“wall of worry” - motilal oswal private wealth management · 2018-08-10 · (detailed views on...

“Wall of Worry”

AUGUST 2018 | ISSUE 68

This document is not valid without disclosure; refer the last page for the disclosure

Alpha Strategist | “Wall of Worry”

Contents

AUGUST 2018 | ISSUE 68 2

Executive Summary

Section I………………………………………………………………......................................................………...04-23

ection II…………………………………………………….......................................................………………....24-39

Section III…………………………………………………….........................................................……………….40-66

………………………………………………………………........................................…….......03

(Market through Graphs, Our advisory calls, Model Portfolio & performance, Outlook, Investment

Opportunities & Investment articles)

S

(Detailed views on Equities, Fixed Income, Alternative)

(Advisory approach, 4C Framework, Update on our recommended products)


For a while now pessimism has been on the rise. There has been rising “ ” at the

moment. The same has been emanating from global trade wars and the noise related to the

impending state and general elections back home. While these noises may get louder with time,

it becomes more pertinent to look beyond the short term horizon and not get dissuaded by the

market movements.

While investors are worried about global developments, the world economy continues on its path

of growth and remains seemingly unfazed by the worrisome headlines for now. Forecasts for growth

have remained relatively unchanged, albeit with slower growth expected in select regions. The risk of trade escalations

still remains as of now, but negotiations are yet to completely play out. Hence, it is better to not arrive at any

conclusions.

Despite the much talked about potential trade war, Indian markets have climbed to new peaks. The rise seems to be on

the back of conviction in strong fundamentals and a recovery in earnings, which has been much awaited for. Domestic

investments remain robust and this has completely overshadowed the fact that foreign investors have been pulling out

of markets in the rising interest rate environment.

The consumption story continues to play out as expected and as earnings are poised for uninterrupted growth, prices

will now have their backing. Going forward, earnings are likely to dictate the prices but there could be increased

volatility during the up coming state and general elections. The elections could also have an impact on the fiscal deficit,

but the expected higher revenue collections and reduction in capital expenditure are likely to contain its impact.

Inflation is likely to remain in check as of now. The risk to the same could be high oil prices or hike in the minimum

support prices which has already been countered by the preemptive measure of increase in policy rates by the RBI.

The government's reforms are set to kick in and provide a catalyst for growth in the upcoming years. All data points

suggest that India's growth trajectory is at an inflection point and an enormous size of opportunity awaits across

industries witnessing value migration. To our mind, this is an opportune time to invest in equities as India's GDP is

expected to double from $2.5 tn to $5 tn over the next 6-7 years. We believe “ASK India 2025 Equity Fund” is rightly

positioned to capture this opportunity. Having said, the recent correction in the mid and small cap space provides an

investment opportunity in certain niche strategies like the Motilal Oswal India Opportunities Fund and Invesco RISE

strategies. For fixed income allocation, we continue to believe to stick to good quality and well researched credit

oriented accrual strategies for sustainable returns with acceptable risk.

To our mind, setting the right asset allocation and sticking by it helps to achieve long term goals. We are certain that our

recommendations will help you overcome “Wall of Worry”. Whichever way the following months pan out, investors

that stay invested and show patience through the highs and lows will emerge triumphant.

Wall of Worry

Happy Investing!

Ashish Shanker

(Head, Investment Advisory – Private Wealth Management)

Executive Summary




Section I

Market through Graphs........................................................................................05

Portfolios Commentary........................................................................................08

Model Portfolios .................................................................................................09

Recategorization of mutual fund schemes.............................................................10

.......................................................11

...............................13

Power of Asset Allocation....................................................................................14

Hind-sight investing ............................................................................................16

Decoding Investment Style..................................................................................17

Temperature Gauge.............................................................................................18

Our Recommendations .......................................................................................20

Investment Grid ..................................................................................................23

Fixed Income Manager Selection Framework

The Basics of Creating a Private Trust for Your Grandchildren


Macro Economy

• The Fed's latest balance sheet shows a total drop of

$129 bn since the beginning of the QE unwind in

October 2017

As the Fed continues to drain out liquidity from the

system, capital flows to emerging market economies

may be impacted

However, given that the Fed stance of normalization is

gradual, it is likely to provide policy space to central

banks in other parts of world to focus on their

domestic situations

•

•

• In just the past decade, India doubled the size of its

economy, thus becoming the world's sixth largest

economy.

In the same period, GDP per capita doubled from

~$1000 to ~1900 which is expected to increase further

on back of demographic dividend, rising income,

digitization, robust infrastructure etc.

Thus, India is building economic muscle consistently

towards its $5 tn journey and is all set to emerge as one

of the powerhouses.

•

•

India – All set for the Big Leap

Source: World Bank, IMF


Markets through Graphs


Source: Fed Board of Governors, St. Louis Fed

Fed’s big balance sheet unwind

• Oil prices settled lower in the month of July as

concerns surrounding Iranian oil eased

At the same time, OPEC countries have increased

production to make up for lost barrels from countries

like Venezuela and Iran, balancing the demand-supply

situation

We believe that the Indian economy has the resilience

to withstand and absorb higher oil prices for few more

months before it affects most macroeconomic

variables such as CAD, inflation, etc.

•

•

Oil settles lower

Source: Bloomberg

30

45

60

75

90

Jul-

16

Oct-

16

Jan

-17

Ap

r-1

7

Jul-

17

Oct-

17

Jan

-18

Ap

r-1

8

Jul-

18

Oil (Brent) $/bbl

1.2 1.21.3

1.71.8 1.8 1.9

2.0 2.12.3

2.6

11

9

7

6

1

2

3

4

5

6

7

8

9

10

110.0

0.5

1.0

1.5

2.0

2.5

3.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

India GDP ($ Tn) - LHS India's Rank in World GDP - RHS

$2,466 bn

$2,337 bn

2,300

2,320

2,340

2,360

2,380

2,400

2,420

2,440

2,460

2,480US Treasury securities held by Fed ($ billions)

End of "taper"

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

Equities



• Equity markets (Sensex & Nifty) bounces back after

two consecutive months of flat returns

Improving global sentiment, a decent start to the

earnings season and a moderation in crude oil prices

kept the markets buoyant

While the markets are touching new highs, the room

for further valuation expansion is limited unless

accompanied by strong earnings growth. Going

forward, we expect strong earnings recovery in FY19-

20 to support markets from hereon

•

•

Source: Bloomberg

Sensex PE (TTM) continues to remain elevated

• The current earnings season has been mixed with

aggregates impacted, as has been the case for last few

quarters now, by Corporate Banks and individual stock

such as Tata Motors

Of the 32 Nifty companies that have declared their

earnings, 20/25 have either met or exceeded our

estimates on the PAT/EBITDA front

Basis the results declared so far, we have revised our

FY19 earnings estimate to Rs. 559 (down 3.6% from

earlier estimate) and have kept FY20 earnings estimate

fairly stable at Rs. 690 (24% growth over FY19)

•

•

Nifty Q1FY19 Interim Earnings Review

Source: MOSL

• Foreign institutional investors (FIIs) turned net buyers

in equities after three months of selloff

At the same time, domestic institutional investors

(DIIs) continued to further invest in equities, however

the pace of inflow moderated

While net inflow in equities by FIIs is a positive

development, it is too early to indicate a reversal in the

trend as concerns over global trade war and higher US

interest rates continue to lure

•

•

FIIs turn net buyer after three consecutive months of selling

Source: MOSL

24.5

19.0

5.0

10.0

15.0

20.0

25.0

30.0

Jul-

08

Jul-

09

Jul-

10

Jul-

11

Jul-

12

Jul-

13

Jul-

14

Jul-

15

Jul-

16

Jul-

17

Jul-

18

Sensex TTM PE 10-year average PE

97

1211

7

13

17

22

9

0

65

10

14

13

Se

p-1

6

De

c-1

6

Ma

r-1

7

Jun

-17

Se

p-1

7

De

c-1

7

Ma

r-1

8

Jun

-18

Sales growth (% YoY) PAT growth (% YoY)

7,500

8,500

9,500

10,500

11,500

-20

-15

-10

-5

0

5

10

15

20

25

30

35

Jan

-17

Ap

r-1

7

Jul-

17

Oct-

17

Jan

-18

Ap

r-1

8

Jul-

18

DII FII Nifty (RHS)

Fixed Income



Summary

Consumption, Domestic Cyclicals, Rural

High quality Corporate Bond funds,

Credit Opportunities funds, FMPBullish on accrual strategies

& tactical on dynamic bond funds

Sovereign Gold Bonds, Gold ETFsNeutral Neutral

• High absolute value, especially in the short to medium

end of the curve, makes a compelling case for sticking

with the accrual strategy

The spreads are hovering in the range of 40-150 bps

with respect to different credit assets across short to

medium end of the yield curve

It is prudent to stick to high quality/well researched

credit oriented accrual strategies so as to get a visibility

of risk adjusted returns over the foreseeable future

•

•

RBI hikes policy rate, maintains a neutral stance

• As a preemptive measure, RBI hiked repo rate by 25

bps considering the risks to its inflation target

However, the central bank maintained the neutral

stance while highlighting balanced risks to inflation &

growth forecasts

We believe current rate hike cycle looks to be a

shallower one with a prolonged pause in the near

term. Yields are expected to be range bound in lieu of

the domestic & global uncertainties

•

•

Source: Bloomberg

• Gold remained under pressure for the fourth

consecutive month primarily on back of strength in the

dollar and rising US 10-year Treasury yield

The prices have failed to move higher despite rising

concern over escalating trade war between US and

China, even as US President continued to pressurize

Beijing by imposing import tariff

We continue to hold neutral stance on gold, as we

believe there is merit in having allocation to this asset

class as it acts as a hedge against any major geopolitical

risk

•

•

Alternatives

Gold prices fall back towards 1-year low

Source: Bloomberg

Source: Bloomberg, RBI

Well managed accrual strategies remain a safe bet

1000

1050

1100

1150

1200

1250

1300

1350

1400

Jul-

14

No

v-1

4

Ma

r-1

5

Jul-

15

No

v-1

5

Ma

r-1

6

Jul-

16

No

v-1

6

Ma

r-1

7

Jul-

17

No

v-1

7

Ma

r-1

8

Jul-

18

GOLD Spot ($/Oz)

8.18.8

7.9 7.8

6.5

7.7

8.0 7.8 8.06.8

6.3

6.5

10.6

9.9

4.35.6

3.2

5.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Dec

-12

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

Jun

-15

Oct

-15

Feb

-16

Jun

-16

Oct

-16

Feb

-17

Jun

-17

Oct

-17

Mar

-18

Jul-

18

10 Yr Gsec (Yield %) Repo Rate (%) CPI (%)

6.76.9

7.0

7.57.7

7.87.9 7.9

8.0 8.0 7.97.8

8.18.0

8.1 8.1

6.0

6.2

6.46.6

6.8

7.0

7.27.4

7.6

7.88.0

8.2

8.4

3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 12Y 13Y 16Y 17Y

Years

Current 1 yr back



Portfolios CommentaryTactical changes and strategies

� – Replaced Income Funds with Dynamic Bond Funds based on the note released -

– Reduced allocation to Gold by 25% and increased to Dynamic Bond Funds based on discussionin the Investment Committee meeting

– Reduced further allocation to Gold by 25% and increased to Dynamic Bond Funds based on discussionin the Investment Committee meeting

– Exited Gilt Fund’s and moved to Short-term Funds (40%), Income Funds (40%) and Dynamic BondFunds (20%) based on the note released -

– Exited Income Funds and other long duration investments and invested the redemption proceeds inUltra Short-term Funds based on the note released –

– Cash allocation brought back to its strategic weight and invested the balance allocation into giltfunds based on the note released –

– Switched 15% of equity allocation to Information Technology (IT) sector funds from large cap andmulti cap funds, based on the note released –

– Reduced 10% of equity allocation and switched to ultra short term funds based on the notereleased –

– Switched 50% of Short-term Funds allocation to Gilt Funds, to increase duration of theportfolio, based on the note released –

– Deployed Cash in Nifty ETFs, based on the note released –

– Switched all cash positions to gilt funds, to further increase duration of the portfolio

– Reduced allocation to Gilts and moved to Ultra Short term Funds to create liquidity in the portfolio

May 23, 2014 – Switched allocation from IT Sector Funds and Nifty ETFs to Infrastructure Funds and Small cap Fundsrespectively, based on the note released –

– Switched allocation from Cash to Gilt funds, to increase the duration of the portfolio based on thenote

– Switched allocation from Small & Midcap funds to Large Cap funds, on the back of relativelyhigher valuations of midcaps as compared to large cap.

– On the fundamental front, demand side continues to be supportive for gold. We have therebyrevised out short term outlook on gold from underweight to neutral stance.

– Reduced Gilt exposure and allocated the proceeds towards Gold, on the back of better risk rewardscenario for gold & bond yields coming below it long term average

December 15, 2012

February 14, 2013

April 1, 2013

May 17, 2013

July 29, 2013

September 20, 2013

September 27, 2013

September 30, 2013

November 20, 2013

November 25, 2013

December 3, 2013

May 5, 2014

September 6, 2014

September 28, 2015

September 24, 2015

February 29 , 2016

“Interest”ing TimesAhead”

“Yields came tumbling after…to plummet further”

“Ride the Tide”

“The Gilt Edge”

“Information Technology – In a position on strength”

“The Bear-nanke Hug – Underweight Equities”

“Time to Rebuild Duration – A Déjà vu”

“Equity Markets – An Update”

“Good Times Ahead!”

“Way Ahead for Duration”.

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

�

April 22, 2016 – Switched allocation from Duration strategies to Accrual strategies, based on the note released –

May 31, 2018 – In Fixed Income, we reiterate our stance on accrual strategy, however, given the current valuations, tacticalallocation to dynamic bond funds can be considered by investors who can withstand interest rate volatility

May 31, 2018 – Increase allocation towards value oriented multi-cap strategies

July 31, 2018 – Increase allocation to mid & small cap strategies in a staggered manner

“Time toShift Gears”

As on July 31, 2018

�

Investment CommitteeCommittee Members

Mr.

Mr. Vijay Goel – Private Wealth Management

Mr. Ashish Shanker – Head, Investment Advisory

Mr. Kishore Narne – Head, Commodities & Currency

Mr. Nikhil Gupta, Economist, MOSL

Mr. Pradeep Ashok Kumar – Vice President,

Gautam Duggad – Head of Research, Institutional Equities, MOSL

Managing Director & CEO,

Investment Advisory

Products & Advisory Team, Private Wealth Management

For current month the Investment Committee was done through internal circulation



Model Portfolios

Note:

Portfolio inception date: October 01, 2012

All ratios calculated for 3 years period. Risk free rate at 6.0%

Performance as on: July 31, 2018

Key Ratios1-year rolling return Max

Drawdown

Draw Down

Period

Jensen's

AlphaInformation

Ratio

Aggressive+

Balanced

Conservative

20.9%

12.9%

8.8%

-12.2%

-4.7%

2.8%

63.2%

34.5%

17.6%

-17.5%

-8.3%

-4.0%

Aug-15 - Feb-16

Aug-15 - Feb-16

Jun-13 - Aug-13

-0.4%

-0.6%

-0.5%

0.7

0.9

1.4

0.4

0.4

0.5

-0.3

-0.2

0.0

Min MaxBeta Sharpe

Average

Client Profile Performance Snapshot

Conservative

55.2%

5.0%

39.8%

Accrual

Gold Fund

Corporate Bond

Balanced

9.0%

12.0%

12.0%

7.0%

26.0%

10.0%

24.0%

Large Cap Funds

Mid Cap Funds

Multi Cap Funds

Balanced Funds

Accrual

Gold Fund

Corporate Bond

Aggressive+

30.0%

22.5%20.0%

27.5%

Equity PMS

Large Cap Funds

Mid Cap Funds

Multi Cap Funds

4.4

-0.5 -0.6

7.2

10.5

20.9

16.9

6.2 6.4

4.0

14.212.7

16.313.9

1 Month 3 Months 6 Months 1 Year 3 Year 5 year Since

Inception

Aggressive+ Portfolio Aggressive+ Index

% R

etu

rn

2.1

0.1

-0.2

5.3

8.4

13.2

11.1

2.6 2.9 2.8

8.69.7

11.09.8

1 Month 3 Months 6 Months 1 Year 3 Year 5 year SinceInception

Balanced Portfolio Balanced Index

% R

etu

rn

0.71.2

2.2

4.2

7.5

8.6 8.4

0.61.3

2.7

4.9

7.58.2 7.9

1 Month 3 Months 6 Months 1 Year 3 Year 5 year Since

Inception

Conservative Portfolio Conservative Index

% R

etu

rn

Recategorization of mutual fund schemes

A turnaround effort by SEBI to rationalize the industry

Given the phenomenal growth of the Indian MF industry over the last 2 decades, investors' dilemma over selection of

schemes have only aggravated due to the plethora of 800+ open ended schemes and 1000+ close ended schemes offered

by 41 fund houses. The process of understanding, evaluating and finally investing in a scheme suitable to one's risk return

objective is like looking for a needle in a haystack.

Hence, keeping in mind the prime objective of maximization of investors' interest, in October 2017, SEBI took another

positive step in that direction and issued a circular on mutual fund scheme categorization with an aim to clean up the

industry and to enhance simplicity, transparency, comparability and uniformity in scheme characteristics.

SEBI has defined various categories of funds along with scheme characteristics and naming convention for each fund

category. While the broad parameter for equity categorization includes market capitalization, debt categorization is

broadly based on the maturity/duration of the fund. The broad categories are as follows:

Equity (10 sub categories)

Debt (16 sub categories)

Hybrid (6 sub categories)

Solution-oriented (2 sub categories)

Others which includes index funds, Exchange Traded Funds and Fund of Funds (2 sub categories)

SEBI has also mandated that each fund house can have only one scheme in each sub category (the exception being sector

funds, ETFs and FoFs) and the scheme needs to comply with the parameters/characteristics of the said category. A case in

point worth mentioning is the AMFI list of large cap (1st 100 stocks), mid cap (101 – 250 stocks) and small cap (251st stock

onwards) in terms of full market capitalization which fund houses are expected to comply with and rebalance the

portfolio, if required, in line with the AMFI list which will be updated every six months.

Thus, the regulator's initiative towards rationalization of the MF industry has kept the fund houses on their toes since the

last six months. Schemes that have seen changes can be classified into three levels — schemes that have simply changed

their name; schemes that have changed their category and schemes that have wound up and merged with another

scheme. Just to put numbers to perspective, the industry has seen mergers of 80+ schemes into 31 unique schemes

across categories. Post recatogarization, there are 39 schemes in large cap (AUM of ~Rs. 1.20 Lakh crs), 22 schemes in mid

cap (AUM of ~Rs. 69,000 crs) and 11 schemes in small cap (AUM of ~Rs. 30,000 Crs) categories (Data as on 31st May 2018).

Any structural change brings along with it benefits as well as difficulties, the scheme rationalization is no exception.

While there is no second thought to the long term benefits the change would provide to the investors, advisors as well as

the fund houses, there are also some costs attached to it in terms of portfolio churn, risk of front running, increased

transaction costs, shrinkage of mid cap universe, etc.

Thus, from an advisor and investors' perspective, it is pertinent to revisit the portfolio, decipher whether the changes

post recategorization are cosmetic or much deeper and then take a holistic view to readjust the portfolio in alignment

with one's risk return profile.

�

�

�

�

�




Adding objectivity to fixed income investing

Fixed Income Manager Selection Framework


In the above graph, we have taken the Average 1 yr rolling return for 5 years for various funds across categories. The result

was that there was a significant difference between the top performer and bottom performer in almost every category,

making a case for choosing fund managers over the funds. The ability to generate enhanced returns varies from manager

to manager within the same category, thus laying emphasis on the skills of a fund manager. But one must also realize that

past performance cannot be the only criteria to judge a fund. It is almost hazardous to do so. Different market cycles

present different opportunities.

