Monthly Mutual Fund Report - September...

August 31, 2018

2

Table of Contents Page No.

How the Indian equity markets fared in August 2018? 3

Domestic MF buying intact, backed by robust SIP inflows 4

Falling Rupee and rising crude price are threats to market 5

Premium valuation and widening yields spread 6

Return on mutual funds (category-wise) 7

Top 5 recommended mutual funds 8-13

Recommended mutual funds (category-wise) 14-15

Annexure

Model portfolios - Mutual Funds 17

Nifty 50 continued the uptrend in August 2018 and made a new high of 11,760.20 on August 28, 2018. Besides, mid-cap stocks and small-cap stocks also recovered from the wounds of carnage in last few months and outperformed large-cap stocks. The carnage in mid and small-cap stocks was caused by mutual funds’ selling to meet the requirement of new categorization of schemes, GSM/ASM by SEBI, and Governance issues.

BSE mid-cap and BSE small-cap were up 5.1% and 3.1% in August 2018 respectively vs. a 2.8% rise in Nifty 50. In previous month, BSE mid-cap and BSE small-cap were down 3.6% and 3.4% respectively vs. a 6% rise in Nifty 50.

GDP for Q1FY19 grew at 8.2%, breached the market expectation of 7.6%, against 7.7% during Q4FY18 and 5.6% during Q1FY18. Besides, as per RBI, GDP to grow at 7.4% during FY19 backed by revival in industrial activity and good monsoon. 3

How the Indian equity markets fared in August 2018?

10.3 9.9

6.5 5.9 5.8 5.3

3.4 3.0

1.2 1.2 0.7 0.3

NIF

TY P

HARM

A

NIF

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ETAL

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MCG

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OM

MO

DITI

ES

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NER

GY

NIF

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SU B

ANK

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FRA

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ANK

NIF

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EALT

Y

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INAN

CIAL

SERV

ICES

NIF

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UTO

Sector Returns in Aug 2018 (%)

Index Return 30-Aug-2018 1 M (%) YTD (%)

Nifty 50 11,677 2.8 10.9

S&P BSE Sensex 38,690 2.9 13.6

S&P BSE Mid-Cap 16,823 5.1 -5.6

S&P BSE Small-Cap 17,100 3.1 -11.1

Dow Jones 25,987 2.2 5.1

Nasdaq-100 7,643 5.7 19.5

S&P 500 2,901 3.0 8.5

Hang Seng 28,164 -1.5 -5.9

Nikkei 225 22,870 1.4 0.5

Returns as on August 30, 2018

Domestic mutual funds continued to pour into Indian equity markets; however, net inflow in August 2018 was flat compared to previous month. Domestic mutual funds have been net buyers in Indian equity markets for the last 25 months.

FIIs returned to Indian equity market in July 2018 after 3 months of selling, but the net inflows were lackluster during last 2 months. FIIs are reducing their exposure to emerging markets as US 10-year Treasury yields has risen to ~3% and emerging market currencies have depreciated against dollar.

The domestic mutual funds continued to receive robust SIP inflows. The total amount collected through SIP during July 2018 was `7,554cr, up 53% yoy.

The AUM has grown to `23.06 lakh cr as on July 31, 2018, a more than three fold increase in a span of 5 years.

4

Domestic MF buying intact, backed by robust SIP inflows

6,486

3,995 3,808

-1,900

49173

Jun-18 Jul-18 Aug-18

Net Inflows in Equity (Rs crore)

Domestic Mutual Fund FIIs

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Jul/1

6

Sep/

16

Nov

/16

Jan/

17

Mar

/17

May

/17

Jul/1

7

Sep/

17

Nov

/17

Jan/

18

Mar

/18

May

/18

Jul/1

8

SIP Inflows (Rs crore)

FIIs Net Inflows in Equity as on August 29, 2018Domestic MF Net Inflows in Equity as on August 28, 2018

The Indian Rupee has depreciated ~11%YTD against US Dollar and crude oil price has gone up ~20% YTD. The rising crude oil price and depreciating rupee pose significant threat to the Indian macros since we import 80% of oil to meet domestic demand, which can widen the CAD and increase the inflation.

The Economic Survey of the Government of India has estimated that a $10/barrel rise in crude oil price can increase WPI inflation by 1.7%, widen CAD by $9-10bn, and reduce economic growth by 0.2-0.3%.

India's current account deficit (CAD) widened to $13bn in Q4FY18, up from$2.6bn in Q4FY17. CAD deteriorated due to a higher trade deficit of $41.6bn. The trade deficit widened owing to an increase in merchandise imports, primarily crude oil and other petroleum product.

