Mutual Fund Review November 19, 2009 | Mutual Fund

November 21, 2018

Mutual Fund
Review
Mutual Fund Review
November 21, 2018

Equity Markets .................................................................................................... 2

Debt Markets....................................................................................................... 3
MF Category Analysis ......................................................................................... 5
Equity funds..................................................................................................... 5
Equity diversified funds ...................................................................................... 6
Pharma funds – in focus ..................................................................................... 6
Exchange Traded Funds (ETF) ......................................................................... 7
Aggressive hybrid funds.................................................................................. 8
Debt funds ....................................................................................................... 8
Short-term fixed income allocation (less than a year) ....................................... 9
Long term fixed income allocation (more than a year)....................................... 9
Gold: Outlook benign, avoid for absolute return ............................................... 10
Model Portfolios ................................................................................................ 11
Equity funds model portfolio ......................................................................... 11
Debt funds model portfolio ............................................................................ 12
Top Picks ........................................................................................................... 13

Note: Whenever, returns for the scheme are shown in the report, they are for the growth option of the scheme.
ICICI Securities Ltd. | Retail MF Research
 Equity Markets
Nifty 50: Subdued month for equity markets Update
12000  After having witnessed a sharp correction in September and October,
Indian equity markets rebounded in November and recouped almost
11500
half of the losses it suffered during the fall. The S&P BSE Sensex fell
11000 almost 14% from August all-time high levels but recovered and gained
10500 around 7.0% from lows in October. Relentless selling by foreign
10000 investors, especially during September and October to the tune of US$5
billion (bn) led to a sharp fall in Indian markets. However, the sharp
9500
rebound of the Nifty from levels of around 10000 indicates buying
9000 appetite among investors at lower levels
Sep-18
Dec-17

Feb-18
Jan-18

Jun-18

Oct-18
Jul-18
May-18
Nov-17

Aug-18

Nov-18
Mar-18
Apr-18

 Sectors like capital goods, banking and real estate have outperformed in
the current rebound, which the market has witnessed. Sector rotation is
Source: Bloomberg happening at a faster rate amid market volatility. The return variation
among various mutual funds is likely to be high in the short-term.
Midcap index outperforms … Investors should give less weightage to near term returns
 Retail investors have shown noteworthy maturity in the last few years
4.3

5
4 where they have invested more during market falls. During October,
3 when market was falling, mutual funds saw higher inflows in equity
1.5

1.5

1.4

1.3

oriented funds on the back of all-time high inflows through the SIP
1.1

2
1 mode, which almost touched | 8000 crore
0
 On the macro front, global crude oil prices corrected sharply from
BSE Small cap

Sensex
BSE 200
BSE 500

BSE 100
BSE Midcap

around US$85 per barrel to currently around US$67 per barrel. The
rupee also stabilised and appreciated from around 74 per US dollar
levels to below 72 per US dollar. The same, along with stable global
Source: Bloomberg markets, was the main reason for the rebound in Indian markets
One month returns till November 15, 2018
 Foreign portfolio investors, who have been net sellers since the start of
Capital goods and real estate sectors do well CY18, turned net buyers in November 2018. They sold Indian equities
15
worth more than US$8 billion between February and October 2018.
9.6

Selling intensified September and October when they were net sellers
10
6.4

to the extent of around US$5 billion. However, in the first half of

4.2

2.8

2.2

5
1.0

November they were net buyers and bought equities worth US$500
0
million (mn) indicating buying interest at lower levels. In US$ terms,
-5 Indian markets are far lower than in rupee terms
-2.1

Healthcare -3.4

IT -4.3

-10
 Broader markets, represented by midcaps and smallcaps, have also
CG

FMCG

Auto
Banking

Oil n Gas

Metals
Real Estate

recovered undoing their recent underperformance since the start of

calendar year 2018
Outlook
Source: Bloomberg
 Overall, calendar year 2018 has been extremely volatile with returns in
One month returns till November 15, 2018
the first 10 months almost flat at around 1.0%. This was followed by a
smooth one-way rally in 2017 where the Sensex delivered around 28%
Research Analyst return with very low volatility. The markets may remain volatile in the
near term in the wake of domestic events like state and general election
Sachin Jain
sachin.ja@icicisecurities.com that are lined up in a few months along with volatile crude oil prices
 From a long term perspective, we remain optimistic on Indian equity
Jaimin Desai markets. We believe it will deliver superior returns compared to other
jaimin.desai@icicisecurities.com
asset classes over a period of time
 The time tested investment strategy has been to put more money
during market falls and not get swayed by the volatility or sharp market
falls. Investors who continued or put fresh money at every dip during
2018 are better off than investors who stopped their regular investment
 Continuing with the regular investment through SIP is of utmost
importance to use market volatility to the advantage and help achieve
the ultimate objective of wealth creation

