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Mutual FundReview

Mutual Fund Review

May 18, 2016

ICICI Securities Ltd. | Retail MF Research

Note: Whenever, returns for the scheme are shown in the report, they are for the growth option of the scheme.

Mutual Fund Review

Equity Markets ....................................................................................... 2 Debt Markets.......................................................................................... 2 MF industry synopsis ............................................................................ 3 MF Category Analysis............................................................................ 5 Equity funds......................................................................................... 5 Equity diversified funds....................................................................... 6 Equity Infrastructure fund.................................................................... 7 Equity Banking Funds.......................................................................... 8 Equity FMCG........................................................................................ 8 Equity Pharma Funds .......................................................................... 9 Equity Technology Funds.................................................................... 9

Exchange Traded Funds (ETF) ....................................................... 10

Balanced funds ............................................................................... 11

Monthly Income Plans (MIP) .......................................................... 11

Arbitrage Funds .............................................................................. 12

Debt funds ...................................................................................... 13 Liquid Funds ...................................................................................... 14 Income funds..................................................................................... 15 Gilt Funds ........................................................................................ 16 Gold ETFs: Medium term outlook benign............Error! Bookmark not

defined. Model Portfolios .................................................................................. 20

Equity funds model portfolio.......................................................... 20 Debt funds model portfolio ............................................................ 21

Top Picks.............................................................................................. 22

May 18, 2016


Page 2

Equity Markets Update

After recovering sharply in March and April from the fall witnessed at the start of the year, Indian equity markets consolidated in May 2016

Overall, equity markets seem to be trading in a broad range with value buying emerging at lower levels and some profit booking being witnessed at higher levels

Inflation rose to 5.39% in April from a six-month low of 4.83% in March. The uptick was largely driven by soaring food price index (6.3% in April vs. 5.2% in March) in the month mainly led by a substantial increase in vegetables, fruits and sugar prices. The surprisingly sharp increase in food prices can be attributed to high temperatures and water shortages in various parts of the country, which could keep certain food prices elevated for a short period while a good monsoon can offset these negative developments

Beaten down sectors like banking, real estate, consumer goods and capital goods outperformed since Budget in the market recovery. Oil & gas and PSU sectors underperformed on account of negative outlook

Outlook

Currently, Indian markets are being dominated by global factors. Therefore, any development in global capital markets is likely to have an impact on the Indian equity market

Domestic macroeconomic variables like benign inflation, increased expectations of normal monsoons, implementation of the Seventh Pay Commission along with increased government ordering in sectors like road, railways and power are set to provide the much needed fillip to economic activity

Indian markets after been in a declining trend from March 2015 to February 2016, recovering some their gains post Budget. Markets seem to have formed a near term bottom in February 2016. Indian markets may consolidate in the near term but the overall downward trend, which started last year, seems to have reversed

The majority of the Q4FY16 results, so far, have been in line or better than expectations. Sectorally, most companies among auto, private banks & NBFC, cement, telecom and FMCG sectors declared good results. Earnings growth is likely to pick up further in coming quarters. Earnings growth for FY17 and FY18 should be significantly better than that in the last few years

If global markets remain supportive, Indian markets are likely to perform well as the domestic economic outlook is improving on normal monsoon, government policy action and improved liquidity from RBI. Seventh Pay Commission and OROP remain a trigger for a consumption boost for the economy

Global markets also seem to have stabilised after a rebound in commodity prices, particularly crude oil. The continued easing of the monetary policy stance by European Central Bank (ECB), Bank of Japan and China along with the dovish stance of the US Federal Reserve while indicating a further rate hike provided the much needed sentiment boost to global investors. Importantly, emerging markets witnessed a return of foreign inflows with most emerging markets outperforming in the last few months. Stability in commodity and currency markets also bode well for global equity markets

We believe investors should be bullish on equity markets and accumulate on dips for the next two to three years

CNX Nifty: Market rebounds sharply regaining losses for the year post Budget

6500

7000

7500

8000

8500

9000

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

May

-16

Source: Bloomberg, ICICIdirect.com Research

Midcap, small cap outperform Sensex…

0.1 0.4 0.6

1.7

2.5

0.0

1.0

2.0

3.0

BSESensex

BSE 100 BSE 500 BSESmall Cap

BSEMidcap

Retu

rn (%

)

Source: Bloomberg, ICICIdirect.com Research Returns : April 13, 2016– May 16, 2016

Realty, Banking delivers highest return among all sectors

-2.8

-2.7

-2.3

-1.2

0.0 0.1

0.1

0.4 0.

7 1.0 2

.6

6.0

-3

-1

1

3

5

7

Oil &

Gas

PSU

Auto

Met

al IT

Heal

thca

re

Sens

ex

FMCG

Cap.

Good

s

Con.

Dura

Bank

ing

Real

ity

Retu

rn (%

)

Source: Bloomberg, ICICIdirect.com Research Returns : April 13, 2016– May 16, 2016

Research Analyst

Sachin Jain [email protected]

Isha Bansal [email protected]


Page 3

Debt Markets Update

Bond yields remained steady as investors were cautious amid lack of fresh economic triggers. Yields fell following an escalation in US treasury prices but the scenario reversed on caution ahead of the weekly auction of government debt

Benchmark 10 year G-sec yields remained absolutely flat during April 2016 at around 7.45%

Liquidity continued to be in deficit but improved in April. It is expected to ease further in coming months as the RBI moves to improve the deficit situation. RBI has committed to progressively reduce liquidity deficit in system from 1% of NDTL to 'a position closer to neutrality.' RBI announced various liquidity easing measures including OMOs. Start of the new financial year also helped bring back the year end deficit

Improving liquidity helped reduce yields on short-term papers across instruments viz. CDs, CPs and the short-term corporate bond market

The structural improvement in the form of benign inflation and prospects of normal monsoons continue to lead to a positive outlook in the medium-term

