Awareness about financial - ICICI Directcontent.icicidirect.com/MoneyManagerMagazine/February... ·...
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Shilpa KumarMD & CEO
ICICI Securities Ltd.
Awareness about financial
planning has risen over the
years, but an important aspect
of financial planning overlooked
by us is that of 'estate planning'.
This systematic approach to
transfer and secure one's wealth
through the use of trust or will,
both during the course of life
and post demise is not very
c o m m o n a m o n g I n d i a n s
pr imar i ly because of two
reasons : either 'it's too early to
draft a will' or 'the portfolio is not
big enough'.
It's time we dispel this myth. An
estate plan is for everyone who
wishes to execute a smooth
transfer of their assets due to his/ her incapacitation, irrespective
of their current age or size of their portfolio.
Estate planning doesn't merely mean will drafting. It is an
extensive process that deals not only with legacy wishes or asset
distribution, but also can help your family to attain financial goals.
A will is a simple legal document that contains wishes of a person
regarding transfer of assets or even responsibilities. Contrary to
our normal perception, writing a will is very simple and does not
require much effort. A hand written will, witnessed by two is
legally valid. It is however advisable to get the provisions of the
will checked by an expert or a lawyer to ensure that there are no
ambiguous statements or conditions.
In the absence of a will, your estate is distributed according to
Indian succession law. However, the succession laws do not
consider specific needs of individual family, consequently
distribution of property may not be executed as per your wish.
Without a will, wealth of the deceased person is distributed
among his legal heirs in accordance with the laws of inheritance
applicable to him. It could be the Hindu Succession Act, the
Islamic inheritance law or Indian Succession Act.
A well-drafted will minimizes the time taken for transfer of assets,
which otherwise is a lengthy process. If the wealth creator is the
sole bread winner, his family may have to face financial crisis in
case of unforeseen delays in the transfer. A will reduces the
efforts to mobilize acquisition of assets by the heirs. A benefit for
the creator is that, he gets a better understanding of his finances
while listing down all his assets and investments in order to make
a will.
Apart from distribution of property, a will can also help entrust
responsibilities such as responsibility of a minor child in absence
of your spouse, guardianship of children until they come of
rightful age.
Lastly, I would like to clear up a common misconception among
investors that providing nomination facility is an alternative
estate planning strategy. While assigning nominee facilitates
transfer of assets to beneficiaries without producing succession
certificate, a nominee is only caretaker of the asset and not the
owner. The will is the most efficient tool to ensure your legacy is
passed on to the intended recipients.
The best of plans are meaningless without proper execution and
it is our endeavor to guide you at every turn of your life. I am sure
this edition of ICICIdirect Money Manager will help you realize the
importance of estate planning. Through our website
www.icicidirect.com and this magazine we want to make an
earnest attempt to partner with you in setting and achieving your
financial goals. Do walk into any of your Neighbourhood
Financial Superstore and talk to us.
ICICIdirect Money Manager February 20181
We spend the better part of our lives building assets, thus it is equally important to take steps towards protecting them. The most effective way to do so is through estate planning. The basic idea of estate planning is to transfer your wealth according to your wishes through wills or trusts. It's a mechanism by which your estate is distributed among people you choose and in a manner you find fair. The practice also reduces family disputes and ensures hassle-free legal process.
So why doesn't a person draw up a will to make sure that the assets are passed on to the rightful person in an orderly manner? One answer could be the fact that there is a lack of awareness about eligibility and also what goes behind the process of estate planning. We hope to put light on some of these questions through our magazine.
There is no specific age to create an estate plan. Anyone who has some asset holding in his/her name should create one. The use of wills and trusts in the right manner enables you in building an estate plan. In this issue of ICICIdirect Money Manager we highlight the process of estate planning and explain the criticality of creating a Will and other mechanisms like trusts to help you create an estate plan.
This month being the Budget month, we also feature a section 'Budget Review' stating key measures announced in Union Budget 18-19 and its impact on economy and various market sectors.
We also offer comprehensive information and analysis on equity diversified funds, the ever-green option for individuals to invest for their long-term financial goals. So read on, stay updated and involved. Do write in with your feedback at moneymanager@ icicisecurities.com and share your thoughts.
Your magazine is now also available on www.magzter.com, a digital newsstand.
ICICIdirect Money Manager February 2018
Editor & Publisher : Abhishake Mathur, CFA
Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey
CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Research Team
Coordinating Editor : Namrata Lonkar
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ICICIdirect Money Manager February 2018
MD Desk.........................................................................................1
Editorial...........................................................................................2
Contents..........................................................................................3
News..............................................................................................4
Stock ideas: Arvind Ltd. & TCI Express..........................................5
Flavour of the MonthEstate planning is a less common practice in India. Moreover, there is wrong notion attached to it: estate planning or writing a will is only for the old. We differ from this traditional thought. Read our cover story where we have looked at the various aspects of this concept to help you understand estate planning better...........................................................................................14
Budget review Find out exclusive highlights from Union budget 2018-19and what announcements will have significant impact on your investments, personal finance and overall financial status......24
Ask Our PlannerYour personal finance queries answered by our expert planner.........................................................................................34
Mutual Fund Analysis It's time to remain constructive in balanced funds and maintain stability in the portfolio. Check these top three funds recommended by our research team........................................37
This month on iCommunityTake a look at the latest activities on our unique information platform- iCommunity (for February 2018)................................47
Equity Model Portfolio.................................................................... 48
Quiz Time.......................................................................................52
Prime Numbers.............................................................................. 53
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The first to experience the future of wireless technology, well before most humans, will be South Korea's wild boars. That's because 5G, the fifth-generation wireless network, is making its worldwide debut at the Winter Olympics in Pyeongchang.
The technology will be used to ward off the porcine pests who roam the mountainous region around the Games with fast-acting systems that shoot rays, spew gases and emit tiger roars. About 1 billion people worldwide are likely to be 5G-enabled within five years.
Courtesy: Livemint
5G is here: super speed makes worldwide debut at Winter Olympics
Retail inflation eases slightly in January
Retail inflation slightly eased in January from a 17-month high in December but
remained above the 4 per cent medium term target of the Reserve Bank of India (RBI)
for the third straight month. Consumer food prices rose 4.70 per cent in January,
compared with 4.96 per cent in December, as prices of pulses fell 20.19 per cent from
a year earlier. Food prices have softened, reflecting eased vegetable costs following
stepped-up arrivals in markets of fresh crops.
The central bank expects retail inflation to pick up to 5.1-5.6 percent in April-
September before easing, assuming normal rainfall.
Courtesy: The Hindu
ICICIdirect Money Manager February 2018
Providing a tax efficient option for its customers, SBI Mutual Fund on Thursday announced the introduction of 'Bandhan SWP (Systematic Withdrawal Plan)' which offers monthly cash flow from an individual's mutual fund investments to their immediate family member.
The facility would be offered to both new and existing SBI Mutual Fund investors who can opt for it to provide a monthly sum of money from their investment in a growth option of an open-ended mutual fund scheme to either a parent, sibling, spouse or child.The minimum withdrawal amount is Rs 5,000 per month for a period of 12 months.
Courtesy: Business Standard
SBI Mutual Fund introduces tax-friendly systematic withdrawal plan
CBT to meet on February 21, decide on rates for 2017-18
The Central Board of Trustees of Employees' Provident Fund Organization (EPFO) will meet on February 21 to finalize the interest rate for 2017-18, officials said.
The retirement fund body has already monetized its investments in exchange traded funds, which will have a bearing upon the fixation of interest rate for this fiscal. Officials said the EPFO has already sold about 2,886 ETF units and earned Rs 1,054 crore from offloading the ETF investment earlier this month, they said. The EPFO had announced 8.65 per cent rate of interest on deposits for 2016-17, a tad lower than 8.8 per cent in 2015-16.The agenda listed for the meeting of the trustees includes the proposal for rate of interest on the EPF deposits for the current fiscal.
Courtesy: Indian Express
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STOCK IDEAS
ICICIdirect Money Manager February 2018
Arvind Ltd - Sustained profitability in B&R segment…
Company Background
Arv ind L td i s the f l agsh ip
company of the Lalbhai Group
that has been round since 1930.
Arvind started as a superfine
fabric manufacturer in the early
30s. Since then, the company has
been constantly reinventing itself
by venturing into new categories
in textiles like denim, suiting,
shirting, etc. Arvind has been a
pioneer in India in launching
domestic denim brands like Ruff &
Tuff and Flying Machine. The
company has also been licensing
international brands like Arrow
and US Polo in India. Currently,
Arvind is considered India's
leading fully integrated textile,
branded apparel & retail company,
which has a strong presence
across the value chain. The
company is a market leader in
manufacturing denim in India with
total capacity of 108 million metre
per annum (mmpa) of which 44%
is export driven. The textile
d i v i s i o n c o m p r i s e s s u b -
categories like denim, woven,
voiles and knits. The company
also has garmenting capabilities
with an annual capacity of ~22
million pieces.
Investment Rationale
Momentum for B&R segment slows
down but profitability improves
Revenues from the brand & retail
(B&R) segment grew 24% YoY to `
957.6 crore in Q3FY18 mainly due
to inclusion of Tommy Hilfiger &
Calvin Klein in the consolidated
numbers due to Ind-As. Excluding
the same, the revenue growth for
the base portfolio was at 9.5% YoY
(GST adjusted growth 15%) to `
8 3 7 c r o r e . ' Po w e r b r a n d s '
continued to report decent like-to-
like sales (LTL) sales growth of
7.9%, 'Unlimited' registered
negative LTL sales growth of 27%
mainly on account of a very high
b a s e e f f e c t o f l a s t y e a r.
Profitability for the B&R segment
improved signif icantly with
EBITDA more than doubling from
` ` 30 crore in Q3FY17 to 67 crore
in Q3FY18. EBITDA margins for
the quarter improved 350 bps YoY
to 7% while excluding (TH & CK)
margins came in at 8.2% vs. 4.4%
in Q3FY17. The management
highlighted that most emerging
brands are expected to breakeven
by Q4FY18 and turn positive by
FY19.
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STOCK IDEAS
` 1500 capex to drive next leg of
growth for textile division
Constant rupee appreciation and
a reduction in duty drawbacks
c o n t i n u e d t o h a m p e r t h e
per formance of the text i le
division. Revenues for the textile
division grew 9% YoY to 1540 `
crore . Growth was ma in ly
accelerated by 16% growth in the
garmenting segment to 319 `
crore. Arvind has commenced its
operations for the Phase I I
garmenting expansion in Ethiopia
and expects to reach high single
digit margin in FY19. Volume for
denims came in at 25 million
pieces (up 14%) while realisations
declined sharply by 7% YoY to `
181/piece. EBITDA margins for
the textile division declined
significantly by 330 bps YoY to
14%. Arvind has charted out a `
1500 capex outlay mainly towards
garmenting and technical textile
division that will drive the next leg
of growth, going forward.
