110
in the early part of the month.
However, it has recovered once
again to $110 in the later part.
Since the start of the year,
Brent crude has been unable to
sustain above $110 levels and
formed lower highs. We believe
any fresh uptrend is likely to
be seen only if Brent is able to
sustain above previous highs of
$112.
From the options front, second
highest Call base is placed at the
110 strike, which is likely to act
DERIVATIVES STRATEGY
ICICIdirect Money Manager May 201413
as immediate resistance level.
Put options base is placed at
the 105 strike for Brent crude.
Hence, the ongoing range of
$105-110 is likely to continue in
crude.
Crude option open interest for June Series
0
4000
8000
12000
105
106
107
108
109
110
111
112
113
114
115
Call OI Put OI
Euro: Likely to move towards
1.40 levels
Euro managed to test 1.39
levels before witnessing sell-off
in the later part of the month.
However, it has not breached its
crucial support of 1.37 despite
sharp declines.
After making a new two year
high, Euro faced some selling
pressure and declined towards
its highest Put base of 1.37.
Before this fall, it had surpassed
the downward trending line
prevailing since July 2008
indicating positive bias intact in
the currency pair.
The options contract in the
currency pair has the highest
Put base at 1.37 strike, which
is expected to remain crucial
support for the currency. We
believe positive bias is still intact
in the Euro and upsides towards
1.40 can be seen in the near
term.
As per the US CFTC data, almost
18% commercial positions
have positive opinion about
the currency pair. In addition,
coming up ECB announcement
regarding interest rates would
be closely watched and a
positive announcement may
pull the currency pair once
again.
Euro option open interest for June Series
0
1000
2000
3000
4000
5000
6000
7000
8000
1.36
1.36
5
1.37
1.37
5
1.38
1.38
5
1.39
1.39
5 1.4
1.40
5
1.41
Call OI Put OI
The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.
DERIVATIVES STRATEGY
ICICIdirect Money Manager May 201414
Bajaj Auto: Sweet spot of valuation and earnings!
Company Background
Bajaj Auto Limited (BAL) is the
second largest motorcycle
manufacturer in India with
a domestic market share of
~18%. The company offers
products in all motorcycle
segments — Platina (entry),
Discover (executive) and
Pulsar (premium). BAL also
has an alliance with Kawasaki
and an equity stake and joint
venture (JV) with KTM. The
company is also the largest
three-wheeler manufacturer in
India with a dominant market
share of ~42%. In the past
few years, BAL has witnessed
strong growth in exports that
now form ~40% of its total
volumes.
Investment Rationale
Economic weakness causing
urban slowdown unlikely to
persist
The weakness in urban
demand has led to a decline
of ~250 in the 125cc segment
basis points (bps) to ~16%
as a share in the motorcycle
space. This segment has
been dominated by urban
product “Pulsar-150cc” and
had remained ~19-20% of
the motorcycle market till
FY12. However this steep fall
in volumes due to slowdown
in urban consumption has
impacted BAL’s domestic
market share the heaviest. We
believe the same is unlikely to
persist and expect FY15E/16E
to be better in terms of
volumes.
New product launches /
exports to aid market share
and margins
BAL is going on the offensive
and will launch new “Discover”
in the 125cc segment to
STOCK IDEAS
ICICIdirect Money Manager May 201415
counter the offensive from
Honda. Blended average
selling price (ASP) rose
(~9.5%) more than RM/
unit (~4.5%) CAGR over the
same period lending support
to margins. Market share
has fallen to ~18% (600 bps
fall) in the overall domestic
motorcycle segment. We
are also concerned about
the loss but believe in the
strong franchise of both
Pulsar/Discover and share
management’s confidence in
recovery of the same led by
Discover-100M, Discover-125
cc. Commercial launch of
the Quadricycle from H2
onwards is also likely to add
incremental revenues for BAL.
Scarcity premium as a high
quality exporter…maintain
BUY
BAL is just not one of
the few manufacturing
companies exporting with
quality management in the
automotive space but also
across other sectors. Exports
have compensated BAL
share of it has grown ~350
bps to ~40% over FY12-
14. BAL would be aided by
realisation gains of ~10-
12% through exports side
throughout FY14E/15E on
rupee depreciation. Also,
BAL’s earnings trajectory both
historical, expected CAGR
EPS (~16% in FY10-14, ~19%
in FY14-16E) is a lucrative one
considering the de-risked
nature of business and high
RoCE profile. The stock at
~11.8x two-year forward
price-to-earnings (PE) remains
at a ~20% discount to Hero’s
pre-breakup average multiple
of ~15x. We value BAL at 15x
FY16E EPS, maintain Buy with
target price (TP) of ` 2,450.
STOCK IDEAS
ICICIdirect Money Manager May 201416
STOCK IDEAS
Key Financials
FY13 FY14E FY15E FY16E Net sales (` crore) 19,997.3 20,643.7 23,226.3 26,583.2EBITDA (` crore) 3,635.3 4,306.3 5,031.0 5,849.0Net profit (` crore) 3,043.6 3,354.3 4,038.0 4,725.4
Valuations Summary FY13 FY14E FY15E FY16E EPS (`) 105.2 115.9 139.5 163.3P/E (x) 18.4 16.7 13.9 11.8Target P/E (x) 23.3 21.1 17.6 15.0Price/Book value (x) 7.1 5.9 4.8 4.0RoNW (%) 38.5 35.1 34.9 33.9RoCE (%) 43.5 43.0 41.6 40.3
Stock Data
Particulars FiguresMarket capitalization (` crore) 55,172.6Total debt (FY13) (` crore) 71.3Cash and investments (FY13) (` crore) 3,270.2Enterprise value (EV) (` crore) 51,973.652 week High/ Low (`) 2,195 / 1,656Equity capital (` crore) 289.4Face value (`) 10MF holding (%) 6.9FII holding (%) 18.7
Key risks include: Major risks include consistent decline in demand due to economic slowdown. Further, with bulk of Bajaj’s exports coming from Africa, persistent instability on political and financial front is likely to hurt volumes going ahead. Another risk could be related to currency fluctuation as BAL’s ~40% revenue comes from exports, which would become less profitable in case the rupee appreciates strongly.
(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; MF: Mutual funds; FII: Foreign institutional investors).
ICICIdirect Money Manager May 201417
Bharti Airtel: Robust data and voice volume growth
Company Background
Bharti Airtel is a leading global telecommunications company with operations in 20 countries across Asia and Africa. Headquartered in New Delhi, the company ranks among the top 4 mobile service providers globally in terms of subscribers. In India, the company's product offerings include 2G, 3G & 4G wireless services, mobile commerce, fixed line services, high speed digital subscriber line (DSL) broadband, internet protocol television (IPTV), direct-to-home (DTH), enterprise services including national and international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G wireless services and mobile commerce. Bharti Airtel has over 283 million customers across its operations at the end of FY14.
Investment Rationale
Shift towards profitable voice volume growth with uptick in realisations
Airtel had 1.1% reduction in the voice average revenue per minute (ARPM) over FY11-13 to 35 paisa due to cut-throat competition with 6.9% FY11-13 compounded annual growth rate (CAGR) in the minutes to 967 billion minutes. However, with consolidation in the sector as the licenses were quashed and smaller operators scaled down or exited the business we can see pricing discipline back in the sector. Airtel has raised ARPMs by about 3 paisa from 35.3 in FY13 to 37.1 in Q3FY14. There was 6.4% voice traffic growth to 1029 billion despite the hikes and it is a positive sign for the sector. We expect the company to further improve its voice realisations and voice traffic from 36.8 paisa and 1029 billion minutes in FY14 to 37.9 paisa and 1128 billion minutes respectively by FY16.
Robustness in data volume to drive the revenues
Over the past year, the contribution of data for Bharti has increased from
STOCK IDEAS
ICICIdirect Money Manager May 201418
6.4% in Q4FY13 to 11.1% in Q4FY14 of total revenues with the increase in the data usage per MB. However, ARMBs continued to decline from 31 paisa in FY13 to 29 paisa in Q4FY14 as the data penetration increased. Going ahead, we expect ARMBs to further decline and telephone companies (telcos) to benefit from the increase in the data usage per subscriber. With the current auctions, Bharti has further augmented its data spectrum portfolio and has a 3G/LTE (long-term evolution) capability in 20 out of 22 circles. We expect data to grow at 39.6% FY14-16E CAGR to reach ` 8494.4 crore hence forming 15.6% of the data revenue by FY16E.
