investment tracker · the gst ball has been set to roll with the gst council approving gst rates...

INVESTMENT

TRACKER May - Jun 2017

The disruptive move of demonetisation took its toll on the sprouting Indian economy with GDP

growth numbers plummeting to 6.10 percent for Jan-Mar’17 quarter. Despite, the poor show in the

last quarter the economy managed a growth of 7.10 percent for FY2016-17. However, all seems to

be not lost, Moody’s Investor service suggested a ripe forecast for the Indian economy with a growth

target of above 7.50 percent in next two years.

The GST ball has been set to roll with the GST council approving GST rates for Goods, Services and

GST compensation Cess. GST is all set to roll out from 01st July 2017 and is expected to change the

landscape for Indian Taxation system and provide much needed impetus for growth of the Indian

economy. Though the Finance minister has maintained that the impact of GST would not be

inflationary the same would be closely watched by market participants for cues in debt market.

Internationally, with the US growth stabilising, the US Fed has given indication of reducing the

bloated balance sheet over a period of next 5 years which may translate to roll back of quantitative

easing done earlier for providing support to the flagging US economy post the sub-prime crisis.

Further, the minutes from the Fed meeting do suggest towards a high probability of June rate hike.

Though, the data continues to remain mixed from the world’s biggest economy we would watch out

for the cues emerging from the US Fed meeting. On the other hand, Moody’s downgraded China’s

debt to A1 from Aa3 citing the likelihood of a “material rise” in economy-wide debt and the burden

that will place on the state's finances. Further, they too changed the outlook to stable from negative.

The same was in line with earlier revision from other ratings agencies.

Equity markets continued to claim higher levels in the month of May’17. We continue with our

philosophy at TATA Capital to invest conservatively, we believe it will be prudent to prune down

returns expectation, ensure steady entry through SIP route as at higher levels markets tend to be

highly volatile, booking targeted profits and have a very portfolio specific approach in these times of

markets.

Indian Corporate Debt markets were hit with multiple downgrades from ratings agencies considering

deteriorating finances and higher debt levels of some issuers. Though the numbers are still small but

it is prudent to remain cautious while investing in credit accrual funds. Further, debt markets are

bracing themselves for Reserve Bank of India’s monetary policy review in which it is widely expected

that a status quo would be maintained on benchmark rates. The markets will take guidance from the

tone of the policy for further directions.

At TATA Capital, we always ensure that we give the right guidance to our clients for their

investments by ensuring in-depth research of products as well

as markets. We ensure to maintain highest service standards

for all your investment requirements.

Dasvir Ankhi National Head – Wealth Management, Distribution & Advisory

Tata Capital Financial Services Ltd.

From the Wealth Head Desk

Message from Advisory Desk

The biggest reform in the form of GST got a massive push with the GST council building a consensus

for July 1 rollout. Further, the GST council finalised the rates for Goods, Services and GST

Compensation cess. GST is touted to be a major reform to create a single market in the Indian

economy. The roll out of GST is expected to create major upheaval for the unorganised market and

may impact inflation in the short term. Though, the move will surely help government to expand the

formal economy and tax base. On the other hand, Indian economic growth witnessed commotion as

the impact of demonetisation led to a dip in growth to 6.10 percent for the last quarter of FY16-17.

We strongly believe the remonetisation process in the economy has led to most of the pain getting

over and the same should start getting reflected in numbers in next 2-3 quarters.

On the global market front, the US Federal Reserve in its May review kept the benchmark rates

unchanged. However, Fed did indicate that a recent economic slowdown was transitory and it

remains on track to deliver two more rate increases by year-end. Markets participants are pricing in

a 90 percent chance of rate hike in Fed’s June policy review despite mixed numbers on economy.

Meanwhile, Moody’s Investor service downgraded China’s debt to A1 from earlier Aa3 citing the

likelihood of a “material rise” in economy-wide debt and the burden that will place on the state's

finances.

On the debt market front, bond yields eased by 14 bps to 6.80 percent on lower inflation and benign

GDP growth fuelling hopes of dovish stance from the Apex bank for the upcoming monetary policy

review. Bond prices have witnessed range bound movements in last couple of months primarily

owing to mix data points on economy and no major trigger arising from developed worlds. Going

forward, bond yields are likely to take direction from the upcoming monetary policy review and US

Fed meet. Further, global macroeconomic factors, investment by foreign portfolio investors (FPIs),

risks of El Nino, impact on inflation due to anticipated pressures from GST implementation,

commodities and dollar index movement will be closely tracked by the bond markets. Accordingly,

we continue to stick to accrual funds for investments considering no clear directions.

Markets have continued with the positive momentum largely driven by the abundant liquidity both

domestically and internationally. However, the rally clearly has not been broad based which was on

expected lines and we have seen specific stocks & sectors driving the uptrend. We expect the same

to continue and remain positive on the equities markets in the near term. Going forward, while we

continue to remain overweight on equities as an asset class, given the recent rally we may witness

volatility and accordingly it would be prudent to cut down on returns expectations. Profit booking

can be undertaken at higher levels. We continue with our recommendation to increase exposure

specifically towards diversified funds with an investment horizon of 3-5 years.

