Trusted Corporate Financial Advisors For Three...

Trusted Corporate Financial Advisors For Three Decades

January 2017

Month

Dec-16

Nov-16

Oct-16

Debt

-18902.3

-6046.39

-19603.1

-48486.9

Equity

-8494.77

-17737

18987.5

-4122.46

FII - ACTIVITY NET (Crs)

January : 2017 • Issue 129

Did you know?

MF – Activity Net (Crs)

MONEY GUIDECREATE - OPTIMISE - SECURE

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Financial Wisdom

Rule No. 1 : Never lose money. Rule No. 2 : Never forget Rule No. 1.

-Warren Buffett

Month

Dec-16

Nov-16

Oct-16

Equity Debt

8032.7

13610.6

46887.6

-4122.46

23995.9

24637.3

11498.3

332475.7Till Date 2016

(as on 31 December, 2016)

Till Date 2016(as on 31 December, 2016)

pg4

pg11Wealth Talks

pg7

Equity Outlook – January 2017 pg3The Shift from Unorganised to organized

Gross Domestic Product Advance Estimate

American companies are thinking long term

pg8

pg14JRL Best 40 Funds

pg16Data Cruncher


2016 was the year of sharp depreciation in Chinese Renminbi, continued economic weakness in China, terrorist attacks in Europe, Brexit and other referendums in Eurozone and, victory of Donald Trump in US. And despite such shaking events across the globe, US S&P index rose 8%, commodity prices moved upward, dollar strengthened and global bond yields rallied. Are the financial markets indicating us recovery in global growth that has been remarkably and painfully stagnant in last five years?

It is too early to say, but we are likely to see the beginning of an era where central bankers gradually tighten their purses (or at least take a back-stage) and fiscal policy makes the increased headlines in terms of either taxation reforms or increased infrastructure spending. The gradual shift in fiscal policies which has a larger employment generation abilities makes us optimistically hopeful. Global trade cycles are showing early signs of revival too. For the first time since Eurozone debt-crisis in 2011, we are seeing signs of better global growth in 2017. To admit, much of the hope hinges on US. In currency market, Dollar Index has crossed the 100 mark after nearly 13 years. As an aside, this should make markets worry about dollar liabilities of the world.

As the global policy focus sees a shift, Eurozone enters into election mode; discussion on execution of Brexit starts, and concerns on China's debt build up gather steam; we expect significant policy uncertainty and hence markets volatility in 2017.

Government's decision to scrap 86% of India's currency on November 8 can be called as one of the biggest economic and sociological experiment. Post demonetization, economic activity has slowed. While the impact on demand is now known to a certain extent, there is still no clarity on how long it will take for growth to recover. The move had not eliminated as much illicit cash as expected, thus upsetting the hope of a windfall gain from the scheme (particularly from the impact on RBI's balance sheet). That said, it has definitely hit the panic button on people dealing in cash and avoiding the tax payment, thereby increasing the scope of better tax compliance and buoyancy in the ensuing years. India's adoption of digital means to execute its financial transactions has been catalyzed which can have significant long-term positive implications on financial inclusion and on country's productivity.

Markets would be keenly waiting for the up-coming budget and its ability to provide a growth impetus to the economy. We saw a glimpse or 'so to say' mini-budget in the prime-minister's year end speech. Apart from the focus on rural economy, push to infrastructure and affordable housing and providing easy access of credit to small business, we sense that FY18 budget is likely to speak more of revenue side reforms (like simplification of taxes). India cannot choose to overlook its complicated tax structure when even the global economy (US) is focusing of taxation reforms.

While there will also be some noise and interim market volatility around the state elections (particularly for UP), we will not pay excessive attention taking a cue from earlier state elections.

In the equity market, Sensex delivered a feeble return of 2% during the year. Performance down the capitalization curve was mixed with the BSE Midcap index delivering 8% return over the year and BSE

Equity Outlook – January 2017Smallcap index growing by a mere 1.8%. FII turned net sellers towards the year end, but the robust FII flow during the middle of the year helped the equity market receiving a net positive inflow of US$ 3.2 billion in 2016. Domestic institutional investors, on the other hand, continued to invest in the equity market, despite the demonetization related pains to the market. Financialization of savings, in our view, is a big structural theme for India, which will keep the equity markets afloat with ample liquidity, thus capping the downside.

Valuations have corrected and are currently hovering around its long-term average of 16 times forward earnings. Like we said, both global and domestic economy will face policy uncertainty in 2017. Domestically, while the demonetization impact should ease out over the next couple of quarters, uncertainty looms from GST implementation and other possible measures that government could take to crack down on tax evaders. On top of that, as the financial stability report highlighted, the banking system is not yet completely out of the woods. Such combination creates difficulty in near-term for revival in private capital-spending despite the sharp reduction in bank lending rates. On the positive side, as the rural economy sees the second season of good agriculture output, states start to adopt the 7th Pay commission, cash-crunch in the economy subsides, public sector spending unfolds and global trade improves, a feeble yet the much needed cyclical recovery is in the offing. Further, we reiterate our earlier rhetoric; the combination of low interest rate environment, simplified taxation structure (from GST), digitization of financial transactions, governance reforms and higher public capital spending place India on a structurally higher growth trajectory in the medium-term

In 2016, Indian bond market has been an outlier vis-à-vis rest of the world, especially in the last quarter when global bond yields inched up while Indian interest rates fell. Over the entire 2016, India 10 year G-sec yields has fallen by 125 bps primarily led by adoption of a neutral liquidity stance by RBI compared to its earlier stance of maintaining the liquidity in deficit, subdued inflation print due to better agriculture output, OMO purchases by RBI and expected growth slowdown impact of demonetization. Looking ahead, we see limited scope of exuberance in the market primarily owing to external factors such as dollar strengthening, rising global bond yields and rising commodity prices. That said, if growth prints come significantly below expectations, additional rate cuts by the central bank cannot be ruled out. Markets could remain volatile as economic activity data unfolds and we get closer to the budget. We remain constructive, but with a slightly longer term approach as the monetary cycle remains accommodative and fiscal health is likely to improve structurally.