Macroeconomic challenges impact
textiles performance
Constant rupee appreciation and
a reduction in duty drawbacks
c o n t i n u e d t o h a m p e r t h e
per formance of the text i le
division. Revenues for the textile
division grew 9% YoY to 1540 `crore . Growth was ma in ly
accelerated by 16% growth in the
garmenting segment to 319 `crore. Arvind has commenced its
operations for the Phase I I
garmenting expansion in Ethiopia
and expects to reach high single
digit margin in FY19. Volume for
denims came in at 25 million
pieces (up 14%) while realisations
declined sharply by 7% YoY to `181/piece. EBITDA margins for the
t e x t i l e d i v i s i o n d e c l i n e d
significantly by 330 bps YoY to
14%. Arvind has charted out a `1500 capex outlay mainly towards
garmenting and technical textile
division that will drive the next leg
of growth, going forward.
Fundamentals remain intact; maintain
BUY!
With de-merger on the cards, we
believe Arvind would be able to
efficiently channelize its resources
to full potential leading optimized
results in the long term. Going
forward, we expect Arvind to
clock sales, PAT CAGR of 13.2%,
24.2%, respectively, in FY17-19E.
We v a l u e t e x t i l e s a t 6 . 5 x
EV/EBITDA and B&R at 2.0x
MCap/sales. We maintain BUY
rating on the stock with a target
price of 480.`
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Stock Data
Key Financials
Valuations Summary
7
Key risks include:
Volatility in cotton prices
Cotton prices have been volatile over the
past few years. The textile business of the
company is exposed to the risks of this
volatility. Any increase in cotton prices
would impact standalone prices and result
in lower EBITDA.
Increase in royalty payments
Currently, the company operates in a combination of arrangements with international brands. This includes setting up of subsidiary/JV, franchisee or licensing. The current royalty payment is 2.87% of net sales. Any increase in royalty
payments or any hike in taxation on royalty payment would impact EBITDA margins for Arvind Brands & Retail (ARBL).
Failure of new brands/investment overshadows core performance
The company currently has 31 brands in its portfolio. If there is sluggishness in the uptake of apparels, new brands / investments of the company would drag d o w n t h e o v e r a l l c o n s o l i d a t e d performance. Furthermore, till new brands stabilize they would keep denting the company's profitability for an extended period. This would also result in new brands not choosing Arvind and preferring other companies for their strategic partnership
` Crore FY16 FY17 FY18E FY19E
Net Sales 8,011 9,236 10,508 11,829
EBITDA 951 943 1014 1203
Net Profit 316 320 349 494
EPS (`) 12.3 12.4 13.5 19.1
FY16 FY17 FY18E FY19E
P/E 31.3 30.9 28.3 20.0
Target P/E 28.5 28.2 25.9 18.3
EV / EBITDA 14.4 13.6 12.5 10.5
P/BV 3.7 2.8 2.6 2.4
RoNW 11.9 9.0 9.3 11.8
RoCE 11.0 9.9 10.5 12.3
Market Capitalization (` crore) 9895.2
Debt (` crore) 2965.5
Cash and Cash Equivalent (` crore) 53.9
EV (` crore) 12806.9
52 Week High / Low (`) 478 / 353
Equity Capital 258.4
Face Value (`) 10.0
ICICIdirect Money Manager February 2018
STOCK IDEAS
ANALYST CERTIFICATIONWe /I, Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts, authors and the names subscribed to
this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or
securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock
brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration
Number – INH000000990. ICICI Securities 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, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in
India. We and our associates might have investment banking and other business relationship with a significant percentage of companies
covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their
relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report
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ICICIdirect Money Manager February 2018
STOCK IDEAS
TCI Express – Speed, agility, delivery!!!
Company BackgroundT C I E x p r e s s ( T C I E L ) , headquartered in Gurugram, was established in 1996 as one of the foremost divisions of Transport Corporation of India ( TC I ) . H a v i n g a c h i e v e d financial and growth stability, TCI de-merged this division in 2017. Given the exclusivity of the business, TCI issued one equity share (FV | 2) to existing shareholders for every two equity shares (FV | 2). Post demerger, TCI Express ceased to remain a division of TCI and was separately listed on the bourses. The wide spectrum of services offered by TCIEL include surface express, domestic and international air express, e -com express, priority express and reverse express. These logist ical solutions are spread across industry segments such as automobi le spare par ts , pharmaceuticals, retail, e-commerce, te lecom and SMEs. The offerings mainly address B2B customers (95% of revenue). It involves door-to-door pick-up and delivery of parcels (5-40 kg) in a time
bound manner predominantly via surface transport. TCIEL claims to have one of the largest reaches domestically. It serves 670 districts (out of 675) through a flotilla of 4000 c o n t a i n e r i s e d t r u c k s . A network of 28 sorting centres, 550 company branches, 400 express routes and 2500 feeder routes, TCIEL serves 40,000 pickup and delivery points.
Investment Rationale
Demarcation to bring focused approach; high growth phase for TCIEL…Post de-merger, FY17-18 was the first operating year wherein TCIEL operated as a separate independent entity declaring separate business goals and t a r g e t s . D u e t o u n d e r -investments and different business verticals, TCIEL under the consolidated entity grew at a sluggish pace of mere 9% in FY10-16 compared to the industry, which grew >10% o v e r t h e s a m e p e r i o d . However the revenue growth
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ICICIdirect Money Manager February 2018
STOCK IDEAS
10
rates for 9MFY18 for TCIEL (post de-merger) remained robust at 16% YoY to | 635.7 crore compared to | 547.8 crore in 9MFY17. For the same period, TCIEL outperformed its industry peers BlueDart, Gati and VRL Logistics for which revenue growth rates were in the range of 5-10%.
Trinity of revenue growth, margin expansion & structural changesThe under-investments and s l u g g i s h b u s i n e s s environment led TCIEL to grow at 6% CAGR in FY13-16. However, FY16-17 marked the first year for TCIEL as an independent entity that led to dedicated investment of | 95.3 crore in FY15-17. TCIEL has now earmarked a capex of ~| 400 crore over five years (FY18-22). The core to these i n v e s t m e n t s w o u l d b e expand ing i t s pan- Ind ia presence (locations served), improving parcel turnaround time (handling equipments) and increas ing handl ing capacity (sorting centres). The focused capex has initiated a new growth phase for the company with FY17 revenue growth of 14% positioning
TCIEL at an inflection point. Revenues are expected to grow at 16% CAGR to | 1184 crore in FY17-20E.
GST, e-way bill - Structural impetus to organised segment…With the abolition of multiple taxes, the GST regime has led most businesses to redesign their supply chain network leading to cost efficiencies compared to the erstwhile network, which was based on state-wise tax benefits. The commencement of e-way bill would ensure that goods being transported comply with the GST law, which includes invoicing, disclosure, tax payment, etc. Moreover, it would also facilitate real time tracking of goods movement. Unorganised players would rema in wary o f r andom checking by “mobile squads”, which continues under the GST system. The surveillance under e -way mechanism m a k e s i t d i f f i c u l t f o r unorganised player to operate. Capitulation of unorganised players coupled with faster turnaround time would benefit organised player like TCIEL.
ICICIdirect Money Manager February 2018
STOCK IDEAS
11
Valuations Summary
Key Financials
` Crore FY17 FY18E FY19E FY20E
Net Sales 755.2 857.1 1012.9 1183.8
EBITDA 67.6 83.3 112.0 139.8
Net Profit 40.7 53.5 66.8 83.6
EPS (`) 10.6 14.0 17.4 21.9
FY17 FY18E FY19E FY20E
P/E 47.0 35.8 28.7 22.9
Target P/E 62.0 47.3 37.8 30.2
EV/EBITDA 28.6 23.4 17.3 13.8
P/BV 12.0 9.5 7.1 5.4
RoNW (%) 28.8 29.6 28.4 27.0
RoCE (%) 35.1 34.9 36.9 36.7
Stock Data
Market Capitalization 1915.0
Total Debt (FY17) 31.6
Cash (FY17) 9.5
EV 1937.1
52 week H/L (`) 645 / 284
Equity capital 7.7
Face value (`) 2.0
FII Holding (%) 3.2
DII Holding (%) 10.2
ICICIdirect Money Manager February 2018
STOCK IDEAS
Key risks include:
Risks to capac i ty u t i l i sa t ion
assumptions…
TCIEL currently operates at an
average utilisation level of 85%.
Utilisation levels in H1 are
usually low at 82%. However, H2
remains strong with utilisation
scaling up to 88%. The current
capacity of 765000 tonnes is
expected to reach 1 million
tonnes by FY20E. Moreover,
these capacities are static
(company owned) for which due
to f ixed overheads (OHs)
util isation remains crucial.
Under-utilisation would be a
d o u b l e w h a m m y f o r o u r
estimates as a decline in topline
would be accompanied by
margin compression resulting in
a s t e e p e r d e c l i n e i n o u r
profitability and EPS estimated,
adversely impacting our target
price.
W e a k e n i n g o f c o m p e t i t i v e
positioning…
Delhivery, Ecom Express and
Rivigo received the maximum
funding for FY17 in the logistics
PE space. The funding spree of
Rivigo backed by marquee
investors like Warburg Pincus
and SAIF Partners has made the
company the fastest start-up to
achieve Unicorn status (startup
company valued at over $1
billion). Following the success
story, the logistics sector which
was plagued by poor manpower
skills, inefficient fleet utilisation
and fragmented infrastructure
remains an opportunity for a
startup. Age-old traditions and
business methodology are
r e p l a c e d b y n e w a g e
technologies to achieve global
standards.
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ICICIdirect Money Manager February 2018
STOCK IDEAS
ANALYST CERTIFICATIONWe /I, Bharat Chhoda, MBA and Ankit Panchmatia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify
that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify
that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock
brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration
Number – INH000000990. ICICI Securities 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, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in
India. We and our associates might have investment banking and other business relationship with a significant percentage of companies
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13
FLAVOUR OF THE MONTH
Leave a legacy through comprehensive estate planning
ICICIdirect Money Manager February 2018
Our personal finance consists of two important factors – building an asset and
protecting that asset. While we put great efforts and time to buildanasset why do
we sideline the latter? Deciding rightful successor of your assets and
responsibilitiesbeforehandisthe most essential way to protect your
estate.Unfortunately, estate planning is a less common practice in India. One of
the reasons is - lack of awareness. So, here we bring to you the criticality of the
concept.What is estate? How to draft a will? Who should make it? We try to
answer all of your questions in the following article…
14
What is an estate?
Your net worth,comprising
everything you own as well as
th ings that you owe is
collectively considered as
your estate. In layman's
words – individual's bank
accounts, properties, car or
any other asset and also
mortgage or other form of
debt tagged along with these
assets can be categorized as
one's estate.
Why we need estate planning?
You may have seen or heard
of stories of families being
affected by legal hurdles after
the patriarch passes away.
These problems occur when
there is no proper inheritance
and succession plan in place.
A very important aspect of
planning your life goals is to
plan for the future and for
your heirs. This is where
estate planning comes in.
Estate planning is the process
o f a r r a n g i n g f o r t h e
distribution of your asset
holdings to your heirs by
anticipating and avoiding
different scenarios that can
create a conflict among them.
It attempts to el iminate
uncertainties associated with
planning for one's estate in
t h e e v e n t t h a t
h e / s h e b e c o m e s
incapacitated andfor when
h e / s h e i s
deceased.Guardians are
often designatedfor minor
children andincapacitate
beneficiaries. Estateplanning
helps preservethe value of
your estate for thebenefit of
y o u r h e i r s b y
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201815
implementingproven estate
and inheritanceplanning
strategiesto minimize estate
sett lementexpenses and
taxes.
