Alpha edge - June 2016

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“The Guessing Game”

India Strategy | June 2016

June 2016 3

The guessing game India Strategy | June, 2016

Foreword

Dear Investor,

The markets have almost gone up 17% from Feb lows and in the last three months we have seen

a spectacular rally in equities. This is the time when equities are back to new ‘recent’ highs and so

are the analysts with their prediction of a ‘new bull run on its way’ and even higher targets. But

given the scenario, it requires a brave soul to completely believe that. Even though the domestic

economy seems to be recovering slowly, markets are expected to follow global cues in the short term, as foreign institutional

investors with deep pockets play a major role in the markets here, and they take their cues from the global economy which is

weak at the moment. This, leads us to the question ‘whether this rally will sustain’?

June is the month of two key global events taking over and a lot of confusion along with it. Brexit & Fed rate hike. Brexit is one

animal that the markets have not been able to figure out, but consensus believes that if it happens it would result in a much

higher volatility as compared to status quo. Going by the general opinion polls, it seems like a close contest with voters slightly

leaning towards a Brexit. With regards to Fed, the general tone has become more aggressive towards a rate hike, with

probabilities of a rate hike as early as June increasing. However, the markets don’t seem to be factoring a rate hike based on

the data points trickling in. Hence, an actual rate hike may temporarily unsettle the markets globally. Whereas, we believe,

the situation for Fed is all the more complicated thanks to global events like Brexit, China slowdown and Brazil, which is

suffering from one of the deepest economic recession in a long time along with an extremely difficult political situation. With

many reasons for concern about the global economy and with likely US domestic uncertainty ahead of the U.S. presidential

election, one has to ask, what is the Fed’s rush to hike interest rates now?

Back home we saw ‘cheer’ in terms of the GDP numbers that came in at 7.9% for Q4FY16. The data, however, seems to be

inconsistent with few high frequency indicators like the IIP, which was barely positive in Q1. Our concerns about the quality of

the numbers continue. Concerns over measurement aside, momentum does seem to be improving and combined with recent

legislative gains in the recent state elections, provide reassurance that the economy is headed in the right direction. A normal

monsoon, which seems to be a certainty, would be the major game changer for the economy which is suffering from

aftermath of two consecutive drought season.

As far as the latest earnings are concerned, we have seen better numbers this quarter compared to previous quarters led

primarily by margin expansion. More companies have beaten estimates, but that is also a function of low expectations for the

quarter. The numbers look much better minus banks which are marred by NPA issues and affected by higher recognition of

bad loans. These days, good news seems to travel faster in to prices. Recent headlines such as ‘worst over for earnings’, ‘good

monsoon’, ‘global commodity prices reviving’, rate hike fears abating etc. have quickly percolated into valuations which once

again indicate that such good news has been discounted. Hence, based on valuations we are little cautious for shorter term

and believe there is less probability of valuations expanding from here, unless we see more good news specially in terms of

earnings surprising on the upside. It would be prudent to invest in a staggered manner in equities until people play ‘The

guessing game’ on Brexit, Fed rate hike or earnings recovery.

Warm Regards,

A V Srikanth

June 2016 4

Alpha Edge | “The guessing game”

Asset Class performance

Asset Class returns for May 2016

Source: Bloomberg

The month of May has seen steady foreign inflows in equity markets due to mounting expectations from India Inc. to report higher Operating profits on the back of low commodity prices. Equity markets have gained 3.95% last month.

Gold has been the worst asset class in the month of May and has lost by 4.35% in the month.

FII Flows for Calendar Year 2016

Source: ACEMF

FII’s continued their buying spree in the month of April with another Rs 2,542 Crs foreign money flowing into the markets. MF’s continued to be net buyers for a consecutive month.

Flows in Rs cr May 2016

April 2016

Mutual Funds (MFs)

7,149 (576)

Foreign Institutional Investors (FIIs)

2,542 8,416

Sector Returns for May 2016

Source: Bloomberg

Capital Goods, Bankex and Auto Indices have been

outperformers for May 2016. Healthcare, Oil & Gas

and Consumer Durables have been the laggards during

the same period.

