Monthly Issue IDirect

8/10/2019 Monthly Issue IDirect

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The ca lend a r ye a r 2014 ha s b eenvery interesting for Indian equitymarkets. Having appreciated 35%th i s yea r, marke t s have beenrunning ahead of an economicrecovery, which is expected tofollow w ith a la g. The g ove rnm enth a s a l r e a d y i n i t i a t e d s e v e r a lconfidence building measures and

taken key dec isions like a llow ingforeign direct investment (FDI) inseveral sectors, railway fare hike,on l ine envi ronment and fores tc l e a r a n c e , e t c . H o w e v e r , a neco nom ic reco very is expected onlyat a gradual pace. After tradinga r o u n d 1 4 x o n e - y e a r f o r w a r d

ea rning s p er sha re (EPS ) for mo st o fthe las t five yea rs, the S ensex is no wtrading at 16.5x one year forwardEPS.

Anup BagchiM D & CEO

ICICI Securit ies Ltd.

At the heart of the change in sentiment is the expectation of anim proving bus ines s environ m ent a m id q uick policy a ction s. Reversingthe nea r term trend, eq uity mutua l fund s ha ve w itness ed inflow s o f

37,800 cro re a fter a cum ula tive o utflow o f 32,900 cro re in thepreceding five years, signifying increasing participation of retailinve s to rs. The foreign ins titutiona l inflow s (FIIs ) ha ve a lso po ured in$15.8 billion in Ind ia n e q uities , hig her tha n a ny o ther em erg ing m a rket.

P r o g r e s s i v e p o l i c y i n i t i a t i v e s , c o u p l e d w i t h i m p r o v i n gma croe cono mic fac tors on b oth the do me stic and g lob a l front w ouldhelp keep markets buoyant. On the domestic front, H1FY15 grossdomestic product (GDP) growth has revived to 5.5% from 4.7% inFY14 w hile infla tio n continues to slide d ow n. Also , the Res erve Ba nk o fInd ia (RBI) ha s ind ica ted a t a po ss ible reversa l in the interes t rate cy clein the ea rly pa rt of next ye a r. This co uld further push the ca pita linves tmen t cycle, w hich ha d co m e to a virtual sta nd still in the pa st fewyears.

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1ICICIdirect M oney Manager November 2014

S eco ndly, w ith the slow do w n in China, co mm od ity prices ha ve be enso ftening . The Lond on Meta l Excha ng e (LME) ind ex is d ow n 9% overthe la st s ix mo nths. Tho ugh this m a y im pa ct ea rning s o f meta l

companies, the overall economy would benefit from lower inputprices , w hich w ould g ive a n im petus to infra structure g row th as w ell.Moreover, crude is down 37% year-on-year (YoY) at $70 per barrel.This w ill ben efit Ind ia 's c urrent a cc ount d eficit (CAD) s itua tio n. Ind iaim po rts a bo ut 80% of its c rude req uirem ents. B es id es helping low erim po rted infla tion , low er crude prices w o uld a lso lea d to a low er fisca lde ficit since o il unde r-recove ries a re expec ted to d ecline to ~ 80,000crore in the current yea r from ~ 1,40,000 crore in Fy14.

Thirdly, Ind ia is rela tively les se r im pa cted by a g lo ba l slow do w n byvirtue of high domestic demand. Among major economies, India'sexport as a percentage of GDP is among the lowest at 24%, whichinsulates it from a slowdown in other economies in comparison too ther co untries .

Lastly, the slowdown in world economies has prompted centralbankers across the globe to come up with expansive monetary

po licies to infla te their w a y o ut of reces sion. The e nha nce d liq uid itywill, in turn, lead to greater inflows in attractive asset classes. Indiaw ith rela tively hig her eco no m ic g row th, a n e xtrem ely sta ble po litica lenvironm ent, la rge d o m estic co nsum ption led m a rket and favo ura bledemographics, stands out as the most eye-catching investmentdestination.

Im proving se ntim ents , a sta b le po litica l env ironm ent a nd a pick-up ineco no m ic a ctivity w ould c on tinue to a ttra ct inves tor to w a rds eq uities ,resulting in a shift in preference towards financial savings fromphysical savings. Other asset classes including gold and real estateha ve a lso sho w n sig ns o f tiring . Even thoug h the ma rkets ha ve run upin the rece nt pas t, eq uity as a n as se t cla ss rem a ins a ttra ctive for lon gterm g oa ls. There is n o be tter w a y to be nefit from the current a ndpo tentia l up sw ing of the Ind ia n eco no m y.

I take this o ppo rtunity to w ish y ou a nd y our love d o nes a very Ha ppy

New Yea r 2015. Do keep investing a nd sta y inves ted for yo ur life g o a ls.Throug h this ma g azine a nd our w ebs ite w w w.icicidirect.com w e w a ntto make an earnest attempt to partner with you in setting andachieving your f inancia l goals . Do walk in to any of yourNeig hbo urho od Fina ncia l S uperstore a nd talk to us .

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November 2014


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With the rising cost of almost everything, today's youngg eneratio n fa ces unprece de nted cha lleng es to a chieve fina ncia linde pend ence .Helping o ur yo uth to lea rn effective m a na g em ento f perso na l fina nces is m o re im po rtant tha n ev er.Parents ca n pla y a n im po rta nt ro le in this a rea helping child renwith their first steps, getting the options of investments cleareve n und erw riting the risk to a n exten t. The first s tep ca n b e a ssim ple a s o pening their saving s, investment a nd de ma t acco unt.

It ma y s ound strang e w ith so m uch talk on investments a round

that youngsters do no really know how an investment can bem a de . We ca n use o ur person a l experience s to g uide them w iththeir first inve stm ent.

How ever do rem em be r tha t our know ledg e is m os tly b e g uidedby o ur o w n experience s. This ca n so m etim es b lind us . Ge t themto invest into w hat is rig ht for them and not w here yo u had a g rea t

experience inves ting it yo urse lf.In this edition we cover some important aspects of teachingfina nce to y o ur child ren and y o ung sters. The e d itio n a lso o fferscomprehensive information and analysis on equity diversifiedfunds , the e ver-g reen o ptio n for young inves tors to g et sta rtedw ith investing .

Further, if yo u w ish to g et cla rity o n d ifferent a spec ts o f perso na lfina nce o r any o ther m o ney m a tter thro ug h Ask o ur Pla nner, yo um a y w rite to us a t mo neym a nag er@ icicisecurit ies.co m . So rea don, stay updated and involved. Do write in with your feedbacka nd sha re yo ur thoughts.

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

Coord ina ting Edito r : Yogita Khatri

Edito ria l Board : Sam eer Chavan , CWM , Panka j PandeyCMEd 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

ICICIdirect M oney Manager November 2014

Your ma g a zine is no w also a vailab le o n w w w.ma gzter.com , adig ital new ssta nd.


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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 Amit Gupta.............................................................10

Stock Ideas: TV Today and UltraTech Cement............................................ . 15

Flavour of the M onth: A parents' guide to help children about moneymanagementHelping our yo uth to lea rn effective m a na g em ent o f perso na lfina nces is to da y m ore im portant than e ver. Here w ediscuss ho w yo u as a parent ca n mentor your children to b ecom efinancially secure...................................................................................21

Tte--tte: 'Asset allocat ion offers the best opportunity to balance risk &rew ard'

An interview w ith Tusha r Prad ha n, CIO, HS BC Mutua l Fund .............. 27Ask Our Planner:Your perso na l fina nce q ueries a nsw ered ..........................................31

M utual Fund Analysis: Categ o ry - Diversified Equity FundsThe be st investm ent option for beg inners as w ell a s s ea so nedinve sto rs to inves t in eq uities for long -term fina nc ia lg oa ls. ..................................................................................................... 35

Equity M odel Portfolio............................................................................... 41M utual Fund Top PicksHere w e present o ur rese a rch tea m 's to p m utua l fundrecom me nda tions, a cros s eq uity a nd deb t ca tego ries ... .. .. .. . .. .. .. .. ..46

Quiz Time..................................................................................................48

Monthly Trends.........................................................................................49

Premium Education Programmes Schedule..................................................53

Claiming RGESS tax benefits

ICICIdirect M oney Manager November 2014


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4ICICIdirect M oney Manager

Government decides to pay 8.75% interest on PF for 2014-15Over five crore provident fund subscribers governed by the Employees'Pro vident Fund Org a nisa tio n (EPFO) w ill g et 8.75 pe r ce nt inte res t on the irde po sits for the current fisc a l. The Fina nce Ministry ha s ratified the rate fo r2014-15, a fter a d ec ision w a s ta ken to retain the interes t pa yo ut a t this level bythe EPFO Central Boa rd o f Trustee s o f the so urces sa id . As p er the prac tice ,EPFO trustee s' de cision g ets im plem ented a fter the co ncurrence of the Fina nceMinistry.

Courtesy: The Economic Times

Desp ite the s prouting of g reen s hoo ts, a robus t recove ry is still to fully take ho ld,

sa ys the Mid -Yea r Eco no m ic Ana lys is for the c urrent y ea r, ta b led in Pa rlia m entb y U nion Fina nce Minister Arun J a itley. The Review pro jec ts 2014-15 g row thw ill be 5.5 per cent. India face s cha lleng es tha t are m os tly d om estic, sa ys theReview. India g rew at s ub-5 per cent for the las t tw o yea rs. G row th bo unced to5.7 per cent in the April-J une q ua rter be fore s lipping a g a in to 5.3 per cent in theJ uly-S eptem be r q uarter.

Courtesy: The Hindu

M id-Year Economic Review projects 5.5 per cent grow th

The g ov ernm ent is no lo ng er lo oking to se ll S pec ified Und ertaking o f UTI's(S uuti's) stake in priva te-se ctor co m pa nies throug h the excha ng e-tra de d fund(ETF) route, Bus ines s S ta nd a rd ha s learnt. The Cen tre had bu dg eted raising Rs6,500 cro re throu g h pa rt-sa le o f the S uuti sta ke in Axis B a nk, ITC, a nd La rse n &To ub ro. The ca pita l ma rkets division in the fina nce m inistry w a s exploring theoption o f bunching the stakes to be offloa ded in these three co mpa nies and atlea st s eve n pub lic-se cto r underta king s a s o ne ETF, an d listing it on exc ha ng es .In Octob er, the g ove rnment ha d floa ted a req uest for propo sa l (RFP) for a S uutiETF.