Estate planning, as the name
suggests, is all about creating
a p lan for your assets ,
including all your holdings in
equity, debt, commodities,
real estate, gold, and
alternate investments like
art, gemstones, etc. If you
intend to keep your estate
assets intact for the sole
benefit of your heirs, you
have to know how to protect
these assets.
The most common
misperception among people
about estate planning is that
they don't think they have an
estate in the first place. For
many, the word “estate” is
associated only with big real
estate properties and trust
funds, but the reality is that all
a s s e t s a n d l i a b i l i t i e s
belonging to an individual at
the time of death constitutes
to an estate. In the absence of
proper succession planning
the court will decide who gets
what based on the intestacy
laws, which are triggered
when you die without a will.
If you have minor children,
part of your estate plan will
include designating who you
wou ld l i ke to se rve as
guardian for them should
they be orphaned? If there is
n o w i l l c o n t a i n i n g a
guardianship designation,
then the court will need to
make the designation based
on what he or she decides is
in the best interests of your
child.
Of late, philanthropy is
generating an interest among
many. People donate a
portion of their wealth to
charity. If, in case, you have a
desire to give back to society
after providing for your heirs,
estate planning provides you
the tools and options to do so.
Also, it must be noted that
there is no predefined age for
starting to create an estate
plan. Anyone who has some
asset holding in his/her name
and is above the age of 18
should create one.
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201816
Tools of estate planning:
Estate planning tools
During the life time of
an individual
Trust
Joint ownership
Gift
Power of attorney
Mutation
After the death of an
individual
Nomination
Will
>Trust
A trust is a legal agreement composed to ensure transfer of movable or immovable assets from one party to another. There are three parties involved while making a trust. Beneficiary- for whose benefit the trust is created, settlor- who is transferring his ownership and the trustee- who manages the trust. The trustee holds the legal title and exercises control over the trust property in the interest of the beneficiary. Living trusts are an essen t i a l t oo l o f es ta te
planning where the creator has liberty to protect his estate while he is alive and decide beneficiary of the same.Trusts are often formulated to avoid probate (a detail note on probate is provided later in this article).
Trusts can be either revocable or irrevocable. The first type is more flexible, meaning, the trust owner/ settlor can change the terms of the trust or modify the entire agreement or even revoke the trust altogether over t ime th rough t rus t amendment. The owner of a
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201817
revocable living trust can c h a n g e d e s i g n a t e d benef ic ia r ies , a l loca t ion strategy, listed assets, and appointed trustees while the trust is in force or even after its establishment.This type of a trust is considered as an alternate to a will.
Irrevocable trusts, which are more common in India, do not come with the provision of trust amendment. In a non-discretionary irrevocable trust, the sett lor has complete control over execution of terms of the trust. He is free to choose asset distribution among beneficiaries. While, in a discretionary irrevocable trust, the settlor lets the t r u s t e e s t a k e d e c i s i o n s regarding asset distribution. All revocable trusts convert into irrevocable living trust after the trust owner's death.
Trusts can be classified as private trust and public trust. Private trusts are commonly adopted for dual purpose of a) b e n e f i t s o f s e t t l o r ' s dependen ts and b ) t ax-planning.Private trust gets published in thenewspapers when executed. These also
offer an insolvency protection if it is an irrevocable trust. Private trust offers stepwise access to the family legacy.
>Joint ownership
Holding an asset under joint ownership helps transfer of that asset to the surviving joint owner with lesser hassle and expense. Financial assets like property, bank account and investments such as demat accounts, shares and mutual funds can be held jointly.
All joint owners' assent is mandatory to execute any t r a n s a c t i o n c o n c e r n i n g respective asset. Rights of survivorship suggest that joint holder/s receive ownership and profits earned from the asset after primary asset holder's death. However, this r i g h t i s s u p e r s e d e d b y succession laws if the primary owner is survived by his legit heirs.
>Gift
Gifts are commonly used to transfer wealth from one person (donor- the person gifting) to another (donee-receiver of the gift) voluntarily and without consideration.
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201818
Although this is an irrevocable asset transfer it can be revoked upon donee's agreement. Gifts received from relatives such as spouse, siblings of self and s p o u s e , p a r e n t s , g r a n d p a r e n t s , c h i l d r e n , grandchildren, among others and anyone e lse on the occasion of marr iage or inheritance through will avail taxexemption. Note that, while gifting an immovable asset a gift deed has to be made.
> Power of attorney
Power of attorney (POA) is ano ther common es ta te planning tool which authorizes a n o t h e r p e r s o n t o t a k e important financial or non-financial decisions on estate owner's behalf. The person granting the authority is called the principal and the one attaining it is called the agent. The purpose of drafting a POA document is to enable the agent participate and act on a transaction if the principal individual is incapacitated or as per his instructions.
There are three types of POA. In a general POA, the agent can act on all general matters on b e h a l f o f t h e p r i n c i p a l .
Whereas in a special POA, agent is given authority to act on special transactions only. In both these cases, agent's rights to actends if principal is incapacitated. However, a durable POA is an alternate way which enables the agent to cont inue take dec is ions despite principal's incapacity.
> Mutation
Mutation is transfer of title ownership in the municipal records. A property when acquired by a person and on becoming the rightful owner of the property should ensure that all the titles of the property are transferred or mutated in his name. Updating such change is necessary in order to decide tax liability of the property owner.
> Nomination
This provision faci l i tates investment holder to appoint a person who will hold and receive benefits from the investment upon holder's death. A minor can also be appointed as a nominee, with a guardian named alongside. You can appoint a nominee either at the time of initial
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201819
investment or during the course holding tenure.
But remember, nomination is jus t a rou te to s imp l i f y payment process in the event of holder's death, it does not ensure fa i r or equi tab le distribution of estate and cannot override inheritance laws.
>Will
Will is a written document in which an individual specifies how his wealth should be distributed or utilized after his death. In India, it is generally noticed that people refrain from creating a will and usually tend to leave the future to fate. This is a thought that should be avoided for the benefit of your heirs.
Writing a will is the simplest form of estate planning. You just need to write down in clear words your wishes, on a s i m p l e p i e c e o f p a p e r. Ambiguity of any type must be avoided, e.g. words which have multiple meanings, nick names, etc. Preferably, a lawyer should be appointed, who helps in making a will and g u i d e s i n t h e l e g a l i t i e s involved.
Will Glossary
Testator: The person making
the will.
Legatee/ beneficiary: The
person who is named in a will
to receive a portion of the
deceased person's estate.
Executor: The person named
in the will to administer the
estate of the deceased
person
Probate: A document from
court certifying legality and
granting execution of your
will.
A will must have the name and
address of the testator and a
statement that the will is being
m a d e v o l u n t a r i l y . T h e
beneficiaries under the will
must be clearly listed as must
the property that is being
bequeathed. It must be signed
by the testator and attested by
two witnesses.
A will has to be unambiguous
and certain as to its intent to
bequeath. To avoid disputes
only a single copy of latest
v a l i d w i l l s h o u l d b e i n
existence, witnesses should
sign in the presence of each
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201820
other, a residuary clause that
leaves all assets that remain
uncovered in the bequests to
an ident i f ied benef ic iary
should be included in the will
and a statement stating that the
cu r ren t w i l l r evokes a l l
previous bequests of any
nature should be included in
the will.
Registration of a will is not
mandatory, however, it is
recommended to do so to
avoid legal issues in the future.
It also makes it easier for your
heirs to get a probate. After all,
p roba te i s a conc lus ive
evidence of the validity and
due execution of the will and of
the testamentary capacity of
the testator.
When a person dies intestate
i.e. in the absence of a will,
intestacy laws are triggered.
Intestacy laws do not take into
consideration whether you
want to provide different gifts
to different children, based
upon their special needs or
other factors; whether your
surviving spouse or partner
needs your estate's assets in
order to provide for his or her
bas ic needs, whi le your
surviving parents have no
n e e d f o r y o u r m o n e y
whatsoever. Neither these laws
distribute your estate in a way
that provides the maximum tax
benefit to those who inherit
your estate.
Consider following scenarios
Will Nomination Process of transfer of assets
Available Unavailable Will is executed as soon as the probate is produced and
assets are transmitted to the account of legal heir(s), as
determined by an order of the competent court.
Unavailable Available
The estate or the rights bequeathed to nominees till the
legal successors of deceased take steps to claim
inheritance. Nominees cannot prevail over legal heirs.
Available Available
- If the nominee and beneficiary mentioned in the will are
same, the process of estate distribution takes lesser time.
- If they are not the same , estate is distributed among beneficiaries as per the testator’s wishes.
- But if nominee applies for transfer of asset before
execution of the Will takes place, assets are transmitted to
nominee’s account until terms in the will are executed.
Unavailable Unavailable Assets distributed among legal heir(s), as per respective
succession laws(based on proximity of the relationship).
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201821
Succession laws in India
There are numerous such
scenarios that might come up
in the absence of a will and that
can lead to entirely unwanted,
even tragic, outcomes. The
succession laws in India are so
diverse and complex that it will
create unnecessary hassles for
your surviving heirs and the
costs incurred in terms of time
and money will be immense.
The laws of succession in India
fall within the realm of personal
law. Because of this, we have
many different succession
laws. We have the Hindu
Succession Act, the Parsi
Succession Act, and the Indian
Succession Act (which applies
to Chr ist ians) . As far as
Muslims are concerned, the
l a w s o f s u c c e s s i o n a r e
governed by the relevant
Muslim Shariat Laws.
Probate
Probate means copy of the will
certified under the seal of a
c o u r t o f a c o m p e t e n t
jurisdiction.
Probate of a will when granted
establishes the will from the
death of the testator and
renders valid all intermediate
acts of the executor as such. It
is conclusive evidence of the
validity and due execution of
the will and of the testamentary
capacity of the testator.
Where a will was executed by a
deceased, succession to his
property is regulated by the
provisions of the will. If an
executor is named in the will,
he has to get the will probated
as it is mandatory under
section 213 of the Indian
S u c c e s s i o n A c t . A f t e r
obtaining probate, it is the duty
of the executor to carry out the
distribution of the property in
a c c o r d a n c e w i t h t h e
provisions of the will. Probate
can be granted only to the
executor appointed under a
will as is provided under
section 222. If no executor is
appointed by the will, anyone
of the persons claiming a right
under the will can file a petition
f o r o b t a i n i n g l e t t e r s o f
administration as is provided
under section 219.
Probate can be granted only to
the executor appointed by the
will. The appointment may be
e x p r e s s o r i m p l i e d b y
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201822
necessary impl icat ion. I t
cannot be granted to any
person who is a minor or is of
unsound mind, nor to any
association of individuals
unless it is a company satisfies
the conditions prescribed by
the rules made by the state
government.
A p r o b a t e d i f f e r s f r o m
succession cert i f icate. A
probate is issued by the court,
when a person dies testate i.e.
having made a will and the
executor or beneficiary applies
to the court for grant of
probate. In case a person has
not made a will his legal heirs
will have to apply to the court
for grant of a succession
certificate which will be given
as per applicable laws of
inheritance.
