MD Deskdocshare02.docshare.tips/files/24695/246955082.pdf · 2017. 1. 15. · The edition also features an interview with Sunil Singhania, CIO - Equity Investments, Reliance Mutual

MD Desk

Anup BagchiMD & CEO

ICICI Securities Ltd.

To get the best out of your investments, invest savings regularly. A disciplined approach to investments makes the process emotions-free and helps the overall portfolio to gain from what is called as Rupee Cost Averaging.

However, it is not always possible to stagger investments. The business income, a bonus payout, maturity of a policy, or even an inheritance are examples of lump sum payouts. Taking a decision to invest such payouts is more complex.

Investing a lump sum payout should not be a hasty decision. It is very easy to fall in for an investment option that comes first to you. Instead, we recommend you to take a detailed look at your current financial situation and determine how you may use these funds to your financial advantage. Though each one of us has a unique financial situation, here are some fundamental steps that could be helpful.

First, review the loans and interest rates you are paying on them. Prioritize debt payments with the highest interest rates first, such as credit card outstanding and personal loans. Depending on the amount of lump sum received, you may also want to reduce your car loan or home loan.

Next, review your insurance coverage, both life and health. Majority of us are still either un-insured or have inadequate amounts of insurance. As per Lloyd’s report, India is the second

ICICIdirect Money Manager 1 April 2014

most under-insured market in the world. Your lump-sum funds can be used to build coverage or to enhance any coverage you may already have, a decision that is usually postponed.

Third, it is advisable to evaluate your basic solvency ratio or simply put your emergency fund. This ratio indicates one’s ability to meet monthly expenses in case of any emergency. A sum - equal to three to six times of monthly expenses, depending on the certainty of your income, can be set aside into higher return giving instruments like liquid funds.

The next step would be to create an investing plan. Take a stock of your investments and determine whether your investment run rate is keeping pace with your requirements. If not, you may use your lump-sum amounts to bridge your required run rate. It is important to make investments that fit your overall asset allocation. The asset allocation depends on one’s risk profile, time horizon and return expectations. For example, if you want to save for a long-term goal such as retirement, you need to allocate higher portion of your capital into equity for growth. Whereas, a portfolio heavily weighted towards equity, for instance, would be inappropriate for a short-term goal. Therefore, it is crucial to link your investments to your overall asset allocation and goals.

Once you have these elements in place you should have an investment strategy to run with. And there is no better strategy than to systematically start channeling your money, i.e. through systematic transfer plans (STPs). This is a good way to stagger the left over corpus.

Last but not the least, don’t forget to re-invest some of the money in yourself - enhance your capabilities to strengthen such revenue streams in the future.

Our message remains the same - ‘Keep investing and stay invested for your life goals.’ Through this magazine and our website www.icicidirect.com we want to make an earnest attempt to partner with you in setting and achieving your financial goals. Give us an opportunity to serve you, walk into any of your Neighbourhood Financial Superstore and talk to us.

ICICIdirect Money Manager April 20142

EDITORIAL

Editor & Publisher : Abhishake Mathur, CFA

Coordinating Editor : Yogita Khatri

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

Editorial Team : Azeem Ahmad, Nithyakumar VP, Nitin Kunte, Sachin Jain, Shaboo Razdan, Sheetal Ashar

Many of us set aside a certain portion of our income on a regular basis to meet specific financial goals. For instance, we may participate in employees' provident fund (EPF) account to plan our retirement, or contribute in mutual funds and other such instruments for our children's education.

Of course, investment surpluses are not always generated on a monthly basis. A bonus payout, maturity of a policy, a sale of an asset, etc. can create situations with lump sum payouts and can present unique challenges in terms of deciding on how to invest them.

With proper planning process and a clear road-map, we can efficiently manage it and put ourselves and our family on a stronger financial footing. Our cover story of this edition takes you through that process and steps involved. All in all, the key point is to accommodate such payouts in our overall financial plan and invest accordingly. To achieve an optimal risk-return trade-off, it is important to adopt fundamental investment strategies like asset allocation and diversification.

The edition also features an interview with Sunil Singhania, CIO - Equity Investments, Reliance Mutual Fund, who shares his views on the economy, markets, and how you may invest in the current scenario. We also offer comprehensive information and analysis on mid-cap equity funds, which present good investment opportunity with high growth potential.

So read on, stay updated and involved. We welcome you to write to us at [email protected] with your feedback or any queries on personal finance.


Important: All the contents of ICICIdirect Money Manager are the exclusive property of ICICI Securities Ltd. No article, either in whole or in part, may be published circulated or distributed through any medium without the express consent of ICICI Securities Ltd.

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CONTENTS

MD Desk ......................................................................................................... 01

Editorial .......................................................................................................... 02

Contents ......................................................................................................... 03

News ............................................................................................................... 04

Markets Round-up & Outlook ....................................................................... 05

Getting Technical with Dharmesh Shah ...................................................... 08

Derivatives Strategy by Amit Gupta ............................................................ 10

Stock Ideas: Coal India and MRPL ................................................................ 14

Flavour of the Month: Investing a Lump Sum

Have received a bonus at work, an inheritance, or a financial surprise of some kind? Here we discuss a few options to help you make the most of your lump sum payouts .................................................................................. 20

Tête-à-tête

Interview with Sunil Singhania, CIO - Equity Investments, Reliance Mutual Fund, who shares his views on the economy, markets, and how you may invest in the current scenario ......................................................................... 28

Ask Our Planner

Your personal finance queries answered ....................................................... 34

Your Financial Health Check

Here we analyze Mumbai-based young individual's finances and suggest a suitable way forward ....................................................................................... 38

Primer: Understanding Monetary Policy ...................................................... 41

Mutual Fund Analysis: Category – Mid-cap Equity Funds .......................... 43

Equity Model Portfolio .................................................................................. 50

Mutual Funds Model Portfolio ...................................................................... 53

Quiz Time ....................................................................................................... 55

Monthly Trends .............................................................................................. 56

Premium Education Programmes Schedule ................................................. 59


NEWS

EPFO to allot permanent a/c number by Oct 2014Retirement fund body EPFO will provide permanent or universal account numbers (UAN) on the pattern of core banking services to its over 50 million active subscribers by October 15 this year. Under core banking services, a customer can avail the bank services in any of its branch through his allotted unique account number. The UAN will facilitate subscribers in avoiding filing of PF transfer claims on changing jobs. "UAN will be allotted to the present active members by October 15, 2014 and thereafter the coverage of other members will be taken up," the EPFO’s action plan for this fiscal stated.

Courtesy: Business Standard

IRDA forms working group for simple products in general insuranceThe Insurance Regulatory and Development Authority (IRDA) has formed a working group to review 'File & Use' (F&U) guidelines to ensure availability of simple products in the general insurance category. "It is felt by the Authority that a review of extant guidelines has to be undertaken to ensure that products are designed, marketed, sold and serviced ensuring that a viable, simple and useful product is available to consumers and is sustainable for insurers," says a circular issued by IRDA. The working group is expected to submit its report to Member (Non-Life) in three months.

Courtesy: The Economic Times

Come July, all insurers may offer digitised insurance policiesAll life insurance companies may be required to offer insurance policies in a digitised format from July onwards. In a recent meeting with the sector representatives, sources said The Insurance Regulatory and Development Authority (IRDA) had asked companies to tie up with all insurance repositories. S V Ramanan, CEO of CAMS Repository Service (CAMSRep), said 1,10,000 policies had been digitised but many customers were not aware of this process. He explained that apart from top bank-promoted private life insurers, other companies have not been active in this space. CAMSRep has digitised 70,000 policies across 380 locations, he said.

Courtesy: Business Standard

PFRDA selects 8 companies to manage pension funds of private sectorThe Pension Fund Regulatory and Development Authority (PFRDA) is believed to have selected eight companies for managing pension funds of non-government employees. "Eight fund managers including LIC Pension Fund, SBI Pension Fund, UTI Retirement, Reliance Capital Pension Fund have been selected by PFRDA for managing the funds of private sector NPS," a source said. The other fund managers selected include DSP Blackrock, ICICI Prudential Pension Funds Management and Kotak Mahindra Pension Fund, sources said.

Courtesy: The Economic Times


MARkETS ROUND-UP

Rally to persist on up-beat sentiments as election marathon begins

In March, Indian indices

were amongst the few global

indices that closed in green.

The markets opened on a weak

note owing to the tensions

in Ukraine. However, as the

month progressed, a series of

positive data points and the

announcement of the election

schedule improved the market

sentiment. Encouraging

inflation as well as trade

deficit / current account deficit

(CAD) gauges, a firmer rupee

and falling bond yields helped

to lift the mood. The rupee

appreciated 2.9% to close the

month at 60.

For February 2014, the trade

deficit further reduced to

US$ 8.1 billion from US$

9.9 billion in January 2014.

Exports marginally de-grew

to US$ 25.7 billion (down

3.7%) while imports dipped

17.1% year-on-year (y-o-y)

to US$ 33.8 billion. Similarly

the CAD for the December

quarter narrowed to US$ 4.2

billion or 0.9% of the GDP,

from US$ 31.9 billion or 6.5%

of the GDP, a year earlier. After

three consecutive months of

negative growth, the Index

of Industrial Production (IIP)

grew albeit barely by 0.1% in

January 2014. The consumer

price inflation (CPI) further

reduced from 8.8% to 8.1%

on the back of lower food and

fuel inflation. The wholesale

price index (WPI) too fell

from 5.05% in January 2014

to 4.68% in February 2014.

In the bi-monthly monetary

policy, the key rates were left

unchanged.

Global markets started the

month’s trading on a weak

note owing to the tensions


MARkETS ROUND-UP

prevailing in Ukraine. On the

bright side, the Eurozone

gross domestic product (GDP)

growth numbers came in

better-than-expected. Also

positive industrial production

data from the US and lower

inflation data from the

Eurozone provided some

encouragement. However,

weak trade, industrial

production, retail sales and

fixed investment data from

China led to a significant sell-

off in the Chinese markets

and it had a spill-over effects

on other global markets

as concerns about global

economic growth worsened.

Similarly a slightly hawkish

tone from the Federal Open

Market Committee (FOMC)

meeting was taken with a

pinch of salt. At the end the

markets closed in the negative

territory.

During the month, Crude

(Nymex) closed 1% lower at

$ 101.6/barrel.

Global markets

Most global indices closed

in the red for the month of

March. The Dow Jones and

S&P 500 gained marginally,

closing 0.8% and 0.7% up,

respectively. On the other

hand, the Nasdaq, FTSE,

Dax and French CAC lost

2.5%, 3.1%, 1.4% and 0.4%,

respectively. Among Asian

indices, the Hang Seng,

Shanghai SSEC and Nikkei

fell 3.0%, 1.1% and 0.1%,

respectively.

Domestic markets

The foreign institutional

investors (FIIs) were net

buyers to the tune of ~` 28,200

crore while the domestic

institutional investors (DIIs)

were net sellers to the tune of

~` 9,050 crore.