So what strategy will help investors so that their investments are relevant for the ongoing market cycle? Even in fixed

income, there are risks associated with interest rates, credit and liquidity. With the numerous funds at one's disposal,

choosing the correct one can be quite a challenge. Before we venture into the framework of choosing a manager let us

take a sneak-peak into the two kinds of strategies adopted for “enhancing” returns – Credit and Duration.

The credit opportunities style looks for companies that have the ability to repay and mitigates risks such as default and

liquidity. This benefits investors via higher coupons, thus enhancing their overall return. However, the duration style

plays on interest rate cycles and requires an intricate macroeconomic understanding as the manager must get the

interest rate cycles right. Both these strategies play out at various points of time. At a time one anticipates interest rates

to peak, duration strategies would be a preferred option as any subsequent decline in interest rates would enhance the

portfolio returns. Likewise, in a rising interest rate scenario, duration strategies would not augur well, calling for

investment in credit strategies.

The battle of objective vs. subjective decision making often makes appearance in investing. To our mind, having an

objective oriented approach gives purpose to investment which helps in avoiding any impulsive calls. Traditionally, equity

has always been viewed as an asset class for capital appreciation while fixed income is seen as an avenue for capital

preservation. Amongst the fixed income instruments, the most commonly accepted investment avenue is fixed deposits.

There is a psychological comfort that investors draw on account of the fixed return provided by such instruments.

However investors must realize that an instrument like a fixed deposit is tax inefficient. As a result, it does not even meet

the core objective preserving the purchasing power. That raises the obvious question – what kind of fixed income options

should investors seek?

If the veil of ignorance is done away with and the fixed income market is probed into, one will realize that there are

various market linked investment avenues that investors can invest in. To our mind, fixed income mutual funds are one

example of an efficient investment option that investors can avail of as they have various benefits like diversification,

professional management and tax efficiency. However, the question of prudent selection still remains unanswered.

Liq

uid

UST

Sho

rt T

erm

Cre

dit

Op

ps.

Lon

g I

nco

me

Dyn

am

ic

Bo

nd Gilt

6.6 6.77.4

9.2

7.7

6.7 6.9

8.3 8.6 9.0

9.9

8.9 9.29.88.9

9.3

10.310.8 10.8

11.912.6

Avg. 1 Yr RR of worst performing fund Category Average Avg. 1 Yr RR of best performing fund



Just like a fast bowler cannot bowl spin and vice versa, a manager cannot mimic both approaches simultaneously. A

manager must be clear on his stance and having experienced two to three market cycles will be of huge significance.

To our mind, good performance is an outcome of a robust process. Hence, one needs to be cognizant of the latter at the

time of evaluation. This thought process has given birth to our . By evaluating the

pilot rather than just the plane, each would enable us to unmask the different hues of investment process from the

performance which is the ultimate outcome.

This framework implies a paradigm shift from the industry norm of ranking funds only on the basis of past performance.

This qualitative and quantitative process would enable us to construct for our clients. In line with

our philosophy of providing better insights to you, we hope you find the same informative.

“4C framework of manager selection”

“C”

“winning portfolios”

The Basics of Creating a Private Trust for Your Grandchildren

If you're considering passing on some of your wealth to your grandchildren, you could gift money to them outright or payfor costs (such as tuition or medical expenses) directly. That said, don't overlook the option of putting money in a trust. Inmany cases, trusts give you more options for how and when your grandchildren receive funds.

Establish guidelines on how you'd like the money to be used.

Release funds at key milestones over your grandchild's lifetime, rather than all at once.

Protect the inheritance from certain dangers, such as substance abuse challenges or problems with creditors.

Help your grandchild meet specific goals, such as higher education, buying a home or starting a business.

Administratively, trusts can be fairly simple to set up, but they require careful thinking about what you'd like them toaccomplish.

Selecting a trustee also requires thoughtful analysis. The trustee is a person who will be responsible for approvingdistributions from the trust. Although you can name a family member as trustee, or you can also appoint a professional(corporate) as a Trustee.

Individual trustees may be the better choice if a particularly close relationship with the beneficiary is needed (whencaring for a parent, for example) or if the trust asset requires specialized knowledge (like running a family business).

Corporate trustees often are the better choice when there isn't a trusted individual available who can both managetrust assets effectively and make the hard decisions about when (and when not) to make distributions. And as acorporate it's an ongoing concern, hence there is stability in terms of professionalism and continuity of the Trustee.

You can either create one trust for all the decedents or create different trusts for each grandchild.

This option has advantages if you have a large family and want to givediscretion to your trustee for distribution of assets. With a trust, you set up a single trust, and your trustee can decidewhen and how much money to distribute to each of your grandchildren or other descendants for their specific,ongoing needs. You can also use a trust to leave a continuing financial legacy for multiple generations of your family.

These can have advantages in case you want to define and segregate specificassets for specific grandchild for their respective needs which can be defined in the trust, creating individual trust arealso useful in case your grandchildren are in different jurisdiction.

One of the advantages of establishing trusts for grandchildren is that you can write specific instructions. Thesestipulations help you to influence how your grandchildren use the funds.

For instance, you can set up your trust to release funds at key milestones — such as when your grandchildren reach ages20, 25, 35, and 40 rather than all at once. You can also leave recommendations for your trustee, asking him or her toconsider approving distributions that would allow your grandchild to pay for college tuition, buy a first home, or addressother goals. Alternately, you could ask the trustee to match your grandchild's funds to buy a new car, rather than pay forthe entire car, for example.

You can also add discretionary language to trusts that allows the trustee to hold back financial distributions in certaincases such as if your grandchild refuses to get a job, develops a substance abuse problem, is in trouble with creditors, or isundergoing a divorce (to prevent the ex-spouse from taking a share of the money).

Just as important as coming up with all the stipulations for a trust. Frank family conversations about the concept is veryimportant aspect in order to keep family harmony.

You may also want to discuss with the parents how much information to provide your grandchildren about the trustsyou're creating for them.

Many experts now recommend talking openly to children about inheriting wealth at the right age, rather than keeping itconfidential until they're older. Doing so can give your family time to educate your grandchildren about responsiblemoney management.

However, each family needs to decide for themselves the best time to speak to grandchildren about trust funds and thebest way to communicate the information so that awareness of the trust does not affect a particular child's ability to workhard or be financially responsible.

•

•

•

•

•

•

1. A family trust for all of your descendants.

2. Individual trusts for each grandchild.

Putting money into a trust for your grandchild lets you:

Establishing a trust

Choose the right trust option

Some of the stipulations

Discuss with family

"Trusts can be fairly simple to set up, but they require careful thinking about what you'd like them to accomplish."





Power of Asset Allocation

Historically equity has been viewed as a wealth creating asset class and debt and gold being inflation beating asset class.

That said, little do people know that both debt and gold have rarely beaten inflation. At the same time while equity offers

superior returns in the long run, it also exposes one to certain volatility inherent to the nature of the asset class. Asset

allocation enables you to maximize your return potential while reduce your risk. Industry research has shown that 92% of

the returns are attributable to the correct asset allocation.

We thought it to be prudent to substantiate it with some data. The table below highlights calendar year performance of

different asset classes such as equity, debt, gold and cash. As you would observe no asset class has been a consistent

winner.

Having said that, it is very clear that if one were to do a very simple asset allocation of equal investing in different asset

classes, there would have been only 1 instance in last 15 years where the strategy would have given negative returns. This

includes period of global financial crisis where most of the markets were battered. Thus there is a clear merit in

diversifying assets across different asset classes as it reduces dependency on single asset classes and protect from

market turbulence.

*Performance as on: July 31, 2018

Equity is represented by Nifty 50

Debt is represented by CRISIL Short term bond Index,

Cash is represented by CRISIL

Liquid fund Index and Gold – Bloomberg, MOWM

Average: Equal allocation to each asset class in the calendar year

In our mind while return certainly matters, but so does risk. Based on your risk taking appetite, one should decide on how

much money needs to be allocated to different asset classes. There are multiple factors that define your risk tolerance

level such as investment horizon, liquidity needs, investment goals and so on. An investor with high risk tolerance may be

willing to accept greater volatility in pursuit to generate higher potential returns and may allocate higher percentage of

the portfolio towards higher risk assets. On the other hand, an investor with low risk tolerance may have to forego higher

potential returns for a steadier and less volatile portfolio.

11.2%

CAGREquity

16.2%

Gold

10.9%

Debt

6.8%

Cash

6.8%

CAGR of underlying asset classes

Multi-asset approach tends to deliver smoother returns than what is achieved by investing in just a single asset class

2003

Equity

71.9%

2004 2005 2006 2007 2008 2009 2010 2012 2013 20142011 2015 2016 2017

Average

Equity

10.7%

Gold

24.1%

Gold

31.9%

Equity

27.7%

Cash

9.0%

Equity

31.4%

Debt

8.7%

Gold

12.0%

Equity

28.6%

Equity

75.8%

Equity

36.3%

Equity

39.8%

Equity

54.8%

Gold

30.1%

Gold

13.5%

Cash

4.0%

Gold

22.3%

Gold

20.8%

Gold

16.7%

Debt

9.5%

Gold

19.7%

Equity

17.9%

Cash

8.2%

Gold

10.2%

Debt

8.3%

Debt

10.5%

Cash

8.2%

Debt

9.8%

Cash

6.6%

23.8%

Cash

4.6%

Debt

5.4%

Gold

5.9%

Debt

2.7%

Cash

4.6%

Cash

6.0%

Debt

8.0%

Cash

8.4%

Debt

6.6%

Cash

5.1%

Debt

7.9%

Debt

9.1%

Cash

7.5%

Equity

-4.1%

Cash

9.2%

Equity

6.8%

11.6%8.1%1.7%12.9%1.2%13.9%5.8%13.0%26.7%-0.9%21.7%18.0%17.0%4.5%

Debt

%5.4

Gold

0.5%

Debt

4.5%

Debt

5.5%

Cash

7.5%

Equity

-51.8%

Cash

4.9%

Debt

4.7%

Equity

-24.6%

Equity

3.0%

Gold

-6.2%

Gold

0.6%

Gold

-19.2%

Cash

8.5%

2.4%

2018*

Equity

7.8%

Debt

2.2%

Cash

4.2%

Gold

0.8%



By selecting a portfolio with equity and fixed income, the potential gains that the equity component can give are much

higher and the associated risk can be well taken care of by the fixed investment portfolio. Thus a portfolio invested across

asset classes has the ability to generate superior risk adjusted return.

To prove our hypothesis, we carried out back-testing with just two asset classes, equity and fixed income. We created

three model portfolios with 75:25, 50:50 and 25:75 exposures to fixed income and equity respectively. Over 5-year

holding period, none of these portfolio generated negative returns. Also, it is worth highlighting that over 3-year holding

period, portfolio which has high exposure to equity (75%) gave positive returns 98.7% of time over the last 12 years.

• Multi-asset class strategies smoothen the ride

• Protects on the downside during extreme falls witnessed from a single asset class

• Makes returns more predictable

The above illustration has been carried out for indices which are passively managed. Our experience has been that

actively managed strategies have been able to generate significant alpha. Thereby, we believe the upside benefit is

higher in case of actively managed strategies. Consequently, the same can be depicted from the below table.

Fixed Income 75%; Equity: 25% Fixed Income 50%; Equity: 50% Fixed Income 25%; Equity: 75%

1 year 3 year 5 year 1 year 3 year 5 year 1 year 3 year 5 year

Period of analysis: March 2002 to July 2018

Equity is represented by Nifty 50 & Debt is represented by CRISIL Short term bond Index

10.3%

28.1%

-8.2%

183

9 (4.9%)

41 (22.4%)

10.0%

21.7%

5.2%

161

0.0%

13 (8.1%)

9.8%

20.3%

5.6%

135

0.0%

3 (2.2%)

13.5%

48.9%

-22.7%

183

19 (10.4%)

43 (23.5%)

12.2%

35.2%

2.4%

161

0.0%

27 (16.8%)

11.6%

30.2%

3.6%

135

0.0%

14 (10.4%)

16.6%

70.6%

-37.4%

183

30 (16.4%)

45 (24.6%)

14.2%

46.4%

-0.6%

161

2 (1.2%)

32 (19.9%)

13.2%

37.8%

1.4%

135

0.0%

18 (13.3%)

For indices:

Fixed Income 75%; Equity: 25% Fixed Income 50%; Equity: 50% Fixed Income 25%; Equity: 75%

1 year 3 year 5 year 1 year 3 year 5 year 1 year 3 year 5 year

13.6%

38.3%

-6.2%

183

7 (3.8%)

28 (15.3%)

13.4%

33.9%

6.0%

161

0.0%

0 (0.0%)

13.0%

30.6%

6.9%

135

0.0%

0 (0.0%)

19.5%

70.2%

-21.1%

183

17 (9.3%)

36 (19.7%)

18.0%

54.1%

2.7%

161

0.0%

9 (5.6%)

16.8%

44.3%

6.0%

135

0.0%

0 (0.0%)

25.5%

102.2%

-36.2%

183

25 (13.7%)

42 (23.0%)

22.0%

70.0%

-1.0%

161

2 (1.2%)

14 (8.7%)

19.9%

54.1%

5.2%

135

0.0%

2 (1.5%)

For actively managed strategies:

For active managers, Franklin India Prima Plus, HDFC Equity Fund and Sundaram Select Midcap have been considered for Equity and Aditya Birla SL Short Term

and SBI Magnum InstaCash Cash has been considered for Debt

Portfolio

Holding Period

Average

Max

Min

Number of observation

Number of times below 0%


Portfolio

Holding Period

Average

Max

Min

Number of observation




Hind-sight Investing

We are well aware of the disclaimer “past performance is no guarantee of future results”. Despite this the most common

method of investing in mutual funds remains by looking at the past performance. It’s quite intuitive to assume that

something that was a good investment in the recent past is still a good investment.

However, it’s not that simple. Our study shows that there is a limited probability of getting investment decisions right

which are solely based on historical data. Let us illustrate this with some examples of the recent past.

The below table comprises of last 17 years of data which to our mind is comprehensive. Funds were ranked based solely

on performance for pre-defined time buckets. As you can see, in the 1 year bucket 36% of the funds continued to be top

performers and 64% could not retain their position. Similarly, in the 3 year bucket 68% of the funds could not retain their

position.

If we translate the above numbers in terms of probability, your chance of selecting a top performing fund basis past

performance is lesser than winning a coin toss!

Just like we don't drive a car looking at the rear view mirror, investment decisions too should not be based on mere past

performance. In fact to our mind one needs to go beyond the norm of return based analysis to arrive at investment

decisions.

As the age old adage goes “bet on the jockey, not the horse”, the same holds true for investment wherein you lay your bet

on the manager and not the fund. So how does one go about it? In line with our philosophy of empowering you, we take

this opportunity to provide you an understanding of our “manager selection methodology”.

(Methodology notes: Date range period 2000-2017, calendar year returns, all open-ended equity schemes, AUM cut off

250cr as on 31st Dec 2017)

Review period: 2000 - 2017

Investments in top performing funds based on 1 – 3 yr track record

Top funds basis

1 yr performance

Rank after1 year

Q1 - 36%

Q2 - 24%

Q3 - 20%

Q4 – 20%

Rank after3 year

Q1 - 33% Q1 - 32%

Top funds basis

1 yr performance

Top funds basis

3 yr performance

Q2 - 34%

Q3 - 16%

Q4 – 17%

Q2 - 33%

Q3 - 18%

Q4 – 17%

Rank after3 year

The top 25% of the funds on basis of performance are assigned Q1, next 25% are assigned Q2 and so on.



Decoding Investment Style

Past performance is just the tip of the iceberg - A consistent and a transparent portfolio management approach

contributes to the sustainable long term returns

As investors and advisors, we tend to get swayed by the recent past performance while making our investment

decisions and overlook the underlying philosophy and process which would contribute towards the future returns.

Moreover, history suggests that the process for selecting funds only on the basis of past performance may not be a full

proof procedure in the future. Thus, we believe that in generating sustainable long term performance, skill plays a

major role rather than luck and to assess the skills of a fund manager, it becomes pertinent to understand the

consistency in their fund management approach.

Like any sportsman who demonstrates their styles in different terrains, we are of the view that every manager has a

different style and approach for stock picking and portfolio construction. Through our detailed due diligence process,

we aim to understand the capabilities, consistency and experience of the Fund manager and substantiate their

investment style with their past and current investments.

Through our analysis and research, we have devised a which basically states that an investment style

oscillates between two extremes of investing i.e. and while the other blended

styles of investment like and lies in between the two extremes. When a manager sticks to

picking stocks which are out of favor or below their average valuations and expect these stocks to revert back, then

these managers are demonstrating a mean reversion investment style. For example, ICICI Fund Managers are known for

their value style of investing. On the other hand, if the manager foresees a sustainable growth in the earnings of a

company and is ready to pay a premium for the stock, then the fund manager belongs to growth style of investing. For

example, Motilal Oswal Fund Managers believe in ‘QGLP’ and exhibit earnings momentum investment style.

In an investment world where more choices may lead to more confusion, it is important to understand the style of the

Fund Manager rather than the standalone performance of the funds.

To put into the perspective of quantifiable numbers, we have exhibited the styles of the managers through portfolio

attributes (P/E, P/B and RoE) over a period of three years, as shown in the bubble chart.

For

example, a fund with relatively low P/B and low P/E would represent a mean reversion style of investing, while a fund

with relatively high P/B, high P/E and higher RoE would represent earnings momentum style. Except for a few funds,

most of the funds represent a blended investment style which is a mix of value and growth style

‘Fund Stylometer’

Mean reversion Earnings Momentum

Value, Blended Growth

Also, since different managers exhibit their

strengths in different market conditions, it is viable to construct a portfolio with appropriate combination of

investment styles which in turn would minimize duplication and over diversification.

The bubble chart aims to show

the relative positioning of each fund with respect to their investment style with the peers and benchmark.


Mean

Reversion

Value Blended Growth Earnings

Momentum

Note: Over a period of 3 years, X Axis represents monthly average of P/B , Y Axis represents monthly average of P/E ,

Size of the bubble represents monthly average of RoE

Positioning of Multi Cap Funds

Period: July 2015 - June 2018

19.8

11.914.9

16.5

15.4

23.3

22.4

13.4

11.3

16.7

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

3 yrs Average P/B

Aditya Birla SL Equity Franklin India Focused Equity Franklin India EquityICICI Pru Multicap ICICI Pru Value Discovery Motilal Oswal Multicap 35Invesco India Contra L&T India Value Nifty 500Kotak Standard Multicap

Bubble size3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

3 y

rs A

vera

ge P

/E


With markets making historical highs there is a lot of time and ink getting consumed giving views on valuations. One of

the views being that valuations are above long term average and the parameter used to arrive at this view is price

earning multiple. To our mind formulating views solely based on this parameter has certain pitfall. For instance

historically higher price earning phases have been backed by high growth momentum which in today’s scenario is

different. Earnings seem to be the missing ingredient over the past couple of years. Thus there is a need to use multiple

parameters rather than confining oneself to a single variable in order to make investment decisions more full proof. In

our view one needs to take into account risk reward in order to arrive at margin of safety which is critical and forms the

basis for any investment decision.

