Money Manager

57
The markets continue to be

strong and the underlying
macro outlook remains
positive and healthy. There are
reasons to believe that
economic activity has picked
up.
Naturally, in times like this,
some may question, whether
this is the right time to invest as
markets have already rallied
significantly. Let me first step
back to explain the behavior
that is exhibited by retail
investors in such change of
cycle. Typically, risk aversion
keeps the level of transactions
low in a bear run. Even if there
is an opportunity to exit a poor
stock, we continue to hold and avoid any re-balancing till signs of
bull run appear. The reversal of the cycle and movement to a bull
run is first greeted with selling and re-balancing of existing
portfolio. Retail customers are net sellers in this initial period. As
the bull markets progress, customer confidence returns and
buying starts.
There is a natural tendency to extrapolate returns from the
markets linearly and by this time the key question in our minds is
how much more we should continue to invest. The answer to this
question does not lie in macro economic scenario as much as it
lies in what we intend to do with our investments. Quantum and
asset class that you propose to invest into depends on your
investment horizon, risk appetite and life stage. It is important to

first identify your life goals and plan an investment strategy
around them.
Investment strategy comprises finding the right asset allocation
for your personal situation. Asset allocation means how much
one invests into various asset classes like equities, debt, gold etc.
Please remember that even with so much of positivity around
equity markets it is possible that the right asset allocation may
have more allocation towards debt than to equity. Therefore the
answer on how much more to invest is ideally derived from a
financial plan that is customized to your situation.
At ICICIdirect, we continue to empower you with your
investments across the asset classes. Empowering does not stop
at just making products available to you, but also helping you
with decision making with our research and services like capital
gains calculator, tax filing, financial planning, and others.
In the same context, we also offer E-voting service for customers
to participate in the company decisions. This service is available
in collaboration with NSDL. E-voting is an important means
available to you to participate in company meetings and
resolutions. In this issue of Money Manager, we give an overview
of shareholder rights and responsibilities and how to exercise
them at shareholder meetings. We also cover important
resolutions that are put to vote in meetings, and how to research
them so that investors can analyze information before voting on
the resolutions.
Our message remains the same - 'Keep investing and stay
invested for your life goals.' Through this magazine and our
website www.icicidirect.com we want to make an earnest
attempt to partner with you in setting and achieving your
financial goals. Give us an opportunity to serve you, walk into any
of your Neighbourhood Financial Superstore and talk to us.
ICICIdirect Money Manager
August 2014
Shareholders in India are entitled to several rights, such as

maintaining oversight on the functioning of management,
passing key resolutions in general meetings, right to access
company documents, etc. There is, however, a general lack of
awareness among shareholders about their rights, and how to
exercise them. As a result, they often do not actively participate
or express their views at meetings.
As shareholders, whether retail or institutional, it is important to
be aware of our rights, roles & responsibilities and engage in a
meaningful way with the companies. This is precisely the issue in
focus of this edition. In our cover story, we give an overview of
different shareholder meetings, types of resolutions put to vote,
shareholder rights and methods of exercising them. We hope it
will help you interact more regularly and constructively with the
companies in which you invest.
The edition also features an interview with Harish Krishnan, Vice
President- Kotak Mutual Fund, who sees investment
opportunities in auto, cement, selective capital goods and
consumer discretionary sectors, as they cater to likely improved
demand. We also offer comprehensive information and analysis
on mid-cap equity funds, which present attractive investment
opportunity in the current scenario.
I would also like to draw your attention to our Ask our Planner
section, wherein we resolve readers' queries pertaining to
personal finance. If you too, wish to get clarity on different
aspects of personal finance or any other money-related matter,
you may write to us at moneymanager@icicisecurities.com.
Read on, stay updated and involved. Do write in with your
feedback and share your thoughts.
Editor & Publisher
Abhishake Mathur, CFA
Coordinating Editor
Yogita Khatri
Editorial Board
Sameer Chavan, CWM, Pankaj Pandey
Editorial Team
Azeem Ahmad, Nithyakumar VP CFPCM, Nitin Kunte, Sachin Jain,

Sheetal Ashar
August 2014
MD Desk..................................................................................................01
Editorial...................................................................................................02
Contents..................................................................................................03
News......................................................................................................04
Markets Round-up & Outlook.....................................................................05
Getting Technical with Dharmesh Shah...................................................... 08
Derivatives Strategy by Amit Gupta............................................................10
Stock Ideas: IDFC and HCL Technologies....................................................13
Flavour of the Month: Rights and responsibilities of shareholders
Here we give an overview of different shareholder meetings in India,
types of resolutions put to vote in meetings, shareholder rights and
methods of exercising those rights................................................... 19
Tte--tte: 'Focus on long term value creation
An interview with Harish Krishnan, Vice President Kotak Mutual Fund................................................................................26
Ask Our Planner: FDs vs. Debt Mutual Funds Post Budget
Your personal finance queries answered...................................................... 30
Mutual Fund Analysis: Category - Mid-cap Funds
We analyse top-performing mid-cap funds, which present
attractive investment opportunity in the current scenario................33
Equity Model Portfolio................................................................................41
Mutual Funds Model Portfolio.....................................................................46
Quiz Time.................................................................................................48
Monthly Trends.........................................................................................49
Premium Education Programmes Schedule.................................................. 52
August 2014
Cap on free ATM transactions

From 1 November, banks will be allowed to charge if you transact more than five
times a month at your own bank's ATM. Also, as of now, you can make five free
transactions on other banks' ATMs as well. But from 1 November, only three such
transactions will be free. And the transaction doesn't necessarily have to be money
withdrawal; even non-financial ones such as balance enquiry, chequebook request
and mini statement request will be included in this limit. If you cross the limits, the
maximum cost that you will have to incur per excess transaction is Rs.20.
Courtesy: Livemint.com
78 per cent Indians don't save enough for comfortable retirement: Report
Notwithstanding a high savings rate of 16 per cent per annum, second only to China,
around 78 per cent of Indian employees still believe they are not saving enough for a
comfortable retirement, says a report by Towers Watson. A majority 56 per cent
Indian employees would rather save more as compared to 29 per cent who would
prefer to work a few years longer says the survey. With most Indian employees
expecting to retire around the age of 60, saving for retirement has appeared as the
top financial priority for those above 50 and amongst the top 3 across all age groups.
Courtesy: The Economic Times
Two-wheeler insurance policies to get cheaper, easier to buy

Comprehensive two-wheeler insurance policies would soon get cheaper once
policies with three-year validity come into effect. To enable long-term motor
insurance for two-wheelers, the Insurance Regulatory and Development Authority
(IRDA) has introduced a long-term motor third-party insurance policy for twowheelers with a three-year term. IRDA said the total premium charged for the thirdparty coverage would be three times the annual third-party premium for twowheelers as decided by the regulator. Motor third-party premium is regulated by
IRDA and the regulator brings out revised rates for these policies every year based
on the claims experience. Third-party motor insurance is mandatory in India.
Courtesy: Business Standard
Common demat: Definition of security under Depositories Act to change

The Finance Ministry plans to call a meeting of the Financial Stability and
Development Council (FSDC) to set in motion common demat account for various
financial instruments and uniform KYC (know your client) for the entire financial
sector. Currently, definition of security includes equity shares, preference shares,
partly paid-up shares, bonds, debentures, commercial papers, certificates of
deposit, and Government Securities (G-Secs), among others.
Courtesy: The Hindu Business Line
August 2014
MARKETS ROUND-UP
Markets on tenterhooks as global jitters take centre stage

Domestic markets started the
month on a strong note
recording fresh new highs,
boosted by optimism ahead of
the Union Budget and betterthan- expected auto sales
numbers for June, 2014. The
gains were, however, short lived
as markets witnessed strong
selling post the Budget euphoria
with profit booking at record
high levels. The losses were
partially capped by healthy
Index of Industrial Production
(IIP) numbers and four-month
low June WPI (wholesale price
index) inflation data, which
drove investor sentiment on
expectation of a rate cut by the
Reserve Bank of India (RBI).
Further, positive news flows for
banks with the RBI extending the
exemption
on
reserve
requirements on bonds raised
by banks, better-than-expected
corporate earnings results and
reducing concerns on monsoon
deficit in the country kept
investors in a positive frame of
mind through the third and
fourth weeks of the month.
During the last week, markets
witnessed strong volatility as
investors locked profits at higher
levels as well as on July
derivatives' expiry. However,
they again jumped in for bargain
buying following positive

quarterly results, closing in the
green eventually. The rupee
depreciated 0.8% to close the
month at 60.6.
The volatility in Indian markets
during the month was led by a
mixed set of data points
reported during the month. On
the positive side, fiscal deficit for
June 2014 contracted to `57,022
crore vs. `1,27,383 crore in May
2014. Total domestic auto sales
also witnessed healthy growth
of ~12% year-on-year (YoY) to
1.5 million units (June 2014), led
largely by passenger vehicle
sales growth of ~11% and twowheeler's growth of ~13% with
commercial vehicles growth
remaining tepid at -9% YoY. IIP
data released for May 2014 also
reported a revival in growth at
4.7% (highest in the past 19
months) against 3.4% monthon-month (MoM). Though
inflation numbers for June 2014
came in lower at 5.43% (WPI)
and 7.31% (consumer price
index (CPI)), the lower reading
was largely led by a higher base
YoY resulting in lower reading
for the month. On the flip side,
the trade deficit (June 2014)
widened to $11.76 billion from
$11.3 billion a year earlier led by
lower growth in exports at $26.5
5
August 2014
MARKETS ROUND-UP
billion (10.2% in June 2014 vs.
12.4% in June 2013) and higher
imports at $38.2 billion (8.3% in
June 2014 vs. -11.4% in June
2013).
upbeat UK unemployment & US

economic data and strong
Chinese & eurozone Purchasing
Managers Index (PMI) data. The
strength, however, was short
lived as the improved data from
the US aggravated fears of an
early rate hike by the Fed while
the news on Argentina's second
debt default in 13 years further
dampened the mood. Global
markets witnessed a mixed
closing with Asian markets
showcasing strong gains (3-8%)
while US markets witnessed a
modest
decline
(1-2%).
European markets continued to
bleed, posting a fall of ~4%.
The results, declared so far,

showed defensive and quasidefensive sectors reporting
either better or in-line numbers.
Pharmaceuticals, fast-moving
consumer goods (FMCG),
automobile,
cement
and
telecom companies have largely
reported better-than-expected
numbers while IT and metals
reported numbers in-line with
expectations. Capital-intensive
sectors like capital goods
continued to post below par
numbers, indicating substantial
ground is yet to be covered.
During the month, crude

