alpha edge - february 2016

www.citadelle.in

Questions

Insight

Analysis

Action

“The Known Unknown”

India Strategy | February 2016

February 2016 3

The Known Unknown India Strategy | February, 2016

Foreword

Dear Investor,

Bidding adieu to a tumultuous ride in 2015 everyone was more than happy to welcome 2016

not knowing that infact another bout of fresh volatility was waiting to welcome us. It was not

a great start to the year with oil prices falling and a further devaluation of Yuan resulting in

poor performance of risky assets across the world with some entering the bear phase. Back

home we saw markets fell almost 5% for the month with FII’s withdrawing huge sums signaling global risk aversion.

Fear grips the world markets as everyone is battling against each other through currency wars in order to make their

exports cheaper and take the larger pie of the available growth. The move in CNY and the decision of bank of Japan to cut

rates in to the negative territory highlights the same. Devaluation of Yuan is also an acceptance of the low domestic

demand, the risk of this could be an export of deflationary forces to the world. Talks about the fears of a recession in the

US too have started. Even though we have cautious stance on global growth at this stage we feel these fears may be

overdone as the consumption growth in the US fares better on the back of falling oil prices. 2016 seems to be a battle with

the ‘known unknowns’ be it the how many Fed rate hikes in 2016 to how much further devaluation of the Yuan and the

ripple effect of the same and the result would be elevated global volatility.

Back home India projects a stark contrast to what is happening in the world economy with its strong fundamentals

supported by an able central banker and a government that is focused on structural growth. While we may have seen

slower pace of legislative reforms in the recent pass there has been lot of ground work with respect to the non-legislative

one’s which helps in repairing and building long term pillars of sustainable growth. With RBI’s constant focus on bringing

down inflation, forcing the banks to bring down the NPA’s and encouraging competition in the banking space sows seed

of a sustainable long term growth, however as we have mentioned in our Jan 2016 report that all of these long term

measures come with short term pain.

We are half way through our earnings season and looks to be like another quarter with tepid earnings growth albeit better

than last quarter. Revenues continue to be in the negative territory reflecting the fall in commodities and a weak global

environment. Another factor that has affected the earnings is a weak rural demand, an outcome of 2 back to back weak

monsoon season. Understandably, FMCG & metals have taken the worst hit. On the brighter side we have seen margin

expansion on the back of lower commodity prices. With signs of La Nina there seems a possibility that monsoons would

be ‘Neutral’ this year, this along with 7th pay commission is expected to lift the rural consumption. We do believe that

once the growth engines fueled by the government and the RBI starts to show its effect coupled with favourable monsoon

season would be followed by earnings recovery in the latter part of next financial year.

How much ever better we may be as compared to our EM peers there is no doubt that our equity markets too will respond

to the global volatility in the short term resulting out of the ‘Known unknowns’ and there is no getting away from that.

Even though we stand to benefit from the long term flows once the dust settles. Having said that 2016 is a year of fear

and skeptics, and it is a well-documented fact that fresh investments in stressed times yields better returns form a long

term point of view.

Warm Regards,

A V Srikanth

February 2016 4

Alpha Edge | “The Known Unknown”

Asset Class performance

Asset Class returns for January 2016

Source: Bloomberg

January has been turbulent for all emerging markets. Post the Fed rate hike the outflow from the EMs have been massive which has resulted in Equity markets spiraling down by 4.82%. Investors again have shifted their assets towards Gold as a safe haven and it has been the best performer with returns of 6.40% for the month.

FII Flows for Jan 2016

Source: ACEMF

Equity as well as Debt markets have seen outflows in December. Equities saw a net outflow of Rs 13,943Crs whereas Debt market has seen net outflow of Rs 3,175Crs.

Sector Returns for January 2016

Source: Bloomberg

Consumer Durables, IT and Teck Indices have been

outperformers for January 2016. Capital Goods, Realty

and Bankex have been the laggards during the same

period.

