From the Managing Director’s Desk

Anup Bagchi
ICICI Securities Ltd.
The year gone by has been very
interesting, a year of strong
performance by Indian equities
(up ~25%) despite persistent
anxiety over slowing growth,
policy inaction and other issues.
While a global tsunami of liquidity
guaranteed too much money
chasing too little investment
alternatives, the global growth
scarcity ensured India’s increasing
share of world investment flows.
India as a market received more
than $22 billion in terms of flows,
the second largest in the history
of capital markets.
The strong performance by Indian
equities in the year 2012 can be
primarily attributed to several
reformist measures announced by
the government. The government
not only tapped the low-hanging fruits in the form of public sector
undertakings (PSU) disinvestments, foreign direct investment
(FDI) in single brand retail, etc., but also shown political
maneuverability to introduce tricky measures like diesel and LPG
price hike, multi-brand retail, banking bill, direct cash transfer and
constitution of Cabinet committee on investment. Though these
measures will start showing on-ground improvement only in the
medium term, the quick pace of reforms remained the sentiment
booster for Indian indices in 2012.
The year 2013, we believe, would be more of a consolidation
with H1CY13 leading a cyclical rally on rate cut expectations and
then the Union Budget becoming imperative for further upsides
in the broader market. In terms of Sensex earnings, we believe
earnings growth in base case should be ~17% for FY14E trading
with 15x PE multiple. We have assigned a 70% probability for
the same. We have also assigned 15% each probability for the
ICICIdirect Money Manager z 1
January 2013
bull/bear cases, which we feel remains slightly far-fetched but
could pan out in case of stellar domestic reforms/rate cuts along
with a steep fall in commodities or vice versa. On a cumulative
basis, we feel the broader market would have limited upside of
~8% with a target of 20,900.
However, there are a few concerns. The Reserve Bank of India
(RBI) may choose to continue its long wait for inflation to subside.
Second, the government may wave off its fiscal consolidation
plan in favor of populist measures in an election year. In either
case, the RBI may not deliver a rate cut in the January–March
2013 quarter, thereby taking market participants by surprise.
This may also coincide with markets taking a breather after
~25% plus up move, which together could lead to a low double
digit correction.
The macro is evolving with every passing day, and we believe
India story remains still strong with gross domestic savings at
31.8% of GDP (H1FY13) and faith in the buying power of India’s
emerging middle class. The expected GDP growth for CY13E, as
indicated by IMF, is 6%; by no means a lower growth in global
context. However, with our population of ~1.3 billion and a
strong demographic profile, the country can strive to achieve
higher growth and revert back to 8% growth sooner than later.
You should participate and benefit from this growth by investing
in equities. It is a well established fact that in the long run, if
the economy does well and corporate profitability over a period
of time, notwithstanding the occasional bouts of volatility, is
positive, the equity markets deliver much better returns than
most other asset classes. Thus, if you have faith in the economy
and the corporate to do well over a period, equity remains the
best place to be in with a long-term perspective.
Our message remains the same – ‘Keep investing and stay
invested for your life goals.’ Through this magazine and our
website 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.
Happy investing and wish you a prosperous 2013!
2 zICICIdirect Money Manager
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Editor & Publisher : Abhishake Mathur
Coordinating Editor : Yogita Khatri
Editorial Board : Sameer Chavan, Pankaj Pandey
Editorial Team : Amit Gupta, Anil Shenoy, Azeem Ahmad, Dharmesh Shah, Nithyakumar
VP, Nitin Kunte, Pankaj Agarwal, Purnendu Jha, Sachin Jain, Shaboo
Razdan, Sheetal Ashar, Venil Shah
The year 2012 has been good in terms of performance by various
asset classes. As we head into another year, it is natural for most
of us to come with the question: How the New Year would be for
markets and investments in terms of performance.
It's never easy to predict the future. However, knowing where
markets and economies are headed can help make informed
investment decisions. This is why, in our cover story, we present
fund managers' perspectives on the future of growth, inflation,
interest rates, and the outlook on equities, fixed-income, gold
and other asset classes.
Further, to get the 'big picture' for markets in particular, we cover
an exclusive interview with Pankaj Pandey, Head - Research,, who shares his thoughts on what's next for the
economy and stock market, and how you might position your
portfolio for the coming year.
To get the flashback of the year that has gone by, we bring to
you new section 'Trends 2012' - a quick snapshot of how the
various key economic and financial indicators performed during
the last year.
As the tax season is around, the edition also offers comprehensive
information and analysis on equity linked savings schemes (ELSS)
- mutual funds with tax benefits. So read on, stay updated and
involved. Do write in with your feedback at moneymanager@ and share your thoughts.
The ICICIdirect Money Manager team wishes you a very Happy
New Year.
Take ICICIdirect Money Manager with you on the go! Your
magazine is now available on all mobile platforms including
iPhone, iPad, and Android.
ICICIdirect Money Manager z 3
January 2013
Important: All the contents of ICICIdirect Money Manager are the exclusive
property of ICICI Securities Ltd. No article, either in whole or in part, may
be published circulated or distributed through any medium without the
express consent of ICICI Securities Ltd.
Join us on Facebook at
From the Managing Director’s Desk ............................................................. 1
Editorial ........................................................................................................... 2
Contents .......................................................................................................... 3
Flashback 2012 ................................................................................................ 4
News ................................................................................................................ 6
Fundamental Outlook 2013 ............................................................................ 7
Technical Outlook 2013 .................................................................................. 10
Monthly Derivatives View ............................................................................. 14
Top Picks: J&K Bank & Zee Ltd. ..................................................................... 18
Flavour of the Month: Investment Outlook 2013......................................... 22
As we head into another year, we asked a panel of fund managers for
their views on how they see 2013 playing out for major asset classes.
Tête-à-tête ....................................................................................................... 36
Interview with Pankaj Pandey, Head - Research, ICICIdirect. He shares his
thoughts on what’s next for the economy and stock market, and how you
might position your portfolio for the coming year.
Query Corner ................................................................................................... 39
Financial Planning Case Study ...................................................................... 42
Investing Tip: ELSS (tax-saving funds)......................................................... 45
Mutual Fund Analysis: Category - ELSS ....................................................... 47
Equity Model Portfolio ................................................................................... 53
Mutual Funds Model Portfolio ....................................................................... 56
Quiz Time ........................................................................................................ 58
Trends 2012 ..................................................................................................... 59
Premium Education Programmes Schedule ................................................. 63
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What was 2012 all about?
Q1CY12 (12.2%) Q2CY12 (-0.3%)
RBI cuts CRR by 50 bps to 5.5%
from 6%
Sharp reduction of inflation in
India to 7.47% from 9.11% in
November 2011
US GDP rises by 2.8% QoQ
(annualised) in Q4CY11 following
1.8% QoQ gain in Q3CY11
Europe approves $173 billion
bailout package for Greece
India IIP for December notches
1.8% YoY growth as against 5.9%
YoY growth in previous month
Geo-political concerns in Iran;
Brent oil price at nine month high
in February
Announcement of increase in
excise and service tax rates by
2% each in Union Budget '12-13
UK and Spain plunge into
recession during Q1CY12
S&P revises its outlook from
'stable' to 'negative' for India
while retaining 'investment grade'
rating, India witnesses its first fall
in exports by 5.7%, since 2009,
citing weak global cues
RBI cuts repo rate by 50 bps to
8% People’s Bank of China cuts
interest rates by 25 bps for first
time since 2008
India’s Q4FY12 GDP at 5.3%,
significantly lower than market
expectation of around 6.1%
Unemployment in euro zone hits
11.1% in May, highest in history
of single currency
ICICIdirect Money Manager z 5
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Q3CY12 (7.8%) Q4CY12 QTD (7.3%)
Contraction in Chinese GDP
backed by sharp drop in export
India's industrial production
contracts 1.8% in June
Brent crude oil price increases
sharply by 9.7% MoM moving
from $96.6/barrel to $105.9/barrel
ECB announces unlimited bond
purchase programme to lower
interest rates
Indian Presidential elections;
Chidambaram made FM
Policy reforms by Indian
government in terms of diesel
price hike & LPG cap
Indian government approves
51% FDI in multi-brand retail
Global equity markets subdued
in October on disappointment
over quarterly results
Unemployment in 17-country
euro zone hits record high of
11.6% in September
Barack Obama re-elected as US
President, results in fall in crude
oil price
Expansion in US GDP to 2%
QoQ in Q3CY12, higher than
India's industrial production for
August reported at 2.7% YoY,
much more than expectation
RBI cuts CRR by 25 bps to
4.25% while keeping other rates
ECB holds its main interest rate
unchanged at record low of
0.75%, in line with expectations
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Govt. increases railway fares by up to 25%, after a decade
Barely a month-and-a-half before his Budget, Railway Minister Pawan Kumar Bansal
sprung a surprise by announcing an across-the-board fare rise– the first in 10 years. The
increase is the second one for the top-segment of railway commuters — those travelling
in air-conditioned coaches, executive chair cars and first- and second-tier coaches. The
passenger fare rise, effective from January 21 midnight, is expected to add around 20
per cent revenue to the railway kitty on an annualised basis and lead to ` 1,200 crore
more passenger earnings this financial year, over and above the budgeted ` 32,000
crore. The Railways will mop up additional ` 6,600 crore in 2013-14.
Courtesy: Business Standard
Mandatory safety net for IPO investors coming soon
Market regulator SEBI plans to introduce safety net mechanism in the form proposed
by it in its discussion paper. Speaking at an Assocham Capital Markets National
Conference, SEBI Chairman U.K. Sinha, believes that the version in the discussion
paper is a mild version. “Our discussion paper is in the public domain. My personal
sense is that we must introduce safety net mechanism, may be in milder form,
primarily to give a signal not about returning money but that the pricing has been
right,” he said. According to the discussion paper, the safety net mechanism would
be triggered in case of those initial public offerings whose price has fallen by more
than 20 per cent from the issue price. The new safety net mechanism is a mandatory
one. There is already a voluntary safety net mechanism available for IPO investors.
Courtesy: The Hindu Business Line
Govt. may raise gold import tax
The government may raise the import duty on gold by two percentage points to 6% in
the next fortnight as part of its plans to rein in the current account deficit (CAD), which
is now at a record high. A widening CAD - the difference between export earnings and
import expenses net of cash payments and remittances - is a worrying sign for a slowing
economy where fulfilling immediate dollar payment obligations may necessitate dipping
into the pool of foreign exchange reserves. Economists have attributed India's widening
current account deficit to rising gold imports, among other causes. A high customs duty
will discourage gold imports by pushing up the yellow metal's landed price.
Courtesy: Hindustan Times
IRDA revises norms for life insurance products
The Insurance Regulatory and Development Authority (IRDA) has revised the norms for
traditional life insurance products. IRDA Chairman J. Hari Narayan said that the insurance
products would now have mandatory minimum death benefit and minimum surrender
value. “The life insurance products have also been aligned with the pension products
in some aspects of benefits,’’ the IRDA chief said adding that the aim was to enhance
customer protection keeping in view the long-term nature of life insurance products.