Navneet Munot, CIO - SBI Funds management Private Limited

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India: On the cusp of accelerated shift to organised segment

Despite being one of the fastest growing economies in the past couple of years, the proportion of informal sector in India has remained extremely high compared to peers. However, things are gradually changing now, with a palpable shift from the unorganised to organised sector in recent years, and we anticipate the pace to accelerate even further hereon. While this shift is systemic, we envisage certain industries to see drastic changes in the near future.

According to a National Statistical Commission's report, the unorganised sector contributes 50% to India's GDP and accounts for 90% employment. Our analysis indicates that within the formal economy, listed companies contribute 25% to GDP. While most of the informal economy is captured by the USD2tn GDP estimates, there could be some portion which is unreported and is not part of official GDP numbers. However, there is no concrete estimate of the unreported informal economy.

Presence of unorganised players varies across sectors and ranges between 20% and 80%. These players enjoy unfair competitive advantage due to tax evasion and non-compliance with regulatory norms, enabling them to offer products at much lower prices vis-à-vis organised players. While there has been consistent shift from the unorganised to organised sector over the years, we anticipate exponential acceleration in the trend spearheaded by factors mentioned below:

Demonetisation: Curbing black money menace.

India's cash-to-GDP ratio is high at ~12.5% compared with most other major economies. While part of the higher cash can be attributed to hoarding of undisclosed income, a large chunk is due to India's informal economy where cash is the primary mode of transaction and compliance with tax laws is minimal. Low compliance with tax and other laws enables companies in the unorganised sector offer products at a lower price compared to those in the organised segment. The government's recent decision to demonetise high-value currency (accounts for ~85% of total outstanding currency) and promote digital payments is envisaged to discourage tax evasion. As a result, unorganised players will gradually lose their competitive advantage over their organised counterparts. While demonetisation is

bound to negatively impact discretionary spending in the short term, we expect it to engineer a meaningful shift in trade to organised players over the medium to long term. It will increase transactions settled via digital channel, thereby reducing tax evasion by the

The Shift from Unorganised to organizedinformal sector and provide a level playing field for organised players.

Clamp down on black money coupled with GST will significantly improve tax-to-GDP ratio, which is abysmally low at 16.6% currently vis-à-vis Organisation for Economic Cooperation and Development's average of 34%. Higher tax revenue will also enable the government to reduce direct as well as indirect tax rates in the medium term. This will not only spur consumption, but also reduce the effective tax rate for organised players, further narrowing the pricing gap with the unorganised segment.

GST: Stringent compliance norms to hit unorganised players

GST, a destination-based tax, will create a trail of different transactions. At every level, traders will have to register invoices to claim input tax credits. In addition, the entire process will be online bolstered by an IT infrastructure. The integration of state and central indirect taxes will also provide a comprehensive profile of taxpayers. It will also result in lower logistics costs due to decline in transit time on account of elimination of multiple check points (octroi/state borders) and consolidation of warehouses. This will

reduce pan-India organised players' logistics costs and enable them to compete with regional unorganised players who incur lower logistics costs.

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Burgeoning middle class and aspiration for branded products

The middle class is envisaged to be the prime driver of the shift from the unorganized to organized sector.

Moreover, with increase in real per capita incomes, food expenditure as a % of total expenditure has declined to 31% during FY03-14 from 45% earlier. This gives leeway to the consumer to spend higher amount on discretionary items. Further, preference for branded products is on the rise with growing consumer preference to shop from organised retail locations like malls/large format stores.

(4) Rapid urbanisation to spur demand

Tepid growth in agriculture and higher job opportunities in service & manufacturing sectors is the primary cause of migration to urban areas. Urban population (% to total population) jumped to 31% in 2011 from 18% in 1961. Since organised sector players have greater presence in urban areas, their revenue will surge with urbanisation.

Sharpened government focus on ease of doing business

India ranks low (130th as per World Bank 2016 report) in terms of ease of doing business on various parameters which include multiple compliance & approvals, complex taxation structure, difficulty in getting land, enforceability of contracts, resolving insolvency etc. This hinders the organised sector as higher compliance costs render them uncompetitive against the unorganised sector. However, the

government's enhanced thrust to improve India's ranking in ease of doing business, amply reflected in palpable initiatives like tax reforms, insolvency bill, higher FDI permissible limits, among others, is bound to spur setting up of businesses in the organised sector.

(a) Simplified proforma for incorporating company electronically: With effect from October 2016, the Ministry of Corporate Affairs has simplified the process for incorporation of a company. As a result, time taken for incorporation has been reduced to 1-2 days versus 2 weeks earlier.

(b) GST to simplify tax payment: India currently ranks 172 (among 190 nations) on ease of tax payment. GST implementation will significantly improve this ranking as the taxation system will be simplified, tax rates will be rationalised and seamless flow of input tax credit will eliminate cascading taxes impact.

(c) Bankruptcy Code (resolving insolvency): It is a unified code

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which aims to resolve insolvency for all companies, limited liability partnerships, partnership firms and individuals. Further, the most critical part is the strict resolution timeline of 180 days (with 1 extension of 90 days in complex cases), starkly different from the current arrangement which permits the debtor / promoter to seek extensions beyond limit. The insolvency resolution process (IRP) is overseen by an Insolvency Professional (IP) who is granted substantial powers. The IP makes sure that assets are not siphoned off from the company and initiates a careful check of the company's transactions for the past 2 years, to look for illegal diversion of assets. Such diversion will attract criminal charges.

(d) (d) Other government reforms:

a. India is developing the Delhi-Mumbai Industrial Corridor (DMIC) as a global manufacturing and investment destination utilising the 1,483km-long, high capacity western Dedicated Railway Freight Corridor (DFC) as the backbone. The objective is to increase the share of manufacturing in GDP and create smart sustainable cities where manufacturing will be the key economic driver.

b. The government has launched UDAY scheme in November 2015 with focus on improving operational efficiency & financial turnaround of discoms and reduction of power generation cost. This will improve the financial capability of discoms to purchase and supply power.