Passive infrastructure would grow due to higher tenancies as data proliferates further
The passive infrastructure segment would benefit from increasing tenancies as data growth picks up. Currently, the tenancies increased from 1.90 in Q1FY13 to 1.99 to Q4FY14. This segment is a
highly profitable one with about 40% earnings before interest, taxes, depreciation, and amortization (EBITDA) margin and is expected to grow at 7.6% CAGR (FY14-16E) to ` 5911.3 crore from ` 5108.6 crore.
Maintain BUY- Belief in its sustainable growth story- target price ` 375
Considering the ability to deliver superior data services with a rich spectrum portfolio, we believe Airtel will register strong growth of 7.8% and 56.3% CAGR (FY14-16E) in its Revenue and PAT. The voice revenues are expected to grow at a 6.2% CAGR (FY14-16E) to ` 42802 crore from ` 37922 crore in FY14. The data revenue is expected to exhibit a 39.6% CAGR (FY14-16E) to ` 8494 crore from ̀ 4361 crore in FY14. We value the company on a discounted cash flow (DCF) based methodology at 7.8% revenue CAGR (FY14 - FY20E) and hence arriving at a target price of ` 375. We maintain our stance as Buy on the stock.
STOCK IDEAS
ICICIdirect Money Manager May 201419
STOCK IDEAS
Key Financials
FY13 FY14E FY15E FY16E Net Sales (` crore) 80,359.0 85,863.6 93,213.0 99,871.6 EBITDA (` crore) 24,870.4 27,777.1 31,170.8 34,242.8 Net Profit (` crore) 2,275.8 2,772.8 5,449.7 6,776.2
Valuations Summary
FY13 FY14E FY15E FY16E EPS (`) 6.0 6.9 13.6 17.0P/E (x) 54.7 47.3 24.1 19.3Target P/E (x) 62.6 54.1 27.5 22.1 Dividend yield (%) 7.9 7.0 6.1 5.2Price/Sales (x) 2.5 2.2 2.0 1.9 RoNW (%) 4.5 4.6 8.1 9.6RoCE (%) 7.4 8.7 10.7 11.9
Stock Data
Particulars FiguresMarket capitalization (` crore) 1,31,114.7 Total debt (FY13) (` crore) 75,895.8Cash and investments (FY13) (` crore) 11,207.3Enterprise value (EV) (` crore) 1,95,803.252 week High/ Low (`) 367 / 278Equity capital (` crore) 1,998.7Face value (`) 5MF holding (%) 7.7FII holding (%) 16.3
Key risks include: Any significant price distortion by Reliance Jio would again disrupt the prevailing price discipline prevailing in the sector leading to a fall in the ARPM’s and hence a decline in the profitability. In addition, if the 3G/4G do not take up as expected by the companies their huge investments into the same would go as a dead investment. Lastly, if African operations deteriorate further it could lead to an overhang on the stock.
(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; MF: Mutual funds; FII: Foreign institutional investors).
ICICIdirect Money Manager May 201420
FLAVOUR OF THE MONTH
Overcoming Roadblocks to Investing
The first step is always the hardest… and that goes for investments too. We find that young individuals are hesitant to start their investment journey. The reasons are many, reveals our study. We interviewed several youngsters to identify the barriers which prevent them from taking that first step in the market. We found out that, 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. While staying away from the market may feel sensible to many given its volatile nature, it however, on the other hand, could harm our long-term financial health if we shun the investments and equities completely. In this article, we look at and demystify some of the common barriers and misconceptions one has, which hold them back from participating in the market and be part of the emerging economy. Read on.
“I haven’t really known people who made money”
This reasoning causes many individuals to stay away from the market. It is not that people do not have a fair amount of knowledge on stock market and its volatile nature, it's about the stories that they generally get to hear or read about people who have made losses. For example, during our study, one individual said, “My cousin followed the tips given by his relative and lost
` 1 lakh.”
Fear of losing money
is understandable. But
remember, not investing your
money doesn’t give it an option
to grow, which is critical for
meeting your financial goals.
Several studies in the field of
behavioral finance have shown
that we do not accept losses
well. We are so afraid of losing
money that we tend to be in the
grip of inaction. Unfortunately,
inaction in investing is not a
choice.
ICICIdirect Money Manager May 201421
FLAVOUR OF THE MONTH
Say, for example, Karan, 25,
manages to save ` 10,000 a
month. Due to fear of losing
money, he lets his funds
remain in a savings account for
the next 30 years, earning just
4% p.a. He will end up having
` 69,40,494 only. Consider
the rate of inflation (say 6%
p.a.) and one actually ends
up losing money in a savings
account (negative 2% returns).
On the other hand, say if Karan,
invests the same amount in
equities every month, he could
end up having ` 10,16,33,175!
This is at a return of 16.63%
p.a. - Sensex has delivered
compounded annual growth
rate (CAGR) of 16.63% in the
past 30 years, despite losing
big sometimes.
There is no doubt that equity
investing comes with its fair
share of risk. There will always
be aspects of investing that
one cannot have control over,
for instance, market volatility,
but that also provides an
opportunity to make money
and reach our financial goals.
The best way to invest in
equities for investors who are
new to markets is through
p r o f e s s i o n a l l y - m a n a g e d
mutual funds.
“The stock market means
short-term trading. It is a kind
of gambling.”
The stock market is often
associated with short-term
trading - buying & selling, and
with gambling. To understand
why investing in stocks is
inherently different from
trading or gambling, we need
to understand what it means
to buy a stock. When you buy
a stock, you own a share of the
company. If the company is
profitable and issues dividend,
you benefit financially.
Gambling, on the other hand,
is a zero-sum game, i.e. gain
for one is a loss for the other.
Whereas, in the stock market,
ICICIdirect Money Manager May 201422
most discuss about buying a
property in Gurgaon.”
Certainly, real estate is a
good investment option, but
we need to understand that
returns on real estate are not
same across regions and are
not guaranteed. Few reasons
why real estate investments
look more attractive is the
sheer quantum of investment
involved, the investment
being leveraged and a feeling
of pride that comes in with
holding a real asset. At the
same time, for a young
investor having an own house
will always take priority over
other investments.
What we found, however,
is that the most of young
investors were unaware of the
margin money required to buy
a house. When asked, how
they will fund, most of them
said that they will take a loan.
It is important to remember that
one needs to have at least 20%
if ten investors hold the shares
of the same company and
prices go up, all of them will
gain. Further, in gambling,
there is no value creation – it’s
the same money to be won
or lost. In investing, company
creates value for shareholders
if it does well.
“Real estate is the most
promising and stable
investment”
One of the biggest aspirations
today’s young generation
has is buying a house. Our
study shows that investing in
real estate seems attractive
to youngsters because of
apparent low risk associated,
high returns and a proud
feeling of owning a house.
Moreover, there was a strong
word of mouth around it. Many
had seen their friends and
relatives making profits in real
estate. For instance, during
one of our study interactions,
a person said, “In my office,
FLAVOUR OF THE MONTH
ICICIdirect Money Manager May 201423
FLAVOUR OF THE MONTH
of the value of the property as
a part of self funding. And one
needs to plan to have this in
place through investments.
Say for example, Rohit needs
to buy a flat worth ` 1 crore in
next 10 years and needs to shell
out at least 20% margin, i.e.
` 20 lakh. If he invests ` 10,000
every month for a period of 10
years, in a bank deposit that
gives 8% p.a. interest rate,
he will be able to make up
` 18,29,460 only. Whereas if
he invests the same amount
via systematic investment plan
(SIP) in equity mutual funds, at
12% p.a expected returns., he
will end up having more, i.e.
` 23,00,386.
“I don’t have enough time”
This is another reason why
youngsters do not get started
with investing. They believe,
if invested, they would have
to continuously track their
stocks as it was needed to get
the real gains. It is critical to
understand that stock market
is not just about trading –
buying and selling stocks
frequently – which requires
daily monitoring. Investments
in equity should be made with
a longer term perspective.
This way, one need not worry
about every little dip in price
or every little news item.
One can focus on the bigger
picture then and not on the
time-consuming process of
rigorous monitoring.
