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Mutual FundReview
October 20 2009 | Mutual Fund October 20 2009 | Mutual Fund October 20 2009 | Mutual Fund
November 19, 2009 | Mutual Fund Mutual Fund Review
January 22, 2016
ICICI Securities Ltd. | Retail MF Research
Note: Whenever, returns for the scheme are shown in the report, they are for the growth option of the scheme.
Mutual Fund Review
Equity Markets ....................................................................................... 2 Debt Markets.......................................................................................... 2 MF industry synopsis ............................................................................ 3 MF Category Analysis............................................................................ 5 Equity funds......................................................................................... 5 Equity diversified funds....................................................................... 6 Equity Infrastructure fund.................................................................... 7 Equity Banking Funds.......................................................................... 8 Equity FMCG........................................................................................ 8 Equity Pharma Funds .......................................................................... 9 Equity Technology Funds.................................................................... 9
Exchange Traded Funds (ETF) ....................................................... 10
Balanced funds ............................................................................... 11
Monthly Income Plans (MIP) .......................................................... 11
Arbitrage Funds .............................................................................. 12
Debt funds ...................................................................................... 13 Liquid Funds ...................................................................................... 14 Income funds..................................................................................... 15 Gilt Funds ........................................................................................ 16 Gold ETFs: Medium term outlook benign......................................... 18 Model Portfolios .................................................................................. 20
Equity funds model portfolio.......................................................... 20 Debt funds model portfolio ............................................................ 21
Top Picks.............................................................................................. 22
January 22, 2016
ICICI Securities Ltd. | Retail MF Research
Page 2
Equity Markets Update
Indian equity markets have started 2016 on a weak note on the back of extremely fragile global capital markets. Domestic markets have been on a declining trend since March 2015 and have fallen back to pre general election results levels of May 2014
From the all-time high levels in March 2015, the BSE Sensex, Nifty 50 is down around 20%. Many bluechip stocks have corrected far higher than headline indices and are trading near 52 week low levels
Global markets have been under severe pressure particularly since the start of the new year on concerns over a slowdown in China, sharp volatility in the global currency market and concerns over the negative impact of a sharp fall in crude oil prices
While the steady decline in commodity prices would have been positive Indian market, the relentless fall, particularly in crude oil prices, has put pressure on crude producing countries and oil related companies globally leading to money shifting out of these segments and finding way to safe havens
The recent correction has seen two interesting trends. FIIs have been large sellers on account of the flight of capital from emerging markets. However, this selling has been absorbed by strong buying on part of DIIs. Outperformance across broader markets is explained by this strong buying trend of DIIs while FII holding remains high in large caps
Mutual funds invested a record | 67000 crore in CY15 in Indian equity markets on the back of record inflows into equity schemes
Outlook
The recent correction in the last 10 months since March 2015 needs to be looked at in conjunction with the significant market rally in the preceding 18 months from September 2013 to February 2015 wherein headline benchmark indices rallied around 70%
The government has initiated a number of structural policy reforms like power reforms, road sector reforms, implementation of DBT in centrally funded welfare schemes, increasing FDI in many sectors, thrust on manufacturing in sectors like defence, focus on ease of doing business, taxation reforms, etc. The GST bill proposed to be discussed in Rajya Sabha is a crucial development, which investors will be watching. Any positive development on this front will boost investor sentiments
Structurally, the outlook for Indian equity markets remains good on the back of a steep correction in commodities, especially crude oil & industrial metals, 125 bps repo rate cut and subsequent transmission of the same to corporate balance sheets along with relatively stable exchange rates
Any intermediate throwbacks from here on should be utilised to buy in a staggered manner from a medium-term perspective to ride the next larger uptrend
Investors with a long term horizon should start accumulating from current levels and look for portfolio construction rather than opportunistic bottom fishing
CNX Nifty: On downward trend since March 2015
6500
7000
7500
8000
8500
9000
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Jan-
16
Source: Bloomberg, ICICIdirect.com Research
Mid & small cap outperform …
6.1
10.0
-0.8
-3.2
-5.0-7.0
-4.5-2.00.53.05.58.0
10.5
BSEMidcap
BSESmallCap
BSE 500 BSE 100 BSESensex
Retu
rn (%
)
Source: Bloomberg, ICICIdirect.com Research Returns : December 31, 2014– December 31, 2015
Consumer Durable & pharma sectors outperform…
24.0
15.3
4.3
2.2
-0.6
-3.4
-5.0
-8.5
-9.9
-13.
6-1
7.2
-31.
2
-35-25-15-55
1525
Con.
Dura
Heal
thca
re IT
FMCG
Auto
Oil &
Gas
Sens
ex
Cap.