(6) Infrastructure thrust to deepen organised players' reach

The government is heavily investing in roads, railways and ports to address India's infrastructure bottlenecks and propel economic growth. The same is reflected in the ~28% increase in total outlay on overall transport sector (roads, rail, shipping, civil aviation etc) to INR2.3tn in FY17 compared to INR1.8tn in FY16.

Further, the government has sharpened focus on rural roads through its Pradhan Mantri Gram Sadak Yojana (PMGSY), under the aegis of which it is planning to construct/upgrade 800,000km of rural roads in Phase I. Of these, 481,354km roads connecting 119,204 habitations have been completed as of June 2016.

The pace of construction has seen an uptick with 139km per day constructed in first 5 months of FY17 against average 100km per day in FY14-16. Further investments in rural roads have clocked 21% CAGR over FY12-16 (estimate).

In addition, state governments are also increasing their fund allocation towards road construction. State roads (highways, major district roads and rural roads that do not come under the purview of PMGSY) constitute over 20% of the country's road network and handle ~40% of road traffic. Owing to improvement in infrastructure, organised players such as Hero Motocorp, Hindustan Unilever, Maruti, among others, have made significant inroads in semi-urban and rural areas over the past decade, leading to steep rise in their distribution networks.

(7) Booming e-commerce a boon for organised trade

The e-commerce boom has revolutionised the distribution reach of organised players and spurred demand for their products. The channel in India has been surging exponentially, altering the way people purchase and sell goods & services. An Internet and Mobile Association of India (IAMAI) study estimates the Indian e-commerce market to have clocked 37% CAGR over FY10-15 to INR1.3tn. It is estimated to catapult 68% in FY16 to INR2.1tn. Further, not only is the market size expanding, it is surging at an accelerating clip.

Source – Edelweiss

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GROSS DOMESTIC PRODUCT ADVANCE ESTIMATE

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CSO's Advance Estimates for FY2017 place GDP and GVA growth at 7.1% and 7.0%, respectively, similar to H1 FY2017 growth

HIGHLIGHTS

• Growth of India's GDP (at constant 2011-12 prices) in year-on-year (YoY) terms in FY2017 has been projected by the Advance Estimates (AE) released by the Central Statistics Office (CSO) at 7.1%, significantly lower than the 7.6% expansion in FY2016.

• The CSO's AE indicate a mild slowdown in growth of gross value added (GVA) at basic prices to 7.0% in FY2017 from 7.2% in FY2016.

• The growth rates projected in the AE for FY2017 are similar to the GDP and GVA growth of 7.2% each in H1 FY2017, despite the expected adverse impact of the note ban on certain sectors from mid-November 2016, as they are constrained by the unavailability of updated information such as Corporate filings for Q3 FY2017, 2nd Advance Estimates of rabi output etc.

• ICRA expects GDP and GVA growth for FY2017 at 6.8% and 6.6%, respectively, appreciably lower than the AE.

OVERVIEW

The AE are typically released each year by the CSO in early February, around three weeks prior to the presentation of the Union Budget, with the size of the GDP required to ascertain various fiscal indicators, such as the fiscal deficit as a percentage of GDP. The AE for FY2017 have been released a month earlier than the normal schedule, which was necessitated by the preponement of the presentation of the Union Budget for FY2018 to February 1, 2017. The AE have forecast India's GDP growth (at constant 2011-12 prices) in FY2017 at 7.1% in YoY terms, significantly lower than the 7.6% expansion in FY2016 (refer Table 1 and Chart 1), but similar to the estimate of 7.2% for H1 FY2017. Growth of GVA at basic prices has been estimated to slow mildly to 7.0% in FY2017 from 7.2% each in FY2016 and H1 FY2017.

The growth rates projected in the AE for FY2017 are unsurprisingly similar to the GDP and GVA growth of 7.2% each in H1 FY2017, despite the expected adverse impact of the note ban on certain sectors, as they are constrained by the unavailability of updated information, such as Corporate filings for Q3 FY2017 and 2nd Advance Estimates of rabi output. For many sectors, lead indicators are available only till September or October 2016, with data for November 2016 limited to sectors such as freight and passengers handled by the railways, cargo handled at sea ports, cargo and passengers handled by civil aviation, sales of commercial vehicles, production of cement and consumption of finished steel. Given the impact of demonetisation on actual activity from mid-November 2016 onward, projecting GDP growth for the full year by extrapolating the available trends up to September/October 2016 for several sectors, may introduce more error than what has been observed in earlier years. In ICRA's view, GDP and GVA growth for FY2017 would be appreciably lower than the AE at 6.8% and 6.6%, respectively.

Sector-wise AE for FY2017: The slowdown in GDP growth to 7.1% in FY2017 AE from 7.6% in FY2016 (refer Chart 1) is led by the 0.2% contraction in gross fixed capital formation (GFCF), in contrast to the 3.9% rise in FY2016. Additionally, the growth of private final consumption expenditure (PFCE) has been estimated to ease to 6.5% in FY2017 from 7.4% in FY2016. In contrast, government final consumption expenditure (GFCE) expansion is projected to increase to a robust 23.8% in FY2017, from the low 2.2% in FY2016. Moreover, exports are expected to record a turnaround to a growth of 2.2% in FY2017, from the contraction of 5.2% in FY2016. This, in conjunction with the deeper contraction of imports (3.8% in FY2017; 2.8% in FY2016), would reduce the drag exerted by net imports on the pace of GDP expansion in FY2017.