We are cognizant of the fact that investments are tuned to meet your objectives and thus calling for a suitable asset mix

basis your investment objective. In addition we believe that investors should have a disciplined investment approach

with respect to asset allocation and should not get swayed by market sentiments to avoid accidents. Deviation from the

strategic asset mix should be under circumstances having favorable risk reward. Ideally a prudent investment decision

revolves around the principle of increasing equity exposure when markets are cheap and allocate less when markets are

expensive. However the challenge always remains to accurately estimate when the market is cheap or expensive. In

order to arrive at the decision of preferring equity over debt or vice versa, we believe earning yield to bond yield is an

excellent parameter to consider. This ratio indicates the perceived risk differential between equity and bonds.

Historically whenever earnings yield and bond yield spreads are above 0.8, equities are considered to be undervalued.

For instance at the time of demonetization which coincided with U.S election, one witnessed a sharp fall in yields

making investment in equity compelling on the back of relative valuations. Likewise, any number below .6 suggests

merit in having the portfolio tinted towards debt.

The earning yield to bond yield parameter along with our in-house indicator of market valuations named as MOVI – The

Motilal Oswal Valuation Index enables us to arrive at a well-researched and thought through asset class outlook. So

what is MOVI and what are the variables considered? MOVI is basically an index which is calculated based on the Price to

Earnings (PE), Price to Book Value (PB) and Dividend Yield (DY) on the components of Nifty 50. By means of an algorithm

the weighted average PE, PB and DY of the components of Nifty 50, one arrives at index. A higher level on the MOVI

means markets are expensive and hence one should reduce equity exposure while a lower level on the MOVI means

markets are attractive and hence one should overweight equity exposure.

With the above mentioned input variables we have crafted a unique model coined as temperature gauge which help in

making investment choices across asset classes. The objective of the strategy is to reduce volatility and keep investors

shielded from the sharp falls that are sometimes seen after sustained rise in equity prices.

So how has this fared in the past?

Temperature Gauge




In the above graph the earning yield is plotted against the x axis and MOVI on the Y axis. The data considered is

represented from the bottom of the market in 2002 till date which basically encompasses two full market cycles of

boom and bust. It is quite evident from the above graph that as the market tends to move towards top right corner,

there are several instances of negative returns and a cautious approach is recommended. However, as the market

moves towards bottom left corner, there are more instances of 18%+ returns from a 3-year forward perspective and

recommend investors to invest aggressively.

This qualitative and quantitative process would enable us to construct “winning portfolios” for our clients. In line with

our philosophy of providing better insights to you, we hope you find the same informative.

3-yr forward NiftyActive

Manager

Average

Max

Min

% times >0%

10%

46%

-9%

97%

19%

54%

-8%

97%

<0%

0-10%

10-18%

18%+

Current

MOVI

40

60

80

100

120

140

160

0.81.01.21.41.61.8

1.53 1.2 0.62 0.54

68%

95%

Fair Value ZoneAttractive Zone

Expensive

Zone

52% of the

observation

lies in this area

0.6

Temperature Gauge – Our internal market thermometer

0.4

EY-BY 0.4-

0.6-

0.8-

1.0-

1.2-

1.4-

1.6-

-

-

-

-

-

-

140

120

100

80

60

40

EY-BY

0.52

MOVI

114.4

Period of analysis: Jan 2002 to July 2018


Our Recommendations


Portfolio Management Services (PMS)

* PMS performance are net of all expenses & fees

Absolute

1 Year 3 Years 5 Years

MOPWM

RatingScheme Name

CAGRStd Dev Beta Alpha

Info.

Ratio

Avg 1 yr

rolling

return

Mααα 3.7

9.7

19.7

8.6

10.8

16.0

-8.7

Mααα

Mααα

6.8

14.2

15.7

12.9

9.3

—

12.1

PMS Strategies*

6.8

9.2

4.4

5.1

7.3

18.3

3.5

4.9

10.8

5.4

7.5

11.1

13.6

13.1

8.4

8.9

7.7

14.6

12.6

12.6

11.4

16.4

10.6

12.1

13.9

13.0

9.0

9.6

8.4

14.6

13.9

13.9

11.1

17.3

—

11.7

14.0

13.6

15.7

12.8

13.0

15.2

16.5

14.8

13.0

16.0

—

14.1

0.89

0.94

1.02

0.89

0.88

1.04

1.09

1.00

0.84

1.05

—

1.00

2.8

2.8

-2.8

-1.5

-2.6

2.7

1.8

2.3

0.3

5.3

—

—

0.3

0.5

-0.4

-0.8

-0.8

0.7

0.4

0.5

-0.1

0.9

—

—

Mααα

Mααα

Mαα

Mαα

Mαα

3.8

5.9

6.0

17.3

5.8

1.7

4.2

-4.6

4.6

3.1

Mααα

Mαα

Mαα

Mααα

Mααα

Absolute

1 Year 3 Years 5 Years

MOPWM

RatingScheme Name

CAGRStd Dev Beta Alpha

Avg 1 yr

rolling

return

AUM

(in Rs. Cr.)Info.

Ratio

Mααα 7.1

10.1

5.1

7.9

6.1

7.5

14.2

Mααα

Mαα

Mαα

Large Cap Funds

10.1

11.3

9.6

9.6

10.1

9.2

11.4

19.9

18.5

19.4

18.9

18.8

17.2

16.0

10.1

11.3

9.9

10.1

9.9

—

10.5

12.7

13.2

13.2

12.8

13.1

—

13.6

0.88

0.94

0.93

0.79

0.94

—

1.00

0.1

1.1

-0.2

0.6

-0.3

—

—

-0.1

0.2

-0.1

0.0

-0.2

—

—

Mαα

—

—

—

4.2

5.0

4.8

-3.4

6.3

8.7

Balanced Funds

Aditya Birla SL Equity Hybrid ’95 Fund

ICICI Pru Equity & Debt Fund

Franklin India Equity Hybrid Fund

HDFC Hybrid Equity Fund

Category Average

CRISIL Hybrid 35+65 - Aggressive

Mααα

Mααα

Mαα

Mαα

9.9

10.6

7.8

4.8

8.7

10.7

18.2

18.8

17.0

17.7

16.5

15.0

10.0

10.9

8.3

10.6

—

10.0

10.4

10.3

8.8

10.7

—

9.0

1.12

1.09

0.95

1.16

—

1.00

-0.5

0.5

-1.5

-0.1

—

—

0.0

0.3

-0.7

0.2

—

—

14,841

28633

2,054

21,961

—

—

—

Mα

—

Mααα

Mααα

Mααα

19.1

31.8

27.7

26.9

25.3

—

21.2

7.7

14.2

13.2

11.6

8.8

—

12.5

13.1

17.0

13.4

13.5

13.7

—

18.9

0.87

0.85

0.74

0.76

0.91

—

0.92

-2.2

1.5

2.9

1.8

-2.5

—

-0.7

-0.5

0.0

0.1

0.1

-0.6

—

-0.1Mααα

AUM

(in Rs. Cr.)

Mααα

Mαα

Mααα

Mαα

Arbitrage Funds

Mααα

Mαα

—

—

Mααα

Mααα

—

MOSt Value Strategy

MOST NTDOP Strategy

ASK IEP Strategy

ASK SELECT Strategy

DHFL DV

RISE Strategy

MOST IOP Strategy

Equity Mutual Funds

2,620

8,550

6,791

3,158

568

611

3,819

19,064

18,747

4,239

1,112

21,380

—

—

Category Average

NIFTY 50 - TRI

SBI BlueChip Fund

ICICI Pru BlueChip Equity Fund

Aditya Birla SL Focused Equity Fund

Motilal Oswal Focused 25 Fund

Aditya Birla SL Frontline Equity Fund

13,016

19,826

7,733

11,832

16659

2,200

8,100

9,749

2887

2,539

—

—

Multi Cap Funds

Motilal Oswal Multicap 35 Fund

Kotak Standard Multicap Fund

Franklin India Focused Equity

Franklin India Equity Fund

ICICI Pru Value Discovery Fund

Invesco India Contra Fund

L&T India Value Fund

Aditya Birla SL Equity Fund

ICICI Pru Multicap Fund

Sundaram Rural & Consumption Fund

Category Average

NIFTY 500 - TRI

1,272

3,162

19,990

4,143

6,617

6,039

7,113

5,255

—

—

Small & Mid Cap Funds

Motilal Oswal Midcap 30 Fund

Kotak Emerging Opportunites Fund

HDFC Mid-Cap Opportunities Fund

HDFC Small Cap Fund

Franklin India Prima Fund

Sundaram Mid Cap Fund

Franklin India Smaller Cos Fund

DSPBR Small Cap Fund

Category Average

Nifty Midcap 100 - TRI

IDFC Arbitrage Fund

ICICI Pru Equity-Arbitrage Fund

Kotak Equity Arbitrage Scheme

Invesco India Arbitrage Fund

Category Average

Crisil Liquid Fund Index

Mαα

Mααα

Mααα

—

—

22.7

23.5

20.3

24.5

27.3

26.7

24.1

20.8

23.7

20.9

18.5

7.6

12.9

13.6

18.2

12.0

10.8

12.8

11.1

11.2

12.5

—

29.7

28.3

24.6

26.3

27.4

29.9

32.9

27.6

23.8

8.3

14.1

14.4

19.4

12.5

13.6

14.5

13.7

—

13.8

14.1

15.9

16.0

17.6

14.1

17.3

14.9

19.1

—

17.2

0.71

0.88

0.90

0.95

0.77

0.95

0.81

1.01

—

1.00

-3.3

1.2

1.3

5.9

0.5

0.2

2.2

-0.1

—

—

-0.6

0.1

0.1

0.8

-0.2

0.0

0.1

0.0

—

—

2,513

7796

1,176

363

—

—

6.0

6.0

6.2

6.1

5.8

7.0

6.0

6.2

6.3

6.1

6.1

7.2

7.1

7.3

7.4

7.0

7.1

8.1

5.9

6.0

6.1

5.9

—

—

0.4

0.4

0.4

0.4

—

—

0.68

0.77

0.78

0.63

—

—

-0.8

-0.8

-0.7

-0.8

—

—

-3.3

-2.9

-3.0

-2.9

—

—

Fixed Income Mutual Funds

IDFC Banking & PSU Debt Fund

Axis Banking & PSU Debt Fund

Crisil Composite Bond Fund Index

6.4

5.6

5.9

5.4

6.0

3.4

4.6

6.0

1.5

6.6

7.4

7.5

691

816

—

Banking & PSU

Corporate Bond

M

—

ααα

Mααα

3 Month 6 Month 1 Year 3 Years 5 YearsMod Dur

Gross

YTM(%)

Sov,

Equivalent

AAA & AA+ &

BelowUnratedScheme Name

MOPWMRating

Simple Annualised CAGRCall & Cash

AUM

(in RS Cr.)

M

M

M

ααα

αα

αα

7.6

6.1

5.7

6.0

6.3

7.1

5.4

4.9

5.2

5.7

6.6

4.7

4.0

4.5

4.7

8.1

7.3

7.7

6.9

7.5

9.5

8.3

8.7

8.1

8.5

8.7

—

—

—

—

.9

7.8

6.7

3.9

—

10,396

5,350

8155

5,223

—

Short Term Income

Franklin India ST Income Plan

Axis Short Term Fund

ICICI Pru Short Term Fund

IDFC Bond Fund - Short Term Plan

Crisil Short Term Bond Fund Index

4.0

82.5

86.7

96.1

—

82.3

9.6

6.6

—

——

Mαα

1.8

1.5

1.5

1.6

—

10.8

8.3

8.4

8.3

—

7.8

8.3

8.8

3.1

2.9

—

8.5

8.4

—

95.0

95.8

—

—

—

—

—

—

—

5.0

4.2

—

Aditya Birla SL Corp Bond Fund

Franklin India Corp Debt Fund-A

BNP Paribas Corp Bond Fund


6.4

5.9

5.1

5.9

5.7

5.8

3.6

3.4

5.0

5.4

4.1

1.5

7.8

7.8

7.4

7.5

14,835

826

120

—

M

—

ααα

Mαα

Mαα

8.9

8.8

8.4

8.8

1.5

2.2

3.1

—

8.4

9.5

8.5

—

81.4

57.6

86.0

—

15.6

37.1

12.0

—

—

0.8

—

—

3.0

4.5

2.0

—

Credit Risk

BOI AXA Credit Risk Fund*

IDFC Credit Risk Fund

Reliance Credit Risk Fund

HDFC Credit Risk Debt Fund*

ICICI Pru Credit Risk Fund


8.8

4.6

6.9

5.3

7.3

5.9

8.1

4.0

5.7

4.0

6.6

3.4

7.4

3.6

5.3

4.0

5.6

1.5

9.7

—

7.9

7.9

7.8

7.5

1,649

1,226

10,912

18,434

11147

—

M

—

ααα

Mααα

M

M

M

ααα

αα

αα

—

—

8.9

—

9.0

8.8

1.5

1.8

1.6

2.4

1.8

—

11.7

9.0

10.1

9.3

9.7

—

28.4

22.9

8.5

28.4

15.2

—

38.1

74.0

86.2

67.1

78.0

—

27.7

—

2.6

—

3.6

—

5.8

3.2

2.8

4.6

3.3

—

Medium Term Duration

6.9

4.0

8.3

5.1

5.9

6.2

3.3

7.4

4.1

3.4

5.1

3.0

6.9

3.9

1.5

8.3

7.5

8.3

7.9

7.5

11,413

2,300

3,604

7,760

—

M

M

M

M

—

ααα

ααα

αα

αα

9.6

—

9.5

—

8.8

2.1

2.8

2.9

2.3

—

9.9

9.1

10.8

9.5

—

27.5

70.8

6.5

17.4

—

62.2

22.0

87.0

80.3

—

7.2

—

4.6

—

—

3.1

7.2

1.8

2.7

—

Aditya Birla SL Medium Term Plan

L&T Resurgent India Bond Fund

Reliance Strategic Debt Fund


Franklin India Income Opportunities Fund

Dynamic Bond Fund

6,310

1,269

1,385

2,793

—

—

M

M

M

M

ααα

ααα

αα

αα

6.5

4.2

4.4

5.9

4.9

5.9

Aditya Birla SL Dynamic Bond Fund

UTI Dynamic Bond Fund

SBI Dynamic Bond

IDFC Dynamic Bond Fund

Category Average


—

—

Ultra Short Term

18,728

13,801

—

—

ααα

αα

M

M

—

—

7.2

8.2

6.9

7.4

Aditya Birla SL Savings Fund

*Franklin India Ultra Short Bond Fund

Category Average


Low duration

18235

5,908

10,843

—

—

ααα

ααα

αα

M

M

M

—

—

7.2

8.2

7.3

6.9

7.4

6.4

7.2

6.6

6.2

7.0

7.0

8.0

7.0

6.8

7.4

7.8

8.8

7.8

7.4

7.2

8.6

9.4

8.9

8.2

8.1

78.5

20.8

81.1

—

—

18.4

61.1

14.6

—

—

—

1.9

—

—

—

3.1

16.1

4.4

—

—

ICICI Pru Saving Fund

*Franklin India Low Duration Fund

UTI Treasury Advantage Fund

Category Average


0.7

0.9

0.5

—

—

8.1

9.5

8.3

—

—

4.2

5.0

3.9

3.6

3.6

3.4

-0.4

1.4

0.4

0.1

1.0

1.5

6.6

8.1

7.7

6.9

6.8

7.5

8.6

10.6

7.7

7.8

7.8

8.8

3.3

1.8

2.4

3.7

—

—

9.2

8.8

7.7

8.0

—

—

45.8

63.6

92.7

98.6

—

—

48.7

13.0

—

—

—

—

3.3

—

—

—

—

—

2.2

23.4

7.3

1.4

—

—

7.1

8.1

6.8

7.4

6.5

7.6

6.2

7.0

8.0

8.9

7.4

7.2

8.8

9.4

8.2

8.1

1.3

0.4

—

—

7.3

8.6

—

—

70.7

45.7

—

—

28.6

48.2

—

—

—

—

—

—

0.7

6.1

—

—



^Less than 1 year period from date of recommendation; Returns less than or equal to 1 year are absolute return & more than 1 year period calculated by CAGRData as on July 31, 2018; *Data as on June 30, 2018

Value

NTDOP

IOP

ASK IEP

ASK SELECT

Invesco R I S E

Invesco Dawn

DHFL Deep Value

Old Bridge All Cap

Old Bridge Thematic

Ashmore

MO AIF B1

MO AIF B2

IOP V2

Renaissance India Next

Old Bridge Vantage

Equity AIF Class A

Old Bridge Vantage

Equity AIF Class B



^Less than 1 year period from date of recommendation; Returns less than or equal to 1 year are absolute return & more than 1 year period calculated by CAGRData as on July 31, 2018;

Performance of our equity recommended schemes from the date of recommendation

BenchmarkFundBenchmark

12.5

13.9

10.1

10.9

23

18.2

11.9

13.8

15.4

15.5

7.9

17.4

17.4

-8.8

7.5

4.5

4.5

01-Oct-12

01-Oct-12

01-May-15

01-Aug-15

01-Jan-17

18-Apr-16

27-Aug-17

01-May-17

30-Aug-16

30-Aug-16

30-Apr-17

01-Mar-17

01-Mar-17

05-Feb-18

19-Apr-18

18-Dec-17

18-Dec-17

15.1

28.7

13.8

15.9

23.8

21.5

-5.7

8.3

19.7

16.3

-10

6.6

7

3.4

-3.4

-11.3

-11.3

Nifty 50

Nifty FF Midcap 100

Nifty FF Midcap 100

S&P BSE 500

S&P BSE 100

S&P BSE 500

S&P BSE 500

Nifty 500

S&P BSE 500

Nifty 50

BSE Small Cap

S&P BSE 200

S&P BSE 200

CNX Small Cap

Nifty 50

BSE 500

BSE 500

RecommendationDatePMS

Large Cap Nifty 50

Multi Cap Nifty 500

23.4

10.2

13.7

19.8

14.4

BenchmarkScheme FundRecommendation

Date

01-Dec-16

01-Apr-15

01-Jan-13

01-Apr-16

01-Apr-14

17.9

9.5

15.6

19.9

18.0



ICICI Pru Bluechip Fund

Motilal Oswal Focused 25 Fund

SBI BlueChip Fund

15.4

24.5

18.9

20.5

16.6

11.2

16.8

16.8

24.5

01-Oct-15

01-Jan-17

01-Oct-13

01-Apr-16

01-Apr-14

01-Apr-15

01-Apr-17

01-Apr-17

01-Jan-17

11.7

23.3

20.9

18.9

19.5

14.5

20.6

12.3

18.8

Franklin India Focused Equity Fund

Kotak Standard Multicap Fund




Motilal Oswal Multicap 35 Fund

Invesco India Contra Fund

Sundaram Rural and Consumption Fund

Aditya Birla SL Equity Fund

MOTILAL OSWAL PRIVATE WEALTH MANAGEMENT (MOPWM) - INVESTMENT GRID (August 2018)

Asset Class Holding Period Theme Strategy Managed Solutions

1 Year

< 3 Years

Equity

Fixed Income

Alternatives

Valuations (TTM) trading slightly above its long term average

Revival in rural economy & consumption, deep value,

cyclical recovery

Growth through diversification

Low duration, taxation benefit

Play on short term rates coming off, Capital Preservation

(low credit risk)

Large caps, Dynamic Equity Funds

Multi-cap

Diversified Strategy

Arbitrage/Ultra Short Term Funds/ Low

Duration Funds Long-short funds

High Quality Shot Term Funds,

Structured Products

> 3 Years Coupon + Capital Appreciation Credit Opportunties Funds

3 Years & above

Accommodative central bank policies and reduced likelihood of

US rate hikeSovereign Gold Bonds, Gold ETFs> 3 Years --

ASK India 2025 Equity Fund, MO NTDOP PMS, ASK Indian Entrepreneur

Portfolio, ASK Select Portfolio, Renaissance All Cap, Franklin India

Focused Equity, Franklin India Equity Fund, MOSt Focused Multicap 35,

M0 NTDOP PMS, Aditya Birla Equity


Investment GridAlpha Strategist | “Wall of Worry”

MO Value PMS, Motilal Oswal F25, Aditya Birla SL frontline Equity,

Aditya Birla SL Focused Eq, ICICI Pru BlueChip Eq, SBI Bluechip , Motilal

Oswal Dynamic

IDFC Arbitrage, Kotak Equity Arbitrage, Invesco India Arbitrage, ICICI

Pru Equity Arbitrage, ABSL Savings, Franklin India Ultra Short, Franklin

Low Duration, ICICI Pru Savings, UTI Treasury Advantage

BNP Paribas Corporate Bond, IDFC Corprate Bond, Aditya Birla

Corporate Bond, IDFC Bond Fund – STP, ICICI Pru ST Plan, 1-3 yr Fixed

Income Structured Products, FMPs

IDFC Credit Opps, HDFC Credit Risk Bond, ICICI Pru Credit Risk,Reliance

Credit Risk, Franklin STIP, BOI Axa Credit Risk, ABSL Medium Term, LnT

Resurgent India Bond, Reliance Classic Bond, Franklin India Income Opp

Renaissance India Next, Ashmore India Opportunities Fund, Invesco

RISE & DAWN Portfolio, DHFL Pramerica Deep Value PMS, Invesco India

Contra Fund, L&T India Value Fund, ICICI Pru Value Discovery

10-12 YearsHigh equity upside based Alternative

Investment FundsIndia Business Excellence Fund III

Investment in mid-market enterprises that are typically market

leaders which are generally managed by first-generation

entrepreneurs specially from consumer, financial services,

pharma & niche manufacturing sectors

5 - 7 yearsInvesting in early stage mezzanine/

structured equity transactions with

reputed developers from top 6 citiesIndia Realty Excellence Fund IV

Affordable Housing space



Section II

Macro Economy...................................................................................................25

Equities...............................................................................................................30

Fixed Income.......................................................................................................35

Alternatives.........................................................................................................38



Macro Economy


Despite upswing,

investors will watch

out for any potential

trade war escalations

The US economy saw 4.1% (annualized QoQ) pace of growth in Q2, its fastest in 4 years. The

same has been boosted by tax cuts and increase in spending. While forecasts claim that this

pace may not last, president Trump's policy measures seem to be working for now.