We expect rising crude prices will further widen the CAD and accelerate inflation.

5

Falling Rupee and rising crude price are threats to market

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

Aug/

13

Nov

/13

Feb/

14M

ay/1

4

Aug/

14

Nov

/14

Feb/

15M

ay/1

5

Aug/

15

Nov

/15

Feb/

16

May

/16

Aug/

16

Nov

/16

Feb/

17M

ay/1

7

Aug/

17

Nov

/17

Feb/

18M

ay/1

8

Aug/

18

Brent Crude Oil ($)

50.0

55.0

60.0

65.0

70.0

75.0

Aug/

13

Nov

/13

Feb/

14M

ay/1

4

Aug/

14

Nov

/14

Feb/

15M

ay/1

5

Aug/

15

Nov

/15

Feb/

16

May

/16

Aug/

16

Nov

/16

Feb/

17M

ay/1

7

Aug/

17

Nov

/17

Feb/

18M

ay/1

8

Aug/

18

USDINR

Currently, the market is trading at an ~22%premium to its 10-year average P/E ratio.However, recovery in economic scenarioand commodity prices are favourabletailwinds for corporate earnings growth. InFY19, corporate earnings will grow ~20%after many years of single-digit growth.However, the spread between earningsyield and bond yield has been wideningsince November 2016.

Since the market is trading at premiumvaluations, investors should focus onlongevity to create wealth in the longterm. Besides, we advise investors to startinvesting in mid and small cap schemessince many mid and small stocks havecorrected significantly due to mutualfunds’ selling to meet the requirement ofnew categorization of schemes, GSM/ASMby SEBI, and Governance issues. In Debt,we advise investors to stick to shortduration funds since we are into a risinginterest rate scenario. 6

Premium valuation and widening yields spread

8.0

10.0

12.0

14.0

16.0

18.0

Aug/

08

Feb/

09

Aug/

09

Feb/

10

Aug/

10

Feb/

11

Aug/

11

Feb/

12

Aug/

12

Feb/

13

Aug/

13

Feb/

14

Aug/

14

Feb/

15

Aug/

15

Feb/

16

Aug/

16

Feb/

17

Aug/

17

Feb/

18

Aug/

18

Nifty Forward P/E

Nifty Forward P/E 10 Years Average Nifty P/E

2.0

4.0

6.0

8.0

10.0

12.0

Aug/

00

Aug/

01

Aug/

02

Aug/

03

Aug/

04

Aug/

05

Aug/

06

Aug/

07

Aug/

08

Aug/

09

Aug/

10

Aug/

11

Aug/

12

Aug/

13

Aug/

14

Aug/

15

Aug/

16

Aug/

17

Aug/

18

Yield SpreadEarning Yield (%) Bond Yield (%)

7

Return on mutual funds (category-wise)

Returns less than 1 year are absolute; Returns greater than 1 year are CAGR.Return as on August 30, 2018Source: ACE MF

Category 1 M (%) 3 M (%) 6 M (%) 1 Y (%) 3 Y (%) 5 Y (%)

Balanced Funds 2.3 3.7 3.7 9.3 11.0 18.0ELSS 3.3 5.0 4.8 13.1 13.6 21.9Large-Cap Equity Funds 3.2 6.6 6.7 12.2 12.4 19.4Multi-Cap Equity Funds 3.5 2.2 0.7 9.7 13.0 27.9Mid-Cap Equity Funds 3.1 5.2 5.2 13.2 12.9 21.7Small-Cap Equity Funds 2.7 -3.6 -6.4 8.1 15.4 30.6S&P BSE SENSEX 3.2 10.8 13.2 22.3 13.6 15.7S&P BSE Mid-Cap 5.4 4.8 1.6 8.5 16.0 26.0S&P BSE Small-Cap 3.4 -1.4 -5.7 7.8 15.8 26.9Liquid Funds 0.6 1.8 3.6 6.9 7.1 7.9Ultra-Short Term Funds 0.6 1.9 3.6 6.5 7.4 8.2Short-Term Funds 0.5 1.8 3.0 4.7 6.9 8.1Medium-Term Funds 0.5 1.7 3.0 4.2 7.6 9.0Long-Term funds 0.2 1.1 2.2 0.2 6.2 7.8Gilt Funds 0.1 1.0 2.8 -0.5 6.8 8.5Dynamic Bond 0.8 2.2 2.8 4.1 7.7 10.5Crisil Liquid Fund Index 0.6 1.9 3.8 7.1 7.2 8.1Crisil Composite Bond Fund Index 0.2 1.2 2.4 1.1 7.2 9.1

