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1
Equity Market – Wealth Creator Machine In Long Run…
What 1 lakh Invested 40 Years ago could have fetched today…
Particulars
Current Value
CAGR %
What can be bought?
1330
6.7%
28,61,078
8.7%
SUV worth 28 Lakhs
29,05,276
8.8%
SUV + iWatch (Rs.29 lakh)
39,15,912
9.6%
SUVs + Ninja(Rs. 40 lakhs)
3,39,25,424
15.7%
House worth (Rs. 2 crores) + Child’s overseas education (1.3 crores) + SUV (20 lakhs)
Gold SensexInflation (B:100) PPFFD
--
Disclaimer: The above Nifty 50 returns are used to show the non-linear movement of equity market returns only and should not be construed as recommendation from LIC Mutual Fund. LIC Mutual Fund is not
guaranteeing or promising or forecasting any returns. Source: BSE, Bloomberg (Data is from 1981 to 2021) 02
Equity Market – A Good Option To Fight Inflation
But it requires Patience...
Disclaimer: The above Nifty 50 returns are used to show the non-linear movement of equity market returns only and should not be construed as recommendation from LIC Mutual Fund. LIC Mutual Fund is
not guaranteeing or promising or forecasting any returns. Source: Bloomberg, RBI 03
1,000
3,000
5,000
7,000
9,000
11,000
13,000
15,000
17,000
19,000
Jan
-02
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Jan
-20
Jan
-21
Cost Inflation Index Nifty 50 TRI G sec indexed FD Index
Nifty50 TRI CAGR : 16.1%
G-Sec CAGR : 7.6%
FD CAGR : 7.5%
Cost inflation index –CAGR – 6.0%
…But High Return Expectation Comes With Higher Volatility
Just like sound waves travel in non-linear frequencies, Stock prices too follow non-linear path.
Sound wave frequencies
Stock price chart
This phenomenon of dynamic change in prices is called Volatility.
Disclaimer: For illustrative purpose only 04
Sharp volatility in market sometime plays with investor’s mind and may give investor sleepless nights.
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Nifty 50 Index
Chal chal chalmere saathi ….
Ab tu Bhaag Milka……
Yeh kya hua…. Kaise hua…..
Bach ke rehna re baba…bach ke rehna re….
Mere sapno ki rally kab aayegi tu…..
Jaane kahaan gaye woh din….
Aaj main upar.. asmaan niche..
Mujhe chod do mere haal pe..zinda hoon yaar kaafi hai…..
The Rollercoaster Ride of Investor Emotions
Disclaimer: The above Nifty 50 returns are used to show the non-linear movement of equity market returns only and should not be construed as recommendation from LIC Mutual Fund. LIC Mutual Fund is not guaranteeing or promising or forecasting any returns. Past Performance may or may not be sustained in future. Source: Internal, Bloomberg 05
How Volatility Can Be Harmful For Your Portfolio ?
Index Performance during sharp correction - Drop in the returns from its immediate peak
06
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
Nifty 50 draw down from its immediate peak
…Hence Revising Equity Exposure Is Necessary
Disclaimer: LIC Mutual Fund is not guaranteeing or promising or forecasting any returns. Future performance may differ from past performance. Source: NSE, Internal
What Causes Volatility ?
07
Global Economic outlook
Government policiesGeopolitical issues
Domestic Economic outlook
Volatility
Behavioral Bias – Emotion & Herd Mentality
* Average monthly inflows in Equity MF in Rs crores (Data from April 2004 onwards)
Disclaimer: For illustrative purpose only. Source: NSE India, AMFI India.
How equity allocation trend should ideally be…..
Valuations
Cheap Costly
High
Low
Cheap
08
2040 146511238
39834
<12 12 to 16 16 to 20 >20
Inflows chasing rising Forward PE
….How it is in Reality!
Valuations
Costly
Equity allocationHighest
Equity allocationMedium to Low
Equity allocationLowest
Equity allocationHigh to Medium
How Can One Manage Volatility?
09Disclaimer: For illustrative purpose only
Inte
rest
Rat
esHigh
Low
Low High
Stock valuations
Is There A Simpler Way To Do It?