Focusing on simple and easy-
to-understand investments
also reduces the time required
to track investments. One need
not own complex instruments.
Invest in simple products, such
as mutual funds, to get started
with.
“I don’t have enough money
to invest”
Many young individuals feel
that it is not worth investing
till they have a large sum
ICICIdirect Money Manager May 201424
FLAVOUR OF THE MONTH
available. Remember, one
does not need a large amount
to get started with investing.
All that really matters is
taking that first step, say for
example, opening a systematic
investment plan (SIP) for just
` 500. An SIP is nothing but a
planned investment program,
which takes a small sum of
money from you and invests it in a mutual fund at regular intervals.
Do not underestimate how a small amount of money can grow over time. Even small amounts invested over a period of time sums up to a sizeable corpus (see the table
below).
Investment contribution per month
Investment value after 1 yearAt return 8% p.a.
At return 10% p.a.
At return 12% p.a.
` 500 ` 6,225 ` 6,283 ` 6,341` 1,000 ` 12,450 ` 12,565 ` 12,683` 2,000 ` 24,900 ` 25,131 ` 25,365` 3,000 ` 37,350 ` 37,697 ` 38,047` 5,000 ` 62,250 ` 62,828 ` 63,413
Always remember to pay yourself first. Putting away a percentage of your paycheck, instead of a set amount, will keep your investments in line with your pay raises. Still, if you feel, you are left with no money after meeting your monthly expenses, do try and recognize some of the non-discretionary expenses, which can be curbed upon, in order to save and invest. This can go a long way in helping you secure your future.
“I’m too young to start investing”
Being young is the perfect reason to start investing, not to put it off. Thanks to the potential
power of compounding, the
earlier you start investing,
the more you can create the
corpus to reach your financial
goals. In fact, if you start
ICICIdirect Money Manager May 201425
FLAVOUR OF THE MONTH
investing early and then stop, you could actually accumulate more than someone who starts later, saves for longer, and puts in more money.
Let’s understand this with an example. Suresh and Ramesh, both 65 years old, worked for the same company for 35 years and both invested in the same managed fund. Suresh started investing at age 30. He invested ` 1,000 each year for ten years and earned 8% per year. Then he stopped contributing. His investment continued to earn an 8% annual return. When he reached age 65, his invested ` 10,000 had grown to ̀ 107,148.
Ramesh did not start investing until age 40 and then invested ` 1,000 each year for 25 years. He also earned 8% per year. At the end of the period, his ` 25,000 investment was worth ` 78,954.
As you can see, although Suresh contributed to his
investment for 15 fewer years
than Ramesh and invested
` 15,000 less, he accumulated
` 28,194 more than Ramesh,
simply because he started
investing ten years earlier.
Remember, when young, time
is our best ally. Let’s make the
most of it.
“Investing is too complicated”
Some also believe that
investing is too complex and
technical. The truth is it’s not.
Just that it requires discipline
and patience. The key is to
invest systematically based
on one’s asset allocation plan,
and keeping in mind a long-
term broad picture.
Getting started
Investing directly in equities
can be an overwhelming
experience, but not everyone
has the time or expertise to
research so many individual
stocks available. Mutual
funds offer a good alternative
here, as you let the fund
manager do much of the
ICICIdirect Money Manager May 201426
FLAVOUR OF THE MONTH
work for you. Further, they offer diversification, liquidity, convenience, and a large variety to choose from.
Here’s how the various categories of mutual funds have performed over the years as compared to key benchmark
indices.
Equity Funds
Categories Average Returns (%)
1-year 3-year 5-year
Equity Diversified 22.05 10.13 18.38
Midcap and Small-cap 29.48 13.32 22.73
Large-cap 19.71 9.85 15.84
Equity Linked Savings Scheme (ELSS) - Tax-saving funds
21.45 10.52 17.03
Sector and Thematic 18.39 8.79 19.74
Infrastructure 21.26 3.05 8.60
Arbitrage 8.86 8.65 7.45
International Equities 10.75 5.35 11.25
Index Funds 15.62 9.22 14.52
Balanced Funds 17.13 10.31 14.85
Key Benchmark Indices
CNX Nifty Index 16.74 9.41 14.41
CNX Midcap Index 16.53 5.94 18.01
S&P BSE Midcap 17.80 4.27 15.31
S&P BSE Sensex 19.14 9.55 14.64
S&P 500 International 13.78 12.19 16.27
Returns as on May 19, 2014; all returns are annualized; Source:
ICICIdirect and CRISIL
ICICIdirect Money Manager May 201427
FLAVOUR OF THE MONTH
Debt Funds
Categories Average Returns (%)
6-month 1-year 3-year
Monthly income plan (MIP) - Aggressive
15.64 7.32 8.32
MIP - Conservative 15.45 6.45 8.09
Liquid Funds 8.56 8.75 8.73
Gilt Funds 8.57 1.15 7.49
Income Funds - Short term 9.97 7.10 8.97
Income Funds - Long term 9.61 2.59 8.18
Key Benchmark Indices
Crisil MIPEX 15.64 7.32 8.32
Crisil LiquiFex 9.45 9.48 8.77
CRISIL Gilt Index 10.46 -2.22 7.33
CRISIL Short Term Bond Index 10.32 8.20 8.95
CRISIL Composite Bond Index 11.56 1.48 7.53
Returns as on May 19, 2014; all returns are annualized; Source:
ICICIdirect and CRISIL
Summing up
Investing has to do with giving today’s benefits for future. It
has to be followed as a discipline and the most important step
is the first step. ICICIdirect is there to provide the guidance,
education, tools, and ongoing support you may need to become
comfortable with investing.
Please send your feedback to [email protected]
ICICIdirect Money Manager May 201428
India has a fascinating opportunity ahead of itself with
a young dynamic population, rising incomes propelling
Indian households into aspirational consumers, and large
entrepreneurial class addressing unmet needs of Indians, says
Harish Krishnan, Vice President- Kotak Mutual Fund, in an
interview with ICICIdirect Money Manager. He believes that
equity as an asset class is the best avenue to harness this
opportunity as an investor. Excerpts:
‘Equity markets are poised for sustainable strong performance’
Tête-à-tête
Harish Krishnan Vice President-
Kotak Mutual Fund
Could you please give us an overview of current market situation? How do you see the markets performing going ahead?
Equity markets have witnessed a strong performance in the last few months. However, if one were to consider medium term performance, equity markets have just about crossed their earlier highs in 2007 and 2010. This medium term performance of Indian equities is primarily a reflection of slowing growth in Indian economy, relatively high interest rates and flux in government policies – all
Q:
A:
of which had taken a toll on
corporate earnings growth.
As we look ahead, we clearly
believe that from a macro-
economic standpoint, things
have improved for India.
ICICIdirect Money Manager May 201429
Tête-à-tête
India’s currency has stabilized with current account deficit (CAD) in manageable territory, the Reserve Bank of India (RBI) seems to be clear in its mandate to temper inflation expectations, unpopular decisions of raising retail fuel prices, some progress on clearances etc. have all had a salubrious impact on the economy and we believe corporate earnings growth will start inching up. While this direction of upward momentum looks clear to us, the pace of this momentum can be strengthened if we have a stable government. While election verdict can have an impact in the near term – either ways, we believe in the medium term, equity markets as an asset class are poised for sustainable strong performance.
The El Nino phenomenon has been in the news lately. Could you please give us an overview and its impact on the Indian
Q:
economy in general and markets in particular?
Data from various meteorological departments across the world are pointing to an increased probability of El Nino. In the past, droughts in India have coincided with El Nino, however, whenever there is El Nino phenomenon, it has not resulted in droughts in India – therefore there is no causal relationship between the two. However, the current forecast from private weather forecasters point to a higher probability of less-than-normal rainfall.
While performance of agriculture has improved over the last two years in the context of otherwise weakening economy, it is imperative to understand that agriculture on its own accounts for less than 15% and therefore a poor monsoon can potentially shave-off 50-75 basis points (bps) from expected gross domestic product
A:
ICICIdirect Money Manager May 201430
Tête-à-tête
(GDP) forecasts. More importantly, it can slow down the momentum of rural consumption that had gained significant traction in the last few years. In this context, consumer staples companies may be at risk to sustain their earnings growth.
