investment tracker...global risk-on sentiment. the mutual fund industry aum rose to an all-time high...

INVESTMENT

TRACKER Apr - May 2017

The month of April witnessed the bellwether BSE Sensex touching all time highs of 30,000 on the

index. Markets bolstered after continued influx of liquidity primarily from the domestic investors and

global risk-on sentiment. The mutual fund industry AUM rose to an all-time high of 19.26 lakh crore

in the month of April’17. Equity investments by mutual fund managers was to the tune of Rs. 10,000

crores in April’17. The trend suggests that MF Industry is at the cusp of take-off with wider

participation of investors. On the other hand, the Reserve Bank of India in its monetary policy review

reiterated the neutral stance creating a flutter among bond investors with an indication of pro-

longed pause on benchmark interest rates. IMD's first rainfall forecast estimates were released

suggesting normal rainfall for June-September monsoon with the volume estimated at 96% of Long

Period Average (LPA). IMD also expects that the El Nino phenomenon could build around the latter

half of the monsoon season but could be countered by a positive IOD (Indian Ocean Dipole).

The recent run-up in equity markets has surely jacked up the valuation with the 1-year forward P/E

for Sensex at around 19X but is away from a bubble scenario. However, as per our philosophy at

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

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

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

markets. Further, we would continuously watch cues emerging from the quarterly results of

companies, implementation of GST and developments in global market primarily emanating from US

and China for further direction in markets.

Debt markets have continued to remain depressed after the Apex bank in February changed its

stance from accommodative to neutral. Further, the recent review has dashed all hopes of any

immediate relief on interest rate front signalling a pro-longed pause on benchmark rates.

Accordingly, our earlier strategic shift to accrual funds have received further impetus and we

strongly believe till the clouds clear on further direction on interest rates, it will be an apt strategy to

stick to accruals.

At TATA Capital, we continue to remain highly watchful of all the events and triggers related with

markets and would be extremely nimble in our approach in case of any deviations from our

expectations.

Finally, as RERA becomes operational in various states, the real estate market is likely to witness

sweeping changes considering the focus of RERA on accountability, transparency and governance.

We would keep our investors posted on development from RERA and various projects marketed by

us.

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

investments by ensuring in-depth research of products as well

as markets. We ensure to maintain highest service standards

for all your investment requirements.

Dasvir Ankhi National Head – Wealth Management, Distribution & Advisory

Tata Capital Financial Services Ltd.

From the Wealth Head Desk

Message from Advisory Desk

The month of April’17 was marked with some landmark moments in the forms of Indian equity

bourses touching new highs supported by domestic liquidity and improving growth prospects of the

economy on back of continued reforms process by the government. Further, the month also

witnessed tougher moments for the debt market after the Apex bank signalled pro-longed pause of

benchmark interest rates. Internationally, geo-political tensions escalated primarily in the Syrian and

Korean peninsula creating flutters in global markets.

On the global market front, the European Central Bank (ECB) left its monetary policy unchanged

even as ECB President Mario Draghi acknowledged the economic recovery taking place in the

Eurozone. The ECB chief stressed that while risks remained tilted toward the negative, the

Eurozone's economic recovery had improved the bloc's outlook. Later during the month, global

markets rose as investors cheered the first-round results of France’s presidential election. On the US

front, the US jobless data witnessed a marked improvement and President Donald Trump's proposed

changes in the tax system cheered markets globally.

On the Indian front, the RBI raised reverse repo rate to 6% and decided to cut MSF rate to 6.50% in

the latest monetary policy review in April’17. The RBI refrained from giving any kinds of hope to the

market and maintained hawkish stance on inflation for second half of the year. Later during the

month, the IMD released its first monsoon forecast suggesting a normal monsoon for the upcoming

monsoon season cheered market sentiments. Prospects of normal monsoon may provide respite to

inflationary pressures building up. On the other hand, Index of Industrial Production (IIP) slipped to a

four-month low, contracting 1.2% in February, mainly on account of decline in the manufacturing

sector and lower offtake of capital as well as consumer goods.

On the debt market front, bond yields rose for the month of April with 10-Year benchmark yields

ending the month at 6.94% compared to previous month’s close of 6.68%. Going forward, with

indication of pro-longed pause from Apex bank, the entire focus would be on global macroeconomic

factors, investment by foreign portfolio investors (FPIs), commodities and dollar index movement,

for direction of yields. Also, as systemic liquidity moves to more realistic levels the shorter end of the

curve might witness adjustments. Accordingly, our earlier strategic shift to accrual funds have

received further impetus and we strongly believe till the clouds clear on further direction on interest

rates, it will be an apt strategy to stick to accruals.

