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4

Exchange Traded Funds have


been of great interest in the
recent years. They provide a low
cost and rule based investment
opportunity in the markets. In
simple terms, ETFs are mutual
funds that trade on a stock Vijay Chandok, MD & CEO,
ICICI Securities Ltd.
exchange. While ETFs share a
few similar traits with mutual
funds; it is their resemblance to stocks that has gained traction
among investors. They represent a basket of securities that
tracks indices such as Sensex or Nifty, much like index mutual
funds.

ETFs experience price fluctuation throughout the day. This


flexibility of trading proves beneficial to exit and enter at a
defined price. In addition, ETFs are rule based which ensures that
the strategy of investment is well known in advance. Most ETFs
track an index and do not aim at beating the index.

Our ETF industry has come a long way since its foundation in
2001. This is propelled by the success of Gold and CPSE ETFs
amongst retail investors and channeling of part of employee
provident funds into markets by the EPFO. As per a Bloomberg
report in 2017, India was world's second-fastest growing
exchange traded funds (ETF) market, behind only Japan.

The ETF industry is still at a nascent stage in our country. This is


partially due to lack of knowledge about the product. Globally,
specifically in the US, the interest in ETFs has grown many times,
given its success in returns, innovations and availability of
diverse underlying assets. In order to attain similar market
outcome in India, we need a large number of participation by
Indian investors and more importantly, awareness about ETFs.
An understanding how ETFs differ from their conventional
counterparts and their role in our portfolio is important.

ETFs are more cost-effective than traditional mutual funds given


that they are managed passively. Tracking error is another gain
for ETFs over conventional index funds. Tracking error is the
difference between returns of the fund (ETF or index) and the
returns generated by target index. Then there are advantages of
getting listed on stock exchange.

Since ETFs are traded like stocks investors enjoy benefits of short
selling and buying on margin. Plus, ETFs make a potential tool for
gaining instant exposure to the security markets through cash
equitization. In some cases, investing in ETFs can be wiser than
single stock investments. This is because ETF spreads its risk
across different assets instead of focusing on specific firm's
stock. This can help mitigate losses occurred during downtrend
of the market Exchange-traded funds are very powerful
instruments to diversify ones investing strategies. A combination
of active and passive management can effectively harness the
result by using each strategy to minimize risks caused by the
other. ETFS are also suited for new to markets customers
especially through a Systematic Equity Plan.

ETFs are indeed one of the key innovations in the financial


markets that is creating lot of interest and value for investors.

Our message remains the same – “Keep investing and stay


invested for your life goals.” Through this magazine and our
website www.icicidirect.com we want to make an earnest
attempt to partner with you in setting and achieving your
financial goals. Give us an opportunity to serve you, walk into any
of your Neighbourhood Financial Superstore and talk to us.

ICICIdirect Money Manager 1 October 2019


Investing in exchange-traded funds (ETFs) is becoming an important
investing instrument because of their simplicity and effectiveness. ETFs
try to mimic the performance of indices. These indices can be a simple
market-cap index (like Nifty or Sensex) or a factor index. Because indices
are rule based, investing in ETFs are cost effective and transparent with
respect to the investment strategy. ETFs can be purchased on exchange
on real time price that changes depending on the demand and supply in
the market. So though behave like Mutual Funds, they trade like a share.

Exchange Traded Funds can play a very important role in your core
portfolio. Since they are broad based and do not chase an active
investment strategy, they usually capture the returns of the market. In
India, the ETFs are gaining traction and a deeper knowledge about them
is likely to bring in more clarity on where they fit in an investment strategy.

This month edition of the magazine is an extended account of ETF guide.


We explain the structure and mechanism of exchange traded funds,
types of ETFs and draw their comparison with actively managed
investments in Flavour of the month. Likely to support this topic, an
interview is conducted with Mr. Chintan Haria, Fund Manager & Head-
Product Development & Strategy, ICICI Prudential Asset Management
Company Limited who has shared his inputs on exchange traded funds.

The October edition of Money Manager also offers comprehensive


review of mutual funds recommended by our research team. The top two
stock picks of the months are also selected by some of our finest research
analysts. So stay updated, start investing and keep reading to stay
financially fit.

Do write us back at moneymanager@icicisecurities.com for any queries


or feedback.

Your magazine is now also available on www.magzter.com, a


digital newsstand.

Editor & Publisher : Abhishake Mathur, CFA


Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey
Coordinating Editor : Rhea Miranda
Editorial Team : Nithyakumar VP CFPCM, Sachin Jain, Research Team

ICICIdirect Money Manager 2 October 2019


MD Desk ................................................................................................. 1
Editorial .................................................................................................. 2
Contents ................................................................................................. 3
News ...................................................................................................... 4
Stock ideas: Radico Khaitan Ltd and Sanofi India Ltd.......................... 5
Flavour of the Month: Exploring ETFs (Exchange Traded Funds)
Exchange traded funds are pooled investment, that has multiple
stocks in one index being traded on the exchange. This open
ended instrument enables liquidity and the cost is low in
comparison to traditional mutual funds. This edition is about
understanding ETFs and its various types. Explore more..................... 15
Tête-à-tête
Mr. Chintan Haria, Fund Manager & Head- Product Development &
Strategy, ICICI Prudential Asset Management Company Limited has
been interviewed based on Exchange traded funds he says the
current attention seeker is the smart beta ETFs and to know more,
read on................................................................................................................. 25
Ask Our Planner
Our financial expert answers your personal finance queries .............. 30
Mutual Fund Analysis
Which are the top performing mutual funds in current market
scenario? Check these top midcap funds recommended by our
research team..................................................................................... ....38
This month on iCommunity
Look out for an extraordinary financial platform for traders and
investors................................................................................................. 51
Equity Model Portfolio.......................................................................... 52
Quiz Time............................................................................................... 56
Prime Numbers...................................................................................... 57

ICICIdirect Money Manager 3 October 2019


5 changes that will impact your personal finances from October 1
First, all floating rate loans, i.e., personal, housing, auto etc. disbursed by banks from
October 1, have to be linked to an external benchmark. The external benchmark can be
RBI's repo rate; 3 or 6-month treasury bill yield or any other market interest rate
benchmark published by the Financial Benchmarks India (FBIL). Second, starting from
Oct 1, all income tax notices, letters or any other official tax related correspondence will
carry a unique number called 'Document Identification Number' or DIN. Third, according
to a PTI report, the 0.75 per cent discount being given on credit card payments made to
buy fuel at petrol pumps will be withdrawn from October 1. Fourth, news for government
pensioners - Starting from October 1, families of government employees who pass away
before completing seven years of service, will also be eligible for enhanced pension.
Fifth, IRDAI in its circular dated September 27, 2019 has imposed curbs on selling of
travel insurance as pre-selected default option at the time of buying of tickets on online
portals.
Courtesy: Economic Times

BSNL, MTNL to be merged as part of a `56,000 crore rescue plan


India will merge its twin state-run telecom companies in an effort to turn around the money-losing firms,
which it considers core assets. The strategy would also see the government look at ways to exploit the vast
land assets of the two companies while paring their manpower by offering incentives to employees to avail
an early retirement plan. The ?56,000 crore merger and revival plan for Bharat Sanchar Nigam Ltd (BSNL)
and Mahanagar Telecom Nigam Ltd (MTNL) was approved by the Union cabinet on 23rd October. MTNL
operates in Delhi and Mumbai, and BSNL in the rest of India.
Courtesy: Live Mint
Amazon pumps in over Rs 4,400 crore in India business
The US-based Amazon is pumping in over Rs 4,400 crore (more than USD 600 million) in
its various units in India including marketplace and food retail to provide them more
ammunition to compete against arch-rival Flipkart. Amazon, which is locked in a battle
against Flipkart, had registered cumulative losses of over Rs 7,000 crore across various
units in 2018-19. However, the fresh funding is indicative of Amazon's confidence in the
Indian market. As per the regulatory filings made to the Corporate Affairs Ministry, two
entities - 'Amazon Corporate Holdings' and 'Amazon.com.incs Ltd' are pumping in Rs
3,400 crore in Amazon Seller Services (marketplace unit), Rs 900 crore in Amazon Pay
(India) (payments arm) and Rs 172.5 crore in Amazon Retail India (food retail business).
Courtesy: Economic Times
Indian Railways starts new OTP-based refund on cancelled tickets
Indian Railways has introduced an OTP (one-time password)-based refund by authorised
railway ticketing agents of state-owned, Indian Railway Catering & Tourism Corporation
Limited (IRCTC), to ensure speedy refund for passengers. The refund amount will be
applicable against cancelled or waitlisted ticket booked by around 1.7 lakh authorized
agents.
Courtesy: Live Mint

ICICIdirect Money Manager 4 October 2019


STOCK IDEAS

Radico Khaitan - Branded liquor play


available at compelling valuation

Company Background year). Within P&A category,


Radico Khaitan (earlier Rampur semi-premium brands such as
Distillery Company) is among Magic Moments dominate the
the largest manufacturers of share in its category while the
Indian made foreign liquor share from the super-premium
(IMFL) in India. The company is brands such as Morpheus
also a supplier of Indian made brandy continues to rise. Also,
Indian liquor (IMIL) and bulk luxury brands such as Rampur
alcohol in India. It has the single malt and Jaisalmer Gin
distinction of being among have shown considerable
very few domestic players that growth in overseas demand,
have over the years entered focused on US, Europe and
and generated brand equity in travel retail market. Radico
the prestige and above liquor plans to launch two more
segment. The company has brands in the premium space,
three distilleries in Rampur imparting further momentum
(Uttar Pradesh) and two other to the trend.
distilleries operating in JV in
Aurangabad (Maharashtra),
with overall capacity of 157 Strong free cash flow
million litre. generation
Radico clocked RoE & RoCE of
Investment Rationale 14.8% & 18.3%, respectively,
in FY19 (earlier 8% and 9.9% in
Continued play on FY16). With rising revenues
premiumisation front and profitability and lack of any
Radico has four millionaire major capex in the medium
brands 8PM whisky, Contessa term, return ratios are
Rum, Old Admiral brandy and expected to remain healthy at
Magic Moments vodka (sell 16.5% and 19.7%,
more than a million cases each respectively, in FY21. Similarly,

ICICIdirect Money Manager 5 October 2019


STOCK IDEAS

with focus on priority states prospects, makes it a preferred


and better working capital pick in the alcobev sector. In
management and lower capex, spite of the dominance of two
cash flows are expected to global players in the 'prestige
remain strong. FCF is expected and above' segment, Radico
to remain robust at ` 185 crore has been able to penetrate the
in FY21E (implied 4.2% yield). segment and create an own
n i c h e f o r i t s e l f. W i t h a
continued focus on brand
Favourable product mix to aid
development, newer premium
robust growth
IMFL launches and strong
A steep correction in the stock distribution network built over
(~30%), despite superior the years, we ascribe a BUY
performance parameters (with rating to Radico Khaitan with a
strong cash flow generation) target price of ` 400 (18x FY21E
and continued strong future P/E)