ICICI Securities Ltd. | Retail MF Research Page 2

 Debt Markets
G-sec yield cools off towards 7.75%
Update
8.2
8.0
 Indian debt markets witnessed a return to normalcy post October after a
7.8 sudden tightening of liquidity in the NBFC space following a default by a
7.6 particular entity. G-Sec yields continued to stabilise and drift
Yield (%)

7.4
7.2 downwards with the 10-year government bond yield down 7.80% from
7.0 ~8.0% as crude fell, the rupee stabilised and the RBI continued its
6.8 aggressive OMOs purchases
6.6
6.4  Early on, defying market expectation of a 25 basis point rate hike, the
6.2
RBI chose to keep rates stable. However, the central bank changed its
Sep-17

Sep-18
Feb-18
Dec-17
Jan-18
Oct-17

Jun-18

Oct-18
Nov-17

Nov-18
May-18

Jul-18
Apr-18

Aug-18
Mar-18

stance from ‘neutral’ to ‘calibrated tightening’ indicating that, going

forward, a rate cut seems unlikely until RBI changes its stance
Source: Bloomberg
 On a positive note, oil prices corrected to ~$67/barrel after rising to
$85/barrel. Moreover, RBI announced open market operations (OMOs)
G-sec yield curve to improve liquidity conditions. RBI had announced and conducted |
360 billion of OMOs during October and followed up with another | 400
8.4
billion OMO announcement for November. Total cumulative OMO
8.1 7.86 7.87 purchases so far has been around | 1.06 lakh crore. While this brought
some respite to government bond yields, corporate bond yields stayed
Yield (%)

7.66
7.8
7.50
7.73 under pressure. NBFC HFC sectors continued to face liquidity crunch.
7.5
7.53 The month also saw foreign outflows in both equity and debt markets
7.2 7.45
7.44  We remain cautious on the NBFC sector, in general, as we believe that
6.9 although there may not be credit risk concern, yield on papers may rise
1yr 3yr 5yr 10yr
14-Nov-18 16-Oct-18
further and not subside in the near term. Similarly, low grade corporate
bonds may find it difficult to borrow at rates at which they have
borrowed in recent months. Yields may remain elevated in near term
Source: Bloomberg
 Inflation surprisingly remained benign. September headline print of
3.77% is materially below RBI’s revised Q2FY19 inflation trajectory of
AAA corporate bond yield curve 4%. The actual average for Q2FY19 is 3.88%, thus springing a surprise
9.2
on the downside with CPI for September coming in at 3.77%
Outlook
8.94
8.83 8.88  G-sec yields remained well behaved, particularly long dated
Yield (%)

8.9
8.90
8.69 securities. Benchmark 10-year G-sec yields fell almost 20 bps from
around 8.0% to 7.8% in October. Corporate bond yields, however,
8.6
8.63
8.58
8.61 remained elevated with one-year AAA yield increasingly trading
around 8.5% and one year AA rated bonds trading at 9.1%. The
8.3 same resulted in increased corporate bond spread with spread
1yr 3yr 5yr 10 yr
14-Nov-18 16-Oct-18
rising higher for lower rated bonds
 Structurally, interest rates have seen a sharp up move in the last
Source: Bloomberg year on the back of global factors like a rise in crude oil prices,
commodity prices and currency depreciation across emerging
markets. Interest rates offered by AAA-rated corporates have also
seen a sharp up move with yield on three-year AAA rated bonds
rising from 7.1% in September 2017 to 9.1% in September 2018, a
rise of 200 bps in one year. Yield on corporate bonds has moved up
to levels last seen in November 2014
 While inflationary concerns are legitimate, the sharp up move in
interest rates is discounting higher concern than warranted. RBI
expects inflations to move down from earlier estimate of 5% to
4.8% by Q1FY20. Inflation has structurally moved down and may
remain below 5% levels over the medium term, going forward. With
the inflation structurally likely to remain far lower than earlier years,
corporate bond yields are unlikely to remain at 2014 levels
 The higher spread between inflation and bond yield is indicating
that the current higher yield offered by good rated companies is a
good investment opportunity

ICICI Securities Ltd. | Retail MF Research Page 3

 MF industry synopsis
 MF industry AUM rose ~0.9% in October to ~| 22.23 lakh crore amid a
pick-up in inflows into equity-oriented and liquid funds. Of the total
AUM, ~31% was held by income funds, ~45% by equity and equity-
oriented funds and ~20% by liquid funds
 During October, equity and equity oriented funds (i.e. equity, arbitrage,
balanced, ELSS, non-gold ETFs) recorded ~| 18000 crore net inflows,
bumping up the FY19TD monthly average to ~| 13970 crore against
FY18 average of ~| 21000 crore
 According to AMFI data, SIP inflows for October touched a fresh high of
| 7985 crore. SIP inflows averaged ~| 5600 crore/month in FY18 vs. ~|
3600 crore/month in FY17, a rise of ~52%. The number of SIP folios has
increased from 1.35 crore in March 2017 to 2.49 crore in October 2018