Courtesy: Business Standard

Govt scraps proposed Suuti ETF

g ove rnment m ove d a Cons titutiona l Am end m ent Bill in the Lok Sa bha to roll outg oo ds a nd se rvices tax (G S T), setting in m otion p la ns to la unch this a m bitiousta x reform from April 1, 2016. The B ill inco rporate s a num b er of pro visio ns tog et the support of states w hos e o ppos ition ha d held ba ck w hat finance minister

Arun J a itley ca lled 'bigg es t ta x reform since 1947' for a lm o st five ye a rs. Theprevious UPA g o vernm ent ha d p la nne d to roll o ut GS T w hich w ill repla ce thepletho ra o f ind irect taxe s levied b y s ta tes , Centre and lo ca l bo d ies o n April 1,2010. The g ove rnment ho pes to g et the Bill pa ss ed in the Bud g et se ss ion a nddo es not se e it being referred to the s tanding com mittee o n finance.

Courtesy: The Economic Times

Government moves bill to roll out GST; sets in motion plans tolaunch tax reform from April 2016

November 2014


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M ARKETS ROUND-UP

Sentiments likely to remain upbeat asRBI hints at reversal of rate cycle

Domestic equity benchmarkssc a led new hig hs in Novem be r,ending the month 3.2% highera s the m a rket too k po sitive cuesfrom a sharp fall in globalco mm od ity prices a ndposit ive macroeconomic data.The g ross do m es tic produc t(GDP) growth came in at 5.3%better than estimates of 5.1%w hile the fisca l deficit co ntinuedto decline. A sequentialimprovement in PurchasingM a n a g e r s ' In d e x (P M I)manufacturing data and 2.5%

year-on-year (YoY) index ofindus t r i a l p roduc t ion ( I IP )growth along with all-time lowconsumer price index (CPI) of5.52% further improveds e n t i m e n t s . S e v e r a lgovernment reforms such asderegulation of diesel prices,

labour reforms, ordinance onco a l block a uctioning, e a sing o fforeign direct investment (FDI)norms in the real estate sectora nd cut in the no n-pla ngovernment expenditure alsohelped maintain the upwardm o m e n t u m o f t h e m o n t h .S e n t i m e n t s a l s o r e m a i n e dupbeat as OPEC (Organizationo f the Petroleum Expo rtingCountries) members voted tokeep their production ceiling

uncha ng ed lea ding to d ecline inc r u d e o i l p r i c e s t o~ $68.9/ba rrel. Pos itive g loba ls e n t i m e n t s a r i s i n g o u t o fh i g h e r - t h a n - e x p e c t e d G D Pgrowth of 3.9% in the US andq uantitative ea sing sig na ls fromthe eurozone helped sus tain thesentiments.

The m a rkets a lso follow ed Q2earnings, which concluded inm id-Novem be r. The co nsumerdiscretiona ry spa ce w itness ed arobust performance with bothauto and consumer durablessectors showcasing goodnum bers. The a uto a ncilla ryspa ce w itnessed the bene fitso f o p e r a t i n g l e v e r a g e a n drepo rted a rob ust performa nce.The info rma tion te chno log y (IT)and pharmaceu t ica l sec to rsreported normalcy of earningson account of normalisation oft h e b a s e e f f e c t . O n t h einfrastructure front, the orderbook o f ca pita l g oods ma jo r L&Tand BHEL witnessed stronginflo w s a s p o w er BTG /EPC(Bo iler, Turbine a nd G enera to r /

Engineering, Procurement andConstruction) orders picked uppace. However, the same wasno t reflec ted in the ir topline a ndb o t t o m l i n e d u e t o l o w e r

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M ARKETS ROUND-UP

execution on account of lowerorder intake in FY12-14. Thequal i ty of earnings saw an

i m p r o v e m e n t w i t h S B Ir e p o r t i n g a s s e t q u a l i t yimprovement and robust 30%g row th in the b o ttom line. In thefast-moving consumer goods(FMCG) space, the growth wasprima rily led by price hikes w ithove ra l l vo lumes r ema in ingsubdued for mo st com panies.

G loba l marke t s have beendriven by contrasting newsflow s a cross the g lob e. Themarkets opened on a positivenote a s the Ba nk of J a pan'sM o n e t a r y P o l i c y B o a r dunexpectedly decided to raisethe mo neta ry ba se a t an annualpace of about 80 trillion yen.How eve r, in the m id-m onth, thehawkish tone of the FederalO p e n M a r k e t C o m m i t t e e(FOMC) minutes, higher-than-

expected US tra de d eficit and ase ries o f ma nufacturing a ctivitydata from China and eurozonekep t sen t iments in check .However, the positive triggeremanating from falling crudepr ices a ided by the OPECsta nce to m a in ta in the

production levels, better-thanexpected G DP g row th in the USand signals towards furthers t i m u l i f r o m e u r o z o n eoutweighed the negative cues.

The m a rkets end ed m ostly inthe g reen a cros s US, eurozonea nd Asia .

With softening inflation, thebenchmark 10-year bond yieldhas fallen to 8.08%, the lowestsince September 2013. Duringthe month, crude (Brent)con t inued the dec l ine andend ed a t ~ $68.9/ba rrel, a ide d

by the sta nce o f OPEC to stick totheir production ceiling. Goldprice s rem a ined fla t, ending them onth a t $1167.4/ounc e.

Global markets

The US ma rkets end ed on apo sitive no te a s the m a rket too kpo s itive cues from falling crudeprices and strong GDP data,w h i c h s t o o d a t 3 . 9 % v s .expectations of 3.3%. Majorind ice s , Dow J ones , S &P 500and the Nasdaq gained about2 . 5 %, 2 . 5 % a n d 3 . 5 %,

respectively. European marketsalso gained in the month withthe rising investor confidenceda ta a nd a hint by the Europea nCentral Bank (ECB) to offerfurther stimulus. The UK FTSEand French CAC gained 2.7%and 3.7%, respectively, whilethe G erma n Dax extended ga insof 7%. Asian markets alsogained in the last two sessionsto end on a positive note withthe Nikkei and Shanghai SSEC

November 2014


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M ARKETS ROUND-UP

ga in ing 6 .4% and 10 .9%,respectively, while the HangS eng rem a ined fla t.

Domestic markets

T h e f o r e i g n i n s t i t u t i o n a linvestors (FIIs) bought heavilyto the tune o f ~ 14,302.2 croreon the ba ck o f streng theningc o n f i d e n c e o n t h e I n d i a neconomy vis--vis the rest ofthe em erging ma rkets. Thoug ht h e d o m e s t i c i n s t i t u t i o n a linves to r s (DI I ) i nves tmen tremained relatively subdued,they co ntinued to b e net buye rsw ith a net inflow of ~ 1,676.9crore.

The Nifty a nd S ens ex ende d inthe positive territory for them o n t h w i t h m o s t s e c t o r a lindices also ending the monthin the green. Except the BSEMeta l Ind ex (-4.6%) a nd BS E OilIndex (-2.2%) all other indicesended November on a strongnote. BSE Realty, BSE Bankex,BSE Auto, BSE FMCG, BSETe c h , B S E IT a n d B S EHealthcare saw sharp gains of8.3%, 8.8%, 3.5%, 3.2%, 3.7%,4.7% and 4.2%, respectively,while the BSE PSE (0.8%) and

BSE Power (0.0%) ended themonth fla t.

Outlook: Markets to take solacefrom dovish RBI comments andpositive global cues

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Despite the expected statusquo stance from the ReserveBank of India (RBI), the policy

signals RBI's resolve to firmlycontain inflation andinflationary expectations whiler e s p o n d i n g t o p o s i t i v edevelopments in inflation andf i sca l conso l ida t ion . Bya dva ncing the infla tion ta rg et of6% to March 2015, RBI has infa ct set out a clea r mes sa g e of areversal of the rate cycle ,sooner than la ter. With o il price sa t h i s t o r i c l o w s , a s t a b l eexcha ng e rate (in the ba ckdropof g loba l currency do w nfall vis --vis the US$) and s trong

capital inflows, the feel goodfactor is likely to stay. Globally,the story rem a ins m ore o r lesss imila r w ith ECB g iving m ixedsig na ls for so me m ore s timuli inthe backdrop of recessionarytrends while the other side ofthe Atlantic i.e. US has been

r e g i s t e r i n g a m a r k e dimprovement in most gauges.OPEC's decision to stay awayfrom prod uction cuts d espite arequest from some membercountries w a s, how ever, am a j o r p o s i t i v e g l o b a lde velopm ent. In this ba ckdrop ,the m a rket und ertone is likely tobe upb ea t for Decem be r on theback of positive domestic andg lob a l sig na ls.

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TECHNICAL OUTLOOK

Buying opportunity amid consolidation

Equity benchmarks continuedtheir record setting spree andextende d the ra lly for a reco rdninth co nse cutive m o nth. Thebenchmarks logged over 2%g ains, w ith the Se nsex a nd theNifty sc a ling th ps yc ho lo g ica lly

significa nt levels o f 28000 and8600, respectively, for the firsttim e eve r.

We expect the benchmarks toe n t e r a s h o r t - t e r m

c o n s o l i d a t io n p h a s e inDece m ber, w hich w ill provide afresh entry opportunity forparticipants who have missedthe rally. Stock specific pricea ctio n is e xpected to co ntinue

while the benchmarks digestthe strong gains of over 10%a m a s s e d i n t h e l a s t t w om o nths . The o ve rall pr ice

structure remains posi t ive.Hence, any cool off towards27350/8200 (S e n s e x /Nift y )sho uld be used a s o pportunityto g o long to ride the ong oinguptrend.

The broa de r ma rkets a chievedimportant milestones duringNo ve m b er 2014. The BS EMidc a p a nd S m a ll Cap indicesvaulted past their respective2 0 0 8 a n d 2 0 1 0 h i g h s .Strengthening of the broadermarkets past multi-year highsa ug urs w ell fo r the lo ng evity o fthe o vera ll uptrend

Limited price correction andextended t ime cor rec t ionsha ve b een the ha llm a rk o f thecurrent uptrend. We expectbenchm a rks to hold fort abo vethe 27350/8200 leve ls in c a seof any corrective price actionfrom here o n.

November 2014


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S ource: Bloomb erg, ICICIdirect.com Research

21 w eek EM A

Weekly stochastic is poised at its highest level since 2012 w ith a reading of 96 indicating highlyoverstretched conditions and w arrants a temporary breather before continuation of the upm ove

Breakout area of September2014 high and 38.2%retracement of current rallyproject support at 27350 levels

4 w eeks

5 w eeks

5 w eeks

5 w eeks

4 w eeks

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TECHNICAL OUTLOOK

BSE Sensex Weekly Candlestick Chart

S ource: Bloo m berg, ICICIdirect.com Rese a 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 rilyreprese nt the v iew s o f ICICI S ecurities .