ICICIdirect Money Manager 6 October 2019


STOCK IDEAS

Key Financials
` crore FY18 FY19 FY20E FY21E
Net Sales 1,822.8 2,096.9 2,348.9 2,645.9
EBITDA 269.7 350.3 368.8 436.6
PAT 124.0 194.1 236.8 298.4
EPS (`) 9.3 14.6 17.7 22.4

Valuations Summary
` crore FY18 FY19 FY20E FY21E
P/E (x) 33.9 21.6 17.7 14.1
M.Cap/Sales (x) 2.3 2.0 1.8 1.6
EV to EBITDA 17.1 12.8 11.9 9.7
P/B (x) 3.6 3.2 2.7 2.3
RoCE (%) 14.3 18.3 17.7 19.7
RoE (%) 10.7 14.8 15.5 16.5

Stock Data
Particulars Amount
Market Capitalisation (` cr) ` 4242 crore
52 Week High / Low (`) 454/260
Promoter Holding (%) ` 40 crore
FII Holding (%) ` 20 crore
DII Holding (%) 6.35
Dividend Yield (%) ` 0.5 crore

Key risks include: governments with regard to


1. Highly regulated sector production, distribution or
marketing of IMFL can impact
Liquor distribution business in the operational performance of
India is subject to strict the company. Also, changes in
regulations. The rules and taxes and other levies by the
regulation vary in different state government can impact
states. Any change in policies the financial performance of
by the respective state the company.

ICICIdirect Money Manager 7 October 2019


STOCK IDEAS

2. Increase in raw material prices can impact the


costs profitability of the company.
The prices of molasses and 3. Inability to take price hikes
grains (which is one of the
In majority of the states, price
primary raw materials for
hikes are decided by the
manufacture of IMFL) and
packaging material have been government. If the company is
hardening since H2FY19, not granted price hikes or the
which has impacted the price hike is insufficient to
margins of liquor companies. cover for increased input cost,
Any further significant and it can impact the margins of the
sustained increase in their company.

ANALYST CERTIFICATION
I/We, Bharat Chhoda, MBA; Harshal Mehta MTech (Biotech) , Research Analysts, authors and the names subscribed to this report, hereby certify that all of
the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our
compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above
mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do
not serve as an officer, director or employee of the companies mentioned in the report

Terms & conditions and other disclosures:


ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and
distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with SEBI Registration Number – INH000000990. ICICI
Securities Limited Sebi Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India's largest private sector bank
and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund
management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and
our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment
Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest
in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions,
trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports.
Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail
Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the
Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and 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 ICICI Securities. While we would endeavour
to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be
regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has
been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI
Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is 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. This report and information herein is solely for informational purpose and shall not be used or considered as an
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Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may
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ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by
the subject company for any other assignment in the past twelve months.

ICICIdirect Money Manager 8 October 2019


STOCK IDEAS

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve
months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant
banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities
or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection
with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at
the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company
mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in
various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

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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
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such restriction.

ICICIdirect Money Manager 9 October 2019


STOCK IDEAS

Sanofi India – Power brand focus to the fore

Company Background Sanofi-Synthelabo (India) Ltd,


Sanofi India (SIL) is a leading Sanofi Pasteur India Pvt Ltd
MNC in the domestic and Shantha Biotechnics).
pharmaceutical market and Investment Rationale
exports to 48 countries. The “Power brands” continue to
exports: domestic split has grow ahead of industry
soared to 30:70 in CY18 from growth
17:83 in CY12. The company
The domestic pharma market
operates mainly in the
(~` 1.4 trillion AIOCD MAT
diabetes, cardiac, vaccines,
September 2019) is growing at
respiratory and analgesics
9-10% YoY. Branded generics
domain (~76% of domestic
dominate the pharmaceuticals
revenue as per AIOCD MAT
market, constituting nearly
September 2019). SIL's top 80% of market share in
nine power brands viz. Lantus revenue terms. Sanofi's top
(diabetes), Allegra three brands (Lantus, Amaryl
(respiratory), Combiflam and Allegra) together posted
(analgesic), Amaryl (diabetes), revenue CAGR of ~21%,
Hexaxim (vaccine), Clexane leading their combined
(CVS/cardiac), Enterogermina contribution to Sanofi's India
(GI), Cardace (cardiac) and Avil sales to grow from 29% in
(respiratory) contributes March 2015 to nearly 44% in
~50% to the company's March 2019. Matured brands
domestic sales (AIOCD MAT like Combiflam are also
September 2019). Post board growing at a steady pace. Note
approval for slum sale and that four core brands (Lantus,
transfer of its manufacturing Amaryl, Clexane and Avil) are
facility at Ankleshwar, SIL will under price control. We expect
have now one manufacturing future launches from its global
site at Goa. The Sanofi group staple along with brand
operates through four legal extensions and access to
entities in India (Sanofi India, innovative molecules from

ICICIdirect Money Manager 10 October 2019


STOCK IDEAS

global parent like the recently in the anti-diabetic category. A


launched anti-diabetic Toujeo strong growth track in top
to drive growth. brands and capability of new
Improvement in margins with launches (including innovative
better return ratios launches) besides strong
balance sheet and non-
Sanofi is a cash-rich company existent corporate governance
and has seen its core RoEs concerns are some key
improving from 15.4% in CY14 attributes of MNC pharma
to 23.4% in CY18. EBITDA companies including Sanofi.
margins have recovered from The issues like NLEM and
the lows of 17.2% in CY14 due other regulatory aspects are
to inclusion of its top brands mostly in the price. Also,
under price control (NLEM) to recent Ankaleshwar deal
22.4% in CY18. Strong exports prima facie looks unfavourable
performance to semi- at 0.56x of EV/sales (` 262
developed economies coupled crore realisation for a revenue
with new product launches, of ` 470 crore (17% of overall
volume led growth in SIL top r e v e n u e s ) , h o w e v e r, w e
brands and intermittent price expect a positive rub-off on the
hikes in its portfolio provide margins front, going ahead. As
comfort on the financial front. per the management's own
The company has maintained assertion, the deal will lead to
dividend payout in the range of extended focus on its core
40-60% in the past five years. branded formulations
business that typically fetches
Valuation & Outlook
better margins vis-à-vis third
Sanofi remains one of the party exports. On the flip side,
fastest growing companies in looming threat of Jan
India in anti-diabetic therapy. It Aushadhi and trade generics
has launched Toujeo within are some head winds at this
just three years of its launch in juncture. We arrive at a target
the US, which suggests it is price of ` 8060 based on 30x
prepared to launch core CY21 EPS of ` 269. We have a
innovative products in India BUY recommendation on
banking on growth prospects Sanofi India.

ICICIdirect Money Manager 11 October 2019


STOCK IDEAS

Key Financials
` Crore CY18 CY19E CY20E CY21E
Revenues 2,770.8 3,096.5 3,111.9 3,318.3
EBITDA 623.5 696.8 731.4 813.1
PAT 380.6 486.8 542.4 618.9
EPS (`) 165.3 211.4 235.5 268.7

Valuations Summary
CY18 CY19E CY20E CY21E
PE (x) 36.3 28.4 25.5 22.3
EV/ Revenues (x) 4.7 4.1 4.0 3.6
EV to EBITDA (x) 20.8 18.4 16.9 14.6
P/B (x) 6.2 5.8 5.3 4.8
ROE (%) 17.2 20.4 21.0 21.7
RoCE (%) 25.9 25.6 26.3 27.1

Stock Data
Particulars Amount
Market Capitalisation ` 13810 crore
Debt (CY18) ` 0 crore
Cash (CY18) ` 832 crore
EV ` 12978 crore
52 week H/L `6599/ `5280
Equity capital ` 23.0 crore
Face value ` 10

Key risks include: prices of pharmaceuticals and


margins offered to trade. Any
Uncertainty associated with further additions to the National
pharma pricing List of essential medicines
Sanofi's four core brands (Lantus, (NLEM) from the company's
Amaryl, Clexane and Avil) are product basket may lead to
under price control. In India, further price cuts.
pharmaceutical prices are subject
Looming threat of product
to regulation. The government
conversion from brands to
has been actively reviewing generics

ICICIdirect Money Manager 12 October 2019


STOCK IDEAS

As per pursuant to a notification on the business, results of


dated October 8, 2016 issued operations and financial
Medical Council of India, doctors condition.
in India are required to provide Disruption in production at
prescriptions in terms of generic manufacturing facility (single
pharmaceutical names instead of facility)
particular brands. The company's After the Ankaleshwar facility sale,
business relies on doctors the company will have only one
(specialists & super specialists) manufacturing facility in Goa. The
who prescribe products identified domestic pie (that included power
by their brand names. In the event brands Combiflam, Amaryl,
that doctors are restricted from Allegra, etc) of the Ankaleshwar
prescribing brands, the demand unit will now be shifted to the Goa
for, and volume of sales of, the facility (some will be outsourced).
company's products may decline. Any disruptions in its Goa facility
This may have an adverse effect could delay production.

ANALYST CERTIFICATION
I/We, Siddhant Khandekar, Inter CA, Mitesh Shah, CFA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the
views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our
compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above
mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months
and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:


ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and
distribution of financial products. ICICI Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number – INH000000990. ICICI
Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India's largest private sector
bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund
management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and
our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment
Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest
in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions,
trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports.
Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the
Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target
price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and 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 ICICI Securities. While we would
endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also,
there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a
particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in
circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is 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. This report and information herein is solely for informational purpose and shall not be used or considered as an
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this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or
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make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken
in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and
return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities
whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance.

ICICIdirect Money Manager 13 October 2019


STOCK IDEAS

Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may
differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by
the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve
months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or
merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities
or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection
with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest
at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company
mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in
various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

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
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and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe
such restriction.

