Research Report

Nov 2016

2

Topics Page no.

Equity Market

Review of Indian Market 3

Impact of Demonetization 4

Economic Calendar and Stocks Recommendations 5

Mutual Funds

Snapshot of Mutual Funds Industry 7-8

Recommended Mutual Funds 9

Other Investments

Fixed Deposits 11-12

IIFL PMS 13

Annexure

Asset Allocation 15

Equity Portfolios allocation 16

Table of Content

The Indian equity market has been under pressure as themarket was surprised by the unexpected US presidentialelection outcome and the unprecedented demonetizationdecision of the Modi government. The BSE Sensex has shed4.7% in last one month.

There was a continuous outflow of foreign portfolioinvestments from equity and debt market duringNovember 2016. In November 2016, the FIIs’ net outflowwas ~Rs 17,000 cr from equity market and ~Rs 20,000 crfrom debt market.

Whereas, domestic mutual funds invested ~Rs 13,000 cr inthe equity market and ~Rs 9,600 cr in the debt market inNovember 2016.

And on November 30, 2016 OPEC agreed to cut the oilproduction by ~33 million barrels per day. It is the firsttime in last eight years that the OPEC will cut production.

RBI to meet on December 07, 2016 to decide the monetarypolicy. It is expected that RBI will cut the Interest rates andreserve repo rate by 25 bps as the inflation is undercontrol. However, RBI may keep CRR unchanged at 4%.

The next important global event will be the outcome of USfed meeting on December 15, 2016. It is expected that USFed will hike the interest rates by 0.25% in December 2016meeting. The US 10 years bond yield has risen to ~2.4% on30thNovember 2016.

3

Indian Market Change (%)

02-Dec-16 1 M YTD

S&P BSE Sensex 26,231 -4.7 0.4

Nifty 50 8,087 -5.0 1.8

Nifty Bank 18,248 -5.1 7.8

S&P BSE Mid-Cap 12,199 -7.5 9.5

S&P BSE Small-Cap 12,083 -9.2 2.1

Developed Markets Change (%)

02-Dec-16 1 M YTD

Dow Jones 19,170 6.7 10.0

Nasdaq 5,256 2.9 5.0

S&P 500 2,192 4.5 7.2

Hang Seng 22,565 -1.1 3.0

Nikkei 225 18,426 7.5 -3.2

-21000

-16000

-11000

-6000

-1000

4000

9000

14000

Sep-16 Oct-16 Nov-16

Net FII flows

Equity Net (Rs cr) Debt Net (Rs cr)

0

10000

20000

30000

40000

50000

60000

Sep-16 Oct-16 Nov-16

Net MF flows

Equity Net (Rs cr) Debt Net (Rs cr)

*figures and returns as on December 02, 2016. Note: Net FII flows and net MF flows for Nov 2016 are as of November 29, 2016

Review of Indian Market

Impact of Demonetization

Sector Impact Remark

Banks Positive The cash deposits will improve the CASA of banks. Demonetization will push inflation down thus RBI will cut interest rates.

NBFC Negative EMI collection will get delayed especially for micro finance companies.

Real Estate Negative According to some estimates 30-35% of real estate sales take place in cash. The sector would face drop in demand in near future.

Automobiles Marginally Negative

Two wheeler sales will reduce since most of the sales happen in cash. The CV sales will also get hit since whole economy will slow down for next 2 quarters.

Consumer Goods Negative Consumer durables will hit hard as sales of the high ticket items would be impacted.

Cement NegativeCrash in demand in real estate and slump in property prices will postpone the construction activities. Thus it will negatively impact the demand of cement.

Metals Negative The postpone in construction activities will decline the demand of metal.

Telecom Marginally Negative

Most of the population still recharge through recharge counters in cash.

Agri-Products Marginally Negative

For Rabi crop , the sale has already being done on credit to distributors. Therefore, the companies will see rise in receivables.

IT Services NeutralThere will be no significant impact on IT companies since most of them are in B2B business. And, the majority of their revenue comes from America and Europe.

Oil and Gas Neutral There will be no severe impact on sales of oil and gas companies.

Pharma Neutral There will be no significant impact on pharma companies since most of there revenue comes from America and Europe.

Infrastructure MarginallyNegative

The execution may slow in short-term since daily wagers paid in cash. However, the government may increase infrastructure spending to boost the economy.