Equity Markets

While Sensex continued its upward journey in the month of May’17, a divergent trend was

witnessed amid mid & small cap and sectoral indices. Broader indices witnessed positive momentum

driven by strong inflows from domestic as well as foreign institutional investors. Forecast of a normal

monsoon and overall positive global cues spurred investor interest. The Indian Meteorological

Department (IMD) announced that the monsoon this year could be ‘normal’ and bring 100% rainfall

instead of its earlier prediction of 96%. FIIs which were net sellers in the month of April’17 resumed

fresh buying in the past month as indicated by the data. The mood also remained buoyant with GST

approaching its deadline. On the other hand, while Sensex and Nifty continued to touch new life

highs, a crackdown was seen in mid & small cap indices and PSU banking stocks. Severe profit

booking was witnessed in mid & small cap segment which was considered to be an overbought

territory. Also with PSU banks’ NPA woes seemed to be taking too long to get over early pushed

investors to dump these stocks. All an all, Sensex closed 4.1% up, while Nifty gained 3.4% during the

period (31st Mar’17 to 28th Apr’17). On the contrary, BSE Mid Cap corrected 1.5% and BSE Small

Cap dropped 2.2% during the same period.

FII & Mutual Funds trends (May’17)

Source: BSE India

Equity markets – Performance

Markets closed in green during the period (28th Apr’17 to 31th May’17)

Indices* movement between 28th Apr’17 to 31th

May’17

Source: BSE India, *S&P BSE Sectoral Indices

99

.6

(22

.1)

33

7.8

10

4.9

(10

.1)

(84

.9)

(17

7.4

)

(49

.9)

93

.4

97

.9

11

1.3

51

.7

25

.8 9

6.2

11

2.4

23

.7

20

.4

52

.3

91

.8

13

7.8

91

.3

38

.4

27

.2

(0.3

)

(0.9

)

71

.5

-250

-150

-50

50

150

250

350

May'17Mar'17Jan'17Nov'16Sep'16Jul-16May-16

FII Invst Monthly (Rs bn) MF Invst Monthly (Rs bn)

94.00

96.00

98.00

100.00

102.00

104.00

106.00

2-May 9-May 16-May 23-May 30-May

BSE MID CAP BSE Sensex

BSE SMALL CAP

(9.7)(4.7)(3.8)

(1.9)(1.5)(1.4)(1.2)(0.7)(0.5)(0.5)

0.4 4.1 4.8 4.8

6.3 7.4

-12.0 -7.0 -2.0 3.0 8.0 13.0

HC Power Index

PSU SMALL CAP

CG Oil & Gas MID CAP

IPO METAL

CD Realty

Sensex Teck

Bankex IT

FMCG

Equity markets – Outlook Markets have continued with the positive momentum largely driven by the abundant liquidity both

domestically and internationally. However, the rally clearly has not been broad based which was on

expected lines and we have seen specific stocks & sectors driving the uptrend. We expect the same

to continue and remain positive on the equities markets in the near term as well as long term.

On the data front, the GDP growth for India for the quarter ended Mar’17 came at 6.1% from 7% in

the preceding quarter. The slowdown is largely attributed to the demonetization impact on key

sectors including construction and financial services sectors. On the inflation front, the base year

was changed for WPI from 2004-05 to 2011-12 and it fell sharply to 3.85% while CPI too eased to 3%

in Apr’17 mostly on account of reduced food and manufactured goods prices. IIP (for which base

year was changed too) witnessed a recovery too at 2.7% in Mar’17.

Going forward, while we continue to remain overweight on equities as an asset class, given the

recent rally we may witness volatility and accordingly it would be prudent to cut down on returns

expectations. Profit booking can be undertaken at higher levels. We continue with our

recommendation to increase exposure specifically towards diversified funds with an investment

horizon of 3-5 years.

Debt markets - Key Influencers

Factors Short term Outlook Medium Term Outlook

Inflation Increase Increase

Consumer price inflation (CPI) eased to 2.99% in April from 3.89% in March. The fall was due to lower cost of food items, including pulses and vegetables that showed a deflationary trend. While, Wholesale Price Index (WPI) slipped to a four-month low of 3.85 % in April as both food articles and manufactured items showed cooling in prices. Though, the CPI was within the comfort zone of the RBI; however, the Apex bank in its monetary policy review has clearly outlined the upside risk to inflation in the form of outcome of the south west monsoon, implementation of the allowances recommended by the 7th CPC and one off impact of GST.