ICICIdirect Money Manager 14 October 2019


FLAVOUR OF THE MONTH

Exploring ETFs (Exchange Traded Funds)

ETFs have gained wide acceptance as a financial instrument


worldwide. However, in India, not many investors know about
this passively managed investment vehicle. In spite of being one
of the fastest growing ETF markets in the world, a lot of us are
unaware about the concept & functioning of ETF. Considering the
fact that our ETF market has seen twofold growth in three years,
we can say there's a lot of potential for progress. And with the
government's initiatives to encourage ETF investments, the need
to understand ETF has become more essential than ever. Thus,
our cover story of this month is a handbook of exchange-traded
funds. We try to explain creation of ETF, its types, characteristics,
advantages, disadvantages and more. Read on to find out all
about it…

What is an ETF? currency, options, futures,


equities and a blend of assets.
ETFs are priced continuously An ETF comes up with an NFO
based on the real time market to trade in the listed stock
as its traded on the exchange. exchange. One can purchase
They hold a portfolio of and sell stocks via the online
securities that reflects the trading portal or take help of a
indexes based on the market. broker. An ETF is priced based
Returns and risk of the ETF is on the real market unlike funds
related to the underlying value of NAV that compute at the end
like the stock indexes or assets of the business day.
like gold or real-estate ETFs.
Minimum lot size in an ETF is 1 December 2001 was dated to
unit similar to a traded stock in be the first ETF being launched
the market. in India that was bench
marketed against Nifty 50.
ETFs is a pooled investment ETFs was also popularly
vehicle that offers exposure to known due to the below two
diversified markets. It invests approaches. First approach
in stocks, bonds, commodities, when the market valuation

ICICIdirect Money Manager 15 October 2019


FLAVOUR OF THE MONTH

becomes fairly priced or are the only electronic mode of


overvalued, it gets difficult to trading in Mutual funds making
beat index and passive it a reason to trade in the Indian
investment (index tracking markets.
funds) gets better advantage
over active management ETFs are different from mutual
funds, and second approach is funds as in the ETF units are
Gold ETF and Real Estate ETFs not sold to public for cash.

Source: NSE website

Process of ETF outstanding ETF units as


The above image will help you compared to mutual funds.
in understanding the process Shares could increase and
of Exchange Traded Funds. decrease according
In the primary market, AMCs instructions given to fund
that sponsors ETFs take shares house for creation and
of companies comprising redemption of ETF units of the
index from various categories underlying shares. Trading
of investors and institutions to members at the other corner
issue blocks of ETFs. There is trade in those ETF shares on
no limit on the number of the secondary markets.

ICICIdirect Money Manager 16 October 2019


FLAVOUR OF THE MONTH

Secondary market trading is cost effective way to invest.


simple as there are buyers and Types of ETF
sellers and according to the
The scope of the security
price preference investors Bid markets has been broadening
and Ask on the specific stock. due to variety of options in
Authorized Participants: It's a ETFs namely equity ETFs,
large institutional investor that commodity ETFs, debt ETFs
enters in a contract to create and global ETFs.
ETFs. Equity ETFs:
Sponsors: The one who issues Index ETF:
ETFs. Index Exchange Traded Funds
Creation: The process at which are the oldest and most
Authorized Participants sell common of the ETF product
stocks to the ETF sponsors in offerings. Index ETFs acquire
return for shares in ETF is securities in amounts that
called creation. proportionately reflect the
Redemption: The process at securities of an existing index
in a given market. By investing
which Authorized Participants
in them an investor can get the
buys the stocks from the ETF
benefit of broad diversification
sponsors in return giving back
that replicates the
the shares of ETF is called
performance of the underlying
redemption.
index.
Active investment: Active
Bank ETF
investors try to beat the stock
market average returns and Theses ETFs include bank
take the advantage of short stocks listed on the index. They
term price fluctuation. are highly traded and offer
liquidity of which one can
Passive investment: Passive easily trade into margins. As
investors track the market. bank is the main route for
They mainly limit the amount financial activities like currency
of buying and selling within market, credits and many
their portfolio, making this a more. Demand for banking

ICICIdirect Money Manager 17 October 2019


FLAVOUR OF THE MONTH

sector and ETFs is generally exchange traded funds where


rising due to increase working the domestic investors are
population, growing exposed to the international
disposable incomes, effective markets. At times when Indian
operational banking facilities equities aren't performing well,
and credible monitoring done
US equities could be a benefit
by Reserve bank of India.
to provide stability in the
Liquid ETFs portfolio. From the below
These investments are mainly chart, one could view the rising
in call money, short-term performance of Global ETFs
government securities and along with growth of ETF since
money market instruments of 2003 till June '19. Assets under
short maturities while Management (AUM) of ETFs
maintaining safety and
across the globe has grown
liquidity.
exponentially from $453 bn in
International ETFs 2005 to $5,489 bn in June 2019
These are globally equity – a CAGR of 20%.

Data source www.etgi.com. Date as on June 2019


Source: ICICI Prudential Private Bank ETF report

ICICIdirect Money Manager 18 October 2019


FLAVOUR OF THE MONTH

Commodity ETFs - ETFs are the stock. In comparison


not only trading in stocks but between gold ETF and physical
has extended to commodities gold, ETFs save on the storage
where the underlying value is risk, flexible, liquid able and tax
commodity itself. This ETF efficient. Gold ETFs are a risk
tracks the performance of the diversifier that protect your
commodity index that includes investments from inflation and
number of underlying currency fluctuations.
commodities including the The first Gold ETF was
mixture of physical storage launched in India 2007 with the
and derivative positions. In name of Gold BeES and now
India, the most favoured the value of gold has grown to
commodity is gold and many 19% per annum that is
are investing into gold ETFs between 2009-17 crossing 5
because of its advantage of t r i l l i o n - d o l l a r. I n a w a y
hedging over inflation. investors get the opportunity
Gold ETFs: to save in gold without having
These ETFs hold physical gold the security risk and locker
as their underlying asset. The charges to be paid. Gold ETFs
returns are low in this ETF but are passive investment that are
based on the price movement
due to their safe investment for
and investments in physical
long term they are yet popular
gold.
among the investors. In total 13
gold ETFs are available in India ETF Bonds - Bonds ETFs are
as of 2019, the performance of going to be a recent addition in
these funds largely based on the Indian markets. what is a
the physical gold price. The Bond ETF? it is basically
price of the gold ETF would be trading in bonds via the
closest to the real value of the exchange just like any
physical gold. The charges conventional bond mutual
applied in a gold ETF are fund. But these bond ETFs will
expense ratio that is lower than be more transparent, liquid
a mutual fund and brokerage and cheaper. They fall into 4
charges on the buy and sell of category; corporate,

ICICIdirect Money Manager 19 October 2019


FLAVOUR OF THE MONTH

sovereign, government and Though it's a AMC product,


broad market. Some ETFs due to its trading done on
would track based on credit market hours one can trade
quality or maturity and other through online portal or need
based on geographical region to execute the trade via broker.
or industry. • Select an ETF
Other Aspects of ETFs:
•Choose the number of units/
Leveraged ETFs and Inverse lot to be added
ETFs – these are the types of
derivative ETFs where •Choose the direction – BUY
individuals will take risk and set or SELL
a higher margin to earn more in •Execute the position
a leveraged ETF whereas in
situation of opposite market an
•At ICICI securities one needs
to login to ICICIdirect.com >
individual can position in
Products and Services > ETF
Inverse ETF to diversify losses.
OR Click:
Smart beta ETFs – This index
https://www.icicidirect.com/idire
has stocks picked with low ctcontent/ProductService/Produc
volatility, alpha, quality and tService.aspx?ETF to trade.
value. They are a combination
Any- one who wishes to
of active and passive
continue its investment on
investment strategy.
fixed duration (daily, monthly
Taxes on ETFs: For long term basis) in that specific good
(more than 36 months), capital performing ETF could use the
gains are taxed at 20% with SEP mode (Systematic Equity
indexation and for short term Plan). This mode is very
(up to 36 months), capital gains commonly used in Mutual
are added to income and taxed Funds as SIP (Systematic
as per income slab. Investment Plan) mode where
monthly investment goes in
How to trade in ETF?
that particular fund. SEP allows
Trading in ETFs isn't difficult as investors to grow its portfolio
it is similar to trading in stocks. with such investment.

ICICIdirect Money Manager 20 October 2019


FLAVOUR OF THE MONTH

Things to keep in mind before ETF's performance in


trading in ETFs. comparison to its benchmark
•While selecting an ETF, one over a period of time.
has to choose the place to Tr a c k i n g e r r o r i s t h e
diversify from general market consistency of ETFs excess
and index funds into a return at the same time. If
specific sector, industry or total returns are your priority
commodity. than excess return becomes
important than tracking error
•Investment horizon another during evaluation, but if
important tool as advantage performance consistency is
would lie in its short or long more favoured than tracking
term investment error is beneficial.
•S c r u t i n i z e y o u r s t o c k s Is ETF a Mutual Fund?
performance as it should not Though an ETF is termed to be
hamper your portfolio a fund but it's not a Mutual
•ETFs are cost effective but fund. The only similarity they
one should not avoid the have is the NAV, while ETF is
brokerage charges. Some like a stock that is traded on the
close ended ETFs could have exchange. The below table will
extra management fees help you understand the
charged. difference between ETF and
MF.
•Excess return reflects the
Exchange Traded Funds Mutual Funds
Tradable during market hours No coverage during trading
hours
NAV fluctuates during market NAV is updated by the end of
hours business day
Expense is low and brokerage fee Expense is high as the
is to be paid management expenses, fund
manager expense, maintenance
charge etc. are implied to the fund.
Transparency is seen in ETFs as Less transparency as the results
portfolio detail are published are disclosed monthly/ quarterly.
daily.

ICICIdirect Money Manager 21 October 2019


FLAVOUR OF THE MONTH

These are passively managed They are actively managed funds


funds where they simply follow where the fund manager decides
the market index the area to park the money

In ETFs exiting the position could In Mutual fund redeeming the


be risky especially when there are units is easy (exit the funds)
no sellers in the front end or if
there is an hault in the market.
There is no Withdrawal charges There is an exit load to be paid as
implied per the scheme's term.
Intraday is possible with ETFs. Intraday option is not available
for Mutual Funds.

Is it a must to have ETF in your inflation or utilize the inverse


portfolio? ETFs when market is against
your favour. Tracking down a
One of the advantage that an
list of stocks gets difficult and
ETF has over the portfolio is
investing in index funds
targeting multiple stocks under
through ETF mode enables the
one fund that is traded on the
investors to broaden its
exchange. Diversification is
market.
the tool as it gives an exposure
to various industry and sectors Ta x B e n e f i t o n E T F s :
across. With variety options Investment in CPSE ETF and
available to ETFs one could Bharat 22 ETF enables
hedge its portfolio risk by investors with tax benefit of Rs.
adding commodity ETF to beat 1.5 lakhs under ELSS.

Bharat 22 ETF:

They are passively managed scheme with portfolio mapped in


Bharat 22 index. This scheme buys the same stocks in same
proportion of the S&P BSE Bharat 22 index. This ETF comprises
of 22 stocks of Central Public Sector Enterprises (CPSEs),
Public Sector Banks (PSB) and strategic holdings of Specified
Undertaking of the Unit Trust of India (SUUTI) selected by the
Government of India. Portfolio has been diversified in 6 sectors

ICICIdirect Money Manager 22 October 2019


FLAVOUR OF THE MONTH

namely basic material, energy, finance, FMCG, industries and


utilities. As this ETF has bluechip stocks in it, investors could
likely go for long term.