3.95%

0.61% 0.58%

-4.35%-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Equity 10 yrTreasuries

Cash Gold

Asset Class Returns For May 2016

Equity 10 yr Treasuries Cash Gold

47 3771

-53

83133

-3

128 113 97

18 15

-6

4

9

12

5

46

42

35

-51

160

46

-7

-100

-50

0

50

100

150

200

250

300

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

FII F

low

s (i

n `

00

0 C

rs)

Equity Debt

-2.2

-0.4

-0.2

-0.2

-0.1

1.1

1.4

1.7

2.2

2.9

4.1

4.5

4.7

4.8

5.2

9.6

-14.0 0.0 14.0

S&P BSE Health Care

S&P BSE OIL & GAS Index

S&P BSE Consumer Durables

S&P BSE PSU

S&P BSE METAL Index

S&P BSE Small-Cap

S&P BSE Power Index

S&P BSE TECk Index

S&P BSE IT

S&P BSE Mid-Cap

S&P BSE SENSEX

S&P BSE FMCG

S&P BSE Realty Index

S&P BSE AUTO Index

S&P BSE BANKEX

S&P BSE Capital Goods

Sector Returns for May 2016(%)

June 2016 5


Oil – Strikes 50

Both Brent and West Texas Intermediate oil futures

cracked $50 this month for the first time since

October 2015. Crude has surged more than 80

percent from a 12-year low earlier this year on signs

the global oversupply will ease amid declining

output in Nigeria, where militants have been

staging a wave of attacks on oil pipelines, cutting

the country’s output to the lowest in more than two

decades and declining output in non-OPEC

countries including Canada.

We believe this turnaround is more supply driven

rather than demand driven. The prospects of a

sustainable turnaround look opaque in the current

market environment with the resurgence of Iran in

to world oil markets and a potential resurgence of

US shale gas if price sustains at current levels and

we see more optimism. We still live in a world

marred by oversupply of oil, and the current

outages in supply are short term and reversible. A

strengthening dollar could further weaken the

demand for crude oil. We could see this supply

driven volatility in oil prices in the shorter term,

however, unless we see global demand recovering

significantly, the outlook still remains weak for oil.

US rate Hike – Is this the month?

On June 23, 2016, Britain will vote on whether to

leave the European Union or stay. If it decides to

leave the European Union, it’s tantamount to a

political earthquake in Europe, and tremors would

be felt around the globe. That would also have

some impact on the Fed’s possible rate-hike

decision in June. The Fed could wait to announce its

rate hike either in July or September after analyzing

the consequences of Britain’s referendum.

Meanwhile, the Chinese economy has slowed down

after showing signs of stabilization in the first

quarter. The economy has been impacted the worst

by the global slowdown. From a global economy

stand point things still look bleak for Fed to take a

rate hike decision in June.

Consumer prices in the United States went up 1.1%

year-on-year in April 2016, higher than a 0.9% rise in

the previous month and in line with market

expectations. The core inflation fell to 2.1% from

2.2% in the previous month. This measure of

consumer prices is more closely watched by Fed

policymakers in judging whether inflationary

pressures are rising in the economy. Overall, core

inflation seems to be gradually firming up. Based on

this it is expected that Fed is now more comfortable

and confident of the recovery in prices towards its

target of 2%. As far as jobs data is concerned, the

April data was not too encouraging. At 38,000, the

number of job gains was the smallest in the last six

years.. Basically, the three main factors for Fed to

consider a rate hike provide confusing signals, as

not all of them are moving in the same direction,

and this has resulted in Fed further sending out

confusing signals to the markets. Fed Funds futures,

a tool that measures the market’s view of the

likelihood of changes to U.S. monetary policy, show

just a 34% chance of a rate rise next month, a 57%

chance of at least one hike in July, and 82% odds by

December. We believe it might be more prudent for

the Fed to wait before raising rates, to allow time to

get a better assessment of the domestic and global

risks.

25

35

45

55

65

Crude oil

June 2016 6


Key events that are likely to move markets globally

1) On 13-14 June, the FOMC shall conclude and

announce the outcome of the monetary

policy.

2) On 16 June, the Bank of Japan (BOJ) shall

meet and announce its monetary policy.

3) On 23 June, the United Kingdom will vote in

the BREXIT referendum to decide whether to

remain in the European Union or not.

4) On 27 July, the FOMC will meet to decide on

Fed rates. This will be FOMC’s first meeting

after the BREXIT referendum.

Global Outlook

We believe globally the risks are skewed towards

weaker growth on fears of China slow down,

currency wars. New scenarios developing like the

‘Brexit’ may shake the EU and further slow the

growth. Unconventional monetary policies globally

could increasingly be a part of the problem. For

example, it could contribute to low productivity by

allowing inefficient companies to continue in

business. Another risk is the failure of these

unconventional policies having the desired effect, in

turn making the central bankers less effective

incrementally.