-4.82%

0.27% 0.62%

6.40%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

Equity 10 yrTreasuries

Cash Gold

Asset Class Returns For CY 2015

Equity 10 yr Treasuries Cash Gold

47 3771

-53

83133

-3

128 113 97

18-14

-6

4

9

12

5

46

42

35

-51

160

46

-3

-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

Jan

20

16

FII F

low

s (i

n `

00

0 C

rs)

Equity Debt

-12.5

-10.1

-8.9

-8.5

-8.2

-8.0

-6.8

-6.5

-6.1

-5.5

-4.8

-3.6

-3.1

-2.1

0.9

1.5

-35.0 -21.0 -7.0 7.0 21.0 35.0

S&P BSE Capital Goods

S&P BSE Realty Index

S&P BSE BANKEX

S&P BSE PSU

S&P BSE Small-Cap

S&P BSE AUTO Index

S&P BSE METAL Index

S&P BSE Mid-Cap

S&P BSE Power Index

S&P BSE FMCG

S&P BSE SENSEX

S&P BSE Health Care

S&P BSE OIL & GAS Index

S&P BSE TECk Index

S&P BSE IT

S&P BSE Consumer Durables

Sector Returns for Jan 2016(%)

February 2016 5


US Interest rates – Fed holds the line…for now

Most of 2015 went in predicting when would Fed

hike interest rate, and it happened right at the end

of the year. Fed finally raised interest rates by 25

bps in December 2015. So now from ‘when would

the first rate hike happen’ to ‘how many rate hikes

would happen in 2016’ is the big question for the

year and the market is expecting the Fed to go slow

on the rate hikes, but is the Fed listening?

Fed in its January meet opted not to raise the

interest rates as was expected by the markets.

However Fed gave no indication of whether it

would consider changing the course of hiking the

rates. Fed did issue a statement saying it is closely

monitoring the global economic and financial

developments referring to the volatility that has led

everyone to dismiss the possibility of a rate hike for

January. This led to selling on wall-street

immediately after the Fed statement as everyone

perceived Fed statement to be more on the hawkish

side.

The main issue currently is with the expectation of

the markets with respect to the hikes in 2016. Fed

had earlier indicated that it would hike as many as 4

times in the calendar year, however with the recent

turmoil in the global markets the market

participants are pricing in one or two hikes. If Fed

actions are not near to market expectations and

they are seen hiking interest rates based on

indicators of full employment while ignoring the

feedback from markets it would lead to further

outflows from EM’s and increase in volatility.

We believe that the US economy data has been

mixed with a lower inflation numbers, an improving

job numbers, stagnant wage growth and a

strengthening dollar. If the inflation numbers do not

improve and any signs of slowing growth would force

the Fed to relook at the forecasts and adjust it to

lower hikes accordingly.

Source: Bloomberg

Chinese economy – To worry or not to worry?

Chinese equity and currency markets exhibited a

great deal of weakness since the start of 2016, just

like in August the global markets too suffered. The

first trading day of the year saw the Shanghai

exchange drop 7%, a move many attributed to a

weaker than expected PMI.

China's economy ended last year with 6.9 per cent

growth, short of the 7 per cent target, significantly

lower than the 7.3 per cent growth of 2014 and 7.7

per cent of 2013. Growth for this year is expected to

be even lower, at around 6.5 per cent to 6.7 per

cent. Quarter by quarter, China's economic growth

has been slowly coming down since 2011. China's

slowdown has now deepened, and is set to be

sustained.

Recent lower growth has been the outcome of rapid

structural change in the economy. In the past, its

investment-driven growth was marked by a lot of

humming industrial activities fuelled by easy credit,

high consumption of energy and power and massive

imports of raw materials. As China's economic

-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

US Inflation

0.03

0.53

1.03

1.53

2.03

2.53

3.03

Unites states hourly wage growth

February 2016 6


5.65.8

66.26.46.66.8

31

-Jan

-14

31

-Mar

-14

31

-May

-14

31

-Ju

l-1

4

30

-Se

p-1

4

30

-No

v-1

4

31

-Jan

-15

31

-Mar

-15

31

-May

-15

31

-Ju

l-1

5

30

-Se

p-1

5

30

-No

v-1

5

31

-Jan

-16

USD/CNY

growth is increasingly dependent on domestic

demand and service activities, which all is in

transition to change. Whatever stimulus measures

that are to be taken, they would not revive China's

past high growth, but merely stabilise or slow its

downward growth process.

With China's macroeconomic fundamentals

continuing to be weak, along with the prospects of

further strengthening of the US dollar, the yuan

remains under strong downward pressure. It is

widely expected to devalue further against the US

dollar this year as Yuan will become a more

important part of their playbook. This would further

result in export of deflationary forces in to the

global markets.