(Nymex) fell significantly by
6.8% and closed at $98.2/barrel.
Global markets started the

month on a weaker note
following the emergence of
fresh concerns on a fresh
financial crisis in Europe,
disappointing German industrial
production and trade data,
subdued French and Italian
industrial production data,
deflationary concerns in China
and an unexpected decline in
UK's industrial production data.
On the other hand, however, the
markets gained some strength
mid-month following better
than-expected gross domestic
product (GDP) data from China,
Global markets
During the month, both the US
and European markets
remained weak. The Dow Jones,
S&P 500 and Nasdaq lost about
1.6%,
1.5%
and 0.9%,
respectively. European markets
also witnessed huge sell-offs
with the FTSE, German Dax and
French CAC losing 0.2%, 4.3%
and 4.0%, respectively. Asian
markets, on the other hand,
registered substantial gains with
Nikkei, Shanghai SSEC and
Hang Seng gaining 3.0%, 7.5%
and 6.8%, respectively.
6
August 2014
MARKETS ROUND-UP
yet another comeback albeit in a
new avatar. Fears of a Russian
invasion of Ukraine on top of
deepening chaos in the Middle
East and the bailout of the
leading Portuguese bank are all
fuelling pessimism. Added to
this, upbeat US macro data and
better-than expected quarterly
earnings also kept markets
jittery about the squeeze in
global liquidity, at one end, with
possibility of interest rates hike
for the first time since 2006,
sooner than later, at the other
end. Already, we are witnessing
pressure on the rupee in sync
with other currencies vis--vis
the US$. Back home, the RBI has
maintained the status quo amid
sticky inflation with a hawkish
tone (earlier slightly dovish). The
commentary suggests an
accommodative interest
scenario is still some distance
away. The Q1FY15 earnings, so
far, were more or less in-line with
expectations. In this backdrop,
markets are likely to follow
global cues, especially the
multiple geopolitical turmoil
besides the US Federal Reserve
commentary. We are also
witnessing some structural shift
from cyclicals to defensives, in
another indication of looming
uncertainties after the domestic
euphoria.
Domestic markets
Foreign institutional investors
(FIIs) continued to buy into the
Indian markets and remained
net buyers to the tune of
~`6,589 crore while domestic
institutional investors (DIIs)
remained net sellers at ~`4,990
crore.
Indian markets maintained a
positive bias throughout July
2014. However, the gains were
modest post the strong rally
witnessed in the past two
months (May June, 2014). The
Nifty and Sensex gained 1.4%
and
1.9%,
respectively.
Defensives witnessed a revival
in buying interest posting strong
gains. The BSE Healthcare, BSE
FMCG and BSE IT indices gained
7.7%,
7.4%
and
4.2%,
respectively. BSE Auto and BSE
Bankex also rose 1.6% and 0.1%
respectively. Cyclicals, on the
other hand, such as BSE Realty,
BSE Power, BSE PSU, BSE Oil
and BSE Metal indices
witnessed profit booking and
lost 8.9%, 8.0%, 7.2%, 3.6% and
0.3%, respectively. Both the BSE
Midcap and Small Cap indices
lost ~2% each during the
month.
Outlook Geopolitical standoffs to give realty check

Global fear factors have made
August 2014
TECHNICAL OUTLOOK
In all hustle & bustle near record high, stick to quality
equality of the current up move
post the election result
outcome low of 24163 with
the preceding two major up
moves,
which
measured
around
3000
points. The
February-April
2014
rally
(19963 to 22939) measured
2976
points
while
the
spectacular rally in May 2014
in the run-up to election results
also measured around 3098
points (22277 to 25375).
Equity benchmarks extended

gains for a sixth consecutive
month after overcoming a bout
of profit booking towards mid
July 2014. The benchmarks hit
record highs at the start of the
month (26190/7808) before
surrendering some gains
owing to profit booking ahead
of
the
Union
Budget.
Supportive efforts near the late
June 2014 consolidation area
of 24800/7440 (Sensex/Nifty)
saw the benchmarks recoup all
mid-month losses and surge to
fresh all-time highs (26400 /
7920) indicating continuance
of the positive bias.
Key immediate support for the

index is placed around
24800/7440 levels. The index
formed two distinct lows
around 24879/7440 during late
June and mid-July 2014. The
strong bounce back on both
occasions highlights the
presence of key buying
support at the 24800/7440
region. The potential double
bottom in place around July
2014 lows will act as a launch
pad for further upsides from
current levels. The measuring
implication of the double
bottom pattern also projects
upsides towards 27000/8100 in
Going ahead, we expect

benchmarks to remain in a
rising trajectory and head
towards 27000 / 8100 (Sensex
/Nifty) in the coming month.
Price projection is based on
August 2014
TECHNICAL OUTLOOK
the near term. Only a faster
retracement below 24800 will
derail the positive momentum
and lead to an extended round
of profit booking in the shortterm.
& gas and select banking

stocks. However, losses in
these sectors have been
compensated by gains in
defensives like IT, healthcare
and FMCG indices. We believe
the recent cool-off in cyclicals
is a healthy phenomenon
within an established uptrend
and will create further room for
upsides.
The broader markets have

witnessed profit booking over
the last couple of weeks even as
benchmarks have maintained a
rising trajectory. Profit booking
was also witnessed in the
capital goods, realty, power, oil
BSE Sensex Weekly Candlestick Chart
Target @ 27000
Double bottom
@ 24879
22277
13 EMA
Weekly RSI sustaining above its support reading of 65 indicates

a firm uptrend
Source: Bloomberg, ICICIdirect.com Research

The views expressed in the article are personal views of the author and do not necessarily
represent the views of ICICI Securities.
August 2014
DERIVATIVES STRATEGY
Long addition in Nifty futures pushing index towards our
stated target of 8000
Previously, Call writing was seen
at the 7800 and 8000 strikes. The
Nifty has already moved above
7800, which may lead to short
covering in this strike. In
addition, sustainability at current
levels may also induce short
covering in the 8000 Call strike,
which commands nearly 1 crore
shares in open interest. The
outcome of the meeting in
Jackson Hole in the US would
also influence the immediate
market movement.
As the global markets stabilised,

the Nifty continued to move
upwards
for
a
second
consecutive week with addition
of long positions.
Long addition to the tune of 25%
was seen in Nifty futures since it
started moving from 7550 levels.
The highest Put base for the Nifty
has become 7800, which should
remain an important support in
the expiry week. Till the Nifty
holds above 7800-7850, there is
a possibility of further short
covering in the market. In such a
scenario, the Nifty may further
climb towards 8040 levels.
Put OI
10
8
6
4
2
8300
8200
8100
8000
7900
7800
7700
7800
7500
Bank Nifty: 15500 key support for

continuance of up move towards
16500
The volume-weighted average

price (VWAP) of the series is
placed at 7740 and the Nifty is
already 180 points above that
level. We expect the divergence
of the Nifty with its VWAP to
increase further on the higher
side.
Coll OI
12
Call writing in the Bank Nifty

remained highest at 15500 and
16000 strikes in the last few
series. However, already 25% of
short covering is seen in the
Bank Nifty 15500 Call options
since it has been holding above
10
August 2014
this level.
FIIs hedging cash positions by buying

index options
Bank Nifty/Nifty price ratio has

given a breakout above 1.97
levels. If this ratio holds this
level, it can even advance
towards 2.20. This means the
Bank Nifty may outperform the
Nifty in such a scenario.
Foreign institutional investors

(FIIs) have remained very
selective in their buying and
bought only US$157 million
during the week with a total of
US$385 million for the month.
This is much lower than their
average inflows in the last
couple of months. A possible
explanation could be increased
geo-political risks, which played
out during the major part of the
month. Also, the strong
economic data emanating from
the US kept the fear of a hawkish
tone by the US Fed alive.
Bank Nifty futures open interest

has risen continuously in the
August series and the index has
moved up by 3.5% so far from
the start of the series. These are
long positions, which are still
intact in the banking index.
Private banking stocks, which
have over 70% weight in the
Bank Nifty are still displaying
strength and could move higher.
FII positions in the derivatives

segment are suggesting that as
they already pumped in record
inflows into stocks they
continued to hedge these
positions via option buying and
bought over US$584 million of
index options. In stock future
segment as well, their buying
was strong as they bought
US$390 million.
Geo-political risk impact on the

rupee, oil and bond yields will be
key triggers for banking stocks,
going ahead, as the results of
banking stocks are already out.
Call OI
700000
Put OI
600000
Domestic institutional investors

(DIIs) were net buyers for a
fourth consecutive week. For the
month, their buying totalled
US$300 million. This is their
500000
400000
300000
200000
16200
16100
16000
15900
15800
15700
15600
15500
15400
15300
15200
100000
11
August 2014
largest monthly buying in 2014.
Cash
80.76
105.55
-43.35
20-Aug
45.61
29.70
-7.17
50.37
-79.27
21-Aug
-26.0
111.2
84.9
NA
10.50
Dax: 9650 remains crucial hurdle for

German Index
German index witnessed a
reversal from its November
2013 lows of 8900 and reverted
towards 9350 last week. For the
September series, major Call
options concentration is placed
at the 9500 and 9600 Call strike,
which should act as an
immediate resistance for the
German Index. The breakdown
level of 9650 should act as a
major hurdle in the near term.
9600
9400
9300
9200
9100
9000
8900
8800
8700
The S&P found support near its

100 DMA levels of 1910 and
managed a strong pullback to
make record highs near 1992
levels. The September series
options concentration is placed
near the 1950 strike while
highest Call base is at 2000.
Moreover, the psychological
barrier of 2000 may remain an
immediate hurdle for the index.
However, we expect the S&P to
move above these levels
eventually in the days to come.
16
14
12
10
8
6
4
2
0
12
Call OI
Put OI
August 2014
2050
77.96
470.17
2040
121.34
137.51
2030
110.86
74.39
2020
35.88
19-Aug
2010
18-Aug
2000
Cash
1990
Index Opt
1980
Stock Fut
Put OI
S&P 500: After three months of

consolidation near 1950, S&P may
stage another up-move:
DII
Index Fut
8600
Call OI
1970
FII
Date
40
20
0
1950
The cash segment data is

suggesting there has been
buying by retail participants
during the week as the Nifty
catapulted to first ever closing
above 7900.
160
140
120
100
80
60
1960
FII flows in other emerging

markets (EMs) also remained
tepid. Marginal inflows were
seen in Philippines (US$ 97
million), Indonesia ($55 million)
and Thailand ($12 million).
The 100 DMA level for the index

also lies at 9600 levels. Hence,
the German Index may face
some difficulty in surpassing
these levels in the near term.
STOCK IDEAS
IDFC: Play on infra financing and conversion to bank

infrastructure, with 44% in
energy, 23% in transport and
18% in telecom. The book has
grown at 33% CAGR (compounded annual growth rate)
over FY09-12. Post that, the
loan book grew at average
10%. Over the next 18 months,
by when the bank will be
launched, IDFC is not expected
to grow its balance sheet
significantly. We expect loan
growth to be flat by FY16E with
diversified assets getting in. In
FY16, the bank will have been
formed for part of the year.
However, we have estimated
on the basis of NBFC as no data
is known on transfer amounts.
Company Background
Infrastructure Development
Finance Company (IDFC),
incorporated
in
1997,
is engaged
in
financing
infrastructure projects
in
sectors
like
e n e r g y,
telecommunication, transporta
tion, commercial and industrial
projects including hospitals,
education, tourism and hotels.
IDFC has a loan book size of
|53,848 crore and generates
annual profit of `1,803 crore
(FY14). In May 2008, the
company entered into asset
management by acquiring the
asset management company
(AMC) business of Standard
Chartered Bank in India. During
FY14, IDFC received the
banking licence from the
Reserve Bank of India (RBI) and
it
now
prepares
for
conversion from infrastructure
non-banking
financial
company (NBFC) to a bank.
Asset quality pain in infrastructure

portfolio, but still manageable
Though
the
gross
non
performing assets (GNPA) ratio
is still manageable at 0.64%even
in Q1FY15, the management has
guided at it being around 1-1.5%
in 12 months. We estimate GNPA
of `632 crore by FY16E. The
restructured assets (RA) book
has remained around 5.3% of
the loan book at `2,853 crore.
Also, 85% of RA belongs to the
energy and power sector while
45% of the same is gas based.
Investment Rationale
Diversification expected in loan
book
Currently, 85% of IDFC's loan
book of `53,848 crore, is in
13
August 2014
STOCK IDEAS
Transition process gathers pace, demerger approvals received
years. IDFC differentiates itself

as 'Deep Pocket No legacy'.
IDFC is to gradually bring down

foreign ownership below 50%
from current 53%. Preferential
offer for domestic investors is on
the cards in the immediate near
term to meet the norm.
Return ratios now estimated to be