8

Top 5 recommended mutual funds

To create wealth for our investors, we have short-listed five mutual funds:

Scheme Name Fund Manager AUM (` cr) 1 Y (%) 3 Y (%) 5 Y (%)

ICICI Pru Equity & Debt Fund(G) Sankaran Naren 28,633 9.7 13.4 20.2

SBI BlueChip Fund(G) Sohini Andani 20,284 9.7 12.7 21.6

Axis Focused 25 Fund(G) Jinesh Gopani 5,499 22.7 19.3 22.8

Tata Equity P/E Fund(G) Sonam Udasi 4,669 11.5 19.5 28.6

DSP Midcap Fund-Reg(G) Vinit Sambre 5,676 9.7 15.5 30.4

Returns less than 1 year are absolute; Returns greater than 1 year are CAGR.AUM as on: July 2018; Returns as on August 30, 2018Source: ACE MF

9

ICICI Pru Equity & Debt Fund

Fund Benchmark CRISIL Hybrid 35+65 - Aggressive Index AUM (`cr) 28,633

Inception Date Nov 1999 Exit Load Nil on 10% of units within 1Y and 1% for more than 10% of units within 1Y, Nil after 1Y

Fund Manager Sankaran Naren, Atul Patel Expense Ratio 2.23%

Fund Basic Details

9.713.4

20.2

11.9 12.916.3

1 Year 3 Years 5 Years

Fund Benchmark

Asset Allocation It is an equity-oriented balanced fund, which does tacticalallocation between debt and equity based on the marketoutlook to ensure optimal risk reward.

The fund increases its exposure in debt when the equitymarket is overvalued and increases its allocation to equitywhen it is undervalued.

As of July 2018, the fund had invested ~67% of AUM inequity to give a steady growth over the long term, while~27% was allocated to debt investments to cap thedownside risk. The fund had invested ~59% of the AUM inlarge-cap stocks, while ~8% is invested in mid-cap andsmall-cap stocks.

Investors who want to follow balanced approach, i.e. 65%equity and ~35% debt, can invest in the scheme to createwealth in the long term.

Returns (%)

59%

6%2%

6%

27% Large Cap

Mid Cap

Small Cap

Others

Debt

Returns less than 1 year are absolute; Returns greater than 1 year are CAGR.Portfolio as on: July 2018; Returns as on August 30, 2018Source: ACE MF

10

SBI BlueChip Fund

Fund Benchmark S&P BSE 100 - TRI AUM (` cr) 20,284

Inception Date Jan 2006 Exit Load 1% on or before 1Y, Nil after 1Y

Fund Manager Sohini Andani Expense Ratio 2.35%

Fund Basic Details

Asset Allocation It is an equity fund which primarily invests in top 100 stocksby market capitalization. The fund invests in companieswhich have significant market share and are leaders in theirrespective industries.

As of July 2018, the fund had invested ~80% of AUM inlarge-cap stocks and ~10% was allocated to mid-cap andsmall-cap stocks to give steady growth over the long term.

The fund had highest allocation to Private Banks (~16.6%),followed by Automobile-PV (~6%), and Refineries (~5.7%).

Investors who want to primarily invest in diversifiedportfolio of large-cap stocks can invest in this fund to createwealth in the long term.

Returns (%)

82%

8%

2% 4% 4%

Large Cap

Mid Cap

Small Cap

Others

Debt

9.712.7

21.618.2

15.318.7


Fund Benchmark


11

Axis Focused 25 Fund

Fund Benchmark NIFTY 50 - TRI AUM (` cr) 5,499

Inception Date June 2012 Exit Load Nil for 10% of investments and 1% in excess of limit within 1Y, Nil after 1Y

Fund Manager Jinesh Gopani Expense Ratio 2.47%

Fund Basic Details

Asset Allocation It is an equity fund that invests in high conviction stocks,maximum 25 stocks, from the top 200 stocks by marketcapitalization.

The fund’s strategy is to invest in quality companies withcredible management, sustainable profit growth & cashflow, and having a clean balance sheet.

As of July 2018, the fund had invested ~73% of AUM inlarge-cap stocks and ~16% was allocated to mid-cap stocksto give steady growth over the long term. The fund had thehighest allocation to Private Banks (~20.3%), followed byFinance-Housing (~10.4%) and Auto Ancillary (~8.5%).