Tell us something about your stock-selection process. How do you find ideas for your funds? What kind of stocks do you prefer and what do you avoid?
Our investment philosophy centers around BMV framework, i.e.
• Business that is scalable and sustainable across cycles.
• Management team that can leverage on the opportunity and that are aligned with longer term value creation objectives.
• Valuations – we prefer to buy companies with growth at reasonable valuations. In this context, we prefer not to buy into companies just because they are cheap.
Q:
A:
We have a large pool of eight buy-side research analysts that aid in stock and sector selection. Besides this, we are serviced by a large section of institutional brokerages that help in stock ideation.
What, is your take on the interest rates? Do you foresee rates to fall or to remain at current levels?
We believe that the Reserve Bank of India (RBI) in its recent statements has focused on tempering down inflation expectations. Unless there is a drought and it impacting agri-prices significantly, we believe inflation is on a falling glide path. Thus we expect interest rates to remain at current levels in the near foreseeable future.
What industry sectors are you favoring currently and why?
We are currently overweight on consumer discretionary as we believe revival in urban consumption
Q:
A:
Q:
A:
ICICIdirect Money Manager May 201431
with significant pent up demand for few categories like automobiles, durables, modern retailing, etc. We are also overweight on financials, as a proxy to play broad macro-recovery. While infrastructure theme has underperformed massively over last 3-5 years, we still believe it is a bit too early to speak about a revival in fresh investment climate, which will require significant policy action as well as falling interest rates.
With all your experience, what advice would you give to a young investor who wishes to invest in equities?
India has a fascinating opportunity ahead of itself with a young dynamic population, rising incomes propelling Indian households into aspirational consumers, and large entrepreneurial class addressing unmet needs of Indians. Equity as an asset
Q:
A:
class is the best avenue to harness this opportunity as an investor. Even after this bout of tepid performance by equities over the last 7 years, Indian equities in the longer term (10 years+) have generated 14%-16% returns.
For a young investor planning for the future, the difference of investing in an asset class like debt (even assuming 10% returns) and equities (even assuming 15% returns) over a 25-year period can be a staggering 3.5x and if equities can generate 20% returns over long term, the difference is an almost astounding 9x. Clearly, this higher return profile of equities comes with a higher volatility and thus it is imperative to consider allocation to a fund house with strong risk management systems and focus on long term value creation, rather than be swayed by momentum.
Tête-à-tête
The views expressed in the interview are personal views of the author and do not necessarily represent the views of ICICI Securities.
ICICIdirect Money Manager May 201432
Tax treatment of pension plans
ASK OUR PLANNER
I had taken a unit-linked pension plan (ULPP) 2 years back for a period of 25 years. I am currently 37 years old. The policy will mature when I turn 60. When I took the policy, the agent had told me that the maturity amount would be tax-free. I had recently read an article, where it says that pension policies are taxed on maturity. Can you please clarify? Also, I am now thinking to retire at 55. If I pre-close my policy at 55, will there be any tax implications?
- Raman Roy
A lot of policy holders have the same question in mind about the pension plans taken by them. When pension plans mature, irrespective of whether they are unit-linked or not, only 1/3rd of the maturity amount is given to the investor as a lumpsum. This lumpsum amount is tax-free. The balance 2/3rd is converted to an annuity and one starts to get regular pension from this corpus post maturity. The pension thus received, is treated as income
Q:
A:
and is taxed accordingly, as per prevalent tax laws.
In case, if one surrenders any pension plan before its maturity, then the entire sum receivable in taxable.
In your last edition, I read about systematic transfer plan (STP) of mutual funds. I want to know more about it. Is it that transfer has to be in the same asset management company (AMC) or I can transfer to other AMC?
I have some thematic fund which is not performing well since last 3 years and hence would like to transfer to some other equity fund. Also, is it today’s value of the investment that will get transferred or the original investment value that will get transferred.
- Ajit Shah
Most of us know about systematic investment plan (SIP) of mutual funds, where we invest at regular intervals. Whereas, the systematic transfer plan (STP) of mutual funds is not-so-popular yet.
Q:
A:
ICICIdirect Money Manager May 201433
ASK OUR PLANNER
Under STP, an amount you opt for is transferred from one mutual fund scheme to another of your choice, at regular intervals. You can get into a weekly, monthly or a quarterly transfer plan, as per your needs.
You may choose to transfer a fixed sum from one scheme to another. The mutual fund will reduce the number of units equal to the amount you have specified from the scheme you intend to transfer money. At the same time, the amount such transferred will be utilized to buy the units of the scheme you intend to transfer money into, at the applicable net asset value (NAV). Some fund houses allow you to transfer only the capital appreciation to be transferred at regular intervals. You can do STP from one fund to another of the same AMC only.
STP is a useful tool to take a step-by-step exposure into equities or to reduce exposure over a period of time. Say, for example, you have ` 10 lakh to invest in equity over a period of time. You could put this amount in a liquid fund of the mutual fund or a short-term bond
fund. This gives an opportunity to earn a better return than interest rate on savings bank account. You can then start an STP where every month a pre-determined amount will be invested into an equity fund. This helps in deploying funds at regular intervals in equities with minimum timing risk.
I want to reduce my tax liability on investments and hence, planning to invest in some fixed deposits (FDs) in my wife’s name, who is a homemaker. I would also like to transfer my second house property to her, in order to show rental income in her name (my home loan has been closed). The interest income from deposits and rental income from property put together, will be less than ` 2 lakh and will be exempt from tax for her. Can this be done?
- Kamlesh Arora
The income from any asset transferred to spouse shall be deemed to be the income of the person who has transferred the asset according to the following conditions:
Q:
A:
ICICIdirect Money Manager May 201434
ASK OUR PLANNER
- The transferor is an individual
- The asset is transferred to his/her spouse.
- The transfer may be direct or indirect
- He/she has transferred an asset
- The asset is transferred otherwise than (a) for adequate consideration, or (b) in connection with an agreement to live apart.
As per the above clubbing-of-income rules, the interest and rental income in your case shall be clubbed with your income only, and be taxed as per the income tax slabs applicable to you.
However, any income from investments made by your wife out of such interest and rental income will be taxed to her and will not be clubbed with your income.
My son is 10 years old. I want to invest in shares and mutual funds in his name. Is this possible? If yes, should he also have a PAN? Will I be able
Q:
to apply for a PAN in his name in such a case?
- Sooraj Patil
It is possible to invest money in shares and mutual funds (MFs) in a minor's name. For investing into mutual funds, the guardian should be Know Your Customer (KYC)-compliant and attach his KYC acknowledgment along with the MF application form. For investing into shares, first requirement is a PAN in the name of the minor, which can be applied as per the normal process.
A guardian has to be appointed for the same. In your case, you will be the natural guardian. Guardian's details (photograph, proof of identity and address) have to be provided, along with a copy of the birth certificate of the minor for applying PAN. A separate demat account has to be opened in the minor's name, and a guardian has to be appointed. A minor cannot nominate in a demat account either directly or through the guardian.
A:
Do you also have similar queries to ask our experts? Write to us at: [email protected].
ICICIdirect Money Manager May 201435
Developing an Investment Plan
YOUR FINANCIAL HEALTH CHECK
Every month, ICICIdirect Money Manager
assesses one family's current financial
situation, and suggests a suitable way
forward to help them reach their goals...
The MISHRAS
Sanjay (35), Rashmi (32), Uday (7), Sweta (infant)
Reside in: Pune Family Annual income: ` 8,28,000
Family Profile
Sanjay and Rashmi, both work as marketing managers with an MNC. The couple wishes to buy a new home (by selling existing home) and wants to plan for their children's education, along with retirement.