>12%, in first year itself as a bank
Against earlier expectation
of return on equity (RoE)
contracting from current 1314% to single digit in the first two
years of conversion to a bank,
we believe RoE will stay >12%
in initial years. Also, return on
assets (RoA), which was likely to
decline to 1.3% from current
2.5%, can stay above 2% with
lower stress of the priority sector
on infrastructure loans. The
RBI's notification on exemption
to banks from cash reserve ratio
(CRR), statutory liquidity ratio
(SLR), priority sector lending
(PSL) on infrastructure loans
(funded by long term infra
bonds) has come as a boon to
IDFC. We expect profits to grow
7.8% year-on-year (YoY) to
`19,441 crore by FY15E and
7.6% YoY to `20,910 crore by
FY16E. We believe the current
market price still offers an
opportunity to play long term
(three to five years) for
strong returns. Based on
benefits accruing to IDFC on
infrastructure push norms from
RBI, we raise our sum-of-the
parts (SoTP) target price to `174
valuing at 1.5x FY16E ABV
(adjusted book value). We
recommend BUY.
Infrastructure Development
Fund (IDF) NBFC is to be
created and certain portion of
infrastructure loans to be
transferred, clarification awaited
from RBI on eligible book.
Further, non-operative financial
holding company (NoFHC) is to
be incorporated and additional
subsidiaries of NoFHC are to be
created to transfer AMC,
alternatives and securities
businesses.
The Bank will be listed on day
one of operation Under de
merger route; IDFC parent
shareholders will receive IDFC
Bank shares also. Shareholders
own NoFHC indirectly via parent
a n d b a n k a l s o . Fo r e i g n
ownership of the bank will be
under 25% as post the parent
becoming domestic, the bank
will also be classified as
domestic. The bank will have
headroom to raise foreign
institutional investor (FII)
holding to 49% on day 1, which
can further rise to 74% after five
14
August 2014
STOCK IDEAS
Key Financials
Net interest income (NII) ( ` crore) 2,570
2,704
2,757
2,735
Pre-provision profit (PPP) ( ` crore) 2,943
3,191
3,354
3,333
Profit after tax (PAT) ( ` crore)
1,836
1,803
1,944
2,091
P/E (x)
12.6
12.9
11.9
11.1
Target P/E (x)
14.4
14.6
13.6
12.6
1.7
1.6
1.5
1.3
1.8
1.7
1.5
Valuations Summary
P/ABV (x)
Target P/ABV (x)
RoA (%)
2.8
2.5
2.6
2.7
RoE (%)
14.1
12.6
12.3
12
Stock Data
Market capitalisation ( ` crore)
23,675
GNPA (Q1FY15) ( ` crore)
342
NNPA (Q1FY15) ( ` crore)
228
NIM (Q1FY15) (%)
52-week High/Low (`)
165/76
Equity capital (`crore)
1,515
Face value (`)
10
DII holding (%)
18.7
FII holding (%)
53
Key risks include: Increase in gross non-performing assets (GNPA) or

restructured assets (RA) higher than the estimates.
(P/E: Price-to-earnings; P/ABV: Price / Adjusted book value; RoA: Return on
assets; RoE: Return on equity; GNPA: Gross non-performing assets; NNPA:
Net non-performing assets; NIM: Net interest margin; DII: Domestic
Institutional Investors; FII: Foreign Institutional Investors).
15
August 2014
STOCK IDEAS
HCL Tech: Infrastructure Management Services boost!

revenues during FY08-14 were
contributed by infrastructure
management services (IMS) as
its contribution as a percentage
of revenues rose 19 percentage
points during the same period.
Core software, which was
sluggish
(grew
1% CQGR
(compounded quarterly growth
rate) during Q1FY13 14)
continues to see demand uptick
as it grew 3.4%, 2.9%, 2.4% and
0.9% in Q4, Q3, Q2 and Q1FY14,
respectively. HCL Tech is
favourably positioned to exceed
industry average growth led by
its focus on the fast growing and
underpenetrated (<5%) IMS
market, helped by annual total
contract value (TCV) wins of >$5
billion (IMS forms a major
portion) and its superior win-rate
in re-bid market. We expect HCL
Tech revenues to grow at 16%
CAGR (compounded annual
growth rate) during FY14-16E.
Company Background
HCL Technologies, which has
over 90,000 professionals and
generated
consolidated
revenues of $5.4 billion in FY14,
provides software development
and related engineering
services. HCL Tech is the fourth
largest Indian IT services
provider and caters primarily to
international markets (America
56%, Europe 32%). Leveraging
its extensive global offshore
infrastructure and network of
offices in 31 countries, HCL Tech
provides holistic, multi-service
delivery in industries such as
financial services (27% of
revenues), manufacturing
(33%), consumer services,
public services and healthcare.
The promoter and group hold
61.6% of outstanding shares;
institutions hold 32.6% while
5.8% is held by public
shareholders.
Business reinvestments, wage hikes

may impact margins
Investment Rationale
Infrastructure services continue to
drive growth
Overall, earnings before interest

and taxes (EBIT) margins
improved 590 basis points (bps)
Noticeably, 44% of incremental

16
August 2014
STOCK IDEAS
during FY08-14 to 24.1%
primarily helped by rupee,
operational levers (utilisation)
and rising margin profile of IMS
deals. At 16.9% and 84.4%,
FY14 attrition and utilisation
continue to improve. Blended
utilisation is up 190 bps year-onyear (YoY) during FY14 to 84.4%
and 850 bps during FY08-14.
Similarly, attrition increased 200
bps YoY during FY14 and 210
bps during FY08-14 but is being
addressed. Though selling,
general & administrative (SG&A)
spends now constitute 11.8% of
revenues versus 20-quarter
average of 13.9%, absolute
spends
generally
have
increased every quarter and
suggests efficiency. We expect
FY15 margins to decline 110 bps
to 23% led by new deal win
transition costs and wage hikes.
deals worth $1 billion TCV in

each of the previous seven
quarters taking FY14 total to >$5
billion. Healthy bookings could
continue in FY15E given the
addressable opportunity of $20
billion and historical win rate of
25% plus.
Healthy deal pipeline coupled with
optimistic commentary merits BUY
HCL
Tech
continues
to
outperform industry helped by
IMS practice while commentary
suggests demand scenario
improving in both traditional
application development and
maintenance (ADM) and IMS
space. We continue to believe a
case for re-rating exists as HCL
Tech's current one-year forward
price - to - earnings (P/E)
represents a modest 18%
premium relative to its five-year
(FY09-14)
average
(12.5x),
despite delivering 38% earnings
CAGR (25% revenue growth and
average 18.2% EBIT margins)
over the same period, and
expected revenue, earnings
CAGR of 13%, 12% over FY14FY16E (with average 22.7%
margins in FY15-16E). We value
HCL Tech at 15x FY16E to arrive
at our target price of `1700.
Client metric improving aided by

healthy bookings
Over time, client metric has
been healthy as HCL Tech added
228 clients to $1-5 million bucket
during FY08-14, higher than 130
added during FY03-08 led by
rising win ratio, focus on IMS
deals and improving solution
offerings. HCL Tech signed new
17
August 2014
STOCK IDEAS
Key Financials
Net Sales ( ` crore)
25,734
32,917
36,579
41,705
EBITDA ( ` crore)
5,836
8,666
9,187
10,301
Net Profit ( ` crore)
4,026
6,370
7,043
7,983
57.1
90.1
99.7
113
P/E (x)
27.2
17.3
15.6
13.8
Target P/E (x)
29.8
18.9
17.1
15
P/ABV (x)
17.2
11.6
11
9.8
EPS ( ` )
Valuations Summary
Target P/ABV (x)
8.3
6.2
4.8
3.8
RoA (%)
30.6
36
30.5
27.4
RoE (%)
37
43
35
31.6
Stock Data
Market capitalisation ( ` crore)
1,09,859.2
GNPA (Q1FY15) ( ` crore)
750.9
NNPA (Q1FY15) ( ` crore)
9,999.8
NIM (Q1FY15) (%)
1,00,610.3
52-week High/Low (`)
1,625/872
Equity capital (`crore)
141.3
Face value (`)
DII holding (%)
3.73
FII holding (%)
5.78
Key risks include: The rupee depreciated 11% in FY14 and 14% in FY13,
thus creating significant margin tailwinds as 1% change in rupee
creates 30-40 bps of margin relief. Significant rupee appreciation could
impact margin profile.
(EBITDA: Earnings before interest, taxes, depreciation, and amortization; EPS:
Earnings per share; P/E: Price-to-earnings; EV: Enterprise value; P/BV: Price-to-book
value; RoNW: Return on Net-Worth; RoCE: Return on Capital Employed; MF: Mutual
Funds; FII: Foreign Institutional Investors).
18
August 2014
FLAVOUR OF THE MONTH

Shareholders, Know and Exercise Your Rights
When we buy shares (whether one or more), we become shareholders
ofthe company. As shareholders, we may not run the day-todayoperations, but we have a say on a number of key decisions of
thecompany. Whether it is appointment of auditors and directors, adoption
of accounts, dividend declaration, etc., we have a say in the outcome. We
have the right to decide and express our approval or rejection by voting for
or against the company resolutions. Most of our rights are exercisable at
company annual general meetings (AGMs). In order to help you
adequatelyprepare to engage at company meetings, we provide an
overview of various types of shareholder meetings, types of
importantresolutions put to vote, rights of shareholders and how
toexercise them. Read on.
There are three important
aspects to shareholders rights.
These
include,
an
understanding of different
shareholder
meetings,
k nowing the r ights and
methods of exercising them.
Court
convened
meeting
(CCM). They differ in their
periodicity
and
type
of
business agenda. Let's take a
more detailed look.
Shareholder Meetings in India

