Usher in this Diwali with Dhan Ki Baat

Usher in this Diwali with Dhan Ki Baat

Premia Research

Dear Investor, We at IIFL, constantly strive to be the engine of imparting financial education. Taking forward this drive, this Diwali, we have joined hands with Zee Business and launched a 26-episode televised series – Dhan ki Baat - your complete guide to understanding and managing your finances. Dhan Ki Baat will come to you every Monday at 10 PM and Saturday at 1:30 PM for the next 25 weeks. You can also catch the episode at Dhankibaat.co.in, our exclusive website on the show. The website will list investors’ FAQs besides addressing your queries. With Dhan Ki Baat, we aim to reach more than 5 crore people by 2018 end. It will tell you all that you need to know about financial planning, mutual funds, stock market investing basics, IPO investing, F&O trading, SIP, insurance and loans. We will also include specialized topics such as Succession Planning, AIF investing etc. which are topics of significant interest to HNI clients. This Diwali, celebrate the festival of lights by pledging to brighten up your life with sound Financial Planning. The average Indian investor has matured by leaps and bounds in the past few months. The Indian Mutual Fund Industry has shown immense promise and the Average Assets Under Management (AAUM) are at an all time high of `20.97 lakh crore. Today, investors are upbeat about investing in both mutual funds and equity, despite recent disruptions such as demonetization and the GST. The trend is likely to continue as investors today is more financially aware and is receptive to financial education. Looking at the economy, we believe with RBI inflation projection being raised to 4.6% from 4.2%, the prospects of reduction in rate cut in this financial year looks slim. RBI also reduced the GVA growth for FY18 to 6.7% from 7.3% on the back of lower growth in Q1FY18 because of the implementation of GST. However, from Q3FY18, we expect acceleration in the GDP growth due to lower base and increase in rural demand. In the next 2 years, we expect a surge in earnings growth at ~18-20% CAGR, mainly due to decline in interest cost, improving business environment and lower base that will further push the Nifty to new highs. In the bond market, we believe there would be uncertainty in the near-term till there is more clarity on growth and inflation. Bonds are expected to remain range-bound with an upward bias in the near-term on concerns of rising inflation, fiscal slippage, slowing FII inflows and surge in global interest rates. The report includes a SWOT analysis of the Indian economy. This report will offer our sector-wise view, and offer recommendations on the top Mutual Funds and Stocks.

Wishing you a very happy and prosperous Diwali IIFL Research

Indian Economy – SWOT Analysis

Premia Research

Strengths Weakness

The government is on the path of fiscal consolidation

Government policies have attracted FDI investments (around$15 Bn for Apr-Jun 2017)

Forex reserves have crossed $400 billion

Revision of GST will boost business momentum

Government to take every possible step to boost infrastructuredevelopment

National debt to GDP will fall to 63.3% by 2020 from ~69% in2017, according to IMF

GDP to grow at 7.4% and 7.8% for FY18 and FY19 respectively,according to IMF

Implementation of GST lowered business activity for a shortterm

Stressed balanced sheets of banks and large corporate

State governments to see a rise in their fiscal deficits

Opportunities Threats

Release of locked up resources is expected due to reforms in bankruptcy laws

Low slippage due to direct benefit transfer and Aadhaar card linkage with accounts

Exports are expected to grow on the back of recovery in the developed economies

No credit upgrade has been initiated on India

International economies are changing towards isolation andprotectionism

Rise in commodity prices and oil prices

Increase in global interest rates may hinder investment flow inIndia

Emerging countries such as Vietnam, Bangladesh and Philippinesare a serious threat to India’s exports and competitiveness

Sector View

Premia Research

Pharmaceuticals• Pro: Valuations are attractive due to stock price corrections. • Con: Earnings are expected to be under pressure in FY18E due to pricing pressure and delays in

USFDA approvals. • Recommendation - UNDERWEIGHT

NBFCs • Pro: Improving government thurst on affordable housing and falling interest rates would benefit the

sector.• Recommendation - OVERWEIGHT

Infrastructure• Pro: Improving capex cycle and government thrust on infrastructure spending are the key triggers. • Con: Delays in project finalization are a major risk. • Recommendation - OVERWEIGHT