Good
s
Bank
ing
Real
ity
PSU
Met
al
Retu
rn (%
)
Source: Bloomberg, ICICIdirect.com Research Returns : December 31, 2014– December 31, 2015
Research Analyst
Sachin Jain [email protected]
Isha Bansal [email protected]
ICICI Securities Ltd. | Retail MF Research
Page 3
Debt Markets Update
The year 2016 started on a steady and cautious approach for fixed income markets. Yields remain steady with long term G-Sec yields remain at elevated levels
The returns of debt funds were subdued during 2015, especially in longer duration funds. Market expectations were, however, quite high as longer duration yields were expected to fall around 75-100 bps on the back of positive macroeconomic data and a 125bps rate cut by the Reserve Bank of India. However, G-Secs as well as corporate bond yields remained sticky and traded in a narrow band
Concerns on the start of monetary tightening by the US Federal reserve, impact on fiscal deficit due to announcement of the Seventh Pay Commission and reduced participation from banks due to asset quality concerns prevented yields from falling in a structural manner
Indian benchmark 10 year G-Sec yields again rose to 7.7% from 7.55%, levels before the latest rate cut of 50 bps by the RBI. The benchmark US 10 year G-Sec yield also witnessed upward pressure and is trading at around 2.30% currently
Foreign portfolio investors, after having put in US$12.3 billion in the first four month of 2015, have been extremely subdued
Outlook
One of the major structural reforms has been the announcement of an increase in FII limit and linking it to the total outstanding issuance at 5%. Since the total current investment currently is effectively around 3.8%, the increase to 5% is proposed in a phase manner till 2018. The same is expected to lead to increased medium term participation by foreign investors
The sharp fall in global commodity prices, particularly crude oil prices, is fundamentally positive for the Indian debt market. The CPI inflation trajectory has already shifted down from nearly 10% to below 6%. Inflation is likely to remain benign and is, therefore, positive for debt markets
Overall, given stable inflation and external account, declining fiscal deficit, an accommodative central bank and weak global growth environment, the outlook for interest rates remains bullish
The Indian debt markets remain attractive from a medium-term perspective as the inflation trend remains on a downward trajectory and well within RBI’s target range
Investors may consider both duration as well as accrual funds depending on their risk-return profile
10 year G-sec yields after having corrected from 9% to 7.7% in CY14, have remained at same levels
7.0
7.5
8.0
8.5
9.0
Jan-
14M
ar-1
4
May
-14
Jul-1
4
Sep-
14N
ov-1
4Ja
n-15
Mar
-15
May
-15
Jul-1
5
Sep-
15N
ov-1
5
G-sec10 year yield
%
Source: Bloomberg, ICICIdirect.com Research
FPIs after having been significant net buyers in first four months of 2015, have been on sidelines since then
-2000-1000
0100020003000400050006000
Jan-
15Fe
b-15
Mar
-15
Apr-1
5M
ay-1
5Ju
n-15
Jul-1
5Au
g-15
Sep-
15Oc
t-15
Nov
-15
Dec-
15
FII (Debt) (USD Mn)
Source: RBI, ICICIdirect.com Research
Longer duration G-sec yields remain sticky while short term fell 100 bps
8.3 8.2
7.9
7.9
7.37.5
7.7
7.8
7.1
7.6
8.1
8.6
1yr 3yr 5yr 10yr
Yiel
d (%
)
31-Dec-14 31-Dec-15
Source: Bloomberg, ICICIdirect.com Research
Corporate bond yield curve shifts lower
8.6 8.7 8.78.6
8.2 8.3 8.4 8.4
7.8
8.08.28.48.68.8
1yr 3yr 5yr 10 yr
Yiel
d (%
)
31-Dec-14 31-Dec-15
Source: Bloomberg, ICICIdirect.com Research
ICICI Securities Ltd. | Retail MF Research
Page 4
MF industry synopsis In December 2015, assets under management (AUM) grew 21% YoY to
| 1274835 crore with the share of equity oriented funds at 32% from 30% in December 2014. There was a total net outflow in MFs to the tune of | 22567 crore in December 2015 due to substantial outflows from income funds to the tune of | 25875 crore. Equity schemes witnessed inflows to the tune of | 3644 crore in December 2015 while liquid funds had outflows to the tune of | 5260 crore
Year 2015 was the year of equity funds as they witnessed net inflows to the tune of | 67055 crore whereas income funds witnessed inflows to the tune of | 14697 crore
Exhibit 1: Equity AUM drives overall AUM
1051
343
1181
356
1202
196
1082
807
1186
364
1203
547
1173
294
1254
506
1324
165
1317
267
1187
313
1295
131
1274
835
27%31% 31% 31%
20%21%19%
25%19%21%
24%24%
31%
0%
5%
10%
15%
20%
25%
30%
35%
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
| Cr
ore
0
200000
400000
600000
800000
1000000
1200000
1400000
Total AUM (RHS) Growth (YoY)
Source: Company, ICICIdirect.com Research
Exhibit 2: AUM share December 2014
Income48%
Gilt1%
Money Market17%
Gold ETFs 1%
Equity30%
Other ETFs1%
FOF(Overseas)0%
Balanced2%
Source: AMFI, ICICIdirect.com Research
Exhibit 3: AUM share December 2015…share of equity AUM increases in the last year
Income45%
Gilt1%Money Market
18%
Gold ETFs 0%
Equity32%
Other ETFs1%
FOF(Overseas)0% Balanced
3%
Source: AMFI, ICICIdirect.com Research
Exhibit 4: HDFC AMC maintains top position, I-Pru & Kotak Mahindra records highest YoY growth in AAUM
1786
66
1722
37
1578
78
1368
45
1061
29
1005
85
7172
2
5486
4
5513
4
3918
3
1504
68
1367
63
1260
69
1079
68
8739
0
7214
1
6364
3
4792
0
3879
6
3753
2
25000
50000
75000
100000
125000
150000
175000
200000
HDFC
MF
Ipru
MF
Relia
nce
MF
Birla
Sunl
ife M
F
UTI M
F
SBI M
F
Fran
klin
Tem
pelto
n
IDFC
MF
Kota
kM
ahin
dra
DSP
Blac
kRoc
k
| Cr
Dec-15 Dec-14
Source: AMFI, ICICIdirect.com Research
Exhibit 5: HDFC, Reliance highest contributors to increase in AAUM HDFC MF
13%
Reliance MF13%
Ipru MF12%
Birla Sunlife MF10%
UTI MF8%
SBI MF7%
Franklin Tempelton MF
5%
Kotak Mahindra MF
4%
DSP BlackRock MF4%
IDFC MF3%
Others21%
Source: AMFI, ICICIdirect.com Research
ICICI Securities Ltd. | Retail MF Research
Page 5
MF Category Analysis
Equity funds Midcap funds delivered -5.2% return last year, significantly
outperforming large cap funds that delivered negative returns of -11.4% Among sector funds, pharma funds delivered highest returns followed
by technology Exhibit 6: Pharma, IT clear winners (returns as on January 18, 2016)
7.7
-1.9
-4.2
-5.2
-9.0
-11.
4
-12.
5
26.9
20.0
13.1
21.9
13.3
9.8
9.1
1.8
20.1
11.2
18.6
16.3
9.8
7.6
3.7 4.2
-24.