November 2014

The index is s een a pproa ching o ur

short-term target of 28800 levelsbeing the value of the rising trendline connecting the monthly highssince May 2014. S ince August 2013,the inde x ha s rallied for a m aximumf i v e w e e k s i n a r o w b e f o r eundergoing a three to five weekconsolidation

With five w eeks of g a ins a lread y in

plac e, w e expect the index to pa useafter apprehending the overheadtrend line (28800) and enter ac o n s o l id a t io n m o d e d u r in gDece m be r 2014


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DERIVATIVES STRATEGY

Key support for Nifty placed at 8100

Amit GuptaHead - Derivat ives Research,ICICI Securit ies

The Nifty optio ns da ta o f theDecember series should beclo se ly a na lys ed in lig ht of thealready existing long datedo ptions . The o pen interes t (OI)in the Call strikes of 8000 and8500 (shown in blue columns)is m a inly the lo ng da ted o ptio nOI a dd itio n, w hich w a s a lrea dy

existing since many expiriesbefore. On the Put side, thehighest Put base at the 8000s t r i k e ( s h o w n i n o r a n g eco lum n) is a g a in a ttributab le tolong da ted contra cts.

Key additions relevant for the

December series started fromNovember 15 onwards. Majoradditions were seen at 8600a nd 8700 Ca ll s trikes , w hichha ve a dded 1.1 a nd 1.5 m illio nsha res , res pec tively. Nifty w a salso not able to close above

8600 levels a nd succum be d toprofit bo o king . On the Put side,key additions are seen at the8300 and 8100 Put strikesw hich a re likely ta rge ts in ca se

o f dec lines .Ongoing premium in Nifty ishigh at 51 points which maynot bode well for incrementalups ides . We expec t shor tpos itions m a y be a ccumulatedd u e t o p r e v a i l i n g h i g h

premium in the ind ex.The Nifty Bo lling er ba nd belowshows it bounced from themean-2 sigma band in midOctober. Since then, the Niftyhas not dipped below volumew e ig h t e d a v e r a g e p r ic e

(VWAP) of 8350. Hence moveb e l o w 8 3 0 0 m a y t r i g g e rdownsides towards 8100 dueto liq uida tio n o f pos itio ns.

November 2014

Nifty Options build up in Decemberseries

0123456789

7 8 0 0

7 9 0 0

8 0 0 0

8 1 0 0

8 2 0 0

8 3 0 0

8 4 0 0

8 5 0 0

8 6 0 0

8 7 0 0

8 8 0 0

O I i n M i l l i o n

S h a r e s

Ca ll OI Pu t OI

Nif ty Bollinger Band likely to testmean+ 2 sigma levels

5900

6400

6900

7400

79008400

F e

b - 1

4

M a r -

1 4

A p r -

1 4

M a y - 1

4

J u n - 1

4

J u

l - 1 4

A u g - 1

4

S e p - 1

4

O c

t - 1 4

N o v - 1

4

Close UBB(2) BollM A (20) on Close LBB(2)


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November 2014

Expiry gains in 2014: includingNovember series, nine out of 11expiries closed w ith gains during the

yearIn the November series, theNifty co ntinued w ith its trend o fclo sing w ith stro ng g a ins. TheNovember month closed withg a ins o f ove r 3%, w hich is thehighest monthly gain since

J une 2014.I n N o v e m b e r , t h e N i f t yrespected its VWAP level of8350 throughout the month.The d ip to w a rds this leve l inthe third w eek w a s g reeted a s abuying o ppo rtunity a s the Nifty

moved up close to 200 pointsin the nex t th ree t rad ingsessions.

Going ahead, the NovemberVWAP o f 8390 w ill be theimmediate support for theNifty s current m o m entum .

Looking at the seasonali tytrend, December has been amonth of consis tent gainshistorically. In the trail ingdecade, the Nifty has closednegative only once in 2011 inDecember. In all other years,the Nifty clo se d po sitive.D e c e m b e r h a s a l s o b e e ns t rong for equi ty marke tsinclud ing S &P, Da x &Nikkei inprevio us yea rs.

Nif ty M oM Expiry gains in 2014

3%3%

-1%

3%3%4%

6%

3%

6%

3%

-3%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

NovOctSepAugJu lJu nM ayAprM arFebJa n

Bank Nif ty upside target now

placed at 19000, key supportplaced at 17500

The B a nk Nifty ha d a strong runin the la st s eries . It sta rted theNovember series from near16800 a nd m o ved up to 18900d u r i n g D e c e m b e r b e f o r eseeing some profit bookingdue to g lo ba l m a rkets.

During the month, the strongm o v e c a m e f r o m p r i v a t ebanking heavyweights alongw ith pub lic s ec tor und ertaking(PSU) banking heavyweightslike S BI a nd PNB. Ho w ever, therest o f the P S U ba nking spa cerem a ined m uted .

D e c e m b e r s e r i e s o p t i o n sbuild -up is sug g es ting the Ba nkN i f t y m a y m a r c h t o w a r d s19000 as this Call has thehighest OI. On the lower side,Put o ptio ns build -up is se en a tthe 17500 strike , w hich is thekey suppo rt on the lo w er side .


14/58



November 2014

F a l l i n g y i e l d s o n t h eb e n c h m a r k 1 0 - y e a rgovernment securities (G-sec)

and cooling inflation on theback of falling crude prices isl i k e l y t o i m p r o v e m a c r o sfurthe r. This w ill a lso he lp inf r e s h u p s i d e s i n b a n k i n gstocks . Most PSU bankingstocks in such a scenario are

throwing up good risk rewardopportunities.

Bank Nifty could continueupsides tow ards 19000

0

0.05

0.10.15

0.2

0.25

0.3

0.35

0.4

1 7 0 0 0

1 7 2 0 0

1 7 4 0 0

1 7 6 0 0

1 7 8 0 0

1 8 0 0 0

1 8 2 0 0

1 8 4 0 0

1 8 6 0 0

1 8 8 0 0

1 9 0 0 0

Call OI Put OI

Cyclicals, defensives participatingw ell in current market move

The Novem be r up m o ve o f theNifty saw good participationno t on ly o n pa rt o f cyc lica ls likeba nking but also by de fensiveslike IT. How eve r, the m a jo rm o v e w a s s e e n i nind ex/se cto ral hea vyw eig hts

while midcap and small capsto cks lo st so m e g ro und in these co nd ha lf.

Fo r the mon th , t he CNX

midcap was up 4% while theNifty w a s up o ve r 3%. TheBa nk Nifty a nd CNX IT m o ved

up o ver 7% ea ch.The NS E ad va nce dec line ratiow as subdued in the seco nd ha lfo f the m o nth. This w a s m a inlya ttributa b le to p rofit bo o king insmall cap stocks as the Niftyrem a ined a bo ve 8400. Thish e a l t h y p r o f i t b o o k i n gsug g es ts a de cline in the CNXS m a ll Cap inde x tow a rds 5000(key suppo rt) ca n be used a s abuying opportunity in thisspace .

Sectoral return in November Series

-50510

CNX Bank

CNX IT

CXN Mid Cap

Nifty

Consumer Durable

Metal

% monthly return

Dollar index strength continuesamid consolidation. Stimulus inJapan, expectations of same inEurope lead to w eakness in JPY,euro

Im p o r t a n t l y , w i t h i n t h e

currency m a rket, a m a jo r m o vewas seen in the Dollar Index,which has moved up over1.75% to 88.4 during the m o ntha nd J PY, w hich has w ea kened


15/58



November 2014

o ver 5.5% to 118.5 on the ba cko f B a n k O f J a p a n (B O J )increased monetary stimulus.

This m ove has w ea kened mo stemerging market currencies.However, the INR was able tolim it the w ea knes s a s FII flo w si n t h e e q u i t y s e g m e n tcontinued.

Also, falling crude prices couldgive support to the rupee from amajor depreciation and therupee could consolidate in therange of 61-63.Brent crude has fallen close tofive-year lows below 65 after thecomments from Saudi Arabia.We believe Brent crude may

cont inue i t s fa l l due tocontinuous selling pressure.Dollar strength caused w eakness in

developed market

96

98

10 0

10 2

10 4

10 6

10 8

11 0

3 0

- O c

t

1 - N

o v

3 -

N o v

5 - N

o v

7 -

N o v

9 -

N o v

1 1

- N o v

1 3

- N o v

1 5

- N o v

1 7

- N o v

1 9

- N o v

2 1

- N o v

2 3

- N o v

Do lla r In de x Eu ro A us tr al ia n Do ll ar J ap an es e Ye n

Rupee outperforming other Emscurrencies

98

100102

104106108

110

112114

116

3 0

- O c

t

1 - N

o v

3 - N

o v

5 - N

o v

7 - N

o v

9 - N

o v

1 1

- N o v

1 3

- N o v

1 5

- N o v

1 7

- N o v

1 9

- N o v

2 1

- N o v

Thai Bhat Indonesian Rupiah Indian RupeeRussian Ruble Zimbabw ian Rand Turkish LiraM alaysian Ringitt Brasilian Real Philippines Peso

India VIX : Likely to rise in the nearterm

We have seen a surge involatility in the last couple oft r a d i n g s e s s i o n s . I n d i avolatility index (VIX) startedreve r t ing f rom i t s s econdlowest weekly closing of 11.9.Nifty o ptions im plied vo la tility,

which was quite subdued inthe las t couple o f mo nths, m a yw itness a rise in the ne a r term.

Nifty Put IVs (im plied vo la tility )are generally higher than CallIVs. However, currently due tohig her o ptim ism in the m a rket,Nifty Call IVs are higher thanPut IVs. ATM 8300 Put IV is at10.5% w hile 8300 Ca ll IV is a t14.5%. Similarly, the 8400 PutIV is a t 8.90% w hile the 8300Ca ll IV is a t 13.45%.

The crucia l 8400-8440 level ha sbeen broken. VWAP of trailing30 da ys is a t 8440 w hile theNifty has moved below 8400that is the highest Put base.There m ay be so m e pa nic

clo sure o f sho rt po sitio ns in Putstrikes.