CPSC ETF:

CPSC ETF have stocks that weight of as high as 20% on the


underlying index in the portfolio mainly into energy and oil
sector. These sectors basically include the index that are
building blocks in deciding growth momentum of the India
economy. This ETF tracks stocks of 11 Central Public Sector
Enterprises (CPSEs) namely ONGC, NTPC, Coal India, IOC,
Rural Electrification Corp, Power Finance Corp, Bharat
Electronics, Oil India, NBCC India, NLC India and SJVN as per
business standards date 19th July 2019.

Advantages of ETFs •Risk is lower as money is


•ETFs are reasonable and the invested in bunch of stocks
charges are low like expense (index) rather a single stock.
ratio which is low in •One can leverage the position
comparison to mutual fund in the market in order to earn
but an ETF investor is implied extra profits as well as
with brokerage charges. inverse the position if the
•There is transparency in the market is going against your
listed stocks in the index as favour.
well as the value of the NAV. Disadvantages of ETFs
For example, Nifty 50 holds
•Not all ETFs are actively
50 largest companies in India
traded as others.
similarly ETFs tracking Nifty
50 will have similar stocks in •T h i s i n d e x c a n n o t
the list. NAV changes are outperform for example; this
known, as it fluctuates as per index tracks Nifty 50 Index
the market timing. then the performance will be
same as the index minus the

ICICIdirect Money Manager 23 October 2019


FLAVOUR OF THE MONTH

cost thus leaving no scope to open ended mutual fund the


outperform. settlement happens the next
day.
•One cannot redeem the units
at any time, they need to sell Summing up:
off during the market hours ETFs have been capturing in all
only. the sections of the market
giving investors variety of
•One could be in trouble options to trade in the market
having your investment stuck
hours. It is a portfolio
that is the case when ETF
diversifier and investors who
reaches his highest (Circuit)
seek for long term investment
and there are no sellers.
would think over the
•Settlement period is T+2 so investments and switch from a
likely the amount received in mutual fund to an exchange
2 days, but for a traditional traded funds.

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

ICICIdirect Money Manager 24 October 2019


Tête-à-tête

Smart Beta ETFs the recent move

ETFs are gaining momentum and are best suited for investors
who lack sufficient knowledge but want to gain exposure to a
variety of securities. The increasing awareness about ETFs being
a low cost investment vehicle that provides diversification is
making it attractive by the day to retail investors. Adding to this
Smart Beta ETFs are gaining attention in the recent time. They are
ideal for investors hoping to maximize their income and returns
while also allowing for the potential to minimize risk. An interview
with Mr. Chintan Haria, Fund Manager & Head- Product
Development & Strategy, ICICI Prudential Asset Management
Company Limited has shared his exclusive views on ETFs.

Mr. Chintan Haria,


Fund Manager & Head- Product
Development & Strategy, ICICI Prudential
Asset Management Company Limited.

Chintan anchors Product Development and Strategy at ICICI


Prudential AMC, where he is responsible for driving new
product initiatives across business lines and working closely
with the respective teams to augment business growth. He
joined the company in October 2005 as a member of the
equity dealing desk and rose through ranks to become a fund
manager.
He continues to manage ICICI Prudential Equity Income Fund

ICICIdirect Money Manager 25 October 2019


Tête-à-tête

& ICICI Prudential Value Fund- Series 3. With overall


experience of more than a decade, his core competency lies in
portfolio management, derivative strategies and market
intelligence.
In terms of investing style, Chintan uses a combination of
top-down and bottom-up approaches and is valuation
conscious while creating the portfolio. His stock-picking style
is flexible, allowing both growth- as well as value-styled
picks. However, valuations play an important role, as he
avoids investing in expensive stocks/sectors even in his
growth picks.
Chintan received a Masters in Commerce from Sydenham
College of Commerce and Economics in 2005 and is a Fellow
Member Chartered Accountant (FCA) from Institute of
Chartered Accountants of India (ICAI). He is an Associate
Member of Cost and Management Accountancy (ACMA)
from Institute of Cost & Works Accountants of India (ICWAI).
He also holds a Masters in Financial Analysis (MFA) and
Chartered Financial Analyst (CFA) from Institute of Chartered
Financial Analysts of India (ICFAI). Further, he is a Certified
Management Accountant from Institute of Management
Accountancy, USA.

Q. Could you give us an c l a s s e s . We n o w h a v e a


overview of ETFs in India? bouquet of large-cap, mid-cap,
sectorial/ thematic based ETFs,
A. The first ETF in India was Gold ETFs, etc. to choose from.
launched in 2001 which tracked ETFs are best suited for
the performance of the NIFTY investors who are keen on
50 Index. Since then their reach tracking their performance
has not only increased based on an underlying index
manifold but also diversified and seeking diversification
across various sectors/asset benefits at a low cost.

ICICIdirect Money Manager 26 October 2019


Tête-à-tête

Assets under Management for investors hoping to maximize


ETFs in India has grown to their income and returns while
approx. Rs. 152,802 crores also allowing for the potential
over the years. One of the to minimize risk.
major contributors to this
growth was Employees' Q. What are the different
Provident Fund Organisation's types of ETFs? –
(EPFO) announcement that it
A. E T F s c a n b e b r o a d l y
would take equity exposure
classified into:
only via ETFs and the decision
by the Government of India to 1. Equity ETFs: Equity ETFs
divest in Public Sector Units are the most popular ETFs and
through ETFs. Recently, we track the performances of
have also seen that passive equity across various
funds have outperformed the capitalizations, sectors,
market mainly due to themes, etc.
performance of broad market
indices. 2. Debt/Liquid ETFs: Debt
ETFs primarily invest in
E T F s ar e b e s t s u i t ed f o r bonds/debentures or money
investors who are keen on market securities issued by the
tracking their performance government or corporations.
based on an underlying index Liquid ETF invests in TREPS.
and seeking diversification
benefits at a low cost. 3. C o m m o d i t y E T F s :
Commodity ETFs invest in
A concept that is gaining precious metals like gold,
attention in recent times is that agricultural goods, etc. Gold
of Smart Beta ETFs. It is a ETFs is the best example of this
perfect blend of active and category.
passive investing where a
rules-based, systematic Q. What are the parameters
approach is used to choose one should analyze while
stocks from a particular index. selecting ETFs for
Smart Beta ETFs are ideal for investment?

ICICIdirect Money Manager 27 October 2019


Tête-à-tête

A. The following parameters A. A portfolio that consists of


should be assessed to select equity ETFs, debt ETFs and
the apt ETF for investment: gold ETFs can be used to
provide investors with the
•Underlying Index or Asset: benefits of diversification
Investors should go for an across various asset classes.
ETF that is based on a broad,
widely followed index, or an Within equity, allocation can be
index that has a narrow made to large-cap ETFs like
industry or geographic focus Nifty 50, Nifty Next 50 index as
based on their preferences. large-cap companies are
generally regarded as leaders
•Tracking Error: Not all ETFs in their respective sectors and
provide steady growth over
can mirror the performance
long periods of time.
of their benchmark index.
Allocations can also be made
This difference is called the
to liquid ETFs which are
tracking error. Hence, an ETF
considered relatively safe and
with minimal tracking error is
highly liquid and to Gold ETFs
preferable to one with a
which acts as a natural hedge
greater degree of error.
to equities during volatile
market conditions.
•Liquidity: An ETF with higher
liquidity i.e. trading volume is The stated strategy may help
preferred to an ETF that is investors achieve reasonable
infrequently traded to risk-adjusted returns over a
facilitate ease of exit when long period of time and can be
desired. rebalanced annually or as the
case may be.
Q. Can one use the SIP (SEP)
route to invest in ETFs? Ideally Q. Is gold ETFs a good option
how many ETFs & what only for hedging? Can
category of ETFs should one investors use these as a
have in the portfolio if the proper investment tool?
target is to invest for a long
term horizon? A. Gold is that commodity

ICICIdirect Money Manager 28 October 2019


Tête-à-tête

which is globally accepted as a making it attractive by the day


safety haven and provides to retail investors.
shelter against market
downturns and inflation. Gold, A concept that is gaining
in India, holds a lot of attention in recent times is that
traditional value and is stocked of Smart Beta ETFs. It is a
up in lockers in its raw or perfect blend of active and
processed form. While it is passive investing. It seeks to
always an option to stock move away from the market
physical quantities of gold, it is capitalization-based weighting
a good choice to opt for Gold patterns and use a rules-based,
ETFs to hedge risks. Gold ETFs systematic approach to
are loaded with benefits such choose stocks from a particular
as ease in transaction, hedge index. They seek to enhance
against inflation, tax benefits, returns, minimize risk and
backed by high quality gold, diversify by investing based on
small investments, etc. which single factors like volatility or
makes it a good investment value or a combination of
tool for investors. factors. Smart Beta ETFs are
ideal for investors hoping to
Q. Where do you see the ETF maximize their income and
market in India headed in the returns while also allowing for
next few years? the potential to minimize risk.

A. ETFs are gaining The assets under management


momentum and are best (AUM) of exchange-traded
suited for investors who lack funds (ETFs), both equity and
sufficient knowledge but want debt has seen a tenfold jump
to gain exposure to a variety of and as of September, 2019-
securities. The increasing AUM in India stand at Rs
awareness about ETFs being a 152,802 Crores and is
low cost investment vehicle expected to continuously
that provides diversification is grow.