BASIC EXPENSES (ANNUAL BREAK-UP):
Household ` 1,20,000Vehicle Loan ` 1, 42,944Medical ` 24,000Education ` 60,000Vehicle Maintenance ` 12,000Medical Insurance ` 9,600Others ` 24,000Total ` 3,92,544
FAMILY NETWORTH
Assets LiabilitiesSelf-occupied house ` 40 lakh Outstanding car loan ` 4 lakhCar ` 4.70 lakhEndowment policies ` 25 lakhSavings account ` 80,000Total Assets ` 70.50 lakh Total Liabilities ` 4 lakhNet-worth ` 66.50 lakh
ICICIdirect Money Manager May 201436
GOALS
New House
(2018, inflation 7%)
Uday's education
(2023, inflation 10%)
Sweta's education
(2031, inflation 10%)
Sweta's marriage
(2034, inflation
6%)
Current Value:
` 85,00,000
Current Value:
` 10,00,000
Current Value:
` 15,00,000
Current Value:
` 17,00,000Future Value:
` 1,24,89,289
Future Value:
` 25,93,742
Future Value:
` 83,39,876
Future Value:
` 57,79,258
YOUR FINANCIAL HEALTH CHECK
PLANNING
Buying a house (2018): Sanjay
plans to sell-off his existing
house to buy a new one.
Assuming the cost of increase
to be 7% p.a., the value of
existing house after 5 years
will be ~ ` 56.10 lakh. Sanjay
can make a down payment
with this amount and take a
home loan for the remaining
amount (` 68,79,082).
Uday's education: Sanjay
hasn't started any investments
yet, and all his endowment
policies also are maturing
late. However, considering
his current investible surplus,
he can plan for his child goals
well. Sanjay needs to save and
invest ` 11,577 p.m. or ` 1.31
lakh p.a. As the goal tenure is
long, he can consider investing
into equity and start an SIP
(systematic investment plan)
into equity mutual funds.
Sweta's education: Sanjay
needs to save and invest
` 11,718 p.m. or ` 1.33 lakh
p.a. in equity mutual funds for
this goal.
Sweta's marriage: Sanjay
needs to save and invest
` 5,541 p.m. or ` 63,160 p.a.
in equity mutual funds for this
goal. The current investible
surplus may not be sufficient.
As Sanjay's income increases,
ICICIdirect Money Manager May 201437
YOUR FINANCIAL HEALTH CHECK
he can regularly increase the
monthly / annual contribution.
RETIREMENT
Sanjay has accumulated
2 lakh in his provident fund (PF)
with a monthly contribution of
` 4,000. He expects his salary
to increase by 10% annually,
and this will also help him
increase PF contributions.
As a first step, Sanjay has
gone through the exercise of
listing down all expenses that
will incur post retirement. He
estimates annual expenses,
post-retirement, in today's
cost at ` 1.92 lakh. He expects
inflation at 6%. Considering
that, his annual expenses
at the time of retirement
(54 years) would be ` 5.80
lakh. Therefore, he needs
to accumulate a retirement
corpus of 1.09 crore. (Life
expectancy - 74 years).
After taking into consideration
his current investments (PF,
endowment policies), he'll still
have a shortfall of ~ ` 26.6
lakh, for which, he needs to
save and invest ` 43,720 per
annum.
OTHER RECOMMENDATIONS
Life Insurance: Sanjay has a
total insurance cover of ` 25
lakh, which does not seem
to be sufficient considering
his expenses and goals. It
is recommended to take an
additional term cover of ` 25
lakh.
Medical Insurance: The
family has a health cover
of ` 7 lakh, currently. They
should review and renew it
every year. Additionally, it is
recommended to take separate
policy for critical illness and
personal accident policies.
Sanjay should also ensure that
his home is insured against
any loss.
ICICIdirect Money Manager May 201438
MUTUAL FUND ANALYSIS
Category: Diversified Equity Funds
Axis Equity Fund
Fund Objective
To achieve long term capital
appreciation by investing
in a diversified portfolio
predominantly consisting
of equity and equity related
securities including derivatives.
Key InformationNAV as on April 30, 2014 (`)
14.6
Inception Date January 5, 2010Fund Manager Pankaj MurarkaMinimum Investment (`) Lumpsum SIP
5000-
Expense Ratio (%) 2.43Exit Load 1% on or before
12M, Nil after 12MBenchmark CNX Nifty IndexLast declared Quarterly AAUM(` cr)
737
Product LabelThis product is suitable for investors seeking*:l Capital appreciation over long ternl Investment in a diversified portfolio
predominantly consisting of equity and equity related instruments
l High risk (BROWN)
Fund Management: Pankaj Murarka
Work experience: 14 years
Pankaj has been managing this fund since June 24, 2013. He is also Head - Equities at Axis Mutual Fund and is responsible for managing the entire equity investment team, process and performance.
Performance
With the completion of three years of net asset value (NAV) history, the fund has been the top performer in the diversified
funds category. In 2013, while the benchmark CNX Nifty delivered 6.8%, the fund outperformed by huge margins delivering 13.5% return and also beating all it peer funds. Investment of ` 10,000 in the fund during the new fund offer (NFO) period would have grown to ` 14,520 by March 31, 2014.
Performance vs. Benchmark
8.6 14
. 3
9.5
7.1 12
.9
5.2
14
05
101520
6 Month 1 Year 3 Year 5 Year
Retu
rn%
Fund Benchmark
ICICIdirect Money Manager May 201439
MUTUAL FUND ANALYSIS
Calendar Year-wise Performance
2013 2012 2011 2010 2009
NAV as on Dec 31 (`)
13.7 12.1 9.2 11.8 -
Return (%) 13.5 31.7 -22.6 18.4 -
Benchmark (%) 6.8 27.7 -24.6 18.0 75.8
Net Assets (` Cr) 632 562 611 823 -
Last Three Years Performance
Fund Name31-Mar-13 31-Mar-12 31-Mar-11
31-Mar-14 31-Mar-13 31-Mar-12
Axis Equity Fund
19.80 17.10 -6.17
CNX Nifty - Benchmark
17.98 7.31 -9.23
Portfolio
The fund house is of the opinion that current recovery in the Indian economy will be more protracted but bodes well for long term investors focused on the quality of future growth in India. Now that a disciplined approach has been instilled by a hawkish central bank, determined to tame inflation, a slower recovery and equity valuation around historical averages means the Indian market for investor should be viewed through a long term lens. The portfolio is, therefore, positioned accordingly. Banks, both private and large-cap public sector undertakings (PSUs), have higher exposure. Then Larson & Toubro (L&T)
and Reliance Industries (RIL) are in the top holdings both being market leaders in the infrastructure and refining space. Technology majors Tata Consultancy Services (TCS) and Infosys have been contributors to the performance and also form part of the current top holdings. Large-cap stocks account for 81% of the total holdings.
The portfolio comprises growth stocks, which make it suitable for long term investment.
Top 10 Holdings Asset Type %
State Bank Of India Domestic Equities 6.8
ICICI Bank Ltd. Domestic Equities 6.8
Infosys Ltd. Domestic Equities 6.7
HDFC Bank Ltd. Domestic Equities 6.4
Reliance Industries Ltd. Domestic Equities 5.0
Larsen & Toubro Ltd. Domestic Equities 4.4
Clearing Corporation Of India Ltd.
Cash & Cash Equivalents
4.1
Tata Consultancy Services Ltd.
Domestic Equities 3.9
Zee Entertainment Enterprises Ltd.
Domestic Equities 3.2
Maruti Suzuki India Ltd. Domestic Equities 3.1
ICICIdirect Money Manager May 201440
MUTUAL FUND ANALYSIS
Whats In %
SML Isuzu Ltd. 0.1
Whats out %
Cadila Healthcare Ltd. 0.3
Market Capitalisation (%)
Large 81.7
Mid 14.6
Small 0.7
Top 10 Sectors Asset Type %
Bank - Private Domestic Equities 17.3
IT - Software Domestic Equities 13.6
Bank - Public Domestic Equities 10.4
Refineries Domestic Equities 8.1
Pharmaceuticals & Drugs Domestic Equities 7.6
Engineering - Construction
Domestic Equities 4.4
TV Broadcasting & Software Production
Domestic Equities 3.2
Automobiles - Passenger Cars
Domestic Equities 3.1
Oil Exploration Domestic Equities 2.9
Power Generation/Distribution
Domestic Equities 2.9
Risk Parameters
Standard Deviation (%) 14.79
Beta 0.83
Sharpe ratio 0.04
R Squared 0.98
Alpha (%) 5.16
Dividend History
Date Dividend (%)
Mar-19-2014 10
Feb-05-2013 12
Portfolio Attributes
Total Stocks 47.0
Top 10 Holdings (%) 50.2
Fund P/E Ratio 18.2
Benchmark P/E Ratio --
Fund P/BV Ratio 3.4
Value of Investment of ` 10000 since
inception
Date 31-Mar
Fund 14520
CNX Nifty - Benchmark 12702
Performance of all the schemes managed by the fund manager
Fund Name 31-Mar-13 31-Mar-12 31-Mar-11
31-Mar-14 31-Mar-13 31-Mar-12
Axis Midcap Fund(G) 24.98 15.30 3.42
S&P BSE Mid-Cap 15.32 -3.22 -7.67
Axis Equity Fund(G) 19.80 17.10 -6.17
CNX Nifty Index 17.98 7.31 -9.23
*Investors should consult their financial advisors 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 medium risk
(BROWN) Investors understand that their principal will be at high risk
Data and Portfolio Details are as on April 30, 2014 Source: ICICIdirect Research, Accord Fintech
ICICIdirect Money Manager May 201441
Category: Mid-cap Equity Funds
SBI Bluechip Fund
Fund Objective
The objective of the scheme would be to provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of equity stocks of companies whose market capitalisation is at least equal to or more than the least market capitalised stock of the BSE 100 Index.