On a YoY basis, the pace of expansion of GVA at basic prices is projected to ease to 7.0% in FY2017 from 7.2% in FY2016 (refer Chart 2 and Annexure), on account of a slowdown in industry (to +5.2% from +7.4%). While services sector growth is forecast to ease mildly to 8.8% in FY2017 from 8.9% in FY2016, the pace of growth of agriculture, forestry & fishing is projected to increase to 4.1% from 1.2%. Within industry, the performance of mining & quarrying is estimated to deteriorate substantially, to a contraction of 1.8% in FY2017 from the expansion of 7.4% in FY2016. In addition, the growth of manufacturing (to +7.4% from +9.3%), construction (to +2.9% from +3.9%) and electricity, gas, water supply & other utility services (to +6.5% from +6.6%) are forecast to worsen in FY2017 compared to FY2016. The mild easing in service sector growth in FY2017 compared to FY2016 is led by trade, hotels, transport, communication and services related to broadcasting (THTCS; to +6.0% from +9.0%) and financial, real estate & professional services (FRP; to +9.0% from +10.3%), the impact of which is largely counteracted by the doubling in growth of public administration, defence and other services (PADOS; to +12.8% from +6.6%). In


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contrast, a near-normal monsoon is likely to boost growth of agriculture, forestry & fishing to a three-year high 4.1% in FY2017 from 1.2% in FY2016. Excluding agriculture, GVA growth is estimated to moderate sharply to 7.5% in FY2017 from 8.3% in FY2016.

Implicit Trends for H2 FY2017: The AE for FY2017 suggest a mild slowdown in GDP growth to 7.0% in H2 FY2017 from 7.2% in H1 FY2017 (refer Chart 3), led by PFCE (to 6.0% from 7.1%), which appears likely in light of the deferral of consumption after the note ban. In contrast, the performance of GFCE, GFCF and exports is projected to improve in H2 FY2017 relative to H1 FY2017. In particular, GFCF is estimated to record a rise of 4.2% in H2 FY2017, in contrast to the contraction of 4.4% in H1 FY2017, which seems quite optimistic. With a sharp revival in private investments unlikely, a substantial increase in capital spending by both the central and several state governments would be necessary for GFCF to display such a turnaround. In this context, the implicit doubling in growth of GFCE to 32.4% in H2 FY2017 from 16.9% in H1 FY2017 suggests the likelihood of a fiscal slippage at the general government level.

Source - ICRA

APRIL

1. Now is the time to assess your goals and risk appetite to make suitable tax-saving investments. Set an ECS mandate so that as soon the salary is deposited in your account, it flows out for investment.

2. If you are planning a May-June vacation, it's time to book air tickets and hotels to get the best deals.

3. 28th: On Akshay Tritiya, buy gold if your portfolio has less than 10% of the metal.

MAY

1. If you have received an increment or bonus, use it either to repay an expensive debt or invest it. Keep aside some amount to splurge with your family too!

2. Check your credit rating. If the credit score is low, take steps to improve it by paying bills, EMIs and credit card bills on time, every time.

JUNE

1. 15th: Last date for paying the first instalment of advance tax.

2. Set a date to complete and update your paperwork, be it reviewing or upgrading insurance policies - motor, health, home - rescheduling your budget, filing bills and receipts, writing a will or rebalancing investment portfolio.

3. Check if your smartphone, Internet and cable plan suit your needs. Alter, if needed.

JULY

1. 31st : Last date to file annual income tax returns for 2016-17. File the returns online in the first or second week of July to avoid last-minute rush. Collect all documents a week before you file it.

AUGUST

1. 15th: Take a long weekend break around Independence day (Tuesday) to declutter your mind.

2. Make a charitable donation and avail of Section 80G tax exemption for 2016-17.

SEPTEMBER

1. 15th : Last date to pay second instalment of advance tax.

2. Festive season begins at the end of this month, with Navrati from 21-29 September and Durga puja from 25-30 September . Prepare a list of things you plan to buy and make a budget. Try not to overshoot this budget.

OCTOBER

1. If you plan to paint or refurbish your home, now is a good time as festive discounts will be in full swing. Also buy clothes and other things to avail of sales.

2. Enjoy the festive season, but try not to overspend. Make the big-ticket purchases around Dhanteras ( 17 October ) or Diwali ( 19 October ), but check if these fit in your budget.

3. If you are planning to travel in December, book your air tickets and hotels now.

NOVEMBER

1. Give yourself and your money a rest by spending as little as possible this month. It's a good time to give your finances and planning a break now!

DECEMBER

1. 15th : Last date to pay third instalment of advance tax.

2. Conduct an annual review of your finances and check whether you met your goals and stuck to the budget or not.

3. Finally, it's time to take a winter break. Enjoy your vacation!

Source : ICRA Research

Planning your financial calendar for 2017? Here's help on what to do each month JANUARY

1. Fix your financial goals for the year. List out tentative investments, fixed spends and estimated big purchases.

2. Set a reminder for the due dates of premium payment for all insurance policies.

3. Also set a reminder for a fixed day every month to pay utility bills, credit card bills, etc.

4. Furnish proof of investment to your employer.

FEBRUARY

1. 1st : Budget announcement. Take note of changes in taxation rules and how your investments are affected.

2. Claim all reimbursements at workplace before the financial year-end. Some like leave travel allowance (LTA) cannot be claimed later while filing tax returns.

MARCH

1. 15th : Last date to pay the fourth and final instalment of advance tax for 2016-17.

2. If you have kids, make sure you have sufficient funds in your bank account for the annual school fee next month.

3. Do not panic and make last minute, tax-saving investments that are not in line with your financial goals.


There have been concerns that most US firms focus on short-term gains. However, data suggest that such concerns about short-termism and poor governance are overblown

Almost every day, US companies are criticized for focusing too much on the short run and not enough on the long run. Laurence Fink, the CEO of BlackRock, one of the largest money managers, recently wrote that “the effects of the short-termist phenomenon are troubling... more and more corporate leaders have responded with actions that can deliver immediate returns to shareholders, such as buybacks or dividend increases, while underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth”.

In other words, US companies are destroying value by not investing for the long run. Poor corporate governance and overly generous pay plans for CEOs that reward short-term behaviour are often cited as accomplices to short-termism. And politicians have taken notice. On her presidential campaign website, Hillary Clinton vowed to halt “quarterly capitalism”, saying, “We need an economy where companies plan for the long run.” She promised to change the tax code, curb shareholder activism, and restrain executive pay with the goal of refocusing corporations on long-term growth. Outgoing vice- president Joe Biden weighed in with similar sentiments in a Wall Street Journal op-ed in September.