Last, but not the least, do not
keep your will arrangements a
secret. You need to share
i n f o r m a t i o n a b o u t t h e
e x i s t e n c e w i l l w i t h k e y
b e n e f i c i a r i e s , i n t e n d e d
guardians and executors. You
might not share the actual
content but keeping these
entities aware about your
having created a will and the
location where you have
stored the same might be a
good idea.
Who needs to make a will?
An earning couple, raising family
Husband and wife team-earn and invest. The investment
details are known only to the person making the investments
and the other spouse remains unaware. If something untoward
were to happen, the spouse left behind struggles to cope with
the sudden demise as well as with figuring out the entire
spread of investments.
Single parents raising children
They are sole earners as well as care givers to their children.
They need to take an additional step of creating a Will. The Will
would not only ease the bequest process – it becomes the
primary document to refer to for information about the assets.
FLAVOUR OF THE MONTH
ICICIdirect Money Manager February 201823
Earning bachelors
Every earning individual who has built any kind of financial
asset needs to take asset protection into account. In the case of
a bachelor, a situation is possible where no one apart from the
person himself/ herself has any clue about the assets. A will
becomes very important for this person.
Individuals above 50
A will at this stage is a mandatory factor in your financial plan.
Especially when you have children or other family members,
irrespective of their financial independence. Also, if you want
to leave something to your friends or distant relatives, drafting
a will makes perfect sense.
Reviewing estate plan
An estate plan needs to be a
live goal – not a create-and-
forget one. Review and revise
it. You might have created new
assets or taken on a new
l iabil i ty over years. Your
marital status could have
changed or you might have
had children. Your executors
or guardians of your children
might change jobs and shift
countries. Owing to any of
t h e s e p o s s i b i l i t i e s , w e
recommend that you review
y o u r e s t a t e p l a n n i n g
documents at least every five
years to ensure its relevancy
w i t h y o u r f i n a n c i a l
circumstances. Better yet, take
some professional help to
organize your documents and
keep them updated.
The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities
BUDGET REVIEW
ICICIdirect Money Manager February 2018
Budget Review2018-19
24
Rejuvenating Bharat for inclusive
growth while balancing fiscal
In the backdrop of growing
expectations of a populist
B u d g e t c o u p l e d w i t h
apprehensions on imposition
of long term capital gains tax
on equit ies, the Finance
M i n i s t e r b a l a n c e d b o t h
extremes without straying
much from the path of fiscal
prudence. Union Budget 2018-
19 laid emphasis on “Ease of
Living” with due thrust to uplift
t h e r u r a l m a s s e s w i t h
e m p h a s i s b e i n g p u t o n
doubling farm income by 2022.
Remarkably, amid pressure on
existing resources, the Finance
Min is ter emphas ised on
increasing expenditure on
infrastructure development
including roads, airports,
railways, etc. On the fiscal side,
the deficit figure was pegged at
3.5% of GDP for 2017-18. We
believe this is a calibrated
measure balancing the need
for infrastructure develo -
pment, buoyancy on tax inputs
and social welfare.
The government focused on
generating employment and
reviving the growth engine in
the MSME space, with host of
incentives, including lowering
the corporate tax rate to 25%
for entities with turnover less
than Rs. 250 crore coupled
with other measures will have
m u l t i p l i e r e f f e c t o n
employment generation.
To broaden the equity tax base,
a tax rate of 10% was imposed
on incremental gains with
effect from January 31, 2018
for an equity holding period of
greater than a year on capital
gains exceeding Rs. 1 lakh.
M o s t i m p o r t a n t l y , t h e
apprehension over LTCG was
handled in a pragmatic way as
i t w a s i n t r o d u c e d w i t h
“grandfather ing c lause” ,
t h e r e b y d i s p e l l i n g t h e
investors' qualms.
Union Budget, indeed, seems
to be a prudent mix of thrust on
u p l i f t i n g r u r a l m a s s e s ,
generation of employment and
long term nation building
through solid infrastructure
ICICIdirect Money Manager February 201825
BUDGET REVIEW
development.
Key highlights of upcoming Budget:
=The revision in fiscal deficit
target 3.2% to 3.5% is mainly
on account of lower GST
collections by Rs.35000 crore
(revenue accounted for only 11
months due to spill over
impact). This has resulted in
additional slippage of 0.2% in
the fiscal deficit for FY18RE.
With the focus on removing
rural distress and augmenting
farm income, the government
has revised its fiscal deficit
target to 3.3% from earlier
target of 3.0% for FY19E.
Although, there is a marginal
deviation from the previous
FRBM target, the government
has stick to its consolation
path.
=On the revenue front, we
expect government net tax
revenues to grow 16.1% YoY
to Rs.14.7 lakh crore in FY19E
on account of better recovery
in indirect taxes (up 18.5% YoY
to Rs.11.2 lakh crore) following
better compliance in GST (E-
way bill). Additionally, the
d i r e c t t a x e s c o l l e c t i o n
continues to remain buoyant
growing 14.8% YoY to Rs.11.5
lakh crore led by improved
business environment and
better compliance. With a
robust disinvestment pipeline
in FY18-19E, we believe the
g o v e r n m e n t h a s u n d e r
promised and is likely to over
deliver. We estimate proceeds
of over Rs. 1, 00,000 crore in
FY19E
=On the expenditure front,
government focus remains on
removing rura l d is t ress ,
improving infrastructure and
ease of living through better
d e v e l o p m e n t e x p e n s e s
(Budgetary allocation up by
9.3% to over Rs.5,90,000 crore
). The govt. announced world's
largest government-funded
healthcare programme which
wil l cover 10 crore poor
f a m i l i e s ( w i t h 5 0 c r o r e
bene f i c i a r i es ) p rov id ing
coverage up to Rs. 5 lakh per
family per year. In order to
make MSME companies more
v i a b l e , i n c o m e t a x f o r
c o m p a n i e s w i t h a n n u a l
turnover up to Rs. 250 crore (in
FY17) has been reduced to
25% which coupled with other
incentives will have multiplier
ICICIdirect Money Manager February 201826
BUDGET REVIEW
impact on the employment
generation.
=Finally, we also highlight that
though government has
introduced LTCG in symbolic
way (revenues of Rs.20,000
crore in FY19E), it could act as
key catalyst in channelizing
resources towards 'ease of
living” while managing fiscal
deficit in long term as LTCG
contributes 0.7-1% in US
market.
Maintaining fiscal prudence with improved quality of spending…
ICICIdirect Money Manager February 201827
BUDGET REVIEW
Aiming to double farm income by
2022 ; emphas i s on i ncome
insurance
=Union Budget 2018-19 is
pro-farmer in nature and well
aligned to double farm income
by 2022. Apart from the
increase in allocation towards
risk mitigation (crop insurance)
and eff iciency ( irr igat ion
including micro-irrigation)
schemes, i t lays specia l
emphasis on augmenting farm
income through remunerative
farm gate prices thereby
targeting “income insurance”
=Emphasis has also been
placed on fixing MSP prices at
a markup of 50% above the
cost of production while at the
same time bringing more
crops under the MSP net. It
also aims at procurement of all
major farm produce at MSP
price through the calibrated
coordination between the
central government, NitiAayog
and state government.
=To augment farm income, it
also aims to promote allied
activities like aquaculture,
animal husbandry, etc, while at
the same time save crop
wastages through requisite
storage and agro-processing
units
Higher allocation towards key
development schemes to improve
ease of living
The government has taken
effective steps to improve the
ease of living mainly led by
increased budgetary allocation
towards the Ministry of Road,
Transport & Highways (up
16.3% YoY to Rs. 70,544 crore),
railways (up 32.7% YoY to Rs.
53,060 crore) and urban
development (up 11.2% YoY to
R s . 5 0 , 8 6 8 c r o r e ) .
Consequently, the government
has increased allocation for
key development related
schemes by 14.1% YoY to Rs.
2,43,052 crore.
GST collections provides hope!
Union Budget 2019 provided a
greater degree of clarity on
GST collections. Revised
estimates for FY18pencil in the
Centre's share of collections
(CGST + IGST) at Rs. 3.8 lakh
c r o r e . W e t h i n k t h e s e
collectionsare for eight months
from July 2017-February 2018,
ICICIdirect Money Manager February 201828
BUDGET REVIEW
w i t h t h e M a r c h 2 0 1 8
collections to be accounted
forin FY19. This implies a
monthly run rate of Rs. 47000
crore. FY19 collections have
been budgeted at Rs. 6.5 lakh
crore, (i.e. Rs. 54000 crore per
month), implying a budgeted
growth of 14.9%.
Against this, actual collections
for the six months from July-
December imply average Rs.
44000 crorebeing added to the
Centre's kitty on a monthly
basis. Thus, on comparing
actual collections thus far
toFY19 BE, the Centre seems
to be es t ima t ing 22 .7%
growth.
In our opinion, this is a
r e a s o n a b l e a s s u m p t i o n
because of the following
factors –
= I nc reased comp l i ance
brought on by a significantly
wider tax net: As per the recent
E c o n o m i c S u r v e y, t h e
numberof registrants under
GST is 9.8 million. Of this, 35%
registrants are new, i.e. those
that were not covered by
earlier indirect tax regimes of
Excise, Service Tax and VAT.
Th is represents a much
broader tax base for the new
systemand should result in a
boost to tax compliance and
eventually tax revenue
=E-way implementat ion:
Interstate e-way bill system on
goods valued above Rs. 50000
come in to e f fect . E -way
billimplementation in states
under the previous system
(pre-GST) had helped boost
revenues. E-way bil ls on
intrastategoods movement
will be rolled out from June 1,
2018 and places stringent
c o m p l i a n c e b u r d e n o n
assesses,restricting scope for
evasion
=Additionally, the impact of
c o m p o s i t i o n s c h e m e
taxpayers required to file
returns on a quarterly basis is
yet toaccrue.
Grandfathering capital gains till
January 31, 2018, government goes
ahead with LTCG
Long term capital gains (LTCG)
on equities will be taxed @
10% if gains exceed Rs. 1
lakh(without the benefit of any
indexat ion) . The holding
ICICIdirect Money Manager February 201829
BUDGET REVIEW
period continues to be one
year andabove for LTCG. For
calculations, all gains til l
January 31, 2018 will be
grandfathered (exemptfrom
tax). The LTCG rate of 10% is
applicable from financial year
2018-19.
Views
=Since gains to be considered
for taxation are prospective,
t h e i m p a c t i s l a r g e l y
n e u t r a l f r o m a m a r k e t
perspective. Against the fear of
a deep sell-off, this seems to
have beenexecuted quite
modestly
=Equity oriented funds of MF
are huge in size at Rs. 10 lakh
crore (December 2017) and
havealready risen 79% in a
year. Charging LTCG tax on
gains from this base can also
raisesubstantial tax revenues
n o t f a c t o r e d i n a b o v e
calculations
=Unit linked investment plans
(ULIPs) are excluded from
c a p i t a l g a i n s a s n o t
specificallymentioned. This
will favour premium growth of
life insurance companies as
r e t u r n s f r o m U l i p f u n d s
become tax exempt
=Hence, on a growing base of
GDP and wider long term
capital gains tax net, reaching
0.7-1% of GDP on LTCG tax
c o l l e c t i o n , c a n a d d
s i g n i f i c a n t l y t o t h e
government's tax kitty overthe
years
Personal income tax: No major
change… senior citizens in focus
· The F inance Min ister has
refrained from effecting any major
change in thepersonal income tax
for individuals assesses. Income tax
rates and slabsremain unchanged
· Senior citizens are the most
b e n e f i t t e d c l a s s f r o m t h e
Budgetannouncement.