16/58



November 2014

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

India VIX : M ay move tow ards 15levels

FII inflow s in equity segment keep

Nifty rally alive As the Nifty bottomed out at8000 near October expiry,foreign institutional investors( F I I s ) s t a r t e d t o b u yaggressively in the cashsegment. For the month, theybought over US$1.5 billion, thelargest inflow since July 2014.Post the increased stimulusfrom BOJ at the start of themonth, most Asian EMs haveseen inflows. Strongest inflows

were seen in Taiwan of US$2.75billion with Indonesia at US$365million.In the derivatives segment, FIIsbought Nifty Put options worthover US $1.6 billion to hedgetheir cash positions. In the index

futures segment, the flowsremained soft. They created

fresh longs totalling overUS$320 million.During the month, as the 10 yearG-Sec yield fell from 8.32 to 8.14some inflows were seen.However, in the second half ofthe month, as yields stabilisednear 8.15 outflows were seen inthe debt segment. For the

month, there was a net outflowof US 15 million.

FIIs cash act ivity in (In Rs. crore)

-5000

0

5000

10000

15000

20000

25000

30000

O c t - 1 3

N o v - 1

3

D e c - 1

3

J a n - 1

4

F e

b - 1

4

M a r -

1 4

A p r -

1 4

M a y - 1

4

J u n - 1

4

J u

l - 1 4

A u g - 1

4

S e p - 1

4

O c t - 1 4

N o v - 1

4

I N R i s C r

Debt markets flow s 10 year G-Sec

yield dips to 8.15

-15000

-10000

-5000

0

5000

10000

15000

20000

O c

t - 1 3

N o v - 1

3

D e c - 1

3

J a n - 1

4

F e

b - 1

4

M a r - 1

4

A p r - 1

4

M a y - 1

4

J u n - 1

4

J u

l - 1 4

A u g - 1

4

S e p - 1

4

O c

t - 1 4

N o v - 1

4

I N R i n C r


17/58

15

STOCK IDEAS

TV Today: No. 1 player in Hindi new s genre; strong ad grow th

ICICIdirect M oney Manager

Company Background

TV Toda y Netw ork (TV Toda y)inco rpo ra t ed i n December,1999, is a pa rt of the Ind ia Toda yGroup and a leading newsbroa dc a ster in India . It ope ratesa s a sub sidia ry o f Living Media ,the holding company of the

I n d i a To d a y g r o u p o fpub lica tions . The Aditya Birlag roup a lso ha s a 27.5% sta ke inLi v i n g M e d i a c u r r e n t l y .Chairman of Living Media,Aroon Purie, has a rich lineagein t he news d i sbu r semen tb u s i n e s s . He h a s b e e n

a s s o c i a t e d w i t h t h e n e w sbusiness for the past threed e c a d e s a n d c o n s i s t e n t l ymaintained the company as al e a d e r o w i n g t o h i s v a s texpe rience. TV Toda y is o ne o fthe leading news broadcastersin India with four channels viz.Aa j Ta k, Hea d line s Toda y, De lhiAa j Ta k a nd Tez d is tribute d byMS M Disco very Pvt. Ltd . TVTo d a y is t h e f ir s t In d ia nbro a dca s ter to up link a 24-ho urHindi new s cha nnel from India .Th e c o m p a n y h a s a nundisputed lea de rship positionin the Hindi news segmentthroug h Aaj Ta k. In a dd ition,Ra dio Tod a y B roa dc a sting Ltd, afellow subsidiary, merged withthe company extending the

pres ence o f TV Toda y to the

radio segment under the brandOye 104.8 FM. The c ompa nyhas a l so made a s t r a t eg i cinves tment w orth 45 crore inFY10 in Ma il Toda y New spa pe rPvt. Ltd., which publishes anew s pa per ca lled Mail Toda y ina bid to enter the print seg mentfor bus ines s s ca la b ility.

TV industry to grow at 16.2% CAGR(FY13-18E); sees 12% CAGR in FY08-13

Th e t e l e v i s i o n i n d u s t r y

witnessed 12% compoundedannual growth rate (CAGR) inCY08-13 despite the economicslowdown. According to theFederation of Indian Chambersof Commerce and Indust ry(FICCI)-KPMG report 2014, theindustry is expected to g row a t

16.2% CAGR in FY13-18E risingfrom Rs. 417 cro re a t the end o f2013 to 885 crore by the end o f2018E. The number of TVhouseholds in India is alsoexpected to increase to 191m i l l i o n f r o m 1 6 1 m i l l i o nc u r r e n t l y. T h e t e l e v i s i o ni n d u s t r y d o m i n a t e s t h ed o m e s t i c m e d i a &enterta inment indus try forming45% of the total industry. Theincrea se in the cha nnel ca rrying

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Investment Rationale

November 2014


18/58

16

STOCK IDEAS


capacity to over 1000 owing todigit isation and revision ofm i n i m u m c h a n n e l s t o b e

b r o a d c a s t e d t o ~ 5 0 0 isexpected to bring in additionals u b s c r i p t i o n r e v e n u e s t obroadcasters .

TV Today - No. 1 player in Hindi new sgenre; strong ad grow th

New s se g ment forming just 7%

of TV view ership, g a rners 21%of total TV advertisement. TVTo d a y, w it h a le a d e r s h ipposition in the Hindi newssegment, commands 10.9% ofto ta l TV new s a dvertisem ent.With a viewership share of~ 18.5% in the Hindi new s

seg ment and ~ 8.7% of theovera ll new s se g m ent, Aa j Ta kco mm a nds a n im press ive 23%(a s per FY13) o f Hind i new s a nd9.2% of overall newsa dvertisem ent revenues . Thiss ig nifies a dvertiser's preferencefo r Aa j Ta k in a fiercelyc o m p e t it iv e s e g m e n tpopulated with 392 news andcurrent affair channels. With agradual recovery in economica ctivity, w e expect the co m pa nyto pos t 16.3% CAG R (FY14-16E)in revenue s to 526.6 cro re.

Operating leverage to kick in,carriage costs reduction - majorEBITDA driver

With digitisation, there hasb e e n a n u n p r e c e d e n t e d

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increa se in the cha nnel ca rryingca pa city o f distributo rs w ith thet o t a l n u m b e r o f c h a n n e l s

increasing from about 80 inanalogue cable to over 1000cha nne ls in d ig ita l. The increa sein ca rrying ca pa city ha s b roug htabout a reduction in carriageco sts for a ll broa dc a sters. Thisreduction in carriage fees iscritical for news broadcasters

a nd w ould res ult in EBITDAmarg in ga ins go ing ahead .News broadcasters shell outabout 25-30% of their totalrevenue in the form o f ca rria g eand placement fees. Englishn e w s c h a n n e l s s p e n dapproximately 70% of theirdistribution co sts a s ca rria g e inthe metros and are yet toreceive an equivalent benefit interms of subscription from themetros.

Re-rating on the cards; recommendBUY w ith target price of 276

With most other costs largelyfixed in nature, high degree ofo p e r a t i n g l e v e r a g e w o u l da ccrue to TV Toda y, res ulting in30.7% EBITDA CAG R (FY14-16E) to 186.6 crore. With arevival in EBITDA margins,v a l u a t i o n m u l t ip l e s a r eexpec ted to inch up to histo rica llevels. We va lue the compa ny a t15x FY16E EPS of Rs. 18.4 toa rrive a t a ta rge t price o f 276.We reco mm end BUY ra ting.

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November 2014


19/58

17

STOCK IDEAS


Key risks include: The im plem enta tion o f the Teleco m Regula toryAutho rity o f Ind ia (TRAI) tw elve minute a d ca p ca n be a neg a tive fo r therevenue es tim a tes. Moreo ver, the new s cha nnels a lso ha ve a threa t ofreputa tiona l risk.

(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; RoNW: Return on net w orth; RoCE: Return on Ca pital Em ploy ed ; DII: Domestic institutional investors; FII: ForeignIns titutiona l Inve sto rs)

Key Financials

Valuations Summary

Stock Data

November 2014

Net sa les ( cro re) 312.7 389.4 480.3 526.6

EBITDA ( cro re) 34.6 109.3 143.1 186.6

Net pro fit ( cro re) 12.2 61.3 80.3 109.6

EPS ( ) 2.1 10.3 13.5 18.4

FY13 FY14E FY15E FY16E`

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P /E (x) 108.1 21.5 16.5 12.1

Ta rg et P /E (x) 134.6 26.8 20.5 15

Dividend y ield (%) 37.8 11.6 8.9 6.3

Price/S a les (x) 4.1 3.5 3 2.5

RoNW (%) 3.8 16.2 18.3 20.9

RoCE (%) 4 22.4 25.2 28.8

FY13 FY14E FY15E FY16E

Ma rket ca pita liza tio n ( cro re) 1,320.6

To ta l debt (FY14) ( ) 0

Ca sh a nd inves tm ents (FY14) ( cro re) 57

Enterprise va lue ( cro re) 1,263.6

52-w eek Hig h /Low ( ) 254 /98

Eq uity ca pita l ( cro re) 29.7

Fa ce va lue ( ) 5

DII ho ld ing (%) 3.4

FII ho ld ing (%) 0

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20/58

18

STOCK IDEAS


Ultratech Cement: Largest and eff icient player

Company Background

UltraTec h Cem ent is the la rges tplayer in terms of capacity(60.2MT (million to ns ) inc lud ingJ a ypee pla nt) w ith ma rket sha reo f ~ 17% in India . The c ompa nyh a s c o n s i s t e n t l y r e m a i n e dahead of its peers in terms of

c a p a c i t y e x p a n s i o n w i t h aCAGR (compounded annualgrowth rate) of 23% vs. peers'CAG R o f 13% over the pa s t fiveyea rs. During FY14, UltraTec hincreased its capacity by 6%year-on-year (YoY) to 53.9MT

by co mm iss ioning the 3.3MTclinker plant in Karnataka. The4.8MT ca pa city o f the recen tlya cq uired G uja ra t unit of J a ypeeCement has resulted in totalcurrent ca pa city o f 60.2MT. Thecompany is aiming to reach itstota l ca pa city o f 70MT b yFY16E. We b elieve this w ouldhelp UltraTec h to ma inta in itsl e a d e r s h i p , g o i n g f o r w a r d .Other than this, the companyhas commissioned a 25MW(MegaWat t ) the rmal powerplant at Andhra Pradesh and

6.5MW waste heat recoverysystem (WHRS) at Awarpur,Maha ras htra. With this , the to ta lpow er ca pacity of the com pany(including WHRS) stands at

733MW, w hich is a round 80% o fthe company's powerreq uirem ent. The c om pa ny ha sa dea ler netw ork o f ove r 15,000dealers, which are well spreadacross the country. In terms ofsales mix across the country, itis w ell d is tributed , ind ica ting

lower vola t i l i ty in b lendedre a lis a t io n s . Th e c o m p a n ycurrently g enerates ~ 30% ofsales from non-trade (sales toins t i tu t ions) and remaining~ 70% of sa les f rom t ra de( r e t a i l e r s ) s e g m e n t , w h i c hkeeps its average realisationshea lthy vs . its peers.