MARkETS ROUND-UP

The Nifty and Sensex gained

6.8% and 6%, respectively,

in March. The rally was led

by realty, banking, metals,

public sector undertakings

(PSUs), power and oil & gas

stocks. The BSE Midcap and

BSE Small cap indices gained

9% and 9.7%, respectively.

Among sectoral indices, major

gainers were BSE Realty, BSE

Bankex, BSE Metals, BSE

PSU, BSE Power and BSE Oil

indices which gained 22%,

18.6%, 16.1%, 15.2%, 12.8%

and 12.6%, respectively.

Apart from these, BSE FMCG

and BSE Auto indices gained

7.5% and 5.4%, respectively.

Among losers were BSE IT

and BSE Healthcare indices

which lost 10.2% and 7%,

respectively.

Outlook

March witnessed across-

the-board rally barring the

so-called defensives such as

Information Technology (IT)

and Healthcare. The large-

caps as well as mid-cap /

small-caps participated in the

rally thus signifying the impact

of some serious buying in

beaten-down stocks. Again

this was in anticipation of

possible NDA victory (recent

surveys highlighted even

higher probability of the same)

in the forthcoming elections.

On the economy front the

gauges continued to impress

in an otherwise sombre

environment. Going ahead, we

expect the optimism to persist

as markets are expected to

continue to ride on the pre-

election rally. Robust FII

buying activity suggests that

the foreigners are in no mood

to take the foot off the gas as

the country enters the election

phase.


TECHNICAL OUTLOOk

Ride the pre-poll rally…

Dharmesh ShahHead - Technical Analysis, ICICIdirect

Domestic equity benchmarks

outperformed their global

peers and posted a strong rally

in the month of March. The

benchmarks defied the broad

scepticism prevailing in global

markets and stormed past their

historical highs to venture into

unchartered territory led by

strong foreign fund inflows

and a strengthening rupee.

The biggest near-term catalyst

for the Indian market is the

upcoming general election

and the current rally is seen

as one fuelled by hopes of a

stable government. Based on

the technical observations, we

expect the index to ride the

current positive momentum

and head towards 22800 levels

in the coming month.

Time-wise, since January

2013, each major directional

move on the index has lasted

4-5 weeks before witnessing

a cool-off. The up-move from

February lows also paused

after rising for four weeks

and witnessed a sideways

consolidation for nine sessions

before resuming the up-trend.

Going by this time-wise

trait, the current up-leg from

March 24, 2014 onwards

may pause around late April

2014. The index is expected

to turn volatile thereafter and


TECHNICAL OUTLOOk

markets will look for further

direction from the outcome of

the general elections. A firm

weekly close above 22800

will signal extending markets

and see the current rally from

February 2014 lows (19963)

to achieve 100% equality with

the August-December 2013

rally (17448 to 21483 = 4035

points), projecting upside

towards 24000 levels.

From a Technical perspective, the index conquering its major historical peak of 2008 and sustaining above the same marks an important turnaround and augurs well for further upside in the medium term

Historical highs and upper band of last 4 months’ consolidation (21200-21400) is likely to reverse its role and act as support

Weekly RSI remains in rising mode and indicates continuation of positive momentum in the short term

BSE Sensex – Weekly Line Chart

Source: Bloomberg, ICICIdirect.com Research

The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.


DERIvATIvES STRATEGY

Level of 6650-6700 remains a buying opportunity for upside target of 6850/7000

Amit GuptaHead - Derivatives Research, ICICI Securities

In the ongoing April series,

after consolidating near 6700

levels, Nifty moved towards

our mentioned targets of 6850.

Despite weak US markets,

domestic indices held the

momentum and broader

participation was observed

in last few sessions. Small-

cap and mid-cap stocks have

out performed Nifty. From the

inception of April series, Nifty

gained just 0.7% while small-

cap index clocked the gains

of almost 8.75% and mid-cap

index gained almost 2.8%.

In the options segment,

continuous writing was

observed at out-of-the-money

(OTM) Put strikes of 6500 and

6600 indicating support placed

at lower levels. Currently the

highest Put base is shifted to

6700 strike. On higher side, no

major Call writing is visible at

near the money strikes. Hence

further upsides may be seen

once again after consolidation.

Meanwhile volatility index (VIX)

has risen considerably in the

last few weeks. Buying among

index options particularly of

May series is clearly visible in

anticipation of big movement

after election outcome. Volatility

has risen almost 120% at 28 and

is currently trading at the highest

levels since September 2013.

We expect volatility to remain

at elevated levels till mid May

when election results would be

announced.

Banking stocks were the major

movers of the recent up- move.

We expect the positive bias to

continue among Cement and

Banking space as significant

short positions are still visible in

these stocks.



01234567

6300

6400

6500

6600

6700

6800

6900

7000

7100

Call OI Put OI

Bank Nifty may test 13500 if holds above 12700

The Bank Nifty has important support at 12700. The index had spent couple of weeks before breaching this level. Hence, on downsides, it may act as a good support. Moreover, the noticeable for the Bank Nifty is at 12000 followed by 12500, which also suggests support at 12250.

The highest Call build-up for the banking index is placed at 13000 strike followed quite closely by 13500 strike. It seems eventually it would try to test 13500 levels as these are stuck Call writers who have been rolling their positions towards higher levels.

The rise in government security (G-sec) yields after the recent monetary policy may play spoilsport in the short-term. However, despite rising yields from 8.8 to 9.02 so far, the banking sector is inching up.

050000

100000150000200000250000300000350000400000450000500000

1250

0

1260

0

1270

0

1280

0

1290

0

1300

0

1310

0

1320

0

1330

0

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0

1350

0

Call OI Put OI

FIIs have been buying in last 35

trading sessions consecutively

and the quantum has surpassed

US$ 6 billion

Foreign institutional investors

(FIIs) continued with their buying

in the cash segment. As the Lok

Sabha polling has commenced,

FIIs are hedging these positions

aggressively and in 2nd week of

April they bought over US $ 570

million of Index options.

FII focus still seems to be in mid-

cap & small-cap segments, with

buying seen in public sector

undertaking (PSU) banking,

infrastructure and metals.

Domestic institutional investors

(DIIs) on the other hand,

continued with their selling in

the cash segment and they sold

over US$440 million in 2nd week

of April .


S&P 500: Level of 1810 remains important support in current uptrend

As expected, another round of profit booking was seen at the highest Call base of 1900 strike and US equities saw sharp decline of almost 5% to move below 1850. In the process, S&P 500 erased its yearly gains while Technology dominant index, Nasdaq has turned negative and closed below its 100 DMA levels first time since December 2012.

For the May series as well, significant accumulation of Put options is visible at 1800 strike indicating major support is placed at these levels. On the other hand, Call options base is evenly distributed at at-the-money (ATM) and out-of-the-money (OTM) strikes. Major resistance can be expected around 1900 levels.

100 DMA levels for S&P has acted as crucial support in last two years and S&P did not spend much time below these levels. Currently 100 DMA for S&P is

placed near 1825 levels. Hence major decline below 1825 is not expected and levels near 1810 can be utilised for creating long positions.

S&P500 options open interest for May Series

0

10000

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30000

40000

50000

60000

1700

1750

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1800

1820

1850

1870

1900

1920

1900

Call OI Put OI

DAX: Underperformance is likely to continue, major support lies at 9300

German index DAX respected its 200 DMA levels and strong recovery in the late March was seen but it failed once again to sustain at higher levels. Selling pressure was experienced near its January highs of 9700 levels. At the same time, it also failed to perform in line with US indices which made their life highs.

DAX moved towards its highest Put base placed at 9300 strike in the recent decline. Looking at the options concentration, DAX is expected to remain sideways in the range of 9300-9800 in the days to come.



The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities.

Both 50 DMA and 100 DMA for

German Index are placed in the

vicinity of 9400 levels. We expect

it to continue its consolidation in

the near term. As DAX reverted

from its 200 DMA levels of 8950,

we do not expect it to test these

levels once again. However

below 9300 levels, some

extended selling pressure can

be expected.

DAX option open interest for May Series

0

2000

4000

6000

8000

10000

12000

9100

9200

9300

9400

9500

9600

9700

9800

9900

1000

0

Gold: 1280 levels to remain

crucial support in the current

uptrend for target of 1400

Gold failed to surpass 1400

levels last month and witnessed

selling pressure which forced it

to breach1300 levels this month.

However, it found support near

its 100 DMA levels of 1280 and

bounced back.

For the April series, significant Put writing is visible at 1275 strike indicating major support for the safe heaven. We expect these levels to remain crucial support for Gold in the near term. Moreover, the 50% retracement of the entire up move seen from 1180 to 1390 is also placed near these levels. Hence one should trade long with stop loss placed below 1280 levels.

On higher sides, we expect 1400 is likely to be tested which has acted as stiff resistance since May 2013.

As per Commodity Futures Trading Commission (CFTC) data reported for the Chicago Mercantile Exchange (CME), significant portion of open interest in gold has positive bias.

Golds option open interest for January Series

0

1000

2000

3000

4000

5000

6000

7000

1175

1200

1225

1250

1275

1300

1325

1350

1375

1400

1425

Call OI Put OI



Coal India: Steady volume growth; patience holds key

Company Background

Coal India Limited (CIL), a Maharatna public sector enterprise, is engaged in mining coal, the key material used in generating thermal power. CIL is the largest coal producing company in the world with huge coal reserves. CIL also enjoys a dominant status in the domestic market wherein it contributes ~81% of India’s total coal output and on the demand side meets ~65% of domestic consumption requirements. The company supplies coal to sectors like power, steel, cement, defence, fertiliser, etc.

Investment Rationale

Huge mineral resource base

Coal India has a huge extractable reserve base (reserves of 18.2 billion tonnes) and is well placed to cater to the rising domestic demand. Its extractable coal reserves can easily suffice for current production levels for the next 40 years (reserves: production at 40). The company also possesses healthy coal

resource base amounting 62.7 billion tonnes.

Government support to aid production growth going forward

The coal production at CIL has been sluggish with FY13 and FY14 coal production growth at 3.7% & 2.3% respectively. However, a series of steps undertaken by the government should boost the production volumes for the company. Few of the notable steps include: (i) Government has allowed expansion in existing coal projects without any public hearing, under environmental appraisal process. Under this proposal, it is decided to allow one-time capacity expansion upto 50%, or incremental production of upto 1 million tonnes per annum (MTPA), whichever is higher. This relaxation is for coal mining projects with annual production of less than 8 million tonnes (MT). (ii) CIL has also received approval from Ministry of Environment & Forests (MoEF) for 23 projects (16 projects have

STOCk IDEAS


been granted environmental clearance (EC), 2 projects have been granted stage-II forest clearance (FC) while 5 projects have been granted stage-I FC) after intervention by the Cabinet Committee on Investment (CCI). (iii) Introduction of mine-developer-operator approach. This all is likely to help state-run CIL boost output, going forward. We expect coal production at the company to grow at a compounded annual growth rate (CAGR) of 4% in FY13-16E to 509 MT in FY16E.