Courtesy: The Hindu Business Line
ICICIdirect Money Manager z 7
January 2013
Liquidity drives markets in
After a disappointing CY11 we
witnessed the broader markets
rising by 25% in CY12, driven
largely by liquidity which
was testified by huge FII net
inflows to the tune of ~US$
24 billion. Over and above
the global liquidity glut and
policy easing by central banks
around the world, it was also
catalysed by government
action on reforms in terms
of allowing FDI in retail,
broadcasting, insurance sector
etc. Inexpensive valuation
and relatively better country
economics as compared to
the BRICS countries also
fuelled the global liquidity
finding its way into India.
As would be the case, the
overflowing liquidity found its
way into the cyclical stocks
leading sectors like Banking,
Automobiles, Capital Goods,
Realty which grew by 25-
50%. Defensive sectors like
Pharma, which also grew
northwards of 35%, were
driven by fundamentals.
2013: The Year would be more of a Consolidation
Market outlook for 2013…
The picture today as we end
CY12 is vastly different to
the way we had entered it.
The market has rallied ~25%
this year and we stand with
another question as to where
are the market heading now?
We believe the year would be
more of a consolidation with
H1CY13 leading a cyclical
rally on rate cut expectations
and then the Union Budget
becoming imperative for
further upsides in the broader
In terms of Sensex earnings,
we believe earnings growth
in base case should be ~17%
for FY14E trading with 15x PE
multiple. We have assigned a
70% probability for the same.
We have also assigned 15%
each probability for the bull/
bear cases, which we feel
remains slightly far-fetched
but could pan out in case of
stellar domestic reforms/rate
cuts along with a steep fall in
commodities or vice versa.
On a cumulative basis, we
feel the broader market would
have limited upside of ~8%
with a target of 20,900.
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Bull & Bear case
Case Probability Sensex
PE(x) Sensex
Remarks Cumulative
15% 1477 16.5 24400 The bull case scenario has been
built on the premise of ~ 150
bps of repo rate cut primarily
front loaded leading to a decline
of cost of debt impacting overall
profits (ex-banks) by 80 bps. This
along with GDP growth in excess
of 6.5%, lower commodity costs
will add another ~ 200 bps on
the bottomline from base case.
This equates to Sensex EPS
growth of 22% for FY14E
70% 1415 15 21200 The base case scenario has been
built on the premise of ~100
bps of repo rate cut through CY
13E leading to slower impact
cost of debt, overall impact on
profits (ex-banks) by 50 bps,
commodities to remain stable.
GDP growth expected to be
~6.5%. This equates to Sensex
EPS growth of 17.3% for FY14E
15% 1193 13.5 16100 The bear case scenario has been
built on the premise of only ~ 50
bps of repo rate cut as inflation
rises again beyond 8% in H1
FY 14E. Slower GDP growth
below 5.5%, higher commodity
prices coupled with higher
working capital requirements
could lead to impact of 500 bps
on bottomline. This equates to
Sensex EPS de-growth of 1%
for FY 14E
Source: Bloomberg, Research
Where Sensex could be heading?
Source: Bloomberg, Research
ICICIdirect Money Manager z 9
January 2013
Sectoral Outlook
We believe the relatively safer
sectors would continue to
lure investors as the capital
preservation albeit lower
returns theme will continue to
find favour among investors.
Accordingly, we prefer
pharma (growth story intact,
PEG within comfortable
range), banking (PSU banks
asset quality concerns to peak
out, rate cut expectations,
reasonable valuations),
telecom (reducing regulatory
uncertainty, cheaper valuation)
and auto (four wheeler
segment to grow, easing rate
cycle, favourable currency
and declining raw material to
We are neutral on IT (cloudy
growth outlook though
valuation reasonable,)
FMCG (consumption story
intact but astronomical
valuations in comparison to
long term growth), cement
(pricing discipline to support
earnings, midcaps may
continue to catch up with
expensive valuations of large
caps), aviation (favourable
government stance though
leverage remains high amid
elevated crude prices).
We have a negative bias on
oil & gas (under recoveries
could come back to haunt,
populist measures could
impact earnings growth)
infra (leverage continues
to remain high, possibility
of valuation trap), capital
goods (declining order inflow,
though valuations attractive),
metals (uncertain demand
outlook, Chinese growth
concerns) and shipping (poor
earning visibility but cheap
10 zICICIdirect Money Manager
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Indian equity benchmarks
fared much better than
expected in 2012, with a good
chunk of the gains coming in
spurts, first in January and
later from September when
the government announced
some policy reforms to
revive growth and avert a
downgrade of India’s credit
rating. The Sensex climbed
~26% in 2012, its biggest
annual advance since 2009 as
overseas investors poured in a
more than $22 billion last year.
A tentatively improving global
economic scenario and the
sentimental boost post policy
action by the government on
the much-awaited reforms
should foster gains for stock
markets going into next year
as well. As the markets are
gearing up to usher in the New
Year with renewed zeal and
optimism, we take a closer
look at the long term price
structures to chart the course
of Indian equities, going ahead.
Liquidity to script new highs for equities;
Bull Run still a mirage
We remain guided by the
key technical principles of
‘history repeats itself’ and
‘price discounts everything’
while forming the long term
prognosis for the Indian equity
In this context, our long term
analysis is guided by the
eight year cycle phenomenon
followed by the Sensex
since its inception. The index
behaviour post the 2008
top, so far, has replicated the
corresponding moves post the
1992 peak.
The comparison of these two
major peaks (1992 and 2008)
is of more relevance because
they were accompanied by a
multi-fold rally while the 2000
peak was formed within the
larger consolidation phase
and did not yield multi-fold
gains. Therefore, going by the
History repeats itself principle,
what transpired post the 1992
peak will have a bearing on
ICICIdirect Money Manager z 11
January 2013
what is likely to pan out post
the 2008 top.
Based on various technical
arguments, we expect the
Sensex/Nifty to head towards
21000- 21500/ 6300- 6460.
However, sustainability at
these levels is questionable;
therefore we recommend that
investors consider booking
profits at such highs.
Sentiments at play: Tendency
of re-test and reactions post
major eight year cycle tops
The famous quote by Sir John
Templeton, “Bull markets
are born on pessimism,
grow on skepticism, mature
on optimism and die on
euphoria”, holds true in any
given market scenario. The
run-up before a major eight
year cycle top is accompanied
by extreme market frenzy and
a broad sense of euphoria.
As the market tops out, a
well established uptrend is
brought to an abrupt halt and
the consequent sharp sell-off
leaves a lasting scar on the
investor sentiment. It is for this
very reason that the ensuing
pullback attempts to re-test
the major eight year cycle tops
are subject to reactions.
It is apparent that we are still in
the consolidation phase post
the 2008 peak and, therefore,
it would be important to note
the index behaviour within this
phase in the previous cycle.
Behaviour post eight year
cycle top (1992 & 2008) –
First attempt to re-test in
The high of 1992 (4546) was
challenged in 1994 as the index
marginally surpassed the 1992
high by 2% to register a high of
4643 in 1994. After the re-test
of 1992 eight year cycle top
in 1994 the index went into a
tailspin and lost 39% towards
early 1996.
A similar trend was replicated
post the 2008 top as the index
nearly re-tested the 2008 high
(21206) towards November
2010 (21108) and went into a
12 zICICIdirect Money Manager
January 2013
downward spiral, thereafter,
and corrected 28% to record
a low of 15135 by December
Behaviour post eight year
cycle top (1992 & 2008) –
Second attempt to re-test in
After a 39% correction post
the first attempt in 1994 the
index once again inched closer
to the 1994 highs (4643) during
August 1997 (4605). However,
in the second attempt, the
index fell just short of touching
the 1994 highs and once again
reverted downwards.
Current Scenario – Second
attempt to re-test in 2013
In the present scenario,
the index remains in a well
established medium term
uptrend and is poised at a
23-month high. The recent
sentimental boost provided
by policy action from the
government’s end on the
much-awaited reforms front,
coupled with the stimulus
announcement from the US
Fed, is likely to hold the bulls in
good stead going into the next
year as well.
However, the index
approaching the 2010 highs or
even surpassing the same by a
small margin (2%) in the near
future must not be construed
as the start of a new bull run.
The bottomline remains that
we are in the midst of a larger
consolidation phase post
the 2008 – eight year cycle
top whereby it is very much
possible that the index re-tests
the previous highs. However,
the sustainability at such highs
is questionable.
Whether the index surpasses
the 2010 highs or not, there
are bound to be overoptimistic
noises and a range of
extrapolated target levels
hurled from some quarters
of the market. However, the
question arises whether long
term investors should get
tempted to put their money
on the table in anticipation of
a new bull run from thereon?
The answer is NO.
ICICIdirect Money Manager z 13
January 2013
Source: Bloomberg,
Eight year cycle phenomenon Quarterly Chart
Based on the aforementioned
technical set-up, we expect
the current up-move in Indian
equities to attempt a re-test of
the 2010 high or even exceed
the same by a 2% margin (as
has been the case in post 1992
scenario) in the early part of
2013 leading to a rally towards
21000/21500 levels.
We further recommend that
investors should consider
booking profit at such highs as
apart from price wise maturity
the current rally will also attain
time wise maturity in the first
quarter of 2013 as discussed
ahead in this report.
In magnitude terms, the down
move post completion of the
current up-move at around
21000/21500 levels is expected
to replicate the earlier down-
leg, which was about 20-25%
opening downsides towards
the 17500-16800 region.
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January 2013
Options concentration at the start of the series, throwing
5750-6100 range.
z Among Put options, the highest OI is placed at 5700 and
5800 strikes. The average premium of 50-70 points at 5800
Put strike suggests 5750 to remain important support. Thus
5750 is expected to remain crucial levels for the ongoing
uptrend in Nifty. Deep OTM 5500 Put has seen additions in
last couple of sessions as a hedge on the back of fiscal cliff
deadlock, we believe this strike might see rollover of open
interest from this strike to higher Put strikes of 5800 and 5900
in the coming sessions.
z Open interest in January series Nifty options, suggests key
resistance placed at 6100, as 6000 Call, which has the highest
OI was shorted at an average premium of ` 100. We believe
these are stuck up short positions and may provide fresh
momentum through short covering for target of 6100.
z Hence the declines in the market can be utilized to buy
considering good support near 5750-5820 for target of 6100.
5750-5820 to remain important support zone
¾ We reiterate the view given in Global Derivatives. 5750-5820
would remain important support zone. Trade with positive
bias for target of 6100.
¾ Stock specific moves may be seen in laggard sectors like
Metals, Real Estate and Oil & Gas as indicated by increasing
stock futures open interest.
ICICIdirect Money Manager z 15
January 2013
US VIX cooling off sharply post fiscal cliff deadline –Closure in
long volatility trades is likely to keep the index to consolidate
in near-term providing comfort to equity markets.
z The uncertainty regarding US Fiscal cliff till the last hour of
deadline, created jitters in US equities. As a result, long call/
put positions in US VIX were created and the volatility index
saw one of sharpest up move of the year.
z As the initial steps towards the Fiscal cliff resolution are taken,
we believe the US VIX is likely to enter into consolidation, as
closure in long Vega positions is likely to keep volatility index
under pressure. This would bode well with the equity markets.
z This cool off in volatility index, supports our “Global
derivatives” view on S&P, that 1390 will remain key support
for the S&P index. In this current downward leg also, S&P
again took support near this level and has started to move up.