Equity markets have been witnessing a positive momentum for quite some time now and both Nifty

and Sensex have touched new life highs. Currently, quarterly earnings announcements are driving

the stock specific actions. The run-up in the equity markets have pushed the valuations higher and

earnings need to catch up to justify the PE expansion. So far, the earnings announcements have

displayed a mixed trend with IT continued to face headwinds. Financials though have reported

improvements selectively; asset quality continues to remain a challenge. Cement companies

showcased some positive surprises. However, the complete picture is yet to come. Going forward,

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

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

Equity Markets

Equity markets continued with its uptrend in the month of April albeit with a volatility. The month

had volatile start with the US launching Air strikes on Syria raising fears of geopolitical flare-up. Profit

booking after the recent run-up too added to the selling pressure. Nevertheless, indices showcased

strong support and with the quarterly earnings season starting, equity markets witnessed stock

specific movements. Also, continued liquidity support primarily from domestic investors and global

risk-on sentiment kept the markets afloat. Good results from heavyweights, signs of revival in

earnings, relief in global markets after outcome of French elections on expected lines also added to

the positive sentiment. All in all, Sensex closed 1% up, while Nifty gained 1.4% during the period

(31st Mar’17 to 28th Apr’17).

FII & Mutual Funds trends (Apr’17)

Source: BSE India

Equity markets – Performance

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

Indices* movement between 31st Mar’17 to 28th

Apr’17

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

(22

.1)

33

7.8

10

4.9

(10

.1)

(84

.9)

(17

7.4

)(49

.9)

93

.4

97

.9

11

1.3

51

.7

25

.8

36

.5 11

2.4

4

23

.7

20

.4

52

.3

91

.8

13

7.8

91

.3

38

.4

27

.2

(0.3

)

(0.9

)

71

.5

(5.8

)

-250

-150

-50

50

150

250

350

Apr'17Feb'17Dec'16Oct'16Aug'16Jun'16Apr'16

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

96.00

98.00

100.00

102.00

104.00

106.00

3-Apr 9-Apr 15-Apr 21-Apr 27-Apr

BSE MID CAP BSE Sensex

BSE SMALL CAP

(1.9)1.0 1.4 1.5

2.4 3.7

4.9 5.0

6.5 6.6

8.6 9.2

-3.0 2.0 7.0 12.0

IT Teck

METAL HC

Sensex CD

FMCG Power Index

Bankex PSU

MID CAP SMALL CAP

Oil & Gas CG

IPO Realty

Equity markets – Outlook Equity markets have been witnessing a positive momentum for quite some time now and both Nifty

and Sensex have touched new life highs. Currently, quarterly earnings announcements are driving

the stock specific actions. The run-up in the equity markets have pushed the valuations higher and

earnings need to catch up to justify the PE expansion. So far, the earnings announcements have

displayed a mixed trend with IT continued to face headwinds. Financials though have reported

improvements selectively; asset quality continues to remain a challenge. Cement companies

showcased some positive surprises. However, the complete picture is yet to come.

On the economy front, inflation, though under control till now, carries upside risks as highlighted by

the central bank in the last monetary policy. The Indian Meteorological Department’s (IMD) first

rainfall forecast estimates were released suggesting normal rainfall for June-September monsoon

with the volume estimated at 96% of Long Period Average (LPA). IMD also expects that the El Nino

phenomenon could build around the latter half of the monsoon season but could be countered by a

positive IOD (Indian Ocean Dipole). The central bank is expected to continue with its neutral

monetary policy stance and be watchful of further data prints.

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

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

expectations. We continue with our recommendation to increase exposure specifically towards

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

Debt markets - Key Influencers

Factors Short term Outlook Medium Term Outlook

Inflation Increase Increase

India’s wholesale inflation (WPI) eased to 5.70% in Mar17 from a 3-year high of 6.55% in Feb’17 month due to slower increase in prices of fuel and in manufacturing sector. While, India’s retail inflation jumped to five-month high of 3.85% in Mar’17, primarily driven by rise in prices of non-food components especially higher fuel inflation. Though, the CPI was within the comfort zone of the RBI, however, RBI is cautious with regards to inflation and believes that upside risks persist. The primary risks to inflation outlook are uncertainty surrounding the outcome of the southwest monsoon and geo-political tension which could impact commodities prices specifically crude.