Competitive cost of production resulting in healthy operating margins

CIL produces ~90% of its coal through open cast mining and witnesses low stripping ratio (1.8 during the nine months ended FY14), thereby ensuring that reserves are easily extractable. Hence, this helps to position the company as among the lowest cost coal producers in the world. The cost of production in case of open cast mines is ~ ` 700-800 per tonne, which is in the lowest decile of the global cost curve and at almost one-fourth of underground

mining cost of ~ ` 3000-4000 per tonne. CIL’s blended cost of production stands at ~ ` 1050/tonne (~US$18 /tonne).

Faith to last in midst of blackest storms, add fuel to your portfolio

CIL has a strong balance sheet with robust cash flows and a healthy liquidity position. In FY13-16E, we expect the top line to grow at a CAGR of 4.1% with EBITDA (earnings before interest, taxes, depreciation, and amortization) and PAT (profit after tax) de-growing 3.9% and 3.2%, respectively, on the back of declining e-auction realisations and other income yield. We have valued the stock at 6.5x FY16E adjusted enterprise value (EV)/EBITDA (adjusted for overburden removal), thereby valuing the company at its international peers’ average FY16E EV/EBITDA of 6.5x and arrived at a target price of ` 320. A healthy dividend payout and impressive dividend yield (~4.3% on a normalised basis) reiterate our positive stance on the company. We have a BUY recommendation.

STOCk IDEAS


key Financials

FY13 FY14E FY15E FY16E Net sales (` crore) 68,303 68,008 72,695 77,088EBITDA (` crore) 18,084 14,413 14,959 16,053Net profit (` crore) 17,356 14,061 14,551 15,736

valuations Summary

FY13 FY14E FY15E FY16E EPS (`) 27.5 22.3 23.0 24.9P/E (x) 10.2 12.6 12.2 11.2 Target P/E (x) 11.7 14.4 13.9 12.9 EV / EBITDA (x) 6.4 8.4 7.5 6.5 P/BV (x) 3.6 4.3 3.8 3.3 RoNW (%) 35.8 34.2 31.1 29.3 RoCE (%) 32.3 29.4 27.0 25.4

Stock Data

Particulars FiguresMarket capitalization (` crore) 1,76,858.2 Total debt (FY13) (` crore) 1,909.1 Cash and investments (FY13) (` crore) 62,236.6 EV (` crore) 1,16,530.7 52-week High/Low (`) 331 / 238Equity capital (` crore) 6316.4 CroreFace value (`) 10DII Holding (%) 2.4FII Holding (%) 5.5

key risks include: Coal Ministry’s directive to sign fuel supply agreement (FSA) for power capacities amounting 78,000 MW which may lead to levying of penalty in case of insufficient coal; delay in environment clearance for coal mines thereby hampering coal production; E-auction volume may be sacrificed to fulfil FSA commitments; insufficient railways rakes for offloading coal from the company’s mines.(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; Ev: Enterprise value; P/Bv: Price to book value (P/BV); RoNW: Return on net worth; RoCE: Return on capital employed; DII: Domestic institutional investors; FII: Foreign institutional investors).

STOCk IDEAS


MRPL: At the crack of dawn

Company Background

Mangalore Refinery &

Petrochemicals Limited

(MRPL), a subsidiary of Oil

and Natural Gas Corporation

(ONGC), is a standalone

refinery operating in the port

city of Mangalore, Karnataka,

with a capacity of 15 MMTPA

(million metric tonne per

annum). MRPL is strategically

located on the west coast

of South India, close to the

Middle East and Far East crude

and product markets. MRPL

buys crude oil from ONGC,

Saudi Aramco (National oil

Company of Saudi Arabia),

Abu Dhabi National Oil

Company (ADNOC), National

Iranian Oil Company (NIOC),

Kuwait Petroleum Corporation

(KPC), Nigeria, Angola, Egypt,

etc. MRPL is now a ‘Mini Ratna,

Category 1’ and a Schedule

“A” public sector enterprise.

Investment Rationale

Capacity expansion and

upgradation project to boost

refining margins

Higher complexity on

commissioning of Phase-III

project will lead to an increase

in distillate yield from 76.5%

to 80.1%, better capability to

handle heavier & sourer crude

and production of higher

margin value-added products.

Additionally, MRPL would

save on freight cost due to the

single-point mooring facility,

commissioned in August 2013.

We believe these benefits will

translate into an improvement

of US$3.5-4/barrel in refining

margins in the next couple of

years.

Downstream integration into

petrochemicals to further

boost gross refinery margins

(GRMs)

MRPL is foraying into the

petrochemical business

STOCk IDEAS


by setting up 2.2 MMT

(million metric tonnes) PFCC

(petrochemical fluidized

catalytic cracking) and 440

kilo tonnes per annum

(KTPA) polypropylene units

under its Phase-III expansion

project. These units, once

commissioned, will produce

higher margin yielding

products that will contribute

US$1.5-2/barrel to refining

margins. We believe the ̀ 1800

crore polypropylene unit will

generate a return on capital

employed (ROCE) of 13%-

16%.

Best placed to play refining cycle among public sector undertaking (PSU) peers

MRPL has managed its business better than its peers in terms of better cash conversion cycle (only PSU refinery which has a negative working cycle), which is mainly due to the higher percentage of sourcing of crude from NIOC of Iran that offers a 90-

day credit period. The recent truce between Iran and the six western nations will benefit MRPL in terms of better credit period, lower pressure on working capital and reduction in interest expense. Also, the completion of Phase-III project will allow MRPL to regain its edge over peer PSU refiners in terms of GRMs. Overall, we prefer MRPL because of its lower policy leverage, improving GRM outlook and lowest gearing on the balance sheet amongst PSU refineries.

An investment opportunity; ready to unfold

Given the improvement in complexity, better distillate yield and access to cheaper crude oil, we expect MRPL to achieve higher profitability. We value the stock at 5.5x FY16E EV/EBITDA multiple to arrive at a target price of ` 61. We have a BUY recommendation on MRPL with a target price

of ̀ 61.

STOCk IDEAS


key FinancialsFY12 FY13 FY14E FY15E FY16E

Revenues (` crore) 54,060.7 66,086.2 71,249.0 74,102.0 75,345.8EBITDA (` crore) 1,638.8 318.0 215.5 2339.9 3,088.5Net profit (` crore) 908.6 -756.9 -595.2 650.2 1,096.3EPS (`) 5.2 -4.3 -3.4 3.7 6.3

valuations Summary FY13 FY14E FY15E FY16EPE (x) -11.6 -14.7 13.5 8.0Target PE (x) NA NA 16.3 9.7EV to EBITDA (x) 44.4 70.2 6.6 4.3Price to book (x) 1.4 1.5 1.4 1.2RoNW (%) -11.7 -10.1 10.4 15.4RoCE (%) -2.1 -3.6 9.1 14.4

Stock Data

Particulars FiguresMarket capitalization (` crore) 8,763.3 Debt (FY13) (` crore) 6,979.8Cash + Liquid investments (FY13) (`crore) 1,620.8 EV (` crore) 14,122.3 52-week High/Low (`) 51 / 26Equity capital (` crore) 1,752.7Face value (`) 10MF holding (%) 0.6FII holding (%) 0.9

key risks include: Further delay in commissioning of secondary processing units will have adverse impact on the refining margins. Any slowdown in the global economy and weaker demand will lead to a decline in gross refining margins and will have a negative impact on the profitability of the company. MRPL’s longer credit period will have an adverse impact on profitability in the phase of depreciation of the rupee. If tensions rebuild between Iran and western countries, imports from Iran would drop further, leading to an increase in working capital and higher crude oil costs for the company.

(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS: Earnings per share; P/E: Price-to-earnings; Ev: Enterprise value; RoNW: Return on net worth; RoCE: Return on capital employed; DII: Domestic institutional investors; MF: Mutual funds).

STOCk IDEAS


FLAvOUR OF THE MONTH

Investing a Lump Sum

For most of us, money comes at a fairly expected schedule. But occasionally, we might get an additional sum, over and above our regular income. This could be from bonus at work, inheritance from a family, investment payout, or even a lottery win. So what do you do with this money? While it may be tempting to splurge, to go on a holiday or buy a new car, it also presents an opportunity to secure your financial future. The choices you make today may have a direct impact on your financial life later on. Here are a few options to help you make the most of your lump sum payouts.

Do not rush

When we receive an extra sum of money, it becomes difficult to resist impulsive buying. This is mainly because we tend to look at this money differently than our regular hard-earned money. Just to give an example, researchers at Harvard University found that, even small windfalls, i.e. a sudden $10-off, led to an increased spending of $1.59 by online grocery shoppers, on things, which they typically do not buy. This is a result of “mental accounting”, a behavioral finance trait, which implies that we treat money differently depending upon its source.

Put simply, we may think twice before freely spending our ‘hard-earned’ money, but if we won the same amount of money, we spend it more easily, because we categorize that income as ‘found money’ or ‘extra cash.’

Therefore, in order to avoid making irrational purchase decisions, it is important that you give yourself some time, until you develop a long-term plan. In the meanwhile, deposit the entire sum in safer options, such as a liquid fund, to get you earning.

Take stock of your current financial situation

To begin with, take a thorough



look at your current financial situation, so that you can determine how you may use the lump sum or a windfall to your financial advantage. List your current income and expenses. List your assets: The amount in your bank accounts, brokerage accounts

and any other investments you may own. Make a list of your debts, including credit cards, personal loan, home loan, etc. Performing this exercise will not only help you provide the reality check needed but also help you set some priorities.

Your Financial Picture

What is your current total monthly income? `______________

What are your current total monthly expenses? `______________

Do you have credit card debt? o Yes o No

If yes:

Credit card Outstanding dues Interest rate (p.a.)

1. _____________________ `_____________ ________%

2. _____________________ `_____________ ________%

3. _____________________ `_____________ ________%

Do you have any other debt? (Personal, consumer durables, car, etc.) o Yes o No

If yes:

Type Total outstanding Interest rate (p.a.) balance

1. _____________________ `_____________ ________%

2. _____________________ `_____________ ________%

3. _____________________ `_____________ ________%

Do you have an emergency fund in place? o Yes o No

Do you currently have any investments? o Yes o No

If yes:

Investment avenue (shares, mutual funds, etc.) Current value

1. ________________________________ `_____________

2. ________________________________ `_____________

3. ________________________________ `_____________

4. ________________________________ ` _____________



Are you/your assets insured? o Yes o No

If yes,

Type (life, health, home, etc.) Sum assured

1. ________________________________ `_____________

2. ________________________________ `_____________

3. ________________________________ `_____________

4. ________________________________ ` _____________

What are your financial goals (planning for children education, retirement, etc.)?

Goal Money needed in today’s value

1. ________________________________ `_____________

2. ________________________________ `_____________

3. ________________________________ `_____________

4. ________________________________ ` _____________

Looking at the bigger picture will help you determine how you may use your

lump sum payouts to meet your financial obligations and goals.