Stock Futures Open Interest at one of the highest levels at the
inception of series.
z Stock futures Open interest has constantly been rising in the
last three series. This trend is clearly visible as strong buying
is seen in mid cap stocks on the back of which CNX Mid Cap
space showed out performance.
z Strong rollover action of the single stock futures in the last
three series, suggests positive bias is carried to this series as
well and the mid cap out performance may continue amid
consolidation in the broader markets.
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Nifty PCR-OI is starting the series with lowest PCR OI of 0.88
since Nov. 2011 : indicates downsides seem to be limited.
z The Jan series started with PCR-OI of 0.88 which is lowest
in the last one year. This is happening when the market is
showing lot of resilience. We believe the traders are still
forming short call positions as indicated by magnifying 6000
call base. Hence the sustenance of the current stability in the
market may eventually lead to closure of these call options,
thus rising the PCR-OI. Rising PCR-OI bodes well with the
market upsides.
z Among the sectors, we believe the catching up exercise is
likely to continue in
z Metals : Hindalco, Sterlite and Tata Steel
z Oil & Gas : ONGC and Reliance
z Real estate : DLF
ICICIdirect Money Manager z 17
January 2013
Strong cash based buying seen during the entire 2012 calendar
year: indicating FIIs robust stance continues.
z FIIs have kept the inflows intact in the cash segment during
the entire 2012 calendar. The inflows aggregated to US $ 24
billion in the cash segment.
z In 2011, Nifty slipped from 6000 levels to 4500, but FIIs
withdrew less than $1bn. However in 2012, Nifty staged a
bounce back from 4500 back to 6000 with inflows of more
than $24bn.
Bank Nifty: Straddle formation at 12500, makes 12500 as the
pivot for directional moves on the index.
z 12500 Call and Put has seen highest OI build up, at a
cumulative premium of 550, making a range of 11950-13000.
z The index should be traded with a positive bias for target of
13000, where a noticeable call base is built. On downsides
the stuck up shorts at 12200/12000 call strikes are likely to
provide support.
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Jammu & Kashmir (J&K) Bank
Company Background
Jammu and Kashmir (J&K)
Bank is the only private sector
bank with state government’s
majority holding (53%). It has
a niche market in the state of
J&K with a market share of
~70% in both deposits and
credit as on FY12. About 55%
of the bank’s total business is
generated from J&K wherein
it enjoys 53% CASA (current
and savings account) ratio and
6% NIM (net interest margin).
With improving J&K economy,
the bank has entered a high
growth phase and is well
poised to sustain healthy
credit growth (25% within
J&K) for two or three years
to come. Asset quality of the
bank is superior with GNPA
(gross non-performing assets)
ratio of 1.6%, NNPA (net
non-performing assets) ratio
of 0.2% and PCR (provision
coverage ratio) above 90%.
The absolute GNPA has hardly
increased from ` 502 crore in
FY07 to ` 517 crore in FY12.
The consolidation phase
during FY07-11 (11.3% credit
CAGR) is yielding positive
results as it is resulting in lower
NPA levels currently. We are
factoring 25.1% profit CAGR to
` 1256.7 crore over FY12-14E
with attractive return ratios of
1.6% RoA (return on assets)
and 22.8% RoE (return on
equity). Based on the Gordon
growth model and providing
for 20% regional discount, we
have valued the bank at 1.3x
FY14E ABV with a target price
of ` 1600.
Investment Rationale
NIM to sustain at elevated
The bank has been able to
sustain NIM above 3% over the
past five years, which indicates
the bank’s pricing power to
pass on the cost. In spite of the
low CD (credit deposit) ratio, it
currently has one of the best
NIMs in industry at ~3.9%.
Going forward, we expect the
CD ratio to improve, which
will support NIM and maintain
healthy traction in NII (net
interest income) growth. In
addition, the management
ICICIdirect Money Manager z 19
January 2013
aims to grow its credit book
within J&K at a faster pace,
which will support the NIM.
The bank would also tend
to benefit from a fall in the
wholesale rate as it has high
bulk deposit proportion of
Asset quality stable
GNPA and NNPA ratio is on
the fairly lower side at 1.6%
and 0.2% respectively with
healthy PCR of above 90%.
The lower credit growth
(11.3% CAGR) over FY07-11
is shaping up well for the bank
as low disbursements during
this period are resulting in
lower NPAs now. About 63%
of the total credit book has
less probability of being NPAs.
This 63% comprises 49% AAA
rated corporate accounts and
14% personal loan whose
salary accounts are with J&K
Bank. Hence, the outlook on
asset quality is positive.
Valuations comfortable
Attractive return ratios with
RoA of 1.5%+ and RoE of
20%+ should sustain. It is
better than the industry in
most parameters including
NIM, CASA ratio, C/I (cost/
income ratio), NPA ratios, PCR,
etc. Even after the sharp rally
in the stock, it is trading at
cheap valuation (1.1x FY14E
ABV) when compared to other
banks having RoA of 1.5%+.
We value the bank at 1.3x
FY14E ABV with a target price
of ` 1600 and recommend BUY
rating on the stock.
FY11 FY12 FY13E FY14E
Net Profit (` crore) 615.2 803.2 1046.0 1256.7
EPS (`) 126.8 165.6 215.7 259.1
Growth (%) 20.1 30.6 30.2 20.2
P/E (x) 10.2 7.8 6.0 5.0
ABV (`) 706.3 833.8 993.3 1189.1
Price / Book (x) 1.8 1.5 1.3 1.1
Price / Adj Book (x) 1.9 1.6 1.3 1.1
GNPA (%) 1.9 1.5 1.5 1.4
NNPA (%) 0.2 0.1 0.2 0.2
RoA (%) 1.3 1.5 1.6 1.6
RoE (%) 19.0 21.2 23.3 23.3
20 zICICIdirect Money Manager
January 2013
Zee Entertainment Enterprise Limited (ZEEL)
Company Background
ZEEL owns one of the largest
broadcasting networks in India
with 30 TV channels including
four HD channels and 22
beams in international markets
with a global viewer-ship of
above 650 million. It competes
in the most popular Hindi
GEC (general entertainment
channel) space with its
flagship channel Zee TV. It also
has considerable presence
in movie channels, regional
GEC’s and movies, English
GEC and movies, sports etc.
ZEEL also has a presence in
content distribution through
both analogue & digital
platforms through Media Pro
Enterprise India, which is a joint
venture between Zee Turner &
Star Den Media Services. The
bargaining power of Media
Pro enables Zee along with
Star and Turner channels to
command a higher share of
the ARPU (average revenue
per user) than their combined
market share.
Investment Rationale
Subscription revenue to
The under declaration by local
cable operators (LCOs) has
marred the ARPU from analog
cable, which currently stands at
~ ` 4/subscriber as compared
to ~ ` 17/DTH subscriber. With
impending digitisation, cable
and DTH ARPU are expected
to converge. Moreover, ARPU
growth in the industry would
further fuel subscription income.
This would lead to an incremental
subscription revenue of ` 667.4
crore in FY12-15. We expect the
overall subscription revenue to
more than double from FY12-15
to reach ` 2577.3 crore in FY15.
The deadline for countrywide
digitisation is currently
December 31, 2014. Even if
there is a delay and only 55%
digitisation is completed by
March 31, 2015, Zee would
witness an incremental
subscription revenue of
` 667.4 crore.
ICICIdirect Money Manager z 21
January 2013
Ad growth turnaround to
Ad growth had slumped
to 6.9% in FY12 when the
company had shied away from
acquiring high cost content
including reality shows and
newly released movies.
However, post FY12 the
company changed its strategy
and invested in high cost
content, which resulted in an
ad growth of 26.1% (including
the revenue from the India-
Sri Lanka series in Q2FY13) in
Also, FY13, thus far, has been
very challenging for companies
across the media sector due
to the slowing economy.
However, with rate cuts from
the Reserve Bank of India (RBI)
seeming increasingly likely, the
ad environment for the entire
media sector is expected to
improve in the next fiscal.
We expect the ad revenue to
grow at a CAGR (compounded
annual growth rate) of 12.5%
in FY12-15 to reach ` 2252.6
Healthy return ratios help
sustain valuations
The EPS (earnings per share) is
expected to grow at a CAGR of
23.8% from FY12-15 to reach
` 11.6. We have valued the
stock at 23x FY15E EPS to
arrive at a target price of ` 268.
We rate the stock as BUY.
FY11 FY12 FY13E FY14E
Net Profit (` crore) 637.0 589.1 676.2 824.8
EPS (`) 6.5 6.1 7.1 8.6
Growth (%) 0.4 -7.5 14.8 22.0
P/E (x) 35.1 37.2 32.4 26.6
Price / Book (x) 7.2 6.4 5.6 4.8
EV/EBITDA (%) 26.1 29.2 24.5 19.6
RoCE (%) 25.9 20.5 21.1 22.4
RoE (%) 20.6 17.1 17.1 17.9
22 zICICIdirect Money Manager
January 2013
Investment Outlook 2013
Nearly all of the major asset classes posted gains in 2012. The
year proved to be quite constructive for equities with 25% gains
in Sensex. Gold returned a decent 13%, though that was lower
than its 2011 returns of 31%. Fixed income, too, performed well
with most categories delivering attractive returns (Crisil 10-
year Gilt Index gained 9.38% in 2012).
Will the good run continue for 2013? We asked a panel of fund
managers for their views on how they see 2013 playing out for
major asset classes. Let’s take a look:
We expect 2013 to be a much
“stronger year” with macro
headwinds that kept markets
under pressure in 2012,
subsiding at the margin and
most of the key fundamental
variables looking much better
than the year gone by. We
expect most of the fundamental
variables to be much better in
the coming year.
Domestic macro environment,
no matter how weak it has
been in the past year, is much
better compared with the
emerging market peers who
are facing sharper impact of
the global slowdown. Amid
all this, India stands out, as a
more stable economy with the
long term story still intact.
History suggests equity as an
asset class has the potential
to deliver better returns than
most comparable asset class.
In our opinion regardless
of intermittent volatility and
attempting to pick stocks,
investors should make due
allocation to equities in their
asset allocation in long term.
We foresee a lower interest rate
regime which will benefit fixed
income investments. We expect
Sunil Singhania
Head - Equities
Reliance Mutual Fund
ICICIdirect Money Manager z 23
January 2013
100 basis points (bps) cut in
repo to 7% from current 8%
(in the base case) by December
2013. In the best case, if inflation
surprises positively, we may
see rate cuts of 150 bps.
Gold has had a sharp run-up in
the last few years and may not
repeat similar stronger run in
the near to medium term. We
recommend investors have
a marginal allocation to gold
in their portfolio, in the order
of about 10% and any excess
allocation to the asset class
could be pruned down.
We expect Rupee to be stable
and range-bound at 53 to 56 to
the US Dollar.
Our view on commodity prices,
which tend to get impacted by
various factors, many of them
global and beyond just domestic
influence and difficult to
forecast, is constructive, given
the liquidity created across the
world and some recent revival
of demand in China.
The last 10 years witnessed
a frenzied boom in the
residential property prices.
But the real estate boom
happened after a prolonged
period between1996-2004 of
little or no appreciation in real
estate. In fact, during the real
estate bust period from 1996
to 1999 the prices dropped by
up to 60%. After stabilizing in
2000, it took another 5 years
for the real estate prices to
reach at the same level which
was prevailing in 1996! The
current real estate cycle looks
quite matured if one focuses
on key variables like “house
price to disposable income”,
etc. It may not be prudent to
add more of real asset to your
existing investments.