Headline CPI for April 2016 came in much higher-than-expected at 5.39% vs. 4.83% in the previous month as food inflation climbed to 6.32% from 5.19% in the previous month on account of ongoing heat waves and acute water shortages in various parts of the country. In its initial forecast for 2016 south-west monsoon, the Indian Meteorological Department (IMD) predicts high probability of an above-normal monsoon. This will provide a much needed breather to the economy that has witnessed two consecutive years of poor monsoon. However, the actual impact would also depend on the spatial and inter-temporal distribution of monsoons and the sowing pattern

Outlook

Overall liquidity measures announced are extremely positive for funds at the short to medium term maturity papers. Therefore, bulk of the debt investment should be in good quality short-term debt funds. Ultra short-term debt fund and liquid funds are likely to benefit from the fall in short-term yields

The Indian Meteorological Department’s (IMD) announcement of expectation of normal monsoons in its first forecast for the season cheered the markets. The IMD has predicted that rains in 2016 would be between 104 and 110% of the long-term average. Better monsoon would improve the inflation prospects and, therefore, would be medium term positive for the debt markets

Although the outlook on G-Sec yields remains positive, the duration strategy should be played through actively managed income or dynamic bond funds. They will be able to make swift duration change within G-secs or switch between corporate bonds and G-secs within specific duration

The structural improvement in terms of lower inflation,

prospects of better monsoons and an improved liquidity

environment augur well for the fixed income market

The 10 year G-sec yields correct 32 bps post Union Budget FY16

7.47.57.67.77.87.98.0

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

May

-16

Yiel

d (%

)

Source: Bloomberg

CPI April at 5.39% well within RBI's limit of 6%

3.0

4.0

5.0

6.0

7.0

Apr-1

5

Jun-

15

Aug-

15

Oct-1

5

Dec-

15

Feb-

16

Apr-1

6

CPI Inflation

%

6% target

Source: Bloomberg

G-sec yields turns flat for longer maturities

7.5

7.47.4

7.47.5

7.37.1

7.17.27.37.47.57.6

1yr 3yr 5yr 10yr

Yiel

d (%

)

16-May-16 13-Apr-16


Corporate bond yield curve shifts higher for higher maturities

8.0 8.1

8.2 8.38.0 8.1

8.2 8.2

7.3

7.8

8.3

8.8

1yr 3yr 5yr 10 yr

Yiel

d (%

)

16-May-16 13-Apr-16



Page 4

MF industry synopsis In FY16, there was an inflow of | 103288 crore into the Indian mutual

fund industry. Out of the total inflow, | 74024 crore came into equity and ELSS funds. Income funds were able to collect | 14738 crore in FY16. Total AUM at the end of FY16 was | 1232824 crore, increasing 14% YoY, of which 46% was held by income funds and 31% by equity funds. In April 2016, there was a net inflow of | 170161 crore of which | 31448 crore was in income funds and | 4438 crore in equity funds.

Exhibit 1: Growth of total industry AUM over the years…

300000

500000

700000

900000

1100000

1300000

FY10 FY11 FY12 FY13 FY14 FY15 FY16

-10%

0%

10%

20%

30%

40%

50%

Total AUM Growth (YoY)(RHS)

Source: Company, ICICIdirect.com, Research

Exhibit 2: Category-wise inflow/outflow for FY16 & FY15…

-10000

10000

30000

50000

70000

EQUI

TY

BALA

NCE

D

LIQU

ID/M

ONEY

MAR

KET

INCO

ME

ELSS

- EQ

UITY

GILT

GOLD

ETF

s

OTHE

R ET

Fs

FY16 FY15

Source: Company, ICICIdirect.com, Research

Exhibit 3: Category-wise AUM share at the end of FY16 of major AMCs

0%

20%

40%

60%

80%

Fran

klin

Tem

plet

o n

DSP

Bla c

kRoc

k

UTI

HDFC SB

I

ICIC

I Pru

dent

ial

Relia

nce

Capi

tal

Birla

Sun

life

Kota

k M

ahin

dra

IDF C

Equity % Debt% Others%

Source: ACE MF, ICICIdirect.com Research

Exhibit 4: AUM share March 2016…share of equity AUM maintained YoY

Income47%

Gilt1%Money Market

16%

Gold ETFs 1%

Equity31%

Other ETFs1%

FOF(Overseas)0%

Balanced3%

Source: AMFI, ICICIdirect.com Research

Exhibit 5: Top 10 AMCs based on average AUM

1758

81

1757

79

1584

08

1365

03

1067

81

1063

09

6694

7

5849

5

5212

9

3913

3

1485

59

1616

34

1371

24

1197

52

7494

2

9275

1

7044

4

4137

8

5171

5

3783

8

25000

50000

75000

100000

125000

150000

175000

200000

Ipru

MF

HDFC

MF

Relia

nce

MF

Birla

Sunl

ife M

F

SBI M

F

UTI M

F

Fran

klin

Tem

pelto

nKo

tak

Mah

indr

a

IDFC

MF

DSP

Blac

kRoc

k

| Cr

Mar-16 Mar-15


Exhibit 6: Fastest growing AMCs in FY16

0%

40%

80%

120%

Edel

wei

ss

Mot

ilal

Mira

e

Indi

abul

ls

SBI

Axis

Kota

kM

ahin

dra

LIC

Nom

ura

IIFL

Baro

daPi

onee

r

0

20000

40000

60000

80000

100000

YoY Growth in AUM Total AUM (| Cr.)