ICICIdirect Money Manager 29 October 2019


ASK OUR PLANNER

Secure your child's future rightly

Q. I have 2 kids, a boy and girl PPF is a 15-year investment,


considering their future goals. which can be extended in
I have started to invest in blocks of 5 years each after
Sukanya Samriddhi Yojana for maturity. PPF also enjoys
my girl child but I am unaware taxation similar to SSY –
of any schemes that are annual contribution is eligible
available for boy child. Please for deduction while computing
help me to secure their future. taxable income under section
- Anthony Dsilva 80C (cumulative limit of Rs.
1.50 lakh p.a.); annual interest
A. Sukanya Samriddhi Yojana earned is exempt from tax;
(SSY) is an excellent and the accumulated corpus at
investment vehicle dedicated maturity is exempt from tax.
towards funding the education As with SSY, PPF interest rates
and marriage needs of your are subject to revision every
daughter(s). At present, there quarter.
are no other schemes focusing
specifically towards funding a Alternatively, you can try to
boy child's future goals – achieve your desired corpus
however there are many by investing in a mix of equity
regular investment options a & debt oriented mutual funds.
parent can consider to meet Mutual funds being market
t h e i r c h i l d g o a l s . Pu b l i c linked products, can provide
P r o v i d e n t Fu n d ( P P F ) i s you superior returns
another excellent long term (compared to PPF) over a long
investment tool, backed by time horizon, but also expose
Government of India, which you to market risks. With your
works similar to SSY, apart desired objective in mind, you
from the fact that PPF can be can invest about 60%-80% in
opened by any resident Indian Equity oriented mutual funds
individual – in their name (sub categories: Large Cap /
and/or open and operate in the Multi Cap / Mid Cap funds)
name of a minor child. while the remaining can be

ICICIdirect Money Manager 30 October 2019


ASK OUR PLANNER

invested in Debt oriented most of your life goals. To


mutual funds (sub categories: know more about this, you
Short Duration / Medium to may write to us at
Long Duration / Corporate fps@icicisecurities.com.
Bond funds). A mix of both
these traditional asset class Q. I am a housewife who lost
will ensure your portfolio her husband recently, all the
volatility is reduced. You can assets were transferred to me
even treat investments in PPF as I am the nominee. I opened
as part of debt allocation. a bank fixed deposit with this
money. With respect to this
Before you choose the ideal fixed deposit, do I have to pay
investment vehicle, you must taxes on the interest income,
find out the target corpus of such deposit (amounting to
required (approximate value Rs. 1,00,000). Can I save that
required in the future for your income from going into tax?
child goals). Once the same is - Swathi Acharya
decided, you can arrive at the
A. Interest income from Fixed
amount required to be
Deposits is fully taxable, as per
invested on recurring basis to
the tax slab of the investor.
meet the target corpus value.
However, assuming you do not
This exercise will help you in
have any other source of
understanding your overall
income, you are liable to pay
savings capacity, considering
tax only if the total income
other critical or discretionary
(including interest income
goals in your life. A customized and/or other sources of
and comprehensive financial income) exceeds Rs. 2.50 lakh
plan will take into p.a. (this limit is Rs. 3 lakh for
consideration your various senior citizens between the
financial goals and age of 60 & 80). Banks also
responsibilities, assess the deduct TDS if the interest
impact on your present & income of all FDs in a single
future cash flow and provide bank exceeds Rs. 40,000. The
investment strategies T D S r a t e i s 1 0 % i f PA N
accordingly in order to ensure information is provided to the
you are able to achieve the bank, or else TDS is increased

ICICIdirect Money Manager 31 October 2019


ASK OUR PLANNER

to 20%. The only way to make in the recent news


sure that no TDS is deducted is government has removed the
for you to submit Form 15H restriction over the pension
(applicable for senior citizens) / amount for the passed away
Form 15G (applicable for pensioners? Please help.
others) at the beginning of - Rahul Khatri
every financial year, which
states that your total income A. A s p e r t h e r e c e n t
does not exceed the base tax amendment, 'the family of a
slab for that year. Government Servant, who
dies within seven years of
In case TDS is deducted and joining service, will also be
you are not liable to pay any eligible for family pension at
tax considering the tax slabs, enhanced rate of 50% of last
you can file Income Tax Return pay drawn, for a period of 10
every year, and claim refund of years'. The amended rules will
the excess tax already apply to families of all
d e d u c t e d . I n c o m e Ta x government employees,
provisions also provide for a including those of Central
list of common expenses or Armed Police Forces
investments that can be made personnel. Prior to the
by an investor to reduce their amendment, such families
taxable income – this includes would receive 30% of the last
payments towards life pay drawn, upon death of
insurance, medical insurance, government employees who
home loan EMI payments had served less than seven
(interest & principal portions), years. Given the amendment,
tuition fees of two children; your family is eligible for
and investments towards enhanced pension.
ELSS funds, ULIPs, PPF, NPS,
SSY, Tax Saving FDs, NSC etc. Q. Invested 140 grams of gold
in Sovereign Gold Bonds and
Q. My brother has expired have Physical gold worth Rs.
after serving 5 years as a 5,00,000. I want to opt for a
government employee. Do we loan of Rs. 4 lakhs, could you
get the benefit of pension as suggest which from the above

ICICIdirect Money Manager 32 October 2019


ASK OUR PLANNER

two option would be the sovereign gold bonds as


beneficial and what would be security). Opting for loan on
the tax implication on the the gold bonds may provide
borrowed amount. minor cost benefit, only if held
- Nikhil Ghosh in demat mode – only due to
lower cost of ownership. Let's
A. Under present guidelines, look at the features of both
there is not much difference on such options which can help
opting for gold loan (whether you determine ideal choice
keeping your physical gold or based on your needs:
Collateral

Particulars Sovereign Gold Bonds (Demat


Physical Gold
/ Physical Certificate)

Term Loan / Overdraft

Nature of Loan Term Loan / Overdraft (Some banks may ask to open
new demat accounts with them
and transfer the holdings)
Min: Rs. 1,500 Min: Rs. 20,000
Loan Amount
Max: Rs. 1.50 crore Max: Rs. 20 lakh
60% to 75% (not based on price
Loan to Value (max: 75%) 60% - 75% of gold bonds, but price of
prevailing gold price)
Tenure 1 day to 36 months 12 months to 60 months
Interest Rates 10.50% - 15% 10.50% - 15%
upto 2% of loan
upto 1% of loan amount subject
Processing Fees amount subject to
to minimum value
minimum value
EMI EMI
Repayment Options Bullet Repayment Bullet Repayment
Overdraft Overdraft
Stamp Duty, Pre-
Pre-payment, Other operational
Other Charges payment, Appraisal,
costs
Other operational costs

Few things to keep in mind is disbursed. Hence during times


that gold loans are sensitive to when gold price witness
change in prices of gold. The drastic fall, lenders can ask you
loan to value rate of 75% is to submit additional collateral
based on prevailing gold or repay some amount.
prices, even after the loan is Like other forms of loan, any

ICICIdirect Money Manager 33 October 2019


ASK OUR PLANNER

default in EMI payments, or subsequent 3-5 years of


failure to payback 100% of expenses), value of which is
principal at the end of tenure, susceptible to interest rate
will attract penalty and impact changes in the economy.
your credit score. Considering prevailing interest
Q. I a m a n u n e m p l o y e d rates/returns, these
individual having an asset of instruments can help manage
Rs. 10 lakhs and a monthly your constant monthly
expense of Rs. 10,000. Please expenses for the next 11-12
guide me onto how long can I years. If we consider inflation
survive with my holdings or in your monthly expenses at an
suggest some financial average rate of 6% p.a., then
instruments which can your corpus can sustain about
provide me a monthly income 8-9 years' worth of expenses.
stream?
- Dikshit Chabra If you have a certain sight of a
stable income source in the
A. With no constant income future say 5-6 years down the
stream, you must invest your line, then you can even choose
funds in conservative or fixed to invest about 20%-30% of
income instruments so that your corpus in Equity oriented
you are able to withdraw your mutual funds – Large Cap /
fixed expenses without Multi Cap funds, with an aim to
exposing your investments to increase the longevity of your
market risks. You can consider corpus. However, this part of
investing either in Bank/Post the portfolio may be very
Office Term Deposits (which volatile in the short term,
do not carry any market risks) considering market risk. You
or invest in debt oriented must choose this only if you
mutual funds ready to accept such risk.
(Overnight/Liquid category for
next 1-2 years of expenses; Q. My current age is 50 years. I
Short to Medium Duration / own a car worth Rs. 7,00,000,
Corporate Bond funds for a property that values at 1.2

ICICIdirect Money Manager 34 October 2019


ASK OUR PLANNER

crore, equity investment Rs. whether any course change is


30,00,000, I contribute 1,000 required.
p.a. towards NPS, rental Assuming you wish to
income of Rs. 25 thousand maintain the same standard of
p.m. My earnings per month is living even after you retire,
3.5 lakh and my expenses your present monthly
come up to 2.5 lakh per expenses of Rs. 2.50 lakh will
month. At present there is no rise to Rs. 3.35 lakh at your age
debt to be paid. I would like to of 55, at an average inflation
know with current holdings rate of 6% p.a. If inflation
will I be able to survive my continues to remain same till
post retirement expenses? your expected life time (say till
Also I wanted to know 80 years of age), and your
whether I could retire by 55 or accumulated corpus at
wait until 60? Please share retirement is invested in such a
your recommendation. way that the entire portfolio
- Rohit Deshpande earns an average return of 8%
p.a. throughout your expected
A. F i r s t s t e p t o w a r d s life time, you should have a
retirement planning is to corpus of approx. Rs. 8 crores
understand your needs post- to meet the inflation adjusted
retirement and the impact of expenses after your age of 55
inflation in your expenses. till 80. With the available inputs
After understanding the future in hand, you face a huge
value of your required shortfall vis-à-vis your target
expenses at the time of your value, to comfortably retire at
retirement, you can figure out the age of 55 years.
the corpus required to Practically, there are many
maintain the inflation adjusted questions to be answered
expenses till your expected before & during your
lifetime. Accordingly, you can retirement planning process:
ascertain whether you can a. D o y o u h a v e a n y
create the necessary corpus by dependents? If yes, do you
your desired retirement age or have adequate life / personal

ICICIdirect Money Manager 35 October 2019


ASK OUR PLANNER

accident & disability / health e. Do you have any other


insurance to protect yourself & physical assets like real estate
your family with unexpected investments (self-owned or to
shocks in life, which can be inherited)?
otherwise drain your f. How are you investing your
accumulated investments? existing surplus (salary less
b. Whether you have saved expenses)? Are you investing
enough for various other with a target in mind? Have you
critical financial goals in your been the reviewing
life e.g. child's education performance of such
and/or marriage, repayment of investments?
any outstanding loans, etc. If g. What is the breakup of your
securing your retirement is existing expenses? Whether
priority, what is the plan of the same set of expenses will
action towards such other continue after you retire?
critical life goals? h. H a v e y o u m a d e a n y
c. What is the nature of your provision for unexpected
emergencies, whether medical
existing financial investments:
or not, after your retirement?
your asset allocation? Are your
Will you have to dip in your
investments only exposed to
retirement corpus for the
Equity? What about any
same? How will that affect the
endowment/money back/unit
longevity of your corpus?
linked life insurance policies or
I. What is your investment
other traditional debt oriented
strategy to ensure your
investments (FDs, PPF, idle
accumulated corpus at
savings balance)?
retirement is able to
d. Are you entitled to various consistently beat inflation
retirement benefits from your throughout your expected
employer viz Gratuity / Leave lifetime?
Encashment, Retirement A customized and
Bonus etc? What is the comprehensive financial cum
accumulated balance with retirement plan will take into
your Employee Provident consideration the above
Fund? questions, analyze your

ICICIdirect Money Manager 36 October 2019


ASK OUR PLANNER

various financial goals & provide investment strategies


responsibilities including accordingly. To know more
retirement, optimize your about this, you may write to us
present & future cash flow and at fps@icicisecurities.com.