10
About LICMF Balanced Advantage Fund (LICMF BAF)
A type of Hybrid Fund
Adopts asset allocation strategy
Using FDMM (Fundamental Driven Mathematical Model)
Equity allocation may increase or decrease depending on the model output.
Our Model considers current economic outlook & fundamentals of corporate world.
LICMF BAF Portfolio Construct
Equity❖ Stock Selection
❖ Capital Appreciation
Arbitrage ❖ Provide Hedge
❖ Endeavour Equity Tax Benefit
Debt❖ Stability
❖ Liquidity
11
LICMF BAF Risk Positioning
High
Low
Low High
LIC MF Debt Hybrid Fund
LIC MF Overnight Fund
LIC MF Liquid Fund
LIC MF Arbitrage Fund
LIC MF Short Term Debt Fund
LIC MF Bond Fund
Ris
k
Relative Return
LIC MF Equity Hybrid Fund
LIC MF Large Cap Fund
LIC MF Large & Mid Cap Fund
LIC MF Flexi Cap Fund
LIC MF Tax Plan
LIC MF Infrastructure Fund
LIC MF Banking & Financial Services Fund
Disclaimer: For illustrative purpose only. Returns of the individual schemes may vary from scheme to scheme12
Debt Funds
Hybrid Funds
Equity Funds
Our Approach – How Did We Arrive At Our VariablesFundamental Driven Mathematical Model (FDMM) Determines Asset Allocation
13
Did an extensive regression analysis to select input variables.
Interest rate has a negative correlation with equity market.
Model uses prevailing Interest rates and Forward earnings to arrive at asset allocation.
Equity allocation will range from 0% – 100%.
Why Interest Rate Is Important Parameter
14Disclaimer: For illustrative purpose only
Interest Rate Outlook
Liquidity
Inflation
Currency Effect
Trade Deficit
Fiscal Deficit
Domestic & Global
Economic outlook
Relationship Between Interest And Equity Markets
15Disclaimer: For illustrative purpose only
▪ Historically, Interest rate and Equity valuation has shown a high negative correlation, i.e. If interest rates goes down, it pushes up the equity valuations higher.
▪ The negative correlation can also be seen while calculating the DCF valuation or present value of future cash flows.
Interest rate
Equity Valuation
How Interest Rate Changes PE Band Of Equity Markets?
16Disclaimer: For illustrative purpose only
• Equity valuations directly or indirectly depends on Interest rate
• It captures most of the current economic activities and outlook.
• Direct & indirect impact on most of the asset classes.
• Close to ground realities.
How PE Band Is Calculated?
17
• In any country, Cost of capital is equal Opportunity cost is equal required return in Equity ~
>nominal GDP(in last 20 yrs Data)
• ~Risk premium + Risk free return
• Estimating future equity returns is difficult, but can be arrived at using earnings-based or
dividend-based approach
• Why Earning Yield ? - We are taking debt yield easier to collate or compare so total yield from
equity = (Earning Yield + Debt yield).
Why Did We Choose Forward PE?
18
Market are always forward looking and forward PE helps in capturing future
earnings.
Trailing PE may not give correct impression about the valuations at the turn of the cycle.
Structural change – Sovereign rating upgrade, government policies, regulatory
changes etc.
“Rather than spending time on what company has earned in the past, one should focus on what we can expect the business to earn in future”
- Benjamin Graham
Source: Bloomberg, Internal. Note: PE Chart is as on Sep 2021
How Did We Arrive At Our Variables – Forward PE Band
19
Interest Rates
Interest rate
Earnings Yield
Lower band X - Factor Higher band
Disclaimer: For illustrative purpose only
PE Band
Interest Rates Earnings Yield
1
Interest Rate
How Did We Arrive At Our Variables – Forward PE Band
20
6.2%
6.2%
4.5%
Lower band: 16x 1.7x Higher band: 29x
Disclaimer: For illustrative purpose only
PE Band
6.2% 4.5%
1
6.2%
How Did We Arrive At Our Variables – Earning Spreads
21Disclaimer: The above illustration is to explain allocation of assets between equity and cash / debt and should not be construed as any asset allocation recommendation from LIC Mutual Fund.