-800000

-600000

-400000

-200000

0

200000

400000

600000

Jun

-06

Mar

-07

Dec

-07

Sep

-08

Jun

-09

Mar

-10

Dec

-10

Sep

-11

Jun

-12

Mar

-13

Dec

-13

Sep

-14

Jun

-15

Mar

-16

US non farm payroll

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

US Inflation

June 2016 7


Indian Economy

India retains the ‘fastest growing’ large economy

tag

The first quarter of 2016 saw Indian GDP growth

accelerate to 7.9% year-on-year, from 7.3% in the

previous quarter, beating consensus expectations of

7.5% growth and cementing India’s pole position as

the fastest growing large economy in the world. The

government’s preferred measure, GVA, expanded

7.4% compared to 7.1% previous quarter. Doubts

over these numbers persist, as there is a deviation

of trends from few of the high frequency indicators

like the weak exports and IIP.

Agriculture revived in the March quarter registering

2.3% growth, against a contraction of 1.7% in the

same quarter last fiscal. A good Rabi harvest and

some base effect aided this performance.

Manufacturing grew 9.3%, vs. 6.6% growth in same

quarter last fiscal. The mining sector, too, recorded

a growth rate of 8.6%, against 10.1% growth in

same quarter last fiscal.

A thing of concern in these numbers is the

contraction of gross fixed capital formation (an

indicator of investment) by 1.9%. Thishighlights the

muted trend in private sector investments, as well

as some slowdown in the pace of growth of the

government's capital expenditure in the final

quarter of the last fiscal. Higher private

consumption expenditure showcases that

consumption still drives the economy instead of

investments.

IIP continues to be volatile

Dragged by poor manufacturing and mining output,

India's industrial production growth slowed to 0.1%

in March, compared to 2.5% during the same month

last year. For the entire 2015-16 fiscal, the factory

output grew at 2.4%, down from 2.8% in the

previous fiscal.

The manufacturing sector, which accounts for over

75% of the index, declined by 1.2% in March against

a growth of 2.7% in same month a year ago. The

sector has not done well in 2015-16 as it grew by

just 2% compared to 2.3% in the previous year.

Capital goods segment, which is a barometer of

investment, contracted by 15.4% in March as

against a growth of 9.1% year ago. During 2014-15,

the output of these goods also declined by 2.9%

compared to a growth of 6.3% in previous fiscal.

Growth in consumer durables, however, increased

by 8.7% after growing at 9.7% in February. A closer

look at monthly indicators points towards a two-

speed recovery. While urban economy seems to be

looking up, rural demand is still languishing.

Monsoon – What can we expect this year?

After two consecutive years of deficit monsoon, the

prediction of above normal monsoon this year at

106% of Long Period Average (LPA) will bring cheers

to every sphere of the economy. There is 94%

probability that monsoon will be normal to excess

this year. It is interesting to note that since 1999

(when IMD predicted 108% rainfall) this is the

highest ever rainfall projection by IMD.

5 4.6

7 7.56.4 6.7 6.7

8.47.1 7.5 7.5 7.6 7.2

7.9

Dec

-12

Mar

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

Jun

-14

Sep

-14

Dec

-14

Mar

-15

Jun

-15

Sep

-15

Dec

-15

Mar

-16

India GDP

-5.0

0.0

5.0

10.0

15.0

Oct

-13

Dec

-13

Feb

-14

Ap

r-1

4

Jun

-14

Au

g-1

4

Oct

-14

Dec

-14

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

Dec

-15

Feb

-16

IIP

IIP 6m moving average

June 2016 8


Several agencies from around the world, including

the IMD, have hinted that this year monsoon could

be better than previous years due to the waning of

El Nino. Even some models have predicted La Nina

conditions in the last stage of monsoon, which will

increase the probability of good rains.

Since 1950, there have been 23 El Nino years and 22

La Nina years. Last 2 years were very strong El Nino

years whereas this year is expected to be La Nina

year and research suggests that during 71% of the

years followed by El Nino years, monsoon was

normal or above normal (>=96% of LPA).

As agriculture in India depends heavily on

monsoons, and given its contribution to GVA

growth is around 15%, the above normal monsoons

will surely have a positive impact on agriculture,

thereby boosting economic growth.

Around 60% of the cropped area in India is rain-fed.

Given the fact that around 75% of rainfall occurs

during June- September period, the fate of the

kharif crops depends on the Southwest monsoon.