Page 5

MF Category Analysis

Equity funds Midcap funds outperformed large cap funds by delivering positive

returns of 3.1% over a one year period whereas large cap funds delivered negative return of 4.1% over the same time period

Among sector funds, all delivered negative returns with IT and FMCG the exception delivering positive return of 6.9% and 4.1%, respectively, over a one year period

Exhibit 7: IT, FMCG clear winners (returns as on May 16, 2016)

6.9

4.1

3.1

-1.1

-1.8

-4.1

-5.5

24.7

11.8

27.8

22.9

17.2

12.6 14

.3

5.7

14.0

18.6

18.9 20

.4

11.9

9.8

6.1

5.9

-9.4

-15

-10

-5

0

5

10

15

20

25

30

Technology FMCG Mid cap Pharma Diversified Large Cap Infrastructure Banking

Retu

rns

(%)

1 year 3 Year 5 year

Source: Crisil Fund Analyser, ICICIdirect.com Research ; Returns over one year are compounded annualised returns

Exhibit 8: Equity funds witness moderate inflows

66515444

-1370

443863245840

848110584

10076

12273

6133

9156

6269

6379

3644

29142522

-4500-2500-50015003500550075009500

1150013500

Dec-

14Ja

n-15

Feb-

15M

ar-1

5A

pr-1

5M

ay-1

5Ju

n-15

Jul-1

5A

ug-1

5Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr

-16

Net

Inflo

w (

| Cr

)

Net inflow (Equity + ELSS)


Exhibit 9: Equity AUM increases in April 2016 on inflows

3194

7834

0936

3457

3934

5139

3451

2936

5166

3723

1339

3602

3817

2338

6517

3967

6540

2671

4056

6238

4350

3546

4238

6403

3997

75150000200000250000300000350000400000450000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

| la

kh C

rore

Equity +ELSS


Exhibit 10: Deployment of equity funds

Allocation Banks Software Pharma AutoConsumer

Non-Durables

Finance Petroleum Construction CementIndustrial Products

| crore 82196 41563 31617 27526 24134 23716 18230 16477 15876 14583

% of total 19.9 10.1 7.7 6.7 5.9 5.8 4.4 4.0 3.9 3.5

Source: Sebi, ICICIdirect.com Research, Sector Classification (as per Amfi)

There was inflow of | 74024 crore into equity funds in

FY16 but the equity AUM increased by | 41264 crore only.

This was mainly led by a decline in market value

Exposure to banks and finance stocks together account for

the highest proportion with 25% of equity assets followed

by technology and pharma


Page 6

Equity diversified funds

Equity diversified funds witnessed a fall of 1.8% last year. On the other hand midcap funds were outperformers , gaining 3.1% during last year whereas large caps funds dropped 4.1% against the BSE Sensex return of -6.9% as on May 17, 2016

Indian markets after been in a declining trend from March 2015 to February 2016, recovering some their gains post Budget. Markets seem to have formed a near term bottom in February 2016. Indian markets may consolidate in the near term but the overall downward trend, which started last year seems to have reversed

The beaten down sectors like banking, real estate, consumer goods and capital goods outperformed since budget in the market recovery. The oil & gas and PSU sectors underperformed on the negative outlook

Global markets also seem to have stabilised after a rebound in commodity prices, particularly crude oil. The continued easing of the monetary policy stance by European Central Bank (ECB), Bank of Japan and China along with the dovish stance of the US Federal Reserve while indicating a further rate hike provided the much needed sentiment boost to global investors. Importantly, emerging markets witnessed a return of foreign inflows with most emerging markets outperforming in the last few months. Stability in commodity and currency markets also bode well for the global equity markets

Markets have triggered a positive structural turnaround during the current up move post the Budget session bottom of 6825 as the index posted a faster retracement of a major falling segment for the first time in 13 months

We expect markets to enter a consolidation phase, going forward, to work off the overbought conditions developed after the strong rally in March. In the coming month, we expect the broader consolidation to pan out in the range of around 24000 to 26000 on Sensex levels while stock specific activity will remain in focus at the onset of the quarterly earnings season. We believe any dips to form a higher bottom in the coming month should be used as an incremental buying opportunity. We do not foresee the benchmarks going below the near term base of around 24000 levels on BSE Sensex

View Short term: Positive Long-term: Positive


Page 7

Recommended funds Large cap

Birla Sunlife Frontline Equity ICICI Prudential Focused Bluechip Equity SBI Bluechip

Diversified

Franklin India Prima Plus Fund Reliance Equity Opportunities ICICI Prudential Value Discovery Fund

Midcap HDFC Mid-Cap Opportunities Fund Franklin India Smaller Companies Fund SBI Magnum Global Fund

(Refer to www.icicidirect.com for details of the fund)

Equity Infrastructure fund The investment cycle that has been under pressure in the last few

years, has started showing signs of emerging green shoots as the government is focusing on infrastructure development (accounts for ~60% of planned investment vs. ~50% few years back). Furthermore, instances of stalled projects in the government vertical have come down sharply whereas the private sector is still seeing a slow recovery in stalled projects

We have also analysed the pattern of tendering in the last 18 months, which further validates that the government is reviving the investment cycle as the government accounts for ~99% of total tenders floated

In terms of segments, road, railways, water and power T&D lead the recovery, which will continue, going ahead, into FY17E as well. Out of total tenders floated during FY16 worth | 6.2 lakh crore, the share of the above segments comprised ~64.7% of the overall tendering activity amounting to ~| 4 lakh crore

Going ahead, while we believe there would be opportunities in infrastructure, we remain selectively positive on the sector

Preferred Picks

Franklin Build India Fund L&T Infrastructure Fund ICICI Prudential Infrastructure Fund

Refer www.icicidirect.com for

details of the fund

View Short-term: Positive Long-term: Positive


Page 8

Equity Banking Funds FY16 has been a tough year for banks with significant addition to NPAs,

SDR and 5/25 cases resulting from troubled corporate in infra, metals, textile and power

PSU banks saw 51% YoY surge in GNPA to | 390443 crore, leading provisions to double QoQ to | 43158 crore. PSBs reported a first loss after several years in bottomline at | 11003 crore for Q3. With lower credit growth remaining a hindrance (PSU - 8.8% YoY) and pressure of NPA still hovering around led by RBI’s asset quality review, we do not believe banks will see any near term improvement either in balance sheet or profitability. Capital raising will add further pressure as barring top banks most need capital in the near term. We are cautious on PSU banks for the next two or three quarters