Consumer spending bounced back and grew at a greater than expected pace. Business

investment increased, the labour market remains strong and the Q1 growth was revised up

too. This may come as a surprise considering the potential trade war situation that the US

finds itself in.

The possibility of an all-out trade war, initiated by the US, still remains. Organizations like

the IMF continue to reiterate its potential negative impact on global economic confidence,

investment and prices. So far the US economy remains unaffected. But the IMF has warned

that the US will be most adversely affected in case of a trade war as its current account

deficit could widen due to increase in demand for imports following the recent upswing. It

remains to be seen if the US backs off from trade bouts in order to protect the recent wave

of economic improvement. Investors, especially, will hope that the trade war turns out to be

political posturing after all.

US economy seems unaffected by trade bouts as growth accelerates

GDP YoY

Inflation rate

10yr Gsec

Policy rate

2.80%

2.90%

2.95%

2.00%

1.10%

0.70%

0.06%

-0.10%

6.70%

1.90%

3.53%

4.35%

2.30%

2.00%

0.44%

0.00%

1.70%

2.30%

0.74%

0.00%

1.20%

2.40%

1.34%

0.50%

2.50%

2.00%

-0.37%

0.00%

US Japan China Germany FranceUnited

KingdomEuro Area

Major Economies - Snapshot

Emerging Economies - Snapshot

GDP YoY

Inflation rate

10yr Gsec

Policy rate

7.70%

5.00%

7.77%

6.50%

5.06%

3.12%

7.72%

5.25%

1.20%

4.39%

11.06%

6.50%

1.30%

4.65%

7.76%

7.75%

2.90%

1.50%

2.57%

1.50%

4.70%

2.40%

2.22%

2.25%

1.30%

2.30%

7.74%

7.25%

India Indonesia Brazil Mexico South Korea RussiaHong Kong

Slowdown concerns rose in the Eurozone after the economy experienced its slowest

growth in two years this second quarter. This was lower than earlier forecast and is likely

due to weaker global trade. Higher oil prices may have bumped up inflation but they have

Eurozone's growth slows down amid trade worries

US economy gets a boost from tax cuts and increased

spending

Source: US Bureau of Economic Analysis

1.8

32.8

2.3 2.2

4.1

Q1 Q2 Q3 Q4 Q1 Q2

2017 2018

GDP (% QoQ)



Eurozone inflation exceeds ECB's target due to increase

in energy prices

Source: Eurostat

Amid slower growth,

ECB may have to be

more patient in ending

its bond buying program

had negative impact on businesses too. Moreover, worries remain regarding trade bout

escalations between US and the rest of the world.

This could reduce business sentiment, dampen investments and weaken exports. But there

is some amount of relief for the bloc, after a meeting with US president Trump which led to a

commitment of ceasefire for now. Meanwhile, unemployment remains at its lowest in a

decade. The recent data could mean that the central bank may consider slowing its pace in

removing its crisis-era support, but is unlikely to hamper their long term plans.

Japan wage growth finally picks up, hits two decade high

Higher summer bonuses in Japan have sparked the highest wage growth in twenty one

years. This is a sign of increased household spending and a recovering economy. The Bank

of Japan will welcome this news with open arms, as they still strive to bump up inflation to

their two percent target. The second quarter GDP numbers too, are expected to be

positive, after a fall in the previous quarter.

Japan exports have been stagnating in recent times but stronger consumption and capital

expenditure will give the economy a much needed boost. While companies are now

addressing the tight labour market with wage hikes, investments into automation and

other artificial intelligence technology could also spike in order to cater to the needs of

Japan's aging population. All eyes will point towards the outcome of continuing trade

negotiations with the US. The latter remains a risk to Japan's economic growth due to its

dependence on exports.

Japan remains optimistic

on back of overseas

demand and domestic

consumption

1.31.1

1.31.2

1.92.0

2.1

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18

EU Inflation rate (%)

China worries continue to hover around US trade negotiations

China's trade dispute with the US continues to remain its major concern. While China's

new loans have reduced, corporate borrowing cost has increased and the Yuan's decline

against the dollar has raised cause for more worry. The central bank continues to pump out

cash in order to increase bank lending, but banks are hesitant to lend to smaller, riskier

firms, which are vital to China's economy.

Not only banks, but even investors have been dumping small cap stocks, citing higher

valuations amid global uncertainties. But far from backing off, China's ministry of finance

has maintained that if US goes through with its proposed tax on Chinese goods, they would

retaliate with duties on five thousand categories of American imports.

US willing to impose

more tariffs to narrow

down the trade deficit



Indian Economy

Government to push revenue spending higher at the cost of capex/deficit target

It is widely believed that central government spend generously in the election year in order

to reinstate themselves in power. However, historical data have painted a different picture

which depicts that revenue spending does not necessarily grow faster during election year.

With the elections around the corner, we believe that though the current government may

spend generously, it would not be at the cost of breaching its fiscal deficit target. Thereby,

while the actual growth in real core revenue spending could be higher than budgeted in

FY19, it will come at the cost of a second consecutive decline in capital spending, rather

than higher total spending. Our calculations suggest that if the government wants to keep

deficit unchanged, real core revenue spending could grow 9.2% versus budgeted growth of

6.1%, only if capital spending declines ~4% YoY in FY19E, similar to the contraction in FY18.

Government keen to

maintain its fiscal

deficit target

Retail inflation at 5-month high

India's headline CPI inflation increased marginally to a five-month high of 5% in June 2018

from 4.9% in the previous month. However, on YoY basis, this was a huge shift from the 1.5%

inflation registered same month last year. The spike in the inflation happened due to the

increase in crude oil prices along with hardening of core inflation.

Food inflation (weight 39.1%) eased to 2.9% in June 2018 from 3.1% in the preceding

month, largely led by lower inflation in cereals, meat & fish, milk products, fruits and

vegetables. The Fuel and light index grew by 7.1% during June 2018 as compared with 5.8%

in the previous month. Core inflation (all items excluding 'food & beverages' and 'fuel &

light') reached four-year high of 6.5% from 6.2% in the previous month. This was the fourth

consecutive month of up tick in core inflation.

Over the last few months, the MSP hike and sharp jump in crude oil prices has impacted the

inflation. However, we believe that CPI has peaked out in June and should decelerate in the

ensuing months owing to a favourable base effect.

We believe CPI has peaked

out and should decelerate

in the ensuing months

Real Core revenue spending of centre

Source: MOSL, CEIC, CSO & Budget Documents

-5%

0%

5%

10%

15%

20%

25%

30%

35%

FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15

Real core revenue spending of centre

ElectionYear

ElectionYear

ElectionYear

ElectionYear

FY17 FY19E

ElectionYear

Retail inflation rises to 5% in June 2018… …as non-food inflation rises

Source: CSO Source: CSO

5

0.0

2.0

4.0

6.0

8.0

10.0

12.0CPI (% YoY)

Oct

-13

Feb

-14

Jun

-14

Oct

-14

Feb

-15

Jun

-15

Oct

-15

Feb

-16

Jun

-16

Oct

-16

Feb

-17

Jun

-17

Oct

-17

Feb

-18

Jun

-18

(0.01)

0.02

0.01

0.02

(0.09)

-

0.09

(0.00)

0.01

0.05

0.03

Cereals & products

Pulses & products

Sugar & products

Vegetables

Other food & beverages

Pan, tobacco & intoxicants

Fuel & light

Housing

Clothing & footwear

Fuel for vehicles

Other misc. items

Contribution to change in inflation - MoM basis (%)



Wholesale Inflation at a record 54-week high

The Wholesale Price Inflation or the producer's inflation jumped to a 54-month high of5.8%

in June 2018 as against 4.4% in the preceding month. Low base (0.9% in June 2017) along

with increasing crude oil prices led to spike in wholesale inflation.

At segment level, inflation in primary articles quickened to 5.3% in June from 3.6% in the

previous month which was not due to food articles inflation as it stood at 1.8% in June, as

against 1.6% in the preceding month. Inflation in 'fuel and power' basket too rose sharply to

16.2% in June from 11.2% in May as prices of domestic fuel increased during the month in

line with rising global crude oil rates. Also, inflation in manufactured products stood at 4.2%

in June against 3.7% in May.

Wholesale inflation for the month of Apr 2018 was revised to 3.6% against the provisional

estimate of 3.2% released earlier. We expect the WPI to harden further before easing

somewhat in the second quarter of FY19. Some of the key factors that could influence the

inflation trajectory include the level at which global crude oil prices stabilise and the trend

in the monsoon dispersion.

Wholesale inflation

soars to highest level

in over 4.5 years

…due to rise in fuel prices and low base effect

Source: DIPP

Wholesale inflation surges…

Source: DIPP

5.8

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Jun

-14

Sep

-14

De

c-1

4

Ma

r-1

5

Jun

-15

Sep

-15

De

c-1

5

Ma

r-1

6

Jun

-16

Sep

-16

De

c-1

6

Ma

r-1

7

Jun

-17

Sep

-17

De

c-1

7

Ma

r-1

8

Jun

-18

WPI (%YoY)

1.4

7.9

3.1

1.1

11.2

3.7

1.6

16.2

4.2

Primary articles Fuel & Power Manufactured Products

(% YoY) Apr-18 May-18 Jun-18

Industrial production growth dips to a 7-month low

The Index of Industrial Production (IIP) rose by just 3.2% in May 2018, slowest pace of

growth in last seven months. Poor manufacturing growth pulled down the overall IIP

growth for the month.

Growth in manufacturing output fell to a 7-month low of 2.8% YoY in May from 5.3% in the

previous month. This was way below the average growth of 6.8% witnessed during the first

4 months of 2018. 10 of the 23 industries within the manufacturing sector saw a YoY decline

in output. However, growth in mining activity geared up to an 8-month high of 5.7% from

3.1% in May 2018 and was impressive compared to 0.3% growth in May 2017.

As per used-based classification, consumer non-durables declined by 2.6% YoY in May after

rising by 9.6% on average during the first 4 months of 2018. Output of capital goods and

consumer durables grew by 7.6% and 4.3%, respectively, in May.

IIP growth has improved marginally to 4% in Apr-May period 2018 compared to 3% for the

same period last year. We expect growth to pick up in the next few months on account of

favourable base. For full-year FY19, we expect IIP growth to improve marginally to 4.6%

from 4.4% in FY18.

Favourable base

to aid near term

IIP growth



Trade Deficit widens to a 43-month high

The country's trade deficit widened to $16.6 bn in June 2018 from $14.6 bn in May 2018,

which is the highest in the last 5 years. This has been driven mainly by the increasing import

bill due to crude oil prices and the weakening rupee, even though merchandise exports rose

17.6% YoY in June 2018.

The oil import bill of India, the world's third biggest crude importer, increased sharply with

global oil prices amid concerns about U.S. sanctions against Iran removing a substantial

volume of crude oil from the world markets. Overall, imports rose by 21.3% YoY to $44.3 bn

in June 2018. Gold imports in June dipped by about 3% to $2.4 bn.

Going forward, we do not expect major acceleration in exports owing to moderating global

growth and mounting trade war concerns. As for imports, the recent rise in oil prices could

keep the import bills high. Also, the weakness in Indian Rupee is yet to reflect in stronger

growth for labour intensive exports, especially where India has some comparative

advantage. Overall, we expect trade deficit at $165 bn for the entire FY19 higher than

$156.8 bn registered in FY18.

Oil remains the major

culprit for widening

trade deficit

…on account of healthy growth in manufacturing

Source: MOSPI

IIP growth recovers…

Source: MOSPI

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

May

-15

Au

g-1

5

No

v-1

5

Feb

-16

May

-16

Au

g-1

6

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

IIP (%YoY)

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

May

-17

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

De

c-1

7

Jan

-18

Feb

-18

Ma

r-1

8

Ap

r-1

8

May

-18

(% YoY) Manufacturing Electricity Mining

Surge in imports with dip in export…

Source: Ministry of Commerce and Industry

Trade deficit widens ($ bn)

Source: Ministry of Commerce and Industry

-30

-20

-10

0

10

20

30

40

50

60

Jun

-16

Au

g-1

6

Oct

-16

De

c-1

6

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

De

c-1

7

Feb

-18

Ap

r-1

8

Jun

-18

Exports (YoY %) Imports (YoY %)M

ar-1

8

Ap

r-1

8

May

-18

Jun

-18

Trade Balance

-25

0

25

50

Jun

-17

Jul-

17

Au

g-1

7

Sep

-17

Oct

-17

No

v-1

7

Dec

-17

Jan

-18

Feb

-18

Exports Imports

2.8

1.2

2.1

3.0

3.9Ju

l-0

8

Jul-

09

Jul-

10

Jul-

11

Jul-

12

Jul-

13

Jul-

14

Jul-

15

Jul-

16

Jul-

17

Jul-

18

10-Yr Avg: 2.6x


Equities


Markets touch record highs

Equity markets (as represented by Nifty 50) ended the month on a strong footing with Nifty

gaining 6.0% in the month of July as compared to flat closing for two consecutive months.

The rally in market was because of handful of stocks such as HDFC twins, Reliance, Infosys,

TCS, HUL, Bajaj Finance, etc. Fading global concerns, moderation in crude oil prices and

better than expected quarterly results aided market sentiment.

From the valuations standpoint, Sensex's forward P/E at 19.3x (MOSL estimates) is trading

above its long term average of 17.4x. Also, Sensex's forward P/B at 2.8x (MOSL estimates) is

trading slightly above its long term average of 2.6x.

The recent rally in the markets has led to spike in the valuations. However, earnings

recovery from here on shall provide the necessary support to the market. We expect strong

earnings recovery supported by demand recovery in consumption sectors driven by rural

sector, bottoming out of asset quality pressures for banks and recovery in earnings from

hitherto laggard sectors like IT and Healthcare. However, in the near term, global

uncertainty and weak rupee could add volatility in the market.

Nifty scale fresh

lifetime highs

Large caps continue to outperform broader market indices

Large caps, as represented by S&P BSE Sensex, rallied 6.2% in the month of July 2018 as

compared to almost flat for the previous 2 months. Among the broader indices, S&P BSE

Midcap broke two months losing streak and registered a gain of 3.6%. Similarly S&P BSE

Small cap also edged up 3.4% after posting loses for two consecutive months.

Large caps outperform

both midcaps and

small caps for third

consecutive month

Sensex Forward P/E (x) - Long term average

Source: MOSL

Sensex Forward P/B (x) - Long term average

Source: MOSL

19.3

7

12

17

22

27

Jul-

08

Jul-

09

Jul-

10

Jul-

11

Jul-

12

Jul-

13

Jul-

14

Jul-

15

Jul-

16

Jul-

17

Jul-

18

10-Yr Avg: 17.4x

Performance across market capitalization

Source: Bloomberg

-5.0-3.6

6.6

0.5 0.3

6.2

-4.6-3.6

6.6

-5.9

-3.5

3.6

-3.1

-6.3

8.3

-6.3 -7.1

3.4

Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18

Sensex (%) BSE Mid Cap (%) BSE Small Cap (%)



Q1FY19 Interim Earnings Review

The Q1FY19 earnings season has so far been mixed with aggregates impacted, as has been

the case for last few quarters now, by Corporate Banks and individual stock such as Tata

Motors. Even as revenue and EBITDA have met our estimates, profits have missed our

estimates, largely dragged by Corporate-focused Private Banks, owing to accelerated

provisioning even as fresh slippage generation has moderated.

Of the 32 Nifty companies that have declared their earnings, 20/25 have either met or

exceeded our estimates on the PAT/EBITDA front. Sales, EBITDA and PAT for the 32 Nifty

companies have grown at 22.1%, 20.7% and 2.5%, as against expectations of 19.7%, 20.5%

and 12.7%, respectively. Excluding PSU Banks and Corporate-focused Private Banks, Nifty

sales, EBITDA and PAT have grown 22.4%, 22.0% and 8.1% v/s expectations of 20.0%, 21.6%

and 14.8%, respectively.

We have revised our Nifty EPS estimates for FY19 downwards by 3.6% to Rs. 559 from Rs.

580, driven by Tata Motors and ICICI, which account for 70% of the EPS cut. Our estimates

for FY20 are largely stable at Rs. 690. Thereby, we are building in Nifty EPS growth of

22%/24% for FY19/20 respectively.

Risk-reward continues to favor multi cap strategies

Over the last 5-years, while the earnings (EPS) for the large caps have grown 33%, the EPS

for midcaps have marginally de-grown by - 2%. At the same time, large caps (Sensex)

delivered 83% absolute returns, while midcaps delivered a stellar 159% absolute returns.

While, there have been re-rating in both the segments, the extent of re-rating in midcap is

relatively high, implying broad based midcap valuations are relatively stretched compared

to its large cap peers. The recent volatility in the small & midcap space has led to some

correction in valuation premiums, however they still continue to be overvalued compared

to their large cap peers.