To benefit from strong recovery indemand due to pan-India exposure

The cem ent industry's c a pa cityutilisa tion bo ttom ed a t ~ 69% in

FY14. We believe low capacityaddition and demand recoverysho uld lift utilisa tion levels fromhereon , g iven the cyc l i ca lupturn in the economy co upledw ith an e xpected po licy push tod r i v e i n v e s t m e n t s i n t h e

infra s tructure s ec tor. By drivingincreased cement usage insectors like road, power andirr igat ion, the industry canachieve the full potential of

Investment Rationale

November 2014


21/58

19

STOCK IDEAS


cement demand growth overthe next three years. Further,supply-s ide bot t lenecks , in

terms o f q ua lity log istics , s killedlabour and delays in land andenvironm ent clea ra nces , a longwith high cost of fuel andfina ncing ha ve put pres sure ont h e c o s t o f c e m e n tm a nufacturing . Thes e, in turn,w e be lieve, w ould lea d to low erc a p a c i t y a d d i t i o n s g o i n gforward.

Operates at healthy EBITDA/tonnevis--vis industry

With lower lead distances dueto a pa n-India presenc e, ca ptive

power plants and higher salesrealisations due to a highertrade mix coupled with higherwhite cement sales realisation,the co mpa ny g enerates highes tEBITDA/to nne in the ind us try. Itha s a lso bee n ab le to reduce itspower consumption per tonneg r a d u a l l y t h r o u g h v a r i o u sinitiatives. Power requirementof ~ 80% is m et throug h ca ptivepower plants, which helps theco mpa ny in reducing per tonnecos t . Other than th i s , thecom pany a lso has coa l linka g es

with Coal India, which helps inl o w e r i n g d e p e n d e n c e o nimports.

Healthy operating cash flow and

low debt/equity to fuel expansions

The co mpa ny is expected togenera te over ~ 3,200 crore ofoperating cash flows annuallydur ing FY15-17E. Fur the r,co nsidering the strong ba la ncesheet of the company withm inima l de b t (D/E (deb t-to -eq uity) o f 0.3: 1), w e b elieve , theexpansion plans will not add

any stress on the ba la nce sheet.This , in turn , w ill fur th e rs t r e n g t h e n t h e c o m p a n y ' spo s ition in the indus try.

Warrants premium valuations tocapture long-term potential

The s tock is c urrently tra d ing a t

12.5x a nd 9.5x EV/EBITDA fo rFY16E and FY17E, res pe ct ive ly,a g a inst la st four yea rs' a vera g ev a l u a t i o n s o f 1 3 . 0 x . A smentioned above, we believel o w c a p a c i t y a d d i t i o n a n ddemand recovery should lift

utilisation levels from hereon.We f o r e c a s t a p a n - I n d i autilisa tion a t 78% by FY16E tha tco uld o ffer pricing po w er. Givent h i s s c e n a r i o , w e e x p e c tUltraTec h, b eing the ind us tryleader wi th s t rong balancesheet, to trade at premiumvaluations. Hence, we maintainBUY ra ting w ith a targ et price o f

3180/sha re (i.e . a t 12.0x FY17EEV/EBITDA a nd EV/to nne o f$190/to nne.

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November 2014


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20

STOCK IDEAS


Key risks include: Lower than expected recovery in demand and anyfuture acquisitions at expensive valuations posses a key risk to ourvaluations.

(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per sha re; P/E: Price -to -ea rning s; EV: Enterprise va lue; RoNW: Returnon net worth; RoCE: Return on Capital Employed; DII: Domestic institutionalinvestors; FII: Foreig n Ins titutiona l Inve s to rs)

Key Financials

Valuations Summary

Stock Data

November 2014

Net sa les ( cro re) 20,077.9 24,704.4 28,791.5 34,007.5

EBITDA ( cro re) 3,616 4,246 5,563.3 7,283

Net pro fit ( c ro re) 2,144.5 2,538.6 3,310.4 4,354.9

EPS ( ) 78.2 92.6 120.7 158.8

FY14 FY15 FY16E FY17E`

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P /E (x) 32 27 20.7 15.7

Ta rg et P /E (x) 40.7 34.3 26.3 20EV/EBITDA (x) 19.1 16.5 12.5 9.5

EV/Tonne ($) 203.2 184.8 164.1 148.8

Ro NW (%) 12.5 12.9 14.9 16.6

Ro CE (%) 11.9 12.3 14.9 18.1

FY14 FY15 FY16E FY17E

Ma rket ca pita liza tion ( cro re) 68,577

To ta l debt (FY14) ( cro re) 4,496

Ca sh a nd inves tm ents (FY14) ( cro re) 4,007

Enterprise va lue ( cro re) 69,066

52-w eek Hig h/Lo w ( ) 2,872/1,635

Eq uity ca pita l ( cro re) 274.2

Fa ce va lue ( ) 10DII Ho ld ing (%) 20.6

FII Ho ld ing (%) 5.2

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23/58


FLAVOUR OF THE M ONTH

Parents, encourage your children to start investingOne of the most precious gifts you as a parent can give to your children is teachingthem about investing at a young age. This almost becomes a responsibility as your

child enters into the real w orld and starts dealing w ith money himself or herself.Your responsibility actually mult iplies as he or she enters into a college or gets hisor her f irst job. Investing or personal finance as a subject is not yet being taught inschools or colleges in India. Hence, the responsibility to guide our children fallsprimarily on us, the parents. Remember, children learn from w atching us. Theyobserve us, listen to us and follow our habits, including money habits. In fact, arecent study reveals that children tend to pick parents' spending habits marginallymore than their saving habits. It is t herefore important to be aw are of themessages that w e as parents send and the examples w e set. We should try toincorporate good financial habits and teach the same to our next generation. Herew e discuss how you as a parent can mentor your children to become financiallysecure, w hether they are still in college or have just got a job.

November 2014

Gett ing startedYoungsters general ly don' tknow w here to s tart and w hatto d o . S o the first step is to g etthem o pened a sa vings a nd ani n v e s t m e n t a c c o u n t .Assuming tha t your ch i ldalready has a savings bankaccount , he needs to open a

dem at account.The d em at a cco unt ca n beopened for free with somebrokers such as ICICIdirect byd o i n g t h e n e c e s s a r ypaperwork. We offer a three-in-o ne a cco unt tha t integ ra tes

banking, trading and demataccount, making it easier forone to trad e a nd invest.

Once the account is opened,

your child can start investingo nline, just a s sho pping o nline,at the click of a mouse. Inearlier days, you may haveseen m a rkets tha t w ere no t soefficient and accessible, buttoda y, thing s ha ve cha ng ed forgood. Investing is really easytod a y a nd just a c lick a w a y.

Most youngsters feel it is notw o rth investing till they ha ve ala rg e a m o unt ava ila b le. Thefac t is, eve n 500 a m o nth is agreat amount to start with.They key is to sta rt inve s tingea rly a nd m a ke it a ha bit.

As parents, we need to teacho u r c h i ld r e n a b o u t t h eimpor t ance o f s av ing andinvesting early and drop by

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24/58



November 2014

drop, in order to help securetheir financial future. Theea rlier they sta rt, the m o re they

can benefit from compoundgrowth.

Say for example, if your childsta rts inve sting 3,000 am o nth fro m the ag e o f 25 in a ninvestm ent tha t provides 10%return, he w o uld a ccum ula te1,02,77,680 w hen he turns 60.However, if he delays hisinvestment plans and even ifhe starts investing a greatera m o unt o f 5,000 per m o nth a t10% w he n he is 35, it w ill

a cc um ula te o nly 62,15,798w hen he is 60. A d ifference o fover 40,00,000!

Your children have time ontheir side , so enco ura g e themto start investing as soon aspossible and benefit from theeig hth w o nde r ca lled 'po w er o fcompounding'.

A m utual fund S IP (sy stem a ticinvestment plan) is the bestw a y to beg in. The trick is toau tomate SIP inves tments .With this, o n a de sig na ted d a yof the month, the money getsinvested a utom a tica lly.

A public provident fund (PPF)or a bank recurring deposit

`

`

`

`

`

(RD) is a lso a g rea t sta rt. At thesame time, investments intoequity are most suitable as

they have long investmentho rizon. Enco ura g e them to fixa c erta in sum that they sho uldsave every month before theystart to spend .

Yo u n g i n d i v i d u a l s a r eg ene rally hes itan t to s ta rt theirinvestment journey, especiallyw hen it com es to inves ting intoeq uity. The rea so ns a re ma ny.Whether i t i s no t hav inge n o u g h t i m e a n d m o n e y,

thinking stock market is toocom plex a nd technica l, yo ungind ividua ls a re q uick to g ive upbe fo re they even s tart.

There is no deny ing tha t eq uitya s a n as se t cla ss is risky, and sois to a vo id ing it. This is b ec a useif a po rtfolio la cks investm entsthat carry higher potentialreturn, such as equity, it maynot achieve sufficient growthto fund crucial long termf i n a n c i a l g o a l s s u c h a sretirem en t. This, y o u a s ap a r e n t , m a y h a v e a l r e a d yrealized that skipping growtha sse ts such as eq uity can hurto ne's lo ng -term fina ncia l g o a ls.

The potential of equity


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November 2014

It is a w ell es tab lished fac t thateq uity o ffers the b es t returns inthe long run as compared to

o ther as se t cla ss es . S &P BS ESensex , fo r i n s t ance , hasdelivered 17% compoundeda nnua l g row th rate (CAG R) inthe last 35 years. Whereasfixed deposits and gold havereturned only 8.7% and 9.1%,respectively, during the sameperiod.

Apart from strong long-termreturns, equity also providesb e t t e r i n f l a t i o n - a d j u s t e dreturns (also known as real

returns) as compared to fixedinco m e instrume nts. G o ne arethe days when one could get12-15% interest on traditionalins trum en ts. To da y, in o rder tomeet goals and create wealthin the long run, investments

must deliver higher returnsthan the rate of inflation. Else,inflation will eat into returnsa n d m a y n o t h e l p b u i l dsufficient corpus for meetingfinancial goals. And equity isperhaps the only such option

tha t de livers b etter return o verinflation.