Exhibit 1: HDFC retains top spot in terms of total AUM while SBI has highest proportion of its AUM in equity-oriented schemes
328,323

261,918
299,153

136,932

78,246
233,557

155,242

108,235
235,079

79,109
80% 350,000

300,000

59%
59%

57%

55%
54%

60%
53%
250,000

51%
51%

48%
46%

45%
44%

44%
43%
40%

40%

200,000
38%

38%

| crore
40%
34%
32%

150,000

100,000
20%

11%
9%
9%

9%

8%

50,000
6%
6%

6%
5%

1%
0% -
Franklin
ICICI Pru

DSP
SBI

Kotak
Aditya Birla

UTI

Axis
Reliance
HDFC

Equity % Debt% Others% AUM

Source: ACE MF, ICICI Direct Research

Exhibit 2: Mutual fund AUM at | 22.23 lakh crore Exhibit 3: Trend in category-wise inflows
140,201

148,875

2600000 200,000
100,285

2400000 150,000
2200000 100,000
10,743

2000000 50,000
1800000
0
| crore

1600000
-50,000
1400000
-31,183

1200000 -100,000

1000000 -150,000
Sep-18
Feb-18
Dec-17
Jan-18
Oct-17

Jun-18

Oct-18
Nov-17

May-18

Jul-18
Apr-18

Aug-18
Mar-18

-156,311

-200,000

-250,000
Income Equity Liquid
Total AUM CYTD18 CY17

Source: AMFI, ICICI Direct Research

Source: AMFI, ICICI Direct Research

ICICI Securities Ltd. | Retail MF Research Page 4

 MF Category Analysis

Equity funds
Exhibit 4: IT funds remain best performing category over last year (returns as of November 15, 2018)

IT funds have outperformed significantly in Midcap funds and small cap funds have been
40 underperformers over the last year having come
the last one year. Pharma funds and
off the highs enjoyed during the golden run from
consumption funds are the only categories 2014-17. They are still among best performing
which delivered positive return in last one
25.1

30 categories over 5 years.

23.3
year

21.3
18.4
18.2

17.3

16.8
16.5
16.0

16.0
15.3
20

14.5

14.1
12.8

11.6
11.3

11.0

10.9

10.5
10.3

10.2
10.0

9.8
9.8

9.7
Returns (%)

8.6
10
4.9

2.3

0
-0.1

-3.3

-3.7
-2.2

-2.7

-3.1

-4.2

-4.9
-10

-8.4

-12.6

-13.0
-20
Technology

Value/Contra

Mid cap
FMCG

ELSS
Focused
Pharma

Multi cap

Large & Midcap

Banking

Infrastructure
Large Cap

Small Cap
1 year 3 Year 5 year

Source: Crisil, ICICI Direct Research ; Returns over one year are compounded annualised returns

Exhibit 5: Inflows into equity funds plunge post March Exhibit 6: Equity funds AUM
1200000
40000 1150000
36000 1100000
Net Inflow ( | Cr )

32000 1050000
28000 1000000
950000
24000 900000
| Crore

20000 850000
16000 800000
12000 750000
700000
8000 650000
4000 600000
0 550000
Sep-18
Dec-17

Feb-18
Jan-18
Oct-17

Oct-18
Jun-18
May-18

Jul-18

Aug-18
Nov-17

Mar-18

Apr-18
Sep-18
Feb-18
Dec-17

Jan-18
Oct-17

Jun-18

Oct-18
Nov-17

May-18

Jul-18
Apr-18

Aug-18
Mar-18

Eq+ELSS+ETF+Balanced Total Equity AUM

Source: AMFI, ICICI Direct Research

Source: AMFI, ICICI Direct Research

ICICI Securities Ltd. | Retail MF Research Page 5

 Equity diversified funds
View  In the present market scenario, bottom up stock picking across the
Short term: Positive market segment is more important than allocation to a particular
Long-term: Positive segment or sub sector. Multicap funds offer fund managers
flexibility to allocate funds across all market segments and are,
therefore, relatively better placed
Exhibit 7: Equity diversified funds have grown at phenomenal pace over past few years …

180,000
Market cap based funds have displayed scorching pace of growth since FY15. Three year CAGR in large
cap funds, multicap funds, midcap funds and smallcap funds is 87%, 97%, 78% and 222%, respectively...