As the effect of stimulus fades we do expect

continued macroeconomic weakness in the Chinese

economy laden with high debt and low domestic

demand which would further result in a lower

demand environment globally.

Crude oil below $30

Brent crude made a new low of $26.15 per barrel in

the month of January 2016 hitting 12 year low. Oil

fell almost 25% since the start of the calendar year

with the continuing supply glut. This was steepest

fall in many years, piling more pain on oil drillers

and producing nations alike.

Post the fall crude prices saw a rebound to $35

levels on talks that OPEC and Russia may reach a

deal to curtail output. However we still feel we are

not near to bottom based on reasons outlined

below.

Firstly Iran, the second largest producer of oil is yet

to hit the market with its supplies adding 500,000

barrels to an already 1.5 million barrel oversupplied

market. Crude inventory is building up and the cost

of storage is increasing, as soon as producers run

out of storage space it will put pressure on crude

prices, EIA reported U.S. crude stockpiles rose by 8.4

million barrels in the previous week, pushing total

oil in storage to a record high. Also with China

slowing down the incremental demand too will get

affected as China constituted a major portion of the

incremental demand for crude oil.

We could see price bumps like we saw during

January end on the news and talks about any effort

of OPEC & non OPEC countries towards curtailing

supply

8.0 7.8

7.5

7.9 7.6

7.3 7.4 7.2 7.2

7.0 7.0 6.9 6.8

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

China GDP

25

35

45

55

65

2-J

an-1

5

2-F

eb

-15

2-M

ar-1

5

2-A

pr-

15

2-M

ay-1

5

2-J

un

-15

2-J

ul-

15

2-A

ug-

15

2-S

ep

-15

2-O

ct-1

5

2-N

ov-

15

2-D

ec-1

5

2-J

an-1

6

Crude oil

February 2016 7


Baltic Dry Index – Drops below 300

We have been closely monitoring the Baltic Dry

Index as it is generally seen as a signal that the

global economy could once again be slowing. So

when there's more demand for cross-ocean

shipping of goods, rates go up. Therefore, when the

price rises, productivity globally is thought to be

increasing. The same goes for when rates drop,

which usually signals too many carriers without

enough goods to ship.

Baltic dry index touches all-time low

Source: Bloomberg

The Baltic dry index too has fallen to its lowest level

on record, a drop of 60 per cent from the previous

low in 2008 amid signs of Global demand. While few

believe that, as the Index comes from the price of

raw materials; considering the deflationary spiral in

commodities, the drop in the index to all-time lows

shouldn’t be a shock.

However, the depths that the index is now lessening

is quite alarming and suggests trouble in the global

trade picture. It would also suggest perhaps that the

deflationary pressure is not just a supply issue.

Indian Economy

Volatile IIP weakens in November

Industrial output contracted 3.2% in November

from a year earlier, compared with upwardly

revised growth of 9.9% the previous month. High

base and a lack of demand and an end to a festive

season could have impacted the IIP numbers. The

manufacturing sector, which constitutes over 75 per

cent of the index, contracted by 4.4 per cent as

against a growth of 4.7 per cent in the same month

last year. Capital goods output, which is a

barometer of investment, contracted by 24.4 per

cent in November 2015 compared to a growth of 7

per cent in same month of previous year. Strong

growth in durables continued (12.5%) but non-

durables presented a volatile contrast with

degrowth of -4.7% reflecting rural demand

weakening on the back of 2 years of poor

monsoons.

We do expect the volatility in IIP to continue given

the slow growth in global economy especially

slowdown in China and domestic concerns on weak

rural demand.

In a weak global demand scenario domestic demand

is of key to push the growth engines of the

economy. A good monsoon in 2016 along with the

7th pay commission would be key to the pickup in

rural demand by second half of 2016.

Source: Bloomberg

0

2000

4000

6000

8000

10000

12000

14000

Baltic dry Index

-1.3

0.11.1

-2.0-0.5

3.75.6

4.3

0.90.52.6

-2.7

5.23.62.8

4.82.53.02.5

4.24.16.3

3.8

9.9

-3.2

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

IIP

February 2016 8


INR to weaken further

We believe the fundamental factors favoring further

weakening in INR/USD are still intact. We expect

further depreciation of INR to 68-70 in the next six

to nine months, with a fair possibility of it breaching

70 during the next 12 months. In our view, there is

considerable scope for INR/USD to depreciate, such

as –

i) Chinese yuan could be in for an extended

depreciation phase due to Fiscal expansion,

lowering policy rates, rebound in money supply

growth. Similar correction in EM currencies can

heighten INR overvaluation and subsequently its

depreciation.

ii) Current Over allocation into EMs, including India

against the backdrop of narrowing growth

differential between EMs and DMs can risk portfolio

flows.