6
-30
-20
-10
0
10
20
30
Pharma Technology FMCG Mid cap Diversified Large Cap Infrastructure Banking
Retu
rns
(%)
1 year 3 Year 5 year
Source: Crisil Fund Analyser, ICICIdirect.com Research ; Returns over one year are compounded annualised returns
Exhibit 7: Inflow into equity funds remains strong
6651
9156
54443644
6324
58408481
1058410076
12273
61336269
6379
-4500-2500-50015003500550075009500
1150013500
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
w (
| Cr
)
Net inflow (Equity + ELSS)
Source: AMFI, ICICIdirect.com Research
Exhibit 8: Equity AUM at high levels
3194
78
3409
36
3457
39
3451
39
3451
29
3651
66
3723
13
3936
02
3817
23
3865
17
3967
65
4026
71
4056
62
150000200000250000300000350000400000450000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
| la
kh C
rore
Equity +ELSS
Source: AMFI, ICICIdirect.com Research
Exhibit 9: Deployment of equity funds
Allocation Banks Software Pharma Auto FinanceConsumer
Non-Durables
Petroleum ConstructionIndustrial
Capital Goods
Industrial Products
| crore 85306 41998 35006 28519 24976 23304 19353 17546 16,939 15701
% of total 20.0 9.8 8.2 6.7 5.9 5.5 4.5 4.1 4.0 3.7
Source: Sebi, ICICIdirect.com Research, Sector Classification (as per Amfi)
Mutual funds invested a record | 67000 crore in CY15 in
Indian equity markets on the back of record inflows in to
equity schemes. Pure equity schemes witnessed inflows of
| 1.32 lakh crore in the last 20 months
Exposure to banks and finance stocks together account for
the highest proportion with 26% of equity assets followed
by technology and pharma
ICICI Securities Ltd. | Retail MF Research
Page 6
Equity diversified funds
Equity diversified funds witnessed a sharp fall of 9% last year. Midcap funds were outperformers falling only 5.2% during the last year whereas large caps funds dropped 11.3% against the BSE Sensex return of -14.4% as on January 18, 2016
The government has initiated a number of structural policy reforms like power reforms, road sector reforms, implementation of DBT in centrally funded welfare schemes, increasing FDI in many sectors, thrust on manufacturing in sectors like defence, focus on ease of doing business, taxation reforms, etc
Structurally, the outlook on the Indian equity markets has improved significantly. This is on the back of a steep correction in commodities, especially crude oil & industrial metals, a 125 bps repo rate cut and subsequent transmission of the same to corporate balance sheets along with relatively stable exchange rates
Investors should start accumulating from current levels. Every sharp correction should be used as an incremental buying opportunity from a medium-term perspective
Major corrections within established bull markets present the most attractive buying opportunities for long term investment. We believe the current correction offers such a lucrative investment opportunity as the reward to risk ratio is significantly favourable after the 17% correction from life-time highs
We believe the benchmarks (Sensex, Nifty) will resolve higher and head towards 31000, 9500 in the next 12-15 months. Investors with a long term horizon should start accumulating from current levels and look for portfolio construction rather than opportunistic bottom fishing
Recommended funds Large cap
Birla Sunlife Frontline Equity ICICI Prudential Focused Bluechip Equity SBI Bluechip
Diversified
Franklin India Prima Plus Fund Reliance Equity Opportunities ICICI Prudential Value Discovery Fund
Midcap
HDFC Mid-Cap Opportunities Fund Franklin India Smaller Companies Fund SBI Magnum Global Fund
(Refer to www.icicidirect.com for details of the fund)
View Short term: Positive Long-term: Positive
ICICI Securities Ltd. | Retail MF Research
Page 7
Equity Infrastructure fund
The investment cycle, which has been reeling under pressure for the last few years, has started showing sign of green shoots as the government is focusing on infrastructure development (accounts for ~60% of planned investment vs. ~50% few years back). Furthermore, instances of stalled projects in the government vertical have come down sharply whereas the private sector is still seeing a slow recovery in stalled projects
We also analyse the pattern of tendering in the last 18 months, which further validates that government is revving up the investment cycle as the government accounts for ~99% of total tenders floated
In terms of segments, road, railways, water and power T&D lead the recovery, which will continue, going ahead, into FY17E as well. Out of total tenders floated during April-October,2015, the share of the above segments comprised 61.9% of the overall tendering activity
Going ahead, while we believe there would be opportunities in infrastructure, we remain selectively positive on the sector
Preferred Picks
Franklin Build India Fund L&T Infrastructure Fund ICICI Prudential Infrastructure Fund
Refer www.icicidirect.com for
details of the fund
View Short-term: Positive Long-term: Positive
ICICI Securities Ltd. | Retail MF Research
Page 8
Equity Banking Funds Banking credit growth stayed at subdued levels with a YoY growth of
less than 10%. Accordingly, we expect credit growth for PSU banks to be subdued (lower than industry traction) and at ~15-17% for private banks. This would result in muted net interest income growth for PSBs vs. private
Provisions will continue to stay high as asset quality still remains under
pressure. Slippages i.e. fresh NPAs remain elevated for most PSU banks. Slippages came from the restructured book, as well as fresh pain. Fresh restructuring under the 5:25 scheme is gradually building. Adding further four SDR cases, they can form ~1% of banking credit
Private banks continued their healthy performance with 16% YoY
growth in profitability. Among PSU banks, BoI and IOB reported losses of | 1126 crore and | 655 crore, respectively, in Q2FY16. Bank of Baroda, Bank of Maharashtra and Dena Bank saw a sharp fall in their profitability. We believe higher provisions and lower growth will continue to mar bank earnings in future also
We believe that, going ahead, asset quality woes and, consequently,
growth concerns for PSU banks will continue for the bulk of FY16E and H1FY17E. Apart from lowering bad assets formation, revival of capex and a surge in credit growth are key factors to provide a boost to the sector, which in the near term seems difficult. We expect the sector to underperform in the near to medium term
Preferred Picks
ICICI Prudential Banking & Financial Services Reliance Banking Fund UTI Thematic - Banking Sector Fund
Refer to www.icicidirect.com for