On the other hand, though private banks reported a profit of | 11364 crore in Q3FY16, still asset quality pain remained significant for them. Private banks also saw higher stress with 46% GNPA surge to | 45577 crore and 66% NNPA surge to | 20349 crore. Strong topline growth enabled a better performance in private banks. Corporate exposure in pain sectors of large private banks will hurt them warranting higher provisions. However, better capital position will safeguard near term balance sheet as well as P/L concerns on RoE and RoA. We expect private banks to continue to outperform but sticking to quality large caps is recommended

We continue to maintain our underperform stance on the sector Preferred Picks

ICICI Prudential Banking & Financial Services Reliance Banking Fund UTI Thematic - Banking Sector Fund

Refer to www.icicidirect.com for

details of the fund

Equity FMCG Our FMCG coverage universe is expected to witness ~12.3% revenue

growth as we believe the expected normal monsoon may spur volume growth for rural India while urban recovery continues to remain slow. Benign input costs are likely to limit the extent of price-led sales growth

On the back of subdued commodity prices, RM cost (percentage of sales) for our coverage universe is expected to fall ~100 bps. However, we believe companies would increase promotional spends significantly to drive volume growth. This is expected to lead to a marginal increase in operating margins. We expect elevated margins for FMCG companies in near term. Our FMCG coverage universe is expected to witness ~16.5% increase in net profit.

We expect GST implementation to lead to a reduction in logistic cost, a simplified tax structure and level playing field for organised players in categories dominated by highly unorganised entities

Preferred Picks

ICICI Prudential FMCG Fund SBI FMCG Fund

Refer www.icicidirect.com

for details of the fund

View Short-term: Negative Long-term: Neutral

View Short-term: Neutral Long-term: Neutral


Page 9

Equity pharma funds We expect pharma universe revenue, EBITDA and PAT to grow at a

CAGR of 15.5%, 15.8% and 18.7% respectively, in FY16-18E

After outperforming the broader indices for five fiscals, the Nifty Pharma Index underperformed, thanks to scores of USFDA related cGMP issues, which weighed on sentiments. Paradoxically, the fiscal witnessed highest number of USFDA product approvals in the last five years. We expect some spillover effect in the first half of FY17 as well

We continue to maintain our positive view on the sector on the back of earning visibility, consistent operating cash flows, healthy operating margins, relatively low leverage and strong return ratios

Preferred Picks

Reliance Pharma Fund SBI Pharma Fund UTI-Pharma & Healthcare

Refer to www.icicidirect.com

for details of the fund

Equity Technology Funds

Tier-I IT companies reported average 1.7% QoQ dollar revenue growth in Q4FY16 (below our 2.2% growth estimates) vs. 0.5% in Q3FY16 and 1.2% decline in Q4FY15. Constant currency revenues grew 2.1% as dollar growth was negatively impacted (~40 bps) by cross currency headwinds. Inorganic investments were key margin headwinds partially offset by currency tailwinds and operational efficiency. CY16E IT budget commentary was consistent while FY17E earnings commentary was stable led by healthy deal signings and traction in digital technologies

Operationally, discretionary spending remains healthy in the US while Europe rebounded and led quarterly growth. Insurance, telecom and oil & gas verticals are structurally challenged and growth continues to be uneven

Upsides could be in line with earnings upgrades given blended valuations are at ~16x FY17E earnings. However, sharp sell-offs should be used to accumulate given long-term growth prospects

Preferred Picks

ICICI Prudential Technology Fund DSPBR Technology fund

Refer to www.icicidirect.com for

details of the fund




Page 10

Exchange Traded Funds (ETF) In India, three kinds of ETFs are available: Equity index ETFs, liquid

ETFs and gold ETFs

An equity index ETF tracks a particular equity index such as the BSE Sensex, NSE Nifty, Nifty Junior, etc

An equity index ETF scores higher than index funds on several grounds. The expense of investing in ETFs is relatively less by 0.50-1.00% in comparison to an index fund. The expense ratio for ETFs is in the range of 0.50-0.75%, excluding brokerage, while for index funds the expense ratio varies in the range of 1.0-1.5%. However, brokerage (which varies) is applicable on ETFs while there are no entry loads now on index funds

Tracking error, which explains extent of deviation of returns from the underlying index, is usually low in ETFs as it tracks the equity index on a real time basis whereas it is done only once in a day for index funds

ETFs also provide liquidity as they are traded on stock exchanges and investors may subscribe or redeem them even on an intra-day basis. This is unavailable in index funds, which are subscribed/redeemed only on a closing NAV basis

There are over 400 ETFs traded globally. ETFs are transparent and cost efficient. The decision on which ETF to buy should be largely governed by the decision on getting exposure in that asset class

Volumes are higher only in the Goldman Sachs Benchmark ETFs and tracking error is also lowest at 0.01%. Therefore, it is our top pick for investors wanting Nifty-linked returns

CPSE ETF is a new entry in the Goldman Sachs ETF offering. The ETF invests in select 10 PSU stocks and has been listed on the exchange since April. It has delivered 16% return since its launch

Exhibit 11: CPSE ETF leads negligible inflows

773

128

752623

-579-334

73

-216

469

1927

1038722

13851190

1866

71

1183

-1000

-500

0

500

1000

1500

2000

2500

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15Se

p-15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

Net

Inflo

w (

| Cr

)


Exhibit 12: AUM increases in April…

6702

7056 7795

8060

7404

7317

7322

7170

7032 89

20 1003

111

197

1188

712

645

1284

6 1606

316

400

0

5000

10000

15000

20000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

| Cr

ore

Other ETFs


Traded volumes should be the major criterion that is used

while deciding on investment in ETFs. Higher volumes

ensure lower spread and better pricing to investors...

Tracking error, though it should be considered, is not the

deciding factor as variation among funds is not huge...