Information Technology• Pro: Depreciating rupee augurs well for the sector. • Con: Earnings likely to remain under pressure due to lack of pickup in BFSI segment and structural

weakness in retail business. • Recommendation - NEUTRAL

Banking • Pro: Banks (private sector banks) with major focus on retail segment are likely to perform well. • Con: Deteriorating asset quality and poor capital base are key concerns for PSU banks. • Recommendation - OVERWEIGHT

Auto Ancillaries • Pro: Falling rubber prices, replacement market share gains and GST to drive organised sector. • Recommendation - NEUTRAL

Metals• Pro: Expected cutdown of steel & aluminium capacities in China, resulting in an increase in

commodity prices auger well for the sector.• Recommendation - OVERWEIGHT

Gold’s Golden Era to Continue

Premia Research

From the start of Samvat 2073, Gold prices have been flat though they are up 12% from

start of the calendar year. A key factor aiding this upward movement is the geopolitical uncertainty arising from the volatile situation between the US and North Korea.

Historically, Gold has been perceived as a safe haven which has protected its investors during economic downturn.

India, the world’s second biggest metal consumer, was expected to witness a fall in its Gold imports prior to the removal of Prevention of Money Laundering Act (PMLA). The removal of this Act will provide the impetus to boost Gold imports in the coming months.

On October 7, 2017,the government removed the Gems and Jewelry industry from PMLA. The removal of Gem and Jewelry from the ambit of the PMLA has come as a big relief for the sector. Following the move, jewelers need not verify the identity of their clients by a KYC process (PAN/Aadhaar Card details) for every transaction of `50,000 or more made through a single or multiple transactions.

Gold purchase’s during religious festival accounts for 12% of the total demand in India as per the World Gold Council data.

The move is expected to boost demand for gold jewelry during the festival season as jewelry makers are bombarding consumers with offers ranging from free silver coins to waiving off making charges to lure them into stores as sales plummeted by 50% even after prices of the precious metal fell this year.

India's Gold import stood at 60 tons in August 2017, according GFMS data. As compared to this, India imported 97 tons of Gold in October 2016. Interestingly, the demand for Gold during festival of Dusshera was down 25% compared to last year.

On MCX, Gold prices have been trading in higher top higher bottom formation. Recently in July, Gold has maintained its legacy and has taken support at 27,600 levels and bounced back till 30,500 mark.

Moreover, Gold prices have been trading above its 100-week exponential moving average. We may see Gold prices testing its multiple high of 32,500 levels till Samvat 2074; however, a move above 32,500 mark could extend its life time high of 35,000 levels.

CMP: ` 29,720

IIFL Diwali 2017 Picks

Premia Research

Stock Data

Sensex 31,847

52 Week h/l (`): 314 / 154

Market cap (`Cr) : 5,538

BSE code: 532548

NSE code: CENTURYPLY

FV (`): 1.0

Div yield (%): 0.39

Performance vs Sensex

Prices as on 09/10/2017

Stock Data

Sensex 31,847

52 Week h/l (`): 475 / 285

Market cap (` Cr) : 4,042

BSE code: 539874

NSE code: UJJIVAN

FV (`): 10

Div yield (%): 0.19



50

70

90

110

130

Oct-16 Feb-17 Jun-17 Oct-17

Century Plyboards Ltd Sensex

50

70

90

110


Ujjivan Financial Services Sensex

Century Plyboards (CPBI) is expected to benefit from Government’s thrust on host of

schemes (Building smart cities, affordable housing) due to its leadership position in the organized plywood market (~25% market share) and being the 3rd largest player in the laminates market (~12% market share).

The expansion of laminates capacity (~50% expansion) and high-margin MDF (medium density fibre) foray at an opportune time would add ~`320 Cr of incremental revenue (to form ~12% of FY19E revenues) over FY17-19E. We forecast its Debt: Equity ratio to decline by ~48 bps to 0.32 over FY17-FY19E.

The GST reforms would have a structural impact leading to shift in demand for wood panel industry products from unorganized to organized players, benefiting CPBI as it has a leading market share profile and strong brand recall. We expect it to register ~25% earnings CAGR over FY17-19E.

We value the stock at 25x on FY19E P/E to arrive at the target price of `325. We recommend BUY for next 12 months horizon.

Financial Summary `cr Revenue EBITDA margin % EPS (`) EPS growth % P/E (x) ROE (%) ROCE (%)

FY18E 2,256 17.6 10.5 25.3 24.1 25.6 23.3

FY19E 2,595 18.4 13.0 24.3 19.4 24.9 25.0 Source: Company, IIFL Research

We are upbeat on growth outlook for Ujjivan Financial Services (UFSL) as a SFB (small

finance bank). The growth in business and lowering cost of funds will aid margin expansion.

