Money Manager September 14 Monthly_Issue

8/11/2019 Money Manager September 14 Monthly_Issue

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Saving for retirement usually is top

prio rity for o ur custom ers e specially

a s they ad vance tow a rds retirem ent.

It is though not the first priority

amongst young investors. Many

surveys ha ve revea led that investo rs

tend to po stpon e their pla ns for early

retirem ent a s they prog ress nea rer to

the retireme nt a g e, clea rly indica ting

that in general we are not as

prepa red for retireme nt as w e think.

Last few years have been tough

specifically with respect to high

infla tion rates . This ha s m a de us

co nscious o f the effect of infla tion on

real growth of our assets . Some

expense s like m ed ica l expense s a nd

educa tion ha ve grow n at even fa sterrate than the reported consumer

price inflation. The other risk in

retirem ent pla nning is that w e ne ed

to pla n for long er retired y ea rs w ith increa se in q ua lity o f hea lth services

a nd overa ll lon g evity.

I feel tha t one o f the b ig g es t im ped im ents to a retireme nt pla n is inertia .

Ess entia lly, during the retired period , w e d epend on o ur fina ncial a ss ets

for income and therefore, our approach towards retirement planning

should be very s tructured . The first step to put a structure to a

retirem ent pla n is es tim a ting how m uch inco m e w e w ould ne ed for our

daily expenses. While expenses will typically go down for a retiree,

me dica l expenses a re so mething o ne has to b e concerned a bo ut.

It is a g oo d idea to have a sepa rate co rpus for med ica l expenses ba sed

on current fitnes s, fa mily h isto ry, co verag e, if any, throug h the c urrent

em ploye r, etc. A listing of current expense s m inus the expens es w hichw ill be no n-existen t a fter retireme nt (e.g . children e xpens es ) is a g ood

w a y o f es tim a ting . Typica lly, this w ill be 60-70 perce nt o f the c urrent

expen se s. The o ther varia bles in the ca lcula tion s a re the expe cted

longevity and inflation. With these, one can estimate the amount of

Anup BagchiM D & CEO

ICICI Securit ies Ltd.


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co rpus req uired a t the tim e o f retireme nt. This then s ho uld b e the b a se

of estimating how much we should invest every month to have that

co rpus a t the tim e o f retireme nt.

Retirement planning is typically construed as planning at the start ofretireme nt. This is a m isc on cep tion. Retireme nt pla nning nee ds to s tart

a t the b eg inning o f one's c a reer. The ea rlier w e s tart the mo re tim e w e

have on our side to take risk with our investments and make higher

returns . A long -term retireme nt pla n needs to s trike a ba la nce b etw een

ca pital g row th, risk m a na g em ent, protection, a nd tax pla nning.

Investments for retirement corpus should have a healthy portion of

eq uity investm ents a s e q uity provide s w ith grow th to the co rpus. The

proportion of equity in a portfolio depends on the time horizon andinves tme nts into d eb t helps in m a na g ing risk in retireme nt po rtfolio if

the tim e ho rizon is s ho rt o r one d oes n't have a risk a ppetite.

Protecting the pla n a g a inst untim ely d ea th of the ea rning m em ber is a

must and hence an adequate insurance is a key to a successful

retireme nt pla n. This s ho uld a lso be fo llow ed by es tate planning

through a simple will. A will in place ensures that the assets are

d istributed w ithout m uch effort to the heirs.Last, but not the least, we need to resist the temptation to withdraw

funds from a retirement corpus, unless in an absolutely emergency.

One needs to a lso ma ke s ure that the insura nce premiums a re a lw ay s

pa id o n time a nd the s ys tema tic inves tment pla ns (S IPs ) a re renew ed

w ithout fail so that o ur retirem ent g oa ls a re n ot jeo pa rdized.

Planning fo r retireme nt oug ht to b e the to p fina ncia l g oa l. The rea so n is

simple. The respons ibility to ensure w e ha ve a regula r inco m e is no one

else 's b ut ours. The s ervices o f a pe rsona l fina ncial pla nner ca n ha nd -

hold you through the process of retirement planning. With our vast

experience in financial markets we offer retirement planning and will

drafting services. Do talk to your ICICIdirect relationship manager to

help yo u w ith yo ur pla n.

Our me ss a g e rema ins the s a me - 'Keep investing a nd s tay invested for

y o ur lif e go a ls . ' Throug h t h is m a g a z ine a nd our w eb s i te

www.icicidirect .com we want to make an earnest at tempt to partnerwith you in setting and achieving your financial goals. Give us an

opportunity to serve you, walk into any of your Neighbourhood

Fina ncial S upersto re and talk to us .

ICICIdirect M oney Manager September 2014


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The prese nt is a lw a ys far clea rer tha n the future. Retirem ent w ill

alw a ys seem distant and hazy espe cia lly to the yo ung. And y et

w hen it com es to pla nning fo r retirem ent, how m uch ever dista nt

retirement may appear, the right time to start is now. Startingea rly no t only helps yo u rea p the benefits of com po unding o ver a

lo ng er perio d , but it also keeps y o u in a better pos itio n to m a ke

suitab le a djustme nts to y o ur pla n in a cha ng ing sce na rio .

The m o re y ea rs a w a y fro m retirem ent yo u are, the m o re yo u w ill

benefit from it. In this issue o f ICICId irect Money Ma na g er, w e

help yo u understand the im po rtance o f sa ving a nd inves ting ea rly

for retirement, and the steps that you may take to reach your

retirem ent g o a l w ith rela tive ea se .

I w o uld a lso like to d raw yo ur a ttentio n to o ur fea ture a rticle o n

Rea l Esta te Investm ent Trusts (REITs). REITs a re propo sed to be

intro duce d in India , w hich w ill help es tab lish a new a ss et cla ssa nd ena ble investors to tap the tw in be nefits of yield and g row th.

The e d itio n a lso fea tures a n interview w ith S w a ti Kulka rni,

Executive Vice Pres ident &Fund Mana g er, UTI Mutua l Fund , w ho

has a positive view on healthcare, banking, cement, industrial

m a nufac turing, autom ob iles, and co nsumer go od s secto rs ove r

the next 3-5 ye a rs.

We also offer comprehensive information and analysis on

pensio n pla ns , in o ur Mutual Fund Ana lys is se ctio n, to help y o u

better plan your retirement. So read on, stay updated

a n d i n v o l v e d . D o w r i t e i n w i t h y o u r f e e d b a c k a t

m oney ma nag er@ icicisecurit ies.co m a nd s hare yo ur thoughts.

Editor &Pub lisher : Abh isha ke Math ur, CFA

Coordina ting Editor : Yog ita Kha tri

Editoria l Board : Sam eer Chavan , CWM , Panka j Pandey

CMEd ito ria l Te am : Aze em Ahm a d, Nithy a kum a r VP CFP , Nitin Kunte , S a chin J a in,

Sheetal Ashar



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M D Desk....................................................................................................1

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

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

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

M arkets Round-up & Outlook ........................................................................5

Gett ing Technical w ith Dharmesh Shah.........................................................8

Derivatives Strategy by Ami t Gupta............................................................ 10

Stock Ideas: Bajaj Elect ricals and Page Industries....................................... 15Flavour of the M onth:Retirem ent Planning The fa ce o f retirem ent ischa ng ing. Here w e help yo u understand w hy s a ving for retirem ent is

im portant and the route yo u ma y ta ke to rea ch yo ur retirement g oa ls

w ith rela tive ea se........................................... ....................................... 22

Feature Art icle:Ind ia n Rea l Esta te Investm ent Trusts (REITs ) A g oodtim e to s ta rt........................................................................................... 31

Tte--tte:'Market va lua tions look inte res ting for 3-5 yea r term' Aninterview w ith S w a ti Kulka rni, EVP a nd Fund Man a g er Eq uities , UTI

Mutual Fund ...........................................................................................35

Ask Our Planner:S w itching yo ur m utual funds inves tme nts Yourperso na l fina nce q ueries ans w ered ..................................................39

M utual Fund Analysis:Categ ory Pens ion P la ns Currently, there a re tw oMF pens ion pla ns a va ila ble in the m a rket. Here w e a na lys e them to

help you plan your retirement..............................................................43

Equity M odel Portfolio...............................................................................49

M utual Funds Model Portfolio.................................................................... 54

Quiz Time.................................................................................................56

Monthly Trends.........................................................................................57

Premium Educat ion Programmes Schedule..................................................60



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Portable PF account number to be launched on October 16

Retiremen t fund m a na g er EPFO's a mb itious project to provide po rta ble universa l

PF account numbers (UAN) to its subscribers will be launched on October 16.

Bes ides , the g ove rnme nt w ill la unch unified w eb po rtal LIN (La bour Identifica tio nNumber) for simplifying business regulations and bringing in transparency and

accountability in labour inspections by various agencies and bodies under the

a dm inistrative co ntrol of La bour Ministry. Prim e Ministe r Na rend ra Mo d i is likely to

la unch b o th LIN w eb po rta l a nd UAN on Octob er 16 as pe r the P la n cha lked out b y

the La bo ur Ministry.

Courtesy: Business Standard

September 2014ICICIdirect M oney Manager

With an a im to a ttra ct grea ter foreig n and do m es tic inves tme nts into real es tate,

S eb i ha s s a id it w ill so on notify norm s for creation a nd listing of b usines s trusts

for this key se ctor. Tw o se pa rate co m m ittees ha ve b een se t-up for the s pecific

g uide lines on the iss ue. The S ecurities a nd Exchan g e Bo a rd of India's b oa rd ha d

a pproved the reg ula tions on Real Esta te Inves tme nt Trusts la st m onth a fter

receiving public co m m ents.