Annual general meeting (AGM):
The AGM is the only
shareholder meeting, which
must be held by every
company every financial year.
The main purpose of holding
an AGM is to transact routine
business items, also known as
"ordinary business. It includes
consideration of financial
statements and the reports of
the board of directors and
auditors, declaration of
It is important to first
understand the different types
of shareholder meetings, as
shareholders can exercise
their rights effectively only
when acting as a group in a
meeting.
Basically, there are four major
types of shareholder meetings
in
India.
1) Annual
general meeting (AGMs); 2)
Extraordinary general meeting
(EGM); 3) Postal ballot; and 4)
19
August 2014

dividend, (re)appointment of
directors, and appointment of
auditors,
including
their
remuneration.
All
other
business items are considered
special business.
wait until the next AGM. The

board can call an EGM
whenever
it
deems
fit.
Shareholders can also request
that the company convene an
EGM.
The
AGM
enables
shareholders
to
obtain
information and to question
the
board
of
directors
regarding the affairs of the
company.
Postal
ballot:
Physically
attending a meeting is often a
constraint for shareholders in
India. In order to encourage
wider participation from all
investors, the central
government has listed certain
business items that are to be
mandatorily approved by
postal ballot instead of at an in
person meeting. Some of
these include: to change the
type of company (public or
private), buyback of shares,
issue of shares with differential
rights, etc.
As per the Companies Act,

2013, the first AGM for a newly
established firm has to be held
within nine months from the
date of closing of its first
financial year. All subsequent
AGMs should be held within 15
months from the date of last
AGM or 6 months from the
close of the financial year,
whichever is earlier.
Court convened meeting (CCM): As

the name suggests, these
meetings are conducted as per
the directions given by the
court. These meetings are
generally called for all schemes
of arrangement (mergers,
acquisitions, amalgamations,
or winding up proposals).
Extraordinary general meeting

(EGM): EGMs are general
meetings of companies that
are conducted between two
AGMs. They are called when
an issue arises that is to be
considered and approved by
the shareholders of the
company and is too urgent to
20
August 2014

A quick summary
AGM
EGM
Postal Ballot
Section of the
Companies Act,
2013
Section 96
Section 100
Section 110
Sections 230-234
Business type
Ordinary/special
Special
Special
Special
Type of resolutions
passed
Ordinary/special
Special/special
Special/special
Special
Periodicity
Annual
Need Basis
Need Basis
Need Basis
Called by
Company
Company/shareholders
Company
Court/National
Company Law
Tribunal
Mode of voting
Show of hands/
poll/e-voting
Show of hands/
poll/e-voting
At
these
shareholder
meetings, companies take
decisions
by
passing
resolutions. 'Ordinary' and
'Special' are two types of
resolutions (under the
Companies Act, 2013) that are
put to vote in shareholder
meetings.
Ballot paper/e- Poll/e-voting

voting
favor of the resolution is not

less than three times the
number of votes cast against
the resolution. Examples:
Alteration
of
charter
documents, issuance of stock
options.
In general, there is a low level
of awareness among minority
shareholders and investors in
India about their rights, due to
a lack of knowledge of
corporate governance issues
and an absence of influence to
bring about a change. As a
result, retail shareholders often
do not actively participate or
express
their
views
at
shareholder meetings either
they do not know how, or feel it
Ordinary resolutions are passed if

the number of votes cast in
favor of the resolution exceeds
the number of votes cast
against the resolution.
Examples:
Approval
of
accounts,
payment
of
dividend, reappointment of
directors. Special resolutions, on
the other hand, are passed if
the number of votes cast in
CCM
21
August 2014

decisions
through
their
rights including attending
shareholder meetings, asking a
question in the AGM and even
calling for extra ordinary
general meeting.
is pointless, says Padma

Venkat, Director - Capital Markets
Policy, CFA Institute. Their
negligible shareholding does
not give them power to affect
the outcomes of corporate
decisions. They are usually
ignored by the controlling
shareholders. We need to
improve awareness among
retail shareholders of their
rights, she adds.
In shareholder meetings, there

are a number of items in the
agenda that are put up for
discussion. How can a retail
investor research and analyze
those items in order to decide
whether to vote for or against
it? Here we provide quick
guidelines.
The second aspect is to

understand the rights. The
small or retail shareholders can
influence on a company's
How to Research Key Items in the Agenda

Agenda Item
Details/Regulatory Provisions
Certain guidelines for

shareholders
Adoption of
Accounts
Every company has to prepare

financial statements (e.g. balance
sheet, profit and loss account) for each
year and get them approved at the
AGM.
- If the growth of the company has

declined over the past few years but
the
industry
has
grown,
shareholders should ask why the
company's growth has been lower
than industry growth.
- Shareholders should raise questions
if the operating margin and net profit
margins are declining consistently.
Appointment
of Auditors
The Companies Act, 2013, mandates

rotation of audit firms every 10 years
(after two terms of 5 years each) and of
the individual auditor every 5 years.
Once rotated, a firm cannot be
reappointed as the statutory auditor
before a cooling-off period of five years
has elapsed.
Shareholders should note that a

prolonged association with the
company may compromise the
independence of the auditor/audit
partner. They must ensure that the
auditor to be (re)appointed has good
market standing and that his
remuneration is in line with the size and
scale of operations and comparable to
other peers.
22
August 2014

Dividend
Declaration
The Companies Act, 2013, states that

the dividend can be declared or paid by
a company only out of the company
profits for that year or any previous
financial year(s) after providing for
depreciation and in accordance with
the relevant provisions and rules.
Shareholders should try to analyze

whether the growth in dividend is
commensurate with the financial
health of the company. In some
circumstances, higher dividends may
not be in the best interests of
shareholders, including when
borrowing levels are high or when the
company has been paying dividends
from retained earnings consistently
over a period of time.
Director
Remuneration
The total remuneration payable to the

directors of a company with respect to
any financial year should not exceed
11% of the net profits of the company
for that financial year.
Shareholders should analyze any in

crease in remuneration versus increase
in profitability, and whether promoters
are awarding inexperienced family
members with high salaries that are not
justified by their role and position in the
company.
Employee Stock
Option Plans
(ESOPs)
All employee stock option plans

(ESOPs) have to be approved by
shareholders by passing a special
resolution in the general meeting.
Further, independent directors cannot
be granted stock options. Members of
the promoter group and directors, who,
along with their associates, hold more
than a 10% stake in the company, are
also prohibited from participating in the
ESOPs.
while voting on ESOP schemes,

shareholders should be mindful of the
following:
Dilution: The conversion of ESOPs into
equity shares will raise the issued
capital of the company, which may
dilute the interests of minority
shareholders. Although moderate
dilution (less than 5%) will not
significantly affect them, shareholders
should question the company further if
the proposed grant would lead to a
higher level of dilution.
Exercise price: Companies are free to
determine the exercise price at which
ESOPs will be converted into shares. If
the exercise price is at a discount to the
market price, the company will have to
bear this cost in its profit and loss
statement. Shareholders should
thusensure that the exercise price fixed
by the company is close to the market
price and question the management
otherwise.
Accounting method: The current
accounting guidelines provide for both
i n t r i n s i c - v a l u e a n d f a i r- v a l u e
accounting for ESOPs. Even though
ESOP-related costs are only notional
(because there is no actual cash
outflow), shareholders should check
for wide disparity between the intrinsic
and fair values. The higher the cost, the
greater the impact on profitability.
23
August 2014

Scheme of
Arrangement
Schemes of arrangement for a

company refer to the - reorganization of
the company's share capital,
compromise between a company and
its creditors or any class of them (e.g.,
corporate debt restructuring), or
scheme for the reorganization of
thecompany involving any merger or
amalgamation.
Applications for such schemes of
arrangement need to be submitted to
the court for approval.
Shareholders should vote after

analyzing the method used to arrive at
the valuation and final price, the
opinion of independent directors on the
deal, the mode of payment - cash or
share swap (and resultant dilution), the
underlying rationale of the scheme, the
impact on financial and leverage ratios,
and the post-merger shareholding
pattern.
The court, at its discretion, may direct

the company to convene a meeting of
its shareholders and creditors and get
their approval through a special
resolution.
The next and most important

aspect is to exercise the rights
through voting.
general meeting when there

are contentious issues or there
is a close vote.
Voting in General Meetings
E-Voting: The Companies Act,
Voting is a legal mechanism for

shareholders to express their
opinions to board members
and let their voices get heard.
There are various ways
shareholders can vote in a
general meeting. Let's take a
look:
2013, stipulates that every

listed company (or company
having not fewer than 1,000
shareholders) shall provide a
facility to vote by electronic
means to its shareholders for
all types of meetings, including
AGMs, EGMs, postal ballots,
and CCMs.
An e-voting process generally
remains open for a minimum
period of one day and a
maximum of three days. Once
a vote is cast, it cannot be
changed. The board appoints a
scrutinizer(s), who must not be
in the employment of the
company, to oversee the entire
process.
Show of hands: This method

follows the principle of one
vote per person. Shareholders
interested in voting for the
proposals raise their hands to
notify their approval or
disapproval.
Poll: The polling method

follows the principle of one
vote per share. A poll is
generally requested at a
24
August 2014

The e-voting is meant
to
increase shareholder
participation in shareholder
meetings by allowing
shareholders to vote online
from the convenience of their
home or office when they are
not able to physically attend
AGMs or appoint a proxy. This
helps to bring about a fair and
transparent manner of voting,
says Vinay Bagri, Chief
shareholders in India have

focused their attention largely
on share price returns and
dividends. As shareholders,
and being part-owners of the
company, it is also important to
focus on our rights, participate
in shareholder meetings, and
express our views.
A number of significant
changes also have happened to
the regulatory framework in
India
in
the
last 12
months
or
so.
The
New
Companies
Act,
2013, introduced significant
corporate
governance
changes. The Securities and
Exchange Board of India (SEBI)
revised and overhauled Clause
49 of the Equity Listing
Agreement that deals with the
corporate governance norms
for listed companies in India to
ensure that the listing rules are
aligned
with
the New
Companies
Act,
2013.
Shareholders should take
advantage of these regulatory
changes and engage effectively
with companies to hold
management accountable and
for better disclosure and
transparency, advises Vinay
Bagri.
Investment Officer (CIO), Shree