Currency Appreciate Neutral

The rupee continued to appreciate in April as well due to robust capital inflows into equities and debt markets. The rupee rose by 0.96% during the month April’17. The rupee also surged after the RBI projected India's growth to strengthen for the current fiscal to 7.4%, up from 6.7% in 2016-17. However, fresh dollar demand from importers and banks amid geopolitical tensions kept the rupee gains under check. Later during the month, rupee witnessed sustained buoyancy amid record-breaking domestic equities taking cues from global markets. The momentum also got an additional push on growing expectations for robust foreign inflows to India sparked by a renewed optimism about the US economy and declining concerns over the European political landscape.

Monetary Policy Neutral Neutral

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

Debt markets – Performance

Indicators 28/04/17 31/03/17 Change

Domestic Indicators

10-Yr G-sec (%) 6.94 6.68 26 bps

CP 1 Year (%) 7.30 7.00 30 bps

Corporate 5 Year (%) 7.42 7.31 11 bps

Overnight Call Rates (%) 6.25 5.95 30 bps

Five Year OIS (%) 6.03 6.38 35 bps

International Indicators

Libor 3 mnth (%) 1.17 1.15 2 bps

US Treasury 2 Yr. (%) 1.27 1.27 0 bps

US 10 Yr (%) 2.29 2.42 13 bps

G-Sec Yield Curve

Debt markets - Outlook

On the debt market front, bond yields rose for the month of April with 10-Year benchmark yields

ending the month at 6.94% compared to previous month’s close of 6.68%; falling by 26bps m-o-m

after the Apex bank’s decision of hold on rates and outlook on inflation.

Going forward, with indication of pro-longed pause from Apex bank, the entire focus would be on

global macroeconomic factors - such as trends of US treasury yields, investment by foreign portfolio

investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar

and crude oil price movement for direction of yields. Also, as systemic liquidity moves to more

realistic levels the shorter end of the curve might witness adjustments.

Accordingly, our earlier strategic shift to accrual funds have received further impetus and we

strongly believe till the clouds clear on further direction on interest rates, it will be an apt strategy to

stick to accruals.

5.65

5.80

5.95

6.10

6.25

6.40

6.55

6.70

6.85

7.00

7.15

7.30

7.45

3 m

on

ths

6 m

on

ths

1 y

ear

2 y

ear

3 y

ear

4 y

ear

5 y

ear

6 y

ear

7 y

ear

8 y

ear

10

ye

ar

11

ye

ar

28/04/2017 31/03/2017

AUM Movement (Rs. in Crore)

_________ __________

Debt category saw fall

in its AUM m-o-m.

The AUM reduced by

6.38% m-o-m. The

AUM decreased from

Rs. 8.12tn in Feb’17

to Rs. 7.61tn in

Mar’17. The category

accounts for 43.35%

of the overall assets

of the Indian MF

industry. The fall in

AUM was due to

outflows witnessed in

Income and Gilt

categories. While, the

category witnessed

healthy growth of

30.35% y-o-y.

The Equity category

saw an inflow of

0.14tn in Mar’17

against 0.11tn in

Feb’17. This also

marks the 12th

straight month of

inflows into equity

category. The robust

inflow pushed up

the AUM of Equity

category from Rs.

5.97tn in Feb’17 to

Rs. 6.28tn in Mar’17;

registering the

growth of 5.22% m-

o-m. The category

rose on back of

combined inflows

witnessed in Equity,

Balanced and ELSS

funds.

Liquid fund assets

under

management fell

during the period

under review. It

declined by 5.33%

m-o-m. The AUM

reduced from Rs.

3.32tn in Feb’17 to

Rs. 3.14tn in

Mar’17. It

witnessed net

outflows of Rs.

0.06tn during the

month. While, the

category witnessed

a y-o-y growth of

57.51% and 1.73%

growth q-o-q.

The total industry’s

AUM fell

marginally by

1.92%, or Rs.

0.34tn. The fall in

AUM was on back

of outflows

witnessed in

Income, Liquid and

Gilt funds. While,

only Equity and

ETF categories saw

inflows in Mar’17

as against Feb’17.

While, the AUM

saw an exceptional

growth of 42.33%

at Rs. 17.55tn in

fiscal 2017 from

Rs. 12.33tn a year

ago.

The other ETFs

category witnessed

maximum growth in

AUM m-o-m; it rose

from Rs.0.40tn in

Feb’17 to Rs.0.44tn in

Mar’17. It grew by

10.68% m-o-m.