Currency Appreciate Neutral

The rupee depreciated against the dollar in May by 0.51% as the dollar strengthened following the US FOMC meeting outcome. The US Fed said that it was on track to raise US interest rates despite recent weak US economic data. Moreover, political uncertainty in the US due to concerns over President Trump’s administration increased risk aversion and led to investor demand for the greenback, thereby putting the rupee under pressure. Dollar demand from state-owned banks for importers and weak domestic trade balance data also pulled the rupee down. Nevertheless, the incredible bull run at the Indian equities markets and record FDI investments ensured that the losses were capped for the home currency.

Monetary Policy Neutral Neutral

The RBI retained the repo rate at 6.25% in the first policy announcement of the new fiscal. The RBI, however, raised the reverse repo rate by 25 basis points to 6%, and cut the marginal standing facility (MSF) and bank rate to 6.50%. As the RBI focuses on targeting inflation, benchmark policy rates are likely to remain at current level for an extended period. Further, the RBI has clearly directed that future course of monetary policy will largely depend on incoming data on how macroeconomic conditions are evolving.

Debt markets – Performance

Indicators 31/05/17 28/04/17 Change

Domestic Indicators

10-Yr G-sec (%) 6.80 6.94 14 bps

CP 1 Year (%) 7.25 7.30 5 bps

Corporate 5 Year (%) 7.31 7.42 11 bps

Overnight Call Rates (%) 6.00 6.25 25 bps

Five Year OIS (%) 6.13 6.03 10 bps

Libor 3 mnth (%) 1.20 1.17 3 bps

US Treasury 2 Yr. (%) 1.28 1.27 1 bps

US 10 Yr (%) 2.20 2.29 9 bps

G-Sec Yield Curve

Debt markets - Outlook

On the debt market front, bond yields eased by 14 bps to 6.80 percent on lower inflation and benign

GDP growth fuelling hopes of dovish stance from the Apex bank for the upcoming monetary policy

review. Bond prices have witnessed range bound movements in last couple of months primarily

owing to mix data points on economy and no major trigger arising from developed worlds.

Going forward, bond yields are likely to take direction from the upcoming monetary policy review

and US Fed meet. Further, global macroeconomic factors, investment by foreign portfolio investors

(FPIs), risks of El Nino, impact on inflation due to anticipated pressures from GST implementation,

commodities and dollar index movement will be closely tracked by the bond markets. Accordingly,

we continue to stick to accrual funds for investments considering no clear directions.

6.00

6.15

6.30

6.45

6.60

6.75

6.90

7.05

7.20

7.35

7.50

3 m

on

ths

6 m

on

ths

1 y

ear

2 y

ear

3 y

ear

4 y

ear

5 y

ear

6 y

ear

7 y

ear

8 y

ear

10

ye

ar

11

ye

ar

28/04/2017 31/05/2017

AUM Movement (Rs. in Crore)

_________ __________

Debt category saw

rise in its AUM m-o-

m. The AUM rose by

4.83% m-o-m. The

AUM increased from

Rs. 7.61tn in Mar’17

to Rs. 7.97tn in

Apr’17. The category

accounts for 41.39%

of the overall assets

of the Indian MF

industry. The rise in

AUM was due to

inflows witnessed in

Income category. The

category witnessed

net inflows of Rs.

0.35tn during the

month.

The Equity category

saw an inflow of

0.17tn in Apr’17

against 0.14tn in

Mar’17. This also

marks the 13th

straight month of

inflows into equity

category including

Balanced and ELSS.

The robust inflow

pushed up the AUM

of Equity category

from Rs. 6.28tn in

Mar’17 to Rs. 6.62tn

in Apr’17; registering

the growth of 5.41%

m-o-m. The category

rose on back of

combined inflows

witnessed in Equity,

Balanced and ELSS

funds.

Liquid fund assets

under

management rose

the maximum

during the period

under review. It

increased by

31.73% m-o-m. The

AUM rose from Rs.

3.14tn in Mar’17 to

Rs. 4.14tn in

Apr’17. It

witnessed net

inflows of Rs.

0.99tn during the

month. The rise

was on back of

huge investments

made by large

institutions during

the month.

The total industry’s

AUM witnessed

decent rise during

Apr’17 of 9.78%, or

Rs. 1.72tn m-o-m

to Rs. 19.26tn as

against Rs. 17.55tn

seen in Mar’17.

The rise in AUM

was on back of

inflows witnessed

in Income, Liquid

and Equity

categories. While,

Gilt, Gold ETFs and

FOF Overseas

categories saw

outflows in Apr’17.

The other ETFs

category witnessed

growth in AUM m-o-

m; it rose from

Rs.0.44tn in Mar’17

to Rs.0.46tn in

Apr’17. It grew by

3.29% m-o-m.

However, the AUM of

Gold ETF fell during

the month by 1.88%

to Rs. 0.05tn in

Apr’17. The overall

ETF category (Gold +

Other ETFs) accounts

for only 2.66% of the

overall assets of the

Indian MF industry.