*Earnings yield spread = Earnings yield – G sec yield
-4%
Earning Yield Spread (Risk Premium)
0%
Equity allocation – 90%
Equity allocation: 10% Equity allocation: 10%
Spread analysis has been done based on past 10-year data
-4%
Flow Chart Of Model Process
22
1-year Forward PE
Earnings yield spread
Weightage: 80%
Weightage: 20%
Equity allocation
✓ Regular rebalancing
✓ Allocation based on change in variables
✓ Minimum Gross equity - 65%
Disclaimer: For illustrative purpose only*Earnings yield spread = Earnings yield – G sec yield
Weighted G Sec rate Earning yield Forward PE band Equity allocation
6%
4%8%
10%
4%
2%6%
8%
50%
25%75%
100%
Minimum Maximum
6.0% 4.5%
16 29
22
57%
10%
6.2%
10 17
16.04
11.8%
7.6% 5.0%
13 21
19.77
Scenario 1
Scenario 2
Scenario 3
How Equity Allocation Changes With Changing Interest Rates?
23
22%
Disclaimer: All figures pertaining to equity levels are used for the purpose of Illustration and understanding only.
LICMF BAF Salient Feature
24
Dynamic Asset allocation using Fundamental Parameters
Net Equity allocation can range from 0% to 100%
Rebalancing of portfolio happens on dynamic basis
1% exit load for redemption before 1 year to be charged only above 12% of units allotted
Model performance
25
Equity Allocation – Historical Range
26Disclaimer: The above data (till 30th September 2021) is illustration of back testing results of our Fundamental Driven Mathematical Model (FDMM). Source : Bloomberg
The above illustration is to explain allocation of assets between equity and cash / debt and should not be construed as any asset allocation recommendation from LIC Mutual Fund.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
500
2500
4500
6500
8500
10500
12500
14500
16500
18500
20500Se
p-0
1
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Equity Allocation Nifty 50
Back Testing Results: Equity Asset Allocation Across Time Period
27Disclaimer: The above data is illustration of back testing results of FDMM.
Note: Weighted G Sec yield would be combination of 10 year G sec, 1 Year G sec & Repo Rate
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Sep
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Equity Allocation Weighted G Sec yield(RHS)
Back Testing Results: Model Performance Vs Nifty 50 TRI
28
0
5000
10000
15000
20000
25000
30000
35000
40000
Nifty 50 TRI Model Value 36153
25234
Disclaimer: The above data is illustration of back testing results of our FDMM. Source : Bloomberg
Note: The model value indicates the model value has been rebased to Nifty 50 TRI at the start date i.e. 30/03/2001
Back Testing Results: Model Performance Vs Nifty 50
28
As on 30th Sept 2021
Disclaimer: The above data is illustration of back testing results of FDMM.
Particulars 3 Year 5 Year 10 Year 15 Year
Model Performance 20.15% 16.45% 14.39% 15.02%
Nifty 50 Returns 17.53% 15.38% 13.54% 11.18%
Model Standard Deviation 1.03% 0.82% 0.70% 0.93%
Nifty 50 Standard Deviation 1.38% 1.15% 1.08% 1.40%
Back Testing Results: Model Indicates Protection Against Downside Risk
-48.44%
-22.42% -20.41%
-36.82%
-12.87%
-6.22%
-0.55%
-26.93%
-60.00%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
Jan 2008 to March 2009 Nov 2010 to Dec 2011 April 2015 to Feb 2016 Feb 2020 to March 2020
Nifty 50 Model
Extent of loss, had you held on to your investment in Nifty50 vs LICMF BAF model
30Disclaimer: The above data is illustration of back testing results of FDMM.
Back Testing Results: Model Performance In Flat Market
31Disclaimer: The above data is illustration of back testing results of FDMM.
Period Nifty Return Model Return
May 2010 to May 2012 0.1% 17.7%
Period Nifty Return Model Return
June 2014 to Jan 2016 -0.1% 10.6%
Back Testing Results: Equity Asset Allocation Across Time Period
32
Market Scenario Type of Market Time period Nifty 50 Model Outperformed
Flat Market May-10 to May-12 0.06% 17.68% Yes
Falling Market Nov-10 to Dec-11 -22.42% -6.22% Yes
1 top to other top Oct-10 to Mar-15 45.43% 50.18% Yes
Rising Market Dec-16 to Nov-17 26.09% 19.24% No
Volatile Market Nov-10 to Feb-16 11.23% 47.22% Yes
Flat Market July-14 to Mar-16 -0.16% 13.77% Yes
Falling market Feb-20 to Mar-20 -36.82% -26.93% Yes
Disclaimer: The above data is illustration of back testing results of FDMM.