Courtesy: The Economic Times

SEBI to soon noti fy norms for Real Estate Investment Trusts

The Res erve B a nk o f Ind ia (RBI) nee d s to further increa se po licy rates to b ring

d o w n infla tio n on a sus ta ined b a sis, the Interna tion a l Mone ta ry Fund (IMF) sa id.

In a note released ahead of the G20 meeting of finance ministers and central

ba nk g ove rnors a t Cairns in Australia , IMF sa id India ne ed s to ta ke m ore s teps to

reduc e s tubb o rnly high infla tio n a nd the large fisc a l de ficit. The RBI is s che duled

to a nnounce its bi-m onthly m one tary po licy o n S eptem be r 30.

Courtesy: The Times of India

RBI needs to raise policy rates to bring dow n inflation: IM F

Foreign institutional investors, or FIIs, have stepped up investments in long-

term g ove rnm ent b ond s w ith ma turities extend ing up to 28-30 yea rs, ma rking a

shift from their pra ctice of b etting m a inly on Indian s ove reig n d eb t instruments

m a turing w ithin five y ea rs an d s ig na lling resto ratio n of g lo ba l faith in the Ind ia neco no m y. FIIs h a ve a lread y e xha uste d nea rly 65% o f the $5-b illio n inve stm ent

limit for long-term investors such as foreign central banks, pension funds,

so vereig n w ea lth funds, endo w me nt funds a nd insurance funds, da ta from the

Na tio na l S ec urities Depo sitory (NS DL) sh ow s.

Courtesy: The Economic Times

Foreign instit utional investors step up investments in long-termgovernment bonds re-instating faith in economy


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Upbeat macro, falling crude prices likely to keep momentum intact

Ind ia n m a rkets rema ined vo la tile

at the beginning of the month

following the uncertainty in theglobal markets amid default

co nce rns in Arg entina a nd rising

g eo -po litica l tens io ns in Ukraine

a n d Ir a q . Th e m id -m o n t h ,

however, witnessed a strong

rally in the m a rkets tha t a ide d the

markets to close at all-timehig hs . The ra lly w a s led b y

supportive news flows from all

fronts , a repo rt fro m Ind ia 's Met

(Meteorologica l ) depar tment

revising monsoon estimates to

10% below average (earl ier

40%), Ind ia 's five-m o nth low

w ho les a le price ind ex (WP I)d a t a , t h e P r i m e M i n i s t e r

a n n o u n c i n g a s c h e m e f o r

fina nc ia l inc lus ion. Also , repo rts

suggested a renewed top spot

for India in a Global Survey of

C o n s u m e r C o n f i d e n c e t h a t

boos t ed s en t i men t s on t h edomestic front while reduced

tensions in the Middle East and

Ukra ine eased geo-pol i t i ca l

concerns and upbeat US data

pro vide d supportive c ues o n the

international front. In the last

w e e k , t h e m a r k e t s t u r n e d

slightly jittery initially after theSupreme Court cracked down

o n c o a l b l o c k a l l o c a t i o n

im pa cting m etals, ca pital g o od s

a n d p o w e r in d i c e s . Th e

s e n t i m e n t w a s , h o w e v e r ,

r e j u v e n a t e d f o l l o w i n g a n

i m p r o v e d g r o s s d o m e s t i cproduc t (GDP) da t a o f the

co untry for Q2CY14 a nd po s itive

news f lows from the US and

Europe (financial stimulus by

European Central Bank (ECB)).

The m a rkets , thereb y, rec o rded

fres h hig hs a g a in in the la st w eeka nd reco rde d a pos itive clos e for

the m o nth. The rupee rem a ined

flat during the month closing at

60.5, los ing 0.1%.

The s t ron g ra lly in Ind ia n

markets was a ided by upbeat

data points reported during themonth. India's GDP for Q2CY14

came in at 5.7% (highest since

Q1CY13) as against 4.7% in

Q 2 C Y 1 3 . T h e I n d i a n a u t o

industry posted growth of 15%

for J uly to 19,08,650 units led by

17% g row th in tw o w heelers and

4 % g r o w t h i n p a s s e n g e rvehicles . The Rese rve Ba nk o f

Ind ia (RBI) in its m o neta ry po licy

kept the repo and cash reserve

ratio (CRR) rates unchanged at

8% and 4%, respectively, and

cut the statutory liquidity ratio

(SLR) requirement further by 50ba s is po ints (bps ) to 22%. The

cut in S LR is expec ted to relea se

~ 40,000 c ro re fun d s fo r

increm en ta l cred it. The RBI a lso

`

M ARKETS ROUND-UP



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reduced the held to maturity

(HTM) limit from 24.5% to 24%.

India's Manufacturing PMI for

J uly ros e to 53 vs . 51.5 in J unebut S ervices a nd Co m pos ite PMI

for J uly w ere ma rg ina lly low er at

52.2 and 53 vs. 54.4 and 53.8 in

J une, resp ec t ive ly. In f la t io n

numbers for July were mixed

w ith co ns um er price ind ex (CPI)

co m ing in hig her a t 7.96% led by

s o a r i n g v e g e t a b l e p r i c e swhereas WPI eased to 5.19%

follow ing a hig h ba se a nd d rop

in fuel inflation on flat global

crud e p r ice s . The ra lly in

markets paid no heed to the

declining index of industrial

prod uction (IIP) da ta for J uneand widening trade deficit data

for J uly. IIP for J une d ec lined to

3.4% fro m 5% in Ma y im pa cted

largely by slower output in the

consumer goods sector. India's

trade deficit widened to $12.23

billion against $11.76 billion in

J une led la rg ely b y hig her oilim po rts , w hich increa sed 12.8%

in J uly to $14.35 billio n.

G l o b a l m a r k e t s b e g a n t h e

mo nth on a w eak note as upbeat

economic data from the US

(expansion in service sector

act ivi ty , rebound in factoryorders, narrowing trade deficit)

g a ve s om e jitters to investo rs o n

the likelihood of an earlier-than

expected increase in interest

rates by the Fed. Disappointing

da ta from Italy a nd a sha rper fa ll

i n G e r m a n m a n u f a c t u r i n g

orders s upply a lso a dd ed to thepessimism. However, markets

g a ined streng th in the la tter ha lf

of the month on waning geo-

political worries as Russia and

Ukraine fo r the first tim e a g reed

to a discussion to resolve the

o ng o ing situation in Ukra ine, o n

po sitive d a ta prints from the US(consumer confidence index at

seven years high, improving

job s a nd ho using da ta, minutes

of the Fed's meeting indicating

on l y g r a d u a l w i t h d r a w a l o f

stim ulus) a nd ECB's sta tem ent to

cont inue quant i ta t ive eas inguntil some tangible recovery in

the eurozone eco nom ies. In the

end, the US ma rkets ga ined ~ 3-

5% whereas European markets

g a ined ~ 1-3%. Asia n ma rkets

shed their ini t ial gains and

closed m o des tly low er (0.3-1%)

following weak data releasesfrom China .

D u r i n g t h e m o n t h , c r u d e

(Nymex) maintained a weak

sta nce lo sing 2.3% a nd clo sed a t

$96/ba rre l.

Global marketsBoth US and Europea n m a rketstra de d w ith a po sitive b ia s. The

D o w J o n e s , S &P 500 a n d

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Nasdaq gained about 3.2%,

3.8% and 4.8%, respectively.

European markets also posted

m ode st g a ins w ith the FTS E,German Dax and French CAC

gaining 1.3%, 0.7% and 3.2%,

respectively. Asian markets, on

the other hand , rem a ined w ea k

with Nikkei and Hang Seng

l o s i n g 1 . 3 % a n d 0 . 1 % ,

respectively, while Shanghai

S S EC posted a ma rg inal g a in of0.7%.

Domestic markets

B o t h f o r e i g n i n s t i t u t i o n a l

investors (FIIs) and domestic

insti tutional investors (DIIs)

pumped money into the Indianm a rkets rem a ining net b uyers o f

~ 7,467 cro re and ~ 2,336

crore, respec tive ly.

The Nifty a nd S ense x g a ined 3%

a nd 2.9%, respectively. The BS E

A u t o a n d B S E H e a l t h c a r e

Indices were the major gainersin the month posting gains of

11.6% and 8.2%, respectively.

BS E Oil, BS E IT, BS E FMCG, BS E

Ba nkex and B S E PS U w ere other

g a i n e r s d u r i n g t h e m o n t h

po sting 4%, 3.5%, 3.2%, 3% a nd

1.1% gains, respectively. BSE

Realty, BSE Metal and BSE

Pow er how ev er lo st 8.7%, 6.2%

a nd 4.2%, respectively. The BS E

Midcap and Small Cap indices

g rew 1.8% a nd 2.8% during the

` `

month.

Outlook: Sentiments upbeat afterdigesting geo-political concerns

Brent crude fell below $100 a

barrel for the first time in 14

mon t h s a mi d mi xed g l oba l

g r o w t h i n d i c a t o r s , w a n i n g

g e o p o l i t i c a l c o n c e r n s a n d

exces s supply. This ha s co m e a s

a shot in the arm for the Indian

economy and one need not

elaborate on how this will be

beneficial , going ahead. On the

economy front , we had some

m ixed s ets o f prints but the m o st

important gauge was that GDP

growth was the highest since

Q1CY13. G loba lly, the m ixed se tof US macro data continued to

flash mixed signals regarding

Fed's next course of action.

However, the surprise move

from the ECB was by way of a

red uctio n in benc hm a rk interest

ra tes a nd o ffering of so me mo re

stimuli for the struggling Euro

zone region. Apprehensions

r e g a r d i n g U k r a i n e a n d t h e

Mid dle Eas t seem to ha ve fizzled

out. Most markets across the

g lobe con t inue to h i t new

pinna cles on the b a ck o f liq uid ity

gush and waning geopoliticalconcerns and a re in no mo od to

consol idate . We expect the

momentum to continue in India

a s w ell.