10000

15000

20000

25000

30000

35000

40000

45000

50000

55000

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

2200000Ja

n-1

6

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

Ap

r-1

7

Debt Equity Liquid Total AUM (Rs Cr) ETF (RHS)

Investment Strategy

Model Portfolios

Safe Moderate Growth High-Growth

Cash 20% 15% 5% 5%

Liquid/Ultra Short Term MFs

Axis Liquid Fund

ICICI Pru Liquid Fund

TATA Money Market Fund

Birla Sunlife Savings Fund

Kotak Low Duration Fund

HDFC FRIF-ST

Debt 60% 50% 20% 5%

Debt MF

L&T Income Opportunities Fund

TATA Corporate Bond Fund

UTI Income Opportunities Fund

Reliance RSF Debt Fund

Reliance Corporate Bond Fund

SBI Corporate Bond Fund

Corporate Fixed Deposit

Bajaj Finance Limited

HDFC Limited

Mahindra & Mahindra Financial Services

Shriram Transport Finance

Dewan Housing Finance

Bonds/NCDs Up to AA only

As per availability Up to AA-

As per availability

Equity 20% 35% 60% 70%

Mutual Funds

Large Cap Funds BSL Top 100

Kotak 50

IPRU Top 100

BSL Top 100

Kotak 50

SBI Bluechip

Birla Top 100

Diversified Funds Kotak Select

Focus

DSPBR Opps.

SBI Multicap

L&T India Value

Motilal Oswal Focused 35

TATA Equity P/E

L&T India Value

Franklin High Growth Cos.

Midcap Funds

Canara Emerging equities

HDFC Midcap Opps.

L&T Emerging Business Fund

Kotak Emerging Equity Fund

Reliance Smallcap Fund

HDFC Midcap Opps.

Canara Emerging equities

Theme Funds

Reliance Diversified Power Sector Fund

SBI PSU Fund

SBI Comma Fund

Kotak Infra & Reforms Fund

PMS Motilal Oswal IOP

Kotak Special Situations Value Strategy

AIF Nil Nil 15% 20%

As Per availability

Our Product Recommendations

Equity Mutual Funds - BUY Recommendations & Performance

Category Absl (%) CAGR (%) Std. Dev. Sharpe

Large Cap Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Birla Sun Life Top 100 Fund 16.0 21.8 15.0 20.5 4.3 0.3

ICICI Prudential Top 100 Fund 13.7 27.7 13.9 18.1 3.9 0.5

Kotak 50 16.2 18.2 15.8 17.8 4.2 0.2

SBI Bluechip Fund 15.1 17.9 18.7 21.6 4.4 0.2

Mid and Small Cap Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Canara Robeco Emerging Equities 25.9 38.8 29.4 30.2 5.7 0.4

Franklin India Smaller Companies Fund 18.1 28.5 27.6 32.7 4.9 0.4

HDFC Mid-Cap Opportunities Fund 16.9 33.3 24.6 27.0 4.9 0.5

Kotak Emerging Equity Scheme 18.8 31.2 29.3 27.2 5.1 0.4

L&T Emerging Businesses Fund 30.7 55.0 29.0 -- 5.5 0.6

Diversified Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

DSP BlackRock Opportunities Fund 17.1 30.1 20.8 22.5 5.1 0.4

Franklin India High Growth Companies Fund 16.6 25.4 23.1 26.1 4.2 0.4

IDFC Classic Equity Fund 20.0 30.4 17.0 18.6 4.4 0.4

Kotak Select Focus Fund 20.2 31.0 21.8 23.7 4.5 0.4

L&T India Value Fund 19.0 36.2 25.8 27.7 5.1 0.5

Motilal Oswal MOSt Focused Multicap 35 Fund 21.4 34.7 30.0 -- 5.5 0.4

SBI Magnum Multi Cap Fund 16.4 23.7 22.0 22.5 4.5 0.3

Tata Equity P/E Fund 20.0 40.0 22.4 23.9 4.4 0.6

ELSS Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Birla Sun Life Tax Relief 96 17.9 21.0 20.9 23.0 4.9 0.3

DSP BlackRock Tax Saver Fund 16.2 28.3 20.3 23.0 5.0 0.4

Franklin India Taxshield 13.8 17.1 18.6 20.4 3.9 0.2

Mirae Asset Tax Saver Fund 22.8 38.2 -- -- 4.6 0.5

Reliance Tax Saver (ELSS) Fund 17.9 29.5 18.4 23.0 4.5 0.4

Balanced Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

DSP BlackRock Balanced Fund 12.6 23.0 18.5 17.0 4.2 0.3

HDFC Balanced Fund 13.1 23.2 17.7 19.5 3.0 0.4

ICICI Prudential Balanced 11.8 26.7 17.6 20.1 2.7 0.6

L&T India Prudence Fund 15.5 23.3 18.5 20.3 3.5 0.3

Reliance RSF - Balanced 14.3 20.2 16.4 18.4 3.6 0.3

Sectoral & Thematic Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Canara Robeco Infrastructure Fund 20.2 30.0 17.8 19.1 5.1 0.3