Develop the plan

The key to managing lump

sum money responsibly is to

draw up a plan based on your

current financial situation and

goals. Though the amount of

payout or windfall also plays a

key role as in what goals you

can achieve with it, here are a

few basic steps you can take to

maximize the benefit of your

additional financial gains.

Paying off expensive debt:

Using lump sum payouts to

pay-off your debts may be

a wise idea, especially if it is

an expensive debt, i.e. debt

with a high interest rate. This

would include your credit card

out-standings and personal

loans. By clearing off this debt

or at least cutting it down

significantly, you can save

up on high interest costs. For



example, if you owe ` 1 lakh

on a credit card that has an

interest rate of 25% p.a. and

you pay the balance off, it

is like investing in an option

which gives 25% p.a. return.

The next in line could be your

car loan, which costs around

12-16% p.a. It's better to use

your extra financial benefits to

pay off high-interest debts so

that the future earnings could

be used to meet your financial

goals.

Building a financial safety-

net:

Uncertainties and emergencies

can strike anytime.

Unexpected expenses such

as a medical emergency,

layoff, sudden large repair

bills, etc. can put a significant

financial burden on you. So

if you don’t already have an

emergency fund in place,

this may be another prudent

financial step to consider for

your windfall. Just to give an

example, about 60 per cent

of households in Ahmedabad

do not set aside any funds for

meeting emergency expenses,

according to a survey by

ASSOCHAM (Associated

Chambers of Commerce and

Industry of India).

It is important to keep aside

a substantial sum, at least

six months’ living expenses,

to be used only in case of

emergency. The money need

not remain in savings account,

earning 4 per cent interest.

Instead, you can put it in a

better alternative, a liquid fund,

offering higher returns than

savings accounts. The current

category average return for

liquid funds is 9% p.a.

If you are unable to deposit a

sum equal to your six months’

living expenses at one go,

start with a small amount and

increase it as your income or

savings increase.



Keep in mind, the need for an

emergency fund increases with

age. Depending upon your age

group, you could put away 5

per cent to 15 per cent of your

money for emergencies.

Re-assessing your insurance

needs:

After you have built up

your emergency fund and

eliminated high-interest debt,

next you may want to consider

reviewing the insurance

coverage you currently

have and determine if it’s

adequate to meet financial

contingencies, in case, an

unforeseen event occurs.

Essentially, your life cover

should take care of: a) Family

expenses till lifetime; b)

Liabilities outstanding and c)

Family and children goals.

Here’s the worksheet to

help you review your current

insurance coverage, and fill

the gaps, if any.

1. Providing for family expenses till lifetime

Annual expenses required for dependants

` 2,40,000

Number of years for which you wish to provide above expenses

25 years

A: Corpus required for funding family expenses

` 60,00,000

2. Liabilities Outstanding

Home loan ` 15,00,000

B: Corpus required for repaying liabilities

` 15,00,000

3. Family Goals

Child’s education (today’s cost) ` 8,00,000

Child’s marriage (today’s cost) ` 10,00,000

C: Corpus required for fulfilling goals

` 18,00,000

A + B + C = The estimated amount of life insurance you will need

` 93,00,000

(From this estimated cover, you can deduct existing life cover, if any, and assets that you have accumulated - excluding the ones for your family’s use)

In case, you are unable to cover

all the above three (i.e. A, B and

C), then cover can be taken at

least for some of them, based

on the this order of priority:

a) Unsecured liabilities; b)

Family expenses till lifetime; c)

Secured liabilities; d) Children

goals; and e) Family goals.

Keep in mind, even a really

big financial windfall can be



quickly wiped out if one faces

with an unexpected medical

emergency. So it may be wise

to channelize your lump sum

payouts to get an adequate

insurance coverage. And this

does not hold true for life

insurance alone. Do re-asses

the coverage of your health

insurance, home insurance,

etc. to be adequately protected

at every life stage.

Moving closer to reaching

your goals:

After you have addressed

protection needs, it may be

time to consider strategies to

move closer to reaching your

financial goals. Look back at

Your Financial Picture - what

are your short, medium, and

long-term goals? Work out

how much you will need for

each of these goals in future

and then work backwards to

evaluate how much you need

to invest now for each of these

goals.

Let’s assume one of your

main goals is to secure your

retirement. This is how one

can go about it.

Assume you are aged 28, your

current monthly expenses are

` 35,000 and that you want

to retire at age 60 which is 32

years from now. Surely, given

inflation this amount will have

risen by the time you retire.

If we assume an inflation of

7% you will actually need

` 3.05 lakh per month when

you retire. Given that your

regular income will stop after

retirement you will have to

create a fund which will help

you generate income for these

expenses. An amount of ` 5.17

crore can help you generate

this income. However, to

create this fund you will need

to invest ` 13,290 beginning

now. This amount is what you

need to start saving.

Now, let’s take a look at how

you can link your lump sum


payouts or windfall gains to

meet your retirement goal.

Say for example, you, a young

individual, have received a

bonus of ` 1 lakh. If you invest

this lump sum amount in

an investment option which

gives 10% p.a. return, you will

be able to create a corpus of

` 10,83,471 in a period of 25

years.

Choosing the STP route:

You may also consider

systematic transfer plans

(STPs) for investing your lump

sum payouts. STP allows you

to invest a lump sum amount in

one scheme (source scheme)

and periodically transfer the

amount in another (target

scheme) of the same asset

management company (AMC).

Say for example, you may first

deposit your lump sum money

in a liquid fund and instruct

the concerned fund house to

transfer say Rs 5,000 every

month from liquid fund to your

chosen fund, equity or debt

fund, and thus, staggering

your investments.

STP has integral feature

of systematic investment

plan (SIP) and systematic

withdrawal plan (SWP). The

amount is systematically

withdrawn from one scheme

and invested in another.

Therefore it helps you to buy

more units at lower net asset

value (NAV) and fewer units at

higher NAV.

Spending thoughtfully:

Once you have set aside funds

for your top financial priorities,

you may consider spending

a small portion of your lump

sum benefits, say 5 per cent

to 10 per cent, on something

you would like. It is important

to understand that a financial

windfall or lump sum benefits

are occasional in nature. If

the funds are used to spend

irrationally, you may run the

risk of draining your resources.




Please send your feedback to [email protected]

Windfall wisdom through life stages

Life-stages Potential source(s) of lump sum benefit/

windfall

Prudent approach

Young & single Bonus at work

- Eliminate high-cost debt. Build your credit score.- Be aggressive. Invest maximum in growth assets such as equities. Ideal allocation could be: 80% in equity, 10% in fixed income, 10% in cash.- Buy a health insurance cover for yourself and parents.

Newly marriedBonus at work, gifts from family and relatives

- Prepare for emergencies. Build up an adequate emergency fund.- Get an adequate life cover.- If servicing a home loan, use any windfall gain for prepayment.- Buy a cover for protection against home loan and home contents.- Include wife in family floater health cover.- Start saving for retirement.

Starting a family

Bonus at work

- Start saving for children's education and marriage. Earmark specific investments for these goals.- Enhance life cover to take care of long-term goals.- Include children in health insurance cover.

Grown-up children

Investment payouts, inheritance, bonus at work

- Buy critical illness cover for self and wife.- Adopt a balanced approach. Allocation could be: 60% in equity, 30% in fixed income, 10% in cash

Retired

Maturity proceeds of investments and insurance, lump sum pension amount, etc.

- Ensure adequate health insurance.- Enhance protection with a contingency fund.- Focus on safety. However, inflation means you can't avoid equity. You could consider: 20% in equity, 70% in fixed income, 10% in cash.

To sum up, if you plan well and control the urge to spend impulsively, a windfall gain or a lump sum payout can be a big boost to your financial future.


Indian economy is entering an interesting phase, after some

years of muted growth, says Sunil Singhania, Chief Investment

Officer (CIO) - Equity Investments, Reliance Mutual Fund, in an

interview with ICICIdirect Money Manager. He believes overall

market valuations are reasonable and present an investment

opportunity for the long-term investors. Excerpts:

‘Fairly confident on the economy coming back on track’

Tête-à-tête

Sunil Singhania CIO - Equity Investments

Reliance Mutual Fund

What is your take on

current market situation?

Do you see the markets to

remain within existing range

or do you see a break-out in

either direction?

Indian economy is

entering an interesting

phase, after some years of

muted growth. The gross

domestic product (GDP)

growth is stabilizing through

improvement in global

demand, good monsoons in

India and possible peaking

of inflation and interest rates.

With the Central Government

elections underway and an

increasing possibility of a

stable formation, the policy

slowdown is expected to see

a reversal. Inflation continues

Q:

A:

to trend downwards along

with the currency stability

reflecting a better outlook for

interest rate reversal over the

next few quarters.

Overall valuations appear

reasonable, despite the

recent rally in markets as a


Tête-à-tête

lot of rerating is also due to

improvement in earnings on a

low base. We believe equities

can be among the best

performing asset classes over

the medium to long term.

What are the key risks

to Indian markets that one

should be watchful about?

The near term direction

of the market will be very

focused on the key domestic

event of General Elections

and based on the formation

there can be some short term

impact on the sentiment. The

Reserve Bank of India (RBI)

in its recent policy review

highlighted the potential risk

to inflation from weather

phenomenon like El Nino. (El

Nino is an abnormal warming

of surface ocean waters in the

eastern tropical Pacific Ocean,

with an impact on weather

conditions around the world).

Markets have witnessed

significant participation from

Q:

A:

foreign institutional investors

(FIIs) in the recent past and

there can be some outflows

based on near term events

like election results or profit

booking.

What is your general

assessment of our domestic

macro story? Is India growth

story still intact in your

opinion?

The key macro

challenges like twin deficits

(current account deficit and

fiscal deficit), inflation and

currency volatility have been

subsiding and domestic

factors are increasingly

favoring a strong equity

market. On the global front

also recovery in key markets

like the US, Europe, etc. have

created positive sentiment

for equity markets. Within

emerging markets space

India offers a fairly diversified

investment opportunity unlike

few other markets which

Q:

A:


Tête-à-tête

are skewed towards select

sectors like commodities,

energy, etc. Thus, given the

backdrop of a revival in key

economic parameters, we

believe it’s just a matter of

time that the GDP growth

will pick up and we are fairly

confident on the economy

coming back on track sooner

than later.

What, according to

you, are the key factors

that will drive investment

opportunities in the country?

Over the last few years

we have witnessed a subdued

investment environment

given the domestic and

global worries. During this

period corporate houses had

maintained a cautious stance

and preferred cash to capital

expenditure. However we

have witnessed a renewed

interest in the economy

as the key headwinds like

inflation, interest rates, etc.

Q:

A:

are peaking, at the margin.

Additionally, improving

global demand on the back

of recovery in key developed

markets is likely to lead to a

better GDP growth. Increasing

possibility of stable central

government post elections is

likely to lead to reversal in the

policy slowdown witnessed in

last few years.

All these key positive factors

are expected to lead to an

improved investment climate

in the country.