Though asset allocation will
play a critical role in determining
your success in meeting your
financial objectives, it may
be important to consider
increasing your equity
allocation overall given the
fact that, we, Indian investors,
under-own equities to a large
extent. To give a perspective,
Indian households own a
whopping $1.5 trillion in gold
and silver, while it is estimated
that they own in excess of $15
trillion of real estate. Compare
this with what we own of
equity – the combined market
capitalization of all the listed
companies is only around $1.25
trillion! Indian household can
buy the entire equity market
with their gold and silver, and
still be left with a surplus.
24 zICICIdirect Money Manager
January 2013
In the last couple of years,
the Indian equity market had
become quite polarized, with
investors logging into only
companies with predictable
growth in sectors like
consumption, healthcare etc.
at the expense of everything
else. The affirmative action
by the government in Sep’12
towards reigniting the
economic reforms has brought
interest again across the broad
market spectrum, especially in
companies which are facing
tough times due to cyclical
reasons, and I think that it
bodes well for the overall
market outlook. Easy global
liquidity would also help, as
FII flows are important for the
Indian equity markets because
of muted participation by the
domestic investors.
For the bond market, the
certainty on the monetary
policy trajectory is a positive
in 2013. I expect the Reserve
Bank of India (RBI) may
resume its rate cut cycle in
the first quarter of 2013 and
continue with that, depending
upon the trend in headline WPI
inflation print. In 2013, Market
is anticipating a rate cut to the
magnitude of around 75-100
bps, which may result in a
general decline in the interest
rates, across corporate and
government bonds.
In 2012, gold price rose 5%
in US Dollar terms, though in
Indian Rupees the returns were
around 12% (Source: MCX
Gold Spot). After a very strong
run for several years, the rise in
price volatility has taken some
sheen off the enthusiasm for
gold. However, continued
Bhupinder Sethi
Head - Equities,
Tata Mutual Fund
ICICIdirect Money Manager z 25
January 2013
loose monetary policies by the
central banks globally would
continue to lend support to
the gold price. Continued
diversification of their reserves
into gold by the Central banks
is also supportive of gold
price. Since gold is an asset
class without an underlying
earnings stream or a dividend
payout, it is always difficult to
calculate its intrinsic value.
Gold’s role as a diversification
emerges in times of crisis.
However, since it is difficult to
calculate its intrinsic value, the
volatility in gold price can be
higher. Last few years’ strong
price action has meant that
gold has very eager and ready
buyers. However, investors
would do well to remember
that over the 20 year period
from 1980 to 2000, gold price
declined by 40% in US Dollar
terms (after its stellar rise in
1970s), though even in that
period for Indian investors
it remained an appreciating
asset class because of Indian
Rupee’s depreciation versus
US Dollar. Historically, in times
of severe dislocation and large
scale forced migration, while
people could not carry their
real estate with them, what
they could carry was gold.
So, from that perspective and
in an environment of massive
currency printing, gold
continues to have its place in a
diversified portfolio. However,
my view is that gold should
have a limited allocation in the
overall asset allocation plan.
The Indian Rupee (INR)
weakened by around 4% vis-à-
vis’ US Dollar (USD) in 2012 to
end the year at INR 55 to 1 USD.
While the INR touched a low of
around ` 57 to USD in June’12,
however post the economic
reform announcements by
the government and QE3 in
Sep’12, it strengthened all the
way towards INR 51 in Oct’12
but retraced to end the year
at INR 55, given the concerns
on current weaker domestic
macro economic situation
coming to fore again.
INR macro situation continues
to be challenging, given that
India is running a high current
account deficit of around 4%,
have a higher inflation vis-à-vis
the world at large, our foreign
exchange reserves have been
26 zICICIdirect Money Manager
January 2013
trending down in the last few
years, bringing down our
foreign exchange coverage
ratios, and we have a rising
external debt situation. In such
a scenario, we continue to be
dependent on strong capital
flows to bridge our current
account deficit. In 2012, India
saw the second highest FII
flows in a calendar year into
India of the tune of around
USD 24 bn. India would need
the capital flows to be strong
and hopefully a weaker crude
price for INR to be stable and
strong. Continuation of the
current positive sentiments,
implementation of economic
reforms which also helps
ward off the threat of rating
downgrade, and a benign
global risk environment
therefore are imperative for a
stable to stronger INR in 2013.
Year 2013 has started with
metal prices continuing to
bounce back on the back
of signs of recovery in
Chinese manufacturing. In
the last decade, the massive
infrastructure construction in
China has driven metal prices
higher. While the new Chinese
leadership is expected to
continue to give stimulus to the
Chinese economy by giving a
thrust to investments, however,
I believe that going forward
the pace and magnitude of
infrastructure build in China
would be lower than what we
have seen in the last decade.
China needs to rebalance
its economy by giving more
push to consumption than
infrastructure as we move
forward. It is because of this
reason that I am less optimistic
going forward on commodities
like metals (barring Copper
and Zinc, which have their
own specific supply-side
issues) than on commodities
like crude oil and coal, whose
demand is expected to remain
more stable given the more
secular and stable demand
emanating from the more
resilient requirement for the
energy need of the world.
The threat of any conflict in
Middle East would also act
as a support to the crude oil
price. There would of course
remain regional dynamics in
some of these commodities,
as while the US moves over
ICICIdirect Money Manager z 27
January 2013
from coal to gas for its power
plants because of availability
of cheaper shale gas, India’s
requirement for coal to fuel
its power plants would act
as support to the coal prices.
My view on agriculture
commodities is that in general
the prices may continue to
have an upward bias, as
the demand continues to
be resilient and increasing,
while there are supply-side
challenges in increasing
plantation areas and yields.
It is important for retail
investors to stick to their
overall asset allocation plan
which is in synch with their
long range financial goals. In
that context, it is rather sad that
in India, despite equity markets
having given very robust long
term gains (BSE Sensex has
given returns of around 17%
CAGR since its inception over
the last 33 years), the volatility
in the equity market continues
to spook retail investors and
they generally try to time the
market rather than benefiting
from the compounding of
returns which happens with
time in the market.
The other important thing is to
have the right time perspective
while investing in equities as
it is a very volatile asset class
and therefore investors need
to invest with a very long term
time horizon. In equities, since
the time horizon is longer, so
there is no specific advice
for the year 2013 per se, but
investors should continue to
invest in systematic investment
plans of well managed equity
mutual funds to an extent
which gives equity its rightful
share within their overall asset
allocation plan.
Within the fixed income
component of an investor’s
overall asset allocation, given
an anticipated general decline
in interest rates in 2013, I feel
that the open-ended duration
funds offers an attractive
investment avenue compared
to other debt products. The
investors in these open-ended
bond and gilt funds may
benefit not only from the good
accrual income, but also from
capital gains due to decline
in interest rates due to their
higher duration.
28 zICICIdirect Money Manager
January 2013
Fiscal consolidation will be
an important cue and will
help provide RBI with better
headroom to take a more pro-
growth stance and begin the
rate cut cycle. The biggest
expectation from the debt
markets in 2013 has been of
reduction in rates. 2013 is well
poised to meet this market
expectation albeit overcoming
a few challenges. If RBI gains
comfort in the fiscal side our
highest probability bet is that
over the next 3-4 months
RBI should be able to deliver
calibrated rate cuts to the
extent of 50 bps.
It is extremely difficult to
predict the movement of gold
over a short period of time like
a year. Gold prices have risen
in the recent past on account of
global uncertainties, inflation
and rupee depreciation.
However, once inflation eases
off, gold can be expected
to under-perform. Having
said this, since gold is not
correlated to other assets, it
Performance of equities in 2013
is expected to hinge primarily
on pace of reforms and the
FII flows. Contracting the twin
deficits and maintaining growth
will be the focus through the
year. Being the pre-election
year, the other important theme
that will drive government
decision making will be the
political landscape. A reduction
in fiscal deficit through steps
other than divestment like
additional taxation and further
hike in diesel prices will have
material impact on the market
and can be a big positive for
markets to rally further.
Sankaran Naren
Chief Investment
Officer (CIO),
ICICI Prudential
Mutual Fund
ICICIdirect Money Manager z 29
January 2013
carries significant importance
as a diversification hedge.
Investors can allocate 5-10
percent of their overall portfolio
to Gold. This excludes holding
in jewellery form.
The rupee continues to be
under pressure as against the
dollar given the existing status
of current account deficit and
trade deficit. Any improvement
in the deficit scenario will
therefore help strengthen the
rupee and vice versa.
Indian investors continue
to be under-invested in
equities since the past 3-4
years. In contrast, allocation
to physical real-estate has
become a significant part of
the investor’s portfolio. On
the valuation front, there still
exists dichotomy of valuations
whereby ex FMCG, Pharma
and select Banking stocks, the
broader market continues to
be attractive. Our advice has
been to maintain appropriate
allocation to equities. However,
data indicates that retail
investors are continuing with
booking profits. In our view,
the recent reform measures
are undoubtedly positive
and can be viewed as a good
beginning. We recommend
investing through systematic
transfer plan (STP) in equities
over the next 18 months.
A moderating inflation and
the lower growth environment
will make a stronger case for
RBI to initiate a rate action
beginning next quarter. We
maintain our expectations of a
50 bps rate cut over the next
3-4 months. We also expect
a fair amount of open market
operations (OMOs) by RBI in
the remaining months of the
fiscal year resulting in the 10
yr benchmark yield to trade
with a downward bias in next
3 months. This potentially
brings forward an opportunity
for investors to add / increase
duration to their portfolios
through fixed income duration
funds like Gilt Funds and
Income Funds.
30 zICICIdirect Money Manager
January 2013
revival in investment cycle,
equity markets are likely to
maintain the uptrend. So far
the rally has been driven by
foreign investors; we hope to
see higher participation from
domestic investors.
We have a benign view on
inflation for FY 2013-14 due
to output gap in India, soft
global commodity prices due
to slowdown in China, stable
currency, lagged effect of
tight monetary policy and our
expectation of relatively tighter
fiscal policy. This should pave
the way for policy easing next
year. We maintain a positive
view on bonds from a medium
term perspective. RBI may
have to continue with OMOs
to ease liquidity which augur
well for the G-sec market.
Though indices are close to
an all-time high in absolute
terms, but valuations are far
more reasonable this time.
The economy and corporate
profitability are bottoming out
while government initiatives
have been positive. With
expected monetary easing
by RBI and emerging signs of
Navneet Munot,
Executive Director
& Chief Investment
Officer (ED & CIO),
SBI Mutual Fund
ICICIdirect Money Manager z 31
January 2013
The trend in trade deficit
continues to be worrisome as
the rupee depreciation over
the last 2-3 years has not yet
helped in boosting exports and
import substitution. However,
as things stand investment
flows have provided a good
counterbalance. We expect
rupee to stabilize at current
levels with scope of 3-4%
appreciation over the next one
While easy liquidity conditions
in the world may help
commodity prices, we believe
the demand destruction due to
slowdown in large parts of the
world particularly China will
ensure that commodity prices
remain soft. One has to watch
geopolitical events in middle-
east which can create volatility
in crude oil prices.