Kotak Infrastructure & Economic Reform Fund 19.3 30.2 20.6 21.5 4.5 0.4

L&T Infrastructure Fund 25.4 46.0 19.7 22.2 5.3 0.5

Reliance Diversified Power Sector Fund 28.1 39.6 12.0 14.7 5.4 0.6

SBI Magnum COMMA Fund 15.3 43.5 14.5 13.5 4.8 0.6

SBI PSU Fund 12.4 42.3 8.1 9.5 3.8 0.8

New Entrants Less than one-year absolute, CAGR returns more than one year, Returns as on 31 May 2017

Equity Mutual Funds - HOLD Recommendations & Performance

Category Absl (%) CAGR (%) Std.Dev. Sharpe

Large Cap Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Birla Sun Life Frontline Equity Fund 16.2 21.3 15.5 20.7 4.5 0.3

ICICI Prudential Focused Bluechip Equity Fund 15.4 22.8 14.6 18.7 3.9 0.3

Mid and Small Cap Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

DSP BlackRock Micro Cap Fund 19.0 34.1 35.0 32.8 4.7 0.5

Mirae Asset Emerging Bluechip Fund 23.2 41.6 31.7 32.8 4.9 0.5

Reliance Small Cap Fund 22.5 40.9 30.4 32.7 5.3 0.5

Diversified Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Mirae Asset India Opportunities Fund 19.4 27.9 19.8 22.7 4.4 0.4

ELSS Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

IDFC Tax Advantage (ELSS) Fund 24.0 30.4 19.9 22.9 5.1 0.3

Balanced Funds 6 Months 1 Year 3 Years 5 Years 1 Year 1 Year

Franklin India Balanced Fund 8.4 14.5 16.9 17.9 2.8 0.2

SBI Magnum Balanced Fund 7.4 14.4 16.0 19.4 3.2 0.2

Tata Balanced Fund - Plan A 9.7 15.9 16.3 19.1 3.4 0.2

Less than one-year absolute, CAGR returns more than one year, Returns as on 31 May 2017

Equity Mutual Funds – 4Q FY17 Rankings Update

New Entrants

Category Large-Cap Funds

Scheme Name Kotak 50

Rationale This large cap oriented scheme would have 50 stocks which may go up to 59 companies. Currently around 80% of the portfolio is in the large cap space and remaining in the mid-caps. The fund has an impressive track record of beating the benchmark; it has outperformed the benchmark (Nifty 50) in 10 out of the past 12 quarters. The scheme has shown returns consistency in the past three-year period and has been an above average performer. The fund is suggested from diversification perspective in the large cap basket from 3-5-year investment horizon.

Category Diversified Funds

Scheme Name Tata Equity P/E Fund

Rationale The fund is an aggressive diversified fund. The scheme follows the philosophy of investing 70% of the total assets in stocks having a trailing P/E ratio less than that of the BSE Sensex at the time of investment. Around 50-55% of the portfolio is into Large caps, ~38% into Mid-caps and ~9% into Small caps. The fund has steadily jumped into our internal rankings criteria during the past year owing to performance improvement. It has outperformed its benchmark (BSE 200) in 9 out of the past 12 quarters. The fund has appeared in the first quartile for the past consecutive four quarters. Its mid-cap bias may lead to the fund witnessing higher volatility compared to its diversified peers; while it could gain more as well due to the same reason. We suggest the fund from 3-5-year investment horizon.

Category Mid & Small Cap Funds

Scheme Name Kotak Emerging Equity Scheme

Rationale The fund from the mid & small cap category has more than 80% allocation towards the mid cap segment and around 6% into small cap space. The scheme has seen substantial improvement in the performance in the past one year and has come under first and second quartile in the trailing five quarters. The portfolio is well diversified and does not take concentrated bets with holding in each stock in the range of 2-3%. We suggest the fund from 3-5 year investment horizon.

Category Mid & Small Cap Funds

Scheme Name L&T Emerging Businesses Fund

Rationale This is a small cap oriented fund with key theme focus of the fund being investing into emerging companies (small cap stocks) which are typically in the early stage of development and have the potential to grow their revenues and profits at a higher rate as compared to broader market. This also raises the risk quotient of the scheme and is suitable for high risk-high return type of investment. The fund is outperformed the benchmark (Nifty Free Float Midcap 100) in 8 out of the past 12 quarters and has come in the first and second quartile in the past four quarters. The scheme is suggested to aggressive investors for a 3-5-year investment horizon.

Category ELSS Funds

Scheme Name Mirae Asset Tax Saver Fund

Rationale Launched in Dec’15, this ELSS scheme has a limited track record. However, within the limited time frame the fund has been able to come up quickly in our internal rankings criteria. Mr. Neelesh Surana, who has also managed the best performing Mirae Asset Emerging Bluechip & Mirae Asset India Opportunities funds, is the fund manager for the scheme. The scheme has come in the first quartile in whole of its five quarter’s existence and has beaten the benchmark in four out of the five quarters. Around 60% of the portfolio is into large caps and 26% & 12% into mid and small caps respectively. The portfolio is well diversified with around 54 stocks. The scheme is suggested from a 3-5-year investment horizon.