Page 11

Balanced funds Balanced funds garnered a moderate amount of | 366 crore in April

2016. They witnessed an inflow of | 19743 crore in FY16. CY15 witnessed massive inflows in balanced funds. AUM of balanced funds has increased from | 26368 crore in March 2015 to | 39146 crore in March 2016. Over the years, the balanced space has emerged as one of the fastest growing equity categories and offers an ideal investment option for first-time equity investors

Balanced funds are hybrid funds. More than 65% of the overall portfolio is invested in equities. Hence, as per provisions of the Income Tax Act, 1961, any capital gains over one year become tax free. Also, dividends declared by funds are tax free

In case one separately invests 35% of one’s investible corpus in a debt fund, the same will be subject to higher taxation. However, if the whole corpus is invested in balanced funds, 100% shall have lower taxation applicable as mentioned above

After a sharp rally in equity markets, the funds can be a preferred investment avenue as the debt proportion serves to protect on intermediate relief rallies or the downturn while providing 65% participation on further upsides

Exhibit 13: Inflow into balanced funds remains volatile

1202 1425 992

4511

78366

1789

8351235

1491

1183

4419

1358

754880 941

0500

100015002000250030003500400045005000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

Net

Inflo

w (

| Cr

)


Exhibit 14: AUM increases…

2449

025

792

2650

726

368

2701

528

749

3225

934

550

3466

036

633

3768

238

559

4219

341

121

3910

439

146

4076

4

1300018000230002800033000380004300048000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

| Cr

ore

Balanced


Preferred Picks

ICICI Prudential Balanced - Advantage Fund

HDFC Balanced Fund

Tata Balanced Fund


Monthly Income Plans (MIP) An MIP offers investors an option to invest in debt with some

participation in equity, ~10-25% of the portfolio. They are suitable for investors who seek higher return from a debt portfolio and are comfortable taking nominal risk. The debt corpus of the portfolio provides regular income while the equity portion of the fund provides alpha. However, returns can also get eroded by a fall in equities

MIPs can be classified into aggressive MIP and conservative MIP based on its equity allocation. Risk averse investors should invest in MIPs with lower equity allocation to avoid capital erosion

The change in taxation announced in the Union Budget 2014, shall be applicable to MIP funds (refer to debt funds section for details)

Investors with a limited investible surplus and a lower risk

appetite but with a willingness to invest in equities can

look to invest in these funds


View Short-term: Neutral Long-term: Positive

MIP should be a preferred debt investment for funds that need to be parked for over two years


Page 12

Preferred Picks

Birla Sun Life MIP II - Savings 5 Plan

ICICI Prudential MIP 25

DSPBR MIP Fund

(Refer www.icicidirect.com for details of the fund)

Arbitrage Funds Arbitrage funds seek to exploit market inefficiencies that get manifested

as mispricing in the cash (stock) and derivative markets

Availability of arbitrage positions depends very much on the market scenario. A directional movement in the broader index attracts speculators in the market while cost of funding makes futures positions biased

Arbitrage funds are classified as equity funds as they invest into equity share and equity derivative instruments. Since these are classified as equity funds for taxation, dividends declared by the funds are tax free. No capital gains tax will be applicable if they are sold after a year

These funds can be looked upon as an alternative to liquid funds. However, for these funds, returns totally depend on arbitrage opportunities available at a particular point of time and investors should consider reviewing the same before investing. Returns of arbitrage funds are non-linear and, therefore, unsuitable for investors who want consistent return across time period

Arbitrage funds should be used as a liquid investment and should not be a major part of the investor’s portfolio

Availability of arbitrage positions depends very much on the market scenario. Directional movement in the broader index attracts speculators in the market while cost of funding makes future positions biased

In case of positive movement, long build-up in futures puts pricing in an upward bias and creates a window for direct arbitrage positions

On the other hand, negative bias attracts fresh sellers in the market. Speculators try to sell the stock much cheaper than theoretical prices. In such situations, reverse arbitrage opportunities arise

On the other hand, a range bound market does not give ample room to create arbitrage positions

Currently, there are few arbitrage opportunities available in the market which can lead to better returns

Preferred Picks

ICICI Prudential Equity - Arbitrage Fund – Regular IDFC Arbitrage Fund - (Regular) Kotak Equity Arbitrage Fund SBI Arbitrage Opportunities Fund




Page 13

Debt funds Exhibit 15: Category average returns

7.91 8

.60

7.478.

10 8.36

8.218.33

8.25 8.

69

6.76

7.99

7.107.

61 7.76 8

.47

0.001.002.003.004.005.006.007.008.009.00

10.00

6 months 1 year 3year%

Income UST Liquid Income ST Income LT Gilt Funds

Source: ACE MF, ICICIdirect.com Research Note : Returns as on May 16, 2016; Returns over one year are compounded annualised returns

Exhibit 16: Deployment of funds: March 2016

CP Bank CD

Bank CD

Bank CD

Corporate Debt

0

5000

0

1000

00

1500

00

2000

00

2500

00

3000

00

3500

00

4000

00

Less than 90 days

90 days to 182days

182 days to 1 year

1 year and above

Government Securities

CP

Bank CD

Treasury Bills

CBLO

Other Money Market Investments

Corporate Debt

PSU Bonds

Securitised Debt

Bank FD

Source: SEBI, ICICIdirect.com Research Note : Holding as percentage of total AUM

Exhibit 17: G-sec yield curve

7.4

7.4

7.5

7.17.3

7.5

7.4

7.1

7.2

7.3

7.4

7.5

7.6

1yr 3yr 5yr 10yr

Yiel

d (%

)

16-May-16 13-Apr-16


Exhibit 18: Corporate bond curve

8.3

8.0

8.1

8.2

8.0

8.1

8.2

8.2

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

1yr 3yr 5yr 10 yr

Yiel

d (%

)

16-May-16 13-Apr-16


Benchmark 10 year G-Sec yield has witnessed correction of around 32 bps since Union Budget FY17

Investment into securities with maturity of less than 90 days and more than a year dominate total investments by mutual funds


Page 14

Liquid Funds Liquid fund returns moderated to 8.1-8.4% pre-tax from over 9%

earned in the previous year. Liquid funds witnessed an inflow of | 17109 crore in FY16. Returns, going forward, may be lower as the money market yield curve has shifted lower on improved liquidity