Further, equity is also a taxe ff i c i en t i nves tmen t . L ike

infla tio n, ta xes a lso reduce thene t ra te o f return. As long -termca pital g a ins (> 1 ye a r) fro m

e q u i t y a r e t a x - f r e e , t h e yp r o v i d e b e t t e r t a x -a d justed returns. Dividend s a realso tax-free in the hands ofinvestors.

Yo u s h o u l d t h e r e f o r eencourage your children tot a k e s o m e r i s k a n d s t a r tinvesting in equity, to createw ea lth in the lo ng run. Risk isa n integ ra l pa rt, and the lo ng erthe time frame is, more riskthey can ta ke. Don't a lw a ys let

your persona l exper iencesc o m p l e t e l y m a s k w h a t i soptimum risk they can takew ith their investm ents .

G i v e n t h e l e s s e rresponsibili t ies and greaterca pa city to take risks a t yo unga g e is the perfect tim e for yo urchildren to take the plunge inequity.

In the teaching process, it isalso important to make ourc h i l d r e n u n d e r s t a n d t h a tequity may turn volatile in theshort term, but it provides thebest returns in the long run(se e the cha rt below ).


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November 2014

How S IP o f Rs. 5,000 p.m. ha s g row n s ince April 1, 1979

8,28,07,659

61,61,327

1,38,98,506

0

1,00,00,000

2,00,00,000

3,00,00,000

4,00,00,000

5,00,00,000

6,00,00,000

7,00,00,000

8,00,00,000

9,00,00,000

Equity G old RD

This is the w ho le rea so n to takethe e ffo rt o f inve sting in eq uity.

Great investing requires time,d isc ipline, a nd pa tienc e.

As pa rents , you m ay have ha dg oo d or ba d experiences fromi n v e s t i n g i n t h e e q u i t y .However, it is important tomake our children learn noto nly thro ug h o ur experience s,but a lso w ha t is rig ht fo r them .Eq uity rema ins the be st o ptio nfo r young sters to a chieve theirlo ng-term g o a ls.

Apart f rom investing, there are alsoother areas of personal finance,w hich should be taught to children,such as managing debt carefully,gett ing an insurance, etc. Let's takea look:

In theManaging debt carefully:

current era of flourishing ecommerce, i t is very easy and

tempting for yo ungs ters to usecredit cards and loans foreverything that they need andwant. However, it is importantto make them understand thed i f f e r e n c e b e t w e e nd i s c r e t io n a r y a n d n o n -discretionary expenses. Fore x a m p l e , e n t e r t a i n m e n texpenses are discret ionary,w hile pa ying the ren t or utilityb ill is no n-d iscre tio na ry.

This is no t to sa y ch ild rensho uldn't spend a ny m oney ond i s c r e t io n a r y e x p e n s e s .However, there should be abalance between saving ands p e n d i n g . A s p a r e n t s , w esho uld m a ke o ur child ren lea rnt h e f i n e a r t o f d e l a y e d


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November 2014

g ratifica tio n, a n a b ility to res is tt h e t e m p t a t i o n f o rd i s c r e t i o n a r y s p e n d i n g i n

o rde r to receive a m uch la rg errew a rd la ter.

In order to help our childrenspend carefully and managede bt d ilig ently, w e nee d to a lsomake them understand thedifference betw een g oo d deb t

and bad deb t.Rationa lly, a g oo d deb t can b ereferred to a loan, where theexpec ted r e tu rn f rom thea ss et/purpo se is m o re than theinterest c o st o f the lo a n. Themost common example of a

good debt is home loan. Baddeb t, on the other hand , can bereferred to a s bo rrow ing for a na ss et w hich d eprecia tes o r fallin value over a period of timeor ma y no t have a n underlyingvalue.

As ho m e loa n is a part of go oddeb t, w e m ay g et our childrentake this loan, as this will notonly help them build an assetearly on, but will also helpthem increase their savings inthe proces s. This is b eca usethere a re tax b enefits a va ila blefor hom e lo a n. First, there is atax d ed uctio n a va ila ble o f up toRs. 1.50 lakh under Section80C fo r princ ipa l repa ym ent of

a self-occupied property andse co nd , under sec tio n 24, up to

2 la kh fo r inte res t pa id . And in

ca se o f a let-o ut pro perty (no t ase lf-o ccupied o ne), o ne g ets atax deduction for the entireinterest pa id .

With these tax benefits, thecost of home loan actuallycomes down.

Supposeyo ur child ta kes a ho m e lo a n of50 la kh a t 10% pe r annum . If hefalls under the highest taxbracket of 30%, the effectivelo a n rate w o uld o nly b e 7.90%(for a self-occupied property),a nd 7% (for a let o ut prope rty),ins tea d o f 10%.

This m a kes the ca se o f buyinga ho m e e a rly o n in their ca ree r.However, it is important tok e e p e q u a t e d m o n t h l yinstallment (EMI) outgo notm o re than 40% o f mo nthly ne tincome.

In ca se o f cred it ca rd deb t, it isimportant to get our childrenclear all the outstanding dueson or before the due date. Ifone fa ils to do so , a ve ry hig hrate of interest is charged,which is anywhere between30% to 45% p.a. Plus, thepenalty is charged for latepayment.

`

Let's understand

this w ith an example:


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November 2014

We should help our childrendevelop a proper plan to payoff debt in a systematic way,

fro m hig hes t interes t ra te lo a ns(e.g. personal loan) to thelo w es t (e.g . hom e lo a n).

Tho ug h y o ur child m a y a lrea dybe provided with a healthcover by his employer, it is

i m p o r t a n t t o m a k e h i munderstand the essentials ofg etting a s epa ra te cover w hatif one loses a job or switch toano ther com pany o r the coverits elf is insufficient?

A ba sic pla n, w hich reim burses

h o s p i t a l i s a t i o n e x p e n s e s ,should be your child's firsthea lth ins urance po licy. Thecover can be enhanced bytaking riders such as criticalillness co ver, etc .

The re a re a lso ta x-benefits

available for premium paidt o w a r d s h e a l t h i n s u r a n c e ,und er sectio n 80D.

Get t ing a hea l th insu rance :

Did yo u kno w ? Yo ur 25-ye a ro ld child ca n buy 5 la kh w o rthof coverage for an annualp remium of ju s t abou t

4,000*.* p r e m i u m m e n t i o n e d i sind ica tive in na ture

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`

Getting a personal accident cover: Th is is a n o t h e r t y p e o f

insu rance p l an youngs te r smus t op t fo r. A persona la ccide nt cove r takes c a re o f the

e x p e n s e s i f o n e g e t spermanently or temporarilydisa bled follo w ing a n acc ide nt.

Did yo u know ? One can get aco ver o f 25 la kh for a n a nnua lp remium of ju s t abou t3,000*.* p r e m i u m m e n t i o n e d i sind ica tive in na ture

Te a c h i n g s o u n d f in a n c i a lhabits to children at an earlya g e g ives them the oppo rtunityto be fina ncia lly hea lthy in thelong run. Remember, even forWa rren Buffett, one o f the m o stfamous bi l l ionaires in thew o rld, the g rea test inspira tio nwas his father. He was myhero w hen I w a s 6 and he is s tillm y h e r o n o w. H e i s a ninsp iratio n to m e in eve ry w a y.Wha t I lea rned a t an ea rly a g efrom him w a s to have the rig hthabits early. Savings was animportant lesson he taught,says Buffett as quoted in themedia . S o pa rents , be a g oo dfinancial role model for yourch ild ren! The ea rlier y o urchildren start investing, themore secure their financialfuture w o uld b e.

``

Summing up

Pleas e s end your feedba ck to m oneym ana ger@ icicisecurit ies.com


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Asset allocation offers the best opportunity to balance risk & rew ard

M arket is t rading at 12-month forw ard PE (price-to-earnings) of 16x versushistorical average of 15.6x . On this multiple, markets may seem expensive, says

Tushar Pradhan, Chief Investment Off icer (CIO), HSBC M utual Fund. How ever, thismultiple is placed favourably w ith it s history of positioning at t he beginning of thegrow th up-cycle, he adds. He suggests investors to continue to follow adisciplined approach to investing and believes that asset allocation off ers the bestopportunity t o balance risk and rew ard. Excerpts:

Tushar Pradhan,

Chief Investment Officer (CIO),

HSBC M utual Fund

Tte--tte

Q:

A:

How is the current economicsituation, on both global anddomestic fronts, looking like?

On the domestic front,reform momentum is quitestrong even though there m ayn o t h a v e b e e n b i g - b a n g

a nnouncem ents. Key co ntoursof the reforms are change ing o v e r n a n c e s t r u c t u r e ,administrat ive reforms, taxreforms, realignment of

s u b s i d i e s , a n d b o o s t t oinfra structure spend ing .

The Prime Minister's officeseem s to be the sing le d ecisionm a k i n g b o d y a n dco nseq uently, d ecisio n m a kingi s f a s t e r . A d m i n i s t r a t i v ereforms like consolidation ofm i n i s t e r s , e m p o w e r i n g o fburea ucra cy, a nd tra nspa rencyin governance (e.g. putting upc l e a r a n c e s l i ke F o r e s t ,Enviro nm ent, a nd Mining o n ad i g i t a l p l a t f o r m ) f i s c a lconsolidation, realignment ofsubsidies and streamlining ofsocial spending will releasecapital, which could be usedf o r l i f t i n g i n f r a s t r u c t u r espends.

On the economic front, themacro indicators are moreh e a r t e n in g . Tw in d e f ic i t s(Current Account and FiscalDef ic i t ) are no longer anoverhang, currency is stable,i n f l a t i o n s e e m s t o h a v ep e a k e d , a n d t h e r e i s areasonable expectation of a

November 2014


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Tte--tte

November 2014

possible lower trajectory ini n t e r e s t r a t e s . F i s c a lconsolidation is happening.

Tr a j e c t o r y o f f i s c a lconsolidation is steep but canbe achieved as growthaccelerates and tax reformsg et im plem ented . All the m a jo rd rive rs o f infla tio n - foo d , fuel,f i s c a l , c u r r e n c y , a n dcommodi ty - a re po in t ingdo w nw ards. Crude prices ha vefallen over 35% from theirnear-term peak. Commodityprices have declined rapidlyover the last 3 months. Netc o m m o d i t y t r a d e d e f i c i tpeaked at about 7% of grossdomestic product (GDP) in2012. It had fallen to 5.5% ofGDP in the 12 months endingAugust 2014. At the currentcommodity price levels, netdeficit from commodity couldfall by a no ther 1%.