Do you also have similar queries to ask our experts? Write to


us at: moneymanager@icicisecurities.com.

ICICIdirect Money Manager 37 October 2019


MUTUAL FUND ANALYSIS

Investing in midcap funds

The Government of India in a suggests an EPS upgrade of


surprised move announced a 6% each for FY20E and FY21E.
reduction in the corporate tax We now expect Nifty EPS to
rate from ~34% to 25.17% grow at a CAGR of 20.3% in
thereby fulfilling its key agenda FY19-21E vs. 16.9% earlier.
of implementing the Direct tax However, from a granular
Code (DTC). perspective, sectors like
banking and FMCG are
The measures announced is a
expected to grow at a CAGR of
massive trigger for revving up 48.2% and 18%, respectively
growth and, more importantly, vs. earlier CAGR of 42.2% and
resurrecting sentiments that 12.2%. On the flip side, sectors
were down in the dumps. The like IT and pharma are not
immediate benefit is increased expected to see any upgrades
cash flows to Corporate India on account of existing lower
that will be either channelised tax rates, which is making the
into debt reduction or Nifty EPS upgrade optically
incremental investments in look to be in single digit.
increasing capacity. Also,
While the benefit of tax cut will
taxing new production
accrue to many large
facilities (that come up by companies, many midcap and
2023) at 15% will enable smallcap companies which
attraction of global capital and were earlier paying higher tax
spur a beleaguered investment are also likely to benefit. The
cycle. same along with reasonable
Our back of the envelope valuations make them an
analysis of Nifty earnings attractive investment option.

ICICIdirect Money Manager 38 October 2019


MUTUAL FUND ANALYSIS

Product Label: THIS PRODUCT IS SUITABLE


Kotak Emerging Equity Scheme FOR INVESTORS WHO ARE
SEEKING
• Long term capital wealth
creation solution
Fund Objective: • An equity fund that
predominantly invests in
equity and equity related
securities of companies
The investment objective of engaged in banking and
Investors understand that their principal financial services.
the scheme is to generate long- will be at Moderately High risk

term capital appreciation from Performance:


a portfolio of equity and equity
The fund is among the oldest
related securities, by investing funds in the midcap space. The
predominantly in mid funds recent performance has
companies. The scheme may lagged its benchmark as it
shied away from few of the
also invest in Debt and Money
expensive stocks which
Market Instruments, as per the continued to rally in last few
asset allocation table. There is months. However, we believe
no assurance that the that the fund is well positioned
investment objective of the to outperform the benchmark
going forward. As of
Scheme will be achieved. September 30th, it has
Key Information
generated CAGR of 6.6% and
NAV as on September 30, 2019 (`)
Inception Date
38.1
March 30, 2007 12.4% over three years and
Fund Manager Pankaj Tibrewal
Minimum Investment (`) Lumpsum
SIP
5000
1000
five years vs. 2.4% and 8.2%
Expense Ratio (%)
Exit Load
1.90
1% on or before 1Y, Nil after 1Y
returns by benchmark,
Benchmark
Last declared Quarterly AAUM(` cr)
Nifty Midcap 100 - TRI
4960 respectively.

Performance vs. Benchmark


12.4

11.3

15
8.2
CAGR Returns %

6.6

10
7

2.4

5
0

0
-5
-5.6

-10

1 Year 3 Year 5 Year Since Inception


Fund Benchmark

ICICIdirect Money Manager 39 October 2019


MUTUAL FUND ANALYSIS

Portfolio: indicating a play on capex cycle


The portfolio comprises 67 revival. However, the fund also
stocks. Currently, the portfolio is has stocks catering to the retail
tilted towards large caps (~64%) segment. The fund has
while midcap and small cap handpicked public sector banks
stocks make up the rest. The fund (non PCA) with relatively better
has significant exposure to large capital adequacy poised to benefit
private corporate centric banks, from a revival in the credit cycle.

Top 10 Holdings Asset Type %


Tri-Party Repo (TREPS) Cash & Cash Equivalents and Net Assets 4.8
Supreme Industries Ltd. Domestic Equities 3.8
PI Industries Ltd. Domestic Equities 3.5
Schaeffler India Ltd. Domestic Equities 3.3
Atul Ltd. Domestic Equities 3.2
The Ramco Cements Ltd. Domestic Equities 3.1
Coromandel International Ltd. Domestic Equities 3.1
Thermax Ltd. Domestic Equities 2.8
AU Small Finance Bank Ltd. Domestic Equities 2.8
Kajaria Ceramics Ltd. Domestic Equities 2.3

Top 10 Sectors Asset Type %


Bank - Private Domestic Equities 10.9
Pharmaceuticals & Drugs Domestic Equities 6.9
Chemicals Domestic Equities 5.5
Finance - NBFC Domestic Equities 5.4
Engineering - Industrial Equipments Domestic Equities 5.2
Cement & Construction Materials Domestic Equities 5.1
Bearings Domestic Equities 4.5
Plastic Products Domestic Equities 3.8
Pesticides & Agrochemicals Domestic Equities 3.5
Fertilizers Domestic Equities 3.1

Whats In %
Axis Bank Ltd. 1.6

ICICIdirect Money Manager 40 October 2019


MUTUAL FUND ANALYSIS

Our View: mediocre. With a good mix of


The fund's strong performance stocks that are a play on
since inception and a long corporate lending and private
history are comforting factors lending, we feel investors can
even though the performance consider the fund from a three-
in recent times has been year perspective.

You can view performance of other schemes being managed


by the fund manager of this scheme on the following link:
https://assetmanagement.kotak.com/documents/19/50f16c84
-6b1c-45ce-92ba-59d3413bd67e

Data as on September 30th, 2019; Portfolio details as on Aug- 2019


Source: ACE MF, ICICI Direct Research

ICICIdirect Money Manager 41 October 2019


MUTUAL FUND ANALYSIS

L&T Midcap Fund

Fund Objective: Performance


To generate capital appreciation The fund has consistently been
by investing primarily in midcap
among the top performing
stocks.
funds in the sector over shorter
NAV as on September 30, 2019 (`)
Key Information
127.3
as well as longer timeframes.
Inception Date August 9, 2004 th
Fund Manager
Minimum Investment (`) Lumpsum
Soumendra Nath Lahiri
5000
As of September 30 , it has
Expense Ratio (%)
Exit Load
SIP 500
1.98
Nil upto 10% of units and 1% for above the limits on or before 1Y, Nil after 1Y
delivered CAGR of 7.2% and
Benchmark
Last declared Quarterly AAUM(` cr)
Nifty Midcap 100 - TRI
5380 11.7% over three years and
five years vs. 2.4% and 8.2%
Product Label: returns by benchmark,
THIS PRODUCT IS SUITABLE FOR
INVESTORS WHO ARE SEEKING
• Long term capital wealth creation
respectively.
solution
• An equity fund that predominantly
invests in equity and equity related
securities of companies engaged in
banking and financial services.
Investors understand that their principal
will be at high risk

Performance vs. Benchmark


18.3
11.7

20
CAGR Returns %

8.2
7.2

10
2.4

0
-1.6

-5.6

-10
1 Year 3 Year 5 Year Since Inception
Fund Benchmark

Portfolio banks (private as well public),


The fund's portfolio has NBFCs as well as insurance. Its
exposure to a diverse mix of focus on corporate facing
businesses within the banking private banks is accentuated
and financial services space – by recent additions to the

ICICIdirect Money Manager 42 October 2019


MUTUAL FUND ANALYSIS

portfolio. Currently, there are exposure to its top picks than


82 stocks in the portfolio, some other peers. It has
making it less concentrated ~60% of its portfolio invested
than some other funds and in large cap stocks with the
with a larger tail than most rest invested in midcaps and
peers. The fund has lower small caps.

Top 10 Holdings Asset Type %


Tri-Party Repo (TREPS) Cash & Cash Equivalents and Net Assets 8.6
City Union Bank Ltd. Domestic Equities 3.2
The Ramco Cements Ltd. Domestic Equities 2.8
Abbott India Ltd. Domestic Equities 2.3
Cholamandalam Investment & Finance Company Ltd. Domestic Equities 2.2
ACC Ltd. Domestic Equities 2.2
Emami Ltd. Domestic Equities 2.2
Shree Cement Ltd. Domestic Equities 2.2
Godrej Properties Ltd. Domestic Equities 2.0
Berger Paints India Ltd. Domestic Equities 2.0

Top 10 Sectors Asset Type %


Cement & Construction Materials Domestic Equities 7.2
Bank - Private Domestic Equities 6.2
Finance - NBFC Domestic Equities 5.6
Pharmaceuticals & Drugs Domestic Equities 5.5
Engineering - Industrial Equipments Domestic Equities 4.6
Chemicals Domestic Equities 4.4
Hotel, Resort & Restaurants Domestic Equities 3.8
Construction - Real Estate Domestic Equities 3.8
Finance - Stock Broking Domestic Equities 2.9
Retailing Domestic Equities 2.7

Whats In %
Bharat Electronics Ltd. 0.5
3M India Ltd. 1
Ipca Laboratories Ltd. 1

ICICIdirect Money Manager 43 October 2019


MUTUAL FUND ANALYSIS

Our View:
The portfolio is well constructed Investors can consider the fund
in terms of diversification. from a three-year perspective.

You can view performance of other schemes being managed


by the fund manager of this scheme on the following link:
https://www.ltfs.com/content/dam/lnt-financial-services/lnt-
mutual-fund/downloads/factsheets/2019-20/L&T
%20Factsheet%20September%202019%20(Color%20Versio
n).pdf

Data as on September 30th, 2019; Portfolio details as on Aug- 2019


Source: ACE MF, ICICI Direct Research

ICICIdirect Money Manager 44 October 2019


MUTUAL FUND ANALYSIS

Product Label:
Nippon India Small Cap Fund THIS PRODUCT IS SUITABLE
FOR INVESTORS WHO ARE
SEEKING
• Long term capital wealth
Fund Objective: creation solution
• An equity fund that
predominantly invests in
The primary investment equity and equity related
securities of companies
objective of the scheme is to Investors understand that their principal
will be at Moderately High risk
engaged in banking and
financial services.
generate long term capital
appreciation by investing Performance
predominantly in equity and The fund has consistently been
equity related instruments of among the top performing
small cap companies and the funds in the sector over shorter
secondary objective is to as well as longer timeframes. It
generate consistent returns by has delivered 8.1% CAGR and
investing in debt and money 11.2% CAGR returns,
market securities. respectively, for three and five-
Key Information
year time frames vs. 1.9%
NAV as on September 30, 2019 (`)
Inception Date
Fund Manager
37.5
September 16, 2010
Samir Rachh
CAGR and 5.2% CAGR
Minimum Investment (`) Lumpsum
SIP
5000
100 performance of the benchmark
Expense Ratio (%) 1.95
Exit Load
Benchmark
1% on or before 1Y, Nil after 1Y
S&P BSE Small-Cap - TRI
over these time frames (as of
th
Last declared Quarterly AAUM(` cr) 8114
September 30 ).