Prefer multi cap

and focused midcap

strategies

5 56

14

3

9

0

65

10

14

13

Jun

-15

Sep

-15

De

c-1

5

Ma

r-1

6

Jun

-16

Sep

-16

De

c-1

6

Ma

r-1

7

Jun

-17

Sep

-17

De

c-1

7

Ma

r-1

8

Jun

-18

Nifty PAT growth (% YoY)

While Nifty topline witnessed strong growth…

Source: MOSL

…bottom-line impacted majorly by ICICI Bank & Tata

Motors

Source: MOSL

-2 -2

1

12

5

97

12 11

7

13

17

22

Jun

-15

Sep

-15

De

c-1

5

Ma

r-1

6

Jun

-16

Sep

-16

De

c-1

6

Ma

r-1

7

Jun

-17

Sep

-17

De

c-1

7

Ma

r-1

8

Jun

-18

Nifty Sales growth (% YoY)

Nifty EPS – expect 23% EPS CAGR over FY18-20, significantly higher than 5%

EPS CAGR over FY08-18

Source: Bloomberg, MOSL

73 78 92131

169 184236

281 251 247315

348 369407 413 394

423458

559

690

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

E

FY

20

E

FY01-08

21% CAGR

FY08-18

5% CAGR

FY18-20E

23% CAGR



Given the above context, from a valuation perspective, large caps offers valuation comfort

as compared to midcaps given the high visibility on earnings provided by large caps. Also,

we believe there are various opportunities in certain companies in the mid & small cap

space which can benefit from broad based recovery in the economy. Thereby, we continue

to favor multi cap and focused midcap strategies.

Significant PE re-rating in midcaps

Source: Bloomberg

Midcap to large cap premium continue to remain

elevated

Source: Bloomberg

Follow staggered

investment

approach

Fundamental valuation indicators trade in slightly overbought zone

To gauge the investment attractiveness of the markets, we track two indicators viz. Motilal

Oswal Value Index (MOVI) and Earnings yield to Bond yield (EY-BY). Both these indicators

help us understand if the markets are cheap or expensive.

MOVI comprises of price to earnings, price to book value and dividend yield. A low MOVI

level indicates that the market valuation appears to be cheap and vice versa. Based on our

analysis, for a three-year holding period, there has been no instance of negative return

when the entry point in the market based on 90-day average MOVI level is below 100. As

markets have moved ahead of earnings, valuations have remained elevated. Currently, the

90-day moving average ratio stands at 114.4, indicating that equity markets are trading in

fair value to slightly overbought zone. Investors have made positive returns 71% of times for

3-year holding period even at these levels.

Also, earnings yield to bond yield is trading at fag end of fair value zone due to recent rally in

the market. Based on historical data, equity as an asset class becomes very attractive when

EY/BY trades above 0.8. Currently, EY/BY trades at 0.52 below its 10-year average of 0.71. At

current levels, investors have made money 88% of times for a 3-year holding period.

Taking both valuation indicators into consideration, we suggest investors to stagger their

investments over the next few months and capitalize by aggressively deploying in any sharp

decline.

Data from Jul 13 to Jul 18

PE

Large cap

Midcap

Jul - 13

16.8

12.8

Jul - 18

24.5

37.6

Earnings growth PE mean reversion PE re-rating/de-rating

33% 28%

125%

33%

66%-2%

Large cap

MidcapPrice

growth159%

Pricegrowth

83%

6500

7500

8500

9500

10500

11500

12500

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

Jul-

15

Jan

-16

Jul-

16

Jan

-17

Jul-

17

Jan

-18

Jul-

18

Mid to Large Cap Premium Avg. Premium Nifty (RHS)

Valuation indicators suggest markets in slightly overbought zone

Source: Bloomberg

4000

9000

14000

19000

24000

29000

34000

39000

44000

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Ju

l-0

8

Ju

l-0

9

Ju

l-1

0

Ju

l-1

1

Ju

l-1

2

Ju

l-1

3

Ju

l-1

4

Ju

l-1

5

Ju

l-1

6

Ju

l-1

7

Ju

l-1

8

Current EY-BY: 0.52

10-year average: 0.71

Earnings:Bond Yield Average Sensex (RHS)

Source: MOAMC

100

50

60

70

80

90

100

110

120

130

140

150

Jul-

08

Jul-

09

Jul-

10

Jul-

11

Jul-

12

Jul-

13

Jul-

14

Jul-

15

Jul-

16

Jul-

17

Jul-

18

MOVI Base

Current Level: 117.690-DMA:114.4



Mutual funds continue

to remain net buyers

for 24-consecutive

months

FIIs turn net buyer after three consecutive months of selling

Foreign institutional investors (FIIs) turned net buyers in equities after three months of

selloff. The inflows for the month stood at Rs. 1,429 cr as compared to a net outflow of Rs.

2,577 cr in the previous month.

At the same time, domestic institutional investors (DIIs) continued to further invest in

equities with net inflow of Rs. 4,504 cr as compared with inflows of Rs 14,146 cr witnessed

last month. The DIIs inflow for the current month was majorly due to the buying by

domestic mutual funds. Domestic MFs have continued with their buying spree for 24-

consecutive months with net inflow of Rs. 5,512 cr in July 2018 (as of July 20, 2018).

While net inflow in equities by FIIs is a positive development, it is too early to indicate a

reversal in the trend as global issues of a trade war and higher U.S. interest rates have not

dissipated. Also, as rupee stabilizes and earnings growth gathers pace, we can expect

meaningful flows from FIIs. On the other hand, domestic liquidity has been buoyant as

there has been a shift from physical assets to financial assets and have supported the

current market rally.

3-year forward returns

At current

90-DMA

MOVI

level29%

Max

-16%

Min

2%

Average

4%

Median

71%

% oftimes

above 0% At current

EY-BY level

11%

Max

-5%

Min

4%

Average

2%

Median

88%

% oftimes

above 0%

7,500

8,500

9,500

10,500

11,500

-20

-15

-10

-5

0

5

10

15

20

25

30

35

Jan-

17

Apr

-17

Jul-1

7

Oct

-17

Jan-

18

Apr

-18

Jul-1

8

DII FII Nifty (RHS)

Source: Bloomberg, MOSL

DIIs continue to remain net buyer for 15 straight months (in Rs. '000 crore)

Sectoral Performance

Except for metal sector, all sectoral indices ended in positive zone in the month of July 2018.

Oil & Gas sector was the performing sector for the month, after the oil & gas major, RIL

reported healthy numbers for the June quarter, led by strong performance in the Petchem,

Jio, and retail segments.

On the other hand, metal sector stood as the major loser (-3.1%) as a slowdown in China's

GDP in the second quarter of 2018 led to decline in metal stocks.

Except for metals,

all sectors ended

in green

Domestic Institutional

Investors (DIIs)

Flows in Rs. cr. July 2018 June 2018

Mutual Fund

Insurance

Total

8,907

5,239

14,146

-2,577Foreign Institutional Investors (FIIs)*

As on July 30, 2018; *As on July 20, 2018

5,512

517

4,504

1,429



Sectoral performance for the month of July 2018

Source: Bloomberg

10.0%7.1% 6.0% 5.4% 4.6% 4.4% 3.4% 2.8%

1.5% 1.4% 1.0% 0.4%

-3.1%

Oil

& G

as

FM

CG

Ba

nk

PS

U

Ca

pit

al

Go

od

s IT

Co

nsu

me

r

Du

rab

les

Au

to

Po

we

r

He

alt

h C

ar e

Re

alt

y

Tele

com

Me

tal

Outlook

While the markets are touching new highs amidst a challenging global and domestic macro set-up (trade war fears,elevated crude oil prices, higher bond yields, currency depreciation), the room for further valuation expansion islimited unless accompanied by strong earnings growth.

From an earnings viewpoint, we believe that FY19 will be characterized by bottoming out of asset quality pressures forPSU Banks and Private Corporate lenders, strengthening consumption trends in an election year and earnings reboundfrom hitherto laggard sectors like Information Technology and Healthcare. Thereby, the confidence on earningsrecovery is higher today than any time in the recent past.

However, valuations continue to remain elevated, especially in mid and small cap space. In the near term, progress ofmonsoon, political developments (potential opposition unity for the upcoming general elections) and global cues ontrade wars shall decide direction of the market.

Thereby, we continue to suggest investors to stagger their investments over the next few months and capitalize on anysharp decline by incremental deployment. Also, given the still chunky premium of mid-caps to large-caps, we continueto favor multi cap and focused midcap strategies.

Source: Bloomberg Note: Performance in absolute terms

8.1%

4.4%

-0.4%

2.3%

-7.2%

-3.7%

6.9%

5.4%

4.0%

5.0%

-1.2%

0.1%

5.1%

1.0%

-0.7%

7.5%

2.0%

5.3%

-2.6%

-4.6%

-3.6%

6.6%

-5.9%

-3.5%

3.6%

-10.1%

0.3%

4.3%

2.8%

1.0%

6.3%

-9.2%

-2.3%

7.4%

5.8%

5.4%

6.5%

-1.9%

2.2%

4.4%

-0.6%

0.8%

9.2%

3.6%

5.5%

-2.7%

-3.1%

-6.3%

8.3%

-6.3%

-7.1%

3.4%

-13.8%

-2.4%

3.2%

1.1%

-4.1%

0.6%

-5.2%

0.7%

5.4%

2.7%

5.3%

1.5%

7.4%

3.2%

-3.2%

0.8%

-3.9%

5.0%

0.6%

3.6%

0.2%

-1.9%

-2.1%

9.9%

-0.1%

-0.7%

7.1%

12.3%

16.7%

5.6%

4.5%

-2.7%

1.5%

-4.7%

-2.7%

7.5%

5.2%

4.0%

3.7%

4.8%

-1.0%

8.0%

-3.3%

-1.5%

4.7%

1.2%

0.8%

7.4%

-8.6%

-3.9%

5.3%

4.7%

-2.5%

6.0%

7.4%

14.0%

1.9%

-7.6%

-4.1%

0.3%

1.2%

-6.1%

11.0%

3.9%

-4.0%

3.0%

0.1%

2.1%

10.6%

-0.6%

-4.9%

19.5%

-4.0%

7.0%

-11.8%

-2.9%

-7.9%

-1.8%

-7.1%

-1.7%

0.4%

-29.0%

-10.0%

5.2%

-0.8%

0.1%

1.8%

-4.5%

-6.4%

0.5%

4.0%

-0.5%

-1.9%

-9.7%

4.6%

0.0%

-7.4%

2.6%

5.9%

-2.0%

5.8%

-1.6%

-3.1%

-6.8%

7.6%

-8.1%

7.7%

1.4%

-4.0%

8.0%

-3.5%

-3.5%

-2.0%

-1.9%

-1.8%

3.3%

-5.8%

8.2%

-0.1%

-7.2%

6.3%

-3.9%

6.1%

-3.6%

-1.2%

4.2%

3.6%

5.1%

11.3%

-0.4%

-3.2%

12.1%

-0.8%

3.5%

4.4%

28.8%

20.1%

9.0%

4.5%

2.8%

8.3%

-2.9%

1.6%

5.6%

5.4%

0.2%

6.6%

-1.4%

-7.3%

7.5%

7.0%

-2.2%

11.5%

-3.8%

2.2%

0.5%

-5.3%

-5.7%

-1.3%

0.0%

-5.3%

10.0%

-7.7%

2.8%

6.8%

4.3%

1.0%

-0.2%

-9.2%

0.6%

7.7%

-1.5%

2.5%

3.5%

6.1%

-3.1%

4.5%

-3.2%

2.1%

5.1%

-0.8%

6.1%

-3.0%

-4.3%

-3.1%

7.4%

-5.3%

-2.6%

2.8%

-8.4%

1.8%

4.1%

-1.7%

-4.1%

2.3%

-5.9%

-2.7%

8.2%

3.7%

7.3%

8.6%

-1.5%

-3.0%

5.3%

-3.6%

-0.9%

7.3%

0.2%

3.7%

6.4%

-6.3%

-3.1%

5.8%

-3.7%

-7.1%

4.6%

-4.4%

-1.0%

7.0%

4.4%

-0.6%

6.3%

-0.7%

-2.4%

8.4%

1.5%

1.6%

4.9%

-3.8%

-6.5%

7.1%

-0.5%

-3.7%

13.0%

-2.3%

-0.1%

-0.6%

-8.6%

-5.7%

0.0%

0.5%

-7.6%

5.4%

-16.2%

-2.2%

4.8%

-4.0%

-1.9%

2.9%

-17.6%

-1.4%

8.4%

9.1%

7.0%

20.2%

0.4%

5.8%

7.0%

-2.2%

-3.4%

11.4%

6.3%

6.6%

0.0%

-5.4%

-9.7%

9.0%

-8.0%

-7.2%

1.0%

-19.7%

-6.1%

3.6%

0.6%

0.5%

3.0%

-12.8%

-0.4%

12.4%

9.1%

10.7%

1.4%

-0.5%

4.0%

2.8%

7.5%

-0.8%

5.2%

16.2%

5.7%

-0.9%

-5.7%

5.1%

0.5%

-7.6%

-2.2%

3.4%

-7.9%

-6.1%

10.4%

5.7%

-1.8%

5.7%

3.4%

-5.2%

15.5%

1.9%

-0.7%

-4.2%

-0.5%

1.1%

9.2%

6.9%

2.1%

8.6%

-5.6%

7.5%

3.3%

-1.6%

-12.2%

7.2%

-4.7%

-4.0%

-3.1%

-15.3%

-5.0%

4.0%

1.1%

-5.2%

0.8%

1.1%

-2.0%

9.1%

1.3%

3.6%

2.4%

-4.7%

0.2%

4.4%

-2.7%

-2.4%

6.5%

-1.2%

2.6%

-2.6%

-4.2%

-4.4%

5.3%

-4.9%

-8.6%

1.5%

-17.1%

-7.1%

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

CYTD

FYTD

3.9%

1.4%

-2.1%

0.2%

-4.6%

-0.1%

3.9%

3.9%

3.1%

1.0%

4.1%

-0.7%

5.2%

-2.4%

-1.4%

6.2%

-0.2%

2.7%

5.6%

-5.0%

-3.6%

6.6%

0.5%

0.3%

6.2%

10.4%

14.1%

Date SensexBSE Mid

Cap

BSE Small

CapFMCG Bank Telecome

Health

CareIT Oil & Gas Auto

Capital

GoodsPSU Realty

Consumer

DurablesMetal Power


Fixed Income


RBI may continue with OMOs to maintain neutral

liquidityRBI highlights balanced risks to inflation & growth

8.18.8

7.9 7.8

6.5

7.7

8.0 7.8 8.0

6.86.3

6.5

10.6

9.9

4.3

5.6

3.2

5.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

De

c-1

2

Ma

y-1

3

Se

p-1

3

Jan

-14

Ma

y-1

4

Se

p-1

4

Jan

-15

Jun

-15

Oct-1

5

Fe

b-1

6

Jun

-16

Oct-1

6

Fe

b-1

7

Jun

-17

Oct-1

7

Ma

r-1

8

Jul-

18

10 Yr Gsec (Yield %) Repo Rate (%) CPI (%)

Source: Bloomberg

A preemptive step by RBI albeit with a neutral stance

The Reserve Bank of India (RBI) hiked the repo rate by 25 bps, second time in the current

financial year, considering the risks attached to its inflation target in terms of high MSP price

revisions, elevated crude oil prices, rising core inflation and rising household inflation

expectations. The Monetary Policy Committee (MPC) voted 5-1 in favor of the rate hike,

however, maintained the neutral stance while highlighting evenly balanced risks to inflation

and growth forecasts. The central bank marginally raised its inflation estimates for the

second half of FY19 to 4.8% from 4.7% earlier and introduced 5% estimate for the first half

of FY20 while retaining the GDP growth projection for 2018-19 at 7.4%.

In our view, the MPC took a preemptive step and was probably guided by the lag effects of

earlier monetary policy changes and thus decided not to wait for the impact to actually

show up in the macroeconomic variables while deciding to increase rates.

To a large extent, the policy rate hike was priced in by the market participants who breathed

a sigh of relief on back of the neutral stance maintained by the MPC. Market yields and

liquidity have already tightened in anticipation of aggressive rate hikes. Hence, it's just a

question of time whether the underlying economy will remain supportive of the tightened

financial conditions or the rate markets will have to readjust itself to the nascent growth

recovery.

Another positive factor for the yield curve will be the continuation of OMO (Open Market

Operation) purchases in response to tight system liquidity. RBI has conducted 3 OMOs in

last three months and we expect RBI to continue conducting OMOs in the remaining half of

the year so as to maintain a neutral liquidity.

We are of the view that the bar for future rate hikes is currently high and there may be a

prolonged pause in the near term. Having said, the current rate hike cycle looks to be a

shallower one. We also expect bond yields to remain range bound as market starts pricing in

a prolonged pause on policy rate action & OMOs to take care of demand – supply

mismatches.

Expect a shallow

rate hike cycle with

an extended pause

in the near term

Well managed accrual strategies remain the safe bet

In lieu of the domestic & global uncertainties, yields across the curve, especially on the front

end, have shifted upwards pushing the credit spreads at higher levels. The spreads are

hovering in the range of 50 – 150 bps w.r.t different credit assets across short to medium

end of the yield curve.

Source: Bloomberg

(270,000)

(170,000)

(70,000)

30,000

130,000

230,000

330,000

430,000

530,000

De

c-1

5

Jan

-16

Ma

r-1

6

May

-16

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Ma

r-1

7

May

-17

Jul-

17

Sep

-17

No

v-1

7

Jan

-18

Ma

r-1

8

May

-18

Jul-

18

System Cash Liquidity (Rs. cr)



To give a perspective, in the last one year, AAA yield curve has shifted upwards such that it is

currently trading at levels above the AA yield curve prevailing at that time. This has been

largely due to the transmission of interest rate rise to AAA segment because of its liquid and

better price discovery attribute. Also the sharp rise in government bond yields has crowded

out the corporate borrowing at competitive rates.

Having said, the rise in funding costs and some challenges creeping in the business

environment of some sectors have made the fund managers more cautious, thus

compelling them to look beyond the current ratings. Hence it becomes more imperative for

the investors to be aware of the credit risk exposure and to allocate funds to those credit

managers who have expertise and experience in investing in well researched credit papers.

Thus, from a prudent risk reward perspective, investing in high quality front end strategies

with bond maturities up to 5 years makes imminent sense. Investors, who are comfortable

taking credit risk, can allocate funds towards well researched credit oriented short term

strategies so as to benefit from higher carry along with lesser interest rate risk.

Prudent to invest in

high quality accruals

for visibility of risk

adjusted returns

Foreigners have become averse towards emerging market including India

Foreign portfolio investors have been sellers of Indian debt in 2018 due to renewed strength

in US yields & currency, deepening oil woes, global political uncertainty, trade tensions and

concerns around India's widening fiscal and current account deficits. In the first seven

months of 2018, there has been a net outflow of ~Rs.41,000 Crs, such quantum of outflow

last seen in 2016 which was on account of demonetization.

Having said, India is not alone in seeing debt outflows. Most emerging markets have seen a

flight of capital as investors adjust to tighter monetary policy in the U.S. and a stronger

dollar.

Also, on absolute or relative basis, the real rate of return of India when compared to most of

the developed economies is quite lucrative barring emerging economies like Brazil,

Indonesia & Russia. Hence, the hunt for the higher yield may drive foreign flows towards

India. However, stability of domestic macros and development on the global factors may

decide the quantum and durability of future foreign flows.

Foreign demand to

be a function of global

and domestic factors

Source: Bloomberg

Absolute yields have increased across credit assets especially in the AAA segment

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

Ap

r-1

5

Jul-

15

Oct-

15

Jan

-16

Ap

r-1

6

Jul-

16

Oct-

16

Jan

-17

Ap

r-1

7

Jul-

17

Oct-

17

Jan

-18

Ap

r-1

8

Jul-

18

3 Yr Gsec 3 Yr AAA Corp 3 Yr AA Corp 3 Yr A Corp

Source: Bloomberg

5 Yr AA Corp5 Yr AAA Corp5 Yr Gsec 5 Yr A Corp

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

Ap

r-1

5

Jul-

15

Oct-

15

Jan

-16

Ap

r-1

6

Jul-

16

Oct-

16

Jan

-17

Ap

r-1

7

Jul-

17

Oct-

17

Jan

-18

Ap

r-1

8

Jul-

18



We expect that the yields would remain range bound considering the confluence of domestic and global factors

affecting the bond market. Value buying would emerge at the current high absolute yields once the confidence returns

in the market.