details of the fund
Equity FMCG Our FMCG coverage universe is expected to witness ~12.6% revenue
growth (ex-Nestlé India) as volume growth continues to remain lacklustre mainly due to slower urban recovery and subdued rural demand on the back of falling agri output and minimal increase in MSPs. Simultaneously, falling commodity prices could lead to aggressive price cuts or increase in promotion activity
With commodity prices falling sharply, RM cost (percentage of sales) for
our coverage universe is expected to fall 100-200 bps. However, we believe companies would increase promotional spends significantly to spur volume growth. This is expected to lead to a marginal increase in operating margins. Our FMCG coverage universe is expected to witness 16.3% increase in net profit led by an expected reduction in the corporate income tax rate in Budget 2016
We expect GST implementation to lead to a reduction in logistic cost, a
simplified tax structure and level playing field for organised players in categories dominated by highly unorganised entities
Preferred Picks
ICICI Prudential FMCG Fund SBI FMCG Fund
Refer www.icicidirect.com
for details of the fund
View Short-term: Negative Long-term: Neutral
View Short-term: Neutral Long-term: Neutral
ICICI Securities Ltd. | Retail MF Research
Page 9
Equity pharma funds We believe recent setbacks on account of USFDA issues have already
been factored in the benchmark Nifty Pharma index, which is down ~17% from the peak and trading at 18x FY18E against the historical range of 20-22x. Going ahead, Street apprehensions on account of compliance issues and currency volatility in emerging markets are likely to be mitigated by acceleration in US approvals (YTD 148 ANDAs vs. 105 in CY14) and sustainable growth in the domestic formulations
US and Indian formulations remain main growth drivers for the sector (~50% of overall universe sales) on the back of a strong pipeline and incremental product launches
We continue to maintain our positive view on the sector on the back of earning visibility, consistent operating cash flows, healthy operating margins, relatively low leverage and strong return ratios
Preferred Picks
Reliance Pharma Fund SBI Pharma Fund UTI-Pharma & Healthcare
Refer to www.icicidirect.com
for details of the fund
Equity Technology Funds
Tier-I IT companies reported average 0.5% QoQ dollar revenue growth in Q3FY16 (in-line with estimates) vs. 2.9% in Q2FY16 and 1.2% decline in Q4FY15. Constant currency revenues grew 1.3% as dollar growth was negatively impacted (~80 bps) by cross currency headwinds. Infosys reported stellar revenue beat, HCLT, Wipro were Ok while TCS was soft led by company specific reasons. Impact of Chennai floods and business continuity costs were key margin headwinds partially offset by currency tailwinds and operational efficiency. CY16E IT budgets could be flat to negative, while earnings commentary was stable led by healthy deal signings and traction in digital technologies
Operationally, discretionary spending remains healthy in the US and led growth while Europe rebounded modestly. Insurance, telecom and oil & gas verticals are structurally challenged and growth continues to be uneven
Average rupee has depreciated 6% during 9MFY16 and could aid margins leading to earnings upgrade in FY17E. Upsides could be in line with earnings upgrades given blended valuations are at ~15.5x FY17E earnings. However, sharp sell-offs should be used to accumulate given long-term growth prospects
Preferred Picks
ICICI Prudential Technology Fund DSPBR Technology fund
Refer to www.icicidirect.com for
details of the fund
View Short-term: Neutral Long-term: Positive
View Short-term: Positive Long-term: Positive
ICICI Securities Ltd. | Retail MF Research
Page 10
Exchange Traded Funds (ETF) In India, three kinds of ETFs are available: Equity index ETFs, liquid
ETFs and gold ETFs
An equity index ETF tracks a particular equity index such as the BSE Sensex, NSE Nifty, Nifty Junior, etc
An equity index ETF scores higher than index funds on several grounds. The expense of investing in ETFs is relatively less by 0.50-1.00% in comparison to an index fund. The expense ratio for ETFs is in the range of 0.50-0.75%, excluding brokerage, while for index funds the expense ratio varies in the range of 1.0-1.5%. However, brokerage (which varies) is applicable on ETFs while there are no entry loads now on index funds
Tracking error, which explains extent of deviation of returns from the underlying index, is usually low in ETFs as it tracks the equity index on a real time basis whereas it is done only once in a day for index funds
ETFs also provide liquidity as they are traded on stock exchanges and investors may subscribe or redeem them even on an intra-day basis. This is unavailable in index funds, which are subscribed/redeemed only on a closing NAV basis
There are over 400 ETFs traded globally. ETFs are transparent and cost efficient. The decision on which ETF to buy should be largely governed by the decision on getting exposure in that asset class
Volumes are higher only in the Goldman Sachs Benchmark ETFs and tracking error is also lowest at 0.01%. Therefore, it is our top pick for investors wanting Nifty-linked returns
CPSE ETF is a new entry in the Goldman Sachs ETF offering. The ETF invests in select 10 PSU stocks and has been listed on the exchange since April. It has delivered 16% return since its launch
Exhibit 10: CPSE ETF leads inflows
773
128
752 623
-579-334
73
-216
469
1927
1038722
1183
-1000
-500
0
500
1000
1500
2000
2500
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
w (
| Cr
)
Source: AMFI, ICICIdirect.com Research
Exhibit 11: AUM increases sharply
6702
7056 77
95
8060
7404
7317
7322
7170
7032 89
20 1003
1
1119
7
1188
7
02000400060008000
100001200014000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
| Cr
ore
Other ETFs
Source: AMFI, ICICIdirect.com Research
Traded volumes should be the major criterion that is used
while deciding on investment in ETFs. Higher volumes
ensure lower spread and better pricing to investors...
Tracking error, though it should be considered, is not the
deciding factor as variation among funds is not huge...
ICICI Securities Ltd. | Retail MF Research
Page 11
Balanced funds CY15 witnessed massive inflows in the balanced funds. The AUM of the
balanced funds has increased from | 24490 crore in December 2014 to | 42193 crore in December 2015. Over the years, the balanced space has emerged as one of the fastest growing equity categories and offers an ideal investment option for first-time equity investors.