The Reserve Bank of India’s proactive liquidity management operations ensured that call rates stayed range bound around the policy rate reducing day-to-day volatility. CBLO rates also hovered just above the repo rate. With an improvement in liquidity conditions, the certificate of deposit and commercial paper rates in the three month bracket also eased over 100 bps to the 7.5-8% range from 9.1-9.3%. The same is likely to moderate returns in liquid funds, going forward

For less than a year, individuals in the higher tax bracket should opt for dividend option as the dividend distribution tax @ 28.325% is marginally lower. Also, though the tax arbitrage has reduced, they still earn better pre-tax returns over bank savings (3-4%) and current accounts (0-3%)

Changes in taxation rules announced in Union Budget 2014 are also applicable to liquid funds, as post tax returns in less than a three-year period get reduced for individuals falling in the higher tax bracket (30% tax slab) and for corporates

Exhibit 19: Call rates near repo rate

56789

101112

Jul-1

4A

ug-1

4Se

p-14

Oct-1

4N

ov-1

4De

c-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

Sep-

15Oc

t-15

Nov

-15

Dec-

15Ja

n-16

Feb-

16M

ar-1

6A

pr-1

6M

ay-1

6

%

Call rate


Exhibit 20: …CP/CD yields

7.0

7.5

8.0

8.5

9.0

9.5

Jul-1

4Au

g-14

Sep-

14Oc

t-14

Nov

-14

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

%

3M CD 3M CP


Exhibit 21: Flows into liquid funds remain volatile on institutional activity

-50,

786

85,8

488,

784

-112

,810

-15,

657

-47,

330

-60,

861

-42,

059 -5,2

602,

455

20,0

39-5

8,60

513

4,31

1

101,

592

89,9

78-7

0,48

9

103,

306

-200,000-160,000-120,000-80,000-40,000

040,00080,000

120,000160,000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

Net

Inflo

w (

| Cr

)


Exhibit 22: AUM increases drastically in April 2016

1784

91 265

358

2760

7016

2562

2667

2225

3899

2069

7930

0738

2341

4117

8507

2766

5523

6486

2329

7023

6700

2579

8619

9404

3370

49

80000130000180000230000280000330000380000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

| Cr

ore

Money Market


Preferred Picks

HDFC Cash Management Fund - Savings Plan SBI Magnum InstaCash Reliance Liquid Fund - Treasury Plan


View Neutral


Page 15

Income funds In income funds category, long term debt funds delivered 7.99%

absolute return last year (as on May 16, 2016) as 10-year G-sec yields have corrected to 7.45 levels from 7.78 levels after the Union Budget

Yields on longer duration securities, particularly government securities, continue to trade in a narrow range in the year 2015. The yields after started correcting since February 2016

Overall, the direction of the G-Sec yield remains southward given the overall improvement in macro economic data. However, higher supply particularly from state governments because of higher UDAY bonds may continue to put pressure on yields. Therefore, dynamic bond funds are better placed than pure duration or G-Sec funds

Short-term debt funds remain a stable performing category, especially in the current volatile environment. Credit funds with reasonable credit quality should be preferred over an aggressive credit fund

Exhibit 23: Income funds witness inflows in April…

-1,6

3212

,163

-152

-8,9

27 -2,5

10 4,2

055,

861

22,8

752,

474

-25,

875

15,0

14-9

25-1

4,04

831

,448

21,7

1312

,671

-26,

717

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

Net

Inflo

ws

(| .C

r)


Exhibit 24: AUM increases on account of inflows

5021

5452

0234

5223

6651

5773

5146

2852

2178

5289

0055

5884

5495

6357

5324

5791

1855

5364

5719

3357

1192

5654

5960

1609

5710

89

300000

400000

500000

600000

700000

Dec-

14Ja

n-15

Feb-

15M

ar-1

5Ap

r-15

May

-15

Jun-

15Ju

l-15

Aug-

15Se

p-15

Oct-1

5N

ov-1

5De

c-15

Jan-

16Fe

b-16

Mar

-16

Apr-1

6

| Cr

ore

Income


Recommended funds

Ultra Short Term Funds Birla Sun Life Savings Fund ICICI Prudential Flexible income

Short Term Funds Birla Sunlife short term fund HDFC Short Term Fund ICICI Pru Short Term Plan

Short Term Funds – Credit opportunities Birla Sunlife Short Term opportunities term HDFC Corporate debt opportunities ICICI Prudential Regular Savings

Long term/Dynamic Birla Sunlife income plus ICICI Prudential Dynamic Bond Fund IDFC dynamic bond fund


View Ultra-short term: Neutral

Short-term: Positive Long-term: Positive

Ultra-short-term fund returns are attractive on risk adjusted basis Short-term funds will benefit as the bond curve reverts to an upward slopping curve. Credit opportunities funds earn the highest accrual and are the best in the category Dynamic bond funds are suitable for all types of investors and for longer duration. They can take exposure to all durations as per the interest rate outlook and switch between G secs and corporate bonds


Page 16

Gilt Funds Gilt funds delivered 7.76% absolute one year return as on May 16, 2016

as lower inflation kept further rate cut expectations high. The government’s adherence to fiscal discipline by maintaining the fiscal deficit target for FY16-17 at 3.5% and a sharp cut in small saving deposit rates have led to a much anticipated rally in G-Sec yields. Benchmark 10 year G-Sec yield has witnessed a correction of around 35 bps in the last month

The liquidity situation was tight at the start of the year 2016 but eased off significantly post March

Inflation is not a policy concern currently with the RBI Governor saying inflation remains on a projected trajectory. Overall, assuming normal monsoon and current levels of oil and exchange rates, the RBI expects CPI to be 'inertial' and be around 5% by the end of FY17. However, it emphasises that implementation of the Seventh Pay Commission has not been factored in these projections whereas risks remaining broadly in the balance from monsoon and geopolitical events

The RBI has increased the FPI limit in government bonds to 5% of total outstanding government securities in a staggered manner by March 2018. Currently, FPI holding is 3.8%. The change in FPI limits has further opened up room for | 1,20,000 crore in central government securities by March 2018. All these augur well for debt funds, especially duration funds