The company is adequately capitalized for next two years. We expect the overall loan growth of ~18% in FY18E and a CAGR of ~26% over FY17-19E. Incrementally, the focus will be on secured segments like housing and MSME, which are expected to grow from 3% of the loan book currently to one-third of the loan book by FY20E.

UFSL has got the scheduled bank status approval which will allow it to raise deposits from big institutions like MF, insurance companies, etc. We expect improvement in net interest margin by 140 bps over FY17-19E as cost of funds are anticipated to go down by 230 bps over the similar period.

Going forward, we believe that the asset quality will improve as the company in Q1 FY18 took provisions and write-off of ~`159 Cr. Furthermore, the current collection efficiency is ~99% post demonetization while the management guided for 4% credit cost for FY18E. We value the stock at 2.8x on FY19E Adj. BV and recommend Buy with a target price of `423 for next 12 months horizon.

Financial Summary

`cr Net interest income

Pre-provision profit EPS (`) EPS growth % P/BV (x) RoA

(%) RoE (%)

FY18E 7,471 2,818 1.5 - 2.5 0.2 1.0

FY19E 9,520 3,954 16.4 - 2.3 1.7 10.7 Source: Company, IIFL Research

Century Plyboards India Ltd [CMP: `254; Target: ` 325; Upside: 27.9%]

Ujjivan Financial Services Ltd [CMP: `340; Target: `423; Upside: 24.3%]


Premia Research

Stock Data

Sensex 31,847

52 Week h/l (`): 509 / 271


BSE code: 540133

NSE code: ICICIPRULI

FV (`): 10

Div yield (%): 1.01



Stock Data

Sensex 31,847

52 Week h/l (`): 97 / 56


BSE code: 500093

NSE code: CGPOWER

FV (`): 2.0

Div yield (%): -



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100

120

140

160


ICICI Prudential Sensex

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80

100

120


CG Power & Industrial SolutionsSensex

IPru Life is well positioned to capture growth opportunities arising from the buoyant

equity markets, given its predominant positioning as seller of unit-linked products (ULIPs) and aided by robust distribution architecture and cost competitiveness.

IPru Life has strong financials and a healthy balance sheet. Its persistency ratio and solvency ratio are higher than peers.

We forecast IPru Life to deliver ~26% CAGR in value of new business (VNB) over FY17-19E driven by 14% CAGR in NBP (new business premium) and 390 bps increase in VNB margins. Embedded Value (EV) will likely grow at ~11% CAGR over FY17-19E. Return on Embedded Value (ROEV) should remain robust at 14-16.5% over the medium term.

A strong market and capital position, rapidly improving profitability metrics and potential upside to earnings from stronger franchise growth should place IPru Life favourably among competitors. We value the stock at 2.6x on FY19E P/EV and recommend Buy with a target price of `512 for next 12 months horizon.

Financial Summary

`cr Net Premium Income

VNB Margins (%)

EPS (`)

EPS growth %

P/EV (x) RoE (%) RoEV (%)

FY18E 26,400 12.0 11.7 0.0 2.3 24.3 14.0 FY19E 31,200 13.0 13.5 15.4 2.0 24.1 14.8

Source: Company, IIFL Research

Divestment of ailing units (Ziv, US Power, Hungary business) would help international subsidiaries to breakeven in FY18E and turn positive in FY19E that should boost consolidated recurring EPS CAGR to 35% over FY17-20E.

Power Systems EBIT margins have recovered in FY17 led by cost efficiency initiatives and turnaround in distribution transformers. With likely closure of the loss-making projects (Power Solutions) in FY18E, Power Systems EBITDA margins are expected to be 10% plus.

CG saw a significant traction in the railways segment during FY17 and targets to consistently increase market penetration supported with new product offerings. Product portfolio expansion, new BEE norms for motors, and increasing presence in railways would drive high growth in Industrial Systems. We forecast 15% earnings CAGR over FY17-20E vs 3% in FY15-17 for this segment.

The above initiatives will strengthen the balance sheet and help ROCE expand to 8.2% level in FY19E. With the worst behind, we believe that successful closure of the Hungary deal and improvement in core business would support re-rating of the stock. CG Power on 14.5x FY19E EPS is at a significant discount to most capital goods peers. We recommend BUY with the target price of `99 for next 12 months horizon.