Balanced funds are hybrid funds. More than 65% of the overall portfolio is invested in equities. Hence, as per provisions of the Income Tax Act, 1961, any capital gains over one year become tax free. Also, dividends declared by funds are tax free
In case you separately invest 35% of your investible corpus in a debt fund, the same will be subject to higher taxation. However, if the whole corpus is invested in balanced funds, 100% shall have lower taxation applicable as mentioned above
After a sharp rally in equity markets, the funds can be a preferred investment avenue as the debt proportion serves to protect on intermediate relief rallies or the downturn while providing 65% participation on further upsides
Exhibit 12: Massive inflow into balanced funds…
12351491
1202 1425992
4511
1789
835 1183
4419
1358754
0500
100015002000250030003500400045005000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
w (
| Cr
)
Source: AMFI, ICICIdirect.com Research
Exhibit 13: AUM increases…
2449
0
2579
2
2650
7
2636
8
2701
5
2874
9
3225
9
3455
0
3466
0
3663
3
3768
2
3855
9
4219
3
1300018000230002800033000380004300048000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
| Cr
ore
Balanced
Source: AMFI, ICICIdirect.com Research
Preferred Picks
ICICI Prudential Balanced - Advantage Fund
HDFC Balanced Fund
Tata Balanced Fund
(Refer to www.icicidirect.com for details of the fund)
Monthly Income Plans (MIP) An MIP offers investors an option to invest in debt with some
participation in equity, ~10-25% of the portfolio. They are suitable for investors who seek higher return from a debt portfolio and are comfortable taking nominal risk. The debt corpus of the portfolio provides regular income while the equity portion of the fund provides alpha. However, returns can also get eroded by a fall in equities
MIPs can be classified into aggressive MIP and conservative MIP based on its equity allocation. Risk averse investors should invest in MIPs with lower equity allocation to avoid capital erosion
The change in taxation announced in the Union Budget 2014, shall be applicable to MIP funds (refer to debt funds section for details)
Investors with a limited investible surplus and a lower risk
appetite but with a willingness to invest in equities can
look to invest in these funds
View Short-term: Positive Long-term: Positive
View Short-term: Neutral Long-term: Positive
MIP should be a preferred debt investment for funds that need to be parked for over two years
ICICI Securities Ltd. | Retail MF Research
Page 12
Preferred Picks
Birla Sun Life MIP II - Savings 5 Plan
ICICI Prudential MIP 25
DSPBR MIP Fund
(Refer www.icicidirect.com for details of the fund)
Arbitrage Funds Arbitrage funds seek to exploit market inefficiencies that get manifested
as mispricing in the cash (stock) and derivative markets
Availability of arbitrage positions depends very much on the market scenario. A directional movement in the broader index attracts speculators in the market while cost of funding makes futures positions biased
Arbitrage funds are classified as equity funds as they invest into equity share and equity derivative instruments. Since these are classified as equity funds for taxation, dividends declared by the funds are tax free. No capital gains tax will be applicable if they are sold after a year
These funds can be looked upon as an alternative to liquid funds. However, for these funds, returns totally depend on arbitrage opportunities available at a particular point of time and investors should consider reviewing the same before investing. Returns of arbitrage funds are non-linear and, therefore, unsuitable for investors who want consistent return across time period
Arbitrage funds should be used as a liquid investment and should not be a major part of the investor’s portfolio
Availability of arbitrage positions depends very much on the market scenario. Directional movement in the broader index attracts speculators in the market while cost of funding makes future positions biased
In case of positive movement, long build-up in futures puts pricing in an upward bias and creates a window for direct arbitrage positions
On the other hand, negative bias attracts fresh sellers in the market. Speculators try to sell the stock much cheaper than theoretical prices. In such situations, reverse arbitrage opportunities arise
On the other hand, a range bound market does not give ample room to create arbitrage positions
Currently, there are few arbitrage opportunities available in the market which can lead to better returns
Preferred Picks
ICICI Prudential Equity - Arbitrage Fund – Regular IDFC Arbitrage Fund - (Regular) Kotak Equity Arbitrage Fund SBI Arbitrage Opportunities Fund
(Refer to www.icicidirect.com for details of the fund)
View Short-term: Positive Long-term: Positive
ICICI Securities Ltd. | Retail MF Research
Page 13
Debt funds Exhibit 14: Category average returns
7.37 8.
08 8.72
7.37 7.
94 8.56
7.43
7.40
8.46
6.97
5.16
7.72
6.55
4.38
7.74
0.001.002.003.004.005.006.007.008.009.00
10.00
6 months 1 year 3year%
Income UST Liquid Income ST Income LT Gilt Funds
Source: ACE MF, ICICIdirect.com Research Note : Returns as on January 18, 2016; Returns over one year are compounded annualised returns
Exhibit 15: Deployment of funds: December 2015
CP Bank CD
Bank CD
Bank CD
Corporate Debt
0
5000
0
1000
00
1500
00
2000
00
2500
00
3000
00
3500
00
4000
00
4500
00
Less than 90 days
90 days to 182days
182 days to 1 year
1 year and above
Government Securities
CP
Bank CD
Treasury Bills
CBLO
Other Money Market Investments
Corporate Debt
PSU Bonds
Securitised Debt
Bank FD
Source: SEBI, ICICIdirect.com Research Note : Holding as percentage of total AUM
Exhibit 16: G-sec yield curve
8.3
8.2 7.97.9
7.3
7.57.7
7.8
7.17.37.57.77.98.18.38.5
1yr 3yr 5yr 10yr
Yiel
d (%
)
31-Dec-14 31-Dec-15
Source: Bloomberg, ICICIdirect.com Research
Exhibit 17: Corporate bond curve
8.68.6 8.7
8.78.28.3 8.4
8.4
7.8
8.0
8.2
8.4
8.6
8.8
1yr 3yr 5yr 10 yr
Yiel
d (%
)
31-Dec-14 31-Dec-15
Source: Bloomberg, ICICIdirect.com Research
With yields remaining sticky and correcting only 9 bps, despite 125 bps rate cut by RBI, gilt funds and income funds underperformed
Investment into securities with maturity of less than 90 days and more than a year dominate total investments by mutual funds
ICICI Securities Ltd. | Retail MF Research
Page 14
Liquid Funds Liquid fund returns moderated to 7.4-8.6% pre tax from over 9% earned
in the previous year. Liquid funds witnessed an outflow of | 5260 crore in December