Farming community in India, thus remain at the

mercy of the Rain-Gods. Because of the monsoon

rains in last two years, the country’s food grain

production declined to 252 million tonne and 253

million tonne in 2014-15 and 2015-16, respectively

from a record production of 265 million tonne in

2013-14. This year’s above normal monsoon along

with the Government’s initiative to fast track 89

irrigation projects will help 80.6 lakh hectares under

cultivation.

We believe that the agricultural GDP is most likely

to witness a robust performance in the current fiscal

and may even touch 7-8% mark because of the IMD

projections amid the Government’s plan to lift

agriculture sector. This may pull up GDP by as much

as 50 basis points.

Direct benefit by Monsoon to GDP is evident

through Agriculture production’s high correlation

but there is a belief that due to Monsoon, food

inflation will be under control, and this will give

some leeway for interest rate cuts. We have tried to

analyse the correlation between a good monsoon

with CPI Food and beverages inflation.

Cumulative rainfall

(Jun-Sep) % of LPA

CPI food and

beverages inflation %, y-o-y

Rural Wages

%, y-o-y

MSP hikes

% y-o-y

FY02 92.2 2.8 2 4.9

FY03 80.8 2.7 4.3 0.4

FY04 102.3 3.7 2 5.7

FY05 86.2 2.2 1.3 3.1

FY06 98.7 4.2 4.7 2.2

FY07 99.6 9.1 6.8 3.7

FY08 105.7 8.4 9.4 13.8

FY09 98.3 12.4 11.8 23.6

FY10 78.2 15.1 18 8.1

FY11 102 9.9 19.8 4.9

FY12 101.6 6.3 22.2 14

FY13 92.9 11.2 18.1 17.6

FY14 105.7 11.9 13.1 4.7

FY15 88 6.5 5.9 2.6

FY16 86 5.1 4.3 3.9

Overall, our analysis suggests that though

agricultural production is at the mercy of Rain Gods,

monsoons are not the primary driver of food price

inflation. Even with below-normal rains, food price

inflation can remain contained, if rural wages and

MSP hikes are low (as seen in FY03, FY05 and FY16).

Similarly, despite normal/above-normal rains, food

price inflation can spiral if rural wages and MSP rise

sharply (e.g. FY08, FY09 and FY14).

June 2016 9


2 Years of Modi Sarkar – Way towards more

governance less government

The Narendra Modi government came to power

with a promise of radical economic reforms. As the

government completes two years in office, let us

see how it has fared:

The course for the reforms by this government has tried strictly to adhere with the “maximum governance, minimum government” slogan by Prime minister, Mr. Modi. As per their manifesto, a citizen friendly and accountable administration is the focus of the government. Government schemes like Jan Dhan Yojana, Sukanya Samriddhi, LPG subsidy reforms (direct benefit reforms) have helped reduce subsidies and link them to the rightful beneficiaries. Swachh Bharat Mission, Bankruptcy code and Digital India initiative has not only improved ease of doing business, but reforms like Real Estate regulations has brought transparency and accountability in the industry. All the initiatives have led India to be the fastest growing country. All said and done, there is a lot to achieve such as GST Bill and Land ordinance to pass through the Rajya Sabha. Smart Cities and Make in India initiative are few notable steps taken by the government but the implementation of it is what we have to wait and watch. Though today there are more hits than misses by

the Modi government, the government needs to

buck up as time is running out for them and there is

a lot to achieve in the coming 3 years.

Equity

The Sensex and Nifty ended the month on a positive

note, with both benchmark indices gaining ~4%

each as foreign funds and MFs were net buyers in

Indian equities. The broader market

underperformed with CNX midcap gaining 0.74% &

CNX smallcap gaining 0.30%.

Earnings update

Nifty sales, EBITDA and PAT grew 3.4%, 12.8% and -

0.5% which differs from the ~10% PAT growth

number doing rounds which is excluding Banks, Oin

and gas companies. Operating margins for Nifty

universe came in at a five-year high of 25.3%, an

expansion of 210bp YoY on the back of fall in global

commodity prices. 74% of Nifty universe posted in-

line or higher than estimated PAT; 84% posted in-

line or higher than estimated EBITDA.

Sales growth was led by Autos (17%), Private Banks

(21%), Technology (17%) and Healthcare (17%). Oil

& Gas ex OMCs (-16%) & Metals (-10%) reported

negative sales growth.