Financial Summary

`cr Revenue EBITDA margin % EPS (`) EPS growth % P/E (x) ROE (%) ROCE (%)

FY18E 6,123 8.1 3.4 17.2 23.5 5.2 8.2

FY19E 6,880 9.3 5.5 61.8 14.5 8.2 10.5 Source: Company, IIFL Research

ICICI Prudential Life Insurance Ltd [CMP: `403; Target `512; Upside: 27.2%]

CG Power & Industrial Solutions Ltd [CMP: `80; Target `99 Upside: 23.8%]

IIFL Diwali 2017 PicksPremia Research

Stock Data

Sensex 31,847

52 Week h/l (`): 378 / 208


BSE code: 570001

NSE code: TATAMTRDVR

FV (`): 2.0

Div yield (%): 0.08



Stock Data

Sensex 31,847

52 Week h/l (`): 1,375 / 782


BSE code: 500300

NSE code: GRASIM

FV (`): 2.0

Div yield (%): 0.48



55

75

95

115


Tata Motors - DVR Sensex

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80

100

120

140


Grasim Industries Ltd Sensex

Jaguar Land Rover volumes are expected to ramp up on account of three newlaunches over the next 12 months.

EBITDA margins were impacted on account of weakness in volume growth andmodel mix in the past are expected to improve with new launches. Moreover, itshedging losses are expected to decline from Q4 FY18 thus aiding margin expansion.

Historically, the DVR share has traded at a discount of ~35% over the FY15-17 to theordinary share. However, this discount has widened to ~44% since Sep 2017.Narrowing spread between the two makes DVR an ideal investment opportunity.

We arrive at target price of `317 for the DVR share based on 35.7% (3 year average)discount to our exit price of `492 for the ordinary share.

Financial Summary

` Cr. Revenue Growth YoY

EBITDA Margin EPS (`) Growth

YoY P/E (x) P/ ABV (x) ROE

FY18E 2,99,013 10.9 12.1 25.1 14.4 9.5 0.9 12.2 FY19E 3,40,975 14.0 13.5 39.4 56.7 6.1 0.8 14.5


On account of consolidation in the cement industry, we expect UltraTech Cement to

increase its market share which will result in volume growth. Since Grasim has ~60%stake in UltraTech, we expect strong momentum in UltraTech’s earnings to driveGrasim’s share price.

The standalone businesses have been performing well with strong performance inQ1 FY18 aided by higher realizations (VSF) and higher caustic soda prices (Chemicals)and the outlook for the same remains bright. We value these at 8.0x its FY19EEBITDA.

Merger gives Grasim shareholders access to fast growing financial services business.Aditya Birla Capital currently trades at a premium of ~25% to Premji Investtransaction value.

Valuing the company on SOTP basis, Grasim remains inexpensive considering thepositive traction in each of the major businesses (Cement, Chemicals & VSF andFinancial Services). Considering the value of its investments (25% holdco discount)we arrive at the target price of `1,499 for Grasim.

Financial Summary

`Cr. Revenue Growth YoY



FY18E 44,419 -- 21.1 53.3 -- 21.7 1.6 10.6

FY19E 54,037 21.7 22.4 72.8 36.6 15.9 1.4 13.1 Source: Company, IIFL Research

Tata Motors DVR [CMP: `239; Target: `317; Upside: 32.7%]

Grasim Industries Ltd [CMP: `1,157; Target: `1,499; Upside: 29.6%]

IIFL Diwali 2017 PicksPremia Research

Stock Data

Sensex 31,847

52 Week h/l (`): 103 / 88


BSE code: 540653

NSE code: SPTL

FV (`): 1.0

Div yield (%): --



Stock Data

Sensex 31,847

52 Week h/l (`): 1,347 / 807


BSE code: 539448

NSE code: INDIGO

FV (`): 10.0

Div yield (%): 3.1



75

95

115

Aug-17 Sep-17 Oct-17

Sintex Plastics Technology Ltd Sensex

80

100

120

140


Interglobe Aviation Ltd Sensex

The recent demerger of the Plastic and EPC business into Sintex Plastics Technology(SPTL) will unlock value for the Plastics business in our opinion as it will be re-ratedon account of better operational metrics.