The central government has signed a memorandum with the RBI setting out a clear inflation objective to bring the inflation rate to the mid-point of the band of 4 +/- 2%. CPI, as per our assessment, should average close to 5% for FY16 (on assumption of normal monsoons and a stable currency). The government’s commitment towards controlling price shocks and steps taken to improve the supply chain are commendable. Also, global prices have corrected sharply and are supportive ranging from crude, metal to food prices. Hence, inflation should likely stay on the intended path. This creates room for the RBI to cut rates by another 100-150 bps in the long term to earn a real return of ~1.5-2%

On the supply front, the Budget has pegged the market borrowing for FY16 at | 6 lakh crore on a gross basis and | 4.56 lakh crore on a net basis (out of this, | 2.34 lakh crore through dated securities and | 15000 through gold bonds have been scheduled for H2FY16). In Union Budget 2016-17, a fiscal deficit target of 3.5% was set for FY16-17 with net market borrowing of | 425000 crore and gross borrowing of | 6 lakh crore. The market was expecting a gross borrowing of around | 6.3 lakh to | 6.5 lakh crore

Although the outlook on G-Sec yields remains positive, the duration strategy should be played through actively managed income or dynamic bond funds. They will be able to make swift duration change within G-secs or switch between corporate bonds and G-secs within a specific duration

Recommended funds

Birla Sun Life Gilt Plus - PF Plan - Regular ICICI Prudential LT Gilt Fund - PF Option - Regular




Page 17

Exhibit 25: Outflows from gilt funds in April

2090

1813 20

58

1439

164

875

-279

190

143

1183

428

-80

-243 2

3

-572

-107

3

-372

-1500

-1000

-500

0

500

1000

1500

2000

2500

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

Net

Inflo

w (

| Cr

)



Page 18

Gold: Outlook stays positive, may consolidate in near term The year 2016 has turned the wave in favour of safe haven demand

amid extreme global capital market uncertainty. Global gold prices rallied around 20% since the start of 2016

Gold prices have been consolidating since March 2016 after rallying significantly in a short time at around | 30000 per 10 grams

Gold prices are close to US$1300 per ounce, highest since January 2015. Investors are flocking to the precious metal due to a much weaker dollar and the poor performance of stock markets. Gold is priced in dollars, so a weak dollar makes it a more attractive investment to non-US buyers

The dovish stance adopted by the US Federal Reserve in its interest rates guidance and a weak global growth environment leading to uncertain equity market outlook are the main catalysts for a rise in gold prices since the start of the year

The near term outlook remain positive on the dovish rate hike stance of the US Fed, a weak US dollar, an uncertain global economic outlook on weak global growth and lack of investment options for investors

The expectation of quantum of rate hike by the US Fed has declined significantly post recent turmoil in global capital markets. The market is now factoring in just one rate hike in the whole of calendar year 2016 especially post the dovish statement from the US Fed Chair. Interest rate hikes, in general, are negative for gold prices. With rate hike concerns receding, the overhang on prices also abates in the near term

The steep fall in industrial commodity prices, including crude oil led to a sharp fall in inflation and inflationary expectations across the globe and particularly in developed economies. The same led to reduced demand for gold as an inflationary hedge investment

Medium-term demand will, however, continue to be impacted by the overall global environment, particularly the US Fed rate hike trajectory

Exhibit 26: Gold prices after rallying sharply since start of 2016 on safe haven demand, hovers at same price in last one month

1050

1100

1150

1200

1250

1300

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

May

-16

Price ($/Ounce)

Source: Company, ICICIdirect.com Research

Exhibit 27: …domestic prices follows global trend

24000

25000

26000

27000

28000

29000

30000

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug

-15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

May

-16

|

Price (|/10 grams)

Source: Company, ICICIdirect.com Research

Investment demand for gold is also governed by the

broader economic climate. Currently, there is a lot of

uncertainty surrounding currency devaluation, global

economic growth prospects and equity & commodity

market turmoil. The same is likely to keep demand for

gold as a safe haven asset upbeat in the near term


Page 20

Model Portfolios

Equity funds model portfolio Investors who are wary of investing directly into equities can still get returns almost as good as equity markets through the mutual fund route. We have designed three mutual fund model portfolios, namely, conservative, moderate and aggressive mutual fund portfolios. These portfolios have been designed keeping in mind various key parameters like investment horizon, investment objective, scheme ratings, and fund management. We have changed the mutual funds portfolio in July, to include midcap funds as we believe an improvement in the growth scenario may generate better alpha in midcap stocks over large cap stocks Exhibit 29: Equity model portfolio Particulars Aggressive Moderate ConservativeReview Interval Monthly Monthly QuarterlyRisk Return High Risk- High Return Medium Risk -

Medium ReturnLow Risk - Low Return

Funds Allocation % AllocationFranklin India Prima Plus 20 20 20Birla Sunlife Frontline Equity 20 20 20ICICI Prudential Dynamic Plan - - 20SBI Bluechip Fund 20 20 20ICICI Prudential Value Discovery 20 20 20HDFC Midcap Opportunities 20 20

Total 100 100 100

Source: ICICIdirect.com Research

Exhibit 30: Model portfolio performance: One year performance (as on April 30, 2016)

-1%

-6%-7%

-9%-10%-9%-8%-7%-6%-5%-4%-3%-2%-1%0%

Aggressive Moderate Conservative BSE 100

%

Aggressive Moderate Conservative BSE 100

Source: Crisil Fund Analyser, ICICIdirect.com Research


Page 19

Exhibit 28: Outflows from gold ETFs continue…

-157

-165

-178 -

149

-146

-341

-227

-105

-112

-47 -38 -32

-111

-131

-74

-111

-69

-86 -76 -5

0

-82 -5

7

-69 -

40 -46

-81

-142

-105

-400

-200

0

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Apr-1

4

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct-1

4

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-1

6

Net

Inflo

w (

| Cr

)

Two years of outflow

Source: Amfi, ICICIdirect.com Research

There has been an outflow from gold ETFs in the past two

years. After the surge in gold prices since December 2015,

investors have preferred sovereign gold bonds over gold

ETFs and gold ETFs have witnessed outflows


Page 21

Debt funds model portfolio We have designed three different mutual fund model portfolios for different investment duration viz. less than six months, six months to one year and above one year. These portfolios have been designed keeping in mind various key parameters like investment horizon, interest rate scenarios, credit quality of the portfolio and fund management, etc.