· Tax exemption on interest income
from savings bank accounthas
been increased from Rs. 10,000 to
Rs. 50,000 and now includeinterest
income from fixed deposits and
post offices deposits
· Deduction l imit for health
i n s u r a n c e p r e m i u m o r
medicalexpenditure increased
from Rs. 30,000 to Rs. 50,000 under
ICICIdirect Money Manager February 201830
BUDGET REVIEW
section80D
· Increase in deduction limit for
m e d i c a l e x p e n d i t u r e f o r
certaincritical illness from Rs.
60,000 (in case of senior citizens)
and from Rs. 80,000 (in case of very
senior citizens) to Rs. 1 lakh for all
seniorcitizens, under section
80DDB.
· Pradhan Mantri Vaya Vandana
Y o j a n a , u n d e r w h i c h a n
assuredreturn of 8% is given by LIC,
extended up to March, 2020.
Theexisting limit on investment of
Rs. 7.5 lakh per senior citizen
underthis scheme has also been
enhanced to Rs. 15 lakh.
· The F inance Minister has
reintroduced standard deduction
for salariesclass individuals to the
extent of Rs. 40000 but removed
the existing annualtransport
allowance of Rs. 19,200 and
medical reimbursement of Rs.
15000.This has resulted in net
additional deduction of Rs. 5800.
The maximum taxbenefit for the
highest tax slab individual comes to
just Rs. 1740 excludingcess.
Standard deduction is now also
applicable to pensioners. The
moveis expected to benefit 2.5
crore employees and would result
in therevenue loss of Rs. 8000 crore
to the exchequer
· Ed u c a t i o n c e s s h a s b e e n
increased to 4% from current 3%
for allassesses and been renamed
as “Health and Education Cess”.
Additionalrevenue from this move
is estimated at around Rs. 11,000
crore
· Dividend distribution tax (DDT) at
1 0 % h a s b e e n i n t r o d u c e d
ondistributions by equity and
equity oriented mutual funds with
effect fromApril 1, 2018
· T a x b e n e f i t o n 4 0 % o f
withdrawals from NPS, which was
till now availableonly to employee
subscribers (i.e. salaried class) is
n o w e x t e n d e d t o
nonemployeesubscribers as well
with effect from April 1, 2019
· Section 54EC has been made
more stringent. From now on
onlyimmovable property (land or
building or both) shall be eligible
for thebenefit. Additionally, the
specified bonds would now need to
be held for aminimum period of
five years against three years
earlier
ICICIdirect Money Manager February 201831
BUDGET REVIEW
· Tax treatment of fund of funds
(FoFs) investing only in domestic
equityETFs brought on par with
taxation of equity oriented funds
· The government would make
further use of ETF route for
disinvestments.DIPAM will come
up with more ETF offers including
debt ETF
· To ensure compliance, it has been
proposed that Chapter VI-A
deductionsshall not be allowed if
income tax return is not filed by the
due date
Other key highlights
=Flagship National Healthcare
p r o t e c t i o n s c h e m e w i l l b e
launched to cover 10 crore poor
fa m i l i e s ( w i t h R s . 5 0 c ro re
beneficiaries) providing coverage
up to Rs.5lakh per family per year
for secondary and tertiary care
hospitalisation. This will be the
world's largest government-
funded healthcare programme
= I n o r d e r t o m a ke M S M E
companies more viable, income
tax for companies with annual
turnover up to Rs.250 crore (in
FY17) has been reduced to 25%
=The government will contribute
12% of wages of new employees in
EPF in all sectors for the next three
years
=Allocation to Digital India
scheme doubled to Rs.3073 crore
=Total Rs.1 lakh crore will be
allocated over the next four years
towards an init iative named
Revitalising Infrastructure and
Systems in Education (RISE)
by2022. This will be done to step up
i n v e s t m e n t & r e l a t e d
infrastructure in in premier
educational institutions
=The government has allocated
Rs.9,975 crore for social security
schemes for the next fiscal year
Under Ujjwala Scheme, eight crore
(five crore last year) poor women
will be given free gas connection
=The government has earmarked
allocation of Rs.56619 crore for SCs
( R s . 5 2 7 1 9 c r o r e i n F Y 1 8 E )
&Rs.39135 crore for STs (Rs.32508
in FY18E) in FY19E
=The government proposes to set
up five lakh Wi-Fi hotspots, which
will provide broadband access to
five crore rural citizens. Total
Rs.10000 crore in 2018-19has been
p r o v i d e d f o r c r e a t i o n a n d
ICICIdirect Money Manager February 201832
BUDGET REVIEW
a u g m e n t a t i o n o f t e l e c o m
infrastructure
=Total 3% primary & secondary
education cess on personal income
tax & corporation tax has been
increased to 4% & renamed as
“Health & education cess
=To develop 10 prominent tourist
s i t e s i n t o i c o n i c t o u r i s m
destinations, the government has
increased fund allocation under
SwadeshDarshan by 14.7% YoYto
Rs.1,100 crore
=Capital outlay on space research
increased substantially by 40% to
Rs.5287 crore (up from Rs.3777
crore)
= To e n c o u r a g e d o m e s t i c
manufacturing under "Make in
India", the government has hiked
BCD in mobile phones (from 10% to
20%), LCD/LED/OLED panels(from
7.5% to 15%) and lamps/ lighting
fittings (from 10% to 20%)
Rail capital expenditure outlay – Focus on modernisation
· Despite merger with the
Central Budget, investments in
Railways continues to remain
an important agenda. The
cen t ra l government has
i n c r e a s e d i t s c a p i t a l
expenditure outlay for FY18-19
by 22% YoY to Rs. 146500
compared to FY17-18 revised
estimate of Rs. 120000 crore
· Approximately 69% of the
capital outlay for FY19 has
been earmarked under major
heads of capital expenditure.
Augmentation of capacity with
construction of new lines and
h igher doubl ing are the
mainstay.
· M o r e o v e r , h i g h e r
electrification would lead the
way for lower fuel expenses
resulting in improvement of
320 bps in operating ratio from
96% in FY18 (RE) to 92.8% in
FY19 (BE) . The focus of
commissioning/addition of
new lines (1000 km) would
remain on enhancing the
capacity in suburban cities like
Mumba i and Benga lu ru .
Following the FDI in railways
f o r c o n s t r u c t i o n o f
locomotives at Bihar, the
budgeted estimates reflect IR
commitments to procure the
same
ICICIdirect Money Manager February 201833
BUDGET REVIEW
Efficient Railways - Execution at theforefront…
Commitment vs Execution
A Rashtriya Rail SanrakshaKosh will be created
with a corpus of Rs. 1 lakh crore over a period of
5 years
Allocated a corpus of Rs. 20,000 crore each over
FY18 and FY19. Elimination of unmanned
levelcrossings by 2020 is on track
Throughput is proposed to be enhanced by 10%
in next three years. Focus on modernisationand
upgradation of identified corridors. Railway lines
of 3500 km will be commissioned in2017-18
against 2,800 km in 2016-17
In the first phase, South Eastern Railway, South
East Central Railway and East Coast Railwayare
identified for 25T axle load running. Long haul
trains will run across congested sections
toincrease throughput
At least 25 stations are expected to be awarded
during 2017-18 for station redevelopment.
500stations will be made differently abled
friendly by providing lifts and escalators
Redevelopment of Habibganj and Gandhinagar
started. Formulating attractive revised schemefor
station redevelopment to fast track the
programme. So far, 430 escalators at 167
stationsand 279 lifts at 122 stations have been
provided
Proposed to feed about 7,000 stations with solar
power in the medium term. A beginning
hasalready been made in 300 stations. Works will
be taken up for 2,000 railway stations as part
of1000 MW solar mission
Total 28.75 megawatt (MW) solar roof top
capacity has been installed on 350
stationsincluding major stations like New Delhi,
Old Delhi, Jaipur, Secunderabad and Kolkata.
Orderhas been placed for 37 MW solar roof top
capacity by Zonal Railways/PUs (covering 250
Focus is on Swachh rail. Post initiating SMS based
Clean My Coach Service propose to
stations)introduce ‘Coach Mitra’ facility, a single
window interface, to register all coach
relatedcomplaints and requirements
The facility shall be extended to all onboard
housekeeping service (OBHS) trains (1000)
in2017-18. ‘Coach Mitra’ facility has been
extended to 670 trains over 13 zonal railways
By 2019, all coaches of Indian Railways will be
fitted with bio toilets. Pilot plants forenvironment
friendly disposal of solid waste and conversion of
biodegradable waste to energyare being set up at
New Delhi and Jaipur railway stations. Five more
such solid waste
management plants are now being taken up
Target for 2017-18 is installation of 40,000
biotoilets. In November 2017, 5417 biotoilets
havebeen installed in coaches. On a cumulative
basis, 33856 bio-toilets have been installed.
Pilotplant at Jaipur Railway Station has been
installed with a target of five solid waste
managementplants by FY18
ASK OUR PLANNER
ICICIdirect Money Manager February 2018
Maintain personal finance balance through Diversified portfolio
Q. I am regularly paying
premium of Rs. 10000/- per year for
"ICICI PruLifeTime Pension" taken
in January 2004, with maturity in
January 2021 as the policy term is
for 17 Years.
My queries are:
a.What would be the treatment
with respect to taxation, if I
surrender the above said policy
now?
b. I had taken the benefit of the
premium paid, till deduction was
allowed from the income, but after
the change in taxation rules, no
taxation benefit has been claimed
under 80C i.e. within the limit of Rs.
1,50,000/-.
c. Is the surrender value exempt
from tax under section 10 (10D), as
the policy has been issued in
January'2004 i.e. issued on/after
April 01, 2003 but on/before March
31, 2012, and the premium payable
for every year is less than 20% of
the sum assured. Premium is Rs.
10, 000/- and sum assured is Rs.
2,00,000/-
- HariSharma
A. As per the Section 80CCC(2) of Income Tax Act, if any amount available in a pension policy, in respect of which deduction has been allowed, together with interest or bonus, is received on account of surrender, then such amount is added to your income and taxed as per your income slab.
Interpreting the same would mean that the portion of surrender value on which deduction has been claimed on the premiums only would have to be added entirely to your income. For the balance portion, only the gains ( i .e. difference between that portion of s u r r e n d e r v a l u e o n w h i c h deduction has not been claimed on the premiums less premiums paid on which deduction has not been claimed) would have to be added to your income.Please consult your tax advisor for appropriateness.
Taxation of pension policy on surrender is covered under Section 80CCC(2) and not Section 10(10D) and hence, the percentage of premium paid on sum assured is immaterial. Section 10(10D) covers other life insurance policies.
34
ASK OUR PLANNER
ICICIdirect Money Manager February 2018
2. What are ETFs? Are they better than Mutual Funds? Which market phase is ideal to invest in this instrument, bullish or bearish?