The Reserve Bank of India’s proactive liquidity management operations ensured that call rates stayed range bound around the policy rate reducing day-to-day volatility. CBLO rates also hovered just above the repo rate. With an improvement in liquidity conditions, the certificate of deposit and commercial paper rates in the three month bracket also eased over 100 bps to the 7.5-8% range from 9.1-9.3%. The same is likely to moderate returns in liquid funds, going forward
For less than a year, individuals in the higher tax bracket should opt for dividend option as the dividend distribution tax @ 28.325% is marginally lower. Also, though the tax arbitrage has reduced, they still earn better pre-tax returns over bank savings (3-4%) and current accounts (0-3%)
Changes in taxation rules announced in Union Budget 2014 are also applicable to liquid funds, as post tax returns in less than a three-year period get reduced for individuals falling in the higher tax bracket (30% tax slab) and for corporates
Exhibit 18: Call rates near repo rate
56789
101112
Jul-1
4Au
g-14
Sep-
14Oc
t-14
Nov
-14
Dec-
14Ja
n-15
Feb-
15M
ar-1
5Ap
r-15
May
-15
Jun-
15Ju
l-15
Aug-
15Se
p-15
Oct-1
5N
ov-1
5De
c-15
Jan-
16
%
Call rate
Source: Bloomberg, ICICIdirect.com Research
Exhibit 19: …CP/CD yields increases
7.0
7.5
8.0
8.5
9.0
9.5
Jul-1
4Au
g-14
Sep-
14Oc
t-14
Nov
-14
Dec-
14Ja
n-15
Feb-
15M
ar-1
5Ap
r-15
May
-15
Jun-
15Ju
l-15
Aug-
15Se
p-15
Oct-1
5N
ov-1
5De
c-15
%
3M CD 3M CP
Source: Bloomberg, ICICIdirect.com Research
Exhibit 20: Flows into liquid funds remain volatile on institutional activity
-50,
786
85,8
48
8,78
4
-112
,810
101,
592
-15,
657
-47,
330
-60,
861
-42,
059 -5,2
60
89,9
78
-70,
489
103,
306
-200,000
-160,000
-120,000
-80,000
-40,000
0
40,000
80,000
120,000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
w (
| Cr
)
Source: AMFI, ICICIdirect.com Research
Exhibit 21: AUM remains moderate on account of outflow in December
1784
91
2653
58
2760
70
1625
62
2667
22
2538
99
2069
79
3007
38
2341
41
1785
07
2766
55
2364
86
2329
70
80000
130000
180000
230000
280000
330000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
| Cr
ore
Money Market
Source: AMFI, ICICIdirect.com Research
Preferred Picks
HDFC Cash Management Fund - Savings Plan SBI Magnum InstaCash Reliance Liquid Fund - Treasury Plan
(Refer to www.icicidirect.com for details of the fund)
View Neutral
ICICI Securities Ltd. | Retail MF Research
Page 15
Income funds In the income funds category, long term debt funds underperformed
delivering 5.2% absolute return in the last year (as on January 18, 2015) on the back of sticky 10-year G-sec yield which is hovering at 7.79%
Indian benchmark 10 year G-Sec yield again rose to 7.7% from 7.55%, levels before the latest rate cut of 50 bps by the RBI. The benchmark US 10 year G-Sec yield have also witnessed upward pressure and trades at around 2.30% currently
Heavy supply in October and November aided already weak sentiments. Also, fears that the Seventh Pay Commission's recommendation may lead to a deterioration in fiscal deficit and inflation impacted bond market sentiments
Given the sharp rate cuts of 125 basis points this calendar year, it is believed there may be an extended pause or another 25 basis points till March 2016. Hence, it may make sense to invest in a mix of short-term income funds and dynamic bond funds and avoid long duration gilt funds
Exhibit 22: Income funds witness outflows in December
-1,6
32
12,1
63
-152
-8,9
27 -2,5
10 4,20
5
5,86
1
22,8
75
2,47
4-2
5,87
5
21,7
13
12,6
71
-26,
717
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
ws
(| .C
r)
Source: AMFI, ICICIdirect.com Research
Exhibit 23: AUM decreases…
5021
54
5202
34
5223
66
5157
73
5146
28
5221
78
5289
00
5558
84
5495
63
5753
24
5791
18
5553
64
5710
89
300000350000400000450000500000550000600000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
| Cr
ore
Income
Source: AMFI, ICICIdirect.com Research
Recommended funds
Ultra Short Term Funds Birla Sun Life Savings Fund ICICI Prudential Flexible income
Short Term Funds Birla Sunlife short term fund HDFC Short Term Fund ICICI Pru Short Term Plan
Short Term Funds – Credit opportunities Birla Sunlife Short Term opportunities term HDFC Corporate debt opportunities ICICI Prudential Regular Savings
Long term/Dynamic Birla Sunlife income plus ICICI Prudential Dynamic Bond Fund IDFC dynamic bond fund
(Refer www.icicidirect.com for details of the fund)
View Ultra-short term: Positive
Short-term: Positive Long-term: Positive
Ultra-short-term fund returns are attractive on risk adjusted basis Short-term funds will benefit as the bond curve reverts to an upward slopping curve. Credit opportunities funds earn the highest accrual and are the best in the category Dynamic bond funds are suitable for all types of investors and for longer duration. They can take exposure to all durations as per the interest rate outlook and switch between G secs and corporate bonds
ICICI Securities Ltd. | Retail MF Research
Page 16
Gilt Funds In the year 2015, gilt funds delivered 4.38% absolute return last year,
the lowest among debt funds, due to sticky G-sec yields. The returns of the overall debt funds were subdued during 2015 especially in the longer duration funds. Market expectations were, however, quite high as longer duration yields were expected to fall around 75-100 bps on the back of positive macroeconomic data and significant rate cut by the RBI. However, G-Secs as well as corporate bond yields remained sticky and traded in a narrow band
Concerns over the start of the monetary tightening by the US Federal reserve, impact on fiscal deficit due to announcement of Seventh Pay Commission and reduced participation from banks due to asset quality concerns prevented yields from falling in a structural manner
Indian benchmark 10 year G-Sec yield again rose to 7.7% from 7.55%, before the latest rate cut of 50 bps by the RBI. The benchmark US 10 year G-Sec yield also witnessed upward pressure and is trading at around 2.30% currently
The RBI has increased the FPI limit in government bonds to 5% of total outstanding government securities in a staggered manner by March 2018. Currently, the FPI holding is 3.8%. The change in FPI limits has further opened up room for | 1,20,000 crore in central government securities by March 2018. All these augur well for debt funds, especially duration funds