In view of positive view on
interest rates, we have been
recommending investors
with risk appetite and longer
horizon to stay invested
in duration funds. Equities
have delivered decent
returns; however, in view of
earnings growth, reasonable
valuations and opportunities
in stock picking, we advice
investors to stay invested in
equity funds. There could be
volatility driven by global or
domestic factors, however,
we recommend investors to
maintain the discipline of asset
allocation. Both Equities and
bond markets are throwing
interesting opportunities as we
enter into 2013.
32 zICICIdirect Money Manager
January 2013
masks the historically
high divergence between
defensives and cyclical
valuations. As economic
recovery unfolds, cyclical
would see the same reflected
in their earnings growth and
normalization of valuations,
driving significantly higher
returns than market averages.
Therefore, we expect interest
rate sensitives, domestic
cyclical, select asset plays and
value theme to outperform.
We expect a continuation of
the accommodative stance
by global central banks and a
benign environment for risk.
This ensures elimination of
tail risk from these economies.
Should there be meaningful
recovery in these economies;
India’s growth would also
We expect equity market to
deliver around 15% upside
from current level, in line
with earnings growth and
sans any valuation re-rating.
However, there are significant
opportunities available to
generate significant excess
returns. Sensex valuation
Mahesh R. Patil
Co- Chief Investment
Officer (Co-CIO),
Birla Sun Life Mutual
ICICIdirect Money Manager z 33
January 2013
have a positive rub off. In
such a scenario, both earnings
growth and valuation re-rating
can drive Sensex returns as
high as 20-25%.
Over a longer time horizon of
5 years, equity markets can
deliver post-tax total return of
15.7% p.a. on a conservative
basis. This is premised on
moderate GDP growth of 6%
and inflation of 7%, delivering
a 13% nominal GDP and
corporate earnings growth and
valuation multiple at long-term
average of 14.9x. Further, in
relation to assets like gold and
real estate, equities are trading
at 2.3 and 1.7 sigma below their
historical trend respectively.
As this mean reverts over the
medium-term, equity returns
would prove to be extremely
competitive in comparison to
most major assets classes.
We expect inflation to average
6.5% in CY13. As a result,
interest rates should also
head south as lower inflation
provides the RBI with enough
room to focus on growth. We
expect 75-100 bps of policy
rate cuts with combination of
Repo, cash reserve ratio (CRR)
and Reverse Repo. This would,
in turn, push down borrowing
costs for financial institutions,
corporates and consumers.
34 zICICIdirect Money Manager
January 2013
PE of 14x are below long-term
averages and are attractive,
considering that upgrade cycle is
yet to begin and interest rates will
Financials will likely do well in
2013 as recovery in domestic
economy coupled with lower
interest rates augurs well for loan
growth and bad loans. Consumer
Discretionary will also benefit
as demand recovery will drive
volumes higher and valuations
are attractive. Capital goods will
be contingent on likely recovery
in the capex cycle, which should
begin in the second half of 2013.
It would be interesting to see the
performances of export oriented
sectors (mainly pharma and
IT) since these were boosted
by a favourable currency this
year. The scope for valuation
re-rating in Consumers looks
limited. Mid-caps should see a
strong performance as economic
recovery; lower rates and
revival of domestic flows are key
catalysts for these stocks.
On the whole, 2013 is set to
begin on a positive note and
investors should look for the year
to bet conservatively. We believe
fundamental analysis will play a
major role and our investment
team remains focused on picking
individually attractive companies
from a long term perspective. In
our portfolios, constructive bias
will be towards rate sensitive
sectors such as financials and
consumer discretionary.
Going into 2013, while the
announcements of reforms have
been a big positive, the successful
execution of these would drive
sentiments and markets. A
moderation in inflation followed
by lower interest rates will impart
macroeconomic stability and
lower fear of a downgrade.
Consensus expectations suggest
that corporate sector earnings
could grow by 12-13% in FY14, post
a modest 8% in FY13. This will have
low contribution of global cyclicals,
providing more stability to growth.
Expectations are low and earnings
upgrades are likely to follow, once
global commodity prices see some
India’s last 10-year average
growth rates have been over
15%+ and earnings are set to
reverse to mean. Valuations at
Soumendra Nath Lahiri
Head – Equities,
L&T Mutual Fund
ICICIdirect Money Manager z 35
January 2013
investors, as a gradual calibrated
approach is clearly preferable.
Favourable demand supply
dynamics for government bonds,
positive market sentiment on
account of resumption of OMOs
and likely policy rate cuts in the
first quarter should provide a
good start to the year. Overall
2013 should be a good year
for fixed income funds, with
long bond / flexi bond funds
delivering impressive returns.
We also expect short term bond
funds to perform well given
their attractive risk adjusted
return potential. Allocations
to fixed maturity plans based
on opportunities arising from
periods of temporary tightness
in liquidity may also be
The views presented/
expressed herein are experts’
personal views and do not
necessarily reflect the views of
ICICI Securities.
We expect the RBI to lower
interest rates in 2013, particularly
in the first quarter of the year
on account of below trend
growth. The central bank which
has displayed a refreshingly
independent approach to policy
decision making has rightly
chosen to be cautious so far
in ensuring that inflation falls
sustainably into a lower band,
before adopting aggressive
easing tactics. We believe this
is a strong positive factor for
medium term fixed income
Shriram Ramanathan
Head – Fixed Income,
L&T Mutual Fund
Please send your feedback to
36 zICICIdirect Money Manager
January 2013
How do you analyze the
macroeconomic outlook for
the coming year?
The macroeconomic
scenario would improve from
here on albeit at a slower pace.
After posting a decade low
growth of 5.4% in H1FY13, the
second half is expected to post
a growth of 5.6%, while we
expect the economy to grow at
6.5% in FY14. The government
has initiated the reforms
process which should help put
a check on fiscal deficit, which
we expect to remain close
to 5.6% in FY13 and 5.3% in
FY14. Inflation has been on
a slight downtrend, with the
latest figures lower than the
year-to-date (YTD) average.
We expect Reserve Bank of
India (RBI) on move on a 50
basis points (bps) rate cut in
Q4FY13, followed by another
50 bps cut by December 2013.
We believe the country would
rediscover a new sustainable
growth normal in FY14 after
below par growth in FY13 and
above par growth in FY04-11.
The Indian markets rallied ~25% in 2012, as we step into 2013
the question is what now? In our interview, Pankaj Pandey,
Head - Research, ICICIdirect, outlines the ‘big picture’ for 2013.
He shares his thoughts on what’s next for the economy and
stock market, and how you might position your portfolio for
the coming year. Edited excerpts:
‘Market may see 10% upside in 2013’
Pankaj Pandey
Head - Research, ICICIdirect
ICICIdirect Money Manager z 37
January 2013
Indian markets have done
quite well in 2012. How do you
see the markets performing
over the year 2013? What
would be the key drivers?
So far, the equity market
performance (25% YTD) has
eluded economic (~5.5%
in FY13E) and corporate
earnings growth (4% Sensex
EPS growth in FY13E). Going
ahead, as we discover the new
normal growth, Indian equity
markets are likely to align more
closely with the economic
and broader earnings growth.
Accordingly, we have built in
a base case scenario for the
Sensex at 21200, upside of
10% (15x FY14E EPS of ` 1415,
17% growth). The key drivers
for the market would include
government’s steady tread on
the reformist path coupled with
expected rate cut by RBI.
What are the top
concerns or factors that can
negatively impact the markets
as we head towards 2013?
The RBI may choose
to continue its long wait for
inflation to subside. Or else,
the government may wave off
its fiscal consolidation plan in
favour of populist measures in
an election year. In either case,
the RBI may not deliver a rate
cut in the January–March 2013
quarter, thereby taking market
participants by surprise.
This may also coincide with
markets taking a breather after
~25% plus up move, which
together could lead to a low
double digit correction.
On the global front, concerns
over both US fiscal cliff and
Euro Zone breakup in the near
future seem to be receding.
However, if the US fails to
negotiate the fiscal cliff,
global growth could face a
challenging environment and
stock markets across the globe
could witness a correction.
Also, although unlikely, if Euro
Zone faces a breakup, it could
have a cascading negative
effect on Indian stock markets.
What are your investment
preferences in terms of sectors?
We believe the relatively
safer sectors would continue
to lure investors as the capital
38 zICICIdirect Money Manager
January 2013
preservation even at lower
returns theme will continue to
find favour among investors.
Accordingly, we prefer pharma
(growth story intact, PEG within
comfortable range), banking
(PSU banks asset quality
concerns to peak out, rate
cut expectations, reasonable
valuations), telecom (reducing
regulatory uncertainty, cheaper
valuation) and auto (four
wheeler segment to grow,
easing rate cycle, favourable
currency and declining raw
material to support).
Do you foresee scope for
any big changes in monetary
Post the 50 bps repo
rate cut in April 2012, the
RBI has resisted industry
and government pressure
for further rate cuts due to
persistently high inflation, even
though GDP growth continues
to be below satisfactory levels.
Going forward, there is a firm
expectation that the RBI would
reduce repo rates and further
cut the cash reserve ratio (CRR)
in H1CY13. The argument is
further augmented by RBI
governor statement about
shifting focus to growth from
now on and expectation of
inflation moderating from
January 2013 onwards.
What investment strategy
should retail investors adopt
in 2013, in your opinion?
We advise retail investors
to continue with a staggered
buying approach with focus on
investment in sectors which
are interest rate sensitive,
but at the same time offer
reasonable capital protection.
The opinions expressed in an
interview are the views of the
ICICIdirect Money Manager z 39
January 2013
Tax Benefits on Construction-linked Home Loans
I have recently booked
a flat in Pune, and its under-
construction. I have taken
a loan for this. In this case,
what is the tax treatment for
the principal and the interest
- Ankit Patil
In a construction-linked
loan, the disbursement of
loan happens in installments,
depending on the stages of
construction. Till the time the
property is fully constructed,
you will be usually paying
only interest (pre-EMI interest)
on the disbursed amount of
loan. The EMI will start only
after the full loan amount is
disbursed, i.e., on completion
of construction of the property.
The pre-EMI interest paid
during construction cannot be
claimed for tax deduction at
that point of time. However,
tax deduction for the pre-
construction period, on the
pre-EMIs, can be availed only
after the construction of the
building has been completed.
Once the construction is
completed, the total pre-EMI
interest paid is deductible
in five equal installments in
the subsequent years. For
example, if you have paid
` 5 lakhs as the pre-EMIs,
then ` 1 lakh will be shown
in the next five years as tax
deduction. Pre-EMI is only
the interest paid during the
period. If you have paid any
principal amount during
construction, it is not eligible
for tax deduction.
Once the EMI starts, the
repayment amount consists
of both principal and interest.
The principal portion being
repaid can be claimed as
deduction from income upto
` 1 lakh under Section 80C
of the Income Tax Act. The
interest portion can be claimed
as deduction under Section
24. The quantum of claim will
depend on whether it’s a self-
occupied property or a let-out
property. If the property is
self-occupied, the maximum
interest amount that can be
claimed as deduction will be
only ` 1.5 lakh per financial
year. If the property is let-out
and rental income is declared,
then the entire amount paid
as interest in a financial year
can be claimed as deduction
without any limit.