87% of SPTL’s FY17 Custom Molding business revenue comes from industrialverticals, which are mainly composite plastics. There is an increasing trend ofcomposite plastics replacing metal part in applications covering Auto, Aviations,Electronics, Mass transit, etc. owing to its light weight. Higher substitution alongwith potential demand from shift towards Electric Vehicles can boost volumes forSPTL.

We expect steady deleveraging over FY17-19E on account of minimal capex, lowerallocation towards w/c intensive monolithic business and improving profitability.

The stock is trading at 10.7x its FY19E earnings, which is attractive considering otherplastic companies like Nilkamal and Supreme Industries that are trading at ~15.0xand ~21.0x their FY19E earnings.

Financial Summary

`Cr. Revenue EBITDA Margin EPS (`) Growth

YoY P/E (x) P/ ABV (x) ROE ROCE

FY18E 6,457 16.9 7.4 6.1 12.5 1.6 13.4 7.7


InterGlobe Aviation (IndiGo) is India’s largest passenger airlines with market share of~38% as of August 2017.

InterGlobe is transforming strategically, and its moves include 1) shifting from puresale and leaseback models to buying aircrafts, 2) targeting shorter term leases whilethe Neo engine issues are resolved and 3) increasing focus on regional routes(inducting ATRs Vs single aircraft type). These are expected to aid market share gainsfor IndiGo.

The company has sufficient cash on the books ~`8,000 Cr (post QIP @ `1,130 pershare) which should enable it to fund its fleet acquisitions.

InterGlobe is trading at an attractive valuation of 14.4x its FY19E earnings.Considering huge penetration opportunity available, stable yields, and strong returnratios, we value the stock at 18.0x its FY19E EPS and arrive at price target of `1,381.

Financial Summary

`Cr. Revenue Growth YoY



FY18E 22,947 23.5 13.9 59.1 28.7 18.6 8.1 50.6


Sintex Plastics Technology Ltd [CMP: `92; Target: `147; Upside: 59.5%]

InterGlobe Aviation Ltd [CMP: `1,101; Target: `1,381; Upside: 25.4%]


Premia Research

Stock Data

Sensex 31,847

52 Week h/l (`): 840 / 595


BSE code: 540005

NSE code: LTI

FV (`): 1.0

Div yield (%): 2.1



Stock Data

Sensex 31,847

52 Week h/l (`): 71 / 50


BSE code: 532659

NSE code: IDFC

FV (`): 10.0

Div yield (%): 0.4



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100

120

140


L & T Infotech Ltd Sensex

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80

100

120

140


IDFC Ltd Sensex

L&T Infotech Ltd’s (LTI) focus on micro-verticals (capital markets, property, casualty

insurance, manufacturing and energy) and a track record of strong client mining is its competitive advantage. The top 20 clients (68% of its revenues in FY17) have driven ~11% revenue USD CAGR over the past three years.

Pick up in BFS spending as the regulatory norms soften will lead to ~13% revenue USD CAGR (FY17-19E) from this segment. LTI is also banking on its digital offerings in insurance which is gaining traction amongst clients and is expected to grow at ~9% USD CAGR (FY17-19E). BFSI contributes ~34% to total revenues.

North America is still the key market (69% of revenues), the company is making investments in UK, Germany, and Switzerland to diversify its geographical risk.

We believe steady growth in top 20 accounts and execution of large deals in FY18E will help the company exceed the avg. industry revenue growth in FY18E. Also formidable hedging strategy (cash flow hedge book of ~$850mn) will keep margin stable at 14-15%. The stock trades at 12xFY19E EPS, relatively lower as compared to peers despite higher returns (ROE & ROCE). We recommend Buy (15xFY19E EPS).

Financial Summary

`Cr. Revenue EBITDA margin EPS(`) EPS Growth

(%) P/E (x) ROE ROCE

FY18E 6,956 17.9% 60.4 6.4 13.2 27.4% 28.3% FY19E 7,582 17.8% 66.5 10.0 12.0 27.8% 28.6%


IDFC has five business verticals - IDFC Bank (53% stake) and wholly owned

businesses- IDFC Infrastructure Finance Ltd (IDFC IFL), IDFC AMC, IDFC Alternative and IDFC Securities.

IDFC IFL has a well-diversified and healthy portfolio with loan book of `2,893 Cr (Q1FY18). IDFC AMC is the 10th largest fund house in India with an AUM of `61,491 Cr and a ~3.4% market share.