What is your view on

valuations? Are the current

market valuations attractive?

The current market

valuations appear to be

reasonable and present an

investment opportunity for

the long-term investors.

The 1-year forward price/

earnings (P/E) ratio of the key

benchmark index like Nifty is

at 14 and is more than 50%

Q:

A:


lower than the peak valuations

that prevailed during 2007-

2008. The current valuations

are even lesser than the eight-

year averages.

Further, not only are the

valuations of the overall

market reasonable, lots of

stocks are available at very

attractive valuations. We

analyzed a universe of over

750 companies with a market

capitalisation of at least ` 100

crore and in terms of trailing

twelve-month PE, we found

that:

• 50%ofcompanies in the

universe are traded at PE of

less than 10

• 75%ofcompanies in the

universe are traded at PE of

less than 20

Thus, despite the recent rally,

where benchmark indices

scaled new highs, the overall

valuations are reasonable.

Which sectors are

looking interesting now?

Which sectors would you

advice to stay away from?

Domestic recovery

themes like consumer

discretionary, banking,

industrials appear to

be interesting areas of

opportunity. Sectors that can

benefit from global recovery

like technology, healthcare,

etc. also remain important

investment themes.

We remain cautious on

sectors with higher valuations

like fast-moving consumer

goods (FMCG) and remain

focused on stock-specific

opportunities in themes like

commodities and real estate.

What are your key

takeaways from the

December 2013 quarter

results? What are your broad

expectations from India Inc

for FY15?

Q:

A:

Q:

Tête-à-tête


We have witnessed an

improvement in the corporate

results and for the first time in

many quarters the results for

December 2013 quarter were

better than the estimates. We

believe corporate earnings

will steadily improve given the

improved growth dynamics

and expect the FY15 earnings

to be significantly higher from

current levels.

How should one go

about investing in equity

markets in the current

scenario?

Equities as an asset

class have created enormous

wealth over a period of time.

For example, BSE Sensex

has generated compounded

returns of approximately

17% p.a. over the last 34

years. The asset class also

was among top performing

asset classes over the last few

years. However, despite the

return potential of equities,

A:

Q:

A:

we have witnessed investors

remaining under allocated to

the asset class based on near-

term underperformance.

This clearly highlights

the need for proper asset

allocation and adequate

investment horizon to gain

from equity investment.

Hence, we believe, based

on the investment horizon

and risk profile, the investors

can consider investments in

equity funds via lump sum or

systematic investment plans

(SIPs).

Tell us about your stock

selection process. How do

you find ideas for your funds?

We have a strong in-

house research team of

over 15 members and track

around 500 companies.

Of this, approximately 250

companies are tracked in

house. We believe that the

best investment is one where

Q:

A:

Tête-à-tête


the performance and the

perception can both improve.

For performance, the key

parameters we focus on are,

external opportunities for

the company, sustainable

competitive advantage,

scalability, management

quality and integrity, as well

as concern for the minority

shareholders.

For the perception part, past

track record, entry barriers to

business, growth prospects,

return on investment (ROI)

and return on equity (ROE) as

well as broad market outlook,

historical benchmarks, etc. are

key considerations.

Intelligence checks on the

company, management,

business models along with

company meetings also for

important inputs for stock

selection.

Idea sources include

investment team meetings

(fund managers and research

analysts), external research

reports, customized research

by appointed agencies, etc.

Anything else you

would like to share with our

readers?

We remain positive on

equity markets and expect

superior returns from the

asset class over the medium

to long term. Domestic

investors remain hugely

under-allocated to equities,

and despite near-term events,

investors can consider

investments in equity funds

in-line with their risk profile

and investment horizon.

The views expressed in the

interview are personal views

of the author and do not

necessarily represent the

views of ICICI Securities.

Q:

A:

The views expressed in the interview are personal views of the author and do not necessarily represent the views of ICICI Securities.

Tête-à-tête


Understanding Inflation Indexed National Savings Securities (IINSS)

ASk OUR PLANNER

I heard that Inflation

Indexed National Savings

Securities (IINSS) have been

launched recently. How does it

work? Is it advisable to invest?

- Amol Shinde

IINSS is an instrument, in

which, interest is linked with the

rate of inflation. Inflation rate

is based on the final combined

Consumer Price Index (CPI). The

final combined CPI is used as a

reference CPI with a lag of three

months. For example, the final

combined CPI for the month of

September 2013 will be used

as a reference CPI for whole of

December 2013.

The interest rate on IINSS

is divided into two parts: (i)

The fixed rate of 1.5% p.a. (ii)

Inflation rate. Say for example,

if inflation rate during the six

months period is 5%, then the

Q:

A:

interest rate for these six months

would be 5.75% (i.e. fixed rate of

0.75% and inflation rate of 5%).

The fixed rate of 1.5% would

act as a floor, which means

that 1.5% p.a. interest rate is

guaranteed if there is deflation.

For instance, if inflation rate is

-5%, then interest rate should

be -3.5%. But in such case,

negative inflation will not be

recognised and investors would

get fixed rate of 1.5% p.a.

The interest is accrued and

compounded in the principal

on half-yearly basis and is paid

along with the principal at the

time of redemption.

The minimum investment

limit for IINSS is ` 5,000. The

maximum limit is ` 10 lakh per

annum for individual investors.

The tenure of this instrument

is 10 years. For senior citizens


ASk OUR PLANNER

above 65 years, the premature

redemption is allowed after one

year. For others, it is allowed

after 3 years.

IINSS was launched on

December 23, 2013 and was

scheduled to close on December

31, 2013. However, due to low

response, the closing date was

extended to March 31, 2014.

IINSS is meant for long-term

savings. With inflation being

high in India in recent years,

this instrument can be looked

to generate good returns and

protect from inflation. The safety

of principal also is not a concern,

as it will be considered par with

government securities. Even

though the taxation is similar to

that of fixed deposits (FDs), the

interest can be higher than FDs

during high inflation periods.

However, during low inflation

periods, the interest can be

lower than FDs.

However, there are some pitfalls.

One is liquidity. The premature

redemptions are available only

on the coupon dates and that

too with some penalty. Two,

IINSS are not tradable in the

secondary market. Further,

there are no tax benefits offered

for principal and interest.

IINSS are expected to hit the

market this financial year too. It

is advisable to wait for the offer

to know the features and then

take a decision.

I am 32-year old male.

Here are my financial details:

Take home income: ` 50,000

p.m. Liabilities: Car loan

outstanding - ` 4 lakh, Credit

card outstanding - ` 1 lakh,

Personal loan outstanding -

` 1.5 lakh. Investments: LIC:

` 30,000 p.a.; Insurance: HDFC

ergo Health insurance: `. 4,000

p.a.

Q:


ASk OUR PLANNER

kindly suggest a detailed plan

on how to save ` 20 lakh in 3

years time to purchase a house

in Bangalore. Also, need your

expert advice on investments

in MFs to reach ` 50 lakh in 8

years time.

- Premanka Majumder

You have not provided any

details of accumulation of your

existing investments, which, if

any, can be used to close your

high cost loans – credit card

and personal loan. Else, you

will have to use your monthly

surplus for the same.

Assuming you spend about 40%

of your monthly income towards

household and other expenses

(i.e. ` 20,000 p.m.), ` 5,500 p.m.

towards EMI of your personal

loan (assuming 3 more years)

and ` 13,500 p.m. towards EMI

of your car loan (assuming 3

more years), you will be left with

a monthly surplus of ` 11,000.

A:

This amount can be used for

next 12 months to payoff your

credit card outstanding amount.

After paying off your credit card

outstanding amount, you can

start investing the surplus (i.e.

` 11,000 p.m.) towards your goal

of buying a house in Bangalore.

This will fetch you around

` 2.87 lakh with two years of

investment (assuming rate of

return at 8% p.a.). Therefore,

accumulating ̀ 20 lakh in 3 years

time to purchase a house seems

improbable.

Coming to your goal of

accumulating ̀ 50 lakh in 8 years

time, assuming that you invest

` 2.87 lakh, which you would

have accumulated in 3 years time

as mentioned above, along with

` 30,000 p.m. surplus (` 5,500

p.m. as personal loan would

have been paid off + ` 13,500

p.m. as car loan would have

been paid off + ` 11,000 p.m.


Do you also have similar queries to ask our experts? Write to us at: moneymanager@

icicisecurities.com.

– your initial investible surplus),

for the next 5 years, you will be

able to accumulate around ` 30

lakh in 8 years time (assuming

rate of return at 12% p.a.).

This can be achieved by

investing into two to three

diversified equity mutual funds.

You can refer our website www.

icicidirect.com to know about

the recommended funds.

I have spent ` 5,000 for

getting MRI of my wife. Can I

claim deduction under section

80D under heading preventive

health check-up? Also, how can

I show my share trading money

in income tax return?

- Bk Singh

You can claim the amount

under section 80D if the MRI

scan has been done as a part

Q:

A:

of preventive health check-

up. Else, if you are employed

and are getting medical bill

reimbursement, this amount

can be claimed under that

(the maximum limit being

` 15,000 p.a.).

If your main business is trading

in securities, then the profit

generated from trading in

securities has to be shown

under the head 'Income from

Business and Profession' and

the same will be taxed as per

your income slab. Else, you

can show the profit generated

under the head 'Income from

Capital Gains', where any long-

term capital gain (profit from

securities held for more than

1 year) will be exempt from

tax and short-term capital gain

(profit from securities held up to

1 year) will be taxed at 15%.

ASk OUR PLANNER


Prioritize, Plan, and Prosper

YOUR FINANCIAL HEALTH CHECk

Every month, ICICIdirect Money Manager

assesses one family's current financial

situation, and suggests a suitable way

forward to help them reach their goals...

The SHINDES

Mandar (25), Ranjit (52), Asha (48)

Reside in: Mumbai Annual income: ` 4,00,000

Family Profile

Mandar Shinde, 25, stays in Mumbai. He is a software engineer

by profession. Mandar's father Ranjit is working with a bank

and his mother Asha is a school teacher. Mandar approached

ICICIdirect Money Manager to better plan his finances.

MANDAR’S BASIC EXPENSES (ANNUAL BREAk-UP)

Household expenses ` 1,00,000

Holiday and entertainment expenses ` 60,000

Traveling expenses ` 50,000

Miscellaneous ` 40,000

Total ` 2,50,000

INvESTMENT DETAILS

Mandar invests ` 70,000 annually in public provident fund (PPF)

account, which he started last year only.



ASSETS AND LIABILITIES

Assets: Mandar has saved

` 3 lakh in his savings bank

account. Liabilities: Currently,

he has no liabilities.

MANDAR’S FINANCIAL

GOALS

1. Buy a car. Time to achieve

goal: 1 year.

2. Save for marriage

expenses. Time to achieve

goal: 4 years.

3. Accumulate a corpus of

` 20 lakh for renovating his

ancestral house. Time to

achieve goal: 10 years.