Mahavir Investment.
E-Voting through ICICIdirect
ICICIdirect.com, in
collaboration with National
Securities Depository Limited
(NSDL), offers its customers e
voting facility, to help them
vote for or against company
resolutions. All you need to do
is: Log into your ICICIdirect
account>Equity>EVoting>Vo
te.
Once you click on 'Vote', you
are directed to NSDL site.
There, you press 'Evoting'
button, and the page will show
you company names where
voting is currently active. You
can cast your vote on the
individual resolutions.
Summing up
For a long time, minority
(Reference/Resource: CFA Institute and Indian Association of Investment Professionals publication 'An Investor's Guide to
Shareholder Meetings in India')
Please send your feedback to moneymanager@icicisecurities.com

25
August 2014
Tte--tte
'Focus on long term value creation'
Nifty has over the last 15 years returned more than 15% compounded
annually, says Harish Krishnan, Vice President - Kotak Mutual Fund, in this
interview with ICICIdirect Money Manager. Clearly, this higher return
profile of equities comes with a higher volatility and thus it is imperative to
focus on long term value creation, rather than be swayed by momentum,
he adds. Excerpts:
Primarily, this was driven by an

improving macro-economic
climate
(where
most
parameters
like
current
account
deficit
(CAD),
inflationary trends had peaked
and growth parameters had
bottomed) and this uptrend in
key
macro - economic
indicators
has
been
accentuated
by voters
electing a stable government.
We expect corporate India
earnings to mirror this uptrend
over the next few years, owing
to large pent up consumer
demand (especially in
discretionary sectors) and pro
active
policy
to
spur
investment climate. This
underpins our bullishness for
Indian equities over the
Harish Krishnan,
Vice PresidentKotak Mutual Fund
Q: The markets have remained

buoyant since the start of this
calendar year. How do you see
them panning out in the coming
months?
A: Indian equities have
witnessed strong returns for
this calendar year-till-date.
26
August 2014
Tte--tte
coming few years. Over the
last few months, volatility in
Indian equities has reduced,
however going forward, we
expect volatility to inch up as
global worries on potential
tightening by US Federal
Reserve induce changes in
expectation of returns across
global asset classes.
by many market participants,

especially as government may
not announce any major
policy initiative that can
impact its electoral verdict in
key state polls to be held in the
coming
few
months.
Inflationary trajectory also
needs to be keenly watched,
as the Reserve Bank of India
(RBI) has made tempering
inflationary expectations the
key to its policy making. Any
significant deviation from the
glide-path drawn by the RBI on
inflationary trends may
prompt the RBI to hike
rates, dampening investor
sentiment and earnings.
Q: What are the major risks to

Indian markets that one should be
watchful about?
A: Starting from October,
when the Federal Reserve is
likely to end its easing cycle,
market participants globally
would want to watch out for
signs of tightening by the
Federal Reserve and this is
likely to increase volatility
across all global asset classes.
Other global flash-points with
regards to developments in
middle-east, Ukraine, etc., can
also keep markets volatile.
Besides global risk factors, on
domestic front, reform
expectations possibly may not
be as near-term as expected
Q: How do you see the Q1 earnings

season; what is your outlook on
earnings for the Fy15?
A: Corporate earnings in
Q1FY15 have broadly been
along
expected
lines,
consumer
discretionary
(autos, durables, telecom) did
well, however capital goods
companies missed on the
expectations. Information
27
August 2014
Tte--tte
technology
(IT),
pharmaceuticals and fast
moving consumer goods
(FMCG) continued their strong
showing as well during the
quarter. We believe earnings
to grow in the mid-teens in
Fy15, with a faster growth in
FY16 (as we expect interest
rates to be cut and greater
momentum in GDP growth in
Fy16).
Q: Foreign institutional investor

(FII) flows have remained robust in
the calendar year 2014 with
around Rs. 70,000 crore so far. Do
you see flows to continue going
ahead?
A: FIIs have over the last few
years invested on an average
US$ 20 billion into Indian
equities (approximately
10,000 crore on a monthly
basis). Therefore, the recent
inflow of FIIs is as per historic
trends. Given the improving
investment climate in India,
we believe such flows can
sustain.
Q: What do the recent macro

economic data suggest about our
economy?
A: A recent macro-economic
data point on Index of
Industrial Production (IIP) is
suggestive of moderate
improvement in investment
climate. Inflation data-point
suggests to tempering of
inflation, especially on
Wholesale Price Index (WPI).
Our current account is now
stabilizing and reserves
increasing, improving RBI's
ability to deal with global
shocks, especially compared
to a year ago.
Q: What industry sectors you are

currently favoring, and why?
Which segment of market is
looking most promising at this
point of time?
A: We are favourably disposed
to business leaders in various
sectors that have invested
disproportionately in their
capacity/brand/distribution in
the downturn as we believe
they
will
be
major
28
August 2014
Tte--tte
beneficiaries of the upcoming
improvement in Indian
economy. Within this broad
framework, we are overweight
on autos, cement, selective
capital goods and consumer
discretionary sectors, as they
cater to likely improved
demand.
can generate post-tax returns

of 10% and equities (even
assuming 15% returns) over a
25-year period can be a
staggering 3.5x and if equities
can generate 20% returns
over long term, the difference
is an almost astounding 9x.
Clearly, this higher return
profile of equities comes with
a higher volatility and thus it is
imperative to consider
allocation to a fund house with
strong risk management
systems and focus on long
term value creation, rather
than
be
swayed
by
momentum. Given the
significant under-investment
of Indian households into
equities, it is important to keep
asset allocation calls with
discipline and would urge
retail
investors
to
systematically invest into
Indian equities.
Q: What should be the investment

approach of retail investors in the
current scenario?
A: Investment into Indian
equities has been rewarding
for longer term investors. Nifty
has over the last 15 years
returned more than 15%
c o m p o u n d e d a n n u a l l y.
However, as of March 2014,
only 2.3% of total household
savings are invested into
Indian equities, compared to
property (56%), gold (14.2%)
and bank deposits (15%)
(Source: RBI, CLSA reports).
For a young investor planning
for the future, the difference of
investing in an asset class that
29
August 2014
ASK OUR PLANNER
Fds vs. Debt Mutual Funds Post Budget

little difference in the post-tax
returns between the two.
Q : After the recent budget

announcement of taxing capital
gains of fixed maturity plans (FMP)
& other debt mutual fund schemes
at 20%, and that too the long-term
being considered as 3 years or
more, is it advisable to opt for bank
fixed deposits (FDs) and not these
schemes?
However, in the long-term

category, i.e. 3 years or more,
debt mutual funds still hold the
advantage over fixed deposits,
from the taxation perspective.
As mentioned above, in fixed
deposits, the interest earned is
added to your income and is
taxed as per your income slab.
In debt mutual funds, however,
the capital gain will be taxed at
a fixed rate of 20% after
indexation, irrespective of your
income slab. Indexation brings
down the net capital gain to be
taxed.
- Akash Kumar
A: Let's look at this budget
announcement from both the
perspectives short-term as
well as long-term. In the short
term category, i.e. up to 3
years, the taxation is now
similar for FDs and debt mutual
funds. In FDs, the interest
earned is added to your
income and is taxed as per
your income slab. In debt
mutual funds too, now the
capital gain will be added to
your income and will be taxed
as per your income slab.
Let's understand this with an

example: Suppose you had
invested ` 1 lakh, three years
back, i.e. in 2011-12, into a
fixed deposit offering an
interest rate of 10% p.a. and
also in a debt mutual fund,
offering same 10% p.a. return
for 3 years.
So, with the return generated

from both these instruments
being similar, there will be a
30
August 2014
ASK OUR PLANNER
Fixed deposit (FD)

Invested amount
Debt mutual fund
Rs. 1,00,000
Rs. 1,00,000
Rs. 33,310
Capital gain after 3 years
Rs. 33,310
Indexed cost*
Rs. 1,30,446
Taxable capital gain

(1,33,310-1,30,446)
Rs. 2,654
As per income slab
20% after
indexation
10% Slab
Rs. 3,431
Rs. 547
20% Slab
Rs. 6,862
Rs. 547
30% Slab
Rs. 10,293
Rs. 547
Interest after 3 years
Tax to be paid :
*Indexed cost refers to the cost of your investment, if you were to invest the same, on the date of selling
it. It is calculated using the Cost of Inflation Index (CII).
As you can see from the table

above, irrespective of which
tax slab you fall into, you will
have a tax advantage if you
invest in a debt mutual fund
over a fixed deposit (The
effective tax rate for debt
mutual fund in this example
isonly 1.64%).
maturity of my existing
investments in the next two
months. Should I use this amount to
prepay my home loan or will I be
better off investing this amount and
continuing the loan? Need your
suggestion.
- Swapnil Jadhav
A: Currently, your home loan
would be offering you tax
benefits. Assuming that you
are claiming deduction only for
interest payment towards your
home loan, and if you prepay
the loan today, you will have a
surplus of Rs.20,840 p.m. (EMI
Q: My current annual taxable

income is Rs.8 lakh. I have a home
loan with an outstanding amount of
`14.50 lakh, for which, I am paying
an EMI of `20,840. I have to pay it
for another 8 years and 9 months. I
am expecting Rs.14.50 lakh from
31
August 2014
ASK OUR PLANNER

being paid). However, you will
have to forego the tax savings
(on interest payment) that you
currently enjoy. This, in effect,
would reduce your monthly
surplus to the extent of tax
being saved.
being stopped.
Q: As per my understanding, for
capital gain calculation, the budget
says that long term for debt mutual
fund schemes will be now 3 years,
instead of 1 year. But my friend says
that the same is applicable even for
gold exchange traded funds (ETF). I
have been investing regularly into
Gold ETFs. Can you please clarify on
this?
On the other hand, if you do

not prepay your home loan,
you will have a lump-sum of
Rs.14.50 lakh to be invested
immediately. Hence, the
decision to prepay or not to
prepay your home loan would
depend upon the return to be
generated
from
your
investment.
- Gurpreet Singh
A: The budget has mentioned
that this change is applicable
for all non-equity schemes,
and has not mentioned any
specific scheme. This means
that this change will be
applicable to all non-equity
schemes, including gold ETFs.
So for any redemption to be
made from gold ETFs on or
after July 10, 2014, and if the
investment was held for less
than 3 years, then the capital
gain, if any, will be added to
your income and be taxed as
per your income slab.
If you are able to invest to

generate a post-tax return of
8.55% p.a. or more from the
investment, then you are
better off by investing the
lumpsum immediately and
continuing the home loan.
However, if you are not able to
generate such return, then it's
better to prepay the home loan
and start investing the monthly
savings, on account of EMI
32
August 2014
MUTUAL FUND ANALYSIS

Key Information
Category: Mid-cap Funds
NAV as on August 14,

2014 (`)
Franklin India Smaller Companies

Fund
Fund objective
It is an open ended diversified
equity fund that seeks to
January 13, 2006
Fund Manager
R. Janakiraman
Minimum Investment
(`)
Lumpsum
SIP
5000
0
Expense Ratio (%)
2.59
Exit Load
provide long term capital
29.5
Inception Date
1% on or before 1Y
Benchmark
CNX Midcap
Last declared Quarterly