134911
150,000

120,531
115,557
112389
120,000
| crore

81,149
78787
90,000

69628
69150
64,345
68388
52,973
54433

49570
60,000
39225
34,772

38164
31551

29360
27873

17135
12906

11867

30,000
7434
1950

-
Oct 15

Oct 17

Oct 18
Oct 14

Oct 16
Oct13

Large Caps Multi Caps Mid Caps Small Caps

Source: ACE MF, ICICI Direct Research

Pharma funds – in focus

 Amid this year’s market volatility, defensive sectors like IT and
pharma have done better by protecting the downside. The pharma
View sector has witnessed increased investor interest in the last few
Short-term: Positive months. We have been positive on the pharma sector for the last
Long-term: Positive few months due to suppressed valuations, a smart recovery in the
domestic market, normalisation of US market related issues like
compliance and pricing pressure along with current tailwind.
Although the growth trajectory has come down from 20-25% to 10-
15% (normalised basis), we believe the visibility has improved. This
offers reasonable return potential
Recommended Pharma funds:
 Most US centric pharma stocks witnessed a strong run up in FY12-
16, thanks to stupendous growth in their US franchisee on the back
 Reliance Pharma Fund of the impending patent cliff (scores of patent expiries) in the US
 UTI Healthcare Fund supported by aggressive product filing as well as US focused capex
and rupee depreciation. The pharma sector (NSE Pharma) traded
between 30x and 35x one year forward PE band consistently during
this period. However, in FY16-18, as the US situation became
increasingly difficult due to compliance issues and persistent pricing
pressure, there was sharp de-rating of the sector PE. While the Nifty
PE currently is still trading at 25x one year forward, many stocks are
trading below their 10-year average PE multiples

ICICI Securities Ltd. | Retail MF Research Page 6

 Exchange Traded Funds (ETF)
In India broadly three kinds of ETFs are available: Equity index ETFs,
liquid ETFs and gold ETFs. An equity index ETF tracks a particular
Traded volumes should be the major criterion that is used equity index such as the BSE Sensex, NSE Nifty, Nifty Junior, etc. Apart
while deciding on investment in ETFs. Higher volumes from these, lately there have emerged niche ETF products that track
ensure lower spread and better pricing to investors... particular themes such as low volatility stocks, high growth stocks, high
value stocks, etc, but the market for such ETFs is limited as seen from
their modest AUM.

Exhibit 8: ETFs inflows intact Exhibit 9: ETF AUMs remain strong

15000

90439
94406
89765

89515
88122
12447 100000

81272
77501
90000

72888
72879
10000 8313

70353
Net Inflow ( | Cr )

70041

69848
80000

60107
5082

| Crore
70000
5000 2694 2820
1675 953 1785 2409 60000
305
0 50000
40000
-1604-2234

Sep-18
Dec-17

Feb-18
Jan-18

Jun-18

Oct-18
Oct-17

Jul-18
May-18
Nov-17

Aug-18
Mar-18
Apr-18
-5000 -3982
Sep-18
Dec-17

Feb-18
Jan-18
Oct-17

Oct-18
Jun-18

Jul-18
May-18

Aug-18
Nov-17

Mar-18

Apr-18

OTHER ETFs Other ETFs

Source: AMFI, ICICI Direct Research

Source: AMFI, ICICI Direct Research

Bellwether index tracking ETF AUMs have increased sharply ever since the
EPFO decided to invest a part of their incremental corpus in the equity
markets in late 2015.

The performance of some of the available ETFs is as follows –

Exhibit 10: ETF performance as of September 30, 2018

Scheme Name 6 Months 1 Year 3 Years 5 Years
Aditya Birla SL Nifty ETF (2.5) 1.8 10.1 11.7
Aditya Birla SL Sensex ETF (5.8) (5.4)
Edelweiss ETF - Nifty 100 Quality 30 (5.0) 3.8
Edelweiss ETF - Nifty Bank (1.1) 0.9
ICICI Pru Nifty Low Vol 30 ETF (3.7) 4.6
ICICI Pru NV20 ETF 6.3 12.2
Kotak Banking ETF (1.2) 0.7 13.7
Kotak NV 20 ETF 6.5 12.5
Kotak PSU Bank ETF 1.6 (23.2) (1.2) 3.8
LIC MF ETF-Nifty 100 (4.1) (0.1)
Motilal Oswal Midcap 100 ETF (14.8) (12.1) 8.8 17.9
Reliance ETF Nifty BeES (2.4) 1.9 9.9 11.6
Reliance ETF PSU Bank BeES 1.6 (23.3) (1.3) 3.8
Source: ACE MF, ICICI Direct Research; Note – 6 month performance is absolute, rest is annualised.