IDFC Bank is the major contributor (75%-80%) of its operating income. IDFC Bank’s focus on customer acquisition (from 1.4mn to 10mn by FY20), diversification into retail/working-capital loans and increasing branch presence will drive its loan growth.

We value IDFC’s stake in IDFC Bank at `75 and other businesses at `30.5. We arrive at SOTP based target price of `84 (20% holdco discount). Positive development on new merger structure with Shriram Group may provide further upside.

Financial Summary

`Cr. Revenue PBT EPS (`) EPS Growth (%)

P/BV (x) ROE ROCE

FY18E 12,341 2,126 5.3 21.7 0.9 7.3% 8.6% FY19E 15,056 2,980 7.5 40.2 0.8 9.4% 8.8% Source: Company, IIFL Research

L&T Infotech Ltd [CMP: `798; Target: `997; Upside: 24.9%]

IDFC Ltd [CMP: `64; Target: `84; Upside: 30.9%]


Premia Research

Stock Data

Sensex 31,847

52 Week h/l (`): 288 / 172


BSE code: 500877

NSE code: APOLLOTYRE

FV (`): 1.0

Div yield (%): 0.8



60

80

100

120

140


Apollo Tyres Ltd Sensex

Apollo Tyres Ltd (ATL) is the largest CV tyre manufacturer in India with 25% market

share each in the T&B (Truck and bus) bias segment and in the T&B radial segment. In the Passenger Car Radial (PCR) segment, it is the 3rd player with 16% market share.

In order to enhance its business scale, ATL is undergoing capacity expansion at its Chennai (doubling capacity to 12,000 TBR) and Hungary plant. ATL has also acquired Germany-based tyre distributor, reifencom GmbH to ramp up its retail network in Europe. It has recently raised `1,500 Cr (at `238 per share) through QIP to help finance its capex plans.

We believe domestic players like Apollo Tyres will continue to benefit from increasing demand and less competition as Chinese manufacturers are now concentrating on the more profitable US market. Anti-dumping duty (10-12% levy) on Chinese TBR imports will provide relief to domestic tyre makers.

The company is well poised for growth by consolidating its leadership position in-key markets through new products (launch of the two-wheelers tyre range) and increasing retail presence. Also, consistent correction in rubber prices will lead to margin expansion.

Capacity expansion by ~40%, new order wins from European OEMs and lower competition from China will drive volume growth leading to revenue CAGR of 11.5% (FY17-19E). The stock trades at 10.4xFY19E EPS (post QIP), which is reasonable as compared to auto ancillary industry’s average of 10-14xP/E. We recommend Buy (13xFY19E EPS).

Financial Summary

`Cr. Revenue EBITDA margin EPS (`) EPS Growth

(%) P/E (x) ROE ROCE

FY18E 14,137 13.5 17.9 10.6 13.4 10.9% 13.1% FY19E 16,329 14.8 23.0 28.7 10.4 12.4% 14.9% Source: Company, IIFL Research, Numbers are adjusted for QIP issue

Sr. No Company Recommended Price CMP Highest Level reached

since recommended % Return at CMP

1 RBL Bank Ltd. 344 518.15 600.9 51

2 PTC India Financial Services 39 39.2 50.75 1

3 Heidelberg Cement India 143 118.35 150.5 (17)

4 DHFL 325 544.7 618 68

5 Arvind 404 381.75 426.85 (6)

6 KEC International 127 308.45 337.6 143

7 Granules India 125 126.1 157.25 1

8 Aurobindo Pharma 820 729.1 831.25 (11)

9 Tata Chemicals 566 681 692 20

10 Navneet Education 109 165.5 193.5 52

Average Return 30 * P&L calculation has been done from October 26, 2016

Apollo Tyres Ltd [CMP: `239; Target: `299; Upside: 25.1%]

Diwali 2016 stock pick’s performance

Mutual Funds to invest in this Diwali

Premia Research

Scheme Name 1Y (%) 3Y (%) 5Y (%)

ICICI Pru Balanced Fund(G) 14.9 14.0 18.3

CRISIL Balanced Fund - Aggressive Index 12.1 9.3 11.3

NIFTY 50 14.7 8.4 12.0 Average Category Return 12.8 11.8 15.3

*1 year returns are absolute; 3 years and 5 years returns are CAGR *Returns as on Oct 06, 2017


Aditya Birla SL Top 100 Fund(G) 17.0 14.0 18.5




Axis Focused 25 Fund(G) 22.0 17.9 17.7



It is an equity-oriented balanced fund which does tactical allocation between debt

and equity based on the market outlook to ensure optimal risk reward. As of August 2017, the fund has invested ~70% of AUM in equity to give steady

growth over long term while ~27% is allocated to debt investments to cap the downside risk.