PLANNING

1. Car: Mandar wants to buy

a new car worth ` 5 lakh in

the next 1 year. Considering

the rise in prices (at 7%), the

cost of this goal may go up

to around ` 5.35 lakh after

1 year. Supposing, he takes

a car loan, he will still have

to arrange for the down-

payment. Considering the

down payment to be 20%, this

would amount to ` 1.07 lakh

after 1 year. To accumulate

this amount, Mandar needs to

save and invest approximately

` 8,551 per month to achieve

this goal. As the goal tenure

is short, Mandar should

invest in debt instruments.

Alternatively, as he already

has ̀ 3 lakh in his savings bank

account, he can invest ̀ 99,074

from it in a bank fixed deposit

(FD) for 1 year to accumulate

for the down payment.

2. Marriage expenses:

Mandar plans to get married

after 4 years and wants to

contribute a certain amount,

i.e. ` 5 lakh for his marriage

expenses. Considering the

rise in general prices, he will

need approximately ` 6.6



lakh after 4 years. To achieve

this goal, Mandar needs to

save and invest ` 11,623 per

month or ` 1.34 lakh annually

for 4 years. Mandar’s surplus

isn’t sufficient to save for this

goal currently; however, he

expects an annual increase in

his income by 10%. So, he can

follow a stepped up investing

approach for this goal, as his

income increases.

3. Ancestral house renovation:

Mandar wants to accumulate

a corpus of ` 20 lakh after

10 years for renovating his

ancestral house. Considering

the inflation, he may need

around ` 39.3 lakh after 10

years. To achieve this goal,

Mandar needs to save and

invest approximately ` 17,561

per month or approximately

` 2 lakh annually. As Mandar’s

annual surplus currently is not

sufficient to plan for this goal,

he should re-look at his goals

and prioritize them. He can

then start investing as per the

goal priority and do a stepped-

up investing with increase in

his income.

Retirement and Insurance

Mandar has not listed

retirement planning as his

goal. He thinks he is too young

to plan for his retirement yet.

Advisably, the sooner he starts

planning, the better he’ll be

able to build corpus for his

sunset years.

Further, insurance is another

important area Mandar should

consider. Currently, he has

no liabilities and his parents

are also not dependant on

him, however, he should

continuously monitor his

finances as he may have

liabilities in future, for which,

adequate amount of insurance

is suggested.


Understanding Monetary Policy

One event that catches investors’ attention every quarter is the monetary policy by the Reserve Bank of India (RBI). This is because monetary policy actions affect stock prices. What is monetary policy? How does RBI conduct it? What are the various monetary policy instruments? In our new series “Monetary Policy Simplified” we’ll demystify these step-by-step. To start with, in this edition, we make an attempt to simplify the concept of monetary policy.

PRIMER

What is monetary policy?

One of the main functions of RBI is to manage the money supply in a country. This is done through a monetary policy. Put simply, monetary policy is nothing but the management of money supply and interest rates, in order to control inflation (price stability) and promote economic growth.

Two broad objectives of monetary policy: (i) Maintain price stability, and (ii) Enhance economic growth

Why is it important?

As monetary policy determines the price of money and money supply in the economy, depending on the situation and assessment of the RBI,

it has implications for both households and corporates. Lower cost of money will mean people will borrow more and consume more. This, in turn, will drive demand and growth. If an economy is witnessing high inflation, the RBI will raise the cost of money by raising interest rates, and it will mean lower borrowing, lower consumption and slower growth.

Monetary policy approaches

A typical monetary policy takes either a contractionary (tighten money supply) approach or an expansionary (loosen money supply) approach.

Contractionary: Rise in interest rates. Individual loans more expensive. Assets lose value. It


PRIMER

is used as a measure to control

inflation.

Expansionary: Cut in interest

rates. It is used to promote

employment and growth.

Source: RBI

For effective implementation of monetary policy, monetary policy framework needs a supporting operating procedure. An operating procedure is defined as day-to-day management of monetary conditions consistent with the overall stance of monetary policy. Generally, it involves: (i) defining an operational target, generally an interest rate; (ii) setting a policy rate which could influence the operational target; (iii) setting the width of corridor for short-term market interest rates; (iv) conducting liquidity operations to keep the operational target interest rate stable within the corridor; and (v) signalling of policy intentions.

To sum up, monetary policy is an important constituent of overall economic policy towards the pursuit of various economic goals, including expansion of employment, higher economic growth, and maintenance of price stability.

Monetary policy framework

The current framework of monetary policy in India can be termed as an augmented multiple indicator approach as illustrated in chart below:

Augmented Multiple Indicator Approach

Monetary Policy Action

Panel of TimeSeries Models

Growth and inflation outlook withrisks. Liquidity conditions

Monetary ProjectionsBroad Money. AggregateDeposits. Cridit to thePrivate Sector

Rate VariablesInterest rates in moneygovernment securitiesand credit markets,various inflation rates;asset prices and exchangerate

Quantity VariablesMoney, credit, fiscal deficit,rainfall index, industrialproduction, service sectoractivity, exports and imports,balance of payments andcapital flows

Forward IndicatorsRelevant variables fromindustrial outlook survey,capacity utilization survey,professional forecasters’survey and inflationexpections survey


MUTUAL FUND ANALYSIS

Category: Mid-cap Equity Funds

IDFC Premier Equity

Fund Objective

The scheme shall seek to

generate long-term capital

growth from an actively

managed portfolio of

predominantly equity and

equity related instruments.

key Information

NAV as on March 31, 2014 (`)

47.2

Inception Date September 28, 2005Fund Manager Kenneth AndradeMinimum Investment (`) Lumpsum SIP

100002000

Expense Ratio (%) 2.13Exit Load 1% on or before

365D.Benchmark S&P BSE 500Last declared Quarterly AAUM (`cr)

3773

Product LabelThis product is suitable for investors seeking*:l Create wealth over a long period of time.l Investment predominantly in equity and

equity related instruments across market capitalisation.

l High risk (BROWN)

Fund Management

Mr. Kenneth Andrade has been managing the fund since June 2006. He is also the chief investment officer (CIO) at IDFC Mutual Fund. He has over 15 years of experience in fund management and equity research.

Performance

Launched in mid-2005, the fund has since then generated ~20% compounded annualised return (CAR) till date in its eight years of

existence. Consumption stocks have been major contributors to fund’s returns leading its journey to the best performing midcap fund. In the last two calendar years, the fund performance has seen a little drop from its historical outperformance as the portfolio converges from consumption heavy to more diverse sector holdings. Even then, the fund manger has managed to outperform most of its peers and beat the benchmark by a decent margin.



Performance vs. Benchmark30

.8

29.4

14.7

29.7

18.2

17.1

3.7

18.7

0

10

20

30

40

6 Month 1 Year 3 Year 5 Year

Ret

urn%

Fund Benchmark

Calendar Year-wise Performance

2013 2012 2011 2010 2009

NAV as on Dec 31 (`)

42.5 40.2 28.5 34.8 26.4

Return (%) 5.6 40.8 -18.0 32.1 102.1

Benchmark (%) 3.3 31.2 -27.4 16.4 90.2

Net Assets (` Cr) 3706 3603 2259 1986 1222

Last Three Years Performance

Fund Name31-Mar-13 31-Mar-12 31-Mar-11

31-Mar-14 31-Mar-13 31-Mar-12

Fund 29.40 10.84 5.24

Benchmark 17.08 4.81 -9.11

Portfolio

The fund portfolio is a mix

of large-cap as well as mid-

cap stocks with the latter

having higher weightage. Bold

contrarian calls have generated

the alpha for the fund. This may

be a riskier strategy but the fund

manager is known in the industry

as a good stock picker backed on

the strong performance of the

scheme so far.

In the current year, the fund

manager has booked profits in

its age old holding Kaveri Seeds.

Despite some profit booking,

the stock still continues to be the

top most holding of the scheme.

In the banking sector, more

large-cap banks are held

compared to mid-cap banks. The

fund manager has accumulated

United Bank, contrary to the

Street, which is not so bullish

on the stock. The fund has the

lowest allocation to banks of

~3-4% again contrary to many

other diversified schemes.

The stock which has been the

“find of the year” is VA Tech

Wabag. The stock has seen a

more than 60% up-move since



it was included in the portfolio.

Also, Larsen & Toubro (L&T),

though a pure large- cap, does

find a place in the portfolio and

has contributed to the returns.

The fund manager has preferred

playing the macroeconomic

recovery theme through

engineering and construction

companies unlike most of the

other peers who have preferred

playing it by having higher

weightage in private sector

banks as portfolio holding.

Godfrey Philips, the Cigarette

Company, United Breweries and

Tilaknagar Industries in the alcohol

industry, Bata India and retailing

companies like Trent, Shoppers

Stop and V-Mart comprise stocks

under the consumption theme.

Page Industries has been in the

portfolio for quite a few years and

contributed significantly to the

scheme’s returns almost every

year in the period of its holding.

While the consumption theme

has been the major contributor

to the portfolio returns so far,

it remains to be seen how

the current diverse portfolio

performs in the future. We

believe, stocks in the portfolio

are unique and have the potential

to grow bigger from hereon.

Top 10 Holdings Asset Type %Kaveri Seed Company Ltd. Domestic Equities 7.8Page Industries Ltd. Domestic Equities 6.6CBLO Cash & Cash

Equivalents5.1

Bata India Ltd. Domestic Equities 4.5Blue Dart Express Ltd. Domestic Equities 4.4MRF Ltd. Domestic Equities 3.6VA Tech Wabag Ltd. Domestic Equities 3.1Asian Paints Ltd. Domestic Equities 3.1GAIL (India) Ltd. Domestic Equities 3.0Zee Entertainment Enterprises Ltd.

Domestic Equities 2.9

Whats In %Godfrey Phillips India Ltd. 2.2Kotak Mahindra Bank Ltd. 2Greaves Cotton Ltd. 1.8

Whats out %Arvind Ltd. 0.6HDFC Bank Ltd. 1.9Gujarat State Fertilizers & Chemicals Ltd.

0


Performance of all the schemes managed by the fund manager

Fund Name 31-Mar-13 31-Mar-12 31-Mar-11

31-Mar-14 31-Mar-13 31-Mar-12

IDFC Premier Equity Fund-Reg(G) 29.40 10.84 5.24

S&P BSE 500 17.08 4.81 -9.11

IDFC Equity Fund-Reg(G) 18.53 8.03 -8.05

CNX Nifty Index 17.98 7.31 -9.23

Market Capitalisation (%)Large 29.0Mid 55.7Small 8.7

Dividend HistoryDate Dividend

(%)Mar-26-2014 25Mar-26-2013 24.8Mar-23-2012 24.2Mar-29-2011 24Mar-29-2010 24Apr-28-2009 15

Top 10 Sectors Asset Type %Agriculture Domestic Equities 7.8Textile Domestic Equities 6.6Gas Transmission/Marketing


Engineering - Construction


TV Broadcasting & Software Production


Leather Domestic Equities 4.5Courier Services Domestic Equities 4.4Retailing Domestic Equities 4.2Power Generation/Distribution


Fertilizers Domestic Equities 3.6

Risk Parameters

Standard Deviation (%) 12.32

Beta 0.66

Sharpe ratio 0.11

R Squared 0.85

Alpha (%) 5.44

Portfolio Attributes

Total Stocks 32.0

Top 10 Holdings (%) 48.3

Fund P/E Ratio 19.0

Benchmark P/E Ratio 16.9

Fund P/BV Ratio 4.8

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them

Note : Risk is represented as:

(BLUE) Investors understand that their principal will be at low risk

(YELLOW) Investors understand that their principal will be at medium risk

(BROWN) Investors understand that their principal will be at high risk

Data as on March 31, 2014 and Portfolio Details as on February 28, 2014Source: ICICIdirect.com Research; ACE MF



Category: Mid-cap Equity Funds

HDFC Midcap Opportunities

Fund Objective

The aim of the fund is to

generate long-term capital

appreciation from a portfolio

that substantially consists

of equity and equity related

securities of small and midcap

companies.