Fund Management : Sohini
Andani
Work experience: Over 15 years
Sohini has been managing the
fund since September 2010. She
joined SBI Funds Management
Pvt Ltd as the Head of Research
in October 2007 and was
appointed fund manager in
May 2010. Sohini is a graduate
in Commerce and is a qualified
chartered accountant.
Key InformationNAV as on April 30, 2014 (`)
19.19
Inception Date January 20, 2006 Fund Manager Sohini AndaniMinimum Investment (`) Lumpsum SIP
50001000
Expense Ratio (%) 2.31Exit Load 1% on or before
1Y,Nil-after 1YBenchmark S&P BSE 100Last declared Quarterly AAUM (`cr)
885
Product LabelThis product is suitable for investors seeking*:l long term Investment.l Investment in equity shares of Companies
whose market capitalization is at least equal to or more than the least market capitalized stock of BSE 100 index to provide long term capital growth opportunities.
l High risk (BROWN)
Performance
Since its launch in 2006, the
fund has outperformed the
benchmark in four out of the
seven calendar years. Except
for the rally of 2009, there is no
major underperformance. In
CY12, the fund outperformed
the benchmark S&P BSE 100 by
8 percentage point and the S&P
BSE Sensex by 14 percentage
points.
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager May 201442
10.7 14
.7
9.5
17
7.9 13
5
14.8
05
101520
6 Month 1 Year 3 Year 5 Year
Retu
rn%
Fund Benchmark
Calendar Year-wise Performance
2013 2012 2011 2010 2009
NAV as on Dec 31 (`) 17.8 16.6 12.0 15.8 14.1
Return (%) 7.6 38.2 -24.2 11.9 87.9
Benchmark (%) 5.9 30.0 -25.7 15.7 85.0
Net Assets (` Cr) 753 747 693 949 1147
Last Three Years Performance
Fund Name31-Mar-13 31-Mar-12 31-Mar-11
31-Mar-14 31-Mar-13 31-Mar-12
SBI Blue Chip Fund
18.49 17.19 -5.36
Fund Benchmark
18.11 6.84 -9.23
S&P BSE Sensex
18.85 8.23 -10.50
Growth of ` 10000 invested since
inception
Date 31-Mar
Fund ` 19134
Benchmark ` 21718
BSE Sensex ` 22194
PortfolioThe fund house has adopted bottom-up stock picking. The fund manager sticks to companies that have positioned themselves to benefit from economic revival (banks, engineering companies) through a well configured franchise, toned balance sheet and financial structure through the downturn, quality assets
and competitive advantage to expand the exports footprint (pharma, technology and auto ancillary stocks). Also, these companies have a large business presence, good reputation and are possibly market leaders in their industries. The fund comprises a well-diversified portfolio of predominantly large-cap companies, with steady growth potential opportunity. The investments are limited to stocks with market capitalisation equal to or more than the least market capitalised stock of BSE 100 Index.
Overall, this is a good portfolio currently positioned to benefit via higher exposure to pharmaceuticals and technology stocks.
Top 10 Holdings Asset Type %
HDFC Bank Ltd. Domestic Equities 7.9
Tata Consultancy Services Ltd.
Domestic Equities 6.0
Motherson Sumi Systems Ltd.
Domestic Equities 4.8
Reliance Industries Ltd. Domestic Equities 4.7
ITC Ltd. Domestic Equities 3.7
Divis Laboratories Ltd. Domestic Equities 3.6
Sun Pharmaceutical Industries Ltd.
Domestic Equities 3.3
Bharti Airtel Ltd. Domestic Equities 3.2
Larsen & Toubro Ltd. Domestic Equities 3.1
HCL Technologies Ltd. Domestic Equities 3.1
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager May 201443
Whats In %
Engineers India Ltd. 1.1
Cadila Healthcare Ltd. 0.8
Whats Out %
Dr. Reddys Laboratories Ltd. 1.6
Market Capitalisation (%)
Large 83.4
Mid 10.2
Small -
Top 10 Sectors Asset Type %
IT - Software Domestic Equities 18.0
Bank - Private Domestic Equities 14.0
Pharmaceuticals & Drugs Domestic Equities 10.2
Refineries Domestic Equities 5.8
Auto Ancillary Domestic Equities 4.8
Bank - Public Domestic Equities 4.3
Cigarettes/Tobacco Domestic Equities 3.7
Household & Personal Products
Domestic Equities 3.3
Telecommunication - Service Provider
Domestic Equities 3.2
Engineering - Construction
Domestic Equities 3.1
Asset Allocation
Equity 96.1
Debt 0.0
Cash 3.9
Risk Parameters
Standard Deviation (%) 15.68
Beta 0.86
Sharpe ratio 0.04
R Squared 0.96
Alpha (%) 5.25
Portfolio Attributes
Total Stocks 58.0
Top 10 Holdings (%) 43.4
Fund P/E Ratio 23.5
Benchmark P/E Ratio --
Fund P/BV Ratio 4.9
Dividend History
Date Dividend (%)
Mar-21-2014 18
Nov-04-2010 15
Nov-30-2007 20
MUTUAL FUND ANALYSIS
*Investors should consult their financial advisors 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 medium risk
(BROWN) Investors understand that their principal will be at high risk
Data and Portfolio Details are as on Apri1 30, 2014Source: ICICIdirect Research, Accord Fintech
Performance of all the schemes managed by the fund manager
Fund Name 31-Mar-13 31-Mar-12 31-Mar-11
31-Mar-14 31-Mar-13 31-Mar-12
SBI Magnum MidCap Fund-Reg(G) 41.86 12.97 -0.37
S&P BSE Mid-Cap 15.32 -3.22 -7.67
SBI BlueChip Fund-Reg(G) 18.49 17.19 -5.36
S&P BSE 100 18.11 6.84 -9.23
ICICIdirect Money Manager May 201444
Our indicative large-cap equity model portfolio has continued to deliver an impressive return (inclusive of dividends) of ~47% since its inception (June 21, 2011) vis-à-vis Sensex return of ~29% during the same period, nearly 1.6x the index performance. This has lent further confidence to our stock picking philosophy for “Quality-21” large-cap stocks. The mid-cap portfolio, which has generally outperformed the market since inception mainly driven by our prudent stock selection, has witnessed a reduction in outperformance to ~1.6x vis-à-vis the midcap index. The “Consistent-15” delivered a return ahead of its benchmark index (~24% since its inception vis-à-vis CNX Midcap return of 15% during the same period). Some key performers of our portfolios are Sun Pharmaceuticals, Lupin, TCS, Tata Motors, ITC, Maruti Suzuki and Dabur India delivering 57-126%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.The index has scaled the walls of fear and positive expectations related to a new stable government have pushed it towards its life-time highs at ~6,800 levels. We feel the market could continue to see an expectation led rally going into general elections in May 2014. However, post this in case the outcome remains as expected we could witness a more grounded behaviour beyond that for the remaining year. Thus, we have leaned forward towards inclusion of stocks with more discretionary domestic export exposure viz. Page Industries and United Spirits. We have favoured booking profit in stocks that we feel can be better replaced, thus exiting Maruti Suzuki with a return of ~70% since inception. We also exit Navneet Publications. We believe we have a better balance to the portfolio going into a possible recovery in H1FY15E.In terms of relative weightage to the sector vis-à-vis the Sensex, we continue to remain overweight on IT, pharma and telecom given their relatively better earnings growth profile. We have also incrementally added to our overweight consumer discretionary stance as we believe it will witness strong delta in terms of both sales growth and earnings rise. We are underweight on financials (prefer private vis-à-vis public sector banks), oil & gas, the infra space (cement, infra and power) as real economic recovery remains still some time away. For other equal weight sectors we are playing specific themes like FMCG (overweight ITC) and the metals and mining space as we like individual names like L&T in the pure play infra space and feel bullish on the cement space via UltraTech Cement while remaining negative on the power space.