Back Testing Results – Attribution of Model performance
33
17.90% 5.94%
1.87%
10.09%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Total Debt Arbitrage Equity
Returns from different asset classes - Last 21 years
16.22% 5.71%
2.05%
8.45%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Total Debt Arbitrage Equity
Returns from different asset classes - Last 5 years
As on 30th Sept 2021 As on 30th Sept 2021
Disclaimer: The above data is illustration of back testing results of FDMM.
Back Testing Results: Model Promises To Have Higher Success Rate
34Disclaimer: The above data is illustration of back testing results of FDMM. The period range is 30th March 2001 to 30th Sep 2021.
Model provides 30%
higher probability of
generating returns
Back Testing Results: Performance Over 3 Years & 5 Years
35Disclaimer: The above data is illustration of back testing results of FDMM. The period range is 30th March 2001 to 30th Sep 2021. * Only 2 observation out of 4347
Back testing result indicates model captured higher number of above 10% bracket thus providing sustainability of performance
PERIOD 3 YEAR 5 YEAR
Model NIFTY 50 TRI MODEL NIFTY 50 TRI
Min -1.26% -4.4% 3.10% -1.6%
Max 54.15% 60.8% 39.78% 47.2%
Average 18.37% 16.7% 18.15% 16.1%
Stnd Deviation 9.96% 12.6% 8.47% 9.8%
Negative Observation Negligible* 1.7% 0.00% 0.1%
0% to 6% 1% 14.9% 0.42% 10.2%
6% to 10% 12% 16.4% 7.05% 17.8%
10% to 15% 39% 26.5% 45.21% 31.7%
Above 15% 48% 40.4% 47.32% 40.2%
Total Observation 4347 4347 3842 3842
Reducing The Volatility
36Disclaimer: The above data is illustration of back testing results of FDMM.
Period: 1-Apr-2001 to 30-Sep-2021
LIC BAF = 0.78 Nifty + 0.038
R square = 0.853
On an average, LIC BAF has added an average alpha of 0.038 on daily basis with a beta of only 0.78
Criteria Nifty 50 TRI Model Value
Maximum One day return 17.74% 15.63%
Minimum One day return -12.91% -11.21%
Average daily return 0.07% 0.07%
Absolute return 1969% 2839%
CAGR 15.89% 17.89%
Daily Return comparison of LICM FBAF Model & Nifty 50 TRI
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
-15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00%
Total number of observations: 5098
Analysis Of Rolling Return Across Time Period – 1 To 15 Years
37Disclaimer: The above data is illustration of back testing results of FDMM.
13.37%
20.97%
17.56%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
1 Y E A R 2 Y E A R 3 Y E A R 5 Y E A R 7 Y E A R 8 Y E A R 1 0 Y E A R 1 2 Y E A R 1 5 Y E A R
Min Max Average
LICMF BAF Endeavors To Offer Benefit Of Equity Taxation
38Disclaimer: For illustrative purpose only. The above illustration is to explain allocation of assets between equity and debt and should not be construed as any asset allocation recommendation from LIC Mutual Fund.
25%
50%65%
80%40%
15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Scenario 1 Scenario 2 Scenario 3 Scenario 4
Net Equity Arbitrage
65% 65%
80%
65%
Net Equity - 25%Gross Equity - 65%
Debt – 35%
Net Equity - 50%Gross Equity - 65%
Debt – 35%
Net Equity - 65%Gross Equity - 65%
Debt – 35%
Net Equity - 80%Gross Equity - 80%
Debt – 20%
Note: The fund endeavors to keep its gross equity exposure greater than or equal to 65% to enable investors to avail equity taxation Benefit.