Investors who want to take exposure in high convictionlarge-cap and mid-cap stocks can invest in the fund tocreate wealth in the long term.

Returns (%)

73%

14%

2% 10%

1%

Large Cap

Mid Cap

Small Cap

Others

Debt

22.719.3

22.819.7

14.917.8


Fund Benchmark


12

Tata Equity P/E Fund

Fund Benchmark S&P BSE Sensex - TRI AUM (`cr) 4,669

Inception Date June 2004 Exit Load 1% on or before 18M, Nil after 18M

Fund Manager Sonam Udasi, Amey Sathe Expense Ratio 2.15%

Fund Basic Details

Asset Allocation It is a value-conscious equity fund that aims to invest 70-100% of its AUM in stocks whose 12-month rolling PE ratiois lower than the 12-month rolling PE ratio of the BSESensex. The remaining AUM is allocated to other equityand debt instruments.

As of July 2018, the fund had invested ~70% of AUM inlarge-cap stocks and ~26% was allocated to mid-cap andsmall-cap stocks to generate higher returns over the longterm. The fund had the highest allocation to Private Banks(~13.1%), followed by Refineries (~10.3%) and Finance-Housing (~9.4%).

Investors who are value-conscious and want to invest inlarge-cap and mid-cap stocks can invest in the fund tocreate wealth in the long term.

Returns (%)

70%

16%

10%4%

Large Cap

Mid Cap

Small Cap

Others

11.5

19.5

28.623.7

15.117.4


Fund Benchmark


13

DSP Mid Cap Fund

Fund Benchmark Nifty Midcap 100 - TRI AUM (`cr) 5,676

Inception Date Nov 2006 Exit Load 1% before 1Y, Nil on or after 12Y

Fund Manager Vinit Sambre, Jay Kothari Expense Ratio 2.19%

Fund Basic Details

Asset Allocation It invests in stocks beyond top 100 companies based onmarket capitalization. The fund manager follows a bottom-up approach to select its stocks and invests in stocks withconsistent earnings and significant growth potential.

As of July 2018, ~61% of its AUM was invested in mid-capstocks, ~28% in small-cap stocks and ~8% was invested inlarge-cap stocks to generate high returns for investors. Thefund had highest allocation to Private Banks (~11.2%),followed by Pharma (~10.1%) and Finance-NBFC (~6.5%).

Investors who want to primarily invest in mid-cap andsmall-cap stocks can invest in this fund to create wealth inthe long term.

Returns (%)

8%

61%

28%

3%

Large Cap

Mid Cap

Small Cap

Others

9.7

15.5

30.4

10.1

16.1

26.1


Fund Benchmark


14

Scheme Name Fund Manager AUM(` Cr) 6M (%) 1Y (%) 3Y (%) 5Y (%)

Balanced Fund

Aditya Birla SL Equity Hybrid '95 Fund(G) Mahesh Patil 14,841 4.3 6.4 12.1 19.3

ICICI Pru Equity & Debt Fund(G) Sankaran Naren 28,633 3.2 9.7 13.4 20.2

Large Cap

ICICI Pru Bluechip Fund(G) Sankaran Naren 18,747 8.1 14.9 14.8 19.7

SBI BlueChip Fund-Reg(G) Sohini Andani 20,284 5.5 9.7 12.7 21.6

Multi-Cap

Axis Focused 25 Fund(G) Jinesh Gopani 5,499 16.1 22.7 19.3 22.8

Tata Equity P/E Fund(G) Sonam Udasi 4,669 4.0 11.5 19.5 28.6

Mid-Cap

Axis Midcap Fund(G) Shreyash Devalkar 1,564 14.4 25.5 13.8 28.5

HDFC Mid-Cap Opportunities Fund(G) Chirag Setalvad 21,149 3.4 11.6 16.1 30.2

Small-Cap

Franklin India Smaller Cos Fund(G) R. Janakiraman 7,295 -4.8 5.7 14.9 31.4

HDFC Small Cap Fund-Reg(G) Chirag Setalvad 4,578 0.3 23.0 21.3 26.4

Recommended mutual funds (category-wise)


15

Recommended mutual funds (category-wise)

Scheme Name Fund Manager AUM (` Cr) 6M (%) 1Y (%) 3Y (%) 5Y (%)