Fund Management

Mr. Chirag Setalvad has been

managing the fund since April

2007, and has over 16 years of

industry experience.

Performance

The fund has been a star

performer in the mid-cap funds

category. In CY10, when the

benchmark CNX Midcap index

slipped by 31%, in same year the

fund limited losses to 18%. In the

rally of CY09, the fund delivered

key Information

NAV as on March 31, 2014 (`)

22.5

Inception Date June 25, 2007Fund Manager Chirag SetalvadMinimum Investment (`) Lumpsum SIP

50000

Expense Ratio (%) 2.13Exit Load 1% on or before 1Y,

NIL after1YBenchmark CNX MidcapLast declared Quarterly AAUM (`cr)

3201.34

Product LabelThis product is suitable for investors seeking*:l Capital appreciation over long term.l Investment predominantly in equity and

equity related instruments of Small and Mid Cap companies.

l High risk (BROWN)

same returns as the benchmark.

In the recent rally, the fund

has beaten the benchmark by

huge margins. CNX Mid-cap

Index, in the last six months,

has delivered 23% return while

the fund has outperformed the

index delivering a whopping

35% return. The performance

has mainly come on the back

of several mid-cap banks

and being overweight on the

pharmaceuticals sector. The

fund was launched in 2007



when markets were at their

peaks. Since inception, the fund

has delivered 13% compounded

annualised returns (CAR) as

against 6.12% CAR delivered

by the benchmark CNX Midcap

index.

Portfolio

The fund has 64 stocks in the

portfolio of which 61 have been

held for more than a year at

least. The buy and hold strategy

in mid-cap stocks has benefited

the fund. Diversification in mid-

cap stocks is optimum as the

fund has accumulated assets

under management (AUM) of

over ` 3,000 crore.

Sector bias is often seen in

the portfolio. Currently, the

portfolio has ~17% allocation

to pharmaceuticals stocks.

Despite the run-up there is no

profit-booking indicating the

fund manager’s positive outlook

on the sector is intact. In mid-

cap pharmaceuticals stocks,

any major downfall for whatever

specific reason is being used as

a buying opportunity for long

term.

Allocation to technology stocks

has been reduced while mid-

cap banking stocks have seen

some addition. Consumption

theme is played through air

conditioners and domestic

appliance manufacturers. Being

a mid-cap fund, auto ancillaries

and tyre companies also form a

decent part of the portfolio.

Overall, a quality larger mid-

cap stocks portfolio, buy and

hold strategy, no cash calls

and outstanding performance

history make the fund suitable

for long-term investment.

Top 10 Holdings Asset Type %

Aurobindo Pharma Ltd. Domestic Equities 4.4

Ipca Laboratories Ltd. Domestic Equities 4.3

Mindtree Ltd. Domestic Equities 3.9

Supreme Industries Ltd. Domestic Equities 3.5

NIIT Technologies Ltd. Domestic Equities 3.2

Net Current Asset Cash & Cash Equivalents

3.1

Torrent Pharmaceuticals Ltd.


Persistent Systems Ltd. Domestic Equities 2.7

Divis Laboratories Ltd. Domestic Equities 2.7

Lupin Ltd. Domestic Equities 2.7



Whats In %Navneet Education Ltd. 0.4

Whats out %

Market Capitalisation (%)

Large 39.0

Mid 31.1

Small 21.9

Top 10 Sectors Asset Type %

Pharmaceuticals & Drugs Domestic Equities 17.4

IT - Software Domestic Equities 11.8

Bank - Private Domestic Equities 6.7

Bank - Public Domestic Equities 5.9

Auto Ancillary Domestic Equities 4.5

Bearings Domestic Equities 3.8

Plastic Products Domestic Equities 3.5

Chemicals Domestic Equities 3.3

Abrasives Domestic Equities 2.9

Tyres & Allied Domestic Equities 2.7

Asset AllocationEquity 96.9Debt 0.0Cash 3.1

Market Capitalisation (%)Large 37.5Mid 47.2Small 12.2

Asset AllocationEquity 96.9Debt 0.0Cash 3.1

Risk ParametersStandard Deviation (%) 12.95Beta 0.70Sharpe ratio 0.11R Squared 0.92Alpha (%) 7.56

Portfolio AttributesTotal Stocks 65.0Top 10 Holdings (%) 33.4Fund P/E Ratio 18.8Benchmark P/E Ratio 14.1Fund P/BV Ratio 3.7

Dividend HistoryDate Dividend

(%)Feb-28-2014 17.5Feb-28-2013 11.5Feb-23-2012 15

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them

Note : Risk is represented as:

(BLUE) Investors understand that their principal will be at low risk

(YELLOW) Investors understand that their principal will be at medium risk

(BROWN) Investors understand that their principal will be at high risk

Data as on March 31, 2014 and Portfolio Details as on February 28, 2014Source: ICICIdirect.com Research; ACE MF

Performance of all the schemes managed by the fund managerFund Name 31-Mar-13 31-Mar-12 31-Mar-11

31-Mar-14 31-Mar-13 31-Mar-12HDFC Mid-Cap Opportunities Fund(G) 30.52 5.23 8.51CNX Midcap 16.36 -4.02 -4.09HDFC Long Term Adv Fund(G) 24.05 7.10 -3.75S&P BSE SENSEX 18.85 8.23 -10.50HDFC Multiple Yield Fund 2005(G) 11.47 6.54 9.41Crisil MIP Blended Index 6.47 9.09 5.26



Our indicative large-cap equity model portfolio has continued to deliver an impressive return (inclusive of dividends) of ~47% since its inception (June 21, 2011) vis-à-vis Sensex return of ~29% during the same period, nearly 1.6x the index performance. This has lent further confidence to our stock picking philosophy for “Quality-21” large-cap stocks. The mid-cap portfolio, which has generally outperformed the market since inception mainly driven by our prudent stock selection, has witnessed a reduction in outperformance to ~1.6x vis-à-vis the midcap index. The “Consistent-15” delivered a return ahead of its benchmark index (~24% since its inception vis-à-vis CNX Midcap return of 15% during the same period). Some key performers of our portfolios are Sun Pharmaceuticals, Lupin, TCS, Tata Motors, ITC, Maruti Suzuki and Dabur India delivering 57-126%returns since inception.We have always suggested the Systematic Investment Plan (SIP) mode of investment and still find a lot of merit in it as the preferred mode of deployment given the market conditions and volatility associated since the inception of the portfolio. It has outperformed other portfolios, thus, reinforcing our belief in a plan of investment.The index has scaled the walls of fear and positive expectations related to a new stable government have pushed it towards its life-time highs at ~6,800 levels. We feel the market could continue to see an expectation led rally going into general elections in May 2014. However, post this in case the outcome remains as expected we could witness a more grounded behaviour beyond that for the remaining year. Thus, we have leaned forward towards inclusion of stocks with more discretionary domestic export exposure viz. Page Industries and United Spirits. We have favoured booking profit in stocks that we feel can be better replaced, thus exiting Maruti Suzuki with a return of ~70% since inception. We also exit Navneet Publications. We believe we have a better balance to the portfolio going into a possible recovery in H1FY15E.In terms of relative weightage to the sector vis-à-vis the Sensex, we continue to remain overweight on IT, pharma and telecom given their relatively better earnings growth profile. We have also incrementally added to our overweight consumer discretionary stance as we believe it will witness strong delta in terms of both sales growth and earnings rise. We are underweight on financials (prefer private vis-à-vis public sector banks), oil & gas, the infra space (cement, infra and power) as real economic recovery remains still some time away. For other equal weight sectors we are playing specific themes like FMCG (overweight ITC) and the metals and mining space as we like individual names like L&T in the pure play infra space and feel bullish on the cement space via UltraTech Cement while remaining negative on the power space.

EQUITY MODEL PORTFOLIO



Name of the company Model PortfolioLargecap

(%)Midcap

(%)Diversified

(%)Largecap StocksConsumer Discretionary 11 7.7United Spirits 3 2.1Tata Motors DVR 5 3.5Bajaj Auto 3 2.1BFSI 19 13.3HDFC 6 4.2HDFC Bank 6 4.2SBI 3 2.1Axis Bank 4 2.8Power, Infrastructure & Cement 8 5.6L & T 5 3.5Ultratech Cement 3 2.1FMCG 13 9.1Nestle 3 2.1ITC 10 7Metals & Mining 3 2.1NMDC 3 2.1Oil and Gas 11 7.7Reliance 11 7.7Pharma 7 4.9Lupin 3 2.1Sun Pharma 4 2.8IT 17 11.9Infosys 5 3.5TCS 8 5.6Wipro 4 2.8Telecom 5 3.5Bharti Airtel 5 3.5Media 3 2.1Zee Entertainment 3 2.1Retail 3 2.1Titan 3 2.1Largecap share in diversified 70


Content source: ICICIdirect.com Research

ICICI Securities Ltd. has been assigned an advisory mandate by Ranbaxy Laboratories Limited with regard to Sun Pharmaceutical Industires Limited's acquisition of Ranbaxy Laboratories Limited. This report is prepared on the basis of publicly available information.


Name of the company Model PortfolioLargecap

(%)Midcap

(%)Diversified

(%)Midcap Stocks

Consumer Discretionary 14 4.2

Bosch 8 2.4

Page Industries 6 1.8

IT 6 1.8

Info Edge 6 1.8

BFSI 16 4.8

J&K Bank 8 2.4

IndusInd Bank 8 2.4

FMCG 20 6

Kansai Nerolac 8 2.4

Dabur 6 1.8

Tata Global Beverages 6 1.8

Pharma 14 4.2

Cadilla 8 2.4

Natco Pharma 6 1.8

Media 6 1.8

Sun TV 6 1.8

Capital Goods 6 1.8

Cummins 6 1.8

Realty/Infrasturcture/Cement 18 5.4

Container Corporation of India 6 1.8

Oberoi Realty 6 1.8

Shree Cement 6 1.8

Midcap share in diversified 30

Total of all three portfolios 100 100 100


MUTUAL FUND MODEL PORTFOLIO

EQUITY MUTUAL FUNDS MODEL PORTFOLIO

20.6720.99 20.99

17.96

16

17

18

19

20

21

22

Aggressive Moderate Conservative BSE 100

(%)

Returns

Investors who are wary of investing directly into equities can still get returns almost as good as equity markets through the mutual fund route.We have designed three mutual fund model portfolios, namely, conservative, moderate and aggressive mutual fund portfolios. These portfolios have been designed keeping in mind various key parameters like investment horizon, investment objective, scheme ratings, and fund management.