Category ELSS Funds

Scheme Name Birla Sun Life Tax Relief 96

Rationale One of the oldest funds, this ELSS scheme has witnessed both the bull and the bear phases in the past more than 20 years of its existence. The fund has a mid-cap bias (~48%) and mostly follows a multi-cap strategy. The scheme has outperformed in 9 out of the past 12 quarters. The fund scores on its consistency have been able to provide above average returns in the category. The fund is suggested from diversification perspective in the large cap basket from 3-5-year investment horizon.

Category Balanced Funds

Scheme Name DSP BlackRock Balanced Fund

Rationale This balanced scheme has around 73% into equities and rest in the debt category. In the equity category, around 66% of the portfolio is in the large cap space and the rest split in the mid & small cap space. The scheme is slightly on an aggressive side considering it’s mid & small cap exposure of more than 30% (within the equities category). The fund has beaten the benchmark in 10 out of the past 12 quarters. The scheme is suggested from diversification perspective for an investment horizon of 3-5 years.

Category Sectoral & Thematic Funds

Scheme Name Reliance Diversified Power Sector Fund

Rationale Reliance Diversified Power Sector Fund is a niche offering investing predominantly in the power sector and allied segments. The sector spread is well diversified among the sectors carrying power theme in some or the other way and include Power T&D, Generation Companies, Equipment Companies, Power Trading Companies, Financials, Power Trading Companies, Fuel Suppliers, & ancillary service providers. The portfolio has 34 stocks spread across Large, Mid & Small cap segments. The portfolio is mid & small cap biased, with around 80% invested into the segment. We believe the fund is well positioned to benefit from the next phase of growth expected in the Indian Power sector in coming 3-5 years. With its presence across key segments which are expected to be the major beneficiaries of the government’s renewed focus on the sector & infrastructure investments, the investment in the scheme can form a part of client’s tactical allocation spread with an investment horizon of five years.

Equity PMS Offerings

Sr. No

Name of the PMS

Fund Manager Theme Ticket Size

Suitable for Our View

1 Tata Consumption1

Consumption related

50 Lacs Growth & High-Growth

HOLD/BOOK PROFIT

2 ICICI PIPE Aditya Sood Small Cap 25 Lacs High Growth BUY

3 Motilal Oswal NTDOP2

Manish Sonthalia Small and Mid Cap

25 Lacs High Growth HOLD

4 Birla Core Equity PMS2

Vishal Gajwani, Natasha Lulla

Diversified 25 Lacs Growth & High-Growth

HOLD/BOOK PROFIT

5 Motilal Oswal IOP

Manish Sonthalia, Mythili Balakrishnan

Small and Mid Cap

25 Lacs Growth & High-Growth

BUY

6 Kotak Special Situations Value Strategy

Anshul Saigal Diversified 25 Lacs Growth & High-Growth

BUY

1: Due to change in fund management, we suggest no fresh buying

2: The strategy is closed for investment; existing investors can continue to hold.

Name of the PMS Theme Suitable for

Tata Consumption Consumption related Growth & High-Growth

Investment Strategy: This thematic portfolio would have companies that have the ability to generate sustainable stakeholder value through their positioning to capture the transformational changes of the Indian economy on the basis of changing demographic profile, rapid urbanization and resilience of rural demand i.e. Indian consumption opportunities. Stock selection would focus on companies possessing long-term competitive advantage underscored by brand loyalty and which are continuously introducing products/ideas to create new markets.

Suitability: On a fundamental basis, we believe that India is at an inflexion point as far as discretionary consumer spending is concerned. As the economy revives and GDP growth picks up, increase in the consumer disposable income is expected to drive growth in the consumption related sectors in India. The portfolio is suitable for Growth and High-Growth investors with an investment horizon of 3-5 years.

Model Portfolio Performance:

1-Month 3-Month 6-Month 1 Year 3 Year Since Inception

(Dec’10)

Consumption Portfolio 3.13% 12.98% 12.16% 37.76% 106.95%

209.90%

Nifty 50 1.42% 8.68% 7.86% 18.53% 38.94% 51.67%

Returns <= 1 year: Absolute. Returns > 1 year CAGR, 30th Apr’17


ICICI PIPE Small Cap High-Growth

Investment Strategy: The PMS PIPE portfolio follows an approach similar to private equity by taking stakes in small and mid-cap companies available at a discount to intrinsic value. The PMS is a focused portfolio of 10-15 stocks comprising of listed small and mid-cap Indian companies. The target universe of investee companies includes emerging companies starting from 281st company ranked in terms of Full Market Cap (below INR 2500 crore as on March 15, 2013).