Sector Funds

ICICI Pru Banking & Fin Serv Fund(G) Roshan Chutkey 2,756 9.0 6.8 20.9 30.2

Reliance Pharma Fund(G) Sailesh Raj Bhan 2,266 12.3 27.7 2.3 17.3

ELSS

Aditya Birla SL Tax Relief '96(G) Ajay Garg 6,569 8.0 20.2 16.3 25.8

Axis Long Term Equity Fund(G) Jinesh Gopani 18,262 12.9 21.4 14.5 27.0

Debt Mutual Funds

Aditya Birla SL Savings Fund(G) Kaustubh Gupta 18,728 7.3 6.5 7.9 8.7

Franklin India ST Income Plan(G) Santosh Kamath 10,855 7.9 6.6 8.2 9.6

Franklin India Ultra Short Bond Fund-Super Inst(G)

Sachin Padwal-Desai 13,801 8.2 7.6 8.8 9.4

SBI Magnum Low Duration Fund(G) Rajeev Radhakrishnan 8,291 7.4 6.6 7.4 8.2


Annexure• Model portfolios – Mutual Funds

16

Sr. No. Scheme Name Allocation

(%)

1 Tata Equity P/E Fund(G) 25%

2HDFC Mid-Cap Opportunities Fund(G)

20%

3 Franklin India Prima Fund(G) 20%

4 DSP Midcap Fund(G) 20%

5Franklin India Smaller Cos Fund(G)

15%

Total 100%

Aggressive


(%)

1DSP Equity & Bond Fund-Reg(G)

25%

2 Axis Focused Fund(G) 20%

3 SBI BlueChip Fund-Reg(G) 25%


5HDFC Mid-Cap Opportunities Fund(G)

15%

Total 100%


(%)

1 Franklin India ST Income Plan(G) 20%

2DSP Equity & Bond Fund-Reg(G)

20%

3 ICICI Pru Equity & Debt Fund(G) 20%


5 SBI BlueChipFund-Reg(G) 20%

Total 100%

Moderate Conservative

17

Model portfolios – Mutual Funds

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.Nothing in this document constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to the investor's specificcircumstances. The details included are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor isits accuracy or completeness guaranteed.Investors should consult their financial advisers if in doubt about whether the product is suitable for them. The fund may or may not be suitable for all investors, who must make theirown investment decisions, based on their own investment objectives, financial positions and needs. This document may not be taken in substitution for the exercise of independentjudgment by any investor. The investor should independently evaluate the investment risks.India Infoline Ltd. or any of its director/s or principal officer/employees and associate companies (IIFL) does not assure/give guarantee for accuracy of any of the facts/interpretations inthis document, and shall not be liable to any person including the beneficiary for any claim or demand for damages or otherwise in relation to this opinion or its contents.The aimed returns mentioned anywhere in this document are purely indicative and are not promised or guaranteed in any manner. Returns are dependent on prevalent market factors,liquidity and credit conditions. Instrument returns depicted are in the current context and may be significantly different in the future.The group company of India Infoline Limited, IIFL Wealth Management Limited is the Sponsor of IIFL Mutual Fund and holding company of the Investment Manager & Trustee Companyof IIFL Mutual Fund.IIFL or its subsidiaries & affiliates may be holding all or any of the units of the scheme(s), referred in the document. The information contained herein is strictly confidential and meantsolely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in anyform, without prior written consent of IIFL. While due care has been taken in preparing this document, IIFL and its affiliates accept no liabilities for any loss or damage of any kindarising out of any inaccurate, delayed or incomplete information nor for any actions taken in reliance thereon.This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction,where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IIFL or its affiliates to any registration or licensing requirementwithin such jurisdiction. IIFL and/or its associates receive compensation/ commission for distribution of Mutual Funds from various Asset Management Companies (AMCs).IIFL hosts the details of the commission rates earned by IIFL from Mutual Fund houses on our website https://ttweb.indiainfoline.com/trade/downloads/brokerage%20file.pdf. Hence,IIFL or its associates may have received compensation from AMCs whose funds are mentioned in the report during the period preceding twelve months from the date of this report fordistribution of Mutual Funds or for providing marketing advertising support to these AMCs. IIFL group, associate and subsidiary companies are engaged in providing various financialservices and for the said services (including the service for acquiring and sourcing the units of the fund) may earn fees or remuneration in form of arranger fees, referral fees, advisoryfees, management fees, trustee fees, Commission, brokerage, transaction charges, underwriting charges, issue management fees and other fees.Please refer to http://www.indiainfoline.com/research/disclaimer and http://www.indiainfoline.com/mf/disclaimer for additional recommendation parameter, analyst disclaimer andother disclosures.

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18

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