EBITDA growth was led by Autos (31%), Cement

(19%), Private Banks (23%), Healthcare (47%) and

Media (33%). Metals (-17%) and Oil & Gas ex OMCs

(-7%) contributed negatively.

PAT growth was led by Autos (60%), Healthcare

(43%), Cement (27%), Media (52%) and Technology

(12%). Metals aggregate PAT was INR33b v/s

expectation of INR4b loss. Performance of Capital

Goods and Telecom was well ahead of expectations.

BFSI was the major drag, impacted by sharp rise in

provisions in PSU Banks.

Overall, 4QFY16 marks a turning point for Indian

company earnings in the positive direction, we

believe. Apart from the build-up in sequential

momentum, the fact that the middle of FY16 was

marred with stresses arising out of a sudden drop in

commodity prices and poor banking system

earnings due to a push to recognise NPAs would

Acheivements

•Jan Dhan Yojana

•LPG subsidy reforms

•Sukanya Samriddhi Yojana

•Swachh Bharat Mission

•Bankruptcy code

•Real Estate regulation

•Digital India

Yet to acheive

•GST Bill

•Land Ordinance

•Smart Cities

•Make In India

June 2016 10


mean that the base of earnings would make for a

significant recovery in earnings in FY17.

Outlook

The current month ended on a good note surprising

many with a rally and catching investors unaware

who had Brexit and a US rate hike in their minds. In

recent months, Nifty has seen a steady run up

thanks to factors like improving global sentiment,

global liquidity, hopes that macro situation is

improving including good monsoons, earnings

revival etc. However, with every up move,

skepticism is growing as to whether this rally will

sustain, due to continued global uncertainty and

valuations.

Again, for the short term we believe that everyone

will keep a keen eye on 2 major global events in

June 1) the Fed and 2) Brexit. We believe that after

seeing such gains in few months ahead of such big

events, investors may sit on the sidelines and

evaluate once the decision is made. Which means

that we may see increased volatility in the month of

June post the calmness seen inthe last 3 months.

From an earnings point of view, this is a quarter

where things seem to be improving except with the

banks. Banking sector is still marred by NPA issues,

with ICICI bank results surprising the markets on the

downside. PSU banks’ balance sheet has only gotten

worse. Even though corporate earnings (minus

banks) have done better than analysts’

expectations, the fact is they were low to begin with

as we went in to the earnings season. The main

driver for growth has been margins and not

volumes, which needs to be watched out for to

assess the sustainability of the growth.

In the last few months, we feel that even though

the markets have rallied significantly, the earnings

may not justify this fully. This has led to stretching

valuations, with Sensex trailing consolidated PE

crossing the 20 mark in the current month. We

believe enough has been already built in terms of a

good monsoon, earnings revival (Factoring 15%

FY17 eps), and things improving globally. This leads

us to the question whether these valuations will

sustain? For this to happen, we need strengthening

of high frequency data (Auto, Cement etc), further

risk on globally and GST would surprise on the

positive as it is yet built in. Given the above factors

we believe that from a valuation stand point and

considering that most of the good news has already

been built in, any bad news could lead to higher

volatility. We believe in the short term, the risk -

reward ratio in favor of equities has slightly

reduced, and the best way to take exposure

towards equities from medium to long term is by

way of staggering one’s investment through the

next quarter or so.

Valuation ‘not so fair’

Debt

India Consumer Inflation inches up, WPI in positive

territory after 17 months.

India's annual consumer price inflation accelerated

to a stronger-than-expected 5.39% in April from

4.83% the previous month. The increase in inflation

was mainly led by food (vegetables, fruits and

sugar). WPI rose 0.34% in April after 17 straight

months of fall. Inflationary push was primarily due

to a rise in food inflation and reversal in decline in

prices of manufactured products, which rose 0.71%

in April after a long spell of deflation.

5

10

15

20

25

Nifty PE

Nifty PE Average +1 Stdev

+2 Stdev -1 Stdev -2 Stdev

June 2016 11


While the impact of the two successive monsoon

failures and the weather-impacted rabi harvest

have been largely contained, the prevailing drought

situation in many parts of the country and the

hotter-than-normal summer seem to be dampening

food supplies.

There are slight chances of an upside risk to

inflation in case of weak or delayed monsoons,

given that food constitutes around 46% of the CPI

basket. However, the confirmation of the end of the

El Nino effect by international weather agencies

augurs well for the forthcoming monsoon outlook.