Thus, we reiterate that investors should capitalize on the absolute value which is most visible on the short to medium

end of the curve with bond maturities upto 5 years. We continue to believe that for capital preservation and

reasonable income accrual, one should consider investing in ultra-short term, short term, high quality corporate bond

and select credit oriented strategies with duration in the range of 1- 3 years.

Outlook

Foreign investors turn net bond sellers in 2018

Source: Bloomberg

US 10 Yr G - Sec India 10 Yr Gsec

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Ma

r-0

0

Ap

r-0

1

Ap

r-0

2

Ap

r-0

3

Ap

r-0

4

Ma

y-0

5

Ma

y-0

6

Ma

y-0

7

Ma

y-0

8

Ma

y-0

9

Jun

-10

Jun

-11

Jun

-12

Jun

-13

Jul-

14

Jul-

15

Jul-

16

Jul-

17

Jul-

18

Both US and India's 10 Yr bond yields have tightened

Source: Bloomberg

(41,392)

34,988

(50,849)

159,156

45,857

(43,647)

148,610

CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018

FPI/FII Debt Flows (Rs. Crs)


Alternatives

Gold remained under pressure for the fourth successive month primarily on back of strength in the dollar against its major

crosses and rising US 10 year yield. Precious metals have failed to move higher despite rising concern over escalating

trade war between US and China. This month was no different and US President continued to pressurize Beijing by

imposing import tariff on products worth $34 billion. He mentioned that he is also considering imposing 10% tariff of

goods worth $200 billion and that lead to increased volatility in major asset class. Market participants are worried that

escalating trade war concerns between world's two largest economies could hit global growth. But at the same time, US

President has taken a step backward from a trade war with the EU as they struck a deal to work towards “ZERO” tariffs,

barriers and subsidies. The EU also agreed to buy billions of dollars' worth of American exports, including soya beans and

natural gas, and work to reform international trade rules. Both sides have agreed that there will be no dispute and no new

fresh tariff will be imposed keeping gains capped for the yellow metal.

Since the start of this financial year, dollar rose against its major crosses following better than expected economic

numbers and hawkish comments from the Fed chairman in his semi-annual testimony before the Senate and House of

Financial service committee. Last month, preliminary GDP number showed the US economy is expected to grow at 4.1%

compared to growth of 2% estimated earlier. On the other hand, core PCE index in May also grew at a steady pace of 2%

compared to growth of 1.8% in the previous month. Pick-up in economic activity reflected in higher 10-year yields and

closed the month in the green after remaining under pressure in the last couple of months.

One of the indicators that most market participants are now gauging at is the spread between US 10-year and 2-year yield

that is currently at the lowest level since 2007. Flattening yield curve suggest that the Federal Reserve's interest rate

increase are driving short term yields higher, this will not only lead to slower inflation but also tip the economy into

recession. Currently spread between 10 and 2 year yield is at 30bps and further flattening of yield curve could keep gold

supported on lower levels. In his first semi-annual testimony the Fed Chairman painted a largely positive picture of the

economy, which he said is growing at a faster pace than previously anticipated. The FOMC has hiked the Fed's benchmark

rate twice this year in quarter-point increments, and is expected to approve two more increases before the end of the

year. The Fed expects recent tax cuts and an increase in federal spending to boost spending and investment at a time

when the labor market is already tight. Policymakers at the central bank are concerned over Trump's decision to impose

tariff on its trading partners but has little reason to change course now because history is full of examples of tariffs that

have been threatened but never imposed, or imposed only temporarily.

In July, SPDR holdings for gold stood at 834.5 tonnes marginally lower from where the year started. At the start of 2018,

gold hold-ing stood at 837 tonnes, but as gold prices were weighed down holding did witness some write-off. In case of

silver ETF holdings have risen by 340 tonnes in this year and currently stand at 10,246 tonnes. No major reaction is seen on

prices as it continues to trade at the lower band of the range of $14.90 and $16.50.

Gold


Gold (INR) - Neutral stance

Source: CRISILSource: CRISILSource: Bloomberg

Gold ends at a more than 6-month low

28,000

29,000

30,000

31,000

32,000

33,000

Jul-

17

Au

g-17

Sep

-17

Oct

-17

No

v-17

Dec

-17

Jan

-18

Feb

-18

Mar

-18

Ap

r-18

May

-18

Jun

-18

Jul-

18

Crisil Gold Index

1000

1050

1100

1150

1200

1250

1300

1350

1400

Jul-

14

No

v-1

4

Ma

r-1

5

Jul-

15

No

v-1

5

Ma

r-1

6

Jul-

16

No

v-1

6

Ma

r-1

7

Jul-

17

No

v-1

7

Ma

r-1

8

Jul-

18

GOLD Spot ($/Oz)

Outlook

In this month, primary focus will be on the FOMC policy statement, wherein the Fed chairman is expected to hold rates

unchanged, but at the same time will endorse whether he continues to hold a view of raising rates twice this year. In his

semi-annual testimony the Fed Chairman did mention on having concern over US President imposing import tariff on

its trading partner and escalation of the same could keep gains capped for the yellow metal. Apart from Fed, market

participants will also be keeping an eye on the Bank of England policy statement, expectation is that the BoE governor

could raise rates keeping gains limited for gold. According to CFTC data, gold's speculative position is in net shorts, last

seen in December'15 post which gold rallied from $1,070 levels to $1,300 i.e. almost 20% rally. At this point, gold

speculative positions are again net short and it is possible that a short covering rally could provide support to prices

that have been under pressure since the last four months. For the month, we expect gold, on the COMEX, to quote in

the range $1,280 and $1,365 and on the domestic bourses it is expected to quote in the range of 30,400 and 31,600.� �





Section III

Advisory Approach..............................................................................................41

Model Portfolios Performance.............................................................................42

4C Framework.....................................................................................................43

Fund llocator.....................................................................................................44

Equity Recommendations....................................................................................45

Managed Strategies.............................................................................................46

Real Estate Offering.............................................................................................54

Fund Insight.........................................................................................................55

α



Advisory Approach

True portfolio of clients and asset allocation is best determined through Financial Planning strategy. If not, the clients

can follow a model portfolio approach. Following steps are followed for Model Portfolio construction:

1) Investors are classified according to their risk profile viz. Aggressive, Moderately Aggressive, Balanced, Moderately

Conservative and Conservative.

2) Asset Allocation is done at two levels:

(a) Static – Based on the risk profile, asset allocation is defined at a broad level:

(b) Dynamic – Asset Allocation based on the market conditions

Our Methodology

Since different clients have different risk return preferences, based on our comprehensive risk profiling process we

have categorized the clients broadly into categories viz.6 Aggressive+, Aggressive, Moderately Aggressive, Balanced,

Moderately Conservative and Conservative

Conservative

Moderately Conservative

Balanced

Moderately Aggressive

Aggressive

Aggressive+

0.0%

20.0%

40.0%

65.0%

85.0%

100%

85.0%

65.0%

40.0%

20.0%

0.0%

-

10.0%

10.0%

10.0%

5.0%

5.0%

-

5.0%

5.0%

10.0%

10.0%

10.0%

-

Equity Bond Cash Gold

Advisory Process

We follow a robust Advisory Process to generate “Alpha” in the client’s portfolio. The entire approach is governed by a

stringent risk management framework.

View on asset

classes

Asset Allocation

Alpha

Investment

Committee

Product Selection

across asset classes

Manager Alpha

Product & Advisory

CommitteePortfolio

Construction

Financial Strategy


80

110

140

170

200

230

260

290

NA

V i

n I

NR

Aggressive + Portfolio SBB

Oct

-12

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct

-16

Ma

y-1

7

De

c-1

7

Jul-

18

90

110

130

150

170

190

210

230

NA

V i

n I

NR

Mod Aggressive Portfolio SBB

Oct

-12

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct

-16

Ma

y-1

7

De

c-1

7

Jul-

18

90

100

110

120

130

140

150

160

170

180

190

NA

V i

n I

NR

Mod Conservative Portfolio SBB

Oct

-12

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct

-16

Ma

y-1

7

De

c-1

7

Jul-

18

90

100

110

120

130

140

150

160

170

NA

V i

n I

NR

Conservative Portfolio SBB

Oct

-12

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct

-16

Ma

y-1

7

De

c-1

7

Jul-

18

90

100

110120

130

140150

160

170180

190

200

NA

V i

n I

NR

Balanced Portfolio SBBO

ct-1

2

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct

-16

Ma

y-1

7

De

c-1

7

Jul-

18

80

110

140

170

200

230

260

NA

V i

n I

NR

Aggressive Portfolio SBB

Oct

-12

Ap

r-1

3

No

v-1

3

Jun

-14

Jan

-15

Au

g-1

5

Ma

r-1

6

Oct

-16

Ma

y-1

7

De

c-1

7

Jul-

18


Model Portfolios Performance


Note:

Portfolio inception date: October 01, 2012

Performance as on :

Static Blended Benchmark (SBB): is an Index that tracks the performance of the strategic asset allocation of the client. It is a blended benchmark for a portfolio

based on benchmarks of each asset class in the portfolio. This index is re-balanced to its original weights after every calendar quarter. No tactical changes or active

asset allocation calls are applied to this index.

July 31, 2018

BalancedModerately Aggressive

Aggressive +

ConservativeModerately Conservative

Aggressive


4C Framework

The 4C Fund Manager Selection Process

Evaluating Manager Expertise



MF Research and Selection Process

Long term portfolio creation through quarterly selection, monitoring and re-balancing of Equity Mutual Funds.

Elimination Criteria

Level I _ Firm Level Filters

Assets under Management or Market Share

Sponsor’s pedigree

Service capabilities

Level II _ Product Level Filters

Assets under Management or Market Share

Scheme’s Age

Level III _ Quantitative Filters

Risk _ adjusted Return Analysis

Level IV _ Qualitative / Subjective Filters

Portfolio Analysis

Deviation from Investment Objective, Strategy, etc

Fund Manager’s Track Record

Fund Houses that have AUM less than 1% of total industry AUM or Rs. 5,000 crore whichever is less are eliminated

Large and Multi Cap Funds _ One per cent of respective Category AUM or Rs. 300 Cr., whichever is less

Small & Mid Cap, ELSS, Balanced Funds and Thematic Funds_ One per cent of respective Category AUM or Rs. 150

Cr., whichever is less

Liquid Funds/ Ultra Short Term Funds _ 1% of category AUM or Rs. 1,000 crore whichever is less

Short Term Funds / MIPs _ 1% of category AUM or Rs. 200 crore whichever is less

Income Funds _ 1% of category AUM or Rs. 100 crore whichever is less

Gilt Funds _ 1% of category AUM or Rs. 50 crore whichever is less


We follow an institutional approach for recommending stocks in client’s portfolios. Below mentioned are our top picks currently:

Direct Equity

Equity RecommendationsAlpha Strategist | “Wall of Worry”


RationaleCompany SectorCurrent Mkt

Price (INR)

Target Price

(INR)

Net Profit 3

Yr CAGR (%)

Dividend

Yield (%)P/E

Market Cap

(INR Crs)

With a variety of regulatory changes happening across the nation, the domestic 3W market has been on an upswing for the last 2-3 months. Averagemonthly volumes were 24.7k in FY18YTD v/s 21.1k in FY17. Bajaj Auto sees incremental opportunity of ~142k passenger 3Ws in the next 2-3 years (v/sFY17 volumes of 240k passenger 3Ws) in key states like Maharashtra, Karnataka and New Delhi

Bajaj AutoAuto &

Auto ancillaries

KEI Industries Ltd is ranked amongst the top3 power cable companies in India and is also engaged in the EPC business. The institutionalsegment is the largest revenue generator for the company followed by retail segment and exports segment Well positioned to be a keybeneficiary fri the recent initiatives taken by government in the infrastructure and real estate segment. HW, EHV, EPC segment are expectedto drive revenue Has high historical ROE & ROCE Even with high capex the company is expected to maintain the net debt to equity below 1.0x

Mahindra CIE (MACA) is a multi-technology automotive components supplier, with annual revenue of INR 53 b in CY16. MACA is all primed for growthphase, after three years of consolidation. It has all ingredients in place for sustained growth over the next 2-3 years. i.e. (a)India business highdependence on fast growing segments and players with favourable product life cycle, (b)Scope to add products/customers in MFE and Metal castello,(c) limited capex, (d)supportive parent, and (e)focused M&Astrategy to access technologies, customers or markets.

Larsen and Toubro is India’s largest E & C company. Apart from core construction activity, L&T has made significant in roads into a diverse range ofproducts and services through its subsidiaries and manufacturing JVs in power BTG, forging and ship building Company’s conscious efforts to bagorders with better margin profile, and cost control measures should ensure margin improvement going ahead will be a key driver to future growth

The company has scripted an impressive turnaround and delivered strong growth with a consistent improvement in profitability. It is transformingitself to a focused financier with 8 product lines across 3 verticals, with a target to achieve 18 20 % RoE by FY20 (13%inFY18). With focusedmanagement and strong execution skills, the company is set to deliver healthy loan CAGR in next 3 years, driven by growth in the rural and housingfinance segments.

Market leader with ~32% market share in moulded furniture segment. The plastics generator is largest revenue for the company at ~89%(FY2017). The company has been able to grow this business consistently (8.3% CAGR over FY12-17) on the back of new products, designsand innovation (ex. Hybrid chairs combining metal and plastics). Market size of Furniture Industry is ~INR750bn. Of this 85% is unorganized,GST implementation would also aid shift from unorganized to organized, where Nilkamal is a market leader and is best suited to benefit fromthis shift.

HDFC Bank is well positioned with ~40% CASA, growth outlook ~1.3x industry and least quality risk. With strong capacity, CET1 ratiof of~13%, strongemphasis on digitization, the bank is well positioned to capitalize on the expected pick up in economic growth cycle

Banking &

Finance

Construction &

Engineering

Banking &

Finance

Plastics

Cables

Banking &

Finance

Auto & Auto

ancillaries

2,701

1,381

2,181

257

1,303

176

1,783

448

3,223

1,650

2,400

274

1,540

240

2,184

563

12

15

20

66

16

12

35

104

2.22

0.80

0.59

0.00

1.23

0.45

0.75

0.22

18

21

31

27

22

21

22

24

78,149

31,334

576,507

9,736

182,604

35,108

2,660

3,513

Shriram Trans.

HDFC Bank

Mahindra CIE

Larsen &

Toubro

L&T Fin.Holdings

Nilkamal Ltd

KEI Inds.

Shriram Transport Finance (SHTF) established in 1979, is one of the largest asset financing NBFCs in India. Its return ratios are just off cyclical lows, withdecadal high credit cost and NPLs. However, credit costs over the past three years have been statutory, rather than economic, i.e., write offs as % ofAUM have been largely steady. Additionally, margin compression fears are over played as there remains significant room to reduce cost of fundsfurther.



Positioning

Managed by one of the pioneers inthe investment management industry

Identifying industries/companiesbenefitting from value migration

ahead of the curve

Journey from$2.5 Tn to $5 Tn GDP

Picking winners in disruptive times

is the success formula for long term wealth creation

Mean

Reversion


Momentum

Investment StyleInvestment Attributes

Size of Opportunity :

Quality of Business :

Earnings Growth :

Value :

Dominance, resilience &

liquidity

Superior ROCE, Strong MOAT

Consistency, durability,

compounding power

Margin of safety, favourable

price - value gap

Positioning

1

2

3

4

A pure bottom up, buy & hold multi cap strategyof 20 – 25 high quality companies

A fitting confluence of quality, valuation and time- 3 main drivers for compounding wealth

Positioned to capitalize on theimpending value migration opportunities in India

Positioned to capitalize on theimpending value migration opportunities in India

Ask India 2025 Equity Fund

Managed Strategies

A big Leap

• We believe earnings revival for India corporate is finally on the horizon on back of

coordinated improvement in global commodity prices & several cyclical indicators

The markets are in the mid cycle and are yet to reach their peaks when one takes into

consideration factors like private capital expenditure, credit growth, capacity utilization,

growth in rural economy etc.

Having said, rationalization of valuations would be an added advantage for investing in

strategies which are positioned to capitalize on the cyclical recovery

We are of the view that allocation towards value oriented strategies from the stable of

Invesco, Ashmore & DHFL are would benefit from such recovery

•

•

•


Case for investing in Earnings recovery portfolio

Reliance Inds.

ICICI Bank

Exide Inds.

Cipla

HCL Technologies

L&T Fin.Holdings

Equitas Holdings

Guj.St.Petronet

Axis Bank

KNR Construct.

Others

8.4

8.2

5.3

5.0

5.0

5.0

4.2

4.0

4.0

3.5

47.5

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

DAWN

Nifty 500

19.8 3.2 16.3 1.1

28.1 3.0 10.6 1.4

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

RISE PMS 24.5 4.1 16.9 0.6

Nifty 500 28.1 3.0 10.6 1.4

Balkrishna Inds

M & M Fin. Serv.

M & M

L&T Fin.Holdings

K E C Intl.

AIA Engg.

Guj.St.Petronet

Cipla

Motherson Sumi

V I P Inds.

Others

7.5

6.7

6.7

5.8

5.7

5.5

5.2

5.1

5.1

4.6

42.1

Top 10 Holdings

Stocks Allocation

Invesco PMS

RISE PMS

DAWN PMS

1.5x

1.5x

9

10

11

12

13

14

15

16

17

18

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

De

c-1

6

Fe

b-1

7

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

No

v-1

7

Jan

-18

Ma

r-1

8

Ma

y-1

8

Jul-

18

RISE BSE 500

0.9x

1.1x

8

9

10

11

12

Se

p-1

7

Oct

-17

No

v-1

7

Jan

-18

Feb

-18

Ma

r-1

8

Ap

r-1

8

Jun

-18

Jul-

18

DAWN BSE 500




St Bk of India

ITC

Container Corpn.

Bosch

Castrol India

Cummins India

Indraprastha Gas

Multi Comm. Exc.

Sanofi India

Amara Raja Batt.

Others

6.0

5.0

4.5

4.0

4.0

4.0

4.0

4.0

4.0

3.5

57.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Deep Value

Nifty 500

26.6 4.9 18.3 1.9

28.1 3.0 10.6 1.4

Allcargo Logist.

Sudarshan Chem.

RBL Bank

Persistent Sys

Ahluwalia Contr.

Granules India

Atul Auto

Parag Milk Foods

Rico Auto Inds

Muthoot Finance

Others

5.3

5.1

5.1

4.7

4.7

4.7

4.2

4.2

4.2

4.2

53.7

Top 10 Holdings

Stocks Allocation

38.9 2.7 6.9 1.0

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Ashmore PMS 18.4 1.7 9.3 0.9

DHFL Pramerica PMS

Deep Value PMS

Ashmore

Ashmore India Opportunities Fund

Nifty Free FloatMid Cap 100

2.9x

2.1x

5

10

15

20

25

30

35

Jul-

13

De

c-1

3

Jun

-14

No

v-1

4

May

-15

Oct

-15

Ap

r-1

6

Sep

-16

Mar

-17

Au

g-1

7

Feb

-18

Jul-

18

DHFL Pramerica DV Nifty 500

2.5%

-16.4%

-20.1%

-12.3%

-10.0%

3.4%

-9.9%-11.4%

3.0%

7.9%

1M 3M 6M 1Y Since inception

Ashmore BSE Small Cap



Renaissance Investment Managers

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

27.0 2.9 10.8 0.9

Axis Bank

ICICI Bank

Indian Energy Ex

Indian Hotels

Gateway Distr.