4

The unprecedented decision to demonetize Rs 500 and Rs 1,000 notes surprised the whole nation. Closeto 86% of the money circulating in the economy was in the denomination of Rs 500 and Rs 1000 notes.Thus, the impact of the decision will be significant and it will enormously hit the parallel economy. In short-term to medium-term some sectors may face the headwinds. Below we have elucidated the impact ofdemonetization on different sectors.

Economic Calendar and Stocks Recommendations

Stock CMP Target Price Upside

1 State Bank on India Rs 254.4 Rs 300 18%

2 Tata Motors DVR Rs 287 Rs 339 18%

3 Coal India Ltd Rs 306.1 Rs 358 17%

4 Power Finance Corp Rs 131.3 Rs 152 16%

5 Gail (India) Ltd Rs 431.9 Rs 501 16%

5*CMP as on December 02, 2016.

Date Event Expected Previous

07-12-2016 India - Cash Reserve Ratio 4.00% 4.00%

07-12-2016 India - Interest Rate Decision 6.00% 6.25%

07-12-2016 India - Reserve Repo Rate 5.50% 5.75%

08-12-2016 Euro – Interest Rate Decision 0.00% 0.00%

15-12-2016 US Fed Interest Rate Decision 0.75% 0.50%

Economic Calendar

Stocks Recommendations

Mutual Funds

6

Type (Rs thousand cr) Oct-16 Oct-15 Change

(yoy)

Hybrid Funds 182 134 36%

Debt Funds 1,026 813 26%

Equity Funds 460 372 24%

Commodity Funds 7 7 -3%

Total 1,675 1,326 26%

7

Category (Rs thousand cr) Oct-16 Oct-15 Change

(yoy)

Income 342 272 26%

Diversified 337 275 23%

Liquid 305 257 19%

Ultra Short Term Plan 201 142 41%

Balanced Funds 116 78 49%

Fixed Maturity Plans 112 86 31%

Equity Linked Savings Scheme 55 42 29%

Floating Rate 42 30 44%

Arbitrage Funds 34 30 14%

Sector Funds 22 21 4%

The total AUM of mutual fund industry stoodat Rs 167.5 lakh crore in Oct-16 compared toRs 132.6 lakh crore trillion in Oct-15.

The MF industry has seen good yoy growth inits all primary categories except Gilt funds inOct-2016. Equity balanced funds have seensplendid growth as more and more investorsgetting aware of its tax benefits andmoderate risk.

Instead of investing in two equity and debtfunds, investors can invest in one equitybalanced fund since equity balanced fundsinvest ~35% of AUM in non-equity securities,primarily in debt instruments, which makethem less risk compared to equity MFs. Andsince they keep minimum 65% in equity, theyget the tax benefits of equity MF.

Diversified equity funds and ELSS saw growthof 23% and 29% respectively in last one year.

In debt funds, Ultra short term fund andfloating rate funds saw enormous growth intheir AUM. Income funds also addedsignificant amount of AUM. Liquid funds alsoreceived considerable inflows.

The selling pressure in November hasdragged the returns of the equity mutualfunds. On an average, the diversified mutualfunds i.e. large-cap, mid-cap, multi-cap andsmall-cap funds have plunged ~10% in onemonth.

Whereas debt mutual funds gained in lastone month. On an average gilt funds andlong-term funds gained ~3% in one month.

AUM (Type wise)

AUM (Category wise)

Snapshot of Mutual Fund Industry

Source: Ace MF

Source: Ace MF

8

Equity mutual funds category returns

Category 1 M (%) 3 M (%) 6 M (%) 1 Y (%) 3 Y (%) 5 Y (%)

Liquid funds 0.5 1.6 3.5 7.5 8.2 8.6

Ultra-short term funds 1.0 2.3 4.6 8.8 8.8 8.8

Short-term funds 1.7 3.3 6.5 10.7 9.7 9.4

Medium-term Funds 2.3 4.0 7.7 12.0 10.6 10.0

Long-term funds 3.2 5.0 9.5 13.7 11.2 10.0

Gilt Funds 4.4 6.3 12.1 17.0 12.8 10.7

MIP 0.9 2.2 7.7 11.5 12.2 10.5

Crisil Liquid Fund Index 0.6 1.7 3.6 7.6 8.4 8.5

Crisil Composite Bond Fund Index 3.2 5.4 10.2 15.0 12.6 10.2

Debt mutual funds category returns

Note: Returns are as on December 02, 2016 and, 3 years and 5 years returns are CAGR

Category-wise Return of Mutual Funds

Source: Ace MF

Source: Ace MF

Category 1 M (%) 3 M (%) 6 M (%) 1 Y (%) 3 Y (%) 5 Y (%)