Banks still resisting rate cuts due to liquidity row

The RBI has slashed rates by 150 basis points (bps)

since the start of last year, bringing the policy rate

to a five-year low of 6.50 percent, but the country's

banks have cut lending rates by less than half of it.

Banks cited reasons of low liquidity in the system,

creating a hindrance to pass on the benefit to the

end consumer. At RBI’s policy review on April 5 RBI

governor committed to creating liquidity deficit to

near zero, post which RBI has injected around 400

billion rupees into the system. However, it seems

the current increase in liquidity is still not enough

for banks to transmit rates. Even though we expect

the liquidity deficit to narrow further, we will have

to wait and see RBI’s comments on the pace at

which it would be done.

Outlook

As far as the monetary policy is concerned, we have

been of the opinion that RBI would maintain status

quo until the end of 2016, unless we see RBI

undershooting its inflation target which looks highly

unlikely given the recent CPI numbers that surprised

the markets on the upside. Rather than more rate

cuts, we believe the focus of monetary policy will

remain towards enabling better transmission

through greater liquidity infusion. Going forward,

the RBI will be cautious of the food inflation and a

bottoming of global commodity prices is also a

factor that will limit the benefits of falling

commodity prices that we saw in 2015. Also, the

expectation of a higher bond supply by government

would keep the yields hardened. We believe due to

reasons outlined above, there would be merit in

being on the shorter end of the yield curve. -10

-5

0

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May

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No

v-1

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Mar

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No

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5

Jan

-16

Mar

-16

Inflation

CPI WPI

June 2016 12


Citadelle Growth Opportunities Portfolio

Company Name 3 yr Avg ROE PAT 3yr CAGR Dividend Yield(%)

Star Rating

Ahluwalia Contracts (India) Ltd. 1.04 133.11 0.00

AIA Engineering Ltd. 19.71 33.44 0.64

Ajanta Pharma Ltd. 41.05 58.81 0.49

Aurobindo Pharma Ltd. 27.95 236.96 0.37

Avanti Feeds Ltd. 41.93 60.69 1.79

Bajaj Corp Ltd. 33.50 12.86 2.50

Bajaj Finance Ltd. 20.11 30.20 0.44

Bajaj Finserv Ltd. 27.26 8.42 0.13

Bosch Ltd. 17.71 6.01 0.33

Cadila Healthcare Ltd. 27.33 20.28 0.69

Caplin Point Laboratories Ltd. 49.84 72.28 0.54

CCL Products (India) Ltd. 21.00 37.34 0.84

Cholamandalam Investment & Finance Company Ltd. 17.88 37.96 0.60

DB Corp Ltd. 25.60 16.06 2.09

Gillette India Ltd. 14.84 27.78 0.33

Gujarat Pipavav Port Ltd. 15.43 89.17 0.00

Gulf Oil Lubricants India Ltd. 24.48 356.17 1.08

Himachal Futuristic Communications Ltd. 88.88 179.95 0.00

Honeywell Automation India Ltd. 12.70 2.15 0.15

JM Financial Ltd. 11.29 43.00 2.81

Kitex Garments Ltd. 36.80 53.67 0.23

KRBL Ltd. 23.73 63.85 1.02

Lupin Ltd. 30.37 40.13 0.37

Marksans Pharma Ltd. 39.39 117.64 0.19

Navneet Education Ltd. 26.35 18.83 2.22

Procter & Gamble Hygiene & Health Care Ltd. 30.49 24.03 0.45

Skipper Ltd. 19.20 107.95 0.85

Sonata Software Ltd. 15.69 204.12 3.93

Tata Elxsi Ltd. 28.13 38.09 0.95

Vinati Organics Ltd. 31.48 28.29 0.67

Note: Post changes in portfolio from 8th Jan ’16, portfolio construct has become more diversified, hence we have changed the benchmark to Nifty 500 from Nifty 50.

90%

10%

Citadelle Growth Opportunities Portfolio Current Asset Allocation

Equity Cash

91.80

82.6380859095

100105110115120

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Citadelle Growth Opportunities Portfolio Performance

Citadelle Growth Opportunities Portfolio NAV Benchmark*

104.61

93.38

80859095

100105110115120

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6



106.74

96.44

80859095

100105110115120

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16



June 2016 13


Model Portfolio: Conservative

Conservative Market Cap wise (%)

Asset Class Sub-Asset Class Mutual Fund Schemes

Strategic

Tactical

Large cap Mid &

Small cap

Others

Equity - - PMS - - Large Cap - - ICICI Pru Focused BlueChip Eq Fund - - 82.4 9.4 8.2