At the same time, US companies are criticized for being very (and even, perhaps, too) successful. Corporate profits (after executive pay) in the US are at historically high levels and at historically high proportions of GDP. And the trend of increasing profits has not been a short-term one. US corporate profits have increased steadily since bottoming in the early 1980s. US companies arguably have taken advantage of technology and globalization to become increasingly profitable and efficient in the intervening period.

The early 1980s is precisely the time that most observers believe finance and shareholder value maximization became ascendant. It is also the time that Wall Street and the financial sector began to grow substantially—both in the US and internationally. The early 1980s also coincided with the rise of management consultants who spread techniques across US firms and across the world. In 1980, consulting firms were relatively new and relatively small. Today, McKinsey & Company has offices in more than 60 countries, Boston Consulting Group in more than 40.

The trend of increasing corporate profits goes back to the early 1980s, a time that saw the rise of Wall Street, management consultants and globalization in the financial sector.

Although many would think the results achieved by US companies have been tremendous, the efficiency and profitability of those companies are perceived to have contributed to the increase in income inequality by benefiting those at the top of the income distribution while keeping wages lower for the rest.

In other words, the fact that the great success of US companies has not been distributed uniformly has created political challenges.

You may have noticed that there is a conflict. How can US companies excel at generating increasing profits over a 30-year period and, at the same time, be mortgaging the future for the short run? The only way to reconcile the two criticisms is to believe that US companies have become increasingly short-termist just recently. But that is simply not the case.

In fact, the criticism that US companies are plagued by short-termism and poor governance has a long history. In the early 1980s, Harvard's Robert H. Hayes and William J. Abernathy wrote an influential article

criticizing American companies for being too short-term oriented: “By their preference for servicing existing markets rather than creating new ones and by their devotion to short-term returns and management by the numbers, many of them have effectively forsworn long-term technological superiority as a competitive weapon. In consequence, they have abdicated their strategic responsibilities.”

The thesis seems strikingly familiar today.

The argument was repeated in 1992 when Harvard's Michael E. Porter wrote that “the US system of allocating investment capital both within and across companies is failing. This puts American companies in a range of industries at a serious disadvantage in global competition and ultimately threatens the long-term growth of the US economy”.

And the argument is being repeated today by the likes of Laurence Fink, Hillary Clinton and Joe Biden.

There is a big problem for the short-term crowd. “The short run” is normally taken to mean between one and three years, at most five years. It's been more than 35 years since the publication of the Hayes and Abernathy article, and almost 25 years since the appearance of Porter's. By any measure, today is the long run.

The implication of the short-termism argument is that in the longer run, because of a lack of investment, corporate profits will wither, things will go wrong, and poor management will be shown to have failed. So, today—according to the short-term perspective—US corporations should be in dire straits.

But that is unequivocally not the case. The trend line has been unmistakably up. The uptrend began just around the time of Hayes and Abernathy and has continued since. This is evidence that the short-termists cannot explain. Nevertheless, short-termists such as Fink continue to repeat the mantras of the 1980s and '90s.

Clearly, there's an incongruity in claiming that US companies are both poorly governed and overly successful. And in fact, almost four decades after Hayes and Abernathy's complaint, the data strongly suggest that concerns about short-termism and poor governance are overblown. The aggregate evidence is much more favourable for the efficiency argument.

Rather than being criticized, US corporations should be congratulated.

And the shareholders of US companies have not been the only beneficiaries. As US corporations have taken advantage of technology and globalization, the global outcomes have been impressive.

According to the World Bank, in 1980 the number of people living in extreme poverty globally was around 2 billion, some 44% of the world's population, which numbered about 4.5 billion. By 2012, that figure had fallen to less than 900 million, or about 13% of the global population of 7 billion. The World Bank projected last year that for the first time the number of people living in extreme poverty around the globe was expected to have fallen below 10%. While causality is hard to prove and many factors have contributed to this result, US companies have played an important role in these outcomes.

So, why is there criticism for success and short-termism? While the success and efficiency of US corporations have been good for the people at the top and for people in developing countries such as China and India, they have not been so good for the people in the middle in developed economies. That has fuelled frustration and anger, which helps explain the Donald Trump and Bernie Sanders

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American companies are thinking long term


phenomena, Jeremy Corbyn's election as leader of the UK Labour party, the UK's vote to leave the European Union, and the rise of populist politics more generally.

In addition to the anger, other pieces of evidence encourage the short-termists. For example, a 2005 academic paper surveying 401 financial executives found that 78% would sacrifice long-term value to smooth earnings. I have no reason to doubt that result. Corporate leaders face strong pressures, some of which may lead them to take actions that flatter the short run at the expense of the longer run. However, it is also clear that some of the same short-term pressures can actually prompt companies to become more efficient. It is not at all clear which of these effects dominates. Again, the trend line suggests that even if some companies are obsessing over the short run, the long run is taking care of itself.

Another argument that is regularly used by those who lament short-termism relates to buybacks. This group contends that companies buy back their own stock to boost their share prices in the short run, regardless of the long-term impact. This argument is something of a non sequitur. It suggests that in a buyback, the money simply disappears rather than going to investors who spend it or use it to make other investments. It also suggests that companies that don't need money should invest it anyway, rather than give it back to shareholders.

For observers such as my colleague Luigi Zingales at Chicago Booth, part of the explanation is crony capitalism, in which incumbent corporate giants use their political connections to shape the system in their favour. There may be industries that fit that description—telecoms being one possible example—but they are the exception rather than the rule. The US's biggest, most valuable companies are Apple, Google, Amazon, Facebook, and the like. They have used market forces to their advantage, are profitable as a result, and certainly now enjoy some market power. But they didn't attain that position through the machinations of some corporate illuminati. They have gotten to where they are in part because they are operating in sectors where there are network effects.

At the same time, the short-termers ignore a lot of evidence that defies their position and their fears. Amazon has been highly valued for many years despite the fact that it was losing money for much of that time. Amazon invested for the long run and has been richly rewarded for doing so. Similarly, US biotechnology companies, which have made huge progress in innovation and push the boundaries of science, are routinely valued in the billions of dollars often before they actually have any drugs for sale. If the market were really as short-termist as critics claim, that industry would not exist.