Irrespective of how much is the net equity, gross will remain 65% or more
Minimum Equity Allocation for Tax Benefit is 65%
Arbitrage position
How Equity Investment Shall Be Done
39
❑ Active Fund Management
❑ Preferably large-cap stocks
❑ Follow Top down and Bottoms-up approach (Micro & Macro)
❑ Business sustainability & Management quality and Corporate
Governance
❑ Scalable businesses, having clear competitive advantage and
capital efficiency
Business
Sustainability
Governance &
Management
quality
Risk parameters
RAR Framework
Business Scalability
How Debt Investment Shall Be Done
40
❑ Debt will include G sec, PSU and AAA corporate bonds
❑ Involves a top- down approach
❑ Follow SLR Process where:
SLR Framework
Return
"S" stands for Safety of Investment,
"L" stands for Liquidity of the Portfolio, and
"R" stands for Returns of the Portfolio.
Benefit To Investor
41
Diversification of portfolio
Dynamic asset allocation
Margin of Safety
Protect downside by reducing the drawdown and participate in the upside by
asset allocation
Aims to generate near equity return with relatively
lower volatility
Equity tax benefit
Who Can Choose To Invest ?
42
FD Investor
Equity Investor
Tangible asset investor
Other asset class
Winner Changes Across The Asset Class..
43Disclaimer: The above data is illustration of back testing results of FDMM.
Equity is must for long term
wealth creation.
There is no consistent
winner every year.
Timing the market is
very difficult.
Right mix of asset
allocation may deliver
optimum return.
Source : MFI Explorer. Above returns are Absolute Return.
Back Testing result shows LICMF BAF Model has generated positive returns in almost all the years
Back Testing Result: SIP Performance
44
Note: Above Returns are Back tested results as on 31st Aug 2021. Past performance may or may not be sustained in the future. Assuming Rs. 10,000 invested systematically onthe first Business Day of every month over a period of time. CAGR returns are computed after accounting for the cash by using XIRR method (investment internal rate ofreturn) for Growth Option. Load is not taken into consideration for computation of performance. The above investment simulation is for illustrative purposes only and shouldnot be construed as a promise on minimum returns and safeguard of capital. The Mutual Fund is not guaranteeing or promising or forecasting any returns.
SIP Period Total Amount Invested (In Rs) Current Value (in Rs) SIP Returns
3 Years 360,000 533,650 27.31%
4 Years 480,000 745,548 22.44%
5 Years 600,000 985,779 19.95%
6 Years 720,000 1,257,227 18.44%
7 Years 840,000 1,548,413 17.16%
8 Years 960,000 1,879,255 16.33%
9 Years 1,080,000 2,248,183 15.70%
10 Years 1,200,000 2,674,945 15.31%
Tax Savings On SWP - Calculation On Investment Of 20 Lakh
45
Note: Above valuation as on 31st Aug 2021. Past performance may or may not be sustained in the future. Assuming Rs. 15,000 withdrawn systematically on the 15th Business Day of every month over a period of time. CAGRreturns are computed after accounting for the cash by using XIRR method (investment internal rate of return) for Growth Option. Load is not taken into consideration for computation of performance. The above investmentsimulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. The Mutual Fund is not guaranteeing or promising or forecasting any returns. For taxpurpose please contact your tax advisor. It is advisable to consult with your financial advisor to understand the terms and conditions of this feature before investing. Tax impact is basis prevailing tax laws. STT & Stamp Duty isignored for ease of calculation. STCG Tax is assumed to be 17.94% (15%+15% Surchage+4% Cess) & LTCG Tax at 11.96% (10%+15% Surcharge+4% Cess) for the purpose of above calculation. The above illustration highlightsthe impact, if the proposed LTCG taxation was applicable from 2013. ^The above table assumes that investor has no other LTCG from other investment (Hence, first 1 Lac Rs. Capital Gain is tax free). In the above calculationwe have not consider the grandfathering clause i.e. fair value as on Jan 31, 2018