40 zICICIdirect Money Manager
January 2013
I am 37 and I want to
start saving and investing for
my retirement. I am looking
to retire at 55. At present, I
have corpus of about ` 8 lakh
(in EPF). I do not have any
other investments. I estimate
that I would need ` 20,000
per month in today cost.
Please advise how I go about
my retirement planning.
- Rajiv Kumar
It’s high time you should
make a financial plan for
yourself, if you do not have
one in place. This plan will
include retirement planning
as well. While making a
comprehensive plan, a lot
of factors like your pension
income and rental income, if
any, any one-time expenses
post retirement, etc. also have
to be taken into account.
On simple calculation, you
will need approximately an
amount of ` 80,000 p.m.
to fund your expenses
post-retirement, which
will also grow as your age
increases. Assuming a life
expectancy of 80 years, you
will approximately require
a corpus of ` 3.05 crore to
fund your post-retirement
expenses till your lifetime.
You will be able to accumulate
a corpus of approximately
` 50 lakh through your
EPF, assuming a monthly
contribution of ` 6,000 p.m.
from both you and your
employer and a growth of
5% p.a. on the same. For
accumulating the shortfall of
` 2.55 crore, you will have to
invest in the range of ` 36,000
to ` 44,000 p.m., depending
on your risk profile.
However, we re-emphasize
you to make a comprehensive
financial plan for yourself,
which will help you
understand and plan better for
your life goals.
How are global funds
taxed? Are they taxed as
Indian equity funds or Indian
debt funds?
- Shyam Krishnan
Global funds are treated
as debt funds and are not
subject to the Securities
Transaction Tax (STT). Short-
term capital gains tax is
charged if you have invested
for less than a year, according
to your tax slab. Similarly, for
over a year, long-term capital
gains tax of 10 per cent without
indexation or 20 per cent post
indexation is charged.
ICICIdirect Money Manager z 41
January 2013
Do you also have similar queries to ask our experts? You may write to us at:
However, in case of global
funds that invest up to 65 per
cent in the Indian domestic
equity markets, the tax
treatment is same as the
domestic funds, and you are
eligible for the tax exemption
on long-term gains from these
funds. For short-term gains,
15 per cent is taxed.
I am interested to invest
in gold. I would like to know
your opinion on purchase of
E-gold, ETFs and Gold Funds.
Which one is the best option?
- Rohini Gupta
If you are looking at
investing in gold through an
electronic form, you could
check out gold exchange
traded funds (ETFs), e-gold,
and gold fund of funds. ETFs
are passively managed funds
that track gold prices. Gold
ETFs are a cheaper proposition,
as there is no entry or exit
load on it. However, there is
a brokerage fee. You can also
consider the fund of funds
route. Although there are no
brokerages, you will have to
bear the exit load. Gold ETFs
and fund of funds use spot gold
prices and investments in these
can be made through an SIP.
In e-gold, you can buy in
units. One e-gold unit is
equal to one gram of gold,
which can be bought and
sold via spot exchange just
like shares, making it a very
liquid investment. While gold
ETFs and fund of funds are
considered more as paper
gold investments, e-gold is
more liquid in nature. E-gold
is the most cost-effective
form and is able to trace gold
prices more closely than
ETFs or gold funds. However,
e-gold loses out to gold ETFs
when it comes to taxation, as
the units need to be held for
more than three years to get
long-term capital gains tax
benefit, unlike gold ETFs that
need to be held only for one
year. Also, one might have
to pay wealth tax on e-gold,
unlike ETFs or gold fund.
If you are looking at liquidating
the investments in the form
of gold and staying invested
more than 3 years, then you
may opt for e-gold; else, Gold
ETFs will be superior, because
of better taxation benefit.
42 zICICIdirect Money Manager
January 2013
Securing Finances for your Daughter
Suresh Thakkar (48) is a businessman and his spouse Meera
(43) is a homemaker. They reside in Navi Mumbai, and have
one daughter Priya (20), who is studying. Their primary concern
is to build a corpus for Priya’s post-graduation and marriage.
Suresh approached ICICIdirect store to get a financial health
check-up done that that would help him secure his family’s
financial future.
Thakkar Family’s Income,
Expenses and Savings Details:
Annual household income: ` 42
lakh + ` 1.32 lakh rental income.
Total current income for the
family= ` 43.32 lakh
Annual expenses: ` 14.65 lakh
Annual investments: ` 1 lakh
p.a. in PPF and ` 3.60 lakh p.a.
in equities.
Total cash outflow: ` 19.25 lakh
Annual investible surplus:
` 24.07 lakh
Expenses break-up (Annual):
Household ` 3 lakh
Home Loan ` 4.20 lakh
Entertainment ` 1.20 lakh
Medical ` 25,000
Education ` 3.60 lakh
Travel ` 1.20 lakh
Utilities ` 60,000
Vehicle Maintenance ` 60,000
PPF (p.a. contribution) ` 1 lakh
Equities (p.a.
` 3.60 lakh
Home (self occupied) ` 1.50 crore
Home content ` 5 lakh
Vehicle ` 17 lakh
Real Estate ` 50 lakh
Savings Balance ` 5 lakh
Equity ` 50 lakh
FD ` 20 lakh
PPF ` 45 lakh
Total Assets ` 3.42 crore
Home Loan ` 30 lakh
Total ` 30 lakh
Total net-worth (assets –
liabilities): ` 3.12 crore.
Financial Goals
z To plan for Priya’s post-
graduation in next 1 year.
The present cost of the
goal is approx ` 50 lakh.
z To accumulate ` 1 crore in
today’s value for Priya’s
marriage in next 4 years.
ICICIdirect Money Manager z 43
January 2013
z Annual Surplus: Thakkar
family has an annual
investible surplus of ` 24.07
lakh, after deducting all
the expenses and current
z Multiple income sources:
Apart from the business
income, Thakkar family
also has rental income
from one of their real estate
Concern Areas
z Medical insurance: Suresh
and his family do not have
any medical cover.
Current Asset Allocation:
Equity 42%
Debt 54%
Cash 4%
(Excluding real estate)
Suresh’s risk profiling suggests
that he is a moderate investor.
Thus, Recommended Asset
Allocation is:
Equity 45%
Debt 45%
Cash 10%
Goal Planning
Priya’s Post-graduation:
Suresh has estimated ` 50 lakh
in today’s value as the cost of
his daughter’s post-graduation.
Considering the rise in costs,
he may need approx. ` 55 lakh
after 1 year. He has a bank FD
of ` 20 lakh, which can be used
for this goal. Considering the
value of FD after 1 year, he may
still have a shortfall of ` 33.80
lakh. To bridge this shortfall, he
needs to invest ` 2.75 lakh per
month for 1 year. As the goal
tenure is short-term, he can
consider investing into debt.
Goal cost
(in today’s
cost (after
1 year)
value of
(FD) aligned
for goal
to be
Monthly SIP
` 50,00,000 ` 55,00,000 ` 21,20,000 ` 33,80,000 ` 2,75,728
Priya’s Marriage:
Suresh wants to plan for his daughter’s marriage after 4 years. He
has estimated ` 1 crore as cost in today’s value. Again, considering
inflation, he may require approx. ` 1.36 crore after 4 years.
44 zICICIdirect Money Manager
January 2013
Suresh has currently ` 50 lakh
in equities, and doing an SIP
of ` 3.6 lakh p.a. in equities.
He should allocate these
investments for Priya’s marriage.
Considering the future value of
these investments after 4 years,
he will still have a shortfall of
approx. ` 40.16 lakh. To bridge
this gap, he needs to save and
invest ` 65,832 per month or
` 7.50 lakh annually for this goal.
Goal cost
(in today’s
Future cost
(after 4
future value
of investment
aligned for goal
to be
Monthly SIP
` 1,00,00,000 ` 1,36,04,890 ` 95,88,155 ` 40,16,735 ` 65,832
Planning for Retirement
Suresh has accumulated a
corpus of ` 45 lakh in his
PPF account with an annual
contribution at ` 1 lakh. He also
gets rental income ` 11,000
p.m. in today’s value, which
will continue post retirement.
Suresh plan to run his business
throughout the life and expects
to get regular income from it. He
estimates his business income
to increase by 10%, annually.
Considering this, he may not
have shortfall for retirement.
Insurance and Protection
Life: Suresh has a dependent
wife and a daughter. He has a
term plan of ` 50 lakh. However,
considering his present expenses
and the requirement for his
daughter’s goals, he should
consider taking an additional
cover of at east ` 50 lakh.
Medical: Suresh has no
medical cover, either for self
or family. He should consider
buying a family floater policy
and should increase the cover
regularly. He may also go for
personal accidental cover.
Home: It is important to insure
one’s home for any loss to
structure and contents due to
both natural and man-made
calamities. Suresh has two
properties, in addition to the self-
occupied house. The total value
of all three properties is about
` 2 crore. Suresh should consider
insuring these properties, which
will cost only about ` 12,000 on
an annual basis.
ICICIdirect Money Manager z 45
January 2013
ELSS is essentially an equity
fund with a three-year lock-
in period. This means that
you cannot redeem your
investment in the fund for
the first three years. This
may seem restrictive, but the
lock-in period can actually
work to your advantage.
Like any other equity
schemes, the fund manager
invests the pool of money
into diverse equity stocks and
actively manages the whole
portfolio. Most of the ELSS
schemes declare dividends,
which again are tax-free.
Redemption of units allotted
can be done only after
three years from the date of
allotment of units.
ELSS: Efficient investment and tax-saving tool
As the tax season closes in, it is necessary to look at various
options available to reduce your tax outgo. One alternative
is to invest in equity linked savings schemes (ELSS). ELSS is
an investment avenue which offers the dual benefits of high
returns with relief in tax liability.
Investments in ELSS can be a
lump sum investment or through
the systematic investment
plan (SIP). Staggering your
80C investments throughout
the financial year is a practice
that needs to be followed
religiously. This way you can
smoothen your income flows
for the whole year and earn
higher returns, as the amount
stays invested for longer
Objectives & features:
Type of scheme: Equity-
oriented schemes
Asset allocation: 80-100%
Scheme objective: Capital
Liquidity: Lock-in for 3 years.
46 zICICIdirect Money Manager
January 2013
Investment strategy for ELSS:
Investment in ELSS can be made as:
a) Lump sum investment
b) Systematic Investment Plan (SIP) of as low as ` 500 can be
Points to remember
- Fund eligible for deduction from taxable income is ` 1 lakh
- Underlying asset class is equities
- Amount invested gets locked in for 3 years from the date of
allotment of units.
For the salaried class, who have
a regular monthly income SIP
in ELSS is a smart way to plan
80C investments to reduce the
tax deducted at source (TDS)
burden. SIP in ELSS started
from month of April has
additional advantages:
– No need to time the market
– Avoid burdening the end
of the year income with tax
savings investments
– Benefits of rupee cost
In case of business owners,
ELSS investments can be
made depending on cash flow
ELSS is ideal for:
i) Small investors as it is a
simple way of investing in
the stock market.
ii) Investors who may not
have a lump sum to
invest in order to save tax.
Open-ended ELSS allows
them to invest at various
points depending on the
availability of funds, as well
as take advantage of cost
ICICIdirect Money Manager z 47
January 2013
Category: ELSS
ICICI Prudential Tax Plan
Fund objective
The scheme seeks to generate
long-term capital appreciation
through investments made
primarily in equity and
equity related securities of
companies. Accordingly, the
NAV of the scheme is linked
to the performance of such
companies. However, there
can be no assurance that the
investment objective of the
scheme will be realised.