So short-termism is not the bogeyman it is often made out to be. The argument does not fit the evidence. And it is the same evidence that leads to the second, converse, criticism made of corporate America: that rather than being poorly governed, companies have been relentlessly and successfully efficient. While that efficiency has contributed to tensions in the developed world, the global effect has been overwhelmingly positive.

Source : Mint

10


MFs add Rs 4-trillion to kitty in 2016, eye Rs 20-trn mark in 2017

Helped by growing interest from retail investors and aggressive buying of stocks, mutual fund industry grew at a rapid pace in 2016 with addition of almost Rs 4 lakh crore, or 28 per cent, to its asset base and is looking to cross Rs 20-trillion mark in the new year.

Having already attained a record asset under management (AUM) of Rs 16.5 lakh crore in November, the fund houses are looking to end the year 2016 with a total kitty of Rs 17.3 trillion, industry experts said.

Fund houses are also upbeat about the industry performance in the new year while expecting investment from new investors to fuel the growth of the sector.

Also, demonetisation of high-value currency notes could have a positive impact, with the industry betting big on conversion of cash assets into financial investments.

"The assets under management of the mutual fund industry is quite likely to cross the Rs 20 lakh crore mark in next year," Quantum Mutual Fund Chief Executive Jimmy Patel said.

In 2016, the total AUM of all 43 active fund houses put together soared by around 28 per cent on strong inflows in equity, as per industry estimates.

This was the fourth consecutive yearly rise in the industry AUM, after a drop in the assets base for two preceding years.

"The equity market has overall been more volatile in 2016 than 2015 with a lot more negative sentiment. The AUM increase can be attributable more to investors staying invested and new investors coming in. Also, investors may have seen the volatility of this year as a positive to average out costs," said Srikanth Meenakshi, COO at FundsIndia.com, an investment portal for MFs.

"The inflow in equity and equity-oriented schemes and the rise in number of investor accounts also helped in increasing the assets base in 2016. Further, retail investors also appear to have become savvier, using liquid schemes to either earn higher returns or run systematic transfer plans into equity funds to average costs," he added.

The total industry AUM stood at Rs 13.41 lakh crore at the end of 2015 while the same was Rs 11.06 lakh crore at 2014-end. It was at Rs 8.26 lakh crore in 2013 and Rs 8.08 lakh crore at 2012-end. It stood at about Rs 6.11 lakh crore in 2011. The assets base was about Rs 6.26 lakh crore in 2010 and Rs 6.65 lakh crore in 2009.

2016, however, saw some exits, including by way of mergers and acquisitions. Those having exited the Indian mutual fund space are JP Morgan MF and Peerless Group.

Patel said consolidation is likely to continue next year too and some non-committed or less serious sponsors will exit owing to the stringent net worth requirement of Rs 50 crore.

"Rising cost structure, mainly on account of increasing compliance and manpower costs, will strain economies of survival. Unavailability of trained manpower is also a concern," he added.

Source – Economic Times

MF folio count climbs 44 lakh in Apr-Nov to record 5.2 crore

Driven by addition equity fund folios, mutual fund (MF) houses have registered a surge of nearly 44 lakh investor accounts in the first eight months of the current fiscal, taking the total tally to 5.2 crore - a record.

This is on top of an additional 59 lakh folios in 2015-16 and 22 lakh in 2014-15. In the last two years, investor accounts increased following robust contribution from smaller towns.

Folios are numbers designated to individual investor accounts though one investor can have multiple ones.

Wealth Talks

11

According to the data from the Association of Mutual Funds in India (Amfi) on total investor accounts with 43 active fund houses, the number of folios rose to a record 5,20,49,348 at the end of last month, from 4,76,63,024 in March-end, a gain of of 43.86 lakh.

Growing participation from retail investors, especially from smaller towns, and huge inflows in equity schemes have contributed to the upside, experts said.

The equity category saw an addition of over 31 lakh investor folios to 4.2 crore in April-November of the current fiscal Mutual funds have reported a net inflow of over Rs 40,700 crore in equity schemes in the first eight months of the current fiscal. Overall, funds have seen an infusion of Rs 3.03 lakh crore.

The inflow is in line with the Sensex surging over five per cent during the period under review. Mutual funds are investment vehicles made up of a pool of funds collected from a large number of investors. The funds are invested in stocks, bonds and money market instruments, among others.

Source – Wealth Forum

Individual wealth in equity funds rose by 11.84 per cent in 2016

The share of individual wealth in the mutual fund industry has increased by 12.95 per cent in 2016, data from Karvy Private Wealth shows. The money invested by individuals in mutual funds has risen from Rs 5,52,325 crores in 2015 to Rs 6,23,825 in 2016.

The proportion of individual wealth share which was 3.44 per cent in 2015 has increased to 3.63 per cent this year. The individual wealth has been calculated by collating the private wealth in all asset classes in which individual investors invest.

The total financial assets in 2016 stood at Rs 1,72,02,099 crores, of which 3.63 per cent was invested in mutual funds. Out of the 4.77 crore that flowed into mutual funds, 99 per cent of the money came from individual investors. Half of these folios came from smaller towns and cities, according to the Karvy report.

The interest in mutual funds did not recede even when the Sensex and Nifty came off nearly 15 per cent in January and February 2016, the report added.

The individual wealth in equity funds rose to Rs 3,53,411 in 2016, compred to Rs 3,15,987 in 2015. The year-on-year hike is 11.84 per cent. The individual wealth in debt funds increased by 14.42 per cent in 2016. The investments rose from Rs 2,36,338 in 2015 to Rs 2,70,414 in 2016.

The report shows 57.21 per cent of AUMs across categories in mutual funds were parked in equity funds while the rest was in debt-based funds. The wealth held by individual investors in mutual funds grew by almost 13 per cent to Rs 6.23 lakh crore.