Date NAV Units Outstanding Monthly SWP Units Withdrawn Principle Amount Capital Gain/Loss Capital Gain TypeCapital Gain Tax (Set-Off)
01-Apr-10 71.6342 27,920 0 0
15-Apr-10 71.6581 27,710 15,000 209 14,995 5 STCG 1
17-May-10 69.9830 27,496 15,000 214 15,354 -354 STCG -63
15-Jun-10 72.2811 27,288 15,000 208 14,866 134 STCG 24
15-Jul-10 74.0494 27,086 15,000 203 14,511 489 STCG 88
16-Aug-10 74.6303 26,885 15,000 201 14,398 602 STCG 108
15-Sep-10 78.4194 26,694 15,000 191 13,702 1,298 STCG 233
15-Oct-10 79.9705 26,506 15,000 188 13,436 1,564 STCG 281
15-Nov-10 80.9095 26,321 15,000 185 13,280 1,720 STCG 308
15-Dec-10 80.2562 26,134 15,000 187 13,389 1,611 STCG 289
17-Jan-11 79.1962 25,944 15,000 189 13,568 1,432 STCG 257
15-Feb-11 78.2531 25,753 15,000 192 13,731 1,269 STCG 228
15-Mar-11 78.3731 25,561 15,000 191 13,710 1,290 STCG 231
15-Apr-11 82.0181 25,378 15,000 183 13,101 1,899 LTCG
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
15-Mar-21 256.5977 11,054 15,000 58 4,188 10,812 LTCG Partially Applicable16-Aug-21 281.8878 10,774 15,000 53 3,812 11,188 LTCG
ParticularsTotal SWP
AmountTotal Income Tax to be paid Tax as a % of SWP Units Outstanding
Valuation of Outstanding Units
XIRR %
Amount 2,055,000 826,781 5,623 0.27% 10,774 3,104,205 12.02%
Note: Above valuation as on 31st Aug 2021. Past performance may or may not be sustained in the future. Assuming Rs. 75,000 withdrawn systematically on the 15th Business Day of every month over a period of time. CAGRreturns are computed after accounting for the cash by using XIRR method (investment internal rate of return) for Growth Option. Load is not taken into consideration for computation of performance. The above investmentsimulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. The Mutual Fund is not guaranteeing or promising or forecasting any returns. For taxpurpose please contact your tax advisor. It is advisable to consult with your financial advisor to understand the terms and conditions of this feature before investing. Tax impact is basis prevailing tax laws. STT & Stamp Duty isignored for ease of calculation. STCG Tax is assumed to be 17.94% (15%+15% Surchage+4% Cess) & LTCG Tax at 11.96% (10%+15% Surcharge+4% Cess) for the purpose of above calculation. The above illustration highlightsthe impact, if the proposed LTCG taxation was applicable from 2013. ^The above table assumes that investor has no other LTCG from other investment (Hence, first 1 Lac Rs. Capital Gain is tax free). In the above calculationwe have not consider the grandfathering clause i.e. fair value as on Jan 31, 2018
ParticularsTotal SWP
AmountTotal Income Tax to be paid Tax as a % of SWP Units Outstanding
Valuation of Outstanding Units
XIRR %
Amount 10,275,000 4,133,903 366,733 3.57% 53,870 15,521,024 12.02%
Tax Savings On SWP - Calculation On Investment Of Rs. 1 Crores
46
Date NAV Units Outstanding Monthly SWP Units Withdrawn Principle Amount Capital Gain/Loss Capital Gain TypeCapital Gain Tax (Set-Off)
01-Apr-10 71.6342 139,598 0 0
15-Apr-10 71.6581 138,551 75,000 1,047 74,975 25 STCG 4
17-May-10 69.9830 137,480 75,000 1,072 76,770 -1,770 STCG -317
15-Jun-10 72.2811 136,442 75,000 1,038 74,329 671 STCG 120
15-Jul-10 74.0494 135,429 75,000 1,013 72,554 2,446 STCG 439
16-Aug-10 74.6303 134,424 75,000 1,005 71,989 3,011 STCG 540
15-Sep-10 78.4194 133,468 75,000 956 68,511 6,489 STCG 1,164
15-Oct-10 79.9705 132,530 75,000 938 67,182 7,818 STCG 1,403
15-Nov-10 80.9095 131,603 75,000 927 66,402 8,598 STCG 1,542
15-Dec-10 80.2562 130,669 75,000 935 66,943 8,057 STCG 1,445
17-Jan-11 79.1962 129,722 75,000 947 67,839 7,161 STCG 1,285
15-Feb-11 78.2531 128,763 75,000 958 68,656 6,344 STCG 1,138
15-Mar-11 78.3731 127,806 75,000 957 68,551 6,449 STCG 1,157
15-Apr-11 82.0181 126,892 75,000 914 65,505 9,495 LTCG