Source: Bloomberg

List of 20 smart cities released

The government released the list of 20 cities that

have won the smart city challenge, with

Bhubaneshwar getting the first rank. It marks a

paradigm shift in the approach towards urban

development in the country. These 20 cities will be

the first to receive funds, hence facilitating the

process of developing them into 'smart cities'.

Few features of smart city are adequate water

supply, assured electric supply, sanitation, robust IT

connectivity, healthcare, education, affordable

housing etc. It would directly benefit the 3.54 crore

people living in these 20 cities apart from benefiting

the real estate sector especially the affordable

housing segment. With this initiative these cities

would become showcases of urban infrastructure

development. Smart city initiative would be a game

changer in raising the standard of infrastructure of

the cities in the country as it would encourage others

to follow suit

Fixing structural issues

Primarily India is suffering from a lack of demand

and the drivers for growth are taking time. The

easier solution would have been to reduce the

interest rate and spur the demand but with RBI

governor focused on breaking the back of inflation

(rightly so) that measure is ruled out. Hence, that

leaves the government with long haul solutions like

fixing the structural issues. We believe that there

has been lot of government action to fix historical

issues across policy-challenged sectors and that the

visibility of these efforts will slowly start to come

through. It is these efforts of RBI and Indian

government that have made India a stand out in a

weak global environment. RBI did mention that they

still hold an accommodative stance and said that

the central bank has the option of effecting an inter

meeting rate cut.

40

45

50

55

60

65

70

75

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

USD/INR

February 2016 9


Fixed income

RBI maintains status quo

As expected RBI maintained status quo and did not

tinker with the policy rates in its last bi monthly

policy meet of the financial year, this was on the

back of 125 basis point reduction in 2015. RBI gave

clear indications that it would like to wait until the

budget announcements which is due end of

February before taking any additional measures. RBI

also highlighted that though inflation has charted

the projected territory until now however, there

could be upside risks to inflation due to the 24%

salary hike recommended in the 7th pay

commission. RBI’s -current projected inflation for

Mar 2017 is 5%.

CPI Inflation rises for 5th straight month

Even though the CPI inflation index fell it inched up

to 5.61% in December 2015 over the same period in

the previous year, while recording rise for fifth

straight month. Some of the rise could also be

attributed to a low base effect of last year. Core

inflation rose to 4.5% with food inflation continued

its rise to 6.3%. Volatility in food inflation and an

unfavourable base effect could drive inflation

further, however we do believe RBI would be able

to achieve its Jan 2016 target of 5.8%.

Outlook

We believe that the drivers that forced inflation

down the last year (Crude oil, metals and other

commodities) are slowly bottoming out or the

downside seems limited from these levels. Once

these deflationary forces fizzle out, there could be

upside risks to the inflation number. Another thing

that could affect the inflation is the fiscal deficit.

Governments fiscal deficit stood at 88% of the

annual target (although better than 100.2% of last

year) of 3.9% and with around 70,000 cr. Subsidy

payment pending to the food corporation of India

this number could widen further. If the government

decides to delay the fiscal road map as it did last

year in order to increase public expenditure to spur

demand then, it could put further upside risks to

inflation. With a real rate of return target of 1.5-2%

and an inflation target of 5% in March 2017, risks of

interest rate hike by US Fed and upside risks to

inflation means room for further rate cuts for RBI is

limited. We believe it is prudent to invest in

dynamic bond funds so as to capture any yield

movement on the downside post which these funds

would have the freedom to move towards the

shorter end of the yield curve.

Equity – Another challenging quarter?

Markets witnessed a very volatile month with Nifty

touching lows of ~7260 and then closing at 7563,

down 4.8% for the month. CNX midcap ended -

6.92% for the month as compared to 1.12% for the

previous month. Small cap index ended -11.02% as

compared to 1.93% for the previous month. This is

one of the few months in recent times where Mid &

small caps have underperformed their larger peers.