In this fund, ~57% of the AUM is invested in large-cap stocks while ~13% is invested in mid-cap and small-cap stocks.

So, investors who want to follow balanced approach i.e. 70% equity and ~30% debt can invest in the scheme to create wealth in long term.

It is an equity fund which primarily invests in top 100 stocks by market capitalization. The fund follows growth cum value investment style. As of August 2017, the fund has invested ~80% of its AUM in large-cap stocks and

~8% is invested in mid-cap stocks. Aggressive investors who want to invest in large-cap stocks can invest in the fund to

create wealth in long term.

It is an equity fund that invests in high conviction stocks, maximum 25 stocks, from

top 200 stocks by market capitalization. The fund’s strategy is to invest in quality companies with credible management,

sustainable profit growth and cash flow, and have clean balance sheet. As of August 2017, the fund has invested ~60% of its AUM in large-cap stocks and

~27% in mid-cap stocks to generate higher returns. Aggressive investors who want to take exposure in high conviction large-cap and

mid-cap stocks can invest in the fund to create wealth in long term.

ICICI Pru Balanced Fund

The AUM of the mutual fund industry has crossed `20 lakh crore in August 2017. In the last 10 years, the AUM of the mutual fund industry has increased more than 6 times because of the record breaking inflows. During April 2017 - August 2017, the mutual fund industry has received `23,750 crore via SIPs. Besides, AMFI data showed that mutual fund industry has added ~8.5 lakh SIP accounts every month during FY18. The aforementioned data indicates that there is a significant shift in saving and investing habits of Indian investors. To create wealth for our investors, on this auspicious occasion of Diwali, we recommend the following mutual funds.

Aditya Birla SL Top 100 Fund

Axis Focused 25 Fund

Mutual Funds to invest in this Diwali

Premia Research


Tata Equity P/E Fund 28.1 21.0 22.9

BSE Sensex 13.4 6.6 11.2 Average Category Return 15.7 12.8 15.6



HDFC Mid-Cap Opportunities Fund(G)

16.0 19.8 25.1

Nifty Free Float Midcap 100 16.0 18.2 18.6

Average Category Return 17.8 18.7 23.8


Scheme Name 6M (%) 1Y (%) 2Y (%)

IIFL India Growth Fund – Reg(G) 10.0 12.9 17.1


*6 months and 1 year returns are absolute; 2 years returns are CAGR *Returns as on Oct 06, 2017

It is a value conscious equity fund which aims to invest 70-100% of its AUM in stocks whose 12 months rolling PE ratio is lower than 12 month rolling PE ratio of BSE Sensex.

The remaining AUM is allocated in other equity and debt instruments. The fund has invested ~58% of its AUM in large-cap stocks and ~28% in mid-cap

stocks to generate higher returns. Aggressive but value conscious investors can invest in the fund to create wealth in

long term.

It is a mid-cap equity fund which has allocated 60% to mid-cap stocks and ~28% to large-cap stocks to generate high returns for investors.

It has a well-diversified portfolio with no more than ~10% exposure to any particular sector.

It has also managed its concentration risk, top 10 stocks account for only ~25% of the AUM.

Aggressive investors who want to take exposure to mid-cap stocks can invest in the fund to create wealth in long term.

It is an equity fund which aims to generate significant alpha by investing in 20-25 high conviction stocks rather than typical 50-70 stocks.

The fund has invested ~80% of its AUM in large-cap stocks and ~13% in mid-cap stocks.

Aggressive investors who want their fund managers to invest in high conviction ideas rather than numerous stocks can invest in the fund to create wealth in long term.