- Pankaj Upadhyay
A. Exchange Traded Funds (ETFs) are similar to mutual funds, but can be traded (bought & sold) through stock exchange. Both have their own advantages.
Mostly ETFs replicate an index and invest into stocks in the index in the same proportion to mirror the performance of the index and hence are passively managed. However, mutual funds are actively m a n a g e d a n d n e e d n o t necessarily mirror the index to which they are bench marked.
The expense ratio of ETFs is lesser compared to mutual funds, predominantly due to the reason that they are passively managed. As mutual funds are actively managed by fund managers, they look to generate higher returns.
ETFs are similar to mutual funds and can be invested regularly. Some brokerage firms offer SIP facility as well. If you are looking to invest into
35
equity asset class, it's always better to invest regularly, rather than waiting to invest during a specific time/phase.
Q. I am having ICICI Prudential Lifestage Pension policy taken in March 2008 with Annual premium INR 25000. I paid the premium for 4 years till 2011 and stopped after that. There is no sum assured. I want to surrender the policy. P l e a s e a d v i s e t h e t a x implications/liability for the same.
- Anuraag Bharti
A. As per the Section 80CCC(2) of Income Tax Act, the entire surrender value is added to your income and taxed as per your income slab, if deduction has been a l lowed under Section 80CCC(1) for the premiums paid. If deduction under Section 80CCC(1) has not been claimed for the premiums paid, tax might have to be payable on the Gain i.e. d i f f e r e n c e b e t w e e n t h e surrender va lue and the premiums paid; and if the surrender value is less than the premiums paid, there's no gain and no tax would have to be payable.
Q. I own a house, taken through home loan in 2014. I have been
ASK OUR PLANNER
ICICIdirect Money Manager February 2018
Do you also have similar queries to ask our experts? Write to us at: [email protected].
36
Q. I have a life-stage pension policy taken in 2009 with no sum assured for 10 years. Every year I am paying a premium of Rs.3,00,000. Could you please advise me;
1. How will the tax be calculated on maturity in 2019?
2. How to avoid and/or reduce the impact of tax on maturity in 2019?
- KalaichelvanPakkirisamy
A . Yo u c a n w i t h d r a w a r d
maximum of 1/3 of the maturity policy in a pension policy as lumpsum at maturity and this amount is exempt
rdfrom tax. The balance 2/3 has to be invested into an annuity plan compulsorily, from which you would start receiving annuity regularly, which would be added to your income and taxed as per your income slab. In the years which you receive annuity, you can consider investing some portion of the annuity into any instruments w h i c h c a n p r o v i d e y o u deduction under Section 80C.
availing deductions u/s 24 & 80C for this property & loan in my individual return since last 3 years. Now I want to gift this house property to my parents. Please advise tax impact in my ITR for already claimed deductions or future deductions.
- Manas Kotari
A. Before gifting the property to your parents, you would have to approach the lender and take their consent, as the property is under mortgage. Most of the lenders hesitate to provide consent. If at all they provide their consent, then you can gift the property through a gift deed.
However, please note that if y o u t r a n s f e r t h e h o u s e property within 5 years from the year of possession, then any deduction claimed on principal repayment till then, would be added back to your income in the year of transfer. Also, you would not be eligible to claim any further deductions on the home loan payment, as you would no longer be the owner / co-owner of the property.
MUTUAL FUND ANALYSIS
Investing in ELSS funds
ICICIdirect Money Manager February 2018
Equity linked savings schemes (ELSS) are diversified equity mutual fund schemes that are eligible for tax benefits under Section 80C of the Income Tax Act. It is the only fully equity investment option available under Section 80C. ELSS gives aggressive investors an ideal option to utilise tax benefit to invest in equity oriented funds. Effectively, ELSS are multicap mutual funds with similar return profile. The lock-in period of three years is lowest among other investment options available under Section 80C of the Income Tax Act.
Advantages of ELSS
§ Investment in ELSS is eligible for tax benefits under section 80C. Maximum tax savings up to | 46,350 on an investment of | 1.5 lakh in a financial year
§ ELSS invests in equity stocks, which has greater potential for long term capital appreciation. Professional, experienced f und m anager s ano the r positive.
§ Capital gains at the end of the lock-in period are completely tax free
§ The lock-in period of three years curtails panic selling in case of interim volatility in e q u i t y m a r k e t s . H e n c e , investments reap the benefit of long term investing in equities
§ S y s t e m a t i c m o d e o f investment (regular monthly investment) available
ELSS category nature
ELSS funds are the only fully equity-based investment option under Section 80C. As such, the performance potential of ELSS
funds is superior compared to alternatives like National Pension S y s t e m ( N P S ) , E m p l o y e e s Provident Fund (EPF)/Voluntary Provident Fund (VPF), Public Provident Fund (PPF) and tax-saving fixed deposits (FDs). ELSS funds have displayed consistent performance.
H is tor ica l ly, the ELSS fund performance has not deviated directionally from the performance of other equity fund categories. This is because ELSS funds have tended to invest across market caps – large, mid and small, thus keeping performance in line with the general performance of the wider equity markets, as a whole. This lack of market cap bias enables comparison of ELSS fund performance with that of multi-cap funds (also known as diversified equity funds). In recent times, ELSS funds have delivered returns in line with multicap funds.
Under th is background, we recommend the following funds: L&T Tax Advantage Fund, Franklin India Taxshield Fund and Reliance Tax Saver Fund
37
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
L&T Tax Advantage Fund
Fund Objective:To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities.
Key Information:
Product Label:
Investors understand that their principal will be at moderately high risk
This product is suitable for investors who are seeking:• Long term capital growth• Investment predominantly in equity and equity related securities
Performance:The fund has been among the top two quartiles performance wise over the last one, three and five year periods (as of January 3 1 ) . I t h a s m a n a g e d t o outperform the category and the benchmark across these time f r a m e s . T h e m a r g i n o f o u t p e r f o r m a n c e o v e r i t s benchmark has increased in recent times. It has generated CAGR of 15.1% and 19.7% in the last three years and five years vs. 9.7% and 14.3% returns by benchmark, respectively (as of January 31, 2018)
Portfolio:Financial and consumption s t o c k s h a v e l e d t o outperformance of the scheme recently. Additionally, the fund
manager has demonstrated good stock picking ability in the commodities space as well as some turnaround opportunities by identifying gainers quite early
Fund Benchmark
Performance vs. Benchmark
38
NAV as on January 31, 2018 (`) 58.3
Inception Date February 27, 2006
Fund Manager Soumendra Nath Lahiri
Minimum Investment (`)
Lumpsum 500
SIP 500
Expense Ratio (%) 2.06
Exit Load Nil
Benchmark S&P BSE 200
Last declared Quarterly AAUM(` cr) 2927
36.6
15.1 19.7
15.9
30
9.7 1
4.3
11.7
0
10
20
30
40
1 Year 3 Year 5 Year Since Inception
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
on. The scheme is significantly overweight consumption stocks w h e n c o m p a r e d t o i t s benchmark although exposure has reduced recently in favour of financials. The fund has recently added names from the newly listed insurance players. There are more than 60 stocks in the portfolio with the weightage to
no stock being much above 4%. This reduces concentration risk at the portfolio level. However, the top four picks in terms of sectors contribute ~66% of the portfolio. The fund is slightly tilted towards large cap stocks but still holds significant amount of midcap stocks.
39
Our View:Investors with a slightly higher
risk appetite can consider the fund from a three-five year perspective.
You can view performance of other schemes being managed by the fund manager of this scheme on the following link:
https://www.ltfs.com/content/dam/lnt-financial-services/lnt-mutual-fund/downloads/factsheets/2017-18/LT%20Factsheet%20November% 202017.pdf
Data as on January 31,2018 ;Portfolio details as on Dec-2017Source: ACE MF, ICICI Direct Research
%
4.5
4.0
4.0
3.0
3.0
2.9
2.8
2.5
2.4
2.2
The Ramco Cements Ltd. Domestic Equities
Future Lifestyle Fashions Ltd. Domestic Equities
Kotak Mahindra Bank Ltd. Domestic Equities
Asset Type
Domestic Equities
Larsen & Toubro Ltd. Domestic Equities
Axis Bank Ltd. Domestic Equities
ITC Ltd. Domestic Equities
Graphite India Ltd. Domestic Equities
HDFC Bank Ltd. Domestic Equities
Housing Development Finance Corporation Ltd. Domestic Equities
ICICI Bank Ltd.
Top 10 Holdings
%26.5
17.0
15.1
9.4
8.0
5.4
5.1
2.8
2.7
2.4
Information Technology Domestic Equities
Others Domestic Equities
Consumer Staples Domestic Equities
Health Care Domestic Equities
Telecommunication Services Domestic Equities
Domestic Equities
Consumer Discretionary Domestic Equities
Materials Domestic Equities
Others Domestic Equities
Top 10 Sectors Asset TypeFinancials Domestic Equities
Industrials
%
0.9
1.5
Whats In
Cholamandalam Investment & Finance Company Ltd.
Sun TV Network Ltd.
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
DSPBR Taxsaver Fund
Fund Objective:The pr imary inves tment objective of the Scheme is to seek to generate medium to long-term capital appreciation from a diversified portfolio that is substantially constituted of equity and equity related securities of corporates, and to enable investors avail of a deduction from total income, as permitted under the Income Tax Act, 1961 from time to time.
Key Information:
This product is suitable for investors who are seeking*:
• Long-term capital growth with a three-year lock-in
• Investment in equity and equity- related securities to form a diversified portfolio.
Product Label:
Performance:The fund has outperformed its benchmark over most periods, however the performance has suffered over the last year. It has beaten the benchmark Nifty 500 Index by ~3.7% CAGR (three years) and ~5.4% CAGR (f ive years) (as of J a n u a r y 3 1 , 2 0 1 8 ) . T h e performance over the last year or so has suffered due to lower exposure to midcap stocks than i ts benchmark. The midcap space has enjoyed substantial rerating during this time, which has hurt funds that are tilted towards large caps.
Fund Benchmark
Performance vs. Benchmark
Investors under-stand that their principal will be at moderately high risk
40
NAV as on January 31, 2018 (`) 48.4
Inception Date January 18, 2007
Fund Manager Rohit Singhania
Minimum Investment (`)
Lumpsum 500
SIP 500
Expense Ratio (%) 2.50
Exit Load Nil
Benchmark NIFTY 500
Last declared Quarterly AAUM(` cr) 3834
26.9
14.3 20.5
15.4
31.4
10.6 15.1
9.8
0
10
20
30
40
1 Year 3 Year 5 Year Since Inception
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 201841
Portfolio:The portfolio has significant exposure to the financials sector, followed by materials a n d d i s c r e t i o n a r y consumption. In terms of portfolio construction, the fund has a significant large cap bias, with ~75% of the portfolio invested in such stocks with midcap stocks making up the rest. The proportion of large cap stocks in the portfolio has increased over the last month
or so. This has contributed to the recent underperformance to some extent, especially when compared to peers which are more multicap in nature. Currently there are ~70 stocks in the portfolio with individual weights to stocks not crossing 4% (except the top few picks). This indicates a focus on risk management. The fund currently has ~2.5% cash in the portfolio.