Particulars Aggressive Moderate ConservativeReview Interval Monthly Monthly QuarterlyRisk Return High Risk- High

ReturnMedium Risk -

Medium ReturnLow Risk - Low

ReturnFunds Allocation % Allocation

Franklin India Prima Plus 25 25 25Birla Sunlife Frontline Equity 25 25 25ICICI Prudential Dynamic Plan - 25 25ICICI Prudential Focused Blue-chip Eq.

25 - -

UTI Opportunities 25 25 25

Grand Total (a+b) 100 100 100Source: ICICIdirect.com Research

All three portfolios have outperformed the BSE 100 Index in FY14 delivering 21% absolute return

Returns (in %) are absolute; Source: ICICIdirect.com Research, Crisil Fund Analyser; Portfolio inception date: September 15, 2009


MUTUAL FUND MODEL PORTFOLIO

DEBT MUTUAL FUNDS MODEL PORTFOLIO

8.60

6.205.49

9.048.31

3.56

0.01.02.03.04.05.06.07.08.09.0

10.0

0-6 Months 6 Months -Year Above 1yr

%

Portfolio Index

We have designed three different mutual fund model portfolios for different investment duration namely less than six months, six months to one year and above one year. These portfolios have been designed keeping in mind various key parameters like investment horizon, interest rate scenarios, credit quality of the portfolio and fund management, etc.Keeping in mind the current market scenario and portfolio of the funds we have changed the allocation. Based on the portfolios of individual funds, we have introduced new funds in the portfolio.Particulars Time Horizon 0 – 6 months 6 months - 1 Year Above 1 YearObjective Liquidity Liquidity with

moderate returnAbove FD

Review Interval Monthly Monthly QuarterlyRisk Return Very Low Risk -

Nominal ReturnMedium Risk -

Medium ReturnLow Risk - High

ReturnFunds Allocation % AllocationUltra Short term Funds IDFC Money Manager Fund - Investment Plan 20 - -Templeton India Low Duration Fund 20 - -Reliance Medium Term Fund 20 - -Short Term Debt Funds Taurus Short Term Income Fund 20 - -Birla Sunlife Short Term Fund 20 - -Birla Sunlife Short Term Opportunities Fund - 20 20ICICI Prudential Short Term - 20 -ICICI Prudential Regular Savings - - 20IDFC SSI Short Term - 20 -Sundaram Select Debt - 20 20UTI Short Term Fund - 20 -Tempelton Short Term Income - - 20Long Term/Dynamic Debt Funds IDFC Dynamic Bond fund - - 20Total 100 100 100

Source: ICICIdirect.com ResearchAbove 1-year portfolio outperformed benchmark index despite volatile yields

throughout FY14

Model portfolio performance: FY14; Source: Crisil Fund Analyser, ICICIdirect.com Research; Index: 0-6 months portfolio – Crisil Liquid Fund Index; 6 months-1 year – Crisil Short Term Index; Above 1 year: Crisil Composite Bond Index.(Note: Higher allocation to short-term funds led to underperformance of the 6 months to 1 year debt funds portfolio against the benchmark Crisil Short Term Bond Index)


1. Retirement fund body EPFO will soon provide ______ number to its subscribers, which will facilitate them to avoid filing of provident fund transfer claims on changing jobs.

2. The tenure of Inflation Indexed National Savings Securities (IINSS) is ______ years.

3. Short-term capital gains, i.e. profit from securities held up to 1 year, are taxed at ______ per cent.

4. A typical monetary policy takes either a ______ approach (i.e. tighten money supply) or an ______ approach (i.e. (loosen money supply).

5. The Inflation Indexed National Savings Securities (IINSS) are tradable in the secondary market. True/False

Note: All the answers are in the stories that have appeared in this edition of ICICIdirect Money Manager. You may send in your answers at: [email protected] answers will be published in our next edition. The names of the earliest all correct entries will be published too. So jog your grey cells and be quick to send in your entries.Correct answers for the March 2014 quiz are:1. In India, a person can make a Will if he or she is above the age of ______ years.A: 212. You can walk into any bank to get your pre-2005 currency notes – including

Rs. 500 and Rs. 1,000 denominations - exchanged till ______.A: January 1, 20153. When you open a new demat account for Rajiv Gandhi Equity Savings Scheme

(RGESS) purpose, you need to first designate the account under RGESS through Form ______, before starting to invest.

A: Form A4. A new pension scheme (NPS) account opened matures only when the

subscriber turns ______ years of age.A: 605. If persons from Christian, Parsi and Jew religions die without making a Will,

______ Act gets applied to them for inheritance purposes.A: Indian Succession Act

Congratulations to the following winner for providing correct answers!Chetan Prajapati

QUIZ TIME


MONTHLY TRENDS

WPI INFLATION (FOOD)

(The figures are in per cent) CRUDE OIL

NYMEX crude oil prices ($/barrel) FII & DII INvESTMENTS

(Foreign institutional investors (FIIs) and domestic institutional investors (DII) net equity investment (` in crore)

vOLATILITY INDEX (vIX)

VIX is a key measure of market expectations of near term volatility. When the markets are highly volatile, the VIX tends to rise.

8.12 9.90

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Feb-14 Mar-14

(%)

102.59 101.58

94.0

96.0

98.0

100.0

102.0

104.0

106.0

28-Feb 5-Mar 10-Mar 15-Mar 20-Mar 25-Mar 30-Mar

$ pe

r bar

rel

607.801117.70

12.02-611.22

-2000

-1000

0

1000

2000

3000

4000

5000

28-Feb 5-Mar 10-Mar 15-Mar 20-Mar 25-Mar 30-MarFII DII

.

14.18

18.37

12.0

16.0

20.0


VIX


MONTHLY TRENDS

DOMESTIC INDICESBSE Sensex

NSE Nifty

GLOBAL INDICESDow Jones

NASDAQ

EXCHANGE RATESUSD-INR

21120.12

22386.27

20000

20500

21000

21500

22000

22500


6276.95

6704.20

5900

6000

6100

6200

6300

6400

6500

6600

6700

6800


16321.71

16457.66

15600

15900

16200

16500


4308.12

4198.99

4000

4100

4200

4300

4400


61.79

60.01

58.5

59.0

59.5

60.0

60.5

61.0

61.5

62.0

62.5


USD

/ IN

R

5.99%

6.81%

0.83%

2.89%

2.53%


MONTHLY TRENDS

103.46

99.98

97.0

98.0

99.0

100.0

101.0

102.0

103.0

104.0


₤/ IN

R

POUND-INR

EURO-INR

BULLIONGOLD

(The prices are in $ per ounce).

SILVER

(The prices are in $ per ounce).

(Source for all indicators: Bloomberg, Reuters)

85.28

82.63

78.0

80.0

82.0

84.0

86.0


€/ I

NR

1325.791283.64

1150

1225

1300

1375

1450


$ pe

r Oun

ce

21.19

19.71

18.0

20.0

22.0


$ pe

r Oun

ce

3.36%

3.11%


Premium Education Programmes Schedule

ICICIdirect Centre for Financial Learning (ICFL) imparts quality education on financial markets to beginners and amateurs, student, housewives, working professionals and self employed. ICFL’s broad objective is to make participant feel confident to start investing in stock market.

Here is the list of our programmes scheduled for the month of April, 2014.

Schedule for Beginners Programme on Futures and Options Trading

Sr. No

City Dates For More Information & Registration call:

1 Pune April 19 and 20 2014 Kusmakar on 7875442311

2 New Delhi April 26 and 27 2014 Vishal on 07838290143, Harneet on 09582158693

3 Kolkata April 26 and 27 2014 Sumit on 8017516187

4 Mumbai-Chembur

April 19 and 20 2014 Manish on 8451057943

5 Navi Mumbai April 19 and 20 2014 Manish on 8451057943

6 THANE April 19 and 20 2014 Vidhu on 9619716146

7 Bangalore April 26 and 27 2014 Subrata on 9620001478

Schedule for Fast Track Beginners Programme on Futures and Options Trading

Sr. No


8 Lucknow April 13 2014 Vishal on 07838290143

9 Ahmedabad April 27 2014 Yogesh on 8238053563

10 Kolkata April 27 2014 Sumit on 8017516187

Schedule for Foundation Programme on Stock Investing

Sr. No





14 Mumbai-Andheri April 26 and 27 2014 Vidhu on 9619716146





19 Chandigarh April 19 and 20 2014 Harneet on 09582158693


21 Hyderabad April 19 and 20 2014 Ruchi on 8297362323

22 Nagpur April 19 and 20 2014 Kusmakar on 7875442311


Contact us

Email:

Send us an email at [email protected] Please mention the name, date and venue of the programme you have attended or wish to attend, for faster resolution of your queries.

SMS:

SMS EDU to 5676766 for more details

23 Mumbai-Chembur



25 THANE April 26 and 27 2014 Vidhu on 9619716146


27 Indore April 26 and 27 2014 Yogesh on 8238053563

28 Navi Mumbai April 19 and 20 2014 Manish on 8451057943

Schedule for Fast Track Foundation Programme on Stock Investing

Sr. No


29 Lucknow April 20 2014 Vishal on 07838290143

30 Surat April 20 2014 Yogesh on 8238053563

31 Gurgaon April 20 2014 Harneet on 09582158693

32 Vadodara April 20 2014 Yogesh on 8238053563

33 Ahmedabad April 13 2014 Yogesh on 8238053563

34 Aurangabad April 20 2014 Kusmakar on 7875442311

Schedule for Advance Derivatives

Sr. No



36 Mumbai-Chembur



Schedule for Technical Analysis

Sr. No






Schedule for Fast Track Technical Analysis

Sr. No


42 Patna April 13 2014 Sumit on 8017516187

43 Ghaziabad April 13 2014 Vishal on 07838290143

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Printed at: SAP Print Solutions Pvt. Ltd., 28A, Laxmi Industrial Estate, S.N. Path, Lower Parel (W), Mumbai 400 013.Printed at: SAP Print Solutions Pvt. Ltd., 28A, Laxmi Industrial Estate, S.N. Path, Lower Parel (W), Mumbai 400 013.Printed at: SAP Print Solutions Pvt. Ltd., 28A, Laxmi Industrial Estate, S.N. Path, Lower Parel (W), Mumbai 400 013.

Documents

MD Deskdocshare02.docshare.tips/files/24695/246955082.pdf · 2017. 1. 15. · The edition also features an interview with Sunil Singhania, CIO - Equity Investments, Reliance Mutual