M ARKETS ROUND-UP



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Domestic equity benchmarks

shrugg ed o ff the initia l round o f

profit bookings at the start ofAugust 2014 and surged to

record highs buoyed by a cool

off in crude oil prices to a 14-

m o n t h l o w a m i d r e c e d i n g

g e o p o l i t i c a l t e n s i o n s a n d

streng th in the rupee a g a inst the

US do lla r. The S ens ex reg istered

a reso lute brea kout pas t the tw om o n t h c o n s o l i d a t i o n r a n g e

(26,300 to 24,878), thereby

c o n c l u d i n g a s e c o n d a r y

corrective phase and signalling

r es u mp t i on o f t h e p r i ma r y

uptrend.

We expect b enc hm a rks to entera sustainab le uptrend a nd hea d

t o w a r d s 2 8 , 3 0 0 /8 , 4 5 0

(S en sex/Nifty) in the co m ing

m onths. The la rg er deg ree trend

remains positive and the index

continues to m arch northw ards

in a rising peaks and troughs

manner. We expect the base of

the marke t to sh i f t h igher

to w a rds 25,750/7,700 leve ls .

Any c oo l-o ff tow a rds this reg io n

s h o u l d b e u s e d a s a n

oppo rtunity to g o lo ng.We believe the sectoral churn

wil l add more legs to this

uptrend and keep the index in

go od stead o ver a med ium term

horizon. Sectoral heavyweight,

the banking index registered a

fres h brea kout after three m onth

c o n s o l i d a t i o n w h i l e m o s t

c y c l i c a l s h a v e c o o l e d o f f

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

m o n t h , w h i c h h a s c r e a t e d

further headroom for pullbacks

f r o m h e r e o n . I n e x t e n d i n g

markets, we deploy Fibonacci

extensions to derive the nextlo g ica l price o b jec tive . The

1 3 8 . 2 % e x t e n s i o n o f t h e

preceding rally that measured

a r o u n d 3 , 0 0 0 p o i n t s f r o m

inception point of current rally

p o s t e l e c t i o n r e s u l t

consolidation low of 24,163

p r o j e c t s u p s i d e p o t e n t i a l

tow a rds 28,300/8,450 over the

com ing mo nths.

The ind ex ha s res o lved

higher af ter forming a

s t e a d y b a s e a r o u n d t h e

24,900/7,440reg ion d uring the

last two month's consolidation.Fo llow ing the bullish b rea kout

past the said consolidation, we

expect the ba se o f the ma rket to

shift hig her tow a rds 25,750/7,

Piercing new highs; Sensex aiming at 28,300

TECHNICAL OUTLOOK



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9

TECHNICAL OUTLOOK


BSE Sensex Weekly Candlestick Chart

S ource: Bloo mb erg, ICICIdirect.com Resea rch

The view s express ed in the article a re perso na l view s o f the author a nd d o no t neces sa rily

represe nt the v iew s o f ICICI S ecurities .

700lev els . The b ullishg a p a rea

formed on August 12, 2014

around 25,645 also coincides

with the 61.8% retracement ofthe current up move (25,750)

making this a key intermediate

suppo rt fo r the ind ex.

Key distinguishing factors that

sig na l a shift o f trend from

side w a ys to po sitive is the fa ster

retra cem ent o f the la st risingse g m ent a nd a ctive pa rticipa tio n

fro m broa de r ma rkets. The ind ex

o v e r h a u l e d i t s 1 0 - s e s s i o n

decl ine (26,300 to 25,232)

in justfive tra d ing ses s io n-

sindicating a strong comeback

by b ulls. Out performa nce o f the

b r o a d e r m a r k e t s w h i l ebe nchm a rks venture into new

t e r r i t o r y h i g h l i g h t s t h e

preva i l ing buoyancy in the

market and augurs well for the

susta ina b ility o f the

uptrend . Theb a nking ind ex,

w h i c h c o m m a n d s h i g h e s t

weightage on the benchmarkhas also risen from a three-

month slumber and supports

further upsid es .

Double Bottom @ 24879

22939

22277

19963

25375

2976 pts

3098

pt s

13 w eek EM A

The 138.2% extension of preceding

rally projects upside tow ards 28300The index concluded a tw o month consolidation and resolvedhigher to indicate res umption of the upward momentum. Webelieve the index is set to extend the current up m ove to the t uneof 138.2% extension of t he preceding rally, projecting upsidestow ards 28300 levels over the coming months

24163

Weekly RSI holding its support reading of 60 -65 during correctivephase highlights the underlying strength in the trend


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10ICICIdirect M oney Manager September 2014

DERIVATIVES STRATEGY

Since the election verdict, the

Nifty has been making higherlows and every decline has

been greeted with long build-

u p i n t h e i n d e x f u t u r e s

seg m ent. In the current m o nth,

the Nifty bo ttom ed o ut a t 7550,

post which it added close to

30% OI and as a follow up

m a de recen t hig hs o f 7965.

During the August expiry

week, we have seen smooth

rollover of long positions. As

the Nifty took out 7800 on

August 19, the roll spread

bo ttom ed out at 30 points and

co nsta ntly m o ved hig her to 38

po ints . This m ea ns lo ng Nifty

futures are getting rolled into

the S eptem ber se ries . This

suggests the bullish bias is

likely to co ntinue.

In the options segment, the

initia l build-up is sug g es ting a

rang e o f 7800-8200.Looking at the Call options

segment, there is visibility

beyond 8000 as well, as 8200

Ca ll ha s h ig h OI. This s ug g es ts,

if the elusive 8000 level is ta ken

o ut, the Nifty w o uld be w ell a ndtruly o n co urse for 8200 in

September.

September Put options are

evenly spread out but the

highest OI concentration is at

the 7800 Put. Coincidentally,the VWAP for the current s eries

is a lso pla ce d nea r 7760 levels.

Since the Nifty bottomed out

near 6000 in February 2014, it

has held monthly VWAP price

on a clos ing ba sis.Nifty Bo lling er is sho w ing

signs of expansion and even

w ith the Nifty c lo cking o ve r 6%

gains on the trot, the index is

a b s o rb ing the a d v e r s e n e w s

flo w s. Henc e, the dec lines inthe ind ex s ho uld be utilise d to

go long.

On upsides target of 8000/8200 likely to be tested

w hile 7760-7800 is major support zone


13/65



Nif ty Options build-up

September series

0

0.5

1

1.5

2

2.5

7100

7200

7300

7400

7500

7600

7700

7800

7900

8000

8100

8200

8300

OIinM

illionS

hares

Cal l OI Pu t OI

Nifty + 2 Sigma Bollingerband : in expansion

5000

5500

6000

6500

7000

7500

8000

23-Aug-1

3

23-

Sep-1

3

23-Oct-13

23-Nov-1

3

23-

Dec-

13

23-Jan-1

4

23-Feb-1

4

23-M

ar-14

23-Apr-14

23-M

ay-

14

23-Jun-1

4

23-Jul-14

23-

Aug-1

4

Nifty Spot M ean + 2 Sigma 20 D EM A M ean+ 2 Sigma

Broad based buying observed in

recent Ni fty up move After bo ttom ing o ut on Aug us t

8 a t 7550 , the Nifty sa w a sha rp

reversa l o f fortunes a s it m a de

yet a no ther reco rd hig h o f

7965 (gains of close to 6%). In

this m o ve, the e ntire s pectrumo f stocks fro m the sm a ll ca p to

la rge ca p a nd fro m IT to

ba nking ha ve pa rticipa ted

Initial leadership was seen in

auto, which later shifted to

banking as the Nifty took out

7800. To w a rds settlem ent, IT

and pharma s tock saw b uy ing .

In Aug ust, the CNX midca p a nd

small cap space witnessed

g a ins o f o ver 2%

How ever, th is buy ing a p p e a rs

to be ma inly d o m es tic a s FII

only bought US $600 m ill io n

for the m o nth . FIIs b o ug ht

protec t ion for the a l ready

aggress ive buy ing o f over

US$13 billion in 2014. Geo-

poli t ical r isk continued to

remain elevated during them o n t h w h i l e t h e s t r o n g

economic da t a in the US

increas ed the chances of a ra te

hike there

The NS E a dva nce de cline ra tio

w ill be keenly tra cked . Th eratio rem a ined po sitive for

m o st o f the Aug ust se ries . A

continuance of this trend is

likely to infuse fresh upsides i n

the broader markets,

especia l ly the midcap and

sm a ll ca p space

Sectoral return in August Series

-10 -5 0 5 10 15

Bse Health Care

Bse Auto

BSE IT

Nifty

BSE Pow er

Bse Metal

Bse Realty

% monthly return


14/65

12ICICIdirect M oney Manager


September 2014

Bank Nift y takes out elect ionverdict high of 15740; likely to hittargets of 16000/16500

A f t e r t h r e e m o n t h s , t h e

banking index took out the

election day high of 15740.

This up m o ve d uring this

series w as on the back o f l o n g

build-up, w here the OI d u r in g

the series nea rly d o u b le d to

95250 co ntra cts

Looking a t the September

series options build-up,

highest Call bases are still

pla ced a t 16000/16500, w h i c h

a re targ et levels for th e ind e x

in the S eptem be r series . Onthe lo w er side , hig hes t Put

ba se is a t 15000

In price ratio terms, the Bank

Nifty/Nifty is currently a t 1 . 9 9 .