Sanghvi Movers

Siemens

A B B

St Bk of India

Tata Motors

Others

8.0

8.0

7.0

7.0

6.0

6.0

6.0

5.0

5.0

5.0

37.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

28.2 3.7 13.1 0.6

Axis Bank

Info Edg.(India)

Sanghvi Movers

Sun Pharma.Inds.

Zee Entertainmen

St Bk of India

Federal Bank

HDFC Bank

Kotak Mah. Bank

Lupin

Others

8.0

8.0

8.0

8.0

8.0

7.0

6.0

6.0

6.0

6.0

29.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Renaissance

Midcap25.8 3.2 12.5 0.6

Syngene Intl.

Federal Bank

DCB Bank

Info Edg.(India)

Just Dial

Sanghvi Movers

Sun TV Network

Mahindra Holiday

Bank of Baroda

Triveni Turbine

Others

9.0

8.0

8.0

7.0

7.0

5.0

5.0

5.0

4.0

4.0

38.0

Top 10 Holdings

Stocks Allocation

Renaissance Midcap Portfolio

Renaissance Opportunities Portfolio

Renaissance India Next

Mean

Reversi on


Momentum

Mean

Reversi on


Momentum

Mean

Reversi on


Momentum

RenaissanceOpportunities

RenaissanceIndia Next


38.9 2.7 6.9 1.0

Nifty 500 28.1 3.0 10.6 1.4

23.5 3.2 13.7 1.5Nifty 50

8.00

8.50

9.00

9.50

10.00

10.50

11.00

11.50

Ren. Opps. BSE 200

1.0x

1.1x

De

c-1

7

De

c-1

7

Jan

-18

Ma

r-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-

18

1.0x

1.0x

1.1x

1.0x

Dec

-17

Dec

-17

Jan

-18

Mar

-18

Mar

-18

Ap

r-18

May

-18

Jun

-18

Jul-

18

8.5

9.5

10.5

11.5

Ren. Midcap Nifty Midcap

No

v-17

8.5

9.5

10.5

11.5

Ren. India Next NIFTY 50

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-

18


Motilal Oswal


Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

IOP PMS 29.6 3.2 10.9 0.6


38.9 2.7 6.9 1.0

DCB Bank

Birla Corpn.

AU Small Finance

Aegis Logistics

Gabriel India

Quess Corp

Alkem Lab

Mahanagar Gas

TTK Prestige

Blue Star

Others

9.0

8.2

7.8

7.3

6.1

5.4

5.4

5.4

5.3

4.4

35.7

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

NTDOP PMS 34.5 5.2 15.0 0.7

28.1 3.0 10.6 1.4

Kotak Mah. Bank

Bajaj Fin.

Page Industries

Voltas

Eicher Motors

City Union Bank

Godrej Inds.

Max Financial

Bosch

L&T Technology

Others

12.2

11.9

10.0

8.4

5.8

4.5

4.2

4.1

3.9

3.8

31.1

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Value PMS 26.3 4.4 16.6 0.8

Nifty 50 23.5 3.2 13.7 1.5

HDFC Bank

Kotak Mah. Bank

Bajaj Finserv

B P C L

AU Small Finance

Eicher Motors

Bharat Forge

Sun Pharma.Inds.

Larsen & Toubro

ICICI Lombard

Others

11.7

9.6

7.3

6.6

6.4

6.0

5.6

5.6

5.4

5.2

0.0

Top 10 Holdings

Stocks Allocation

Value PMS

NTDOP PMS

IOP PMS

Nifty 500

3.2x

2.2x

0

5

10

15

20

25

30

35

40

45 IOP Nifty Small Cap

No

v-1

6

Ap

r-1

6

Ma

r-1

5

Ja

n-1

4

Ju

n-1

3

Au

g-1

4

Se

p-1

5

De

c-1

7

Ma

y-1

8

Ap

r-1

1

Se

p-1

0

Oct-1

1

Fe

b-1

0

Ju

l-1

8

De

c-1

7

Ju

l-1

7

0

10

20

30

40

50

60

70 NTDOP Nifty 500

De

c-0

7

De

c-0

8

Jan

-10

Fe

b-1

1

Ma

r-1

2

Ap

r-1

3

Ap

r-1

4

Ma

y-1

5

Jun

-16

6.1x

1.9x

Jul-

17

Jul-

18

26.2x

11.2x

0

50

100

150

200

250

300 Value Nifty 50

Ma

r-0

3

Jul-

04

Oct

-05

Jan

-07

Ap

r-0

8

Au

g-0

9

No

v-1

0

Feb

-12

May

-13

Sep

-14

De

c-1

5

Ma

r-1

7

Jul-

18

8.00

8.50

9.00

9.50

10.00

10.50

11.00

11.50

IOP2 Nifty Small Cap

1.0x

0.9x

Ma

r-1

8

Ap

r-1

8

Feb

-18

Ma

y-1

8

Jun

-18

Jul-

18

Jun

-18



Motilal Oswal Focused Multicap Opportunities Fund (AIF)*Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

MO AIF 37.5 3.6 9.6 0.5

Nifty 500 28.1 3.0 10.6 1.4

Quess Corp

Kotak Mah. Bank

DCB Bank

Voltas

Asian Paints

Godrej Inds.

Colgate-Palm.

Birla Corpn.

TCI Express

Federal Bank

Others

12.7

12.3

8.5

8.4

8.1

7.2

6.4

5.9

5.5

5.5

19.3

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

IOP 2 PMS 29.1 4.4 15.1 0.7


38.9 2.7 6.9 1.0

HEG

GRUH Finance

Cholaman.Inv.&Fn

Godrej Agrovet

Bajaj Electrical

Ipca Labs.

Coffee Day Enter

Sundram Fasten.

Sobha

JK Lakshmi Cem.

Others

10.6

7.7

7.5

7.2

6.7

6.5

5.8

5.2

5.0

4.8

32.9

Top 10 Holdings

Stocks Allocation

IOP 2 PMS

Motilal Oswal Emergence Fund (AIF)*Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

MO AIF 33.1 5.7 17.2 0.6

Team Lease Serv.

V I P Inds.

Can Fin Homes

Mahindra Logis.

Cera Sanitary.

Ent.Network

MAS FINANC SER

V-Mart Retail

Bajaj Corp

Eveready Inds.

Others

10.9

9.2

9.1

8.5

7.9

7.6

7.3

6.9

6.5

5.7

20.4

Top 10 Holdings

Stocks Allocation


38.9 2.7 6.9 1.0

6.6% 7.0%

17.4%

MO AIF B1 MO AIF B2 BSE 200

Performance (since March 1, 2017)

3.4%

-8.8%

IOP V2 Nifty Small Cap

Performance (since Feb 05, 2018)



Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

India Select 43.4 7.9 18.3 0.5

Nifty 500 28.1 3.0 10.6 1.4

Bajaj Finserv

Bajaj Fin.

HDFC Bank

Page Industries

GRUH Finance

MRF

IndusInd Bank

Maruti Suzuki

Asian Paints

Motherson Sumi

Others

7.9

7.8

7.4

6.9

6.6

6.4

6.1

5.9

5.7

5.6

33.7

Top 10 Holdings

Stocks Allocation

India Select PMS

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

IEP PMS

Nifty 500 28.1 3.0 10.6 1.4

42.8 7.2 16.8 0.4

Bajaj Finserv

Bajaj Fin.

Britannia Inds.

IndusInd Bank

Page Industries

Havells India

Cholaman.Inv.&Fn

Asian Paints

Astral Poly

MRF

Others

7.9

7.3

7.0

6.8

6.5

6.1

5.8

5.5

5.4

5.1

36.7

Top 10 Holdings

Stocks Allocation

ASK PMS

IEP PMS

5.2x

2.3x

0

10

20

30

40

50

60 ASK IEP BSE 500

Jan

-10

Jan

-11

Dec

-11

No

v-12

Oct

-13

Oct

-14

Sep

-15

Au

g-16

Jul-

17

Jul-

18

4.5x

2.2x

0

5

10

15

20

25

30

35

40

45

50 ASK Select BSE 100

No

v-1

2

No

v-1

1

De

c-1

0

Jan

-10

Au

g-1

7

Au

g-1

6

Sep

-15

Sep

-14

Oct

-13

Jul-

18



*The Portfolio data As on June 30, 2018

The Portfolio data and Fundamental attributes As on July 31, 2018

Fund Stylometer

Mean

Reversion


Momentum

Kaveri Seed Co.

Tata Chemicals

Escorts

Chambal Fert.

M & M

T.V. Today Netw.

Jain Irrigation

-

-

-

Others

15.4

11.4

10.2

8.5

7.7

6.3

6.3

0.0

0.0

0.0

34.1

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

Kaveri Seed Co.

Power Mech Proj.

United Spirits

Coromandel Inter

Syngene Intl.

Escorts

Hathway Cable

Indian Energy Ex

Arvind Ltd

KSB Pumps

Others

6.3

5.5

5.1

4.7

4.2

4.1

3.9

3.9

3.8

3.1

55.3

Top 10 Holdings

Stocks Allocation

Old Bridge PMS

Old Bridge Thematic PMS

All Cap PMS

Ashok Leyland

SRF

Indian Energy Ex

M & M

Coromandel Inter

Jet Airways

JSW Energy

Syngene Intl.

United Spirits

GTPL Hathway

Others

5.8

5.0

4.9

4.6

4.2

4.2

4.1

3.1

2.8

2.5

58.7

Top 10 Holdings

Stocks Allocation

Old Bridge Vantage Equity*

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

OBCM

Vantage Equity21.9 3.4 15.5 1.0

Nifty 500 28.1 3.0 10.6 1.4

-1.3%

-13.5%

-10.4%-11.3%

-1.3%

-13.5%

-10.4% -11.3%

1M 3M 6M Since inception

Old Bridge Vantage Equity Class A Old Bridge Vantage Equity Class B BSE 500

4.0%

-12.4%-10.2%

-3.7%

16.3%

6.0% 5.8%

3.0%

12.7%15.5%


Old Bridge Thematic Nifty 50

-0.1%

-11.3% -11.0%

16.7%

19.7%

5.4%

1.8%

-0.2%

10.2%

15.4%


Old Bridge All Cap BSE 500

Real Estate Offering



India Realty Excellence Fund IV

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Supply had

overtaken demand

Inventory levels peaked

and average price

growth slowed down

Demand expected to

outpace supply leading to

fall in inventory level

Inventory expected to

bottom-out and prices

expected to rise

Higher demand &

rising prices will lead

to more supply

Fund’s Investment

Period

Fund’s Exit

Timeline

Investment Strategy

City Strategy• City focus: MMR, Delhi NCR,

Bengaluru, Pune, Chennai &

Hyderabad

• City concentration (except MMR &

Bengaluru): <30% of fund

size

Project Strategy• Residential segment with focus on

affordable segment

• Commercial projects (selectively)

• Single project concentration: <20% of

fund size

Developer Strategy• Established & dominant players in

each micro-market having good

execution capability

• Investment with a developer group not

to exceed 20% of Fund Size

Investment Structure Strategy• Mezzanine Investments (~50%):

Downside protection with regular

coupon along with equity kicker

• Structured equity (up to 50%):

Enhanced returns by undertaking

equity investments with reputed

developers

iref IV

Target Fund Size Rs. 1500 cr (incl. green-shoe option of Rs. 500 cr)

Hurdle Rate 10% IRR (pre-tax)

Target Return 22-24%

Minimum Commitment Rs. 1 cr

Sponsor & team Commitment 10% of aggregate Capital Commitments received by the Fund, subject to a minimum Capital

Commitment of Rs. 50 cr and maximum of Rs. 100 cr

Tenure 5 Y from the date of the final closing subject to two additional 1 year extensions

Commitment Period 2 Y from final closing (extendable by 1Y)

Management Fees• Rs. 1 cr to 10 cr: 2.0% p.a.

• > Rs. 10 cr to 25 cr: 1.75% p.a.

• > Rs. 25 cr: 1.50% p.a.

Carried interest (with catch up) • Rs. 1 cr to 10 cr: 15.0% p.a.

• > Rs. 10 cr to 25 cr: 12.50% p.a.

• > Rs. 25 cr: 10.0% p.a.

Key Terms

Capturing the real estate recovery cycle


Fund InsightLarge Cap Funds


Positioning of Large Cap Funds


Top 5 Sector

Top 5 Sector

23.5 3.2 13.7 1.5

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

23.5 3.2 13.7 1.5Nifty 50

HDFC Bk

ICICI Bk

Infosys

ITC

L&T

Maruti

HDFC

Dabur India

Yes Bk

Cipla

Others

9.3

7.1

6.4

6.1

5.3

4.4

4.3

3.4

3.3

3.2

47.3

Top 10 Holdings

Stocks Allocation

HDFC Bk

Infosys

ICICI Bk

ITC

L&T

Maruti

HDFC

Yes Bk

SBI

M&M

Others

8.4

5.1

5.1

4.8

3.3

2.9

2.5

2.4

2.3

2.2

61.0

Top 10 Holdings

Stocks Allocation

Aditya Birla SL Focused Equity Fund (Fund Manager - Mahesh Patil)

Aditya Birla SL Frontline Eq Fund (Fund Manager - Mahesh Patil)

19.8 3.1 15.4 1.4

18.7 2.9 15.7 1.3

3 y

rs A

vera

ge P

/E

19.6

18.5

16.6

23.0

17.8

14.1

18.0

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

3 yrs Average P/B

Aditya Birla SL Frontline Equity Aditya Birla SL Focused Equity ICICI Pru Focused Bluechip

MOST Focused 25 SBI BlueChip Nifty 50

Bubble size3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

34.2

11.4

11.0

7.0

6.9

Financial Cons GoodsIT Energy Auto

36.0

12.6

9.8

8.0

7.7

Financial Cons GoodsIT Auto Energy



Top 5 Sector

ICICI Pru Focused BlueChip Eq Fund (Fund Manager – Sankaran Naren)

Most Focused 25 Fund* (Fund Manager – Siddharth Bothra)

SBI BlueChip Fund* (Fund Manager – Sohini Andani)

SBI

ICICI Bk

Infosys

ITC

NTPC

Bharti Airtel

Motherson Sumi

Maruti

Bajaj Finserv

L&T

Others

7.0

5.5

4.9

4.4

4.3

4.2

4.0

3.3

3.0

2.9

56.6

Top 10 Holdings

Stocks Allocation

HDFC Bk

L&T

M&M

ITC

Nestle

Sun Pharma

Kotak Bk

IndusInd Bk

HDFC

Chola Finance

Others

8.7

5.1

4.3

3.9

3.5

2.9

2.8

2.6

2.5

2.4

61.3

Top 10 Holdings

Stocks Allocation

Top 5 Sector

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

23.5 3.2 13.7 1.5

23.5 3.2 13.7 1.5

18.4 2.6 14.1 1.7

19.8 3.1 15.4 1.4

Top 5 Sector

HDFC Bk

Maruti

Kotak Bk

HDFC Ltd

HDFC Life Insur

Britannia

Eicher

ICICI Lombard

ABB

TCS

Others

9.6

8.5

7.1

6.4

5.9

5.1

5.0

5.0

4.5

4.4

38.3

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50 23.5 3.2 13.7 1.5

31.9 5.7 18.0 0.8

25.5

12.0

11.6

9.0

8.9

Financial EnergyAuto Cons Goods IT

40.6

13.5

12.1

11.3

4.5

Financial Auto ITCons Goods Cap Goods

31.2

12.2

9.4

6.6

6.4

Financial Auto Cons GoodsEnergy Construction



Multi Cap Funds

Top 5 Sector

Top 5 Sector

Aditya Birla SL Equity Fund (Fund Manager - Anil Shah)

Franklin India Equity Fund (Fund Manager - Anand Radhakrishnan)

HDFC Bk

ICICI Bk

Dr. Reddys Lab

Maruti

ITC

Tata Steel

Tech Mahindra

Infosys

Dabur India

Bajaj Finance

Others

6.8

5.7

3.8

3.7

3.7

3.0

2.9

2.7

2.7

2.5

62.6

Top 10 Holdings

Stocks Allocation

HDFC Bk

Infosys

Bharti

Yes Bk

ICICI Bk

L&T

M&M

Axis Bk

Kotak Bk

HCL Tec

Others

9.2

5.9

4.9

4.4

3.9

3.9

3.8

3.3

2.9

2.9

54.9

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

20.9 3.0 14.5 1.2

22.3 3.4 15.1 1.2

Positioning of Multi Cap Funds


19.8

11.914.9

16.5

15.4

23.3

22.4

13.4

11.3

16.7

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

3 yrs Average P/B

Aditya Birla SL Equity Franklin India Focused Equity Franklin India EquityICICI Pru Multicap ICICI Pru Value Discovery Motilal Oswal Multicap 35Invesco India Contra L&T India Value Nifty 500Kotak Standard Multicap

Bubble size

3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

3 y

rs A

vera

ge P

/E

18.0

15.612.9

8.7

8.3

Financial Cons GoodsCap Goods Auto Energy

32.8

13.5

9.0

7.1

7.1

Financial Cons GoodsIT Pharma Metals



Top 5 Sector

Top 5 Sector

Top 5 Sector

Franklin India Focus Equity Fund (Fund Manager - Roshi Jain)

ICICI Pru Value Discovery Fund (Fund Manager - Mrinal Singh)

ICICI Prudential Multicap Fund (Fund Manager - George Heber Joseph, Atul Patel)

SBI

ICICI Bk

HDFC Bk

Axis Bk

Bharti Airtel

IOC

Abbott India

Ultratech

BPCL

Cognizant Tec

Others

9.5

9.4

8.5

6.9

6.4

4.5

4.1

3.8

3.5

3.4

40.1

Top 10 Holdings

Stocks Allocation

Sun Pharma

Infosys

Wipro

M&M

NTPC

ITC

Power Grid

SBI

IOC

Exide

Others

11.2

6.4

5.8

5.4

4.6

4.2

4.1

3.6

3.2

3.2

48.3

Top 10 Holdings

Stocks Allocation

ITC

GAIL

NTPC

SBI

Cummins

Motherson

Eicher

Vedanta

Lupin

Maruti

Others

6.9

5.9

5.6

5.0

4.9

4.5

3.8

3.5

3.4

3.4

52.9

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

28.1 3.0 10.6 1.4

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500

Earnings

Momentum

Mean

ReversionValue GrowthBlended

28.1 3.0 10.6 1.4

19.5 2.7 13.8 1.4

18.9 2.7 14.2 1.6

23.3 3.4 14.8 1.8

Top 5 Sector

Invesco India Contra Fund (Fund Manager - Taher Badshah, Amit Ganatra)

RIL

HDFC Bk

ITC

Infosys

ICICI Bk

HDFC

L&T

Petronet LNG

L&T Finance

M&M

Others

8.6

7.2

7.0

6.3

5.4

5.4

4.0

3.4

3.4

3.3

46.0

Top 10 Holdings

Stocks Allocation

20.8 3.3 16.0 1.2

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

35.1

14.7

8.1

7.0

6.5

Financial Energy TelecomPharma Cement

15.2

15.1

13.2

11.0

8.8

Energy IT PharmaAuto Financial

19.9

14.913.4

11.4

11.2

Auto Financial EnergyCons Goods Pharma

30.1

17.8

11.6

11.2

11.0

Financial Energy ITCons Goods Auto



Top 5 Sector

L&T India Value Fund* (Fund Manager - Venugopal M)