Key Information
NAV as on December
31, 2012 (`)
Inception Date August 19, 1999
Fund Manager Chintan Haria
Minimum Investment (`)
Expense Ratio(%) 2.0
Exit Load nil
Benchmark S&P CNX 500
Last declared Quarterly
AAUM (` cr)
The fund has always been
an average performer in the
ELSS pack. For three year
ending on December 31, 2012
the fund has delivered 9.1%
return against benchmark
S&P CNX 500 delivering 3%
return. The fund has been in
existence for over 10 years
and, hence, withered major
up and down market cycles.
For a three year rolling return,
calculated on daily basis since
2005, the fund has managed
to deliver 15.9% annualised
return. Someone who had
invested in the fund at the peak
in 2007 would have hardly lost
any money and in some cases
would have made marginal
gains even post the down turn.
This is primarily because the
fund has done pretty well in
CY09 and CY10 posting 112%
and 24% return, respectively.
This is much higher than 88%
and 14% return delivered by
its benchmark for the same
time period. Fund manager
Chintan Haria took over the
management of the fund in
May 2011. Since then, it has
delivered 10.5% return against
the benchmark delivering
3.71% return.
48 zICICIdirect Money Manager
January 2013
Calendar Year-wise Performance
2012 2011 2010 2009 2008
NAV as on
Dec 31 (`)
158.1 114.9 151.0 121.7 57.4
Return(%) 37.6 -24.0 24.1 112.0 -56.0
Benchmark(%) 31.8 -27.2 14.1 88.6 -57.1
Net Assets(` Cr) 1468 1197 1320 1011 497
Fund Name
Last three Year Performance
31-Dec-10 31-Dec-09 31-Dec-08
31-Dec-11 31-Dec-10 31-Dec-09
ICICI Prudential
Tax Plan
-23.96 24.11 112.00
Benchmark -27.19 14.13 88.57
The fund has a multicap
portfolio composition with
~70% holding in large
caps. Top 10 stocks, mainly
the bigger names in the
respective sector, comprise
~33% of the total portfolio as
on December 2012. Large cap
orientation prevents excessive
capital erosion. Since May
2011, i.e. after appointment
of the new fund manager, the
portfolio composition has not
undergone much change.
Cairn India has been in the
top holding since then. The
fund follows a buy and hold
strategy with exposure to
bigger names likes Infosys
and Reliance Industries.
Mid & small cap bets are
generally restricted to ~25%
of the portfolio. Overall, the
portfolio provides a good mix
of stocks to invest for the long
The fund manager is fairly
new to fund management
with mere 1.5 years of
experience. He has worked as
an equity dealer in his earlier
assignments. However, the
fund has done very well since
he has taken over.
Top 10 Holdings Asset Type %
Cairn India Ltd. Domestic Equities 5.6
Infosys Ltd. Domestic Equities 5.2
ICICI Bank Ltd. Domestic Equities 5.0
HDFC Bank Ltd. Domestic Equities 4.5
Reliance Industries Ltd. Domestic Equities 4.0
Oil & Natural Gas Corpn. Ltd. Domestic Equities 3.4
Hindustan Zinc Ltd. Domestic Equities 2.8
Cadila Healthcare Ltd. Domestic Equities 2.7
ICICIdirect Money Manager z 49
January 2013
Whats in %
Grasim Industries Ltd. 1.00
Torrent Pharmaceuticals Ltd. 0.60
Whats out %
Hindustan Unilever Ltd. 1.10
Nestle India Ltd. 1.00
Market Capitalisation %
Large 69.1
Mid 10.7
Small 13.6
Top 10 Sectors Asset Type %
IT - Software Domestic Equities 10.6
Bank - Private Domestic Equities 10.5
Pharmaceuticals & Drugs Domestic Equities 9.9
Oil Exploration Domestic Equities 9.1
Refineries Domestic Equities 5.2
Metal - Non Ferrous Domestic Equities 4.8
Mining & Minerals Domestic Equities 4.4
Packaging Domestic Equities 3.2
Engineering Domestic Equities 2.5
Steel/Sponge Iron/Pig Iron Domestic Equities 2.3
Portfolio Attributes
Total Stocks 60.0
Top 10 Holdings(%) 33.1
FundP/E Ratio 18.2
Benchmark P/E Ratio --
FundP/BV Ratio 2.6
Asset Allocation
Equity 90.6
Debt 0.0
Cash 9.4
Dividend History Date Dividend(%)
Feb-27-2012 10
Feb-21-2011 20
Dec-07-2009 40
Jul-21-2008 15
Jan-21-2008 20
Aug-20-2007 20
Performance of all the schemes managed by the fund
Fund Name
31-Dec-10 31-Dec-09 31-Dec-08
31-Dec-11 31-Dec-10 31-Dec-09
ICICI Pru Child
Care Plan-Gift
42.34 -26.10 24.30
Nifty Midcap 50 35.14 -39.90 10.42
37.63 -23.96 24.11
S&P CNX 500 31.84 -27.19 14.13
Data as on December 31, 2012; Portfolio
details as on December 2012
Source: ACE MF
50 zICICIdirect Money Manager
January 2013
Category: ELSS
Canara Robeco Tax Saver
Fund objective
To provide long term capital
appreciation by predominantly
investing in equities to
facilitate subscribers to seek
tax benefits as provided under
Section 80C of the Income
Tax Act, 1961. However, there
can be no assurance that the
investment objective of the
scheme will be realised
Key Information
NAV as on December
31, 2012 (`)
Inception Date February 2, 2009
Fund Manager Krishna Sanghavi
Minimum Investment (`)
- Lumpsum
Expense Ratio(%) 2.3
Exit Load nil
Benchmark BSE-100
Last declared Quarterly
AAUM(` cr)
The fund has seen an
exceptional performance in
its short period of existence.
Since its launch in February
2009, the fund is the second
best performer in the category
delivering 30% annualised
return against category
average of 23% and benchmark
BSE 100 22% return for the
same period. On a three year
rolling return, calculated on a
daily basis since its inception,
the fund has delivered median
43% annualised return. The
fund has been an above
average performer as it has
the advantage of building
the portfolio just after the
correction of 2008 with most
of the stocks trading at their
historical lows. In the last three
years, the fund has delivered
10.8% beating the benchmark
by a decent margin as can be
seen in the below chart.
6 Month 1 Year 3 Year 5 Year
Fund Benchmark
There have been a couple
of changes in the fund
management team in the
current calendar year. This has
also led to the fund delivering
return of 30% just in line with
the benchmark for CY12.
ICICIdirect Money Manager z 51
January 2013
Calendar Year-wise Performance
2012 2011 2010 2009 2008
NAV as on
Dec 31 (`)
29.6 22.8 27.2 21.8 --
Return(%) 30.0 -16.3 24.9 109.1 --
Benchmark(%) 30.0 -25.7 15.7 85.0 -55.3
Net Assets(` Cr) 507 307 235 86 --
Fund Name
Last three Year Performance
31-Dec-10 31-Dec-09 31-Dec-08
31-Dec-11 31-Dec-10 31-Dec-09
Canara Robeco
Equity Tax
Saver Scheme
-16.27 24.92 --
Benchmark -25.73 15.66 85.04
The fund primarily has a
large cap portfolio since
inception. Top 10 holdings as
reflected in the table below
are all bigger names and BSE
Sensex companies except
for IndusInd Bank. As soon
as Krishna Sanghvi took
over the fund management
in September 2012, he
introduced a few stocks like
Mahindra & Mahindra, Cipla
and Jaiprakash Associates
in the portfolio. Overall, the
portfolio is now well placed
to capture the momentum in
larger companies. Allocation
to the banking sector is on the
higher side up to 21% of the
total holdings. Engineering &
construction stocks both large
and small cap find a place in
the portfolio indicating the
fund manager betting on
the infrastructure story of
India. Fund manager Krishna
Sanghvi has vast experience
in fund management and
should be able to maintain the
outperformance delivered by
the fund so far.
Top 10 Holdings Asset Type %
ICICI Bank Ltd. Domestic Equities 7.3
Reliance Industries Ltd. Domestic Equities 5.3
HDFC Bank Ltd. Domestic Equities 4.9
Larsen & Toubro Ltd. Domestic Equities 3.9
ITC Ltd. Domestic Equities 3.7
Infosys Ltd. Domestic Equities 3.4
Housing Development
Finance Corporation Ltd.
Domestic Equities 3.1
Tata Consultancy Services
Domestic Equities 2.7
IndusInd Bank Ltd. Domestic Equities 2.6
State Bank Of India Domestic Equities 2.5
52 zICICIdirect Money Manager
January 2013
Whats in %
Aditya Birla Nuvo Ltd. 0.9
Raymond Ltd. 1.2
Apollo Tyres Ltd. 0.6
Whats out %
Dr Reddys Laboratories Ltd. 1
Sundram Fasteners Ltd. 0.7
Ambuja Cements Ltd. 1.1
Market Capitalisation %
Large 79.7
Mid 12.3
Small 5.5
Top 10 Sectors Asset Type %
Bank - Private Domestic Equities 21.3
IT - Software Domestic Equities 9.5
Engineering - Construction Domestic Equities 8.1
Refineries Domestic Equities 6.7
Pharmaceuticals & Drugs Domestic Equities 6.1
Finance - Housing Domestic Equities 4.6
Cigarettes/Tobacco Domestic Equities 3.7
Bank - Public Domestic Equities 3.3
Finance Term Lending Domestic Equities 3.1
Diversified Domestic Equities 2.9
Portfolio Attributes
Total Stocks 58.0
Top 10 Holdings(%) 39.4
FundP/E Ratio 22.9
Benchmark P/E Ratio --
FundP/BV Ratio 4.5
Asset Allocation
Equity 97.6
Debt 0.0
Cash 2.4
Dividend History Date Dividend(%)
Mar-12-2012 10
Mar-21-2011 10
Jan-24-2011 20
Mar-22-2010 20
Jan-11-2010 20
Mar-31-2008 30
Performance of all the schemes managed by the fund
Fund Name
31-Dec-10 31-Dec-09 31-Dec-08
31-Dec-11 31-Dec-10 31-Dec-09
Canara Rob
47.55 -22.31 32.80
S&P CNX Nifty 27.70 -24.62 17.95
Canara Rob
Equity Tax Saver
29.99 -16.35 24.99
BSE-100 29.96 -25.73 15.66
Canara Rob Nifty
Index Fund-
27.44 -24.13 17.65
S&P CNX Nifty 27.70 -24.62 17.95
Canara Rob
Balance Fund-
26.37 -9.76 17.36
Crisil Balanced
Fund Index
21.27 -14.39 13.57
Data as on December 31, 2012; Portfolio
details as on December 2012
Source: ACE MF
ICICIdirect Money Manager z 53
January 2013
Keeping varied investor interest in mind, we have selected 33
quality companies, segregated them into 18 large cap stocks
and 15 mid-cap stocks. These stocks broadly belong to the
BSE 200 universe as they provide a better representation of
steady, matured and emerging businesses. The constituents of
the BSE 200 index have been screened based on the quality of
the management and several business parameters to arrive at a
core list of 35 stocks, which fall in the I-direct coverage universe
so that continuous monitoring can be maintained.