Suitability: The theme of the PIPE PMS aims to ride the small-cap wave by investing in true to label small-cap companies at a very early stage in their evolution, thus providing an opportunity for investors to take part in their growth. The portfolio is a high risk high return proposition with a long term horizon of 3-5 years given its concentrated theme of 10-15 stocks from the universe of small-cap companies. The portfolio is suitable for High-Growth investors with an investment horizon 5 years.


3-Month 6-Month 1 Year Since Inception (Nov’13)

PIPE Portfolio Series 1 14.63% -0.90% 34.00% 41.37%

S&P BSE Small-Cap 18.84% 13.17% 39.49% 31.26%



Motilal Oswal NTDOP Small & Mid Cap High-Growth

Investment Strategy: The Strategy aims to deliver superior returns by investing in stocks from sectors that can benefit from the Next Trillion Dollar GDP growth. It aims to predominantly invest in Small and Mid-Cap stocks with a focus on non-Nifty companies. The stock portfolio would consist of 20-25 scrips with individual stock allocation limit of around 10% for Mid-caps and 5% for Small caps.

Suitability: This small & mid-cap focused portfolio strives to invest in companies from sectors which are poised to benefit from the GDP growth and the growth in the discretionary spending. The small and mid-cap spectrum of universe offer better valuations and therefore increased returns potential in this space albeit with a higher investment horizon and volatility. The strategy is therefore suggested to High-Growth investors with an investment horizon 5 years.


3-Month 6-Month 1 Year 3 Year 5 Year

Motilal Oswal NTDOP 12.82% 6.34% 39.77% 36.67% 31.44%

Nifty Free Float Midcap 100

17.34% 13.66% 37.07% 27.22% 19.34%



Birla Core Equity PMS Diversified Growth and High-Growth

Investment Strategy: The PMS consists of 25-30 stocks selected from a multi-cap universe. The strategy followed is of value investing based on quantitative screeners supported by fundamental research. One of the most important tools used to identify growth industries and businesses at attractive valuations is the P-score (Piotroski – Score) methodology. P-Score measures the overall strength of the firm’s financial position and the improvement (delta) in the financial position of the firm. The PMS offers a differentiation through an investment strategy that buys High P-score stocks and shorts Low P-score stocks within its universe.

Suitability: The PMS has a multi-cap universe, with a mid & small-cap bias (around 65% in mid & small-cap currently). The strategy offers differentiation led by its selection methodology and proven track record due to its strong patronage in stringent policies and processes. The strategy is therefore suggested to Growth and High-Growth investors with an investment horizon 3-5 years.



Birla Core Equity PMS 13.24% 4.92% 24.35% 38.81% 35.51%

CNX 500 11.32% 9.50% 24.68% 16.04% 14.47%

Absolute returns as on 30th Apr’17 till 1 year and annualized for greater than 1 year


Motilal Oswal IOP Small & Mid Cap Growth & High-Growth

Investment Strategy: In Feb’16 Motilal Oswal AMC repositioned the multi cap PMS as the new small and midcap strategy PMS under the fund manager Varun Goel. The PMS would have a concentrated portfolio of 15-20 stocks. The focus is to pick high growth small and midcap stocks which will be the mid and large cap stocks of tomorrow. IOP average market cap is 6,000 Crores.

Suitability: This small & mid-cap focused portfolio focuses to capitalize on three themes viz. Rise in Discretionary Spending, Make in India, and the Infrastructure Push by the government. The portfolio construction is done keeping in view these three key themes. The strategy is levered to the economic & manufacturing revival of India story. The strategy is therefore suggested to Growth & High-Growth investors with an investment horizon 5 years.



Motilal Oswal IOP 20.76% 13.47% 65.82% 34.04% 22.64%

BSE 200 10.32% 8.75% 22.92% 51.89% 91.08%



Kotak Special Situations Value Strategy

Diversified Growth & High-Growth

Investment Strategy: The main objective of this strategy is to generate capital appreciation through investments in equities with a medium to long-term perspective. This strategy invests in all listed equity and equity related instruments with emphasis on capturing Value and Special Situation opportunities.

Suitability: This diversified portfolio with a mid & small cap bias would comprise 10-20 stocks having Nifty 500 as its benchmark. The portfolio strategy is a mix of value & special situation opportunities. The value strategy aims to identify companies trading at a discount to its intrinsic value and offer lucrative investment opportunities. The special situations strategy keeps an eye on the probability of occurrence of one or more corporate events, rather than market events. Such situations could include; Price Related situations, Merger Related situations, Corporate Restructuring such as spin offs, management change, asset sales etc. While the value strategy is expected to provide long term returns, the special situations strategy is likely to be used as a yield kicker to boost overall portfolio returns. The strategy is suggested for growth & high-growth investors from 3-5 year investment horizon.



Kotak Special Situations Value

10.39% 7.70% 43.33% 44.60% NA

NIFTY 500 11.32% 9.50% 24.68% 16.04% NA


Recommended Fixed Deposits

Name of the FD

Credit Rating

Rationale Interest Payout Options

Mthly Qrtly Half-yrly

Yrly Cum

Bajaj Finance

FAAA Bajaj Finance has a very strong patronage and is among the largest consumer and SME finance companies in India. Also, the company has delivered strong financial performance on a continuous basis. The credit of AAA indicates that the degree of safety regarding timely payment of interest and principal is very strong.