The ra t io has seen a t re n d l in e

break o ut a t 1.97 a nd is ho ld ing

a bo ve this level. Eventua lly,the ra tio is likely to h ea d hig her

tow ards 2.2

With major asse t c lasses ,

namely crude and gold in a

declining trend on the back of

inherent streng th in the d o lla r,

the current account deficit islikely to come down further.

This w ill be a g o o d trig g er for

the ba nking se cto r, in

particular. The positive

sentiment could get a further

push if the CPI read ing due o n

September 12, 2014 comes inlower.

Private sector banks, which

contribute over 70% to the

index, are showing an

accumulation pattern. If

ad verse new s flow s sof ten o ut ,

t h i s p a t t e r n i s l i k e l y t ocontinue.

Bank Nifty options build up suggeststarget of 16000/16500

OI Build up for August Series

0

0. 1

0. 2

0. 3

0. 4

0. 5

0. 6

14500

14700

14900

15100

15300

15500

15700

15900

16100

16300

16500

OIinMill

ions

Call OI Put OI

India VIX : Likely to be subdued

below 16 levels in near term

Since the election verdict inMay 2014, the volatility index

has been in a declining trend

and ha s been m aking new low s

eve ry m o nth. We believe Ind ia

VIX is likely to move in the

rang e o f 12-16.

With volatility near multiyearlo w s, s o m e pullba ck in it is n o t

ruled out during the series.

However, i f this up move


15/65



September 2014

happens in India VIX, it is

unlikely to deter the Niftys

upward trajectory and should

be used as a buyingopportunity to create short

vo la tility po sitio ns .

On a positional basis, the 100

week moving average is at

18.2. This level is likely to be

tested only in the event of anes ca la tio n o f geo po litica l risk.

Ano ther area that co uld trig g er

volatility is strength in the

dollar. With the dollar index

a lrea dy at a one -yea r hig h, any

further streng thening co uld hit

emerging currencies with ade preca ting bia s. If a currency

de preca tio n s tarts in Ems, then

this may have an impact on

equities negatively, pushing

the fea r ga ug e hig her. The

European Central Bank

meeting on September 4, andtheir stance on stimulus could

a lso push vo la tility h ig her.

India VIX likely to remain in 12 to 16range

FII cash flow s remain muted in

August but they bought index

options to hedge cash positions

FIIs cash buying remained tepidduring the month as they boughtonly US$ 600 million, which isalmost 65% lower than the lastthree months average of US$1.7billion.

This low cash buying is also

supported by seasonality, whichsuggests August remains a slackmonth since 2009 for FII cashinflows.

In the current month, buying wasseen on part of domesticparticipants wherein DIIs after a

gap of five months bought in thecash segment. Their total buyingwas close to US$300 million.

The bond market also remaineddry for a major part of the month.Barring record buying by FranklinTempleton of US$2.62 billion in a

single session, the figure for therest of the month is insignificant.Higher CPI reading dampenedhopes of long bond playprospects.

The net inflow (FII equity inflow +FII debt inflow) of close to US$3

billion was 33% lower than lastmonths inflow of US$4.5 billion

During the month, the dollarindex was a key area of strength


16/65



September 2014

as it moved up close to 2% to aone-year high of 82.7. Euro fell to11 month low of 1.32 and JPY to

seven month high of 104.5.However, the rupee has shownsurprising resilience till now as itcontinues to trade near 60.However, if the dollar strengthcontinues further, it will be difficultfor the rupee to continue to defydepreciation

FIIs cash act ivity in (In `crore)

-10000

-5000

0

5000

10000

15000

20000

25000

30000

Aug

-1

3

Sep

-1

3

Oc

t-1

3

Nov

-1

3

Dec

-1

3

Jan

-1

4

Fe

b-1

4

M

ar-1

4

Apr-1

4

M

ay

-1

4

Jun

-1

4

Ju

l-1

4

Aug

-1

4

INRisCr

FIIs debt activity (In `crore)

-25000

-20000

-15000

-10000

-5000

0

5000

10000

15000

20000

Aug-1

3

Sep-1

3

Oc

t-13

Nov-1

3

Dec-1

3

Jan-1

4

Fe

b-1

4

M

ar-

14

Apr-

14

M

ay-1

4

Jun-1

4

Ju

l-14

Aug-1

4

INR

inC

r

FIIs hold key to substantial up move

in N ift y: Since 2009, September has

seen largest inflow s

Foreig n ins titutiona l inve s tors

have b een the big g est so urce o f

liquidity and have represented

the largest appetite for Indian

eq uity m a rkets . Even thoug h FII

f lows have remained tepid

during August, flows are likely

to pick up in S epte mber.Historically, since 2009, one of

the smallest inflows is seen in

Augus t, w hich rem a ined true in

August 2014 as well. However,

September records the largest

inflows, which may happen to

be true this ye a r.

Since 2009, their run rate was

US$14 billion per year. In the

current year, they have already

boug ht close to US $13 b illion.

FI I buying p icks up f rom

September onwards. Averagem o n t h ly i n f lo w s d u r in g

Se p te mb e r D e ce mb e r w e re

see n a t US $1.85 billion, w hich is

45% higher than the monthly

average of US$1.27 billion for

the w hole yea r

Average monthly net FII inflow ssince 2009

576 9

17

2011

915

1153

358

1615

286

2662

2107

1214

1409

0

500

1000

1500

2000

2500

3000

Jan Feb M ar Apr M ay J un J ul Aug Sep Oct Nov Dec

AverageU

S$million


17/65

15

STOCK IDEAS

Bajaj Elect ricals: Strong brand play!

Company Background

Established in 1938, Bajaj

Electrica ls Ltd . (BEL) w a s firs t

incorporated as Radio Lamp

Wo r ks Lt d . It w a s la t e r

renamed Bajaj Electricals in

1960. BEL operates mainly in

t h r e e b u s i n e s s s e g m e n t s ,namely, lighting &luminaries,

consumer durables (CD) and

eng ineering & project (E&P).

The co m pany follow s a n a sse t

lig ht m o de l stra teg y w herein it

largely outsources (revenue

f r o m o u t s o u r c e d p r o d u c t

c o n t rib u t e s ~ 95% in t h e

topline) the manufacturing of

its kitchen a nd ho m e a pplia nce

products and lightings. Under

i t s k i t c h e n a n d h o m e

appliances, BEL offers a wider a n g e o f b r o w n g o o d s

including water heaters, mixer

grinder, food processors etc.

The Bajaj lighting &luminaries

unit markets a wide range of

light sources and domesticlum ina ries . The E&P seg m ent

(co ntributes ~ 20% to topline)

includes three sub segments

viz. special projects,

transmission line tower and

hig h m as ts .

Consumption story to remain intact

Dominant play in appliances

s e g m e n t , B E L i s a w e l l

established national brand in

t h e kit c h e n & d o m e s t icappliances (KDA) and lighting

s e g m e n t s . Th e s e t w o

seg me nts contribute ~ 70% to

the to pline a nd reco rde d s a les

CAGR (compounded annual

g ro w th ra te) o f ~ 18.3% inFY09-14. BEL has successfully

levera g ed its brand to create a

huge retail network of 45,000

for appliances, 86,000 for fans

and over 4,00,000 for lighting

a cros s Ind ia . In o rder to use its

expertise in different product

lines, BEL has entered into

va rio us jo int ve ntures (J Vs) in

the appliances and lighting

s e g m e n t s . A m o n g m a j o r

b r a n d s , M o r p h y R i c h a r d s

(leading brand in the UK) is awell-accepted brand in India

m a rketed by Ba ja j. The J V w a s

started in 2003 mainly to tap

Investment Rationale



18/65

16

the market for premium

produc t s . Revenues o f

Morphy's prod ucts reco rde d a

CAGR of 28.2% in FY09-14

fro m 55 crore to 190 cro re.

BEL outsources its lighting

products domestically while

luminaries are sourced from

do m es tic a nd interna tio na l

vendors. With a strong dealernetwork, we believe the CD &

lighting segment will witness

sa les CAG R of ~ 17% and

~ 10%, respectively, in FY14-

16E, supported by an un-

penetrated rural market, rapid

urbanisation and a growing

m idd le cla ss .

Recovery in engineering & project

(E&P) segment

BEL entered lighting project

se rvice s in 1960 w ith a n a im o f

diversifying the business from

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

durable player to a strong

contender in the engineering

a nd pro ject s eg m ents. The

business unit is divided into

three segments, namely highm a s t s , t r a n s m i s s i o n l i n e

to w e rs (TLT) a nd s pe c ia l

pro jects . The E&P seg m ent

` `

revenue increased four fold

fro m 178 cro re in FY05 to

1150 cro re in FY14 w hile the

seg m ent co ntributes ~ 29% to

the FY14 to pline . The seg m en t

recorded revenue CAGR of

~ 1 6 . 2 % i n F Y 0 9 -1 4 . A

slowdown in the industrial

b u s i n e s s a n d s t r e t c h e d

working capital cycle resultedin a decline in EBIT m a rgin

from 12.6% in FY09 to -18.1%

in FY13 and -9% in Fy14.

How ever, BEL's o rder bo o k size

has more than doubled in

FY14. Company has recently

won major orders (all higher

margin orders) from various

states electricity boards and

Power Grid Corporat ion of

India. With the completion

period of 24 months, major

pa rt of revenues w o uld flo w inFY17E. However, continuous

order inf low improved the

visibility of revenue booking

fro m the E&P seg m ent.