After stock selection, we have further taken our exercise forward
to bifurcate the above stocks into the three following portfolios:
º Large cap portfolio (stable, cohsisteht, low volatility)
º Midcap portfolio (high growth, relatively more volatile)
º Diversified portfolio (blehd of large ahd midcap portfolio)
On the basis of risk tolerance, return expectation and time
horizons, one can mimic any of the above three portfolios, which
we believe will cater to investors of all kind.
Portfolio allocation: Bet on large caps for longevity and mid-
caps for alpha
A portfolio should always be allocated in an optimal form in
terms of choosing the number of stocks from the large cap and
the mid-cap space. The allocation ratio is again a function of the
risk tolerance and return expectations of individual investors. If
one is willing to take higher degree of risk given he understands
the volatility that persists during difficult market conditions, then
an overweight stance on mid-caps does make sense. On the
other hand, beginners or inexperienced investors should go
overweight on large caps and be less dependent on mid-caps
as the former provides better safety of capital with a reasonable
rate of return.
The indicative model portfolio has been constructed using a
balanced approach wherein the major part of the portfolio is
concentrated on large cap stocks managed conservatively, and
mid-cap stocks with relatively higher risks. We advise that these
stocks be invested for periods of three to five years. Thus, they
will be able to ride through market volatility and thus generate
relatively superior returns adjusted for the risk attached to them.
54 zICICIdirect Money Manager
January 2013
We have built a direct equity indicative model portfolio as a
guiding tool for investments in direct equities. The indicative
model portfolio has been constructed on the premise that the
clients understand the risks associated with investments in
equity markets and are comfortable remaining invested in sound
businesses over a long period of time.
Name of the company Model Portfolio
Largecap Midcap Diversified
Largecap Stocks
Auto 9.0 6.3
Maruti Suzuki 5.0 3.5
Tata Motors DVR 4.0 2.8
BFSI 26.0 18.2
HDFC 6.0 4.2
HDFC Bank 8.0 5.6
SBI 6.0 4.2
Axis Bank 6.0 4.2
Capital Goods 6.0 4.2
L & T 6.0 4.2
FMCG 12.0 8.4
HUL 4.0 2.8
ITC 8.0 5.6
Metals & Mining 7.0 4.9
Coal India 4.0 2.8
Hindustan Zinc 3.0 2.1
Oil and Gas 11.0 7.7
ONGC 3.0 2.1
Reliance 8.0 5.6
Pharma 10.0 7.0
Lupin 4.0 2.8
Sun Pharma 6.0 4.2
IT 13.0 9.1
Infosys 8.0 5.6
TCS 5.0 3.5
Telecom 6.0 4.2
Bharti Airtel 6.0 4.2
ICICIdirect Money Manager z 55
January 2013
Name of the company Model Portfolio
Largecap Midcap Diversified
Midcap Stocks
Auto 6.0 1.8
Exide Ind. 6.0 1.8
Aviation 6.0 1.8
Jet Airways 6.0 1.8
BFSI 24.0 7.2
Federal Bank 8.0 2.4
Bank of India 8.0 2.4
Yes Bank 8.0 2.4
Infrastructure 6.0 1.8
Simplex Infra 6.0 1.8
FMCG 12.0 3.6
Dabur India 6.0 1.8
VST 6.0 1.8
Pharma 16.0 4.8
Cadilla 8.0 2.4
Glenmark 8.0 2.4
Capital Goods 6.0 1.8
Cummins 6.0 1.8
Realty 6.0 1.8
Oberoi 6.0 1.8
Retail 6.0 1.8
Shoppers Stop 6.0 1.8
IT 6.0 1.8
Eclerx 6.0 1.8
Media 6.0 1.8
Dish TV 6.0 1.8
Total 100 100 100
Content source: Research
56 zICICIdirect Money Manager
January 2013
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. These portfolios have
been designed keeping in mind various key parameters like
investment horizon, investment objective, scheme ratings, and
fund management.
Performance: Since inception
The model portfolios have been in existence for over three years.
The aggressive model portfolio has outperformed the BSE 100
by 28%; moderate by 18% and conservative by 15% till date
since its inception.
Absolute returns as on December 31, 2012; inception date:
September 15, 2009.
ICICIdirect Money Manager z 57
January 2013
We have designed three different model portfolios for debt mutual
funds 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.
Keeping in mind current market scenario, allocation in the 0-6 month’s
portfolio has been increased to 60% to ultra short term funds from 40%
earlier. While keeping in mind the tactical government securities (G-sec)
opportunity, the allocation to dynamic bond funds has been increased in
the six months to one year and one year and above portfolio. Based on
the portfolios of individual funds, we have introduced new funds in the
portfolio and replaced pure income funds with dynamic bonds funds.
Note: Absolute 3M return as on December 31, 2012; Portfolio Index: 0-6 Months: Crisil liquifex;
6 Months -1year: Crisil short term bond index; Above 1 year : Crisil composite bond index.
58 zICICIdirect Money Manager
January 2013
1. In case of self-occupied property, the maximum interest
amount that can be claimed under section 24 is ` ______ per
financial year.
2. SEBI plans to introduce safety net mechanism in case of
those initial public offerings whose price would fall by more
than ______ per cent from the issue price.
3. In case of e-gold, the units need to be held for more than
______ years to get long-term capital gains tax benefit.
4. Government hikes railway fares by up to ______ per cent after
a decade.
5. There is no entry or exit load for Gold ETFs. True/False
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:
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 December 2012 Quiz are:
1. The Reserve Bank of India (RBI) extends deadline for new
format cheques till ______.
A: March 31, 2013
2. Dividend declared as a percentage for a particular stock is
always equal to its dividend yield ratio. True/False
A: False
3. The current interest rate on Employees’ Provident Fund (EPF)
and Public Provident Fund (PPF) is ______ and ______, respectively.
A: 8.6% and 8.8%
4. Dividend yield ratio differs from investor to investor. True/False
A: True
5. Expand REIT.
A: Real Estate Investment Trust
Congratulations to the following winners for providing correct
Srinivas Gangundi; Honey Gaba;
Kishor Bothra; Dr. Saket M. Ghaisas
ICICIdirect Money Manager z 59
January 2013
Figures are in %; the yearly movement of monthly food articles
The yearly movement of OPEC crude oil basket price ($/barrel)
FII & DII investments
Foreign institutional investors (FIIs) and domestic institutional
investors (DII) net equity investment in 2012 (` cr)
Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12
Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13


Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12
60 zICICIdirect Money Manager
January 2013
VIX is a key measure of market expectations of near term volatility.
When the markets are highly volatile, the VIX tends to rise.
VIX movement over the year 2012
BSE Sensex
NSE Nifty
Jan-12 Feb-12Mar-12Apr-12 May-
Jun-12 Jul-12 Aug-12Sep-12 Oct-12Nov-12Dec-12
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13
ICICIdirect Money Manager z 61
January 2013
Dow Jones
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13

62 zICICIdirect Money Manager
January 2013
(The prices are in $ per ounce).
(The prices are in $ per ounce).
(Source for all indicators: Bloomberg, Reuters)
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13

Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13


Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13


ICICIdirect Money Manager z 63
January 2013
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 January 2013.
Schedule for Beginners programme on Futures and Options Trading
Sr. No City Dates For More Information & Registration call:
1 Mumbai -Andheri Jan 12-13 Vidhu on 9619716146
2 Nagpur Jan 12-13 Kusmakar on 7875442311
3 Delhi Jan 19-20 Vishal on 07838290143, Harneet on 09582158693
4 Chennai Jan 19-20 Makhizhnan on 8939646628
5 Bangalore Jan 19-20 Subrata on 9620001478
6 Mumbai-Chembur Jan 19-20 Manish Jamb on 8451057943
7 Navi Mumbai Jan 19-20 Manish Jamb on 8451057943
8 Thane Jan 19-20 Vidhu on 9619716146
Schedule for Fast Track Beginners programme on Futures and Options Trading
Sr. No City Dates For More Information & Registration call:
1 Ahmedabad Jan 13 Nihal on 9619353592
2 Trivandrum Jan 12 Subrata on 9620001478
3 Surat Jan 13 Nihal on 9619353592
4 Thrissur Jan 19 Subrata on 9620001478
5 Kochi Jan 19 Subrata on 9620001478
6 Vadodara Jan 20 Nihal on 9619353592
7 Jamnagar Jan 20 Nihal on 9619353592
8 Vizag Jan 27 Manivannan on 9748873109
9 Guwahati Jan 27 Sumit Sarkar on 8017516187
10 Patna Jan 20 Sumit Sarkar on 8017516187
Schedule for Foundation Programme on Stock Investing
Sr. No City Dates For More Information & Registration call:
1 Thane Jan 12-13 Vidhu on 9619716146
2 Mumbai -Malad Jan 12-13 Vidhu on 9619716146
3 Mumbai -Chembur Jan 12-13 Manish Jamb on 8451057943
4 Navi Mumbai Jan 12-13 Manish Jamb on 8451057943
5 Pune Jan 12-13 Kusmakar on 7875442311
6 Kolkata Jan 12-13 Sumit Sarkar on 8017516187
7 Delhi Jan 12-13 Vishal on 07838290143, Harneet on 09582158693
64 zICICIdirect Money Manager
January 2013
9 Delhi Jan 19-20 Vishal on 07838290143, Harneet on 09582158693
11 Gurgoan Jan 19-20 Harneet on 09582158693
12 Hyderabad Jan 19-20 Manivannan on 9748873109
13 Chennai Jan 19-20 Makhizhnan on 8939646628
14 Bangalore Jan 19-20 Subrata on 9620001478
16 Mumbai-Malad Jan 19-20 Vidhu on 9619716146
17 Pune Jan 19-20 Kusmakar on 7875442311
18 Tirunelveli Jan 19-20 Makhizhnan on 8939646628
19 Chandigarh Jan 19-20 Harneet on 09582158693
Schedule for Fast Track Foundation Programme on Stock Investing
Sr. No City Dates For More Information & Registration call:
1 Dhanbad Jan 13 Sumit Sarkar on 8017516187
2 Cuttack Jan 13 Sumit Sarkar on 8017516187
3 Lucknow Jan 20 Vishal on 07838290143, Harneet on 09582158693
4 Ghaziabad Jan 20 Vishal on 07838290143, Harneet on 09582158693
5 Bhubaneshwar Jan 20 Sumit Sarkar on 8017516187
6 Ahmedabad Jan 27 Nihal on 9619353592
7 Kanpur Jan 27 Vishal on 07838290143
Schedule for Fast Track Technical Analysis
Sr. No City Dates For More Information & Registration call:
1 Lucknow Jan 20 Vishal on 07838290143
2 Ahmedabad Jan 20 Nihal on 9619353592
Schedule for Advanced Derivative Trading Strategies
Sr. No City Dates For More Information & Registration call:
1 Delhi LN Jan19-20 Vishal on 07838290143, Harneet on 09582158693
2 Mumbai-Andheri Jan19-20 Vidhu on 9619716146
Schedule for Technical Analysis
Sr. No City Dates For More Information & Registration call:
1 Kolkata Jan19-20 Sumit Sarkar on 8017516187
2 Chennai Jan19-20 Makhizhnan on 8939646628
Contact us
Send us an email at
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