AAUM(` cr)
appreciation by investing in
974
Product Label
This product is suitable for investors
seeking*:
midcap and small cap
Long term capital appreciation
companies.
A fund that invests primarily in small

and mid cap companies
High risk
Fund Manager Profile:
both up and down markets

reflects that mid-cap stocks in
the fund have good
fundamentals and strength to
protect themselves from
economic downturns. Over the
last year (ending August 14,
2014), the fund has delivered
whopping 87% return against
benchmark index return of
55%. Even in CY11, when the
benchmark was down 31%,
fund had restricted the fall to
26%.
Janakiraman Rengaraju is vice

president and research analyst
for Franklin Templeton India
AMC Ltd. Mr. Rengaraju earned
his MBA from the Indian
Institute of Management in
Bangalore in 1995 and he is a
chartered financial analyst
(CFA).
Performance:
The fund has outperformed the
benchmark CNX Midcap index
both in rising as well as falling
markets. Outperformance in
33
August 2014

Performance
1 Year
Fund
23.3
3 Year
12.7
29.4
12.5
87.1
6 Month
55.3
57
100
80
60
40
20
0
44.1
Return%
Performance vs. Benchmark
5 Year
Benchmark
Calender Year-wise Performance

2013 2012 2011 2010 2009
NAV as on Dec
31 (`)
19.3
17.1
11.3
15.2
12.8
Return (%)
13.2
51.7
-25.9
18.6
104.6
Benchmark
(%)
-5.1
39.2
-31.0
19.2
99.0
Net Assets
(` Cr)
369
344
307
665
673
Last Three Years Performance

31-Mar-13 31-Mar-12 31-Mar-11
Parriculars
31-Mar-12 31-Mar-13 31-Mar-12
Fund
73.66
19.93
-5.22
Benchmark
51.13
-0.13
-7.77
Nifty
30.28
10.67
-6.53
Portfolio:
The fund focuses on
identifying high-growth
companies, operating in the
small-cap space, that are likely
to get transformed into
tomorrow's market leaders,
resulting in substantial capital
appreciation over time. The
current portfolio is a basket of
companies with fundamentally
strong balance sheets.
Exposure to each company is

less than 5% and to a particular
sector is also below 10%. In
total, there are 61 companies
and such diversification across
companies and sectors has
benefited the fund, especially
in market downturns.
The fund has defined smaller
(midcap and smallcap)
companies as ones, which
have market capitalisation
below that of the 100th stock in
the S&P CNX 500 index. The
fund house has in-built
processes and systems, which
assures that each fund manger
adheres strictly to the defined
objective and scheme
investment rules while
constructing the portfolio. The
bottom-up approach is the
primary equity-investment
philosophy based on which the
portfolio of all schemes is
constructed.
We believe, in an economic
environment poised for faster
growth, a smaller companies
fund from the Franklin family,
can be a good investment to
generate alpha.
34
August 2014

Top 10 Holdings
Call Money
Asset Type
Cash & Cash Equivalents
%
9.7
Finolex
Cables Ltd.
Domestic Equities
3.8
Yes Bank Ltd.
Domestic Equities
3.4
Repco Home
Finance Ltd.
Domestic Equities
3.0
JK Lakshmi
Cement Ltd.
Domestic Equities
2.9
Mindtree Ltd.
Domestic Equities
2.7
Cyient Ltd.
Domestic Equities
2.6
Amara Raja
Batteries Ltd.
Domestic Equities
2.6
.SKF India Ltd.
Domestic Equities
2.4
Axis Bank Ltd.
Domestic Equities
2.4
Top 10 Sectors
Whats In
MM Forgings Ltd.
0.1
Hitachi Home & Life

Solutions (India) Ltd.
0.4
Asset Allocation
Equity
88.2
Debt
0.0
Cash
11.8
Asset Type
Bank - Private
Domestic Equities
11.2
IT - Software
Domestic Equities
5.3
Cement &
Construction
Materials
Domestic Equities
4.8
Auto Ancillary
Domestic Equities
4.7
Pharmaceuticals
& Drugs
Domestic Equities
4.6
Bearings
Domestic Equities
4.6
Plastic Products
Domestic Equities
3.9
Diesel Engines
Domestic Equities
3.9
Cable
Domestic Equities
3.8
Finance Housing
Domestic Equities
3.0
35
August 2014

Dividend History
Risk Parameters
Standard Deviation (%)
Date
13.39
Beta
0.65
Sharpe ratio
R Squared
Alpha (%)
0.28
0.85
17.04
Dividend (%)
Feb-17-2014
Feb-25-2013
15
25
Aug-09-2007
Current Value of Standard

Investment of ` 10,000
Portfolio Attributes
Total Stocks
Top 10 Holdings (%)
Fund P/E Ratio
Benchmark P/E Ratio
Fund P/BV Ratio
61.0
35.4
(`)
22.2
19.8
3.7
Fund
28168
Benchmark
26345
CNX Nifty
26701
Since inception to June 30, 2014
Performance of all the schemes managed by the fund manager

30-Jun-13
30-Jun-12
Fund Name
30-Jun-12
30-Jun-13
31-Jun-11
31-Jun-12
Franklin India Smaller Cos Fund(G)
73.66
19.93
-5.22
CNX Midcap
51.13
-0.13
-7.77
Franklin India Prima Fund(G)
59.01
18.08
-3.27
CNX 500 Index
36.87
8.16
-7.79
Franklin India High Growth Cos Fund(G)
56.64
15.94
-7.11
CNX 500 Index
36.87
8.16
-7.79
Franklin India Flexi Cap Fund(G)
49.90
9.41
-7.98
CNX 500 Index
36.87
8.16
-7.79
Franklin India Opportunities Fund(G)
39.95
7.78
-7.66
S&P BSE 200
34.45
8.69
-7.63
27.52
23.58
Franklin India Feeder Franklin U.S. Opportunities Fund(G)

NA*
Franklin Asian Equity Fund(G)
--
13.87
13.63
6.35
--
NA*
NA*: Not available
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
(Blue) Investors understand that
(Yellow) Investors understand that
their principal will be at low risk
their principal will be at meduim risk
(Brown) Investors understand

that their principal will be at high
risk
Data as on August 14, 2014; Portfolio details as on July 31, 2014

Source: ICICIdirect Research, Accord Fintech
36
August 2014

Key Information
Category: Mid-cap Funds
NAV as on August 14,

2014 (`)
HDFC Mid-cap Opportunities Fund

Fund Objective
Fund objective
29.3
Inception Date
June 25,2007
Fund Manager
Chirag Setalvad
The aim of the fund is to
Minimum Investment
(`)
Lumpsum
SIP
5000
0
generate long-term capital
Expense Ratio (%)
2.13
Exit Load
1% on or before 1Y,
NIL after1Y
appreciation from a portfolio

Benchmark
that substantially consists of

equity and equity related
6269
Product Label
This product is suitable for investors seeking*:
capital appreciation over long term
investment predominantly in equity and equity
securities of small and mid-cap

companies.
related instruments of Small and Mid Cap

companies.
Fund Manager Profile:
High risk
(Brown)
fund outperformed the index

delivering a whopping 75%
return against 55% return
delivered by the benchmark.
The performance has mainly
come on the back of several
mid-cap banks and being
overweight on the pharma
sector.
Chirag Setalvad has been

managing the fund since April
2007 and has over 16 years of
industry experience.
Performance:
The fund has been a star
performer in the mid-cap funds
category. In CY10, when the
benchmark CNX Midcap index
slipped 31%, in the same year,
the fund limited losses to 18%.
In the recent rally, the fund has
beaten the benchmark by huge
margins. In the last year, the
CNX Midcap
Last declared
Quarterly AAUM(| cr)
6 Month
3 Year
Benchmark
August 2014
24.4
12.7
22.4
12.5
75.5
1 Year
Fund
37
55.3
44.6
80
60
40
20
0
44.1
Return%
Performance vs. Benchmark
5 Year

sector banks. Allocation to
technology stocks has been
reduced while that to
pharmaceuticals has remained
the same.
Calender Year-wise Performance

2013 2012 2011 2010 2009
NAV as on
Dec 31 (`)
20.4
18.6
13.4
16.3
12.4
Return (%)
9.6
39.6
-18.3
32.1
94.4
-5.1
39.2
-31.0
19.2
99.0
Net Assets (` Cr) 3049
2756
1593
1221
1281
Benchmark (%)
The expected up-tick in the

capital expenditure (capex)
cycle should help in demand
revival of various capital goods
companies. The fund,
therefore, has higher (third
largest) exposure to bearing
manufacturing companies,
which in the last three to four
months have contributed
vastly to the fund return.
Last Three Years Performance

30-Jun-13 30-Jun-12 30-Jun-11
Parriculars
30-Jun-14 30-Jun-13 30-Mar-12
Fund
70.10
6.70
-0.21
Benchmark
51.13
-0.13
-7.77
Nifty
30.28
10.67
-6.53
Current Value of Standard Investment of

` 10,000
(`)
Fund
29288
Benchmark
19044
CNX Nifty
17870
Since inception to June 30, 2014
New projects and expansionoriented air-conditioners and

domestic appliance
manufacturing companies
have also contributed to the
fund returns. Being a mid-cap
fund, auto-ancillaries and tyre
companies also form a decent
part of the portfolio.
Portfolio:
The fund has 68 stocks in the
portfolio, majority of which,
have been held for more than a
year at least. The 'buy and hold'
strategy in mid-cap stocks has
benefited the fund.
Diversification in mid-cap
stocks is optimum as the fund
has accumulated assets under
management (AUM) over
` 6000 crore.
Overall, quality larger mid-cap

stocks portfolio, 'buy and hold'
investment strategy, no cash
calls and outstanding
performance history, make the
fund suitable for long-term
investment.
The fund manager has

increased exposure to banks,
especially mid-cap public
38
August 2014

Top 10 Holdings
CBLO
Asset Type
Cash & Cash Equivalents 5.5
Aurobindo
Pharma Ltd.
Domestic Equities 3.1
Mindtree Ltd.
Whtas out
(%)
Ador Welding Ltd.
0.1
Asset Allocation
Equity
Supreme
Industries Ltd.
Ipca
Laboratories
Ltd.
Torrent
Pharmaceuticals
Ltd.
AIA Engineering
Ltd.
SKF India Ltd.
94.6
Debt
0.0
Cash
5.4
Risk Parameters
Standard Deviation (%)
13.58
Beta
0.69
Sharpe ratio
0.25
R Squared
0.93
Alpha (%)
9.45
Bayer Crop
Science Ltd.
Axis Bank Ltd.
Top 10 Sectors
Asset Type
Pharmaceuticals & Drugs
Domestic Equities
12.2
Bank - Public
Domestic Equities
8.7
Bank - Private
Domestic Equities
7.0
IT - Software
Domestic Equities
6.1
Auto Ancillary
Domestic Equities
4.9
Chemicals
Domestic Equities
4.0
Bearings
Domestic Equities
3.9
Air Conditioners
Domestic Equities
3.7
Engineering
Domestic Equities
3.6
Pesticides & Agrochemicals
Domestic Equities
3.5
39
August 2014
Dividend History
Portfolio Attributes
Total Stocks
68.0
Top 10 Holdings (%)
27.1
Fund P/E Ratio
19.9
Benchmark P/E Ratio
19.8
Fund P/BV Ratio
Date
4.5
Dividend (%)
Feb-28-2014
17.5
Feb-28-2013
11.5
Feb-23-2012
15
Performance of all the schemes managed by the fund manager