The central government has signed a memorandum with the RBI setting out a clear inflation objective to bring the inflation rate to the mid-point of the band of 4 +/- 2%. CPI, as per our assessment, should average close to 5% for FY16 (on assumption of normal monsoons and a stable currency). The government’s commitment towards controlling price shocks and steps taken to improve the supply chain are commendable. Also, global prices have corrected sharply and are supportive ranging from crude, metal to food prices. Hence, inflation should likely stay on the intended path. This creates room for the RBI to cut rates by another 100-150 bps in the long term to earn a real return of ~1.5-2%
On the supply front, the Budget has pegged the market borrowing for FY16 at | 6 lakh crore on a gross basis and | 4.56 lakh crore on a net basis (out of this, | 2.34 lakh crore through dated securities and | 15000 through gold bonds have been scheduled for H2FY16). Both gross and net market borrowings were close to market expectations. Borrowing related concern is expected to come down, given the government’s commitment towards reducing the fiscal deficit to 3% of GDP by FY17
Aggressive investors can invest in gilt funds with an investment horizon of one or two years
Recommended funds
Birla Sun Life Gilt Plus - PF Plan - Regular ICICI Prudential LT Gilt Fund - PF Option - Regular
(Refer to www.icicidirect.com for details of the fund)
View Short-term: Neutral Long-term: Neutral
ICICI Securities Ltd. | Retail MF Research
Page 17
Exhibit 24: Outflows last month led to increase in yields
2090
1813 20
58
1439
164
875
-279
190
143
1183
428
-80
-243
-500
0
500
1000
1500
2000
2500
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
w (
| Cr
)
Source: AMFI, ICICIdirect.com Research
ICICI Securities Ltd. | Retail MF Research
Page 18
Gold: Downside limited… may consolidate Gold prices, after having delivered negative returns in the previous
three consecutive calendar years (2013, 2014, 2015), have started the year on a positive note, on the back of extremely volatile capital markets leading to demand for the safe haven
Global gold prices are back near US$1100 per ounce after falling to nearly US$1050 per ounce in December 2015. Indian prices are also trading above | 26000 per 10 gm after falling below | 25000 per 10 gm
There has been extreme volatility in the currency market with many countries resorting to devaluation of their local currency. The volatility increased with China also resorting to devaluing its currency leading to concerns over currency war
While the decline in commodity prices was negative for gold prices as it would reduce global inflationary concerns, the relentless fall, particularly in crude oil prices, has put pressure on crude producing countries and oil related companies globally leading to money shifting out of these segments and finding way to safe havens
One of the major determinants of global gold prices is benchmark real interest rates. With increasing probability of a rise in interest rates in December 2015, the opportunity cost of holding gold will increase while the same is likely to put pressure on gold prices from a medium-term perspective
Gold prices in the near term may consolidate in a narrow range as current global capital market volatility may provide support while overall medium term inflation and interest rate outlook (US Fed rate hike) may prevent any significant upside
Sovereign gold bonds launched by the Government of India offer the best alternative to take exposure to gold as it offers additional interest. There are no annual recurring expenses as compared to gold ETFs (expense ratio in ETF is ~1%). These gold bonds therefore are a threat to Gold ETFs in medium term
Exhibit 25: International gold price subdued…
1097100010501100115012001250130013501400
Jan-
14Fe
b-14
Mar
-14
Apr-1
4M
ay-1
4Ju
n-14
Jul-1
4Au
g-14
Sep-
14Oc
t-14
Nov
-14
Dec-
14Ja
n-15
Feb-
15M
ar-1
5Ap
r-15
May
-15
Jun-
15Ju
l-15
Aug-
15Se
p-15
Oct-1
5N
ov-1
5De
c-15
Jan-
16
Price ($/Ounce)
Source: Company, ICICIdirect.com Research
Exhibit 26: …domestic prices follows global trend
24000
25000
26000
27000
28000
29000
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Jan-
16
|
Price (|/10 grams)
26238
Source: Company, ICICIdirect.com Research
Gold prices in the near term may consolidate in a narrow range as the current global capital market volatility may provide support to the otherwise benign outlook in the medium term
ICICI Securities Ltd. | Retail MF Research
Page 19
Exhibit 27: Outflows from gold ETFs continue…
-157
-165
-178 -1
49
-146
-341
-227
-105
-112
-47 -38 -32
-111
-131
-74
-111
-69
-86 -76 -5
0
-82 -5
7
-69 -4
0
-46
-400
-200
0
Dec-
13
Jan-
14
Feb-
14
Mar
-14
Apr-1
4
May
-14
Jun-
14
Jul-1
4
Aug-
14
Sep-
14
Oct-1
4
Nov
-14
Dec-
14
Jan-
15
Feb-
15
Mar
-15
Apr-1
5
May
-15
Jun-
15
Jul-1
5
Aug-
15
Sep-
15
Oct-1
5
Nov
-15
Dec-
15
Net
Inflo
w (
| Cr
)
Two years of outflow
Source: Amfi, ICICIdirect.com Research
ICICI Securities Ltd. | Retail MF Research
Page 20
Model Portfolios
Equity funds model portfolio Investors who are wary of investing directly into equities can still get returns almost as good as equity markets through the mutual fund route. We have designed three mutual fund model portfolios, namely, conservative, moderate and aggressive mutual fund portfolios. These portfolios have been designed keeping in mind various key parameters like investment horizon, investment objective, scheme ratings, and fund management. We have changed the mutual funds portfolio in July, to include midcap funds as we believe an improvement in the growth scenario may generate better alpha in midcap stocks over large cap stocks Exhibit 28: Equity model portfolio Particulars Aggressive Moderate ConservativeReview Interval Monthly Monthly QuarterlyRisk Return High Risk- High Return Medium Risk -
Medium ReturnLow Risk - Low Return
Funds Allocation % AllocationFranklin India Prima Plus 20 20 20Birla Sunlife Frontline Equity 20 20 20ICICI Prudential Dynamic Plan - - 20SBI Bluechip Fund 20 20 20ICICI Prudential Value Discovery 20 20 20HDFC Midcap Opportunities 20 20
Total 100 100 100
Source: ICICIdirect.com Research
Exhibit 29: Model portfolio performance: One year performance (as on December 31, 2015)
7%
2%
0%
-3%-4%
-2%
0%
2%
4%
6%
8%
Aggressive Moderate Conservative BSE 100
%
Aggressive Moderate Conservative BSE 100
Source: Crisil Fund Analyser, ICICIdirect.com Research Portfolio inception date : April 15, 2009
ICICI Securities Ltd. | Retail MF Research
Page 21
Debt funds model portfolio We have designed three different mutual fund model portfolios for different investment duration namely less than six months, six months to one year and above one year. These portfolios have been designed keeping in mind various key parameters like investment horizon, interest rate scenarios, credit quality of the portfolio and fund management, etc.