√ √ √ √ √

DHFL FAAA Diwan Housing Finance Company Ltd. (DHFL) is one of the premier institutes in mid-small segment Home Loan sector. With over three decades into the business, the company also has sound financials. CARE has recently revised DHFL fixed deposit rating from CARE AA+ (FD) to CARE AAA (FD) indicating highest safety.

√ √ √ √ √

HDFC FAAA Housing Development Finance Corporation ltd (HDFC) is one of the respected financial groups in India, started operation in 1977 and have wide network of more than 283 offices in India. HDFC has received “AAA” rating for its deposit products indicates highest safety from CRISIL and ICRA for consecutive 16 years

√ √ √ √ √

HUDCO AAA Housing & Urban Development Corporation Ltd. (HUDCO), incorporated in 1970, is a public sector company fully owned by Govt. of India for financing of housing and urban infrastructure activities in India. The company’s FDs are rated AAA (ICRA), indicating high safety

× √ √ √ √

Name of the FD

Credit Rating

Rationale Interest Payout Options

Mthly Qrtly Half-yrly

Yrly Cum

MMFSL FAAA Mahindra Financial Service Ltd (MMFSL), a subsidiary of Mahindra and Mahindra, is a deposit-taking, asset financing NBFC that provides financing for cars, tractors and commercial vehicles. The highest credit rating of ‘AAA’ by CRISIL, comfortable capital adequacy, and good pedigree are the key arguments for taking the exposure.

× √ √ × √

PNBHFL FAAA PNB Housing Finance Limited is a Non-Banking Financial Company Incorporated in the Year 1988 and provides long term housing finance for construction / purchase / repair & renovation of residential housed / flats to individual (resident and NRIs) and corporate. The company scores well on credibility, financials and has sustainable growth model.

√ √ √ √ √

Shriram Transport Finance

AAA/ AA+

Shriram Transport Finance Company (STFC) is India’s largest asset financing non-banking financial corporation (NBFC) with over Rs 30,000 crore of assets under management (AUM). This FD scheme has been assigned a FAAA/stable rating by Crisil and an MAA+/stable rating by ICRA, indicating high level of safety.

√ √ √ √ √

Debt Fund Recommendations

Liquid Funds Liquid fund is a category of mutual fund which invests primarily in money market instruments like

certificate of deposits, treasury bills, commercial papers and term deposits having maturity of up to

91 days.

Recommended Schemes

Axis Liquid Fund

ICICI Liquid Fund

Kotak Floater - ST

L&T Liquid Fund

Tata Money Market Fund

Corpus (Rs. Cr) 19245 36418 14618 7392 7732

Avg Maturity (Days) 29 44 33 33 48

7 days returns (percent)

6.46 6.43 6.41 6.46 6.41

1 mth Return (percent) 6.50 6.45 6.51 6.54 6.50

Asset Profile (percent)

AAA/P1+ 92 110 88 110 98

AA+/P1 1 1 1 0 0

Below AA+ 3 2 0 0 0

Cash/Call/Others 4 -13 11 -10 2

Simple Annualized Returns as on 31 May ‘17, Portfolio as on Apr’17

Ultra-Short Term Funds Ultra-short-term funds invest in fixed-income instruments which are mostly liquid and can have short-

term maturities higher than 91 days.

Recommended Schemes

Birla Sun Life Savings Fund

HDFC FRIF STF

IDFC Ultra Short Term

Fund

Kotak Low Duration

Fund

SBI Ultra Short Term Debt Fund

Corpus (Rs. Cr) 18181 14312 4476 5633 10853

Avg Maturity (Days) 482 339 388 252 223

7 days returns (percent)

8.96 7.65 8.25 7.13 7.04

1 mth Return (percent)

7.78 7.15 7.23 6.76 6.61


AAA/P1+ 70 77 61 34 67

AA+/P1 10 7 12 1 8

Below AA+ 13 11 6 56 22

Cash/Call/Others 8 5 22 8 2


Credit Funds

Recommended Schemes

L&T Income Opportuniti

es Fund

Reliance Corporate Bond Fund

Reliance RSF Debt

Fund

SBI Corporate Bond Fund

Tata Corporate Bond Fund

UTI Income Opportuniti

es Fund

Corpus (Rs. Cr) 2687 5751 9329 3542 420 2791

Avg Maturity (days) 960 1456 850 1040 453 825


7.67 9.92 7.55 8.56 6.98 7.87


6.41 5.50 6.22 5.91 5.72 6.32


AAA/P1+ 28 31 32 46 65 22

AA+/P1 7 14 15 7 10 9

Below AA+ 55 50 47 44 20 51

Cash/Call/Others 10 5 6 3 5 18


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