O n t h e g l o b a l f r o n t , t h eeconomic situation is mixed.US is g row ing and a ccelera tingbut there has been a s low do w nin the European Union (EU)a nd J a pa n. Over 2015, it isexpected that EU and Japanwill have a loose monetary

policy but the US and the UKare likely to t ighten theirm o neta ry po licies.

What is your outlook for theQ:

m a r k e t s g o i n g a h e a d ? D ovaluations look expensive?

Market is trading at 12month forward PE (price-toe a r n i n g s ) o f 1 6 x v e r s u shisto rica l a vera g e o f 15.6x. Onthis multiple, markets maysee m expens ive. How ever, thismultiple is placed favourablyw ith its histo ry o f pos itio ning a tthe beginning of the growthup-cy cle. We s ho uld a lso no tetha t this hea d line m ultiple is o nba ck o f three ye a rs o fdece le ra t ing economy andfalling margins. As growthc o m e s b a c k a n d m a r g i n sincrea se , 2-ye a r fo rw a rd

multiples could shrink to 13x.Forthcoming rate cuts, too,s h o u l d f e e d i n t o e q u i t yva lua tio ns. As o f no w, m a rketsm a y perceptibly se em slig htlyexpensive but can besupported due to earningsacceleration and rate cuts. Weexpe ct ma rket returns to follo wtra jecto ry o f ea rning s g ro w th.

W hat are the immediate risks tothe markets?

G eo -po litics co ntinues to b ethe biggest risk not only forIndia but for markets globally.On the d o m estic fro nt, a de la yin rate cutting cyc le a nd de la yin imp lemen ta t ion o f keyreforms could also act as a

A:

Q:

A:


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Tte--tte

November 2014

have erased three years ofunderperformance vis--vislarge caps. At the current

valuation levels, small andmid-caps are a l igned wi thaverage historical discount tola rg e-ca ps o n a 2-ye a r forw a rdea rning s b a sis.

In terms of sectors, w here doyou see the opportunities for

investors in the current scenario? We remain constructive onF i n a n c i a l s , C o n s u m e rDisc retio na ry, Tec hno lo g y a ndMaterials.

What is your stock-pickingstrategy?

We have a snapshot ofInd ian sec to r s and s tocksviewed through valuation andp r o f i t a b i l i t y m e t r ic s i sg enerated and checked a g a instin-house estimates. Further,f u n d a m e n t a l b o t t o m -u panalysis is carried out on thestocks that seem attractive.The g o a l o f stoc k a na lys is is toestablish a company's currentlevel of profitability and tou n d e r s t a n d w h e t h e r i t i ssustainable over the mediumterm . The a na lys is w ill result in

a d e c i s i o n t o i n c l u d e o rexc lude each of the h ighr a n k i n g s t o c k s , a n d w i l lcontinue until the portfoliom a n a g e r s h a v e s u f f i c i e n t

Q:

A:

Q:

A:

dampener.

How do you see the markets andcurrency reacting to the expectedFed action (hike in interest rates) in2015?

It is w idely e xpec ted tha t theUS Fed w ill hike interes t rate ssometime in 2015. When theevent actually happens, it isbo und to ha ve som e impa ct on

the currency markets, fixedincome markets and equitymarkets across the world .Ho w eve r, in a nticipa tio n o f tha teventuality and having learntfrom past experiences, Indiahas been fortifying itself. Overthe last 15 months, India'sf o r e i g n e x c h a n g e ( f o r e x )reserves have gone up from$275 b illio n to $315 b illio n, theforward premium has comedown, and the currency hass t a b i l i z e d . S o , w e e x p e c tadverse reaction to currency

and markets but the impactwould be minimised due tomitigating efforts undertakenby the Reserve Bank of India(RBI).

The small and mid-cap space hasseen sharp gains in the recent past.Is the space still att ract ive?

Over the la st y ea r, the s m a lla n d m i d - c o m p a n i e s h a v eincreased more than thei rla rg e ca p peers a nd therefore

Q:

A:

Q:

A:


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Tte--tte

November 2014

d i s c i p l i n e d a p p r o a c h t oinvesting. We have been andco ntinue to b e o f the view that

i n v e s t o r s s h o u l d m a keallocations in keeping witht h e i r r i s k a p p e t i t e a n dinvestment horizon. We alsobelieve that asset allocationoffers the best opportunity toba la nce risk a nd rew a rd.

individual stock ideas to beable to construct a suitablyd ive rsified po rtfolio .

W hat strategy w ould yousuggest for investors to adopt atthis point of time in the market?W hat according to you is the key tosuccessful investing?

We w o uld s ug g es t inves torst o c o n t i n u e t o f o l l o w a

Q:

A:

The views expressed in the interview are personal views of the authors and do nnecessarily represent the view s of ICICI Securities.

Mutual fund investments are subject to market risks, read all schemerela ted d ocum ents ca refully.

The article is for gene ra l inform a tion on ly a nd do es no t ha ve reg a rd tospe cific inves tme nt ob jectives , fina ncia l situa tion and the pa rticula rneeds of any specific person who may receive this information.Investors should understand that statements made herein regardingfuture prospects ma y no t be rea lise d . The view s express ed in the a rticleare personal views of the author and do not necessarily reflect theview s o f HS BC Ass et Mana g em ent (Ind ia ) Priva te Lim ited o r any o f itsa ss ocia tes. Neither this d ocum ent no r the units o f HS BC Mutua l Fundha ve b ee n reg is tered in a ny jurisd iction. The d istribution o f thisdo cum ent in certa in jurisd ictions m a y be restricted or tota llyprohibited a nd a cco rdingly, perso ns w ho co m e into pos ses sion o f this

do cument are req uired to inform thems elves ab out, and to ob serve,a ny such restrictions .

No part of this publication may be reproduced, stored in a retrievalsys tem, or tra nsm itted, on any form or by any me ans , electronic,m echa nica l, photo co pying, reco rding, or o therw ise , w ithout the priorw ritten perm iss ion o f HS BC Ass et Mana g em ent (Ind ia ) Priva te Lim ited .HSBC Asset Ma na g em ent (Ind ia ) Priva te Lim ited ; 16, V. N. Roa d , Fort,Mum ba i 400 001. Tel: 6614 5000.

Ema il: hsbcm f@ hsbc.co .in.


33/58


ASK OUR PLANNER

Claiming RGESS tax benefits

Q:

A:

I had invested Rs.50,000 undersection 80 CCG (RGESS) forfinancial year 2013-14. Am I eligibleto invest 50,000 each for tw omore years and claim deduction?

- Satish G

The Rajiv G a nd hi Eq uity

Savings Scheme (RGESS) taxbenefits can be availed forthree consecutive f inancialyea r s , beg inn ing wi th thefinancial year in which theinvestment unde r the s chem ewas made for the first time.Hence, you are eligible toinves t and c l a im bene f i t sduring FYs 2014-15 and 2015-16.

The d epo s ito ry w o u ld b eautomatically locking-in all theeligible securities whichcomes into an RGESSd e s i g n a t e d d e m a t a c c o u n tduring the relevant financialye a r up to a va lue o f Rs. 50,000.

However, if you wish not to

claim tax benefi t fori n v e s t m e n t s m a d e i n a n yparticular financial year withinthe a l lowable 3-year t ime

`

perio d, yo u need to s ubm it the

g e n e r a l a p p l i c a t i o n a sspecified by depositories,before April 15th of the nextfina nc ia l yea r.

Also , yo u have the freed om toselect the stocks to be kept

under lo ck-in up to 50,000 fo rc l a i m i n g b e n e f i t s u n d e rRGESS. Since the depositoryw o u l d b e a u t o m a t ic a l lylocking- in a l l the e l ig iblese curities , yo u have to intim a tethe depos i to ry pa r t i c ipan tthrough Form B within onem o n t h f r o m t h e d a t e o ft r a n s a c t i o n , a b o u t t h o s einvestments w hich yo u do no tw ant to keep a s pa rt of RG ES Sinvestment in that year, such

that y o u ha ve the rig ht to s ell /pledge those securities at anytime.

Once an application is madethro ug h Fo rm B, tha t pa rticula rsecurity cannot be broughtb a c k u n d e r R G E S S w h i l ecla im ing for tax b ene fit.

I am a defence pensioner (youraccount holder). 15 lakh w ill bematuring in tw o months from one of

`

`Q:

November 2014


34/58


ASK OUR PLANNER

my existing investments. I w ant toinvest the amount in a reliablescheme/mutual fund (M F) w hichgives monthly/quarterly return likedebt / monthly income plan (MIP).Kindly advise.

- Col. Kaushal Chaturvedi If yo u a re lo o king a t reg ula r

income immediately from the

entire amount, then you canc o n s i d e r i n v e s t i n g i n t o aco m bina tio n o f Fixed Depo sits(FDs), Senior Citizen SavingsScheme (SCSS) and MonthlyIncome Plans (MIPs) wi thd i v i d e n d p a y o u t o p t i o n .Ho w ever, there's no a ss ura nceon the f requency and thea m o unt of payo ut in MIPs .

The interest e a rned fro m Fdsand S CSS w ill be a dd ed to yo urincome and taxed as per theincome slab. However, in anMIP, the dividend paid to youwi l l be a f t e r deduc t ing aDiv id e nd Dis t r ib u t ion Ta x(w hich is pa id b y the s che m e),w hich currently s tand s a t a fla t

2 8 . 3 2 5 % (2 5 % + 1 0 %S urcharg e + 3% cess).

Alternatively, you can investpa rt of the a m o unt into FDs a nd

A:

S CS S and the balance am ountinto MIPs w ith a g ro w th optio n.In such a sce na rio , yo u w ill begene ra t ing r egu la r i ncomeimmediately only from FDs &SCSS. For investment intoMIPs, y o u ca n w a it fo r 3 ye a rsa n d t h e n y o u m a y s t a r twithdrawing a fixed amount

e v e r y m o n t h t h r o u g hSystematic Withdrawal Plan(S WP).

This a rra ng em ent w ill be m o retax efficient, as you will bepaying tax only on capitalgains, which is currently 20%after indexation. Indexationwill bring down the taxablecapital gains to a much lowerlevel and the effective taxo utgo ca n be les s tha n 10%.

Ho w eve r, yo ur corpus w ill kee p

coming down in an SWP andbeyond a point of time it willexhaust.

Fo r kn o w i n g o u rrecommended mutual funds,plea se refer o ur MF To p P icks

in this edition or visit ourwebsi te www.icicidirect.com.

November 2014


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ASK OUR PLANNER

November 2014

Q: I am 30 years old. Could you please assess and tell me about investmentin mutual funds (M Fs) vs. public provident fund (PPF) over 15 years period?