FII & DII Flows

FII’s continued the selling spree on the back of falling

oil prices, lack of domestic earnings visibility, low

global growth environment & expectations of further

rate hikes by Fed. FII’s sold around $1.8 billion in

Indian equities in the month of January. On the

contrary DII’s continued their buying spree with

around 12,800 cr. of equity bought in January.

-10

-5

0

5

10

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

CPI and WPI

CPI WPI

February 2016 10


Flows in Rs cr January 2016

December

2015

Domestic Institutional Investors (DIIs)

Mutual Fund

6,702 4,544

Insurance 6,172 1,783

Total 12,875 6,327

Foreign Institutional Investors (FIIs)

(13,943) (2,816)

Results update

Based on the results declared by Nifty companies till

date it seems this would be another challenging

quarter for Indian companies. This quarter has been

marred with inconsistency and mixed trends as the

companies who depend on global commodities as

their input have improved profitability even though

subdued demand continues to weigh on the

revenue growth. Overall 25 Nifty companies have

come out with their results at the time of writing

this report with an average PAT growth of 5.5% and

a fall in the revenue of around 5% signifying the low

growth environment. We expect the overall

earnings growth to be in the lower single digit range

as lot of metal companies and PSU banks are yet to

declare the results which could drag the 7.5%

growth number lower.

From a sectoral point of view we have seen a fall in

revenues of energy companies (However there is

margin expansion) & metals. Another visible trend is

weak topline growth of FMCG companies signifying

reduced expenditure of the Indian consumer

especially discretionary expense. On the domestic

demand front the numbers suggest a stable urban

demand but the rural demand continues to be weak

thanks to the weak monsoon season. As far as the

banking sector is concerned until now most of the

private banks have come out with their results with

around 11% PAT growth, however this number

could end up lower as PSU banks are yet to declare

results.

Amongst the stocks that outperformed was RIL

which reported a record quarterly profit, beating

analysts’ estimates, as margins in its core refining

business expanded to the highest in seven years

because of the slump in crude oil prices, Power Grid

results were quite strong on the back of robust

capitalization during the quarter, topline growth

was strong at 24.2% yoy led by strong growth in the

transmission revenues and higher contribution from

other segments. Reported PAT jumped 31.4% yoy

led by higher contribution from consultancy

revenues, UltraTech Cement Ltd, India's largest

maker of the building material, reported 36%

increase in profit for the three months ended 31

December, driven by lower operating costs.

Outlook

2016 started on a subdued note and further toned

down the expectation, which wasn’t the case in

2015 where we started on high expectations of a

quick turnaround of the Indian economy, which only

made things worse and the hope rally soon was

dashed with realism and a weak global scenario

which resulted in dismal equity performance on an

index level in 2015. The good part about 2016 is the

low expectation and cautious approach, which

results in lower surprises and lower cut in earnings

estimate as most of the revision was done in 2015.

2016 will see lower risks to earnings from global

growth with most of the fall commodity prices being

captured in 2015 and the bulk of the earnings

downward revision was driven by global cyclicals.

India’s macroeconomic fundamental stands

improved with the fall in global commodity prices

resulting in better balance of payments and lower

CAD, due to which India Inc. saw margin expansion

resulting in profit growth despite fall in revenues.

Last 2 years we have seen lot of ground work in

focused areas by the government and we will see

continued efforts on that front. The outcome of the

small ticket reforms will slowly and steadily start

trickling in the economy. As we had mentioned in

our last report that the small reforms undertaken by

the government will result in shaking up the

February 2016 11


economy in the short term and would affect the

earnings negatively, however the impact would be

positive in the medium to long term.

We have seen lack of private spending, however

public spending has been strong and will continue

to be so. Rural consumption has been weak but is

likely to improve in the current year with 7th Pay

commission percolating to rural and semi urban

areas and a forecast of a better monsoon in 2016.

One of the major disappointment of last year was

no action on Land bill and GST. However, this year

there has been proactive efforts from the

government to expedite the passing of GST bill.

Overall we are cautious from a shorter to medium

term perspective and believe that different levers of

the economy would start pushing the growth slowly

in medium to long term. We expect markets to

return single digit annualized until FY17. Having said

that we see 2016 not as the year of returns but as

the year of investments. We believe it is one of the

best years to accumulate investments in equity

through the year.