%
6.2
4.3
4.0
3.5
3.4
2.7
2.4
2.4
2.4
2.3
Top 10 Holdings Asset Type
HDFC Bank Ltd. Domestic Equities
Tata Steel Ltd. Domestic Equities
ICICI Bank Ltd. Domestic Equities
State Bank Of India Domestic Equities
GAIL (India) Ltd. Domestic Equities
Maruti Suzuki India Ltd. Domestic Equities
Hindustan Petroleum Corporation Ltd. Domestic Equities
ITC Ltd. Domestic Equities
Larsen & Toubro Ltd. Domestic Equities
CBLO Cash & Cash Equivalents and Net Assets
%29.8
14.3
11.0
10.5
6.4
6.3
5.3
5.1
4.7
2.3
Consumer Discretionary Domestic Equities
Industrials
Top 10 Sectors Asset TypeFinancials Domestic Equities
Materials Domestic Equities
Consumer Staples Domestic Equities
Others Domestic Equities
Information Technology Domestic Equities
Domestic Equities
Energy Domestic Equities
Utilities Domestic Equities
Health Care Domestic Equities
%
0.6
0.8
1
Whats In
JB Chemicals & Pharmaceuticals Ltd.
Srikalahasthi Pipes Ltd.
Manappuram Finance Ltd.
%
0.6
0.70.5
Whats out
Techno Electric & Engineering Company Ltd.
Eris Lifesciences Ltd.AU Small Finance Bank Ltd.
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 201842
Our View:Putt ing as ide the recent u n d e r p e r f o r m a n c e , t h e scheme has a good long term track record on its side. Due to
its positioning as a large cap tilted fund, it is suitable for slightly more conservative investors.
Data as on January 31,2018 ;Portfolio details as on Dec-2017Source: ACE MF, ICICI Direct Research
You can view performance of other schemes being managed by the fund manager of this scheme on the following link:
https://dspblackrock.com/quick-links/downloads?utm_source= CorporateWebsite&utm_medium=Homepage&utm_campaign=Navigation
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
Reliance Tax Saver Fund
Fund Objective:To generate long-term capital appreciation from a portfolio that is invested predominantly in e q u i t y a n d e q u i t y r e l a t e d instruments.
Key Information:
Product Label:
This product is suitable for investors who are seeking*:
• Long term capital growth
* Investment in equity and equity related securities.
Performance:The fund has consistently outperformed the category and its benchmark over the last year, 3 years and 5 years. It has been a top quartile performer in the last one-year period and 5-year period and a second quartile performer in the last 3-year period (as of January 31). The one year, three years and five-year performance (as of January 31) is 34.8%, 11.2% CAGR and 22.9% CAGR, respectively, as compared to BSE Sensex's 30.0%, 7.2% CAGR and 12.4% CAGR respectively (as of January 31).
Performance vs. Benchmark
Fund Benchmark
Investors under-stand that their principal will be at moderately high risk
PortfolioThe fund demonstrates a bias towards high growth and scalable businesses, which has helped it deliver well during the
good run for equity markets beginning from mid-2013. The portfolio earlier was multicap in nature with an almost equal split between large cap and
43
NAV as on January 31, 2018 (`) 67.8
Inception Date September 21, 2005
Fund Manager Ashwani Kumar
Minimum Investment (`)
Lumpsum 500
SIP 500
Expense Ratio (%) 1.98
Exit Load Nil
Benchmark S&P BSE SENSEX
Last declared Quarterly AAUM(` cr) 10758
34.8
11.2
22.9
16.7
30
7.2 1
2.6
12.4
0
10
20
30
40
1 Year 3 Year 5 Year Since Inception
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
mid cap stocks. However recently it has added some more large cap stocks giving it a slightly greater large cap tilt. W h e n c o m p a r e d t o i t s benchmark, the scheme is underweight on financials and significantly overweight on automobiles. It has exited
some financial stocks over the last month. While some of the top stock picks have fairly healthy allocations, at the overall portfolio level the scheme seeks to mitigate concentration risk with a fairly large number of holdings (60+ currently).
44
%
7.3
7.1
5.2
5.0
4.3
3.8
3.7
3.2
3.1
2.9
Top 10 Holdings Asset Type
State Bank Of India Domestic Equities
TVS Motor Company Ltd. Domestic Equities
Tata Steel Ltd. Domestic Equities
ICICI Bank Ltd. Domestic Equities
Tata Motors Ltd. Domestic Equities
Infosys Ltd. Domestic Equities
Bharti Airtel Ltd. Domestic Equities
Honeywell Automation India Ltd. Domestic Equities
Bharat Forge Ltd. Domestic Equities
ABB India Ltd. Domestic Equities
%23.3
19.5
17.7
13.2
8.8
5.0
3.4
2.9
2.5
1.2
Industrials Domestic Equities
Materials
Top 10 Sectors Asset TypeConsumer Discretionary Domestic Equities
Financials Domestic Equities
Telecommunication Services Domestic Equities
Others Domestic Equities
Consumer Discretionary Rights
Domestic Equities
Information Technology Domestic Equities
Others Domestic Equities
Health Care Domestic Equities
%
0.8
0.1
Whats In
Punjab National Bank
Union Bank Of India
%
1.3
0.20
Whats out
The Indian Hotels Company Ltd.
GIC Housing Finance Ltd.Reliance Communications Ltd.
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
Our View:The fund is slightly on the aggressive side with significant midcap holdings. However, the
portfolio is well constructed in terms of sector-level and stock-level diversification.
You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://www.reliancemutual.com/InvestorServices/FactsheetsDocuments/Fundamentals-December-2017.pdf
Performance of other schemes managed by these fund managers: 1. L&T Tax Advantage Fund
45
47.85 24.95 --42.30 18.16 21.5342.20 20.58 23.6922.60 3.45 7.5238.59 20.51 28.9731.36 16.28 19.83
26.82 10.49 17.7527.50 9.67 14.4021.27 12.09 18.505.12 7.80 8.48
10.11 4.15 14.015.12 7.80 8.48
Crisil Short Term Bond Fund IndexL&T Dynamic Equity Fund-Reg(G)
Fund Name 1 Year 3 Years 5 Years
Top 3 Performing Schemes L&T Emerging Businesses Fund-Reg(G)S&P BSE Small-Cap
Crisil Short Term Bond Fund Index
Performance of other schemes managed by the fund manager - Soumendra Nath Lahiri
L&T Infrastructure Fund-Reg(G)NIFTY INFRAL&T Midcap Fund-Reg(G)Nifty Free Float Midcap 100
Bottom 3 Performing SchemesL&T Equity Fund-Reg(G)S&P BSE 200L&T India Prudence Fund-Reg(G)
Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 8 other schemes of the concerned Mutual Fund
MUTUAL FUND ANALYSIS
ICICIdirect Money Manager February 2018
Data as on January 31,2018 ;Portfolio details as on Dec-2017Source: ACE MF, ICICI Direct Research
46
2. DSPBR TaxSaver Fund
Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 4 other schemes of the concerned Mutual Fund
3. Reliance Tax Saver Fund
32.73 11.39 18.6327.50 9.67 14.4031.83 10.98 22.8326.67 8.57 13.4531.53 10.17 17.8726.67 8.57 13.45
-- -- --27.50 9.67 14.40
Performance of other schemes managed by the fund manager - Ashwani Kumar
Reliance Tax Saver (ELSS) Fund(G)S&P BSE 100Reliance Vision Fund(G)S&P BSE 100
Fund Name 1 Year 3 Years 5 Years
Top 3 Performing Schemes Reliance Top 200 Fund(G)S&P BSE 200
Bottom 3 Performing SchemesReliance Capital Builder Fund-IV-B(G)S&P BSE 200
Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 4 other schemes of the concerned Mutual Fund
30.93 26.02 23.35-- -- --
30.29 13.24 17.6626.39 7.72 12.9226.19 15.74 20.2326.39 7.72 12.92
24.44 14.33 20.6326.39 7.72 12.92
Performance of other schemes managed by the fund manager - Rohit Singhania
DSPBR India T.I.G.E.R Fund-Reg(G)NIFTY 50DSPBR Opportunities Fund-Reg(G)NIFTY 50
Fund Name 1 Year 3 Years 5 Years
Top 3 Performing Schemes DSPBR Natural Res & New Energy Fund-Reg(G)MSCI World Energy Index
Bottom 3 Performing SchemesDSPBR Tax Saver Fund-Reg(G)NIFTY 50
ICICIdirect Money Manager February 2018
What is iCommunity?iCommunity is ICICIdirect's interactive platform where one can answer and get answered as well. With extensive range of forums, events & discussions iCommunity serves as an opportunity to learn more about financial world.
This month on iCommunity
Discussion
Do you think that LTCG taxation changes is a
good move by the Government?
As per the government, the total
exempted capital gains from listed
shares and units is around Rs 3,67,000
crore as per returns filed for A.Y.17-18.
Major part of this gain has accrued to
corporates and LLPs. Accordingly,
@10% LTCG tax revenue could have been Rs 36,700 crore in FY18, which is
a loss of almost 0.22% of GDP as market returns were high.
So, do you think that LTCG taxation on equities is a good move by the
Government?
Q & A Forum
Seek answers to your queries regarding investments
and market updates for free. Questions like:
> I am new to trading world. Is this the right time to
enter market?
> Should I square off xxxx stock @ target price of
Rs.xxx?
> Suggest top five mutual funds for short-term
investment.
47
Budget special
Be a part of discussion about Union Budget 18-
19, where our research team has decoded
Finance Minister's budget speech for you.
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager February 2018
Our indicative large-cap equity model portfolio has continued to deliver an impressive return (inclusive of dividends) of 113.89% till date (as on February06, 2018) since its inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex) return of 97.22% during the same period, an outperformance of 16.67. This validates our thesis of selecting companies with sound business fundamentals that forms the core theme of our portfolio. Our midcap portfolio of 16 stocks continues to outperform well, delivering 323.39% (inclusive of dividends) till date (as on February 06, 2018) vis-à-vis the benchmark index (CNX Midcap) return of 148.24%, outperformance of 175.15%. Our consistent outperformance demonstrates our superior stock picking ability as markets aligned to our view of favourable risk reward, good franchisee vs. reward-at-any-risk businesses.
We have always suggested the SIP mode of investment and still find a lot of merit in it as the preferred mode of deployment given the market conditions and volatility associated since the inception of the portfolio. We highlight that the SIP return of our portfolio has consistently outperformed the indices.
Following the same pace and opportunities in the market, our portfolio (large caps) remain overweight on BFSI sector – HDFC Bank (10%), HDFC (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI (6%). Affirming our view on consumption demand, Dabur (5%) and Asian Paints (5%) continue to be part of our large cap portfolio. However, there's an addition of metal sector- Hindustan Zinc (6%) in the revised portfolio.
We remain positive on auto, IT and pharma. We remain overweight to neutral on pure play defensives (IT, FMCG) as secular earnings coupled with sector rotation could lead to consolidation in near term valuations and offer stock specific opportunities.
Among individual names, we continue to recommend TCS in the IT space. A revival in the capex cycle coupled with lower interest rate scenario would benefit the BFSI and construction space (UltraTech, L&T, SBI, Asian Paints).