Birla SL Frontline Equity Fund

- - 88.9 3.0 8.1

Mid & Small Cap - - BNP Paribas Mid Cap Fund - - 28.2 66.7 5.1

Edelweiss Emerging Leaders Fund - - 15.8 77.8 6.4

Mirae Asset Emerging BlueChip - - 30.3 65.7 4.0

Multi Cap - - MOSt Focused Multicap 35 Fund - - 87.8 12.1 0.0

Birla SL Pure Value Fund - - 17.4 76.0 6.6

Franklin India High Growth Cos Fund - - 57.3 24.9 17.8

Thematic / Sectoral Funds - - Equity Hybrid Funds - - Average

Maturity Years

Mod

Duration Years

YTM

(%)

Debt 90.0% 90.0% Short Term 30.0% 30.0% Axis Short Term Fund 10.0% 10.0% 2.7 2.0 8.0

Franklin India ST Income Plan 10.0% 10.0% 2.5 2.3 10.5

HDFC STP 10.0% 10.0% 2.2 1.8 9.8

Dynamic Bond Funds 30.0% 30.0% IDFC Dynamic Bond Fund-Reg 10.0% 10.0% 15.9 8.7 7.8

SBI Dynamic Bond 10.0% 10.0% 17.5 8.5 7.8

UTI Dynamic Bond Fund-Reg 10.0% 10.0% 14.8 7.2 8.1

Income Funds 30.0% 30.0% DWS Premier Bond Fund 10.0% 10.0% 1.8 1.5 8.0

HDFC Income Fund 10.0% 10.0% 16.4 8.1 8.0

UTI Bond Fund 10.0% 10.0% 16.3 7.9 8.2

Gilt - - Debt Hybrid Funds - -

Cash 5.0% 5.0% Liquid Funds - - Ultra Short Term 5.0% 5.0%

Gold 5.0% 5.0% Gold 5.0% 5.0% Total 100.0% 100.0%

0.0%

90.0%

5.0%5.0%

Strategic Portfolio

Equity Debt Cash Gold

0.0%

90.0%

5.0%5.0%

Tactical Portfolio


90

95

100

105

110

115

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-

15

Sep

-15

Oct

-15

No

v-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16

May

-16

Conservative UCI Index

June 2016 14


Model Portfolio: Moderately Conservative

Mod Conservative Market Cap wise (%)


Strategic

Tactical

Large cap Mid &

Small cap

Others

Equity 25.0% 25.0% PMS - - Large Cap 25.0% 25.0% ICICI Pru Focused BlueChip Eq Fund 12.5% 12.5% 82.4 9.4 8.2


12.5% 12.5% 88.9 3.0 8.1

Mid & Small Cap - - BNP Paribas Mid Cap Fund - - 28.2 66.7 5.1


Mirae Asset Emerging BlueChip - - 30.3 65.7 4.0




Thematic / Sectoral Funds - - Equity Hybrid Funds - - Average

Maturity Years

Mod

Duration Years

YTM

(%)



HDFC STP 10.0% 10.0% 2.2 1.8 9.8


SBI Dynamic Bond 10.0% 10.0% 17.5 8.5 7.8


Income Funds 5.0% 5.0% DWS Premier Bond Fund - - 1.8 1.5 8.0

HDFC Income Fund - - 16.4 8.1 8.0

UTI Bond Fund 5.0% 5.0% 16.3 7.9 8.2

Gilt - - Debt Hybrid Funds - -

Cash 5.0% 5.0% Liquid Funds - - Ultra Short Term 5.0% 5.0%

Gold 5.0% 2.5% Gold 5.0% 2.5% Total 100.0% 100.0%

80

100

120

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-

15

Sep

-15

Oct

-15

No

v-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16

Mod Conservative

25.0%

65.0%

5.0%5.0%

Strategic Portfolio


25.0%

65.0%

5.0%5.0%

Tactical Portfolio


90

95

100

105

110

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-

15

Sep

-15

Oct

-15

No

v-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16

May

-16

Mod Conservative UCI Index

June 2016 15


Model Portfolio: Balanced

Balanced Market Cap wise (%)


Strategic

Tactical

Large cap Mid & Small cap

Others



15.0% 15.0% 88.9 3.0 8.1

Mid & Small Cap 15.0% 10.0% BNP Paribas Mid Cap Fund 7.5% 5.0% 28.2 66.7 5.1


Mirae Asset Emerging BlueChip 7.5% 5.0% 30.3 65.7 4.0




Thematic / Sectoral Funds - - Equity Hybrid Funds - 5.0% Edelweiss Absolute Return Fund 5.0%