Exhibit 31: Debt funds model portfolio Particulars

0 – 6 months 6months - 1 Year Above 1 Year

Objective LiquidityLiquidity with

moderate return Above FDReview Interval Monthly Monthly Quarterly

Risk ReturnVery Low Risk - Nominal Return

Medium Risk - Medium Return

Low Risk - High Return

Funds AllocationUltra Short term FundsBirla SL Savings Fund 20ICICI Pru Flexible Income Plan 20Short Term Debt FundsBirla Sunlife Short Term Fund 20 20Birla Sunlife Short Term Opportunites Fund 20Reliance Regular Savingfs Fund 20HDFC Short Term Opportunities Fund 20 20ICICI Prudential Regular Savings 20ICICI Prudential Short Term Fund 20IDFC SSI Short Term 20 20UTI Short Term Income Fund 20Long Term/Dynamic Debt FundsBirla SL Income Plus 20IDFC Dynamic Bond fund 20Total 100 100 100

Time Horizon

% Allocation

Source: ICICIdirect.com Research

Exhibit 32: Model portfolio performance: One year performance (as on April 30st, 2016)

8.25 7.97

6.72

7.78 8.16 7.96

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

0-6 Months 6Months - 1Year Above 1yr

%

Portfolio Index

Source: Crisil Fund Analyser, , ICICIdirect.com Research

*Index: 0-6 month’s portfolio – Crisil Liquid Fund Index; 6 months-1 year – Crisil Short term Index Above 1 year: Crisil Composite Bond Index


Page 22

Top Picks Exhibit 33: Category wise top picks

Category Top Picks

Largecaps Birla Sunlife Frontline equity Fund

ICICI Pru Focussed Bluechip Equity Fund

SBI Bluechip Fund

Midcaps HDFC Midcap Opportunities Fund

Franklin India Smaller Companies Fund

SBI Magnum Global Fund

Diversified Franklin India Prima Plus

Reliance Equity Opportunities

ICICI Prudential Value Discovery Fund

ELSS Axis Long Term Equity

ICICI Prudential Tax Plan

Franklin India Tax shield

Category Top Picks

Liquid Funds HDFC Cash Mgmnt Saving Plan

ICIC Pru Liquid Plan

Reliance Liquid Treasury Plan

Ultra Short Term Birla Sunlife Savings Fund

Reliance Medium Term Fund

ICICI Pru Flexible Income Plan

Short Term Birla Sunlife Short Term FundHDFC Short Term Opportunities Fund

ICICI Pru Short Term Plan

Credit Opportunities Fund Birla Sunlife Short Term Opportunities Plan

Reliance Regular Savings Fund

ICICI Prudential Regular Savings

Income Funds ICICI PrudenIncome FundBirla Sun Life Income Plus - Regular Plan

UTI Bond Fund

Gilts Funds ICICI Pru Gilt Inv. PF Plan

Birla Sunlife Constant Maturity 10 year

gilt plan

MIP Birla Sunlife Savings 5Aggressive ICICI Prudential MIP 25

DSP Blackrock MIP

Equity

Debt



Page 23

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected] Disclaimer ANALYST CERTIFICATION We Sachin Jain, CA and Isha Bansal, MBA (Fin) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or Funds. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) AMFI Regn. No.: ARN-0845. Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai – 400020. India ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock broking and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, distribution of financial products etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading distributors of Mutual Funds and participate in distribution of Mutual Fund Schemes of almost all AMCs in India. The selection of the Mutual Funds for the purpose of including in the indicative portfolio does not in any way constitute any recommendation by ICICI Securities Limited (hereinafter referred to as ICICI Securities) with respect to the prospects or performance of these Mutual Funds. The investor has the discretion to buy all or any of the Mutual Fund units forming part of any of the indicative portfolios on icicidirect.com. Before placing an order to buy the funds forming part of the indicative portfolio, the investor has the discretion to deselect any of the units, which he does not wish to buy. Nothing in the indicative portfolio constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the investor's specific circumstances. The details included in the indicative portfolio are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The funds included in the indicative portfolio may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs. This may not be taken in substitution for the exercise of independent judgement by any investor. The investor should independently evaluate the investment risks. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this indicative portfolio. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. ICICI Securities may be holding all or any of the units included in the indicative portfolio from time to time as part of our treasury management. ICICI Securities Limited is not providing the service of Portfolio Management Services (Discretionary or Non Discretionary) to its clients. Mutual fund investments are subject to market risks, read all scheme related documents carefully. Kindly note that such research recommended funds in indicative portfolio are not based on individual risk profile of each customer unless a customer has opted for a paid Investment Advisory Service offered by I-Sec. Investors should consult their financial advisers if in doubt about whether the product is suitable for them. The information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Limited. The contents of this mail are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. While due care has been taken in preparing this mail, I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any inaccurate, delayed or incomplete information nor for any actions taken in reliance thereon. This mail/report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. ICICI Securities and/or its associates receive compensation/ commission for distribution of Mutual Funds from various Asset Management Companies (AMCs). ICICI Securities host the details of the commission rates earned by ICICI Securities from Mutual Fund houses on our website www.icicidirect.com. Hence, ICICI Securities or its associates may have received compensation from AMCs whose funds are mentioned in the report during the period preceding twelve months from the date of this report for distribution of Mutual Funds or for providing marketing advertising support to these AMCs. ICICI Securities also provides stock broking services to institutional clients including AMCs. Hence, ICICI Securities may have received brokerage for security transactions done by any of the above AMCs during the period preceding twelve months from the date of this report

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