Pan-India presence through strong

dealer netw orkB E L , o n e o f t h e o l d e s t

consumer durable companies

in the co untry, ha s a pa n-Ind ia

` `

STOCK IDEAS



19/65

17

STOCK IDEAS


presence through a s trong

dea ler and reta il ne tw o rk. The

c o m p a n y h a s 2 , 200+

distributors and 5,000+

dealers across India. Further,

Bajaj's lighting solutions are

a va ila b le in o ver 3,50,000 reta il

s t o r e s w h i l e f a n s a n d

appliances are available at

over 88,000 and 45,000 retailsto res a cross India . In o rde r to

leverag e its s tro ng brand , BEL

ha s ta ken a n initia tive to reach

d i r e c t l y t o t h e c o n s u m e r

through opening retail chain

'Bajaj World' (pure franchise

model) for appliances and

lighting products. Currently,

the co m pa ny ha s 75 exclusive

Bajaj World stores. It also has

plans to expand its presence

globa l ly through f ranchise

agreements. It has recentlyopened stores in Nepal and

plans to o pen stores in G hana ,

Nigeria, Sri Lanka and South

Africa.

Consumer business to drive rat ing

Bajaj Electricals, despite beinga do m ina nt pla y in the lig hting

a n d c o n s u m e r d u r a b l e

se g m ent (co ntributes ~ 70% o f

topline) with a strong dealer

network, has paid the price for

po o r exe cutio n in the E&P

b u s i n e s s . P o o r E B I TD A

margins with rising working

capital requirement (due to a

d e la y in e xe cution o f E&P

projects) resulted in sharp

multiple contractions. At the

current price, the stock istra d ing a t a PE m ultiple o f 17.4x

FY15E a nd 10x FY16E ea rning s .

On a n EV/EBITDA ba s is, it is

tra ding a t ~ 9.9x and 7x for

FY15E a nd FY16E, respe ct ive ly.

With the expected turnaround

in th e E&P bus ine ss from FY15E

onwards and dominance in

lig hting & co nsumer dura ble

b u s i n e s s , w e e x p e c t t h e

c o m p a n y t o g e n e r a t e o f

EBITDA o f 315 cro re in FY15E

a nd 430 crore in FY16E. Webelieve the stock is trading at

a t t r a c t i v e m u l t i p l e s

considering the turnaround in

the E&P se g m ent. We ha ve

valued the consumer durable,

lig hting &E&P bus ine ss a t 12x,6x and 6x FY16E EBITDA,

res pec tively, to a rrive a t a targ et

price o f 416 w ith a BUY

recommendation.

`

`

`


20/65

18

Key risks include:Rising co m petition from d om es tic an d internationa l pla ye rs entering the Indianma rkets co uld po se a threa t. In ad dition, the co mpa ny's import content co ntributes ~ 13% to the

topline, w hich includes 40% of Mo rphy Richa rds, 20% of a pplia nces , 10% ea ch o f lig hting a nd

fans. Rupee depreciation over a n extended duration could put press ure o n m argins in the nea r

term. Further, a slow do w n in the po w er trans mission a nd d istribution industry a nd s low er rate

of project exec ution ha s hit the com pa ny's s eg m ent reve nue. This led to stretched w orking

ca pital req uireme nt and fina lly hit ma rgin.

(EBITDA:Earnings before interest, ta xes, d epreciation, a nd am ortization; EV: Enterprise value; EPS:Earnings per share; P/E:Price-to-earnings; P/BV:Price/bo ok va lue; RoNW:Return on net w orth; RoCE:Return on Ca pital Employed ; Mcap:Market ca pitalization; M F:Mutual Funds ; FII:Fo reign Institutiona lInvestors)

STOCK IDEAS

Key Financials

Valuations Summary

Stock Data


Net sa les ( cro re) 3,381 4,048 4,695 5,512

EBITDA ( cro re) 101.2 81.8 314.5 429.9

Net pro fit ( crore) 51.2 (5.3) 168.3 285

EP S ( ) 3.1 (0.5) 16.9 28.6

`

`

`

`

P/E (x) 90.9 - 16.6 9.8

Ta rg et P/E (x) 135.2 - 24.7 14.6

EV /EB ITDA (x) 28.7 37.7 9.5 6.7

P/BV (x) 3.8 3.9 3.3 2.5

Ro NW (%) 7 (0.7) 19.7 25.7

RoCE (%) 9.8 5.4 24.8 29.2

Mca p/sa les (x) 0.8 0.7 0.6 0.5

Pa rticula rs Fig ures

Ma rket ca pita liza tion ( cro re) 2,793.2

To ta l debt (FY14) ( cro re) 344.3

Ca sh a nd inves tm ents (FY14) ( crore) 121.8

Enterprise va lue (FY14) ( cro re) 3,015.7

52-w eek Hig h/Low ( ) 382 /150

Eq uity ca pita l ( cro re) 20

Fa ce va lue ( ) 2

MF Hold ing (%) 3.9

FII Ho ld ing (%) 16.3

`

`

`

`

`

`

`


21/65

19

Page Industries: Galloping ahead!

Company Background

Investment Rationale

Pag e In d us t r i e s (Pag e ) ,prom oted by the G enom a l

b r o t h e r s i n 1 9 9 5 , i s t h e

exclusive licens ee o f J oc key

International Inc (US) for the

m a nufa cture a nd d istribution of

the J ockey brand innerw ear

/leis ure w ea r fo r me n a ndwomen in India, Sri Lanka,

Bangladesh, Nepal and UAE.

Th e prom ote rs h a v e b e e n

a s s o c i a t e d w i t h J o c k e y

International Inc. for over 50

years (since 1959) as their sole

lice nsee in the Philippines . Pa g ehas 10 factories with a total

ma nufa cturing ca pacity of ~ 16

crore pieces . Pa g e's distributo rs

cater to over 23,000 retail

ou t l e t s spre ad ac ross f i v e

formats - chain stores (large

format stores), multi brandoutlets (MBOs), hosiery stores,

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

exclusive J ockey b ra nd outlets

(EBOs).

Favourable demographics, low

penetration to boost grow thThe India n innerw ea r seg m ent

va lued a t $4 billion is expe cted

to grow at 12% compounded

a nnua l g row th ra te (CAG R) over

the next decade. Page hasconsistently grown well above

the indus try a verag e. We e xpect

the same to continue as India's

per capita spend on innerwear

is ~ 90% low er than that of

Tha ila nd a nd China . The ma rket

has been growing faster thanthe overall clothing market,

d riven by prem iumisa tion. With

discretionary consumer spend

in India continuing to grow,

these trends should persist,

a ided by rising urba nisa tion a nd

g row th in co nsumer incom es.Healthy revenue grow th to continue

and margins to be maintained

Pag e's revenues ha ve g row n a t

a CAGR of 36.4% during Fy10

14. We e xpect the g row th ra te to

slow down to 27.6% during

FY14-17E ow ing to a la rge r ba seeffect. We e xpect b o th vo lumes

a s w ell a s rea lisa tion to a id this

growth. Considering that the

p e n e t r a t io n o f b r a n d e d

innerw ea r is s ig nifica ntly low in

India and that Indians spend

sig nifica ntly low er o n innerw ea rcompared to their Asian peers,

w e d o n o t a n t i c i p a t e a n y

roadblocks in the company's

g r o w t h p l a n s . C o n t i n u o u s

STOCK IDEAS



22/65

20

ca pa city a dd ition a nd entry into

ne w er m a rkets is l ikely to

further aid growth. Page is

cushioned from rising inputcosts as it takes price hikes to

the tune of 5-10% per annum,

which enables it to maintain

o pera t ing m a rgins . The

company is confident of

maintaining its operating

m a rgin a round 20%. Tho ug ht h e o p e r a t i n g m a r g i n h a s

increased to 21.4% in Fy14

(owing to removal of excise

duty), w e e xpect it to s tabilise a t

21% by FY17E.

Capacit y addition to continue

P a g e h a s c o n t i n u o u s l yexpa nde d ca pa cities in line w ith

the growing demand for its

products. Page's capacity has

increa se d from 2.2 crore pieces

in FY07 to 16.3 crore pieces in

FY14. We e xpect the sa me to g o

up to 28.2 crore pieces byFY17E. As the company is

absent in a highly capital-

intensive segment, Page has

been comfortably able to fund

the same through in terna l

a ccruals. We expec t the s a me to

continue, going forward. Withthe current rate of capacity

addition, the company is only

able to cater to the Indian

markets despite holding

licenses for Sri Lanka,

Ba ng la de sh, Nepa l a nd UAE a s

w ell. In a sc ena rio w hen India n

dem a nd s tarts to fla tten o ut, thecompan y can acce ss th e se

m a r k e t s f o r g r o w t h

opportunities.

Consistent grow th w ith healthy

fundamentals; recommend BUY

W e b e l i e v e c h a n g i n g

demographics will continue towork in favour of consumption

oriented companies like Page

Ind ustries . The c om pa ny w ill be

a beneficiary of the shift from

u n b r a n d e d t o b r a n d e d

products . Apart f rom local

demand, Page has l icenses toca ter to c ountries like Nepa l, S ri

Lanka, Bangladesh and UAE.

M a n y c o n s u m e r o r i e n t e d

companies that have delivered

co nsistent grow th are tra ding a t

premium multiples. Similarly,

we believe Page should alsoc o m m a n d a p r e m i u m

considering its strong

fundamentals and consistent

dividend payouts. Page has

been able to grow consistently

while many of its peers are

s trug g ling to g row . We, thereb y,r e c o m m e n d B U Y o n P a g e

Indus tries w ith a targ et price of

8,660 (based on 30x FY17E

EPS o f 288.7).

`

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STOCK IDEAS



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21

Key risks inc lude:Rising co m petition from internation a l pla ye rs en teringthe Indian m a rkets co uld po se a threa t. Also , if sa les g row th slow s d ow n

faster-than-expected , the co mpa ny w ould ha ve to reso rt to d eb t to fund

w orking ca pital a s w ell a s pa y d ivide nds a t the current ra te.