Valuations moderating

0

5

10

15

20

25

30

Sensex PE Average

February 2016 12


Citadelle Growth Opportunities Portfolio

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

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 3560.17 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

100.46

89.85

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

Citadelle Growth Opportunities Portfolio Performance

Citadelle Growth Opportunities Portfolio NAV Benchmark*

February 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% 92.5% 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% 32.5% IDFC Dynamic Bond Fund-Reg 10.0% 10.8% 15.9 8.7 7.8

SBI Dynamic Bond 10.0% 10.8% 17.5 8.5 7.8

UTI Dynamic Bond Fund-Reg 10.0% 10.8% 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% 2.5% Gold 5.0% 2.5% Total 100.0% 100.0%

0.0%

90.0%

5.0%5.0%

Strategic Portfolio

Equity Debt Cash Gold

0.0%

92.5%

5.0%2.5%

Tactical Portfolio


95.00

100.00

105.00

110.00

115.00

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

6

Conservative UCI Index

February 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 - - MOSt Focused Midcap 30 Fund - - 28.2 66.7 5.1

HDFC Mid-Cap Opportunities Fund - - 15.8 77.8 6.4

BNP Paribas Mid Cap Fund - - 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% 10.8% 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%

25.0%

65.0%

5.0%5.0%

Strategic Portfolio


25.0%

67.5%

5.0% 2.5%

Tactical Portfolio


96.0098.00

100.00102.00104.00106.00108.00

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

6

Mod Conservative UCI Index

February 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% MOSt Focused Midcap 30 Fund 7.5% 5.0% 28.2 66.7 5.1

HDFC Mid-Cap Opportunities Fund - - 15.8 77.8 6.4

BNP Paribas Mid Cap Fund 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% 5.0% Gold 100.0% 100.0%

45.0%

45.0%

0.0%

10.0%

Strategic Portfolio


45.0%50.0%

0.0%

5.0%

Tactical Portfolio


94.00

96.00

98.00

100.00

102.00

104.00

106.00

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

6

Balanced UCI Index

February 2016 16


Model Portfolio: Moderately Aggressive

Mod Aggressive Market Cap wise (%)


Strategic

Tactical


Others



15.0% 15.0% 88.9 3.0 8.1


HDFC Mid-Cap Opportunities 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

(%) Debt 20.0% 25.0%

Short Term 20.0% 20.0% Axis Short Term Fund 10.0% 10.0% 2.7 2.0 8.0


HDFC STP - - 2.2 1.8 9.8

Dynamic Bond Funds - 5.0% IDFC Dynamic Bond Fund-Reg - 5.0% 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% 5.0%

Gold 10.0% 5.0% 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


80.00

90.00

100.00

110.00

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

6

Mod Aggressive UCI Index

February 2016 17


Model Portfolio: Aggressive

Aggressive Market Cap wise (%)


Strategic

Tactical


Others



15.0% 15.0% 88.9 3.0 8.1


HDFC Mid-Cap Opportunities 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 - 5.0% 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 - 5.0% IDFC Dynamic Bond Fund-Reg - 5.0% 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% 5.0% Gold 10.0% 5.0% Total 100.0% 100.0%

90.0%

0.0%0.0%10.0%

Strategic Portfolio


90.0%

5.0%

0.0% 5.0%Tactical Portfolio


85.00

95.00

105.00

115.00

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

6

Aggressive Nifty

February 2016 18


Thank you for your time!

Safe harbor statement!

This document has been prepared by Citadelle Asset Advisors Private Limited (CAAPL). CAAPL, its holding company and associate companies offer full range of, integrated investment banking, portfolio management and brokerage services, through own and or partnerships.

Our research analysts and sales persons provide important input into our investment advisory activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. CAAPL or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors. We and our affiliates, group companies, officers, directors, and employees may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (is) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as advisor or lender/borrower to such company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished to you solely for your information.

This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject CAAPL and affiliates/ group companies to any registration or licensing requirements within such jurisdiction.

The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. CAAPL reserves the right to make modifications and alterations to this statement as may be required from time to time. However, CAAPL is under no obligation to update or keep the information current. Nevertheless, CAAPL is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither CAAPL nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Past performance is not necessarily a guide to future performance.

The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. CAAPL generally prohibits its analysts, persons reporting to analysts and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies

and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in

this report. Any dispute arising out of the document shall be subject to the exclusive jurisdiction of the Courts in Mumbai, India

alpha edge - february 2016

Economy & Finance