Performance vs. Benchmark


15.7

20
11.2
CAGR Returns %

8.1

5.2

10
1.9

0
-4.7

-7.8

-10
1 Year 3 Year 5 Year Since Inception
Fund Benchmark

Portfolio and financial services space –


The fund's portfolio has banks (private as well public),
exposure to a diverse mix of NBFCs as well as insurance. Its
businesses within the banking focus on corporate facing

ICICIdirect Money Manager 45 October 2019


MUTUAL FUND ANALYSIS

private banks is accentuated peers. The fund has lower


by recent additions to the exposure to its top picks than
portfolio. Currently, there are some other peers. It has ~60%
118 stocks in the portfolio, of its portfolio invested in large
making it less concentrated cap stocks with the rest
than some other funds and invested in midcaps and small
with a larger tail than most caps.

Top 10 Holdings Asset Type %


Tri-Party Repo (TREPS) Cash & Cash Equivalents and Net Assets 4.1
Deepak Nitrite Ltd. Domestic Equities 2.8
CreditAccess Grameen Ltd. Domestic Equities 2.2
HDFC Bank Ltd. Domestic Equities 2.2
Zydus Wellness Ltd. Domestic Equities 2.0
Tube Investments of India Ltd. Domestic Equities 2.0
Orient Electric Ltd. Domestic Equities 2.0
VIP Industries Ltd. Domestic Equities 1.9
Affle (India) Ltd. Domestic Equities 1.8
Tata Global Beverages Ltd. Domestic Equities 1.7

Top 10 Sectors Asset Type %


Chemicals Domestic Equities 10.0
Bank - Private Domestic Equities 7.3
Household & Personal Products Domestic Equities 6.1
Engineering - Construction Domestic Equities 4.4
Engineering - Industrial Equipments Domestic Equities 3.8
Pharmaceuticals & Drugs Domestic Equities 3.6
IT - Software Domestic Equities 3.4
Finance - NBFC Domestic Equities 3.2
Electric Equipment Domestic Equities 3.0
Hotel, Resort & Restaurants Domestic Equities 2.9

Whats In %
Dhampur Sugar Mills Ltd. 0.2
United Breweries Ltd. 0.6
RBL Bank Ltd. 0.6

Whats out %
State Bank Of India 0.6
Emami Ltd. 0.4
Maruti Suzuki India Ltd. 0.7

ICICIdirect Money Manager 46 October 2019


MUTUAL FUND ANALYSIS

Our View:
The portfolio is well constructed Investors can consider the fund
in terms of diversification. from a three-year perspective.

You can view performance of other schemes being managed


by the fund manager of this scheme on the following link:
https://www.nipponindiamf.com/InvestorServices/Factsheets
Documents/Fundamentals-October-2019.pdf

Data as on September 30th, 2019; Portfolio details as on Aug- 2019


Source: ACE MF, ICICI Direct Research

ICICIdirect Money Manager 47 October 2019


MUTUAL FUND ANALYSIS

Performance of other schemes managed by these fund managers:

1. Kotak Emerging Equity Scheme


Performance of other schemes managed by the fund manager - Pankaj Tibrewal

Fund Name 1 Year 3 Years 5 Years


Top 3 Performing Schemes
Kotak Equity Hybrid Fund(D) 15.38 5.63 7.97
NIFTY 50 Hybrid Composite Debt 70:30 Index -- -- --
Kotak Emerging Equity Scheme(G) 12.91 5.48 12.58
Nifty Midcap 100 - TRI -0.11 1.50 8.20
Kotak Small Cap Fund(G) 8.67 2.56 9.74
Nifty Smallcap 50 - TRI -4.05 -8.27 0.01

Note : The schemes may or may not have been managed by the same Fund
Manager since its inception
Note : The concerned Fund Manager manages 2 other schemes of the
concerned Mutual Fund

Data as on September 30th, 2019; Portfolio details as on Aug- 2019


Source: ACE MF, ICICI Direct Research

ICICIdirect Money Manager 48 October 2019


MUTUAL FUND ANALYSIS

2. L&T Midcap Fund


Performance of other schemes managed by the fund manager - Soumendra Nath Lahiri

Fund Name 1 Year 3 Years 5 Years


Top 3 Performing Schemes
L&T Hybrid Equity Fund-Reg(G) 8.60 6.32 9.44
S&P BSE 200 - TRI 13.07 9.99 9.55
L&T Large and Midcap Fund-Reg(G) 8.15 6.02 7.96
S&P BSE 200 - TRI 13.07 9.99 9.55
L&T Balanced Advantage Fund-Reg(G) 7.77 5.87 6.68
S&P BSE 200 - TRI 13.07 9.99 9.55
Bottom 3 Performing Schemes
L&T Infrastructure Fund-Reg(G) 2.28 6.23 9.91
NIFTY INFRA - TRI 15.53 6.21 2.29
L&T Emerging Businesses Fund-Reg(G) -4.75 5.16 12.03
S&P BSE Small-Cap - TRI -2.89 0.09 5.27
L&T Focused Equity Fund-Reg(G) -- -- --
NIFTY 500 - TRI 11.78 9.08 9.14

Note : The schemes may or may not have been managed by the same Fund
Manager since its inception
Note : The concerned Fund Manager manages 9 other schemes of the
concerned Mutual Fund

Performance of other schemes managed by the fund manager - Vihang Naik

Fund Name 1 Year 3 Years 5 Years


Top 3 Performing Schemes
L&T Emerging Opp Fund-II-Reg(D) 8.27 -- --
S&P BSE Small-Cap - TRI -2.89 0.09 5.27
L&T Midcap Fund-Reg(G) 4.30 5.87 11.91
Nifty Midcap 100 - TRI -0.11 1.50 8.20
L&T Emerging Opp Fund-I-Reg(D) 3.37 -- --
S&P BSE Small-Cap - TRI -2.89 0.09 5.27
Bottom 3 Performing Schemes
L&T Focused Equity Fund-Reg(G) -- -- --
NIFTY 500 - TRI 11.78 9.08 9.14

Note : The schemes may or may not have been managed by the same Fund
Manager since its inception
Note : The concerned Fund Manager manages 2 other schemes of the
concerned Mutual Fund

Data as on September 30th, 2019; Portfolio details as on Aug- 2019


Source: ACE MF, ICICI Direct Research

ICICIdirect Money Manager 49 October 2019


MUTUAL FUND ANALYSIS

3. Nippon India Small Cap Fund


Performance of other schemes managed by the fund manager - Samir Rachh

Fund Name 1 Year 3 Years 5 Years


Top 3 Performing Schemes
Nippon India Small Cap Fund(G) -0.47 5.31 11.10
S&P BSE Small-Cap - TRI -2.89 0.09 5.27
Nippon India Capital Builder Fund-IV-D(G) -6.33 -- --
S&P BSE 200 11.57 8.61 8.15
Nippon India Capital Builder Fund-IV-C(G) -8.75 -- --
S&P BSE 200 11.57 8.61 8.15

Note : The schemes may or may not have been managed by the same Fund
Manager since its inception
Note : The concerned Fund Manager manages 3 other schemes of the
concerned Mutual Fund

Performance of other schemes managed by the fund manager - Kinjal Desai

Fund Name 1 Year 3 Years 5 Years


Top 3 Performing Schemes
Nippon India Nivesh Lakshya Fund(G) 20.30 -- --
Crisil Long Term Debt Index -- -- --
Nippon India Gilt Securities Fund(G) 15.64 8.40 10.41
CRISIL Dynamic Gilt Index -- -- --
Nippon India Income Fund(G) 14.40 6.84 8.63
NIFTY Medium to Long Term Debt Index -- -- --
Bottom 3 Performing Schemes
Nippon India Capital Builder Fund-IV-C(G) -8.75 -- --
S&P BSE 200 11.57 8.61 8.15
Nippon India Equity Hybrid Fund-Segregated Portfolio 1(G) -- -- --
CRISIL Hybrid 35+65 - Aggressive Index 13.31 9.23 9.60
Nippon India Ultra Short Duration Fund-Segregated Portfolio 1-(G) -- -- --
NIFTY Ultra Short Duration Debt Index -- -- --

Note : The schemes may or may not have been managed by the same Fund
Manager since its inception
Note : The concerned Fund Manager manages 44 other schemes of the
concerned Mutual Fund

Data as on September 30th, 2019; Portfolio details as on Aug- 2019


Source: ACE MF, ICICI Direct Research

ICICIdirect Money Manager 50 October 2019


ICICIdirect Community (iCommunity)

Most popular blog of the month


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For most of the investors, "return" is the
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ICICIdirect Money Manager 51 October 2019


EQUITY MODEL PORTFOLIO

Our indicative large-cap equity model portfolio is delivering an impressive


return (inclusive of dividends) of 151.94% till date (as on September 30, 2019)
since its inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE
Sensex) return of 117.49% during the same period, an outperformance of
34.45. This validates our thesis of selecting companies with sound business
fundamentals that forms the core theme of our portfolio. We have revised
stocks in our midcap portfolio. It continues to outperform, delivering 251.44%
(inclusive of dividends) till date (as on September 30, 2019) vis-à-vis the
benchmark index (CNX Midcap) return of 107.26%, an outperformance of
144.18. Our consistent outperformance demonstrates our superior stock
picking ability as markets aligned to our view of favourable risk reward, good
franchisee vs. reward-at-any-risk businesses.

We have always suggested the SIP mode of investment and still find a lot of
merit in it as the preferred mode of deployment given the market conditions and
volatility associated since the inception of the portfolio. We highlight that the SIP
return of our portfolio has consistently outperformed the indices.

Following the same pace and opportunities in the market, our latest portfolio
(large caps) remains overweight on BFSI sector – HDFC Bank (10%), HDFC
Limited (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI (6%). Large cap
portfolio remains unchanged while we made fresh changes to our midcap
portfolio. Reliance Nippon Life Asset Management and Mahanagar Gas are the
latest addition to the mid-cap portfolio, both given 6% weightage. Please note
that Somany Ceramics and Arvind Fashions have been removed from the mid-
cap and diversified model portfolio. The weightage for State Bank of India and
Divis Laboratories have been revised. Affirming our view on consumption
demand, Dabur (5%) and Marico (4%) continue to be part of our large cap
portfolio.

We remain positive on auto, IT and pharma. We remain overweight to neutral on


pure play defensives (IT, FMCG) as secular earnings coupled with sector
rotation could lead to consolidation in near term valuations and offer stock
specific opportunities.