(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS:Earnings per share; P/E:Price -to -ea rning s; RoNW:Return on Net-Worth; RoCE:Returnon Capital Employ ed; M F:Mutua l Fund s; FII:Foreign Ins titutiona l Inves to rs).

Key Financials

Valuations Summary

Stock Data

STOCK IDEAS


Net sa les ( crore) 1,187.6 1,511.6 1,923.8 2,458

EBITDA ( crore) 251.2 310.9 400.3 512.7

Net pro fit ( c ro re) 153.8 193.1 250.8 322

EPS ( ) 137.9 173.2 224.9 288.7

`

`

`

`

P/E (x) 53.3 42.5 32.7 25.5Ta rg et P/E (x) 62.8 50 38.5 30

Divid end y ield (%) 0.7 0.8 1.2 1.5

Price/S a les (x) 6.99 5.49 4.31 3.37

Ro NW (%) 53.2 52.3 53 53.1

Ro CE (%) 52.5 58.4 59.7 60.1

Ma rket ca pita liza tio n ( crore) 8,203.7

Tota l debt (FY14) ( crore) 163.2

Ca sh a nd inves tm ents (FY14) ( crore) 3.5

Enterprise va lue (EV) ( cro re) 8,363.4

52-w eek Hig h/Lo w ( ) 8,205 /3,850

Eq uity ca pita l ( cro re) 11.2

Fa ce va lue ( ) 10

MF ho ld ing (%) 14.9

FII ho ld ing (%) 20

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22

FLAVOUR OF THE M ONTH


A guide to secure your ret irement

The face o f retirement is cha ng ing . To da y, m o st o f us c a n't co unt

on what our previous generations could, for their retirement

needs . Assured pension, g uaranteed returns from g ove rnme ntschemes, support from a joint family, and periods of relatively

low inflation -- are almost things of the past. Our retirement is

going to be very different from that of our parents or

grandparents. We would need to fend for ourselves for our

retirem ent needs . Here w e help yo u understand w hy s a ving for

retirem ent is im po rtant a nd the ro ute yo u ma y ta ke to rea ch yo ur

retirem ent g o a ls w ith rela tive ea se.

The changing landscape

Pensions are nearly ext inct :In the

p a s t , l a r g e e m p l o y e r s

w o r l d w i d e p r o v i d e d t h e i r

e m p l o y e e s w i t h d e f i n e d

benefit (DB) plans. Put simply,

c o m p a n i e s p r o m i s e d

employees a certain monthly

benefit at retirem ent. Tho se

benefits are almost a dream

no w. The increa sing b urden o f

p e n s i o n l i a b i l i t i e s o n

governments and the private

s e c t o r a c r o s s t h e w o r l d ,

including Ind ia , ha s fo rced the

s h i f t t o w a r d s d e f i n e d

contribution (DC) plans. For

example, Japan and Canada ,

both historically had only DB,are now showing s igns of a

shift tow a rds DC, ac cording to

a

In

ca se o f DC pla ns , the lia b ility is

clea r; w hereas in DB pla ns, thelia b ilities a re uncertain.

repo rt 'G lo ba l Pens io ns Ass et

S tud y 2014' by To w ers Wa tso n,

a global consultancy firm.

S ource: Tow ers Wats on, G lob al Pensions Asset S tudy 2014


25/65

23



The g rad ua l sh ift from DB to

DC plans suggests that we

ourselves would need to take

the charge of our retirement.Th o u g h s o m e o f us a re

covered under employees '

provident fund (EPF) account,

the overall coverage remains

low. Adding civil servants and

the voluntary and mandatory

participants of the EmployersProvident Funds Organization

(EPFO) schemes (of which not

a ll a re active pa rticipa nts), on ly

1 7 2 1 % o f t h e I n d i a n

w o rkforce is currently co vered

b y a f o r m a l p e n s i o n

arrangement,

The a vera g e

Indian now lives for up to

almost 65 years, compared

w ith 48 yea rs in 1970. The life

expectancy is expected to

further rise in the coming

ye a rs. It is e xpec ted to rea ch 72for m a les a nd 76 for fema les b y

2025, according to a planning

co m m iss io n repo rt.

ac co rding to the

A s i a n D e v e l o p m e n t B a n k

(ADB).We are living longer:

S ource: Planning Com mission report - Demo graph ic s cena rio, 2025

Rising life expectancy means

w e w ould need to save enough

today for 25-30 years of our

retired life.

The Indianpo pula tio n is a g eing . India ha s

around 100 million elderly (60

yea rs o f a g e) a t present a nd the

n u m b e r is e x p e c t e d t o

Dem o g ra phic shift:

i n c r e a s e t o 3 2 3 m i l l i o n ,

constituting 20% of the total

po pula tio n, by 2050, ac co rd ing

to .

This m ea ns w e w ill ha ve a

lo ng er spa n in retirem ent, a nd

therefore, must accumulate a

bigger corpus for our sunset

years .

the United Nations report

Projected life expectancy


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24



Cost of living rising: About 60years ago, an average middle

cla ss person ea rning 600 a

m o nth, could w ell suppo rt his

fam ily. To da y, it ta kes a bo ut

30,000. Likew ise, there w ill be a

`

`

continuous price rise over along period. If you plan to

maintain your current lifestyle

even after you retire, you

would need to build in an

infla tio n-protec ted po rtfolio .

If your monthly expenses today are 30,000`

10 53,725

15 71,897

20 96,214

25 128,756

30 172,305

35 230,583

Years to retirement Ac tual amount required c onsidering inflat ion(Rs.)

Note: Inflation ta ken a t 6%


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25



Healthcare costs sharply rising:

The g o o d pa rt is, d es pite a ll the

challenges listed above, we

can achieve our goals with

rela tive ea se . The key is: S ta rt

w here yo u are. S tart now.

The early bird catches the w orm

Healthcare costs are on the

rise, and they are significantly

outpacing consumer inflation

averages. In India, medical

infla tio n ha s bee n running into

do uble d ig its -- a t the ra te o f 18

20% every y ea r. As hea lthca re

expens es g o up in retirem ent,

i t i s i m p o r t a n t t o b u i l dsufficient retirement corpus to

take ca re o f o ur need s.

Saving for ret irement may

seem very dis tant when you

a re yo ung. But the so oner you

start saving and investing for

your ret irement , the more

se cure yo ur future w ill be.

Starting early has significant

long-term benefits, thanks to

the magic of compounding.

Calculations show that if a

person aged 30 years, startsinvesting 3,000 a m o nth, a t

the rate of return at 12% p.a.,

h e w o u l d b e a b l e t o

`

a cc um ula te 51,06,620 by the

age of 55. If he starts 5 years

la ter , even with a grea ter

inves tme nt a m o unt o f 5,000 amonth, he will be able to

a cc um ula te o nly 45,99,287.

`

`

`

Age of s tarting

investm ent 30 yea rs 35 yea rs

Retirement a g e 55 yea rs 55 yea rs

Monthly

investm ent Rs . 3,000 Rs. 5,000

Ra te o f return 12% p.a . 12% p.a .

Corpus

a cc um ula te d Rs . 51,06,620 Rs . 45,99,287

Scenario 1 Scenario 2

Also , w hen y o u sta rt ea rly, yo ur e q u i r e l e s s e r i n v e s t m e n t

amount to build retirement

corpus. Let's understand this

with an example. Suppose, a

perso n need s a corpus of 1

crore in his retirement kitty atthe a g e o f 60. If he pla ns a t the

a g e o f 25, co nside ring returns

o f 8%, he ha s to sa ve 58,033

per ye a r. If he s tarts pla nning a t

the ag e o f 35 he has to sa ve

1,36,788 every year. And if hestarts planning late at the age

o f 45 he ha s to sa ve 3,68,295

to rea ch his g o a l o f 1 crore.

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AgeAmount to be invested every year to accumulat e 1 crore`

At 8% p.a . return At 10% p.a . return At 12% p.a . return

25 `58,033 `36,897 `23,166

35 `1,36,788 `1,01,681 `75,000

45 `3,68,295 `3,14,738 `2,68,242

Since younger investors have

a long er tim e to a bs orb m a rket

setbacks, it is usually prudent

for them to invest a larger

portion of their portfolio in

e q u i t y . H i s t o r i c a l l y ,

i n v e s t m e n t s i n e q u i t y

haveprovided better returns

t h a n o t h e r a s s e t c l a s s e s .

S i n c e i n c e p t io n , S e n s e x

hasdelivered a compoundedannual growth rate (CAGR)

return o f 17%, w hich is hig her

t h a n a n y o t h e r a s s e t

c l a s s . Inves tment in equ i t y

alsohelps build-in an inflation-

protected and tax-ef f ic ient

po rtfo lio in the long run.

For a retirement corpus, one

should take maximum equity

expos ure a t an ea rly a g e. One

can gradually reduce it as he

approaches ret irement . But

suppose, if one has startedpla nning for retirem ent a t a la te

a g e then to sa tisfy his g oa l he

has to take equity exposure

accordingly, irrespective of his

a g e .

How much is enoug h to lead aco m fortab le retired life? Well, it

d e p e n d s o n a n u m b e r o f

f a c t o r s . Th e s e in c l u d e :

y o u r e x p e c t e d l i f e s t y l e i n

retirement, hea lth histo ry, ho w

much risk you are willing to

take in your portfolio, the

amount you have saved and

invested s o far, and ho w m uch

tim e y o u ha ve until retirement.

- First, determine the age at

which you wish to retire. (e.g.

Current age 30; Retirement

a g e 55). To da y, a lo t o f us

w a n t t o r e t i r e e a r l y . B u t

remember, retiring early willreq uire m o re m o ney.