- Pavithra GayathriA: The ta ble b elo w o utlines the b a sic d ifference be tw een PP F &eq uity MFs:

Feature s PPF EquityM Fs

Tenure Fixed Term -15 years; Lock-infor 5 years

No fixed term or lock-in(except Equity Linked

Sa vings S chemes(ELLS ), w here there is 3-

year lock-in

Asset Cla ss Debt Eq uity

Return Fixed return as d ecided b y theGo vernment of India every yea r No fixed return

Ta x bene fit on principa l

As pe r current ta x la w s, Rs.1.50 lakh p.a. exem pt under sec tion

80C

No exemption (exceptELS S funds, w hereinvestme nt up to

Rs.1.50 la kh p.a . isexem pt under section

80C, currently)

Ta x on return Exempt from ta xExempt from tax, if heldfor 12 months o r more

Capital protection Guaranteed by the Governmento f Ind ia No gua rantee

Comparing PPF with EquityMFs may not be correct, asboth these instruments fallunder different asset classes,debt and equity, respectively.Both have their own pros &cons.

If you had invested Rs. 10,000into PPF &S ens ex in April 1988,PPF would have fetched you

Rs. 1,08,911 at the end of 15years, whereas Sensex wouldha ve fetched yo u 4,73,241.

L o o k i n g a t t h e p a s t

`

performance of PPF &Sensexfo r 23 yea rs (from April 1980 toMarch 2013), PPF ha s g iven a nannualized return of 9.68%,while Sensex has given ana nnua lized return o f 15.27%.

Q: I have three mutual fund

schemes through SIP (systematic

investment plan) by monthly

installment of 1,000 each for theperiod of 60 months. These are:

1. Reliance small cap fund (G)2. Fr a n k l i n I n d i a s m a l l e r

`


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ASK OUR PLANNER

November 2014

companies fund (G)3. Birla sun life top 100 fund (G)

A l l s c h e m e s t a k e n t h r o u g h

online mode.

I have some doubts about mutual

funds (MFs) as I am a new investor.

1. Can I increase my monthly

installment in the existence

scheme?2. If no, then, if again I am

investing the same scheme by

new fo l io then w hat w i l l

happen? Is it t he right decision?

3. Can I increase my installment

months i.e 60 months to 120

months or more later?

4. Can I w i thdraw w i th my

scheme any time?

5. Can I get only one Folio for all

schemes? If yes then w h a t i sthe benefit of this?

- Aqeeq Akhter

The ins tallm ent a m o unt a s

well as the investment period

can be changed by modifying

the SIP from the 'Modify SIP'

link in the SIP book, provided

www.icicidirect.com,

A:

t he S IP has comple t ed 6

months.

Yo u h a v e t h e c o m p l e t e

freedom of withdrawing the

schem e a t any tim e. How ever,

SIPs in mutua l funds a re

beneficial if held and run for

lo ng er perio d.

You can have the single foliofor all schemes of on Fund

house. You cannot hold funds

from different fund houses in

one folio. However, since you

hold the investments through

ICICId irect.co m , it g ives yo u a ll

the benefits of holding

investments in one account.

Th e b e n e f i t s b e i n g

c o n s o l i d a t e d a c c o u n t

s t a t e m e n t , c o n s o l i d a t e dportfolio, consolidate capital

g a in statem ent, etc.

Do you also have similar queries to

ask our experts? Write to us at:

moneymanager@ icicisecurities.com.


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35

M UTUAL FUND ANALYSIS

ICICIdirect M oney Manager September 2014

Category: Diversified Equity Funds

Key Informat ion:

Fund Objective:To g en era te lo ng -term c a pita lappreciation from a portfolio ofe q u it y a n d e q u it y r e l a t e dsec urities , g enerally foc used on afew selected sec tors.

Product Label:This prod uct is s uita b le fo r inve sto rsseeking*:

long term ca pital grow th I n v e s t m e n t i n p o r t f o l i o o f

p redom inan tly eq u ity & eq u ityr e l a t e d s e c u r i t i e s g e n e r a l l yfocussed on a few selected sectors

Hig h risk

Fund M anager : Harsha UpadhyayaHarsha Upadhyaya heads theequity management team atK o t a k A s s e t M a n a g e m e n t

Kotak Select Focus

NAV a s o n Novem ber 28, 2014 ( ) 22.2

Inception Da te S eptem ber 11, 2009

Fund Ma na g er Ha rsha Upa d hya ya

Minimum Investme nt ( ` )

Lum psum 5000

S IP 1000

Expense Ra tio (%) 2.23

Exit Lo a d 1% o n o r b efo re 1Y,

Nil after 1Y

Benchma rk CNX 200

La st d ecla red Qua rte rly AAUM(| cr) 1220

`

Company (AMC). He has 18

ye a rs o f rich experience sprea dove r eq uity resea rch a nd fundmanagement. His prior stintshave been with companiessuch a s DS P Bla ckRo ck, UTIAsset Management, RelianceG ro up and S G Asia S ecurities .H a r s h a i s a B a c h e l o r o fEng ineering (Mecha nica l) fro mN a t i o n a l I n s t i t u t e o fTec hno lo g y, S uratka l, a PostG r a d u a t e i n M a n a g e m e n t(Finance) from Indian Institute

o f Mana g em ent (IIM), Luckno wand a Char te red F inanc ia lAna lys t fro m the CFA Ins titute.

The fund pe rforma nce h a spicked up a fter Mr Upad hya ya

joined Kotak AMC and startedmanaging the fund. In the lasts ix months , the fund hasdelivered 31% return almostd o u b l e ( 1 . 7 x ) t h a t o f i t sbenchmark CNX 200 return of17.8%. In the la s t ye a r, the fundh a s o u t p e r f o r m e d i t sbenchmark by a whopping 20percentag e points.

Performance:


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36



Performance vs. Benchmark

F und B ench m ark

30-Sep-13 30-Sep-1230-Sep-13 30-Sep-12 30-Sep-1130-Sep-14

Last Three Years Performance

Fund Name

2013 2012 2011 2010 2009Calendar Year-w ise Performance

`DateFund 19809

Benchm a rk 16219

CNX Nifty 16489* As on Sep 30, 2014

Note: Investors should note that past performance may ormay not be repeated in future

3 1

6 3

. 3

2 9

. 1

1 6

. 3

1 7

. 8

4 4

. 6

2 1

. 5

1 1

0

10

20

30

40

50

60

70

6 Month 1 Yea r 3 Yea r 5 Yea r

R e t u r n %

NAV a s on Dec 31 ( ) 14.1 13.3 9.9 12.8 10.6

Return (%) 6.1 33.5 -22.3 20.1 6.4

Benchm a rk (%) 4.4 31.6 -27.0 14.2 86.6

Net Asse ts ( ` Cr) 325 368 359 122

`

Fund 58.04 1.66 16.40

CNX200 42.81 -1.26 14.04

CNX Nifty Index 38.87 0.56 15.38

Current Value of Standard Investment of ` 10000 in the

Portfolio:The fund ha s 90% la rge-ca p

stocks in the portfolio with allhe a vy w eights like ICICI Ba nka nd S ta te Ba nk o f Ind ia (S BI) in

the banking sector, Infosys inthe informa tio n tec hno lo g y (IT)spa ce a nd Ta ta Moto rs &Maruti

Suzuki in the auto sector. Thefund m a nag er has bee n b ullisho n p r i v a t e b a n k s , w h i c hconstitute about 19% of thet o t a l a s s e t s u n d e rmanagement (AUM). Amonge x p o r t d r i v e n c o m p a n i e s ,

exposure to pharmaceuticalcom panies has g ra dua lly bee nreduced while exposure tot echno logy compan ies hasbee n m a inta ined a t 13% o f theportfolio.

The top 3 sec tors (b a nks,automotive and technology)cumulatively account for 60%o f the po rtfolio , w hich is in linewith its objective of beingfocused on a few selectedsectors. Overall, the fund iss u i t a b l e f o r l o n g t e r m

h o ld i n g /S IP ( s y s t e m a t icinvestm ent pla n).

Top 10 Holdings Asset Type %

ICICI Ba nk Ltd . Dom estic Eq uities 6.3

Infosys Ltd . Dom estic Eq uities 5.3

Tech Ma hindra Ltd . Dom estic Eq uities 5.2

S ta te Ba nk Of Ind ia Dom estic Eq uities 4.4Ta ta Motors Ltd . Dom estic Eq uities 3.5

HDFC Ba nk Ltd . Dom estic Eq uities 3.4

Axis Ba nk Ltd . Dom estic Eq uities 3.2

Reverse Repo Ca sh &Ca sh Eq uiva lents 3.2

Ultra tech Cem ent Ltd . Dom estic Eq uities 3.1

Ma ruti S uzuki Ind ia Ltd . Dom estic Eq uities 3.0


39/58

37



*Investors should co nsult their financial ad visers if in doubt a bout w hether the product is suitable for them.

(Blue) Investors understand that

their principal will be at low risk

(Yellow) Investors understand that

their principal will be at meduim risk

(Brown) Investors understand

that their principal will be at high

risk

Top 10 Sector Asset Type %

M arket Capitalisation (%)La rg e 90

Mid 8.5

S m a ll --

Portfolio AttributesTota l S tocks 52.0Top 10 Hold ing s (%) 40.6Fund P /E Ra tio 23.7Benchm a rk P /E Ra tio Fund P /BV Ra tio 4.6

Asset AllocationEq uity 98.6

Deb t 0.0

Ca sh 1.4

Dividend History

S ep-29-2014 10

Oct-18-2010 12.5

Date Dividend (%)

Performance of all the schemes managed by the fund manager

Fund Name 30-Sep-1330- -14Sep

30- -12Sep30- -13Sep

31- -11Sep31- -12Sep

Data and Portfolio Details as on November 28, 2014 Source: ICICIdirect.com Research, Accord Fintech

Ba nk - Priva te Dom estic Eq uities 19.0

IT - S oftw a re Dom estic Eq uities 13.5

Cem ent &Cons truction Ma teria ls Dom estic Eq uities 7.6

Refineries Dom estic Eq uities 7.4

Ba nk - Pub lic Dom estic Eq uities 5.7

Auto Ancilla ry Dom estic Eq uities 4.8

Industria l G a ses &Fuels Dom estic Eq uities 3.9

Autom obiles -Trucks /Lcv Dom estic Eq uities 3.5

P ha rm a ceutica ls &Drug s Dom estic Eq uities 3.4

Autom obiles - Pa sseng er Ca rs Dom estic Eq uities 3.0

Kota k S elect Focus Fund (G ) 58.0

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