Balanced - Equity-Oriented -3.6 -3.6 5.0 7.7 16.8 14.6

ELSS -6.7 -6.9 3.1 4.6 18.4 15.7

Large-cap -6.0 -7.4 2.2 3.7 14.2 12.7

Mid-cap -7.8 -5.6 6.8 6.4 27.5 21.6

Multi-cap -6.1 -6.2 5.1 6.2 19.6 15.8

Small-cap -7.5 -3.7 7.6 8.8 34.7 26.0

S&P BSE SENSEX -4.7 -8.1 -2.3 0.4 7.9 9.2

S&P BSE Mid-Cap -7.5 -7.8 6.9 9.9 24.1 16.2

S&P BSE Small-Cap -9.2 -4.4 7.9 3.4 25.1 14.3

Recommended Mutual Funds

9

Equity Mutual Funds Category Corpus (Rs cr)

1 M (%)

6 M (%) 1 Y (%) 3 Y (%) 5 Y (%)

Balanced Funds - Equity Oriented

HDFC Prudence Fund(G) Balanced Fund 14,184 -1.7 11.4 10.7 20.6 15.9

Birla SL Balanced '95 Fund(G) Balanced Fund 4,741 -4.2 5.1 9.9 19.7 15.8

Diversified Equity Funds

HDFC Equity Fund(G) Large-cap 16,238 -4.2 7.1 6.4 17.9 14.8

SBI BlueChip Fund-Reg(G) Large-cap 9,534 -6.3 0.2 6.3 19.7 18.3

Reliance Growth Fund(G) Large-cap 5,784 -7.6 6.1 4.8 21.1 16.1

UTI Mastershare(G) Large-cap 3,676 -5.8 -0.1 2.9 14.4 12.4

Reliance Top 200 Fund(G) Large-cap 2,388 -5.0 4.0 1.9 18.6 16.1

ICICI Pru Value Discovery Fund(G) Multi-cap 14,461 -3.6 5.1 4.4 26.5 22.7

HDFC Mid-Cap Opportunities Fund(G) Mid-cap 13,454 -6.0 11.2 14.1 30.5 24.0

DSPBR Micro-Cap Fund-Reg(G) Small-cap 4,264 -7.4 10.6 16.1 43.4 29.0

ELSS

Axis LT Equity Fund(G) ELSS 10,999 -7.8 -1.4 2.1 22.1 20.8

Birla SL Tax Relief '96(G) ELSS 2,541 -8.4 0.7 3.4 21.4 18.3

Reliance Tax Saver (ELSS) Fund(G) ELSS 5,792 -5.9 6.7 5.2 25.8 21.0

Debt Mutual Funds Category Corpus (Rs cr)

1 M (%)

6 M (%) 1 Y (%) 3 Y (%) 5 Y (%)

ICICI Pru Income Opportunities Fund(G) Long-term 3,527 2.5 8.7 12.7 12.0 10.5

HDFC Medium Term Opportunities Fund(G) Medium Term 8,382 1.9 7.1 11.8 10.5 9.9

HDFC STP(G) Short-term 3,679 1.4 6.1 10.9 10.5 9.7

Reliance Money Manager Fund(G) Ultra-Short Term Plan 15,382 0.9 4.5 8.8 8.8 9.1

Note: Returns are as on December 02, 2016 and, 3 years and 5 years returns are CAGR

Source: Ace MF

Source: Ace MF

Other Investments

10

Fixed Deposits

Shiriram Unnati Fixed Deposits

11

Fixed Deposit Rate Matrix

Normal Scheme

Non-cumulative scheme rates p.a. Cumulative scheme rates p.a.