We continue to remain underweight on metals and oil & gas with our only pick
being Gail Ltd., which has a better risk reward opportunity. Among individual
names, we recommend TCS in the IT space, HDFC and HDFC Bank in the BFSI
space and ITC in consumer space.

ICICIdirect Money Manager 52 October 2019


EQUITY MODEL PORTFOLIO

Name of the company Model Portfolio


Largecap Midcap Diversified
(%) (%) (%)
Largecap Stocks
Mahindra & Mahindra (M&M) 4.0 2.8
HDFC Bank 10.0 7.0
Axis Bank 6.0 4.2
HDFC Limited 9.0 6.3
Bajaj Finance 6.0 4.2
State Bank of India 8.0 5.6
Larsen & Toubro 6.0 4.2
UltraTech Cement 4.0 2.8
Dabur India 5.0 3.5
Marico 4.0 2.8
ITC 6.0 4.2
Nestle India 4.0 2.8
Tata Consultancy Services 6.0 4.2
Tech Mahindra Limited 6.0 4.2
Hindustan Zinc 6.0 4.2
GAIL Ltd. 5.0 3.5
Divis Laboratories 5.0 3.5
Total 100.0
Largecap share in diversified 70.0

ICICIdirect Money Manager 53 October 2019


EQUITY MODEL PORTFOLIO

Bharat Forge 6.0 1.8


Bajaj Finserve 8.0 2.4
Indian Bank 6.0 1.8
AIA Engineering 6.0 1.8
Kalpataru Power transmission 6.0 1.8
Ramco Cement 6.0 1.8
Kansai Nerolac 6.0 1.8
Pidilite Industries 6.0 1.8
Tata Chemicals 6.0 1.8
Bata India 6.0 1.8
Brigade Enterprises 6.0 1.8
Reliance Nippon Life
Asset Management 6.0 1.8
Firstsource Solutions 6.0 1.8
Container Corporation of India 6.0 1.8
Syngene International 8.0 2.4
Mahanagar Gas Ltd 6.0 1.8
Total 100.0
Midcap share in diversified 30

TOTAL 100.0

ICICIdirect Money Manager 54 October 2019


EQUITY MODEL PORTFOLIO

Performance so far since inception*

300
251.4392572

200 179.9409635
151.9356394
%

117.4900727 112.523517
107.2577725
100

0
Large Cap Midcap Diversified

Portfolio Benchmark

*Returns (in %) as on September 30, 2019

Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio Benchmark:


CNX Midcap; Diversified Portfolio Benchmark: Combination of BSE Sensex and
CNX Midcap

Value of Rs 1,00,000 invested via SIP at end of every month

16000000
10100000

10100000

10100000
22444446.18

14000000
12000000
16076300.76
15214843.65

10000000
13743692.27

13101475.56

13015153.16

8000000
|

6000000
4000000
2000000
0
Largecap Midcap Divesified

Investment Value of Investment in Portfolio Value if invested in Benchmark

Start date of SIP: June 30, 2011; *Value as on September 30, 2019

ICICIdirect Money Manager 55 October 2019


QUIZ TIME

Quiz:
1. A fund that is traded on the exchange
2. When an Authorized participant sells shares to the Sponsors in
exchange for ETFs it is called as _________________
3. An _______ ETF is used when markets go against your market
direction.
4. One can save on Tax by investing in Bharat 22 ETF and CPSE
ETF under ELSS scheme. state True or False.
5. _________ETF is a combination of active and passive
investment strategy.
6. Are there any withdrawal charges on ETFs? Yes or no

Note: You may send in your answers at:


moneymanager@icicisecurities.com. The answers will be published in
our next edition. The names of the earliest all correct entries will be
published too. So jog your grey cells and be quick to send in your entries.

Correct answers for the September 2019 Word Search is:

ICICIdirect Money Manager 56 October 2019


PRIME NUMBERS

Equity Markets
Domestic Equity Indices
30-Sep-19 31-Aug-19 Change (%)
CNX Nifty 11474.0 11023.3 4.1%
CNX Midcap 16026.0 15652.2 2.4%
S&P BSE Sensex 38667.3 37332.8 3.6%
S&P BSE 100 11580.9 11139.8 4.0%
S&P BSE 200 4794.3 4609.1 4.0%
S&P BSE 500 14810.0 14234.1 4.0%

Global Equity Indices


30-Sep-19 31-Aug-19 Change (%)
Dow Jones 26,916.8 26,403.3 1.9%
S&P 500 2,976.7 2,926.5 1.7%
Nasdaq 7,999.3 7,962.9 0.5%
FTSE 7,408.2 7,207.2 2.8%
DAX 12,428.1 11,939.3 4.1%
CAC 40 5,677.8 5,480.5 3.6%
Nikkei 21,755.8 20,704.4 5.1%
Hang Seng 26,092.3 25,724.7 1.4%
Shanghai Composite 2,905.2 2,886.2 0.7%
Taiwan Weighted 10,829.7 10,618.1 2.0%
Straits Times 3,120.0 3,106.5 0.4%

Sectoral Indices
30-Sep-19 31-Aug-19 Change (%)
S&P BSE Auto 16,761.8 15,768.4 6.3%
S&P BSE Bankex 32,889.1 30,949.7 6.3%
S&P BSE FMCG 18,695.3 16,941.8 10.4%
S&P BSE Healthcare 12,493.5 12,875.4 -3.0%
S&P BSE Metals 9,085.7 8,524.3 6.6%
S&P BSE Oil & Gas 14,642.1 13,163.7 11.2%
S&P BSE Power 1,934.4 1,888.0 2.5%
S&P BSE Realty 1,978.0 2,047.7 -3.4%
S&P BSE Teck 7,654.0 7,853.1 -2.5%

ICICIdirect Money Manager 57 October 2019


PRIME NUMBERS

Volatility Index (VIX)


30-Sep-19 31-Aug-19
VIX 15.87 16.28

Debt Markets
Government Securities Yield (in %) Sep-19 Aug-19 Change (bps)
10 year 6.70 6.56 14
5 year 6.37 6.25 12
3 year 6.13 6.04 9
1 year 5.60 5.68 -8

Corporate Bond Yields (in %) Sep-19 Aug-19 Change (bps)


AAA 10 year 7.94 7.90 4
AAA 5 year 7.66 7.56 10
AAA 3 year 7.35 7.20 15
AAA 1 year 6.92 6.97 -5
AA 10 year 8.46 8.35 11
AA 5 year 8.06 7.96 9
AA 3 year 7.79 7.69 10
AA 1 year 7.36 7.50 -14

Commercial Paper (in %) Sep-19 Aug-19 Change (bps)


12 Months 0
6 Months 0
3 Months 0
1 Month 0
Note : Data not available on Bloomberg for 3,6 and 12 month CP post 1/15/19 and for
1 month CP post 3/27/18
T-Bills Yields (in %) Sep-19 Aug-19 Change (bps)
91D TB 0
182D TB 0
364D TB 0
Note : Data not available on Bloomberg for 3,6 and 12 month Tbill post 3/28/18

ICICIdirect Money Manager 58 October 2019


PRIME NUMBERS

10-year benchmark yields (%) across countries


Countries 30-Sep-19 31-Aug-19 Change in bps
US 1.665 1.496 17
UK 0.488 0.479 1
Japan (0.213) (0.269) 6
Spain 0.142 0.100 4
Germany (0.571) (0.700) 13
France (0.277) (0.406) 13
Italy 0.822 0.998 (18)
Brazil 7.047 7.430 (38)
China 3.141 3.061 8
India 6.702 6.559 14

MF Investment Sep-19 Aug-19 Fy19


Equity 11029 17407 87667
Debt 31354 50316 389356

FII Investment Sep-19 Aug-19 Fy19


Equity 6674 -15552 9722
Debt -1913 11414 -39425

Macro-economic Indicators
Consumer price index (CPI)
Items Weights(%) Jul-19 Aug-19 Sep-19
Food&bev. 45.86 2.33 2.96 4.70
Pan,tob& intox. 2.38 4.89 5.00 4.59
Cloth & Foot 6.53 1.65 1.23 0.96
Housing 10.07 4.87 4.84 4.75
Fuel & light 6.84 -0.36 -1.70 -2.18
Misc. 28.31 4.65 4.71 4.45
CPI 100 3.15 3.21 3.99
Wholesale price index (WPI)
Month
Weights Jul-19 Aug-19 Sep-19
WPI 100.0 1.1 1.1 0.3
Primary Articles 22.6 5.0 6.4 5.5
Fuel & Power 13.2 -3.6 -4.0 -7.1
Manufactured Goods 64.2 0.3 0.0 -0.4
*WPI numbers are based on new series with 2011-12 as the base year’

ICICIdirect Money Manager 59 October 2019


PRIME NUMBERS

Index of industrial production (IIP) Sector-wise growth rate (%)


Categories 31-Aug-19 31-Jul-19 30-Jun-19 Weight(%)
Mining -8.0 -6.0 -3.4 14.4
Manufacturing -3.3 3.5 -5.2 77.6
Electricity -2.4 -1.9 -2.2 8.0
Overall -3.7 1.8 -4.6 100.0
*IIP numbers are based on new series with 2011-12 as the base year’
Currencies and Commodities
Currencies
30-Sep-19 31-Aug-19 Change (%) Status
USDINR 70.9 71.4 -0.8% Appreciated
EURINR 77.3 78.8 -1.9% Appreciated
GBPINR 87.3 86.9 0.4% Depreciated
AUDINR 47.9 48.0 -0.3% Appreciated
CHFINR 71.2 72.2 -1.4% Appreciated
JPYINR 0.7 0.7 -2.5% Appreciated
CNYINR 9.9 10.0 -0.6% Appreciated
Commodities
30-Sep-19 31-Aug-19 Change (%)
Crude ($/barrel) 60.8 60.4 0.6%
Gold ($/ounce) 1,472.5 1,520.4 -3.1%

Mutual Funds: Category Average Returns


Equity Funds Returns (in %)
Multicap Midcap Large Cap Small cap ELSS
6 months -1.64 -3.91 0.68 -8.15 -2.77
1 year 3.76 2.08 6.86 -2.35 3.00
3 year 7.31 4.85 8.35 3.35 7.64
5 year 8.73 9.14 8.66 8.71 8.94
Returns as on August 30, 2019

Debt Funds Returns (in %)


Debt Funds Returns (in %) Liquid Debt ST Ultra ST Debt LT
6 months 6.26 1.50 6.45 15.36
1 year 6.79 5.44 7.11 18.02
3 year 6.71 5.60 6.51 7.76
Returns as on August 30, 2019

Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com


Research

ICICIdirect Money Manager 60 October 2019


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