ICICI Securities Ltd. | Retail MF Research Page 7

 Aggressive hybrid funds
View  Inflows into balanced funds have slowed considerably in this
Short-term: Positive financial year. Average net monthly inflow in 2017 of ~ | 7000 crore
Long-term: Positive dropped to | 3500 crore in April, ~| 2700 crore in May, ~| 1500
crore in June and ~| 300 crore in July, before recovering slightly to
~| 2600 crore in August and dropping again in September to
~| 730 crore and to ~| 519 crore in October. Imposition of dividend
distribution tax (DDT) on equity mutual funds and re-introduction of
LTCG tax seems to have dealt a double whammy to investor
preference for balanced funds. With bond yields remaining elevated
and equity markets also consolidating over the last few months, the
performance of balanced funds has dipped recently

Exhibit 11: Inflows into balanced funds fall sharply in FY19 Exhibit 12: YoY 32% growth in AUM of balanced funds
11000
9,756
10000 253000
9000
233000

187924
181306

180647
177995

177065
8000

176087

174737

174523
174468
172151
213000
Net Inflow ( | Cr )

167385
7000 7,665

155105
6,754
7,614 193000

147460
| Crore
6000
5000 5,897 5,026
3,500
173000
4000 153000
3000 2,666 2,630
133000
2000 1,482
731 113000
1000 287
0
519 93000

Sep-18
Feb-18
Dec-17
Jan-18
Oct-17

Jun-18

Oct-18
Nov-17

May-18

Jul-18
Apr-18

Aug-18
Mar-18
Sep-18
Feb-18
Dec-17
Oct-17

Jan-18

Jun-18

Oct-18
Nov-17

May-18

Jul-18
Apr-18

Aug-18
Mar-18

BALANCED
Balanced

Source: AMFI, ICICI Direct Research Source: AMFI, ICICI Direct Research

Debt funds
Exhibit 13: Category wise performance (returns as on November 15, 2018)

12

10
8.3
7.36

7.27

7.18

7.4
7.05

8
7.01

6.94

6.78
7.0

6.61
6.60

6.54
6.8

6.5
6.5

6.5
6.4

6.4

6.05
Returns (%)

6.0

5.9
5.8

5.8

6
5.5
4.5
4.3

4.2

4.1

4
3.1

2.6
2.4
4.7

0
Low Duration

Dynamic Bond
Credit Risk
Liquid

Long Term
Ultra Short Term

Corporate Bond
Medium Duration
Short Term
Money Market

Gilt

6 months 1 year 3year

Source: Crisil, ICICI Direct Research. All returns are compounded annualised.

ICICI Securities Ltd. | Retail MF Research Page 8

 Short-term fixed income allocation (less than a year)
Positive View
Ultra-short term  We believe that ultra-short term funds and low duration funds
Low Duration categories offer a relatively better investment opportunity
 Ultra short-term bond funds and low duration funds are an ideal
option to park money temporarily compared to overnight or liquid
fund categories. They offer higher return potential by investing a
Short term commercial paper (CP) and corporate deposit higher proportion in a mix of corporate bonds and commercial
(CD) rates have risen sharply in past few months thereby papers compared to overnight/liquid funds. At the same time, most
offering a good opportunity in these segments funds in these categories do not have exit load restrictions, thereby
making them liquid from an investors’ perspective
 Money market funds are also a worthwhile option from liquidity and
credit quality perspective, particularly for conservative investors.
However, the return potential may be lower compared to ultra-
short/low duration categories

Positive View
Medium Duration
Credit Risk
Allocation to pure G-Sec or duration funds should be
avoided given their historical outperformance and G-sec
yield trading at the lower end of its historical range. Crisil
10-year Gilt index has delivered 38% return in the last
three years. It is likely the return will be significantly
decline, going forward
Long term fixed income allocation (more than a year)
 We believe medium duration funds and credit risk funds categories
offer relatively better investment opportunity. Short-term funds are
also a worthwhile option for conservative investors. However, the
return potential may be lower compared to medium duration and
credit risk categories due to higher credit quality
 In the medium duration category, many funds offer an optimum mix
of credit quality along with higher return potential. Credit quality in
this category is lower than short duration funds but higher than
credit risk category
 Credit risk funds are more suitable for aggressive investors as they
fall within higher risk-higher return potential. However, few funds
are offering optimal mix of credit risk for reasonable return potential
and can be considered from a long term point of view

Exhibit 14: Categorisation of debt funds

Short Term
Category Comment
Overnight funds Maturity upto 1 day
Liquid funds Maturity upto 91 days
Ultra short funds Maturity between 3-6 months
Low duration funds Maturity between 6-12 months
Money market funds Money market securities with maturity upto 1 year