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager May 201445
EQUITY MODEL PORTFOLIO
Name of the company Model PortfolioLargecap
(%)Midcap
(%)Diversified
(%)Largecap StocksConsumer Discretionary 11 7.7United Spirits 3 2.1Tata Motors DVR 5 3.5Bajaj Auto 3 2.1BFSI 19 13.3HDFC 6 4.2HDFC Bank 6 4.2SBI 3 2.1Axis Bank 4 2.8Power, Infrastructure & Cement 8 5.6L & T 5 3.5Ultratech Cement 3 2.1FMCG 13 9.1Nestle 3 2.1ITC 10 7Metals & Mining 3 2.1NMDC 3 2.1Oil and Gas 11 7.7Reliance 11 7.7Pharma 7 4.9Lupin 3 2.1Sun Pharma 4 2.8IT 17 11.9Infosys 5 3.5TCS 8 5.6Wipro 4 2.8Telecom 5 3.5Bharti Airtel 5 3.5Media 3 2.1Zee Entertainment 3 2.1Retail 3 2.1Titan 3 2.1Total 70
ICICIdirect Money Manager May 201446
Content source: ICICIdirect.com Research
ICICI Securities Ltd. has been assigned an advisory mandate by Ranbaxy Laboratories Limited with regard to Sun Pharmaceutical Industires Limited's acquisition of Ranbaxy Laboratories Limited. This report is prepared on the basis of publicly available information.
EQUITY MODEL PORTFOLIO
Name of the company Model PortfolioLargecap
(%)Midcap
(%)Diversified
(%)Midcap Stocks
Consumer Discretionary 14 4.2
Bosch 8 2.4
Page Industries 6 1.8
IT 6 1.8
Info Edge 6 1.8
BFSI 16 4.8
J&K Bank 8 2.4
IndusInd Bank 8 2.4
FMCG 20 6
Kansai Nerolac 8 2.4
Dabur 6 1.8
Tata Global Beverages 6 1.8
Pharma 14 4.2
Cadilla 8 2.4
Natco Pharma 6 1.8
Media 6 1.8
Sun TV 6 1.8
Capital Goods 6 1.8
Cummins 6 1.8
Realty/Infrasturcture/Cement 18 5.4
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
ICICIdirect Money Manager May 201447
EQUITY MODEL PORTFOLIO
Performance* so far since inception
52.8
29.5
45.9
35.6
22.0
29.0
0
10
20
30
40
50
60
Large Cap Midcap Diversified
%
Portfolio Benchmark
*Value as on May 14, 2014
Value of ` 1,00,000 invested via SIP at the end of every month
3,50
0,00
0
3,50
0,00
0
3,50
0,00
04,35
0,20
8
4,25
6,03
9
4,29
0,81
6
4,00
1,69
0
3,92
9,85
0
4,00
1,80
9
2,600,000
2,800,000
3,000,000
3,200,000
3,400,000
3,600,000
3,800,000
4,000,000
4,200,000
4,400,000
Largecap Midcap Divesified
|
Investment Value of Investment in Portfolio Value if invested in Benchmark
Start date of SIP: June 30, 2011; *Value as on May 14, 2014
ICICIdirect Money Manager May 201448
MUTUAL FUND MODEL PORTFOLIO
EQUITY MUTUAL FUNDS MODEL PORTFOLIO
20.6720.99 20.99
17.96
16
17
18
19
20
21
22
Aggressive Moderate Conservative BSE 100
(%)
Returns
Investors who are wary of investing directly into equities can still get returns almost as good as equity markets through the mutual fund route.We have designed three mutual fund model portfolios, namely, conservative, moderate and aggressive mutual fund portfolios. These portfolios have been designed keeping in mind various key parameters like investment horizon, investment objective, scheme ratings, and fund management.
Particulars Aggressive Moderate ConservativeReview Interval Monthly Monthly QuarterlyRisk Return High Risk- High
ReturnMedium Risk -
Medium ReturnLow Risk - Low
ReturnFunds Allocation % Allocation
Franklin India Prima Plus 25 25 25Birla Sunlife Frontline Equity 25 25 25ICICI Prudential Dynamic Plan - 25 25ICICI Prudential Focused Blue-chip Eq.
25 - -
UTI Opportunities 25 25 25
Grand Total (a+b) 100 100 100Source: ICICIdirect.com Research
All three portfolios have outperformed the BSE 100 Index in FY14 delivering 21% absolute return
Returns (in %) are absolute; Source: ICICIdirect.com Research, Crisil Fund Analyser; Portfolio inception date: September 15, 2009
ICICIdirect Money Manager May 201449
MUTUAL FUND MODEL PORTFOLIO
DEBT MUTUAL FUNDS MODEL PORTFOLIO
8.60
6.205.49
9.048.31
3.56
0.01.02.03.04.05.06.07.08.09.0
10.0
0-6 Months 6 Months -Year Above 1yr
%
Portfolio Index
We have designed three different mutual fund model portfolios for different investment duration namely less than six months, six months to one year and above one year. These portfolios have been designed keeping in mind various key parameters like investment horizon, interest rate scenarios, credit quality of the portfolio and fund management, etc.Keeping in mind the current market scenario and portfolio of the funds we have changed the allocation. Based on the portfolios of individual funds, we have introduced new funds in the portfolio.Particulars Time Horizon 0 – 6 months 6 months - 1 Year Above 1 YearObjective Liquidity Liquidity with
moderate returnAbove FD
Review Interval Monthly Monthly QuarterlyRisk Return Very Low Risk -
Nominal ReturnMedium Risk -
Medium ReturnLow Risk - High
ReturnFunds Allocation % AllocationUltra Short term Funds IDFC Money Manager Fund - Investment Plan 20 - -Templeton India Low Duration Fund 20 - -Reliance Medium Term Fund 20 - -Short Term Debt Funds Taurus Short Term Income Fund 20 - -Birla Sunlife Short Term Fund 20 - -Birla Sunlife Short Term Opportunities Fund - 20 20ICICI Prudential Short Term - 20 -ICICI Prudential Regular Savings - - 20IDFC SSI Short Term - 20 -Sundaram Select Debt - 20 20UTI Short Term Fund - 20 -Tempelton Short Term Income - - 20Long Term/Dynamic Debt Funds IDFC Dynamic Bond fund - - 20Total 100 100 100
Source: ICICIdirect.com ResearchAbove 1-year portfolio outperformed benchmark index despite volatile yields
throughout FY14
Model portfolio performance: FY14; Source: Crisil Fund Analyser, ICICIdirect.com Research; Index: 0-6 months portfolio – Crisil Liquid Fund Index; 6 months-1 year – Crisil Short Term Index; Above 1 year: Crisil Composite Bond Index.(Note: Higher allocation to short-term funds led to underperformance of the 6 months to 1 year debt funds portfolio against the benchmark Crisil Short Term Bond Index)
ICICIdirect Money Manager May 201450
1. The Securities and Exchange Board of India (SEBI) has increased the limit for cash investments in mutual funds to ` ________ from ` ________.
2. When pension plans mature, irrespective of whether they are unit-linked or not, only _______of the maturity amount is given to the investor as a lumpsum.
3. The Reserve Bank of India (RBI) has allowed minors above the age of ________ to open a savings bank account independently.
4. A minor can nominate in a demat account either directly or through the guardian. True/False.
5. In case, if one surrenders any pension plan before its maturity, then the entire sum receivable is taxable. True/False
Note: All the answers are in the stories that have appeared in this edition of ICICIdirect Money Manager. You may send in your answers at: [email protected]
The answers will be published in our next edition. The names of the earliest all correct entries will be published too. So jog your grey cells and be quick to send in your entries..