However, the AUM of

Gold ETF fell during

the month by 4.96%

to Rs. 0.05tn in

Mar’17. The overall

ETF category

accounts for only

2.84% of the overall

assets of the Indian

MF industry.

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

De

c-1

5

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6

May

-16

Jun

-16

Jul-

16

Au

g-1

6

Sep

-16

Oct

-16

No

v-1

6

De

c-1

6

Jan

-17

Feb

-17

Mar

-17

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

Investment Strategy

Model Portfolios

Safe Moderate Growth High-Growth

Cash 20% 15% 5% 5%

Liquid/Ultra Short Term MFs

Axis Liquid Fund

ICICI Pru Liquid Fund

TATA Money Market Fund

Birla Sunlife Savings Fund

Kotak Low Duration Fund

HDFC FRIF-ST

Debt 60% 50% 20% 5%

Debt MF

L&T Income Opportunities Fund

TATA Corporate Bond Fund

UTI Income Opportunities Fund

Reliance RSF Debt Fund

Reliance Corporate Bond Fund

SBI Corporate Bond Fund

Corporate Fixed Deposit

Bajaj Finance Limited

HDFC Limited

Mahindra & Mahindra Financial Services

Shriram Transport Finance

Dewan Housing Finance

Bonds/NCDs Up to AA only

As per availability Up to AA-

As per availability

Equity 20% 35% 60% 70%

Mutual Funds

Large Cap Funds BSL Top 100

Kotak 50

IPRU Top 100

BSL Top 100

Kotak 50

SBI Bluechip

Birla Top 100

Diversified Funds Kotak Select

Focus

DSPBR Opps.

SBI Multicap

L&T India Value

Motilal Oswal Focused 35

TATA Equity P/E

L&T India Value

Franklin High Growth Cos.

Midcap Funds

Canara Emerging equities

HDFC Midcap Opps.

L&T Emerging Business Fund

Kotak Emerging Equity Fund

Reliance Smallcap Fund

HDFC Midcap Opps.