- Ne x t , lis t y o u r c u rre n t

e x p e n s e s a n d p o s t

A bit of number c runching

Here's the simple method to

find out the retirement corpus

required.


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retirem ent expense s in to da y's

co st. Fo r exa m ple, if yo u a re

a family of 4 with annual

househo ld expenses of 3lakh, your post-ret irement

expenses for a family of 2

m em be rs co uld be 2 la kh in

t o d a y ' s c o s t . I t i s a l s o

i m p o r t a n t t o f a c t o r in

increases in certain expensessuch as medical and traveling

expenses. (e.g. let's say your

current mo nthly expe nse s a re

30,000 per m o nth).

- Factor in the inflation rate

( e . g . 6 % p . a . ) a n d t h e n

c a l c u l a t e t h e m o n t h l y

expenses that you will need

after retirement. (e.g. 128,756

per m o nth).

- Ass um e a ra te o f return to be

g e n e r a t e d f r o m y o u r

retirement c o rpus, i.e. a nnuityra te. (e.g . 8% p.a .).

- Now , arrive a t the rea l rate o f

return from your retirement

corpus post-retirement, after

neg a ting the e ffec t of infla tio n.

(Eg: [(1+ 8%)/(1+ 6%)] 1 =1.89%)

- D i v i d e t h e m o n t h l y

e x p e n s e s r e q u i r e d p o s t

`

`

`

retirement by the real rate of

r e t u r n t o a r r i v e a t y o u r

r e t i r e m e n t c o r p u s . ( E g :

128,756 /[1.89%/12] = Rs. 8.17crore.)

This w ill be the to ta l co rpus

required. You also need to

f a c t o r i n t h e i n v e s t m e n t s

i n c l u d i n g p r o v i d e n t f u n d ,

w hich you have a lread y m ad e,to arrive at the net corpus

required.

This w a s f a ir ly a s im ple

calculation. But getting the

precise fig ure ne ed s a lo o k into

various aspects that you may

h a v e n o t t h o u g h t o f . A

professional financial planner

will help you look into all the

aspec t s and min imize the

complexity.

Once yo u have d eterm ined the

retirem ent corpus need ed , yo u

nee d to sta rt pla nning for it.

I f you are a parent, you may

find yourself asking how to

save enough for retirement

w hen s a ving for your child ren's

ed uca tio n g o a ls. Tho ug h yo urch ild ren's ne ed s ta ke prio rity, it

is important to make it a

balancing act. Remember, one


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28



c a n b o r r o w f o r c h i l d 's

e d u c a t io n , b u t n o t f o r

retirem ent. The key is to build a

separate kitty for each short-term and long-term financial

goal .

Th e r e a r e v a r io u s t o o ls

a v a i l a b l e f o r b u i l d i n g

retirement corpus. One of the

best tools is Public Provident

Fund (PPF) account. One can

open P PF a cco unt and de pos it

a m a xim um o f 1.50 la kh

every ye a r. The current interes t

rate is 8.7%. A PPF a cco unt ha sa m a turity o f 15 ye a rs a nd it ca n

be renewed for 5 years each

time.

For equity investments, one

ca n g o for eq uity mutual funds ,

na tio na l pens io n system (NPS )

o r pens io n pla ns.

are an ideal

o p t i o n f o r a c c u m u l a t i n g

retirement corpus, as equities

tend to o utperform m os t a sse t

cla sse s in the long run. The

best way to start is to invest

t h r o u g h a s y s t e m a t i c

investment plan (SIP). SIPs

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

Building a retirement kitty

Equity mutual funds

`

fluctuations over a period of

tim e. Yo u ca n sta rt a n S IP w ith

a n a mo unt a s sm a ll a s 500 a

month.

, launched by the Pension

F u n d R e g u l a t o r y &

D e v e l o p m e n t A u t h o r i t y

( P F R D A ) , i s a d e f i n e d -

contribution product, where

your contributions grow andaccumulate over the years.

NPS begins with a mandatory

Ti e r I a c c o u n t ( n o n -

withdrawable) , which helps

you save regularly to build

yo ur retirem en t co rpus . A Tier

II account is like a voluntary

s a v i n g s f a c i l i t y ( w i t h a

w ithdraw a l o ptio n).

Th e m i n i m u m a n n u a l

co ntributio n for Tier I a cc o unt

is 6,000 ( 500 a m o nth). Fo r

Tier II a cc o unt, the m inimum

co ntributio n is 250, a nd o ne

needs to have a minimum

ba la nce o f 2000 a t the end o f

fina nc ia l yea r. There is no

upper cap o n the co ntributio ns

for bo th the a cco unts.Any c itizen o f Ind ia , w hether

reside nt or nonreside nt, w ho is

in the age bracket of 18-60

`

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NPS


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29



this 4% makes a substantial

difference. At the t ime of

matur i ty o f these pens ion

plans, you can withdraw one-third the a m o unt as lump -sum

and the balance has to be

utilized to buy a nnuity.

Another choice is pension

p l a n s o f m u t u a l f u n d s .

Curren tly, there a re tw o MFpension plans available in the

market (please refer Mutual

F u n d A n a l y s i s f o r m o r e

details).

Beside the regular investmentavenues, there may be other

resources that can be tapped

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

retirem ent. This w ill m a inly be

a n outcom e o f the investments

that you m ake a long your w ay

to fulfill your financial goals.

Some of the income sources

are:

This ca n b e use ful

to generate s teady returns

against your earlier property

investment . I f you have a

se co nd h o use a nd if it is rented

out, then it is a g oo d so urce o f

inco m e d uring yo ur retired life.

Living w ell in retirement

House rentals:

years, can subscribe NPS. It

o f f e r s t h r e e i n v e s t m e n t

options to cho os e from : Eq uity

(E) in which a maximum of5 0 % c a n b e i n v e s t e d ,

Corpora te bonds or f ixed-

income securities other than

g overnment securit ies and

G o vernm ent s ecurities (G ).

N P S h a s t h e l o w e s t c o s ts t r u c t u r e a m o n g o t h e r

products in the m a rket. The

fund ma nag ement charge is up

to 0.25%. Further, it has a

provision for mandatory 40%

annuitization, which ensures

reg ula r pensio n in o ld yea rs.

are offered by

insurance companies as well

a s m utual funds in Ind ia . Pla ns

o f f e r e d b y i n s u r a n c e

companies include traditional

as well as unit linked pension

plans (ULPPs). One can go in

fo r these pe nsio n pla ns a s per

their risk appetite. Normally,

traditional pension plans give

returns o f 8%, w herea s returns

o f ULPPs a re m a rket-linked a ndone can expect around 12%

returns for the equity option

o v e r a y e a r . O n e s h o u l d

rem em be r tha t in the lo ng run

Pension plans


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30



Pleas e s end y our feedba ck to m oneym ana ger@ icicisecurities.com

Reverse mortgage: A reverse

mortgage provides income

that people can tap into for

their retirement. It is a type ofm o r t g a g e i n w h i c h a

h o m e o w n e r c a n b o r r o w

m oney a g a inst the va lue of his

or her hom e. No repa ym ent of

the mortgage (principal or

interest) is required until theborrower passes away or the

ho m e is s o ld . The trans a ctio n

is structured so that the loan

amount will not exceed the

va lue o f the ho m e o ver the life

of the loan. A senior citizen

w ho holds a house or property,but lacks a regular source of

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

p r o p e r t y w i t h a b a n k o r

h o u s i n g f i n a n c e c o m p a n y

(HFC) and the bank or HFC

pays the person a regularpay m ent. The a dva ntag e is

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

m o rtga g ed his property in this

manner can continue staying

in the house for his life and at

the same time receiving the

m u c h n e e d e d r e g u l a rpayments. So, effectively the

property now pays for the

owner.

Life after

retirement also provides you

with an opportunity to turn

your passions and hobbies,

such as teaching , wr i t ing ,

gardening, music, arts, etc.

into a payable scheme. You

m a y a lso choo se to s et-up your

o w n b u s i n e s s , w i t h t h eexperience fro m a lo ng ca reer.

Factors such as increasing life

s p a n s , r i s i n g i n f l a t io n ,

preferenc e for nuclea r fam ilies ,

absence of pension systems,

etc. nece ss itate ea rly investing

for retirem ent. The ea rlier yo u

start the greater you can save

to create a nest egg for old a ge .

The re a re va rio us fina nc ia l

products that will help youreach your retirement goals

with relative ease. If you have

concerns , ge t p ro fess iona l

help s o that yo u ca n lo o k a t all

the a spec t s o f re t i rement

planning, thus leading to an

i n d e p e n d e n t , s t a b l e a n d

se rene life a fter retirem ent.

A second career:

Summing up


33/65


FEATURE ARTICLE

Indian REITs A good t ime t o start

Rea l Esta te Inve stm ent Trusts

(REITs) a re inve stm ent vehiclesthat invest in a pool of real

estate, or income generating

prop ert ies . The und erlying

income generating asset can

be office, retail, hospitality,

i n d u s t r i a l , r e s i d e n t i a l o rlogistics property. In India,

h o w e v e r, c u r r e n t R E I T

d efinitio n d o es no t a llo w REITs

to invest in the residential

market.

Intro duc tio n o f REITs in Ind ia

w ill help es tab lish a new a ss et

class that enables investors to

tap the twin benefits of yield

a nd g row th, improve property

m a r k e t t r a n s p a r e n c y ,

smoothen volat i le property

cycles, and potentially lower

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

developers.

We expect the lis ting o f REITs

to start in approximately 6-9

m o nths (po st Bud g et 2015), a s

so me bo ttlenecks rem a in to be

a ddress ed . S ince REITs ha ve

q u a s i d e b t - e q u i t y

characteristics, macro factors( b o n d y i e l d c o m p r e s s i o n ,

f a v o u r a b l e c o m m e r c i a l

property dynamics) appear

w ell a lig ned for REIT m a rkets

to grow and d evelop.