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
15-Mar-21 256.5977 55,271 75,000 292 20,938 54,062 LTCG Partially Applicable16-Aug-21 281.8878 53,870 75,000 266 19,059 55,941 LTCG
Tax Saving Analysis LICMF BAF Vs Debt Funds Vs FD
47
Note: Above calculation is for illustrative purpose only. Consult your tax advisor before investing or taxation. The tax rate assumed is the highest rate based on the current tax slabsfor individual/HUFs with income above Rs 5 Crore. For domestic corporate corresponding tax rate applicable would be 34.94% for interest on term deposits and 23.30% for longterm Capital gains for open ended debt funds. Assuming investment is done in Oct 2016, Indexation cost is considered as FY2016-17 = 246 and FY2021-22 = 317
Particulars LICMF BAF Model Debt Mutual Fund Fixed Deposit
Amount Invested (in Rs) 100,000 100,000 100,000
Assumed rate of return (Annualised) 9% 9% 9%
Value at Redemption/Maturity after 5 years 153,862 153,862 153,862
Indexed Cost of Acquisition after 5 years - 120,076 -
Capital Gain (in Rs) 53,862 33,787 53,862
Tax Rate 0 28.496% 42.744%
Taxable Gain (in Rs) 53,862 33,787 53,862
Tax Payable (in Rs) 0 9,628 23,023
Post Tax Value (in Rs) 153,862 144,235 130,839
Profit earned (in Rs) 53,862 44,235 30,839
CAGR Investment Yield (Post Tax) 9.00% 7.60% 5.52%
About Our Sponsor
48
LIC MUTUAL FUND ASSET
MANAGEMENT LTD.
(LICMF AMC)
GIC HOUSING FINANCE LTD. (11.70%)
LIC OF INDIA (45%)SOLE SPONSOR OF LIC
MUTUAL FUND
UNION BANK OF INDIA (4%)
LIC HOUSING FINANCE LTD. (39.30%)
About Our Shareholders
49Source: http://www.lichousing.com/aboutus.php, http://gichfindia.com/, https://www.unionbankofindia.co.in/english/aboutus-profile.aspx
About LIC Of India
50
Fund Facts
51
Category of Scheme Balanced Advantage
Type of Scheme An open ended Dynamic Asset Allocation Fund
Investment Objective
The investment objective of the scheme is to provide capital appreciation/ income to the investors from a dynamic mix of equity, debt and money market instruments. The Scheme seeks to reduce the volatility by diversifying the assets across equity, debt and money market instruments.
However, there is no assurance or guarantee that the investment objective of the Scheme will be realized.
Asset Allocation
Fund Facts
52
Scheme Name The product is suitable for investors who are seeking* Riskometer
LIC MF Banking & Financial Services Fund
• Capital appreciation over long term.• Investing predominantly in portfolio of equity and
equity related securities of companies engaged in banking and financial services.
• Risk – Very High
LIC MF Infrastructure Fund • Long Term Capital Growth• Investment in equity and equity related instruments of
companies engaged either directly or indirectly in infrastructure sector.
• Risk – Very High
LIC MF Large Cap Fund • Long Term Capital Appreciation• A Fund that primarily invest in large-cap stock.• Risk – Very High
LIC MF Large & Mid Cap Fund • Long Term Capital Appreciation.• A fund that primarily invests in Large and Mid-cap
stocks• Risk – Very High
LIC MF Flexi Cap Fund • Long term capital appreciation• Investing across Large, Mid & Small Cap stocks.• Risk - Very High
LIC MF Tax Plan • Long Term Capital Growth• Investment in equity and equity related securities• Risk - Very High
LIC MF Equity Hybrid Fund • Long term capital appreciation with current income• A fund that invests both in stocks and fixed income
instruments. • Risk - Very High
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Riskometer
53
Scheme Name The product is suitable for investors who are seeking* Riskometer
LIC MF Debt Hybrid Fund • Medium term capital appreciation with current income• A fund that invests predominantly in debt instruments
with marginal equity exposure.• Risk – Moderate
LIC MF Short Term Debt Fund • Generation of reasonable returns over short to medium term.
• Investment in Debt securities and money market instruments.