Canara Emerging equities

Theme Funds

Reliance Diversified Power Sector Fund

SBI PSU Fund

SBI Comma Fund

Kotak Infra & Reforms Fund

PMS Motilal Oswal IOP

Kotak Special Situations Value Strategy

AIF Nil Nil 15% 20%

As Per availability

Our Product Recommendations

Equity Mutual Funds – BUY Recommendations & Performance

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

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

Birla Sun Life Top 100 Fund 8.7 25.1 18.9 19.1 3.9 0.4

ICICI Prudential Top 100 Fund 10.5 29.6 17.0 17.3 3.5 0.5

Kotak 50 8.1 19.9 17.7 16.3 3.9 0.3

SBI Bluechip Fund 6.4 20.8 21.1 20.4 4.1 0.3

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

Canara Robeco Emerging Equities 16.0 42.5 37.5 29.4 5.3 0.5

Franklin India Smaller Companies Fund 10.4 33.0 33.3 31.6 4.4 0.5

HDFC Mid-Cap Opportunities Fund 12.0 39.0 29.8 26.2 4.5 0.5

Kotak Emerging Equity Scheme 11.7 37.7 35.3 26.2 4.6 0.5

L&T Emerging Businesses Fund 17.7 55.1 -- -- 5.1 0.7

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

DSP BlackRock Opportunities Fund 10.6 33.5 24.1 21.2 4.7 0.4

Franklin India High Growth Companies Fund 10.5 26.2 26.6 24.5 3.9 0.4

IDFC Classic Equity Fund 11.8 34.2 18.6 17.1 4.1 0.5

Kotak Select Focus Fund 12.0 33.3 25.2 22.2 4.2 0.5

L&T India Value Fund 13.8 40.3 33.0 26.8 4.7 0.5

Motilal Oswal MOSt Focused Multicap 35 Fund 13.5 37.4 -- -- 5.0 0.5

SBI Magnum Multi Cap Fund 8.5 25.8 25.0 20.8 4.1 0.4

Tata Equity P/E Fund 16.8 46.4 28.8 22.8 4.1 0.7

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

Birla Sun Life Tax Relief 96 8.7 24.4 24.8 21.7 4.4 0.3

DSP BlackRock Tax Saver Fund 9.4 32.3 24.5 21.9 4.5 0.4

Franklin India Taxshield 6.9 18.8 21.4 19.2 3.5 0.3

Mirae Asset Tax Saver Fund 12.4 40.1 -- -- 4.2 0.6

Reliance Tax Saver (ELSS) Fund 10.2 28.3 24.7 21.2 4.1 0.4

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

DSP BlackRock Balanced Fund 6.3 25.4 21.4 15.8 3.8 0.4

HDFC Balanced Fund 8.3 24.1 20.3 18.2 2.7 0.5

ICICI Prudential Balanced 8.1 25.7 19.8 18.9 2.5 0.6

L&T India Prudence Fund 9.2 23.4 21.1 19.2 3.2 0.4

Reliance RSF - Balanced 8.0 21.4 19.4 17.5 3.3 0.4

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

Canara Robeco Infrastructure Fund 16.2 36.2 26.3 18.4 5.1 0.4

Kotak Infrastructure & Economic Reform Fund 16.6 35.0 28.8 20.7 4.3 0.5

L&T Infrastructure Fund 19.7 46.6 27.6 20.6 5.0 0.6

Reliance Diversified Power Sector Fund 26.6 45.7 21.6 13.5 4.7 0.6

SBI Magnum COMMA Fund 13.8 47.0 20.9 12.3 4.5 0.6

SBI PSU Fund 17.4 46.2 15.6 9.0 3.9 0.7

New Entrants Less than one-year absolute, CAGR returns more than one year, Returns as on 28 Apr 2017

Equity Mutual Funds – HOLD Recommendations & Performance

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

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

Birla Sun Life Frontline Equity Fund 7.9 24.6 18.7 19.2 4.1 0.3

ICICI Prudential Focused Bluechip Equity Fund 8.6 23.7 17.0 17.0 3.5 0.4

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

DSP BlackRock Micro Cap Fund 11.1 41.2 41.6 31.8 4.3 0.6

Mirae Asset Emerging Bluechip Fund 14.0 44.0 35.9 31.4 4.5 0.6

Reliance Small Cap Fund 16.0 45.6 38.6 32.5 5.0 0.6

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

Mirae Asset India Opportunities Fund 9.4 28.6 21.9 20.8 4.1 0.4

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

IDFC Tax Advantage (ELSS) Fund 12.8 29.5 21.9 21.1 4.6 0.4

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

Franklin India Balanced Fund 4.3 15.0 18.7 16.9 2.6 0.3

SBI Magnum Balanced Fund 2.3 14.9 17.5 18.4 2.9 0.2

Tata Balanced Fund - Plan A 5.4 18.6 20.1 18.3 3.1 0.3

Less than one-year absolute, CAGR returns more than one year, Returns as on 28 Apr 2017

Equity Mutual Funds – 4Q FY17 Rankings Update

New Entrants

Category Large-Cap Funds

Scheme Name Kotak 50

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

Category Diversified Funds

Scheme Name Tata Equity P/E Fund

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

Category Mid & Small Cap Funds

Scheme Name Kotak Emerging Equity Scheme

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

Category Mid & Small Cap Funds

Scheme Name L&T Emerging Businesses Fund

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

Category ELSS Funds

Scheme Name Mirae Asset Tax Saver Fund

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

Category ELSS Funds

Scheme Name Birla Sun Life Tax Relief 96

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

Category Balanced Funds

Scheme Name DSP BlackRock Balanced Fund

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

Category Sectoral & Thematic Funds

Scheme Name Reliance Diversified Power Sector Fund

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

Equity PMS Offerings

Sr. No

Name of the PMS

Fund Manager Theme Ticket Size

Suitable for Our View

1 Tata Consumption1

Consumption related

50 Lacs Growth & High-Growth

HOLD/BOOK PROFIT

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

3 Motilal Oswal NTDOP2

Manish Sonthalia Small and Mid Cap

25 Lacs High Growth HOLD

4 Birla Core Equity PMS2

Vishal Gajwani, Ms. Natasha Lulla

Diversified 25 Lacs Growth & High-Growth

HOLD/BOOK PROFIT

5 Motilal Oswal IOP

Varun Goel Small and Mid Cap

25 Lacs Growth & High-Growth

BUY

6 Kotak Special Situations Value Strategy

Anshul Saigal Diversified 25 Lacs Growth & High-Growth

BUY

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

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

Name of the PMS Theme Suitable for

Tata Consumption Consumption related Growth & High-Growth

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

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

Model Portfolio Performance:

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

(Dec’10)