Correct answers for the April 2014 quiz are:
1. Retirement fund body EPFO will soon provide ________ number to its subscribers, which will facilitate them to avoid filing of provident fund transfer claims on changing jobs.
A: Universal account number (UAN)
2. The tenure of Inflation Indexed National Savings Securities (IINSS) is ________ years.
A: 10
3. Short-term capital gains, i.e. profit from securities held up to 1 year, are taxed at ________ per cent.
A: 15
4. A typical monetary policy takes either a ________ approach (i.e. tighten money supply) or an ________ approach (i.e. (loosen money supply).
A: Contractionary, expansionary
5. The Inflation Indexed National Savings Securities (IINSS) are tradable in the secondary market. True/False.
A: False
QUIZ TIME
ICICIdirect Money Manager May 201451
MONTHLY TRENDS
WPI INFLATION (FOOD)
(The figures are in per cent) CRUDE OIL
NYMEX crude oil prices ($/barrel) FII & DII INVESTMENTS
(Foreign institutional investors (FIIs) and domestic institutional investors (DII) net equity investment (` in crore)
VOLATILITY INDEX (VIX)
VIX is a key measure of market expectations of near term volatility. When the markets are highly volatile, the VIX tends to rise.
9.90
8.64
8.08.28.48.68.89.09.29.49.69.8
10.0
Mar-14 Apr-14
(%)
101.58
99.74
97.0
98.0
99.0
100.0
101.0
102.0
103.0
104.0
105.0
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
$ pe
r bar
rel
2882.20
478.30
-611.226.46
-1500-1000
-5000
500100015002000250030003500
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
FII DII
.
21.62
30.59
12.0 16.0 20.0 24.0 28.0 32.0 36.0
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
VIX
ICICIdirect Money Manager May 201452
MONTHLY TRENDS
DOMESTIC INDICESBSE Sensex
NSE Nifty
GLOBAL INDICESDow Jones
NASDAQ
EXCHANGE RATESUSD-INR
22386.27 22417.80
219002200022100222002230022400225002260022700228002290023000
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
6704.20 6696.40
6550
6600
6650
6700
6750
6800
6850
6900
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
16457.6616580.84
15600
15900
16200
16500
16800
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
4198.99
4114.56
3800
3900
4000
4100
4200
4300
4400
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
60.0160.34
59.259.459.659.860.060.260.460.660.861.061.261.4
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
USD
/ IN
R
0.14%
0.75%
2.01%
0.12%
0.56%
ICICIdirect Money Manager May 201453
MONTHLY TRENDS
99.98
101.79
98.0
98.5
99.0
99.5
100.0
100.5
101.0
101.5
102.0
102.5
103.0
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
₤/ I
NR
POUND-INR
EURO-INR
BULLIONGOLD
(The prices are in $ per ounce).
SILVER
(The prices are in $ per ounce).
(Source for all indicators: Bloomberg, Reuters)
82.63 83.67
78.0
80.0
82.0
84.0
86.0
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
€/ I
NR
1283.64
1291.29
1150
1225
1300
1375
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
$ pe
r Oun
ce
19.71
19.11
18.0
20.0
22.0
31-Mar 5-Apr 10-Apr 15-Apr 20-Apr 25-Apr 30-Apr
$ pe
r Oun
ce
1.81%
1.26%
ICICIdirect Money Manager 54 May 2014
Premium Education Programmes Schedule
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 May, 2014.
Schedule for Beginners Programme on Futures and Options Trading Sr. No
City Dates For More Information & Registration call:
1 New Delhi May 24 and 25 2014 Vishal on 07838290143, Harneet on 095821586932 Hyderabad May 24 and 25 2014 Ruchi on 82973623233 Pune May 17 and 18 2014 Kusmakar on 78754423114 Indore May 17 and 18 2014 Kusmakar on 78754423115 Bangalore May 24 and 25 2014 Subrata on 96200014786 Mumbai-
ChemburMay 17 and 18 2014 Manish on 8451057943
7 Vashi May 17 and 18 2014 Manish on 84510579438 Kolkata May 17 and 18 2014 Sumit on 80175161879 Mumbai-
AndheriMay 10 and 11 2014 Vidhu on 9619716146
10 Thane May 17 and 18 2014 Vidhu on 961971614611 Mumbai-
AndheriMay 24 and 25 2014 Vidhu on 9619716146
12 Chennai May 24 and 25 2014 Manivannan on 9742273109Schedule for Fast Track Beginners programme on Futures and Options Trading
Sr. No
City Dates For More Information & Registration call:
13 Bhubaneshwar May 18 2014 Sumit on 801751618714 Ahmedabad May 25 2014 Yogesh on 823805356315 Vadodara May 18 2014 Yogesh on 823805356316 Ghaziabad May 18 2014 Vishal on 0783829014317 Ludhiana May 03 and 04 2014 Harneet on 09582158693
Schedule for Foundation Programme on Stock InvestingSr. No
City Dates For More Information & Registration call:
18 New Delhi May 10 and 11 2014 Vishal on 07838290143, Harneet on 0958215869319 New Delhi May 24 and 25 2014 Vishal on 07838290143, Harneet on 0958215869320 Kolkata May 10 and 11 2014 Sumit on 801751618721 Pune May 10 and 11 2014 Kusmakar on 787544231122 Pune May 24 and 25 2014 Kusmakar on 787544231123 Nagpur May 17 and 18 2014 Kusmakar on 787544231124 Bangalore May 17 and 18 2014 Subrata on 962000147825 Bangalore May 31 and June 01 2014 Subrata on 9620001478
ICICIdirect Money Manager 55 May 2014
Contact us
Email:
Send us an email at [email protected] Please mention the name, date and venue of the programme you have attended or wish to attend, for faster resolution of your queries.
SMS:
SMS EDU to 5676766 for more details
26 Mumbai-Chembur
May 10 and 11 2014 Manish on 8451057943
27 Vashi May 10 and 11 2014 Manish on 845105794328 Chandigarh May 17 and 18 2014 Harneet on 0958215869329 Hyderabad May 24 and 25 2014 Ruchi on 829736232330 Thane May 10 and 11 2014 Vidhu on 961971614631 Mumbai-
AndheriMay 17 and 18 2014 Vidhu on 9619716146
32 Mumbai-Andheri
May 31 and June 01 2014 Vidhu on 9619716146
33 Chennai May 24 and 25 2014 Manivannan on 9742273109Schedule for Fast Track Foundation Programme on Stock Investing
Sr. No
City Dates For More Information & Registration call:
34 Dhanbad May 18 2014 Sumit on 801751618735 Kochi May 17 2014 Subrata on 962000147836 Ahmedabad May 11 2014 Yogesh on 823805356337 Aurangabad May 11 2014 Kusmakar on 787544231138 Gurgaon May 25 2014 Harneet on 0958215869339 Faridabad May 25 2014 Vishal on 07838290143
Schedule for Advanced Derivative Trading Strategies Sr. No
City Dates For More Information & Registration call:
40 New Delhi May 10 and 11 2014 Vishal on 07838290143, Harneet on 0958215869341 Mumbai-
AndheriMay 03 and 04 2014 Vidhu on 9619716146
Schedule for Technical AnalysisSr. No
City Dates For More Information & Registration call:
42 New Delhi May 17 and 18 2014 Vishal on 07838290143, Harneet on 0958215869343 Kolkata May 24 and 25 2014 Sumit on 801751618744 Bangalore May 10 and 11 2014 Subrata on 962000147845 Mumbai-
ChemburMay 24 and 25 2014 Manish on 8451057943
Schedule for Fast Track Technical Analysis Sr. No
City Dates For More Information & Registration call:
46 Ranchi May 18 2014 Sumit on 801751618747 Surat May 18 2014 Yogesh on 8238053563
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Printed at: SAP Print Solutions Pvt. Ltd., 28A, Laxmi Industrial Estate, S.N. Path, Lower Parel (W), Mumbai 400 013.Printed at: SAP Print Solutions Pvt. Ltd., 28A, Laxmi Industrial Estate, S.N. Path, Lower Parel (W), Mumbai 400 013.Printed at: SAP Print Solutions Pvt. Ltd., 28A, Laxmi Industrial Estate, S.N. Path, Lower Parel (W), Mumbai 400 013.
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