In 2016, retail investors primarily held equity-oriented schemes while institutions held liquid and debt-oriented schemes Total individual wealth in financial assets grew by only 7.14 per cent in FY16, which is much slower than in FY15. In the previous year, the wealth had grown nearly 19 per cent. Direct equity reversed positions with fixed deposits and bonds as its share dropped to 17.23 per cent. Insurance retained the third spot, while all other classes gained marginally over FY15.

Source – Economic Wealth.

Private Equity and Mergers & Acquisitions

According to the annual data update by VCCEdge, the data research arm of News Corp VCCircle, the value of investments announced by private equity and venture capital firms in India almost halved in 2016 after hitting a peak in 2015.


The value of transactions, slumped by 44% to around $12.38 billion in CY2016 from $22.01 billion as compared to the same period last year. Additionally, the number of private equity deals declined by a fourth to 1309 deals in 2016 from 1752 deals a year earlier, reflecting the slowdown in private investments was not just due to a few companies getting less money.

Angel / Seed investors holds the transaction activity in 2016, accounting for 57% of the total private equity investments, while it was 50% in 2015. Early stage investments in startups (including Angel/Seed and Venture Capital Series A and Series B rounds) has shown a significant decline of 39% to $1.59 billion in CY2016, as compared to $2.62 billion last year, while deal volume declined by 24% from 1,286 to 984 deals.

Private Equity Exits

Private equity exits have been rich this year. Private equity investors unlocked $6.79 billion worth of investments across 239 exits in 2016. Although the number of exits have declined in 2016 as compared to 2015, deal values have increased by 17% compared to the same period last year, indicating improved valuations.

M&A was the preferred exit route in CY2016 contributing 43% to the total exit activity closely followed by open market exits with 32%.

Financials and Information Technology sector led the exit activity with 56 and 55 deals respectively, others like Consumer Discretionary and Industrial sector have contributed significantly.

Mergers & Acquisitions

Merger and acquisition activity in India perked up this year thanks to a few multi-billion-dollar deals that companies struck either to slash debt or consolidate their market share. Although, the number of M&A deals remained robust this year, the cumulative announced value of M&A transactions jumped by almost 160% from $23.71 billion in CY 2015 to $61.44 billion in CY 2016.

Deal value has increased significantly across all M&A types, except for outbound deals. In particular, inbound deals where multinational firms zoomed in to acquire assets in India and a few large domestic mergers spiked the total announced value of M&As to $61.44 billion, according to VCCEdge.

Equity Capital Markets

The Equity Capital Market saw IPOs make a stellar comeback, replacing QIPs and Rights Issues as the preferred means to raise capital. There are 93 IPOs as against 62 IPOs during the same period last year. Capital raised by IPO route has increased by 88% as compared to the same period of last year, while it has been dipped for Rights Issue and QIPs by 62% and 81%, respectively.

Overall ECM deals in India increased by 19% in CY 2016 with 117 deals as compared to 98 deals during the same period last year. However, capital raised dipped 19% from $6.17 billion to $4.99 billion.

Source – VC Circle.

Fed expects gradual rate increases in next 2 years.

Median projections show federal funds rate reaching 2.1% at end of 2018

Almost all members of the Federal Open Market Committee expect economic conditions to warrant only gradual increases in the federal funds rate, and many did not expect it to reach more normal levels until 2019, according to minutes released Wednesday of the group's Dec. 13-14 meeting. That meeting saw the first rate increase in 2016, with the committee unanimously agreeing to raise the rate by 25 basis points to a 0.5% to 0.75% range.

“Many participants judged that the appropriate level of the federal funds rate in 2019 would be close to their estimates

12

The median projections of the federal funds rate continued to show gradual increases, to 1.4% at the end of 2017, 2.1% at the end of 2018 and 2.9% at the end of 2019.

A strengthening labor market and expectations that inflation would rise to a 2% objective over the medium term persuaded FOMC members to approve the modest rate increase, although some worried about how a strengthening dollar would impact inflation. Since their early November meeting, most participants attributed improvements in financial market conditions — including increased longer-term interest rates, a strengthening dollar, rising equity prices and narrowing credit spreads — “to expectations for more expansionary fiscal policies in coming years or to possible reductions in corporate tax rates,” according to the minutes.

In their economic forecasts, participants emphasized “considerable uncertainty about the timing, size and composition of any future fiscal and other economic policy initiatives, as well as about how those polices might affect aggregate demand and supply,” the minutes said

Source – Pensions & Investments

MF's assets size gets bigger

Year 2016 was not good as the previous two years for mutual funds. Fund flows slowed and the performance of a majority of the schemes (barring debt funds) was in mid-single digits. However, it did not have an implication on the asset size.

The sector's average assets under management (AUM) was up 26. Three per cent on the back of schemes' performance, mainly debt category funds.

The total average AUM in the quarter ended December 2016, stood at Rs 16.93 lakh crore, against Rs 13.4 lakh crore in 2015-end. Amid this, top fund houses managed to gather assets at a much faster pace than that of the overall industry.

Source – AMFI

Five reasons why you should invest in an ELSS this year

The tax saving season has started. In fact, most tax saving exercises take place in the last three months of the financial year - between January and March. There are plenty of tax-saving investment options available to you to claim a tax deduction: Public Provident Fund (PPF), National Savings Certificate (NSC), Tax-saving five-year term deposit, National Pension Scheme (NPS), among others. Here we would tell you why Equity Linked Savings Scheme (ELSS) or tax saving/planning mutual funds are the best tax saving option for you.

Tax benefit under Section 80C

It is the most obvious reason. Your investments in ELSS are eligible for a tax deduction of up to Rs 1.5 lakh from your gross total income under section 80C of the Income Tax Act. Though you can avail a maximum deduction of Rs 1.5 lakh under the section, there is no limit on the amount you can invest in these schemes. You are free to invest more than Rs 1.5 lakh but the extra amount would not fetch you a deduction. In short, investing Rs 1.5 lakh in an ELSS can help you save tax up to Rs 46,350 depending on the income tax slab applicable to you.