Period (Years) Monthly Quarterly Half Yearly Yearly

Rate % p.a.Compounded

monthly

EffectiveInterest

rates

Maturity value of Rs 5,000

1 7.95% 8.00% 8.08% 8.25% 7.95% 8.25% Rs 5,413

2 8.19% 8.25% 8.33% 8.50% 8.19% 8.87% Rs 5,887

3 8.19% 8.25% 8.33% 8.50% 8.19% 9.25% Rs 6,388

4 8.42% 8.48% 8.57% 8.75% 8.42% 9.97% Rs 6,994

5 8.42% 8.48% 8.57% 8.75% 8.42% 10.42% Rs 7,604

Senior Citizen Scheme

Non-Cumulative Scheme rates Cumulative Scheme rates

Period (Years) Monthly Quarterly Half Yearly Yearly

Rate % p.a.Compounded

monthly

EffectiveInterest

rates

Maturity value of Rs 5,000

1 8.19% 8.25% 8.33% 8.50% 8.19% 8.50% Rs 5,425

2 8.42% 8.48% 8.57% 8.75% 8.42% 9.14% Rs 5,914

3 8.42% 8.48% 8.57% 8.75% 8.42% 9.54% Rs 6,431

4 8.65% 8.71% 8.81% 9.00% 8.65% 10.29% Rs 7,058

5 8.65% 8.71% 8.81% 9.00% 8.65% 10.77% Rs 7,693

Key Features Rating : FAAA Stable by CRISIL & MAA+/ Stable by ICRA Minimum Investment: Rs 10,000 for non-cumulative deposits and Rs .5,000 for cumulative

deposits. Additional deposits in multiples of Rs 1,000 Additional interest of 0.23-0.25% for senior citizens** Cumulative deposits can be renewed at maturity value

Fixed Deposits

DHFL Health2Wealth

12

Fixed Deposit Rate Matrix

Normal Scheme (Deposits below Rs 50 lakh)

Non-Cumulative Scheme rates Cumulative Scheme rates

Period (Years) Monthly Quarterly Half Yearly Yearly

Rate % p.a.Compounded

monthly

EffectiveInterest

rates

Maturity value of

Rs 25,000

1 7.90% 8.00% 8.05% 8.25% 8.25% 8.51% Rs 27,127

2 8.15% 8.20% 8.30% 8.50% 8.50% 8.77% Rs 29,580

3 8.25% 8.30% 8.40% 8.60% 8.60% 8.88% Rs 32,270

4-10 8.30% 8.35% 8.45% 8.65% 8.65% 8.93% Rs 35,205 –Rs 58,830

Normal Scheme (Deposits equal to or above Rs 50 lakh)

Non-Cumulative Scheme rates Cumulative Scheme rates

Period (Years) Monthly Quarterly Half Yearly Yearly

Rate % p.a.Compounded

monthly

EffectiveInterest

rates

Maturity value of

Rs 25,000

1 8.15% 8.25% 8.30% 8.50% 8.50% 8.77% Rs 27,127

2 8.24% 8.45% 8.55% 8.75% 8.75% 9.04% Rs 29,580

3 8.50% 8.55% 8.65% 8.85% 8.85% 9.15% Rs 32,270

4-10 8.55% 8.60% 8.70% 8.90% 8.90% 9.20% Rs 35,551 –Rs 60,287

Key Features: Rating : Brickwork FAAA and CARE AAA (FD) Minimum deposit: Rs 25,000, thereafter in multiples of Rs 1,000. Interest compounded half yearly. Cashless access to empanelled hospitals/diagnostic centers* Free of premium Rs 1 lakh accidental death insurance to every individual depositor of first

depositor incase of joint holding. Additional interest of 0.25% for privilege customers** Additional interest rate of 0.25% deposits equal to or above Rs 50 lakh.

*Terms and conditions apply**Privilege customers: Senior Citizens, existing DHFl home loan / SME loan/ mortgage loan borrowers, armed forces personnel, widows (appropriate Proof should be attached)

IIFL PMS

Investment objective• To generate capital appreciation in medium to long term perspective.

Investment philosophy • Emphasis on fundamentally sound, well researched companies perceived to be undervalued

considering their medium to long term growth prospects.• Focus will be on medium to large capitalization companies

– Companies which have a proven track record or earning capability, quality management, leadership status in sectors or potential to achieve such status.

– Companies which have potential to deliver growth over the long term.

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Return 1 month 3 months 6 months 1 year

Portfolio -6.1% -1.0% 10.4% 9.8%

Benchmark – CNX Nifty 50 -4.7% -6.4% 0.8% 3.6%

Outperformance (Alpha) -1.4% 5.4% 9.6% 6.1%

* Returns as on 30th November 2016

Fee Structure

Annual Management Fee (charged upfront) Fees

Rs 25 lakh to Rs 1 crore 1.50%

Above Rs 1 crore 1.00%

• An exit load of 2% will be charged if the fund is withdrawn within 1 year of activation. No exit load after 1 year.

• Transaction charges is 0.50%, as charged by broker.• 10% annual profit sharing on total profit above the hurdle rate of 10%.