Long Term
Category Comment
Short duration Maturity between 1-3 years
Medium duration Maturity between 1-4 years
Medium to long duration Maturity between 4-7 years
Long duration Maturity of more than 7 years
Dynamic bond funds Across duration
Corporate bond funds High rated instruments (AA+ and AAA)
Credit risk funds Below high rated instruments (below AA+)
Gilt funds G-secs across maturity
Source: Sebi, ICICI Direct Research

ICICI Securities Ltd. | Retail MF Research Page 9

 Gold: Outlook benign, avoid for absolute return
 Global gold prices continued to trade within a narrow range around the
US$1200-1220 per ounce mark during October. Ending the month at
~US$1214 per ounce, prices are ~6.8% lower in YTD terms
 On the other hand, Indian prices have been doing far better and gained
Gold prices in the near term may find support due to ~4.6% to end October at ~| 31700 per 10 grams. With that, Indian gold
concerns on trade war and higher volatility in capital prices were better off by ~8.4% YTD till October. However, in early
markets November, appreciation of the rupee has led to a fall in gold prices.
They were trading at ~| 30800 per gram on November 14
The medium term outlook, however, remains benign given
 The US Fed raised rates at its September meeting as expected. Earlier,
the rising global interest rate trajectory and reducing
the Fed had raised rates thrice in 2017 and twice in 2018. Coupled with
monetary stimulus
a tightening liquidity cycle begun late last year, higher interest rates are
likely to prevent any sustained medium term rally in gold price
 Geopolitical fears continue to persist. Gold could provide a safe haven
in the short-term in the event of a risk off environment. Worries
surrounding tensions between US-Iran and US-China could lend
support to the yellow metal
 The US dollar continued to remain strong against a basket of major
currencies. The Dollar Index has ranged at 94-96 over the past several
months. Dollar strength is negative for gold since the metal is priced in
that currency
Exhibit 15: Global prices remain range bound

1400

1350

1300
Gold prices have remained below US$1300 per ounce
since May 1250

1200

1150

1100

Sep-18
Dec-17

Feb-18
Jan-18

Oct-18
Jun-18
May-18

Jul-18

Aug-18
Nov-17

Nov-18
Mar-18

Apr-18

Price ($/ounce)

Exhibit 16: Indian prices drop off after recent rally

32000

31000

30000

29000

28000
Sep-18
Feb-18
Dec-17

Jan-18

Jun-18

Oct-18
Nov-17

Jul-18

Nov-18
May-18
Apr-18

Aug-18
Mar-18

Price (|/10 grams)

Source: Bloomberg

ICICI Securities Ltd. | Retail MF Research Page 10


What’s In What's Out
Aggressive
Mirae Asset India Equity HDFC Midcap Opportunities
L&T India Value Kotak Standard Multicap
Moderate
L&T Midcap HDFC Midcap Opportunities
ICICI Pru Bluechip Kotak Standard Multicap
Model Portfolios
Equity funds model portfolio
Investors who are wary of investing directly into equities can still get
returns almost as good as equity markets through the mutual fund route.
We have designed three mutual fund model portfolios, namely,
conservative, moderate and aggressive mutual fund portfolios. These
portfolios have been designed keeping in mind various key parameters like
investment horizon, investment objective, scheme ratings, and fund
management.

(Note – The portfolio changes will be reflected in the Exhibit 17: Equity model portfolio
performance from next month) Review Interval Monthly Monthly Quarterly
Risk Return High Risk- High Medium Risk - Low Risk - Low
Return Medium Return Return
Funds Allocation % Allocation
Franklin India Focused Equity Fund 20 - -
Principal Emerging Bluechip Fund - 20 20
HDFC Smallcap Fund 20 20 -
SBI Bluechip Fund - - 20
L&T India Value Fund 20 - -
L&T Midcap Fund 20 20 -
Mirae Asset India Equity Fund 20 20 20
ICICI Prudential Bluechip Fund - 20 20
Reliance Large Cap Fund - - 20
Total 100 100 100
Source: ICICI Direct Research

Exhibit 18: Model portfolio performance since inception

Aggressive Moderate Conservative BSE 100 TRI
20%
16.3%
15.1% 14.6%
15% 13.6%

10%
%

5%

0%

Aggressive Moderate Conservative BSE 100 TRI

Source: Crisil Fund Analyser, ICICI Direct Research; CAGR performance as on October 31, 2018 since inception, i.e.
May 2009