REITs pro vide a va riety o f

b e n e f i t s t o s t a k e h o l d e r s .

Investors stand to gain fromportfolio diversification, while

o v e r a l l p h y s i c a l p r o p e r t y

m a rkets be nefit fro m im pro ved

liq uid ity, lo w er co s t of ca pita l,

improved transparency and

higher quality real estate (due

to bet ter asset management

a nd po sitio ning ). Reduc tio n in

information asymmetry leads

t o l e s s v o l a t i l e p r o p e r t y

markets, and aids in pricediscovery leading to a more

efficien t rea l es ta te m a rket.

Introduction of REITs a potential

game changer for real estate:


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32

FEATURE ARTICLE


b o n d , w i t h a g r o w t h

component built-in through

price a pprec ia tio n. Further, rea l

es ta te 's his tor ica l inf la t ion

h e d g e c h a r a c t e r i s t i c s ,

p rov ides inves tors w i th a

sta ble underlying a ss et cla ss .

Liquidity benefits and low er cost of

capital: REITs a re m a nd a ted to

provide recurring dividends,

a nd m o s t REIT leg is la tio ns

globally also put a cap on

gearing (debt-to-asset) ratios,

w h i c h r e d u c e s t h e r i s k

perceptio n as so cia ted w ith the

a s s e t c l a s s . F u r t h e r , t a x

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

dividend payouts are healthy

Portfolio diversification:Fo r sm a ll

inves tors and ins t i tu t ions ,

REITs pro vide a n o ppo rtunity

t o i n v e s t i n l a r g e - s c a l e

commercial real estate, which

would have otherwise been

only possible for high net-

w o rth ind ividua ls (HNIs) a nd

w ea lthy ind ividua ls.

REITs e na b le inv es to rs to

achieve better returns with

lo w er vo la tility prim a rily d ue to

their q ua si deb t-eq uity na ture.

A co m pulso ry d ivide nd pa yo ut(typica lly > 80% g lo ba lly a nd

> 90% in Ind ia ) m a kes the

underlying asset similar to a


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FEATURE ARTICLE


REIT roadmap Regulations largely

in line w ith regional markets;

expect more clarity to emerge:

We benc hm a rked current d ra ft

SEBI regu la t ions to o ther

reg io na l m a rkets a nd find that

the regulator has provided a

good starting point despite

limitations over its jurisdiction

( t a x , f o r i n s t a n c e ) . O u r

interactions with stakeholders

(developers , lega l and tax

experts) indicate that current

REIT reg ula tio ns do no t o ffer

significant advantages versus

l i s t i n g i t s e q u i t y . A k e y

deterrent currently rem a ins the

high upfront costs for the

principal sponsor (developer).

Final REIT regulations from

S EBI a re anticipa ted to provide

m o re c la rity o n ce rtain cla uses

regard ing t rus tees , re la ted

party transactions, f inancial

sponsor (PE) REIT listings, etc.

Stakeholders are also hopeful

o f sim plifica tio n o f tax no rms in

Bud g et 2015, pos t w hich a ctive

REIT lis ting s a re a nticipa ted .

and less impa cted b y chang es

in Central tax la w s.

REITs e nha nc e liq uidity w ithinthe real estate sector, and the

s t a b l e u n d e r l y i n g i n c o m e

p r o s p e c t t e n d s t o a t t r a c t

foreig n c a pita l.

Improved transparency and lessvolatile property cycles: REITs

improve transparency in the

real estate markets as

informat ion is periodica l ly

disclosed on average rents,

o c c u p a n c y l e v e l s , t e n a n tprofile, rene w a l profile, e tc.

Ava ila b ility o f such informa tio n

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

asymmetry, which is typically

se en in rea l es tate m a rkets a nd

is a key rea so n for vo la tility.

G r e a t e r a v a i l a b i l i t y o f

in forma t ion a l so he lps

smoothen out the property

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

sta keho lders in the m a rket a re

be tter inform ed ena bling them

t o m a k e p r u d e n t c a p i t a l

co mm itments, etc.


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34

FEATURE ARTICLE


M acro factors appear w ell aligned:REITs ha ve q ua s i deb t-eq uitycharacteristics, due to whichthey b eco m e a pla y o n yields ,and property fundamenta ls(rent reversion, occupancy,etc).

We believe pea king o ut o f lo ngterm bond yields (likely tosof ten going forward) , andi m p r o v i n g p r o p e r t yfundamentals in the of f icese cto r (es pec ia lly in the S o uth,

w h e r e o c c u p a n c i e s a r eimproving) will be conduciveto REIT m a rkets in Ind ia .

Further, debt on developers'balance sheets continues toremain high, and cash-flowg ene ra tio n from the res identia l

s e c t o r h a s b e e n s l u g g i s hm a king REITs a n a ttrac tive exitopt ion to acce lera te cash-flo w s . Key pla ys o n Ind ia REITlis t ing s a re D LF, P res t ig eEstates, Oberoi Realty and


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35

M arket valuations look interesting for 3-5 year term'

The market valuations are looking reasonable, considering the FY15

earnings estimate, but they look interesting for 3-5 year term, says Sw ati

Kulkarni, Executive Vice President (EVP) and Fund M anager Equit ies, UTI

M utual Fund, in an interview w ith ICICIdirect M oney Manager. She has a

positive view on healthcare, banking, cement, industrial manufacturing,

automobiles, and consumer goods sectors, over the next 3-5 years.

Excerpts:

the Indian equity market. BSESensex FY 15 B loomberg

consensus price-to-earnings

(P/E) m ultiple e xpa nd ed fro m

14 to about 17 times. We

believe that the investors will

n o w t a k e c l u e s f r o m t h e

earnings growth which wouldg uide the next up-m o ve.

W hat are the possible negativesthat could upset the momentum?

There is a n e xpec ta tio n tha t

the Indian government willnow focus to revitalize the

in v e s t m e n t s id e o f t h e

eco no m y. There a re ea rly s ig ns

o f s t u c k p r o j e c t s g e t t i n g

clearances. A mismatch of

market expectation about the

ind us tria l pick up vs. the a ctua l

on ground evidences of the

sa m e ca n be a risk in the sho rt

term. Also , g lo ba l liq uid ity ha s

remained supportive for 'Risk

Q:

A:


Tte--tte

Sw ati Kulkarni,

Executive Vice President (EVP) &

Fund M anager Equities,

UTI M utual Fund

Q:

A:

Over the past few w eeks, themarkets have touched new highs.Can w e expect the momentum tocontinue?

The g lo ba l liq uid ity, ea rly

s i g n s o f I n d i a n e c o n o m ybottoming out and decisive

general election results have

been instrumental in re-rating


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36

On' tra des res ulting into strong

inflo w s into em erging m a rkets

inc lud ing Ind ia . Any reversa l in

that can upset the marketstemporarily.

A re the marke ts l ook ingovervalued right now ?

I w o uld s a y they a re lo o king

reasonable considering theFY15 earnings estimate, but

they look interesting for 3-5

yea r term .

What are your expectations interms of earnings grow th for Fy15?

The ea rning s g ro w th fo r

FY15 is expected to be 12%

14%. How ever, it is expec ted

that as the economy picks up

the o perating leverag e b enefits

c a n e x p a n d t h e c u r r e n t

operating m a rg ins a nd support

higher earnings growth from

FY16 o nw a rds.

Which sectors are likely to dow ell over the next 3-5 years?

We ha ve a po sitive view o n

healthcare, banking, cement,i n d u s t r i a l m a n u f a c t u r i n g ,

automobiles, and consumer

g oo ds ove r that period a s India

Q:

A:

Q:

A:

Q:

A:

h a s a h u g e d e m o g r a p h i c

a d v a n t a g e p r o v i d i n g

sustainab le do m estic dem a nd.

The expe cted foc us o n a ndim prove m ent in infra structure,

urbanization over the next 3-5

ye a r perio d a lso a ug urs w ell fo r

these sectors.

How are you looking at the entire

public sector undertakings (PSU)space? Do you see value here?

PS U space appears to have

va lue, pro vide d they a re a ble to

participate in the anticipated

economic recovery without

a ny hindranc es . We ha ve to b ecognizant about the valuation

discount in these names, part

of which may remain if the

intermittent supply in s o m e o f

the names from the

g ove rnme nt co ntinues.

What do the recent macroeconomic data suggest about oureconomy?

The current d o m es tic m a cro

encapsulates: 1) a cyclical

upturn and revival in growth

sentiment. 2) Steady externalb a l a n c e s g i v e n t h e

manageable current account

deficit (CAD) a nd rob us t ca pita l

Q:

A:

Q:

A:


Tte--tte


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37

inflo w s. 3) Fisc a l co ns o lida tio n

on its defined trajectory. 4)

Elevated headl ine inf la t ion

levels, albeit structural factorssuch as high-wage inflation

and sharp spike in minimum

support prices (MSP) on the

downtrend. 5) A steady and

fairly-valued Indian rupee.

Th e s e m e a s u r a b l e

macroeconomic adjustmentsa ug ur w ell a nd s et the pla tfo rm

for bottoming out of growth

cycle.

Va rio us incipien t s ig ns o f

reco very a re im m inent in fa ster

pro ject clea ra nces , stro ng co re

industries performance (viz.c o a l , e l e c t r i c i t y , c e m e n t ) ,

recovery in mining activity,

s trong capita l goods growth,

pick up in industrial

performance, spike in

m a n u f a c t u r in g P M I

Documents

Money Manager September 14 Monthly_Issue