48
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager February 2018
Name of the company
Largecap Stocks
Model Portfolio
Largecap(%)
Midcap(%)
Diversified(%)
49
Auto 16.0 11.2
Tata Motor DVR 4.0 2.8
Maruti 5.0 3.5
EICHER Motors 3.0 2.1
Mahindra & Mahindra (M&M) 4.0 2.8
BFSI 37.0 25.9
HDFC Bank 10.0 7.0
Axis Bank 6.0 4.2
HDFC 9.0 6.3
Bajaj Finance 6.0 4.2
SBI 6.0 4.2
Capital Goods 4.0 2.8
L & T 4.0 2.8
Cement 4.0 2.8
UltraTech Cement 4.0 2.8
FMCG/Consumer 18.0 12.6
Dabur 5.0 3.5
Marico 4.0 2.8
Asian Paints 5.0 3.5
Nestle 4.0 2.8
IT 6.0 4.2
TCS 6.0 4.2
Media 4.0 2.8
Zee Entertainment 4.0 2.8
Metals 6.0 4.2
Hindustan Zinc 6.0 4.2
Oil and Gas 5.0 3.5
GAIL Ltd. 5.0 3.5
Largecap share in diversified 100.0 70.0
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager February 2018
ICICI Securities has received a mandate from Indian Bank'.ICICI Securities has received a mandate from Mahindra & Mahindra.
50
Auto 6.0 1.8
Bharat Forge 6.0 1.8
BFSI 20.0 6.0
Bajaj Finserve 8.0 2.4
J&K Bank 6.0 1.8
Indian Bank 6.0 1.8
Capital Goods 6.0 1.8
Bharat Electronics 6.0 1.8
Cement 6.0 1.8
Ramco Cement 6.0 1.8
Consumer 36.0 10.8
Symphony 6.0 1.8
Supreme Ind 6.0 1.8
Kansai Nerolac 6.0 1.8
Pidilite 6.0 1.8
Tata Chemicals 6.0 1.8
Bata 6.0 1.8
Metals 6.0 1.8
Graphite India 6.0 1.8
Infrastructure 8.0 2.4
NBCC 8.0 2.4
Logistics 6.0 1.8
Container Corporation of India 6.0 1.8
Textile 6.0 1.8
Arvind 6.0 1.8
Total 100.0 30.0
Midcap share in diversified 30
TOTAL 100 0 100.0
Performance* so far since inception
*Returns (in %) as on Feb 6, 2018
Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio
Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination
of BSE Sensex and CNX Midcap
Value of 1,00,000 invested via SIP at the end of every month `
Portfolio Benchmark
Investment Value of Investment in Portfolio Value if invested in Benchmark
Start date of SIP: June 30, 2011; *Value as on Feb 6, 2018
EQUITY MODEL PORTFOLIO
ICICIdirect Money Manager February 201851
113.89
323.39
160.22
97.22
148.24108.68
0255075
100125150175200225250275300325350
Large Cap Midcap Diversified
%
8.1
00.0
00
8200000
8200000
11572316.4
4
21801091.3
7
13057602.9
1
10834308.0
2
13035271.4
5
11799825.8
1
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
Largecap Midcap Divesified
|
QUIZ TIME
1. In a non-discretionary irrevocable trust, the settlor lets the
trustees take decisions regarding asset distribution.True/ False
2. After obtaining probate, it is the duty of the ___________ to
carry out the distribution of the property in accordance with the
provisions of the will.
3. If the nominee of an asset and beneficiary mentioned in the will
are same, the process of estate distribution takes__________
time.
4. If there is no will containing a guardianship designation, then a
judge will need to make the designation based on what he or she
decides is in the best interests of your child.True/false
5. ___________ is the person who is named in a will to receive a
portion of the deceased person's estate.
Note: All the answers are in the stories that have appeared in this
edition of ICICIdirect Money Manager. You may send in your
answers at: [email protected]. The answers will
be published in our next edition. The names of the earliest all correct
entries will be published too. So jog your grey cells and be quick to
send in your entries.
Correct answers for the January 2018 quiz are:
1. GDP growth of India recovered to 6.3% in second quarter of Fy18.
2. As per the latest data for 2017, equity based ETFs have received
almost double the record inflows seen in 2016.
3. Asset allocation is a trade-off between investment-specific risk
and return and is hence an antidote to market volatility.
4. Lower than expected GST collections would be an overhang on
deficit financing.
5. Agriculture loan waiver and increase in disposable income are
less likely to provide support to food & beverages consumption
and basic housing needs. False
Congratulations to the following winners for providing correct answers!
Rengaswamy Narasimhan, Richa Patil, N K Damle
ICICIdirect Money Manager February 201852
PRIME NUMBERS
Equity Markets
ICICIdirect Money Manager February 2018
Domestic Equity Indices
Global Equity Indices
Sectoral Indices
53
31-Jan-18 29-Dec-17 Change (%)
CNX Nifty 11028.0 10531.0 4.7%
CNX Midcap 20785.0 21133.5 -1.6%
S&P BSE Sensex 35965.0 34056.8 5.6%
S&P BSE 100 11419.0 11029.8 3.5%
S&P BSE 200 4812.0 4678.7 2.8%
S&P BSE 500 15347.0 15002.7 2.3%
31-Jan-18 29-Dec-17 Change (%)
Dow Jones 26,149.4 24,719.2 5.8%
S&P 500 2,823.8 2,673.6 5.6%
Nasdaq 7,411.5 6,903.4 7.4%
FTSE 7,533.6 7,687.8 -2.0%
DAX 13,189.5 12,917.6 2.1%
CAC 40 5,481.9 5,312.6 3.2%
Nikkei 23,486.1 22,764.9 3.2%
Hang Seng 32,887.3 29,919.2 9.9%
Shanghai Composite 3,480.8 3,307.2 5.3%
Taiwan Weighted 11,103.8 10,642.9 4.3%
Straits Times 3,534.0 3,402.9 3.9%
31-Jan-18 29-Dec-17 Change (%)
S&P BSE Auto 25,945.3 26,751.2 -3.0%
S&P BSE Bankex 30,986.0 28,856.8 7.4%
S&P BSE FMCG 10,711.0 10,695.2 0.1%
S&P BSE Healthcare 14,559.4 14,799.4 -1.6%
S&P BSE Metals 15427.4 14939.8 3.3%
S&P BSE Oil & Gas 16,368.2 16,283.3 0.5%
S&P BSE Power 2,319.0 2,381.7 -2.6%
S&P BSE Realty 2,609.1 2,608.3 0.0%
S&P BSE Teck 6,831.0 6,408.2 6.6%
PRIME NUMBERS
ICICIdirect Money Manager February 2018
Debt Markets
Government Securities (G-Sec) Yields (in %) Jan-18 Dec-17 Change (bps)
Corporate Bond Yields (in %) Jan-18 Dec-17 Change (bps)
Commercial Paper (CP) Rates (in %) Jan-18 Dec-17 Change (bps)
Treasury Bill (T-Bills) Yields (in %) Jan-18 Dec-17 Change (bps)
Volatility Index (VIX)
31-Jan-18 29-Dec-17 Change (%)
VIX 15.93 12.67 0%
54
10 year 7.43 7.32 11
5 year 7.40 7.11 29
3 year 7.08 6.77 31
1 year 6.67 6.28 39
AAA 10 year 8.19 8.07 12
AAA 5 year 7.82 7.77 5
AAA 3 year 7.60 7.59 1
AAA 1 year 7.54 7.43 11
AA 10 year 8.61 8.44 17
AA 5 year 8.35 8.22 13
AA 3 year 8.14 8.05 9
AA 1 year 7.91 7.78 13
12 Months 7.98 7.53 45
6 Months 7.89 7.33 56
3 Months 7.76 7.06 70
1 Month 6.95 6.86 9
91D TB 6.40 6.20 20
182D TB 6.46 6.32 14
364D TB 6.55 6.40 15
PRIME NUMBERS
10-year benchmark yields (%) across countries
ICICIdirect Money Manager February 2018
Macro-economic Indicators
Consumer price index (CPI)
Wholesale price index (WPI)Month
*WPI numbers are based on new series with 2011-12 as the base year'
55
Countries 31-Jan-18 29-Dec-17 Change in bps
US 2.705 2.405 30
UK 1.510 1.190 32
Japan 0.085 0.048 4
Spain 1.422 1.558 (14)
Germany 0.697 0.427 27
France 0.966 0.780 19
Italy 2.029 2.016 1
Brazil 9.720 10.256 (54)
China 3.922 3.902 2
India 7.430 7.326 10
MF Investment Jan-18 Dec-17 YTD
Equity 9083 8333 9083
Debt 22240 18998 22240
FII Investment Jan-18 Dec-17 YTD
Equity 12983 -4747 12983
Debt 9355 2433 9355
Items Weights(%) Nov-17 Dec-17 Jan-18
Food&bev. 45.86 4.41 4.85 4.58
Pan,tob& intox. 2.38 7.89 7.76 7.58
Cloth & Foot 6.53 5.04 4.95 4.94
Housing 10.07 7.36 8.25 8.33
Fuel & light 6.84 8.24 7.90 7.73
Misc. 28.31 3.72 3.79 3.78
CPI 100 4.88 5.21 5.07
Weights Oct-17 Nov-17 Dec-17WPI 100.0 3.59 3.93 3.58Primary Articles 22.6 3.33 5.28 3.86Fuel & Power 13.2 10.52 8.82 9.16Manufactured Goods 64.2 2.62 2.61 2.61
PRIME NUMBERS
Commodities
Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com Research
ICICIdirect Money Manager February 2018
Mutual Funds: Category Average Returns
Equity Funds Returns (in %)Tenure Diversified Funds Mid-cap &
Small-cap Funds
Large-capFunds
ELSS (Tax-
savingfunds)
Returns as on January 31, 2018
Debt Funds Returns (in %)
Returns as on January 31, 2018
Tenure Liquid Funds
Index of industrial production (IIP) Sector-wise growth rate (%)
Currencies and CommoditiesCurrencies
*IIP numbers are based on new series with 2011-12 as the base year'
Debt ST Ultra ST Debt LT
56
Categories 30-Nov-17 30-Oct-17 30-Sep-17 Weight(%)Mining 6.4 6.8 2.2 14.4Manufacturing 2.8 -1.3 1.5 77.6Electricity -6.5 -0.5 -3.2 8.0Overall 2.4 -0.3 1.2 100.0
31-Jan-18 29-Dec-17 Change (%) StatusUSDINR 63.6 63.9 -0.4% AppreciatedEURINR 79.2 76.5 3.5% DepreciatedGBPINR 89.9 86.3 4.2% DepreciatedAUDINR 51.5 49.9 3.2% DepreciatedCHFINR 68.2 65.5 4.1% DepreciatedJPYINR 0.6 0.6 3.0% DepreciatedCNYINR 10.1 9.8 3.0% Depreciated
31-Jan-18 29-Dec-17 Change (%)Crude ($/barrel) 68.8 66.8 3.0%Gold ($/ounce) 1,345.2 1,303.1 3.2%
6 months 9.59 11.73 7.80 9.361 year 29.69 34.01 27.89 29.853 year 11.95 16.29 9.35 11.705 year 18.37 25.47 15.38 18.15
6 months 6.10 3.77 5.26 0.16
1 year 6.17 5.33 6.08 3.08
3 year 7.10 7.57 7.58 6.75
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