IIFL India Growth Fund

Tata Equity P/E Fund

HDFC Mid-Cap Opportunities Fund

Equity - Model Portfolio

Premia Research

Aggressive Moderate Conservative Company Allocation (%) Company Allocation (%) Company Allocation (%)

Hindalco Ind. 6% Tata Motors DVR 7% Amara Raja 8%

ICICI Bank 8% Kotak Mahindra Bank 9% Motherson Sumi 8%

Kotak Mahindra Bank 7% ICICI Bank 8% HDFC Bank 7%

Federal Bank 8% South Indian Bank 8% Federal Bank 8%

HUDCO 8% Federal Bank 7% ICICI Bank 8%

GIC Housing Finance 7% CESC 8% Grasim Industries 8%

CESC 9% L&T 6% L&T 9%

L&T 9% Century Plyboard 7% Infosys 7%

PNC Infratech 8% DHFL 8% HCL Tech 8%

CG Power & Industrial Solutions 7% REC 8% REC 8%

Sintex Plastic 7% M&M Finance 8% Petronet LNG 7%

Godrej Properties 7% ICICI Prudential Life 8% Aurobindo Pharma 7%

Century Plyboards 9% Hindalco Ind. 8% M&M Finance 7%

Under Aggressive, Moderate and Conservative portfolio, we have given maximum weightage to banking sector, as we believe falling cost of funds and revival of credit growth bodes well for the banking sector. Also, we believe improving CASA ratio and higher core fee income are positive for banking stocks in our model portfolio. We are also overweight on Infra/Cap-goods considering improving order books, revival in capex and increasing execution; government thrust on infrastructure spending will facilitate the above mention triggers. Closure of illegal aluminium capacities in China to curb pollution have contributed to a rise in aluminium prices. Outlook for aluminium demand as well as prices remains strong, given expected high global deficits over the next few quarters. Hence, we are positive on Hindalco in the Metals space. We are also bullish on housing finance space as we believe improving thrust by government on affordable housing under PMAY will boost respective company's loan book and will also improve the product demand for companies dealing into building material products. Moreover, infra status to housing finance sector would lower cost of funds for the housing finance space. We are bullish on HUDCO, DHFL, GIC & Century Plyboards.

Asset Allocation

Premia Research

Conservative portfolio

A Conservative investor aims to generate a healthy mix of capital appreciation and capital protection. His primary aim is capital protection. The 60% exposure to debt and gold ensures a capital protection while 40% allocation to equity will generate high returns in long-term.

Moderate portfolio

A moderate investor seeks for a mixture of modest capital appreciation, safety and income. His key objective is to generate decent returns with limited downside risk. The 35% exposure to debt and 5% exposure to gold will ensure limited downside risk while 60% allocation to equity will enhance alpha in long periods.

Aggressive Portfolio

An aggressive investor hunts for higher returns and is ready to face the short-term volatility. So, he should allocate 80% of his capital to equity to generate higher returns. He should also invest in debt to keep a favorable risk-reward.

Equity40%

Debt45%

Gold ETF15%

Equity60%

Debt35%

Gold ETF5%

Equity80%

Debt20%

Disclaimer

Recommendation Parameters for Fundamental/Technical Reports: Buy – Absolute return of over +10% Accumulate – Absolute return between 0% to +10% Reduce – Absolute return between 0% to -10% Sell – Absolute return below -10% Please refer to http://www.indiainfoline.com/research/disclaimer for recommendation parameter, analyst disclaimer and other disclosures. Published in 2017. © India Infoline Ltd 2017, India Infoline Limited (Formerly “India Infoline Distribution Company Limited”), CIN No.: U99999MH1996PLC132983, Corporate Office – IIFL Centre, Kamala City, SenapatiBapatMarg, Lower Parel, Mumbai – 400013 Tel: (91-22) 4249 9000 .Fax: (91-22) 40609049, Regd. Office – IIFL House, Sun Infotech Park, Road No. 16V, Plot No. B-23, MIDC, Thane Industrial Area, Wagle Estate, Thane – 400604 Tel: (91-22) 25806650. Fax: (91-22) 25806654 E-mail: [email protected] Website: www.indiainfoline.com, Refer www.indiainfoline.com for detail of Associates. National Stock Exchange of India Ltd. SEBI Regn. No.: INB231097537/ INF231097537/ INE231097537, Bombay Stock Exchange Ltd. SEBI Regn. No.:INB011097533/ INF011097533/ BSE-Currency, MCX Stock Exchange Ltd. SEBI Regn. No.: INB261097530/ INF261097530/ INE261097537, United Stock Exchange Ltd. SEBI Regn. No.: INE271097532, PMS SEBI Regn. No. INP000002213, IA SEBI Regn. No. INA000000623, SEBI RA Regn.:- INH000000248. For Research related queries, write at [email protected] For Sales and Account related information, write to customer care: [email protected] or call on 91-22 4007 1000

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