ICICI Securities Ltd. | Retail MF Research Page 11

 Debt funds model portfolio
What’s In What's Out We have designed three different mutual fund model portfolios for different
0-6 months investment duration viz. less than six months, six months to one year and
SBI Mag Ultra Short Duration Aditya Birla SL Savings Fund
above one year. These portfolios have been designed keeping in mind
0-12 months
various key parameters like investment horizon, interest rate scenarios,
SBI Mag Ultra Short Duration Aditya Birla SL Savings Fund
0-12 months
credit quality of the portfolio and fund management, etc.
HDFC Corporate Bond Fund Aditya Birla Sun Life Credit Risk
(Note – The portfolio changes will be reflected in the Exhibit 19: Debt funds model portfolio
performance from next month) Liquidity with
Objective Liquidity moderate return Above FD
Review Interval Monthly Monthly Quarterly
Funds Allocation % Allocation
SBI Mag Ultra Short Duration 20 20
ICICI Pru Savings Plan 20
Franklin India Ultra Short Bond Fund 20
Axis Strategic Bond Fund 20 20
Kotak Low Duration Fund 20 20
Franklin India Corporate Debt Fund 20
L&T Ultra Short Term Fund 20 20
HDFC Corporate Bond Fund 20
UTI Medium Term Fund 20
L&T Low Duration Fund 20 20
Total 100 100 100
Source: ICICI Direct Research

Exhibit 20: Model portfolio performance since inception

10.0%
9.0%
7.9% 7.8% 7.9% 7.7%
8.0% 7.6% 7.6%

7.0%
%

6.0%
5.0%
4.0%
3.0%
0-6 Months 6Months - 1Year Above 1yr

Portfolio Index
Source: Crisil Fund Analyser, ICICI Direct Research; CAGR performance as on October 31, 2018 since inception, i.e.
May 2009

*Index: 0-6 month’s portfolio – Crisil Liquid Fund Index; six months-one year – Blended Index with 50% weight to
Crisil Liquid Index, 50% weight to Crisil Short Term Bond Fund Index; Above 1 year: Crisil Short Term Bond Fund
Index

ICICI Securities Ltd. | Retail MF Research Page 12

 Top Picks
Exhibit 21: Category wise top picks
Equity Funds & Equity-oriented Funds
Largecaps ICICI Pru Focused Bluechip Fund
SBI Bluechip Fund
Reliance Large Cap Fund
Large and Midcaps DSP Blackrock Equity Opportunities Fund
IDFC Core Equity Fund
Principal Emerging Bluechip Fund
Multicaps HDFC Equity Fund
L&T India Equity Fund
Mirae Asset India Equity Fund
Midcaps Invesco India Midcap Fund
Kotak Emerging Equity Fund
L&T Midcap Fund
Smallcaps L&T Emerging Businesses Fund
Reliance Small Cap Fund
HDFC Small Cap Fund
Focused ICICI Pru Focused Equity Fund
Franklin India Focused Equity Fund
Reliance Focused Equity Fund
ELSS Aditya Birla Tax Relief 96 Fund
DSP Blackrock Tax Saver Fund
IDFC Tax Advantage Fund
Aggressive Hybrid HDFC Hybrid Equity Fund
ICICI Pru Equity & Debt Fund
Principal Hybrid Equity Fund
Debt Funds
Category Fund Category Comment
Overnight / Liquid / Ultra Short Term SBI Magnum Ultra Short Duration Fund Volatility - low
Franklin India Ultra Short Bond Fund Investment horizon - 0-6m
L&T Ultra Short Term Fund
Low Duration / Money Market L&T Low Duration Fund Volatility - low
Kotak Low Duration Fund Investment horizon - 0-12m
ICICI Pru Savings Fund
Short Term HDFC Short Term Debt Fund Volatility - low
Aditya Birla SL Short Term Opportunities Fund Investment horizon - more than 1 year
L&T Short Term Bond Fund Credit risk - low
Medium Term UTI Medium Term Fund Volatility - medium
Axis Strategic Bond Fund Investment horizon - more than 1 year
HDFC Medium Term Debt Fund Credit risk - medium
Medium to Long Term / Long Term Aditya Birla SL Income Fund Volatility - high
ICICI Pru Bond Fund Investment horizon - more than 1 year
Reliance Nivesh Lakshya Fund Credit risk - low
Dynamic Bond Fund ICICI Pru All Seasons Bond Fund Volatility - high
UTI Dynamic Bond Fund Investment horizon - more than 1 year
IDFC Dynamic Bond Fund Credit risk - medium
Corporate Bond Franklin India Corporate Debt Fund Volatility - low
HDFC Corporate Bond Fund Investment horizon - more than 1 year
Aditya Birla SL Corporate Bond Fund Credit risk - low
Credit Risk Franklin India Credit Risk Fund Volatility - medium
SBI Credit Risk Fund Investment horizon - more than 1 year
Reliance Credit Risk Fund Credit risk - high
Gilt IDFC G-Sec Fund - Investment Plan Volatility - high
Aditya Birla SL G-Sec Fund Investment horizon - more than 1 year
ICICI Pru Gilt Fund Credit risk - low