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

181.01%

Nifty 50 1.42% 8.68% 7.71% 18.53% 38.94% 72.77%

Returns <= 1 year: Absolute. Returns > 1 year CAGR, 28th Apr’17


ICICI PIPE Small Cap High-Growth

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

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


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

PIPE Portfolio Series 1 15.39% 1.60% 38.06% 41.72%

S&P BSE Small-Cap 19.82% 12.93% 36.92% 29.71%

Returns <= 1 year: Absolute. Returns > 1 year CAGR, 31st Mar’17


Motilal Oswal NTDOP Small & Mid Cap High-Growth

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

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


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

Motilal Oswal NTDOP 17.47% 5.75% 37.84% 34.42% 31.53%

Nifty Free Float Midcap 100

19.83% 11.57% 34.85% 25.92% 17.40%

Returns <= 1 year: Absolute. Returns > 1 year CAGR, 31st Mar’17


Birla Core Equity PMS Diversified Growth and High-Growth

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

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



Birla Core Equity PMS 16.30% 2.70% 24.60% 39.70% 34.40%

CNX 500 14.50% 8.10% 23.90% 15.20% 13.60%

Absolute returns as on 31st Mar’17 till 1 year and annualized for greater than 1 year


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

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

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



Motilal Oswal IOP 20.43% 14.23% 59.57% 30.24% 21.81%

BSE 200 13.69% 7.32% 22.47% 48.87% 84.99%



Kotak Special Situations Value Strategy

Diversified Growth & High-Growth

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

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



Kotak Special Situations Value

14.96% 14.00% 48.32% 45.10% NA

NIFTY 500 14.50% 8.12% 23.91% 15.22% NA


Recommended Fixed Deposits

Name of the FD

Credit Rating

Rationale Interest Payout Options

Mthly Qrtly Half-yrly

Yrly Cum

Bajaj Finance

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

√ √ √ √ √

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

√ √ √ √ √

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

√ √ √ √ √

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

× √ √ √ √

Name of the FD

Credit Rating

Rationale Interest Payout Options

Mthly Qrtly Half-yrly

Yrly Cum

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

× √ √ × √

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

√ √ √ √ √

Shriram Transport Finance

AAA/ AA+

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

√ √ √ √ √

Debt Fund Recommendations

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

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

91 days.

Recommended Schemes

Axis Liquid Fund

ICICI Liquid Fund

Kotak Floater - ST

L&T Liquid Fund

Tata Money Market Fund

Corpus (Rs. Cr) 13529 28040 11004 10284 9203

Avg Maturity (Days) 53 63 51 44 47

7 days returns (percent)

6.39 6.39 6.37 6.31 6.37

1 mth Return (percent) 6.65 6.65 6.63 6.50 6.55

Asset Profile (percent)

AAA/P1+ 105 117 95 80 91

AA+/P1 2 1 0 0 0

Below AA+ 0 0 0 0 0

Cash/Call/Others -7 -18 5 20 9

Simple Annualized Returns as on 28 Apr ‘17, Portfolio as on Mar’17

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

term maturities higher than 91 days.

Recommended Schemes

Birla Sun Life Savings Fund

HDFC FRIF STF

IDFC Ultra Short Term

Fund

Kotak Low Duration

Fund

SBI Ultra Short Term Debt Fund

Corpus (Rs. Cr) 16622 11505 3404 4499 8131

Avg Maturity (Days) 577 420 479 318 237

7 days returns (percent)

6.27 5.22 6.18 6.64 6.24

1 mth Return (percent)

8.09 7.09 7.38 8.20 7.47


AAA/P1+ 81 76 63 28 76

AA+/P1 11 9 27 8 10

Below AA+ 12 11 8 59 15

Cash/Call/Others -4 4 3 5 -2


Credit Funds

Recommended Schemes

L&T Income Opportuniti

es Fund

Reliance Corporate Bond Fund

Reliance RSF Debt

Fund

SBI Corporate Bond Fund

Tata Corporate Bond Fund

UTI Income Opportuniti

es Fund

Corpus (Rs. Cr) 2584 5118 8993 3272 351 2579

Avg Maturity (days) 931 1573 872 1088 420 909


8.12 9.38 8.31 8.56 6.62 7.32


7.99 7.55 7.54 7.98 6.33 7.90


AAA/P1+ 27 28 30 44 71 29

AA+/P1 2 13 15 8 11 8

Below AA+ 56 56 49 44 11 51

Cash/Call/Others 15 2 5 4 6 12


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