• Risk –Moderate
LIC MF Bond Fund • Income Over Medium to long term• To generate income/capital appreciation through
investments in Debt / Money Market Instruments• Risk –Moderate
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Riskometer
54
Scheme Name The product is suitable for investors who are seeking* Riskometer
LIC MF Liquid Fund • Regular income for short term• Investment in Debt/Money Market Instruments with
maturity of upto 91 days.• Risk – Low to Moderate
LIC MF Arbitrage Fund
• Income over a short term investment horizon• Income through arbitrage opportunities between cash
and derivative market and arbitrage opportunities within the derivative segment of the equity market
• Risk – Low
LIC MF Overnight Fund• Regular income with high levels of safety and liquidity
over short term.• Investment in debt and money market instruments
with overnight maturity.• Risk – Low
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Risk-o-meter is based on evaluation of risk level of Scheme’s portfolio as on 30th September 2021 and the change in Risk-o-meter will be evaluatedon a monthly basis.
Riskometer
55
56
Thank You
Extensive Analysis To Arrive At Appropriate Variables
57
Interest Rate
Forward Earnings
Asset Allocation
Interest Rate
Price to Book
Trailing PEForward
PE
Market cap to GDP
Back Testing Results: Model Performance Vs Composite Benchmark
58Disclaimer: The above data is illustration of back testing results of FDMM. Custom benchmark is LICMF Hybrid Composite 50-50 Index
3 Year 5 Year 10 Year
Model Performance 20.15% 16.45% 14.39%
Composite Benchmark Returns 14.53% 11.98% 11.57%
Model Standard Deviation 1.03% 0.82% 0.70%
Composite Benchmark Standard Deviation 0.58% 0.49% 0.48%
Back Testing Results: Equity Allocation Trend vs Forward PE
59
Model shows promising result of switch in Equity allocation during attractive valuations
Disclaimer: The above data is illustration of back testing results of FDMM.
The above illustration is to explain allocation of assets between equity and cash / debt and should not be construed as any asset allocation recommendation from LIC Mutual Fund.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0
5
10
15
20
25
30
Sep
-10
De
c-1
0M
ar-1
1Ju
n-1
1Se
p-1
1D
ec-
11
Mar
-12
Jun
-12
Sep
-12
De
c-1
2M
ar-1
3Ju
n-1
3Se
p-1
3D
ec-
13
Mar
-14
Jun
-14
Sep
-14
De
c-1
4M
ar-1
5Ju
n-1
5Se
p-1
5D
ec-
15
Mar
-16
Jun
-16
Sep
-16
De
c-1
6M
ar-1
7Ju
n-1
7Se
p-1
7D
ec-
17
Mar
-18
Jun
-18
Sep
-18
De
c-1
8M
ar-1
9Ju
n-1
9Se
p-1
9D
ec-
19
Mar
-20
Jun
-20
Sep
-20
De
c-2
0M
ar-2
1Ju
n-2
1Se
p-2
1
Equity Allocation (S. axis) 1 year Fwd PE
Back Testing Results: Consistent Performance Over Long Term
60Disclaimer: The above data is illustration of back testing results of FDMM.
Note: The model rebase indicates the model value has been rebased to Nifty 50 TRI at the start date
25,368
42,814
2000
7000
12000
17000
22000
27000
32000
37000
42000
47000
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
Sep
-16
Jan
-17
May
-17
Sep
-17
Jan
-18
May
-18
Sep
-18
Jan
-19
May
-19
Sep
-19
Jan
-20
May
-20
Sep
-20
Jan
-21
May
-21
Sep
-21
Nifty 50 TRI Model Rebase
Back Testing Results: Model Performance Vs Benchmark
61Disclaimer: The above data is illustration of back testing results of FDMM. Custom benchmark is LICMF Hybrid Composite 50-50 Index
Note: The model rebase indicates the model value has been rebased to Nifty 50 TRI at the start date
3,569
2,731
500
1000
1500
2000
2500
3000
3500
4000
Jan
-11
Sep
-11
May
-12
Jan
-13
Sep
-13
May
-14
Jan
-15
Sep
-15
May
-16
Jan
-17
Sep
-17
May
-18
Jan
-19
Sep
-19
May
-20
Jan
-21
Sep
-21
Model Rebase Custom Bench