Right horizons - PMS India - 2016 Review and Outlook 2017

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Indian Asset markets – 2016 review and Outlook 2017December 2016

Right Horizons PMS

For private circulation only

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Agenda / Table of contents

2016 review of the Indian asset markets1

Turbulance has continued!2

2016 – top trends that could linger3

2017 – looking at the crystal ball4

Look around– there is opportunity in financial markets5

2017 – there is only one way: UP!

Right Horizons PMS – Keeping the head down!6


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2016 was going along fine, but bonds just Trumped! Equities just threw in the towel

- Calendar 2016 turned out to be unusually volatile, with two

sharp correction and one long rally.

- External environment continued to influence the markets

and funds flow too has been quite uneven.

- One positive surprise: Domestic funds flow into equites

remains stronger despite sharp corrections. This has lent

support and prevented a sustained sell-off.

Bonds / Debt securities continued to perform,

two years in a row. 2016 has had the final flare

up. LT debt has just returned upwards of 20%

and no asset class come even close.

Gold did a relief rally in 2016 after a bad 2015,

however most the gains were erased during

the end of 2016.

Real estate has already topped out couple of

years ago. 2016 could be the beginning of the

end.

2016 review of the Indian asset markets1


-11.00%

-6.00%

-1.00%

4.00%

9.00%

14.00%

19.00%

Equities -Nifty

Equities -CNX Mid

Cap

Bond -ShortTerm

Bond -LongTerm

(GILT)

Gold -ETF

RealEstate -

Tier I

Asset return in 2016#

in India

# YTD ending December 15th 2015

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The new normal is TURBULANCE!2


History tells us: Pause / negative

years are usually followed by

strong return years.

Over the last 24 months, every

asset class has provided more

volatility and less returns; across

the globe. India is no exception.

In 2016, though; India has been

the most volatile markets thanks

to external and internal induced

shocks.

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

19

95

19

96/9

7

19

98

19

99

20

00

20

01

20

02

20

03

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

24 year Data: Strong years have followed down

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2016 trends that might linger on in 20173


Trend # 1Crude price movements in past 12 months have caused windfalls

for consumer and bankruptcy for producers. Producers have tried

and now impose hefty cuts in production from 2017; depending

upon what the outcome; 2017 could impact success stories of 2016

in India – Autos, goods transportation, tourism and consumers.Trend # 2

Trend # 3

FED funds rate story is over 3 years old. Finally the up cycle has

started. Depending upon where the FED funds rate ends in 2017,

we could have impact on liquidity, currencies and risk asset prices.

India appears to be in slightly better position compared with EU and

rest of Asia.

Demonetization: the impact of which is being debated by every

economist worth his name for analytical outcomes as different as

chalk & cheese. Our assessment tells us that whatever the outcome

the impact of which would certainly apply to most of 2017 and

positive/negative outcomes would have an impact on equities and

other asset classes.

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Trend # 4 The last monetary policy was a pass! The anticipation of

another total 50bps points cut in the next 6 months the

market expectation. Given lower inflation expectation and

fallout from the demonetization exercise, it is likely that

there could be a cut before April 2017

Trend # 5

Trend # 6

India’s Foreign Policy has seen a material shift and decisiveness

over the past 24 months. Bi-lateral relations between key partners –

US, Japan, Russia, China and EU would shape materially in 2017

and impact such as FII/FDI inflows, defence co-operation and

trade/commerce is likely to set the stage the next 3 years.

India’s Fiscal policy including the key legislations that were not

brought in the past 24 months would be key action event in 2017.

the GST rollout, tax rationalization on personal (direct) taxes and

widening / deepening of the tax base would be key issues that

might impact the asset class returns

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2017 crystal ball gazing...4


Global Outlook 2017

Equites: Select EU and Developed market stocks appear attractive

Real Estate: markets appear resilient across the globe

Commodities: in for a bumpy rebalancing

Fixed income: Selective opportunities in EM debt

India outlook 2017

We anticipate around 15%-17% equity mainline index performance predominantly

towards the SH 2017

We believe that GOLD would continue to tread with long period average returns of

around 8%-10%

Fixed Income yield falling is not good news for short terms investors. Returns could

range in the of 6.5% - 7.5% for 1 year; lower than those reported in 2016

Real Estate could be some price correction after a period of stagnancy in 2016.

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Recent consensus estimates

suggest Rs.1,430 Sensex EPS for

FY17. EPS targets appear to be

robust for FY18 & FY19

Next 12 months SENSEX targets

factor in moderate growth

around16% or 30,000 by 2017

end.

Equities are better positioned in 20174

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Inflexion point: closer than we might think!5


Higher Interest rates

Higher Savings

Low Money Supply

Lower investments

Fall in consumption

Lower Investments

Fall in Inflation

Fall in Interest rates

Investments pick up

Higher Money Supply

Increase in Consumption

Higher Corporate profits

Rising Inflation

Loss of purchasing power

Asset

Market

Cycle

BUY Fixed

Income

BUY

Equities

BUY

Real Estate

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Right Horizons PMS portfolios – wealth creation vehicles6


Portfolio Strategy

Nifty Plus Flexicap AllianceSuper Value

RH India Underserved

ObjectiveLong term Wealth

creation

Long term weath

creation

Lower Capital

Volatility

Provide for

high capital

appreciation

Provide for high

capital appreciation

Predominantly

invests in

Equities

• Nifty Index stocks

• BSE 200 stocks

Equities

•BSE 500 stocks

Equities, MF’s

Fixed Income

securities

• Direct stocks,

taxable and tax-

freee bonds, MF

and ETF’s

Equities

• Mid-cap

Equities

Equities

• Mid-cap Equities

Recommended

Holding Horizon> 18 months > 30 months 24 months >36 months >36 months

Portfolio StrategyBUY & Hold; Weight

Management

BUY & Hold;

Thesis Driven

BUY & Hold;

Trading Driven

Active

Strategy;

Bottom Up

Active Strategy;

Bottom Up

Risk Level Medium Medium Low High High

Minimum Strategy

Size1 INR 1million INR 1million INR 1million INR 1million INR 1million

1 Each PMS account shall be a minimum of INR25,00,000 set up value

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Right Horizons PMS portfolios – performance6


2014 2015 2016

RH NiftyPlus Portfolio 31.60% -1.20% 8.10%

CNX Nifty Index 29.89% -4.06% 1.98%

RH Flexicap Portfolio 43.3% 0.65% 3.30%

CNX 500 Index 35.81% -0.72% 2.84%

RH Super Value (Mid & Small Cap) Portfolio 58.6% 14.2% -5.80%

RH Underserved - - 9.42%

CNX Midcap Index 53.10% 6.46% 6.28%

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Right horizons - PMS India - 2016 Review and Outlook 2017

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