30-Jun-13
30-Jun-12
Fund Name
30-Jun-12
30-Jun-13
31-Jun-11
31-Jun-12
HDFC Mid-Cap Opportunities Fund(G)
70.10
6.70
-0.21
CNX Midcap
51.13
-0.13
-7.77
HDFC Long Term Adv Fund(G)
48.59
8.92
-5.67
S&P BSE SENSEX
31.03
11.28
-7.51
HDFC Small and Mid Cap Fund-Reg(G)
40.58
11.69
-8.63
CNX Smallcap
85.40
-13.25
-8.57
HDFC Multiple Yield Fund 2005(G)
20.59
5.90
7.80
8.24
10.86
6.56
Crisil MIP Blended Index
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
(Blue) Investors understand that
their principal will be at low risk
(Brown) Investors understand

that their principal will be at high
risk
(Yellow) Investors understand that

their principal will be at meduim risk
Data as on August 14, 2014; Portfolio details as on July 31, 2014

Source: ICICIdirect Research, Accord Fintech
40
August 2014
EQUITY MODEL PORTFOLIO

Our indicative large-cap equity model portfolio has continued to
deliver an impressive return of 61% (inclusive of dividends) till date
(as on August 11, 2014) since its inception (June 21, 2011) vis--vis
the benchmark index (S&P BSE Sensex) return of 45.3% during the
same period, out-performance of 15.7%. Our portfolio approach
towards high-quality stocks aided us in outperforming the Sensex
with continued success. We continue to trust our philosophy of
choosing stocks where the risk reward is favourable and not just
the reward aspect. We feel Quality-21 large-cap portfolio will
continue to be aligned to the same philosophy.
Our Consistent-15 mid-cap portfolio also continues to
outperform, delivering 52.2% (inclusive of dividends) till date (as
on August 11, 2014) vis--vis the benchmark index (CNX Midcap)
return of 39.6%, as we continued to identify fundamentally strong
stocks. Some key performers of our portfolio are Sun
Pharmaceuticals, Lupin, Tata Consultancy Services (TCS), Tata
Motors, Info Edge and Dabur India delivering 97%-190% returns
since inception.
We have always suggested the systematic investment plan (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. It has outperformed
other portfolios, thus, reinforcing our belief in a plan of investment.
However, now we are also advising clients to look at lump-sum
investments at any possible dips.
In the last few years, anxiety stemming from weak economic health
and unstable policy environment has resulted in defensive sectors
commanding high scarcity premium while debt-ridden cyclicals
witnessed a de-rating. However, the recent decisive election
verdict has given investors optimism over the overall growth
prospects of the economy. Thus, the current rally has totally
reversed the penchant for defensives (like information technology
(IT), pharmaceuticals and fast-moving consumer goods (FMCG)),
which have underperformed in 2014 year-to date (YTD). On the
other hand, old economy sectors, including capital goods, realty,
metals, power and oil & gas have been topping the charts this year,
41
August 2014

signifying changing investor preference.
Thus, from a portfolio perspective, we have now leaned forward
towards inclusion of stocks with more real economy, domestic
discretionary exposure viz. GAIL, JK Cement, Arvind, etc. We have,
thus, taken a strategic call of including stocks that possibly have a
larger opportunity size either via reforms push or via revival in the
discretionary demand from domestic consumers. Thus, we exit
Page Industries and Nestl with minimal returns.
Hence, we have made a significant shift in our portfolio stance to
play the recovery cycle. In terms of relative weightage of the sector
vis--vis the Sensex, we have changed our stance and gone
overweight on financials (raising weights of public sector banks),
oil & gas, the infrastructure space (cement, infrastructure and
power). This has been primarily triggered by the possibility of
decisive action in the infrastructure and real economy space by the
new government. We have maintained our overweight stance on
telecom considering the reducing regulatory hurdles and relatively
better earnings growth profile. We are also overweight on sunrise
sectors like media via Zee Entertainment.
We have, thus, positioned away from pure play defensives like the
pure play mature exporter- IT and the expensive FMCG space. We
feel both these sectors may have normalised earnings growth but
the sectoral churning would cause them to de-rate on valuation
terms.
For other equal weight sectors we are playing consumer
discretionary sectors like autos (pent up demand, strong
franchises) and the metals and mining space (high infrastructure
demand expected), pharmaceuticals (large global generic
opportunity yet to be tapped).
On individual names, we are strongly overweight on companies
like L&T and UltraTech Cement in the infrastructure space while in
public sector banks we like State Bank of India (SBI).
We believe we now have a better balance to our portfolio going into
a recovery cycle and possibly a longer-term Bull Run.
42
August 2014

Name of the company
Largecap
(%)
Largecap Stocks
Consumer Discretionary
United Spirits
Tata Motors DVR
Bajaj Auto
Titan
BFSI
HDFC
HDFC Bank
SBI
Axis Bank
Power, Infrastructure & Cement
L&T
Ultratech Cement
Model Portfolio
Midcap
(%)
10
2
4
2
2
27
6
6
8
7
13
8
5
Diversified
(%)
7
1.4
2.8
1.4
1.4
18.9
4.2
4.2
5.6
4.9
9.1
5.6
3.5
FMCG
10
ITC
Metals & Mining
NMDC
Oil and Gas
Reliance
Gail
Pharma
Lupin
Sun Pharma
10
4
4
14
11
3
5
2
3
7
2.8
2.8
9.8
7.7
2.1
3.5
1.4
2.1
IT
12
8.4
Infosys
2.1
TCS
Wipro
Telecom
Bharti Airtel
Media
Zee Entertainment
Largecap share in diversified
6
3
3
3
2
2
4.2
2.1
2.1
2.1
1.4
1.4
70
43
August 2014

Name of the company
Largecap
(%)
Midcap Stocks
Consumer Discretionary
Bosch
Cox & Kings
Arvind
IT
Info Edge
BFSI
DCB
IndusInd Bank
FMCG
Kansai Nerolac
Tata Global Beverages
Pharma
Natco Pharma
Media
PVR
Capital Goods
Cummins
Realty/Infrasturcture/Cement
JK Cement
Container Corporation of India
Oberoi Realty
Shree Cement
Midcap share in diversified
Total of all three portfolios
100
Model Portfolio
Midcap
(%)
Diversified
(%)
20
6
6
8
6
6
16
8
8
6
1.8
1.8
2.4
1.8
1.8
4.8
2.4
2.4
14
8
6
6
6
8
8
6
6
24
6
6
6
6
4.2
2.4
1.8
1.8
1.8
2.4
2.4
1.8
1.8
7.2
1.8
1.8
1.8
1.8
30
100
100
Content source: ICICIdirect.com Research

ICICI Securities Ltd. has been assigned an advisory mandate by Ranbaxy
Laboratories Limited with regard to Sun Pharmaceutical Industries Limited's
acquisition of Ranbaxy Laboratories Limited. This report is prepared on the
basis of publicly available information.
ICICI Securities Limited has received an advisory mandate from Natco Pharma.
This report is prepared based on publicly available information.
44
August 2014

Performance* so far Since inception
70
61.0
58.8
60
52.2
45.3
50
41.3
39.6
%
40
30
20
10
0
Large Cap
Portfolia
Midcap
Benchmark
Diversified
*Returns (in %) as on August 11, 2014

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
6,000,000
3,000,000
Largecap
Investment
Midcap
Value of Investment in Portfolio
Divesified
Value if invested in Benchmark
Start date of SIP: June 30, 2011; *Value as on August 11, 2014
45
August 2014
4,188,950
5,217,741
4,973,488
3,900,000
3,500,000
3,900,000
4,000,000
5,186,855
4,500,000
3,900,000
5,722,175
5,000,000
5,319,699
5,500,000
MUTUAL FUND MODEL PORTFOLIO

EQUITY MUTUAL FUNDS MODEL PORTFOLIO
Investors who are wary of investing directly into equities can still get
returns almost as good s equity markets through the mutual fund
route. We have designed three mutual fund model portfolios,
namely, conservative, moderate and aggressive. These portfolios
have been designed keeping in mind various key parameters like
investment horizon, investment objective, scheme ratings, and fund
management.
Keeping in mind the current market scenario, we have revised the
portfolio allocation. Based on the portfolios of individual funds, we
have introduced mid-cap funds in the portfolio.
Particulars
Review Interval
Risk Return
Aggressive
Moderate
Conservative
Monthly
Monthly
Quarterly
High Risk- High

Return
Medium Risk Medium Return
Low Risk Low Return

Allocation
Funds Allocation%
Franklin India Prima Plus
Birla Sunlife Frontline Equity
ICICI Prudential Dynamic Plan
UTI Opportunities
Reliance Long Term Equity
ICICI Prudential Value Discovery
HDFC Midcap Opportunities
Grand Total(a+b)
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
-
100
100
100
Source: ICICIdirect.com Research
All three portfolios have outperformed the benchmark index

25
20.26
(%)
20
19.20
18.89
15.61
15
10
5
0
Aggressive
Moderate
Conservative
BSE 100
Returns
Returns (in %) are compounded annualized (since April 15, 2009);

Source: ICICIdirect.com Research, Crisil Fund Analyser
46
August 2014
MUTUAL FUND MODEL PORTFOLIO

DEBT MUTUAL FUNDS MODEL PORTFOLIO
We have designed three different mutual fund model portfolios for different investment
duration namely less than six months, six months to one year and above one year. These
portfolios have been designed keeping in mind various key parameters like investment
horizon, interest rate scenarios, credit quality of the portfolio and fund management, etc.
Time Horizon
0 6 months 0 6 months 1 Tear Above 1 Year
Liquidity with
Liquidity
Above FD
moderate return
Monthly
Monthly
Quarterly
Very Low Risk - Medium Risk Low Risk Nominal Return Medium Return
High Return
Allocation
Particulars
Objective
Review Interval
Risk Return
Funds Allocation%
Ultra Short term Funds
IDFC Money Manager Fund - Investment Plan
Templeton India Low Duration Fund
Reliance Medium Term Fund
20
20
20
20
20
-
20
20
20
20
20
-
20
20
20
20
Short Term Debt Funds