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

ICICI Securities Ltd. | Retail MF Research Page 13

 Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

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

research@icicidirect.com
Disclaimer
ANALYST CERTIFICATION
We, Sachin Jain, CA, and Jaimin Desai, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect
our views about the subject issuer(s) or Funds. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:
ICICI Securities Limited (ICICI Securities) AMFI Regn. No.: ARN-0845. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities
Limited Sebi Registration is INZ000183631 for stock broker. Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate,Mumbai - 400020, India. ICICI Securities is a
full-service, integrated investment banking and is, inter alia, engaged in the business of stock broking and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank
which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund
management, distribution of financial products etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading distributors of Mutual Funds and participate in distribution of Mutual Fund Schemes of almost all AMCs in India.

The selection of the Mutual Funds for the purpose of including in the indicative portfolio does not in any way constitute any recommendation by ICICI Securities Limited (hereinafter referred to as ICICI
Securities) with respect to the prospects or performance of these Mutual Funds. The investor has the discretion to buy all or any of the Mutual Fund units forming part of any of the indicative portfolios
on icicidirect.com. Before placing an order to buy the funds forming part of the indicative portfolio, the investor has the discretion to deselect any of the units, which he does not wish to buy. Nothing in
the indicative portfolio constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the investor's specific circumstances.

The details included in the indicative portfolio are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its
accuracy or completeness guaranteed. The funds included in the indicative portfolio may not be suitable for all investors, who must make their own investment decisions, based on their own
investment objectives, financial positions and needs.

This may not be taken in substitution for the exercise of independent judgement by any investor. The investor should independently evaluate the investment risks. ICICI Securities and affiliates accept
no liabilities for any loss or damage of any kind arising out of the use of this indicative portfolio.

Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. ICICI Securities may be holding all or any of the units included
in the indicative portfolio from time to time as part of our treasury management. ICICI Securities Limited is not providing the service of Portfolio Management Services (Discretionary or Non
Discretionary) to its clients.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Kindly note that such research recommended funds in indicative portfolio are not based on individual risk profile of each customer unless a customer has opted for a paid Investment Advisory Service
offered by I-Sec.
Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

The information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any
other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Limited. The contents of this mail are solely for informational purpose and may not be used or
considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. While due care has been taken in
preparing this mail, I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any inaccurate, delayed or incomplete information nor for any actions taken in reliance
thereon. This mail/report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where
such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction.

ICICI Securities and/or its associates receive compensation/ commission for distribution of Mutual Funds from various Asset Management Companies (AMCs). ICICI Securities host the details of the
commission rates earned by ICICI Securities from Mutual Fund houses on our website www.icicidirect.com. Hence, ICICI Securities or its associates may have received compensation from AMCs
whose funds are mentioned in the report during the period preceding twelve months from the date of this report for distribution of Mutual Funds or for providing marketing advertising support to these
AMCs. ICICI Securities also provides stock broking services to institutional clients including AMCs. Hence, ICICI Securities may have received brokerage for security transactions done by any of the
above AMCs during the period preceding twelve months from the date of this report.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive
any compensation or other benefits from the AMCs whose funds are mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities
nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Sachin Jain, CA, and Jaimin Desai, CA, Research Analysts of this report have not received any compensation from the Mutual Funds house whose funds are mentioned in the report
in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or is associates may be holding all or any of the units included in the indicative portfolio from time to time as part of our treasury management. Hence, ICICI Securities or its associates
may own 1% or more of the units of the Mutual Funds mentioned in the report as of the last day of the month preceding the publication of the research report.

Research Analysts or their relatives of this report do not own 1% or more of the units of the Mutual Funds mentioned in the report as of the last day of the month preceding the publication of the
research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies/ AMCs including the AMCs
whose funds are mentioned in this report or may have invested in the funds mentioned in this report .

ICICI Securities also distributes Mutual Fund Schemes of ICICI Prudential Asset Management Company which is an ICICI Group Company, scheme details of which might also be appearing in the report
above. However, the transactions are executed at Client's sole discretion and Clients make their own investment decisions, based on their own investment objectives, financial positions and needs..

It is confirmed that Sachin Jain and Jaimin Desai, Research Analysts do not serve as an officer, director or employee of the AMCs whose funds mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies/funds mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction.
The funds described herein may or may not be eligible for subscription in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to
inform themselves of and to observe such restriction.

ICICI Securities Ltd. | Retail MF Research Page 14