%

Average Maturity Years

Mod Duration Years

YTM (%)



HDFC STP 10.0% 10.0% 2.2 1.8 9.8


SBI Dynamic Bond - - 17.5 8.5 7.8


Income Funds - - DWS Premier Bond Fund - - 1.8 1.5 8.0


UTI Bond Fund - - 16.3 7.9 8.2

Gilt - - Debt Hybrid Funds - - DSPBR Dynamic Asset Allocation Fund - - - - -

Cash - - Liquid Funds - - Ultra Short Term - -

Gold 10.0% 10.0% Gold 100.0% 100.0%

45.0%

45.0%

0.0%

10.0%

Strategic Portfolio


45.0%

45.0%

0.0%10.0%

Tactical Portfolio


90

95

100

105

110

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-

15

Sep

-15

Oct

-15

No

v-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16

May

-16

Balanced UCI Index

June 2016 16


80.0

90.0

100.0

110.0

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-

15

Sep

-15

Oct

-15

No

v-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16

May

-16

Mod Aggressive UCI Index

Model Portfolio: Moderately Aggressive

Mod Aggressive Market Cap wise (%)


Strategic

Tactical


Others



15.0% 15.0% 88.9 3.0 8.1


Edelweiss Emerging Leaders Fund 10.0% 6.0% 15.8 77.8 6.4


Multi Cap 10.0% 10.0% MOSt Focused Multicap 35 Fund 10.0% 10.0% 87.8 12.1 0.0



Thematic / Sectoral Funds - - Equity Hybrid Funds - 12.0% Edelweiss Absolute Return Fund 12.0% Average

Maturity Years

Mod Duration Years

YTM (%)



HDFC STP - - 2.2 1.8 9.8

Dynamic Bond Funds - - IDFC Dynamic Bond Fund-Reg - - 15.9 8.7 7.8


UTI Dynamic Bond Fund-Reg - - 14.8 7.2 8.1



UTI Bond Fund - - 16.3 7.9 8.2


Cash - -

Liquid Funds - - Ultra Short Term - -

Gold 10.0% 10.0%

Gold 10.0% 10.0% Total 100.0% 100.0%

70.0%

20.0%

0.0%10.0%

Strategic Portfolio


70.0%

25.0%

0.0%5.0%

Tactical Portfolio


70.0%

20.0%

0.0%10.0%

Tactical Portfolio


June 2016 17


Model Portfolio: Aggressive

Aggressive Market Cap wise (%)


Strategic

Tactical


Others



15.0% 15.0% 88.9 3.0 8.1


Edelweiss Emerging Leaders Fund 10.0% 6.6% 15.8 77.8 6.4


Multi Cap 30.0% 30.0% MOSt Focused Multicap 35 Fund 10.0% 10.0% 87.8 12.1 0.0

Birla SL Pure Value Fund 10.0% 10.0% 17.4 76.0 6.6

Franklin India High Growth Cos Fund 10.0% 10.0% 57.3 24.9 17.8

Thematic / Sectoral Funds - - Equity Hybrid Funds - 10.0% Edelweiss Absolute Return Fund 10.0% Average

Maturity Years

Mod

Duration Years

YTM

(%)

Debt - - Short Term - - Axis Short Term Fund - - 2.7 2.0 8.0

Franklin India ST Income Plan - - 2.5 2.3 10.5

HDFC STP - - 2.2 1.8 9.8

Dynamic Bond Funds - - IDFC Dynamic Bond Fund-Reg - - 15.9 8.7 7.8


UTI Dynamic Bond Fund-Reg - - 14.8 7.2 8.1



UTI Bond Fund - - 16.3 7.9 8.2


Cash - - Liquid Funds - - Ultra Short Term - -

Gold 10.0% 10.0% Gold 10.0% 10.0% Total 100.0% 100.0%

90.0%

0.0%0.0%10.0%

Strategic Portfolio


90.0%

0.0%0.0%

10.0%Tactical Portfolio


80

90

100

110

120

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5M

ay-1

5Ju

n-1

5Ju

l-1

5A

ug-

15

Sep

-15

Oct

-15

No

v-1

5D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16

May

-16

Aggressive Nifty

June 2016 18


Thank you for your time!

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Economy & Finance

Alpha edge - June 2016