RIL

HDFC

L&T

Infosys

ITC

Divis Lab

M&M

Graphite

Future Retail

Axis Bk

-

4.4

4.0

3.7

3.3

3.2

2.4

2.3

2.2

2.1

2.0

70.6

Top 10 Holdings

Stocks Allocation

20.3 2.6 12.8 1.3

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

Top 5 Sector

MOSt Focused Multicap 35 Fund* (Fund Manager - Gautam Sinha Roy)

HDFC Ltd

HDFC Bk

Maruti

IndusInd Bk

Eicher

Bajaj Finance

Infosys

United Spirits

BPCL

Britannia

Others

9.5

8.6

7.2

5.9

5.0

5.0

4.5

4.0

3.8

3.3

43.2

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

23.7 4.9 20.5 1.0

Top 5 Sector

Kotak Standard Multicap Fund* (Fund Manager - Harsha Upadhyaya)

HDFC Bk

RIL

L&T

HDFC

Infosys

ICICI Bk

Hero MotoCorp

RBL Bk

SBI

Maruti

Others

7.7

4.9

4.9

4.7

4.3

3.5

2.9

2.8

2.7

2.7

59.0

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

25.9 4.1 15.8 1.0

Top 5 Sector

Sundaram Rural & Consumption Fund* (Fund Manager: S. Krishnakumar)

M&M

HUL

ITC

UPL

Britannia

SBI

Asian Paints

Ujjivan

Tata Chemicals

Heritage Foods

Others

5.3

5.2

3.8

2.7

2.5

2.2

2.1

2.1

2.0

2.0

69.9

Top 10 Holdings

Stocks Allocation

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 500 28.1 3.0 10.6 1.4

34.2 5.1 14.8 0.8

32.8

12.1

9.1

9.0

6.9

Financial EnergyAuto Cons Goods IT

20.9

10.8

8.6

8.5

8.4

Financial ConstructionCons Goods IT Energy

44.7

14.0

10.0

9.8

7.6

Financial Auto EnergyCons Goods IT

38.7

14.4

10.1

9.7

6.6

Cons Goods FinancialFertilisers Auto Cement

Midcap Fund

Positioning of Midcap Funds




Top 5 Sector

Top 5 Sector

38.9 2.7 6.9 1.0

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty Free Float

Mid Cap 100

38.9 2.7 6.9 1.0

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Finolex

HDFC Bk

Kotak Bk

Yes Bk

City Union Bk

Apollo Tyres

Voltas

Equitas

Wabco

Nerolac Paints

Others

3.8

3.3

2.9

2.6

2.6

2.6

2.5

2.4

2.4

2.3

72.8

Top 10 Holdings

Stocks Allocation

Sundram Fasteners

Chola Invest & Fin

Balkrishna

Hexaware Tech

Voltas

RBL Bk

City Union Bk

Aarti

Exide

Edel Fin

Others

4.5

4.1

3.5

3.0

2.8

2.7

2.7

2.6

2.6

2.4

69.0

Top 10 Holdings

Stocks Allocation

Franklin India Prima Fund (Fund Manager: R. Janakiraman)

HDFC Mid-Cap Opportunities Fund* (Fund Manager: Chirag Setalvad)

25.5 3.4 13.4 0.8

25.2 3.6 14.4 0.8

Nifty Free Float

Mid Cap 100

16.2

15.8

14.3

18.2

20.0

6.9

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

46.0

1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5

3 yrs Average P/B

HDFC Mid-Cap Opportunities Franklin India Prima Sundaram Mid cap

Kotak Emerging Equity Motilal Oswal Midcap 30 Nifty Free Float Midcap 100Bubble size : 3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

3 yr

s Av

erag

e P/

B

18.0

15.612.9

8.7

8.3

Financial Cons GoodsCap Goods Auto Energy

35.1

14.7

8.1

7.0

6.5

Financial Energy TelecomPharma Cement



Top 5 Sector

Top 5 Sector

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Bharat Fin

Schaeffler

RBL Bk

Atul

Ramco Cements

Shriram City Fin

Supreme

Solar

Finolex

Bata

Others

4.0

3.7

3.5

3.2

3.0

2.9

2.7

2.7

2.7

2.5

69.1

Top 10 Holdings

Stocks Allocation

RBL Bk

IndusInd Bk

Page

Bajaj Finance

City Union Bk

Astral Poly Tech

Crompton Greaves

Nerolac Paints

Eris Lifesciences

Voltas

Others

6.5

5.8

5.2

5.0

4.5

4.0

3.9

3.8

3.8

3.7

53.9

Top 10 Holdings

Stocks Allocation

Kotak Emerging Equity Fund* (Fund Manager: Pankaj Tibrewal)

Motilal Oswal Midcap 30 Fund* (Fund Manager: Akash Singhania)

36.7 6.1 16.5 0.4

30.6 4.3 13.9 0.6

Top 5 Sector Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Ramco Cements

Sundaram-Clayton

Quess Corp

Mahindra CIE Auto

Schaeffler

Honeywell Auto

Trent

Exide

Arvind

Chola Invest & Fin

Others

4.0

3.5

2.9

2.8

2.7

2.6

2.6

2.5

2.4

2.2

71.9

Top 10 Holdings

Stocks Allocation

Sundaram Midcap Fund* (Fund Manager: S. Krishnakumar)

29.5 3.5 11.8 0.7

Nifty Free Float

Mid Cap 10038.9 2.7 6.9 1.0

Nifty Free Float

Mid Cap 10038.9 2.7 6.9 1.0


38.9 2.7 6.9 1.0

21.3

17.5

12.0

9.0

6.2

Financial Cap GoodsCons Goods Others Auto

37.4

16.3

10.7

6.6

6.2

Financial AutoCons Goods Others Cap Goods

15.9

15.214.1

11.0

7.8

Cap Goods Cons GoodsFinancial Auto Others

Small Cap Fund



Positioning of Small cap Funds

Top 5 Sector

Top 5 Sector

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Finolex

Aarti

Atul

Ipca

SRF

APL Apollo

DCB Bk

KPR Mill

Siyaram Silk

Nilkamal

Others

5.3

4.5

3.6

3.3

3.3

3.1

2.9

2.7

2.5

2.4

66.4

Top 10 Holdings

Stocks Allocation

Finolex

Vardhman

HDFC Bk

Repco Home Fin

eClerx Services

Infosys

Cyient

Nesco

Karur Vysya Bk

Dr. Lal Pathlabs

Others

4.3

2.8

2.7

2.6

2.4

2.3

2.1

2.0

2.0

2.0

74.8

Top 10 Holdings

Stocks Allocation

DSPBR Small Cap Fund*(Fund Manager: Vinit Sambre)

Franklin India Smaller Cos Fund* (Fund Manager: R. Janakiraman)

20.9 2.8 13.5 0.9

20.1 2.9 14.5 0.8


38.9 2.7 6.9 1.0


38.9 2.7 6.9 1.0


14.6

17.8

17.2

6.9

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

1.5 2.5 3.5 4.5 5.5 6.53 yrs Average P/B

Franklin India Smaller Cos DSPBR Small Cap HDFC Small Cap Nifty Free Float Midcap 100

Bubble size :

3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

3 yr

s A

vera

ge P

/B

15.4

13.210.9

6.5

6.5

Cap Goods TextilesChemicals Metal Financial

17.0

12.011.9

7.3

6.8

Financial Cap GoodsConstruction Cons Goods IT



Balanced Fund

Top 5 Sector Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

NIIT Tec

Aurobindo

Firstsource Solut

Sharda Cropchem

SKF

Sonata Software

Chambal Ferti

Indian Bk

Vardhman

Vijaya Bank

Others

3.5

3.4

3.4

3.3

2.9

2.7

2.6

2.5

2.4

2.3

71.2

Top 10 Holdings

Stocks Allocation

HDFC Small Cap Fund* (Fund Manager: Chirag Setalvad)

18.5 2.6 14.2 0.9


38.9 2.7 6.9 1.0

Top 5 Sector

HDFC Bk

ICICI Bk

Infosys

L&T

Maruti

Yes Bk

ITC

Whirlpool

Eicher Motors

IndusInd Bk

Others

5.9

3.0

2.8

2.5

2.1

1.7

1.5

1.5

1.5

1.4

76.1

Top 10 Holdings

Stocks Allocation

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Aditya Birla SL Hybrid Equity '95 Fund (Fund Manager - Mahesh Patil, Dhaval Shah)

23.5 3.2 13.7 1.5

21.3 3.4 15.9 1.2

Positioning of Balanced Funds


17.7

16.9

15.8

16.4

14.1

18.0

20.0

22.0

24.0

26.0

28.0

30.0

32.0

2.0 3.0 4.0 5.0 6.03 yrs Average P/B

3 y

rs A

vera

ge P

/B

Aditya Birla SL Equity Hybrid '95 Franklin India Equity Hybrid HDFC Hybrid Equity

ICICI Pru Equity & Debt Nifty 50

Bubble size

3 yrs Average RoE

High P/B

High P/E

Low P/E

Low P/B

11.8

11.16.9

6.2

5.2

Cap Goods IT FinancialServices Pharma

23.2

10.3

5.9

5.8

5.6

Financial Cons Goods

Auto Pharma IT



Top 5 Sector

Power Grid

HDFC Bk

Kotak Bk

Axis Bk

Hindalco

M&M

Grasim

Infosys

IOC

Bharti

Others

5.9

5.7

5.7

4.7

4.1

3.7

3.0

2.5

2.1

1.9

60.8

Top 10 Holdings

Stocks Allocation

Franklin India Equity Hybrid Fund (Fund Manager - Lakshmikanth Reddy, Sachin Padwal-Desai)

Mean

Reversion


Momentum

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50 23.5 3.2 13.7 1.5

15.7 2.5 15.7 1.5

Top 5 Sector

Top 5 Sector

HDFC Bk

Infosys

HDFC

ITC

ICICI Bk

L&T

Aurobindo

IndusInd Bk

RIL

Axis Bk

Others

7.1

4.2

4.0

3.1

2.9

2.9

1.9

1.8

1.7

1.7

68.6

Top 10 Holdings

Stocks Allocation

ICICI Bk

SBI

NTPC

Bharti

ITC

ONGC

Hindalco

Infosys

Wipro

HCL Tec

Others

5.5

4.8

4.1

4.0

4.0

3.6

2.8

2.8

2.6

2.0

63.9

Top 10 Holdings

Stocks Allocation

HDFC Hybrid Equity Fund (Fund Manager - Chirag Setalvad, Rakesh Vyas)

ICICI Pru Equity & Debt Fund (Fund Manager - Sankaran Naren, Atul Patel)

Fund Stylometer

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50

Mean

Reversion


Momentum

23.5 3.2 13.7 1.5

Fund Stylometer

Mean

Reversion


Momentum

ParticularsP/E

Ratio

P/B

RatioROE

Div

Yield

Fund

Nifty 50 23.5 3.2 13.7 1.5

15.6 2.0 13.0 1.8

18.8 3.2 17.0 1.4

19.8

14.8

7.3

7.1

5.5

Financial EnergyCons Goods Auto Metals

23.7

7.5

6.5

5.6

5.0

Financial Energy ITConstruction Cons Goods

15.1

13.9

8.4

5.7

4.8

Financial Energy IT

Cons Goods Telecom


The Portfolio data and Fundamental attributes As on July 31, 2018

*The Portfolio data and Fundamental attributes As on June 30, 2018


Portfolio Details

81.5

82.7

89.0

74.6

79.4

79.7

73.6

61.7

74.8

66.4

73.6

49.7

77.6

49.1

27.8

10.7

6.6

3.4

17.7

4.8

12.8

—

50.6

57.7

60.0

46.3

Scheme Name Large Cap

Equity

Midcap Small cap Sov & AAA AA &equivalent Cash Others

Fixed Income Cash & Others

SBI BlueChip Fund

ICICI Pru BlueChip Equity Fund


Motilal Oswal Focused 25 Fund *


Motilal Oswal Multicap 35 Fund *

Kotak Standard Multicap Fund *

Franklin India Focused Equity



Invesco India Contra Fund *

L&T India Value Fund *


Sundaram Rural & Consumption Fund *

Motilal Oswal Midcap 30 Fund *

Kotak Emerging Opportunites Fund

HDFC Mid-Cap Opportunities Fund

HDFC Small Cap Fund *

Franklin India Prima Fund *

Sundaram Mid Cap Fund *

Franklin India Smaller Cos Fund *

DSPBR Small Cap Fund *

Aditya Birla SL Equity Hybrid ’95 Fund

ICICI Pru Equity & Debt Fund

Franklin India Equity Hybrid Fund

HDFC Hybrid Equity Fund

8.8

4.9

4.3

22.3

13.1

17.5

15.8

19.8

14.5

10.3

10.9

32.0

14.5

18.4

63.2

68.0

71.0

12.4

69.6

72.4

13.9

21.6

16.6

6.2

7.1

12.8

1.3

—

—

1.7

1.8

0.6

1.5

8.6

5.0

4.5

13.5

13.8

—

25.1

7.4

19.6

18.4

67.9

8.4

20.0

65.2

74.5

5.8

1.8

1.5

7.9

0.7

7.5

1.4

—

0.3

—

2.5

3.8

—

9.7

—

—

—

4.7

—

0.1

—

—

1.0

1.1

1.1

0.0

1.3

-3.8

—

1.2

—

2.3

—

—

0.0

0.0

1.0

—

—

13.6

—

—

—

—

—

0.4

0.7

—

—

—

—

—

11.3

26.1

11.4

24.1

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

9.8

8.4

19.7

2.6

in % terms

7.7

2.5

5.3

1.5

5.3

2.1

5.7

6.0

5.7

-4.5

2.0

4.5

7.9

2.8

1.7

1.2

3.3

16.2

3.2

1.7

7.0

3.9

4.7

3.6

0.3

5.2


Notes



Motilal Oswal Wealth Management Limited

CIN: U67110MH2002PLC135075

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road,

Opposite Parel ST Depot, Prabhadevi, Mumbai 400 025

Tel No.: 022 3980 4263; Website: www.motilaloswal.com

Registration details: SEBI PMS Regn No: INP000004409; AMFI Regn No: ARN87554

Please read disclosure document as issued by company from time to time.

Ashish Shanker

Head – Investment Advisory

[email protected]

91 22 3982 5549+

Pradeep Ashok Kumar

Vice President - Financial Strategy

[email protected]

91 22 3010 2353+

Kumarpal Jain

Manager

[email protected]

91 22 3010 2327+

The information, data or analysis does not constitute investment advice or as an offer or solicitation of an offer to purchase or subscribe for any investment or a recommendation and is meantfor your personal information only and suggests a proposition which does not guarantee any returns. Motilal Oswal Wealth Management Ltd (hereinafter referred as MOWML) or any of itsaffiliates is not soliciting any action based upon it. This information, including the data, or analysis provided herein is neither intended to aid in decision making for legal, financial or otherconsulting questions, nor should it be the basis of any investment or other decisions. The historical performance presented in this document is not indicative of and should not be construed asbeing indicative of or otherwise used as a proxy for future or specific investments. The relevant product offering documents should be read for further details. MOWML does not takeresponsibility for authentication of any data or information which has been furnished by you, the entity offering the product, or any other third party which furnishes the data or information.The above mentioned assets are not necessarily maintained or kept in custody of MOWML. The information contained in this statement are updated as and when received as a result of whichthere may be differences between the details contained herein and those reflected in the records of the respective entities or that of yours. In the event where information sent through anyelectronic Media (including but not limited to Net Banking or e-mail) or print do not tally, for whatever reason, with the records available with the entity offering the product or the third partymaintaining such information in each of the foregoing cases, the information with the entity offering the product or third party maintaining such information shall be considered as final. Thebenchmarking shown in document above is a result of the choice of benchmark MOWML uses for the various products. It is possible that some investments offered by the third parties haveother benchmarks and their actual relative under- or out-performance is different from that provided in the statement. The recipient should seek appropriate professional advice includingtax advice before dealing with any realized or unrealized gain / loss reflecting in this statement. The above data, information or analysis is shared at the request of the recipient and is meant forinformation purpose only and is not an official confirmation of any transactions mentioned in the document above. Service related complaints may be acceptable for rectification ofinaccurate data. You should notify us immediately and in any case within 15 days of receipt of this document date if you notice any error or discrepancy in the information furnished above,failing which it would be deemed to have been accepted by you. MOWML reserves the right to rectify discrepancies in this document, at any point of time. The sharing of information inrelation to one’s assets may not be secure and you are required to completely understand the risk associated with sharing such information. The information being shared with MOWML canpose risk of information being stolen and or used by unauthorized persons who do not have the rights to access such information. MOWML or any of its group companies, its employees, andagents cannot be held liable for unauthorized use of such information. Our sales professionals or other employees may provide oral or written views to you that reflect their personal opinionswhich may be contrary to the opinions expressed herein. You should carefully consider whether any information shared herein and investment products mentioned herein are appropriate inview of your investment experience, objectives, financial resources, relevant circumstances & risk appetite. All recipients of this Information should conduct their own investigation andanalysis and should check the accuracy, reliability and completeness of the Information .This Information is distributed upon the express understanding that no part of the information hereincontained has been independently verified. Further, no representation or warranty expressed or implied is made nor is any responsibility of any kind accepted with respect to thecompleteness or accuracy of any information as may be contained herein. Also no representation or warranty expressed or implied is made that such information remains unchanged in anyrespect as of any date or dates after those stated herein with respect to any matter concerning any statement made herein above. In no event will MOWML and their officers, directors,personnel, employees or its affiliates and group company be liable for any damages, losses or liabilities including without limitation, direct or indirect, special, incidental, consequentialdamages, losses or liabilities, in connection with your use of the information mentioned in this document or your reliance on or use or inability to use the information contained in thisdocument, even if you advise us of the possibility of such damages, losses or expenses. The contents of this document do not have any contractual value. The information contained in thisdocument is confidential in nature and you are receiving all such information on the express condition of confidentiality. If you are not the intended recipient, you must not disclose or use theinformation in this document in any way whatsoever. If you received it in error, please inform us immediately by return e-mail and delete the document with no intention of its being retrievedby you. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them. This report and information therein is not directed orintended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication,availability or use would be contrary to law, regulation or which would subject MOWML and affiliates to any registration or licensing requirement within such jurisdiction. The informationcontained 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 otherperson or to the media or reproduced in any form, without prior written consent of MOWML.MOWML in the course of conduct of its business activity may have financial, business or otherinterest in other entities including the subject mentioned herein, however MOWML encourages independence in preparing this information and strives to minimize conflict in preparation ofthe above information. MOWML does not have material conflict of interest at the time of publication of this information. While every effort has been made to ensure that the informationprovided herein is accurate, timely, secure and error-free, MOWML, their directors, promoters, employees, agents and assigns shall not in any way be responsible for any loss or damagesarising in any contract, tort or otherwise from the use or inability to use this information and its contents. Any material downloaded or otherwise obtained through the use of the website oremail is at your own discretion and risk and you will be solely responsible for any damage that may occur to your computer systems and data as a result of download of such material. Anyinformation sent from MOWML to an e-mail account or other electronic receiving communication systems/ servers, is at your risk and if the same is lost, incorrectly received, or sent to theincorrect e-mail or are accessible to third parties, MOWML is not and cannot be responsible or made liable for such transmission.

“©

“

use. CRISIL has taken due care and caution in computation of the Indices, based on the data obtained from sources, which it considers reliable. However, CRISIL does

not guarantee the accuracy, adequacy or completeness of the Indices and is not responsible for any errors or for the results obtained from the use of the Indices.

CRISIL especially states that it has no financial liability whatsoever to the Licensee / users of CRISIL Indices.”

2013 CRISIL Limited. All Rights Reserved.

CRISIL Indices are the sole property of CRISIL Limited (CRISIL). CRISIL Indices shall not be copied, retransmitted or redistributed in any manner for any commercial

Safe Harbor