Taurus Short Term Income Fund
Birla Sunlife Short Term Fund
Birla Sunlife Short Term Opportunities Fund
ICICI Prudential Short Term
ICICI Prudential Regular Savings
IDFC SSI Short Term
Sundaram Select Debt
UTI Short Term Fund
Templeton Short Term Income
Long Term/Dynamic Debt Funds

IDFC Dynamic Bond fund
Total
Source: ICICIdirect.com Research
20
100
100
100
CY14 YTD* (year-to-date) returns closer to 6% so far

7.42
8.0
7.0
6.0
5.31 5.28
5.62 5.89
5.90
5.0
4.0
3.0
2.0
1.0
0.0
0-6 Months
6Months - 1Year
Portfolio
Above 1yr
Index
YTD*: July 31, 2014; Source: Crisil Fund Analyser, ICICIdirect.com Research; Index: 0-6
months portfolio Crisil Liquid Fund Index; 6 months-1 year Crisil Short Term Index;
Above 1 year: Crisil Composite Bond Index.
47
August 2014
QUIZ TIME
1. As per the Companies Act, 2013, the first annual general meeting (AGM)
for a newly established firm has to be held within ______ months from the
date of closing of its first financial year.
2. ______ resolutions are passed if the number of votes cast in favor of the
resolution exceeds the number of votes cast against the resolution.
3. The total remuneration payable to the directors of a company with
respect to any financial year should not exceed ______% of the net
profits of the company for that financial year.
4. ______ method of voting follows the principle of one vote per person.
5. The Companies Act, 2013, mandates rotation of audit firms every ______
years and of the individual auditor every ______ years.
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:
moneymanager@ icicisecurities.com
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 July 2014 quiz are:
1. The basic income-tax exemption limit, for both, individuals below the
age of 60 years and senior citizens, has been raised by ` ________ in the
Budget 2014.
A: ` 50,000
2. 'Long-term' for the purpose of computing capital gains in non-equity
mutual funds has been changed from ________ year to ________ years
in the Budget.
A: 1 year to 3 years
3. SEBI plans to do away with physical share certificates by making
dematerialisation compulsory by the ________ year.
A: End of this financial year
4. The deduction limit on account of interest on loan in respect of selfoccupied house property has been raised from ` ________ to `
________.
A: ` 1.5 lakh to ` 2 lakh
5. Investment limit under both - section 80C and Public Provident Fund
(PPF) account - has been raised from ` ________ to ` ________.
A: ` 1 lakh to ` 1.5 lakh
Congratulations to the following winner for providing correct answers!
Mohd. Umar Usmani
48
August 2014
MONTHLY TRENDS
(%)
WPI INFLATION (FOOD)

8.5
8.5
8.4
8.4
8.3
8.3
8.2
8.2
8.1
8.1
8.0
8.0
8.43
8.14
Jun 14
Jul 14
(The figures are in per cent)

CRUDE OIL
106.0
105.37
104.0
$ per barrel
102.0
100.0
98.17
98.0
96.0
94.0
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
NYMEX crude oil prices ($/barrel)

FII & DII INVESTMENTS
6000
4000
2000
55.91
0
-2000 -172.40
-1112.19
-4000
-4126.29
-6000
30-Jun
5-Jul
10-Jul
15-Jul
FII
20-Jul
25-Jul
30-Jul
DII
(Foreign institutional investors (FIIs) and domestic institutional

investors (DII) net equity investment (` in crore)
VOLATILITY INDEX (VIX)
VIX
20.0
17.87
16.0
13.82
12.0
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
VIX
VIX is a key measure of market expectations of near term volatility.

When the markets are highly volatile, the VIX tends to rise.
49
August 2014
MONTHLY TRENDS
DOMESTIC INDICES
BSE Sensex
26500
26000
25894.97
25500
25413.78
25000
1.89%
24500
24000
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
NSE Nifty
7900
7800
7700
7721.30
7600
7611.35
1.44%
7500
7400
7300
7200
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
GLOBAL INDICES
Dow Jones
17400
17100
16800
1.56%
16826.60
16500
16563.30
16200
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
NASDAQ
4500
0.87%
4400
4408.18
4,369.77
4300
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
EXCHANGE RATES
USD-INR
60.8
60.55
60.6
USD / INR
60.4
60.2
60.05
0.84%
60.0
59.8
59.6
59.4
59.2
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
50
25-Jul
30-Jul
August 2014
MONTHLY TRENDS
POUND-INR
103.5
103.0
/ INR
102.5
102.23
102.70
102.0
101.5
0.45%
101.0
100.5
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
EURO-INR
84.0
82.0
81.06
/ INR
82.21
1.39%
80.0
78.0
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
BULLION
GOLD
$ per Ounce
1375
1300
1327.19
1282.09
1225
1150
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
(The prices are in $ per ounce).

SILVER
22.0
$ per Ounce
20.97
20.35
20.0
18.0
30-Jun
5-Jul
10-Jul
15-Jul
20-Jul
25-Jul
30-Jul
(The prices are in $ per ounce).

(Source for all indicators: Bloomberg, Reuters)
51
August 2014
Premium Education Programmes Schedule

ICICIdirect Centre for Financial Learning (ICFL) imparts quality education on
financial markets to beginners and amateurs, student, housewives, working
professionals and self employed. ICFL's broad objective is to make participant
feel confident to start investing in stock market.
Here is the list of our programmes scheduled for the month of August, 2014.
Schedule for Beginners Programme on Futures and Options Trading
Sr.
No
City
Dates
For More Information & Registration call:
Pune
Aug 16 and 17 2014
Kusmakar on 7875442311
Andheri
Aug 16 and 17 2014
Vidhu on 9619716146
Hyderabad
Aug 23 and 24 2014
Ruchi on 8297362323
Bangalore
Aug 23 and 24 2014
Subrata on 9620001478
Chembur
Aug 23 and 24 2014
Manish on 8451057943
Navi Mumbai
Aug 23 and 24 2014
Andheri
Aug 23 and 24 2014
Vidhu on 9619716146
Chennai
Aug 23 and 24 2014
Manivannan on 9742273109
Nagpur
Aug 23 and 24 2014
10
New delhi
Aug 30 and 31 2014
Vishal on 07838290143, Harneet on 09582158693
Sr.
No
City
Schedule for Fast Track Beginners Programme on Futures and Options Trading
Dates
11
Jamshedpur
Aug 10 2014
Sumit on 8017516187
12
Ahmedabad
Aug 17 2014
Yogesh on 8238053563
13
Surat
Aug 17 2014
14 Bhubaneswar
Aug 17 2014
Sumit on 8017516187
15
Aug 24 2014
Harneet on 09582158693
Sr.
No
Ghaziabad
City
Schedule for Foundation Programme on Stock Investing

Dates
16
Pune
Aug 09 and 10 2014
17
Andheri
Aug 09 and 10 2014
Vidhu on 9619716146
18
Chembur
Aug 16 and 17 2014
19
Bangalore
Aug 16 and 17 2014
Subrata on 9620001478
20
Navi Mumbai
Aug 16 and 17 2014
52
August 2014
21
Thane
Aug 16 and 17 2014
Vidhu on 9619716146
22
Pune
Aug 23 and 24 2014
23
New delhi
Aug 23 and 24 2014
24
Andheri
Aug 23 and 24 2014
Vidhu on 9619716146
25
Thane
Aug 23 and 24 2014
Vidhu on 9619716146
26
Hyderabad
Aug 23 and 24 2014
Ruchi on 8297362323
27
Kolkata
Aug 23 and 24 2014
Sumit on 8017516187
28
Chennai
Aug 23 and 24 2014
Manivannan on 9742273109
29
Indore
Aug 23 and 24 2014
30
New delhi
Aug 30 and 31 2014
Schedule for Fast Track Foundation Programme on Stock Investing

Dates
Sr.
No
City
31
Vadodara
Aug 17 2014
32
Lucknow
Aug 24 2014
Harneet on 09582158693
33
Jalandhar
Aug 30 2014
Vishal on 07838290143
Schedule for Advance Derivatives Trading Strategies

Sr.
No
City
Dates
34
Andheri
Aug 16 and 17 2014
Vidhu on 9619716146
35
Jaunpur
Aug 29 and 30 2014
Vishal on 07838290143
Schedule for Technical Analysis

Dates
Sr.
No
City
36
New delhi
Aug 16 and 17 2014
37
Kolkata
Aug 30 and 31 2014
Sumit on 8017516187
Schedule for Fast Track Technical Analysis

Sr.
No
City
38
Patna
Dates
Aug 24 2014
Sumit on 8017516187
Contact us
Email:
Send us an email at learning@icicisecurities.com
Please mention the name, date and venue of the programme you have
attended or wish to attend, for faster resolution of your queries.
SMS:
SMS EDU to 5676766 for more details
53
August 2014

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57

The markets continue to be

investment horizon, risk appetite and life stage. It is important to

ICICIdirect Money Manager

Shareholders in India are entitled to several rights, such as

Abhishake Mathur, CFA

Sameer Chavan, CWM, Pankaj Pandey

Azeem Ahmad, Nithyakumar VP CFPCM, Nitin Kunte, Sachin Jain,

ICICIdirect Money Manager

ICICIdirect Money Manager

Cap on free ATM transactions

Two-wheeler insurance policies to get cheaper, easier to buy

Common demat: Definition of security under Depositories Act to change

ICICIdirect Money Manager

Markets on tenterhooks as global jitters take centre stage

ICICIdirect Money Manager

buying following positive

upbeat UK unemployment & US

The results, declared so far,

During the month, crude

Global markets started the

Outlook Geopolitical standoffs to give realty check

Equity benchmarks extended

Key immediate support for the

Going ahead, we expect

ICICIdirect Money Manager

& gas and select banking

The broader markets have

BSE Sensex Weekly Candlestick Chart

Weekly RSI sustaining above its support reading of 65 indicates

Source: Bloomberg, ICICIdirect.com Research

ICICIdirect Money Manager

As the global markets stabilised,

Bank Nifty: 15500 key support for

The volume-weighted average

ICICIdirect Money Manager

Call writing in the Bank Nifty

FIIs hedging cash positions by buying

Bank Nifty/Nifty price ratio has

Foreign institutional investors

Bank Nifty futures open interest

FII positions in the derivatives

Geo-political risk impact on the

Domestic institutional investors

ICICIdirect Money Manager

Dax: 9650 remains crucial hurdle for

ICICIdirect Money Manager

The S&P found support near its

S&P 500: After three months of

The cash segment data is

FII flows in other emerging

The 100 DMA level for the index

IDFC: Play on infra financing and conversion to bank

Asset quality pain in infrastructure

years. IDFC differentiates itself

IDFC is to gradually bring down

Return ratios now estimated to be

Pre-provision profit (PPP) ( ` crore) 2,943

Profit after tax (PAT) ( ` crore)

Target P/E (x)

GNPA (Q1FY15) ( ` crore)

NNPA (Q1FY15) ( ` crore)

NIM (Q1FY15) (%)

52-week High/Low (`)