*Allocation as on 30th November, 2016

21%

21%

14%8%

7%

6%

5%

4%

4%3%

4% 2% 1%

Sector-wise allocationFinanceAutomobileEnergyMediaCashConstructionPharmaMetalsCons GoodsITIndustrialChemicalsOthers

33%

27%

12%

12%

10%6%

Market Cap allocation

SUPER LARGE

LARGE

MID

TINY

SMALL

Cash / Other

Annexure • Asset Allocation• Equity Portfolio Allocation

14

Asset Allocation

Equity35%

Debt45%

Gold ETF20%

Conservative Portfolio

15

Equity50%

Debt35%

Gold ETF15%

Moderate Portfolio

Equity70%

Debt20%

Gold ETF10%

Aggressive Portfolio

Conservative portfolio

A Conservative investor aims to generate ahealthy mix of capital appreciation and capitalprotection. His primary aim is capital protection.The 65% exposure to debt and gold ensures acapital protection while 35% allocation to equitywill generate high returns in long-term.

Moderate portfolio

A moderate investor seeks for a mixture ofmodest capital appreciation, safety and income.His chiefly objective is to generate decent returnswith limited downside risk. The 35% exposure todebt and 15% exposure to gold will ensure limiteddownside risk while 50% allocation to equity willenhance alpha in good periods.

Aggressive Portfolio

An aggressive investor hunts for higher returnsand is ready to face the short-term volatility. So,he should allocate 70% of his capital to equity togenerate higher returns. He should also invest indebt and gold to keep a favorable risk-reward.

Equity Portfolios Allocation

Conservative PortfolioSr.No Stocks Sector Allocation

1 Tata Motors DVR Auto 9%2 Motheson Sumi Auto 8%3 HDFC Bank Bank & NBFC 9%4 PFC Bank & NBFC 8%5 Coal India Capital Goods 10%6 Nestle FMCG 8%7 Britannia FMCG 7%8 HCL Tech IT 7%9 ONGC Oil & Gas 8%

10 Lupin Pharma 8%11 Sun Pharma Pharma 8%12 Power Grid Power 10%

Total 100%

16

Moderate PortfolioSr.No Stocks Sector Allocation

1 Tata Motors DVR Auto 8%2 Motherson Sumi Auto 7%3 ICRA BFSI 7%4 SBI Bank BFSI 8%5 HDFC Bank BFSI 9%6 RBL Bank BFSI 6%7 ONGC BFSI 8%8 KEC International Capital Goods 8%9 Brittania FMCG 8%

10 HCL Tech IT 7%11 Gail Oil & Gas 8%12 Sunpharma Pharma 8%13 Power Grid Power 8%

Total 100%

Aggressive PortfolioSr.No Stocks Sector Allocation

1 Tata Motors DVR Auto 7%2 Bank of Baroda BFSI 8%3 SBI Bank BFSI 8%4 Kotak Mahindra Bank BFSI 7%5 RBL Bank BFSI 7%6 ICRA BFSI 7%7 KEC International Capital Goods 9%8 Carborandum Universal Capital Goods 9%9 Heidelberg Cement 8%

10 Navneet Education Miscelleneous 7%11 IPCA Laboratories Pharma 8%12 ICICI Prudential Life Insurance Insurance 6%13 Arvind Ltd Textiles 9%

Total 100%

Disclosure

• Mutual Fund investments are subject to market risks, read all scheme related documents carefully.• Nothing in this document constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable

or appropriate to the investor's specific circumstances. The details included are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed.

• Investors should consult their financial advisers if in doubt about whether the product is suitable for them. The fund may or may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs. This document may not be taken in substitution for the exercise of independent judgment by any investor. The investor should independently evaluate the investment risks.

• India Infoline Ltd. or any of its director/s or principal officer/employees and associate companies (IIFL) does not assure/give guarantee for accuracy of any of the facts/interpretations in this document, and shall not be liable to any person including the beneficiary for any claim or demand for damages or otherwise in relation to this opinion or its contents.

• The aimed returns mentioned anywhere in this document are purely indicative and are not promised or guaranteed in any manner. Returns are dependent on prevalent market factors, liquidity and credit conditions. Instrument returns depicted are in the current context and may be significantly different in the future.

• The group company of India Infoline Limited, IIFL Wealth Management Limited is the Sponsor of IIFL Mutual Fund and holding company of the Investment Manager & Trustee Company of IIFL Mutual Fund.

• IIFL or its subsidiaries & affiliates may be holding all or any of the units of the scheme(s), referred in the document. The information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of IIFL. While due care has been taken in preparing this document, IIFL and its affiliates accept no liabilities for any loss or damage of any kind arising out of any inaccurate, delayed or incomplete information nor for any actions taken in reliance thereon.

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