Exhibit 30: Debt funds model portfolio
Particulars
0 – 6 months 6months - 1 Year Above 1 Year
Objective LiquidityLiquidity with
moderate return Above FDReview Interval Monthly Monthly Quarterly
Risk ReturnVery Low Risk - Nominal Return
Medium Risk - Medium Return
Low Risk - High Return
Funds AllocationUltra Short term FundsBirla SL Savings Fund 20ICICI Pru Flexible Income Plan 20Short Term Debt FundsBirla Sunlife Short Term Fund 20 20Birla Sunlife Short Term Opportunites Fund 20Reliance Regular Savingfs Fund 20HDFC Short Term Opportunities Fund 20 20ICICI Prudential Regular Savings 20ICICI Prudential Short Term Fund 20IDFC SSI Short Term 20 20UTI Short Term Income Fund 20Long Term/Dynamic Debt FundsBirla SL Income Plus 20IDFC Dynamic Bond fund 20Total 100 100 100
Time Horizon
% Allocation
Source: ICICIdirect.com Research
Exhibit 32: Model portfolio performance
8.36
8.10
7.15
7.94
8.33 8.33
6.46.66.87.07.27.47.67.88.08.28.48.6
0-6 Months 6Months - 1Year Above 1yr
%
Portfolio Index
Source: Crisil Fund Analyser, , ICICIdirect.com Research
*Index: 0-6 month’s portfolio – Crisil Liquid Fund Index; 6 months-1 year – Crisil Short term Index Above 1 year: Crisil Composite Bond Index
ICICI Securities Ltd. | Retail MF Research
Page 22
Top Picks Exhibit 33: Category wise top picks
Category Top Picks
Largecaps Birla Sunlife Frontline equity Fund
ICICI Pru Focussed Bluechip Equity Fund
SBI Bluechip Fund
Midcaps HDFC Midcap Opportunities Fund
Franklin India Smaller Companies Fund
SBI Magnum Global Fund
Diversified Franklin India Prima Plus
Reliance Equity Opportunities
ICICI Prudential Value Discovery Fund
ELSS Axis Long Term Equity
ICICI Prudential Tax Plan
Franklin India Tax shield
Category Top Picks
Liquid Funds HDFC Cash Mgmnt Saving Plan
ICIC Pru Liquid Plan
Reliance Liquid Treasury Plan
Ultra Short Term Birla Sunlife Savings Fund
Reliance Medium Term Fund
ICICI Pru Flexible Income Plan
Short Term Birla Sunlife Short Term FundHDFC Short Term Opportunities Fund
ICICI Pru Short Term Plan
Credit Opportunities Fund Birla Sunlife Short Term Opportunities Plan
Reliance Regular Savings Fund
ICICI Prudential Regular Savings
Income Funds ICICI PrudenIncome Fund
Birla Sun Life Income Plus - Regular Plan
UTI Bond Fund
Gilts Funds ICICI Pru Gilt Inv. PF Plan
Birla Sunlife Constant Maturity 10 year
gilt plan
MIP Birla Sunlife Savings 5Aggressive ICICI Prudential MIP 25
DSP Blackrock MIP
Equity
Debt
(Refer www.icicidirect.com for details of the fund)
ICICI Securities Ltd. | Retail MF Research
Page 23
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093
[email protected] Disclaimer ANALYST CERTIFICATION We Sachin Jain, CA and Isha Bansal, MBA (Fin) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or Funds. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) AMFI Regn. No.: ARN-0845. Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai – 400020. India ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock broking and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, distribution of financial products etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading distributors of Mutual Funds and participate in distribution of Mutual Fund Schemes of almost all AMCs in India. The selection of the Mutual Funds for the purpose of including in the indicative portfolio does not in any way constitute any recommendation by ICICI Securities Limited (hereinafter referred to as ICICI Securities) with respect to the prospects or performance of these Mutual Funds. The investor has the discretion to buy all or any of the Mutual Fund units forming part of any of the indicative portfolios on icicidirect.com. Before placing an order to buy the funds forming part of the indicative portfolio, the investor has the discretion to deselect any of the units, which he does not wish to buy. Nothing in the indicative portfolio constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the investor's specific circumstances. The details included in the indicative portfolio are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The funds included in the indicative portfolio may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs. This may not be taken in substitution for the exercise of independent judgement by any investor. The investor should independently evaluate the investment risks. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this indicative portfolio. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. ICICI Securities may be holding all or any of the units included in the indicative portfolio from time to time as part of our treasury management. ICICI Securities Limited is not providing the service of Portfolio Management Services (Discretionary or Non Discretionary) to its clients. Mutual fund investments are subject to market risks, read all scheme related documents carefully. Kindly note that such research recommended funds in indicative portfolio are not based on individual risk profile of each customer unless a customer has opted for a paid Investment Advisory Service offered by I-Sec. Investors should consult their financial advisers if in doubt about whether the product is suitable for them. The information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Limited. The contents of this mail are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. While due care has been taken in preparing this mail, I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any inaccurate, delayed or incomplete information nor for any actions taken in reliance thereon. This mail/report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. ICICI Securities and/or its associates receive compensation/ commission for distribution of Mutual Funds from various Asset Management Companies (AMCs). ICICI Securities host the details of the commission rates earned by ICICI Securities from Mutual Fund houses on our website www.icicidirect.com. Hence, ICICI Securities or its associates may have received compensation from AMCs whose funds are mentioned in the report during the period preceding twelve months from the date of this report for distribution of Mutual Funds or for providing marketing advertising support to these AMCs. ICICI Securities also provides stock broking services to institutional clients including AMCs. Hence, ICICI Securities may have received brokerage for security transactions done by any of the above AMCs during the period preceding twelve months from the date of this report