Lowest lock-in period

All tax saving investments typically come with a mandatory lock-in period. For example, Public Provident Fund (PPF), another tax saving instrument permitted under Section 80C, come with a 15-year lock-in period. However, you are allowed to make partial withdrawals in PPF from the seventh year. Tax-saving term deposits have a lock-in period of five years. ELSS comes with a lock-in period of three years. You can withdraw the (redeem in mutual fund lingo) after three years.

A word of caution : though ELSS comes with a lock-in period of three years, invest in ELSS with an investment horizon of at least five years in mind. This is just to be on a safe side as ELSS invests predominantly in stocks.

Benefit from equity exposure

If you are a traditional investor who prefers tax-saving instruments that come with assured returns, you should consider investing in ELSS to take a small exposure to equity. ELSS are considered ideal for first-time investors in the stock market.

The mandatory lock-in period would help investors to weather the volatility associated with the stock market. Also, since the fund manager in ELSS is not worried about huge unexpected redemption, she would be adopting a buy and hold strategy to maximise returns. ELSS category has returned around 18 per cent in the last three years.

Source – Economic Times

Private Equity, M&A and Capital Markets

Private Equity Investments

According to the annual data update by VCCEdge, the data research arm of News Corp VCCircle, the value of investments announced by private equity and venture capital firms in India almost halved in 2016 after hitting a peak in 2015.

The value of transactions, slumped by 44% to around $12.38 billion in CY2016 from $22.01 billion as compared to the same period last year. Additionally, the number of private equity deals declined by a fourth to 1309 deals in 2016 from 1752 deals a year earlier, reflecting the slowdown in private investments was not just due to a few companies getting less money.

13

‘Angel / Seed investors holds the transaction activity in 2016, accounting for 57% of the total private equity investments, while it was 50% in 2015. Early stage investments in startups (including Angel/Seed and Venture Capital Series A and Series B rounds) has shown a significant decline of 39% to $1.59 billion in CY2016, as compared to $2.62 billion last year, while deal volume declined by 24% from 1,286 to 984 deals.

Private Equity Exits

Private equity exits have been rich this year. Private equity investors unlocked $6.79 billion worth of investments across 239 exits in 2016. Although the number of exits have declined in 2016 as compared to 2015, deal values have increased by 17% compared to the same period last year, indicating improved valuations.

M&A was the preferred exit route in CY2016 contributing 43% to the total exit activity closely followed by open market exits with 32%.

Financials and Information Technology sector led the exit activity with 56 and 55 deals respectively, others like Consumer Discretionary and Industrial sector have contributed significantly.

Mergers & Acquisitions

Merger and acquisition activity in India perked up this year thanks to a few multi-billion-dollar deals that companies struck either to slash debt or consolidate their market share. Although, the number of M&A deals remained robust this year, the cumulative announced value of M&A transactions jumped by almost 160% from $23.71 billion in CY 2015 to $61.44 billion in CY 2016.

Deal value has increased significantly across all M&A types, except for outbound deals. In particular, inbound deals where multinational firms zoomed in to acquire assets in India and a few large domestic mergers spiked the total announced value of M&As to $61.44 billion, according to VCCEdge.

Equity Capital Markets

The Equity Capital Market saw IPOs make a stellar comeback, replacing QIPs and Rights Issues as the preferred means to raise capital. There are 93 IPOs as against 62 IPOs during the same period last year. Capital raised by IPO route has increased by 88% as compared to the same period of last year, while it has been dipped for Rights Issue and QIPs by 62% and 81%, respectively.

Overall ECM deals in India increased by 19% in CY 2016 with 117 deals as compared to 98 deals during the same period last year. However, capital raised dipped 19% from $6.17 billion to $4.99 billion.

Source – VC Circle.

JRL 40

Performance as on January 02, 2017

Best Funds

With at least 1000 mutual fund schemes in the market and fund houses pitching different awards and rating, how to choose the 6-8 funds you need to invest in? We have handpicked 40 Schemes across various categories based on different parameters like Risk adjusted returns, Consistent performance and good Portfolio quality. We have also used the ratings from different rating agencies and tested the funds on qualitative and quantitative risks to filter out the odd ones. We carefully looked at how a fund performs in Bull and Bear market cycles since we need funds that do well at all times. The results of these filters is JRL 40. Treat JRL 40 as the final universe of funds from which you will pick the ones that suit your investment needs and risk appetite to give you superlative returns in all markets.


Debt Schemes

Benchmark

Crisil Liquid Fund Index 6.83 6.37 5.85 6.53 6.91

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Liquid Funds NAV 1 D 1 W 1 M 3 M 6 M "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

Birla Sun Life Cash Plus - (G) 256.41 7.51 6.76 6.33 6.67 6.93 0.30 25375.95 6.53 0.12 NILReliance Liquid Fund - Treasury Plan (G) 3890.89 7.27 6.69 6.29 6.69 6.95 0.25 22226.93 6.43 0.11 NILICICI Pru Liquid Plan - Regular (G) 236.34 6.98 6.64 6.29 6.70 6.95 0.15 29698.96 6.29 0.16 NILHDFC Liquid Fund (G) 3149.38 6.89 6.64 6.27 6.62 6.87 0.45 26958.46 6.35 0.13 NILSBI Premier Liquid Fund (G) 2505.71 6.40 6.35 6.24 6.52 6.81 0.15 27124.44 6.46 0.07 NILUTI-Liquid - Cash Plan (G) 2478.53 6.07 6.05 5.62 6.13 6.36 0.33 21754.32 6.40 0.00 NIL

Ultra Short Term Funds NAV 1 D 1 W 1 M 3 M 6 M "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

HDFC Cash Mgmt - Treasury Advantage - WP (G) 35.44 31.24 7.09 0.94 8.27 9.75 1.33 13073.09 7.16 1.35 NILICICI Pru Flexible Income Plan - Regular (G) 305.38 20.45 6.87 0.91 7.92 8.97 0.27 20012.17 7.02 1.20 NILSBI Ultra Short Term Debt Fund (G) 2064.07 9.56 5.74 4.53 7.26 7.88 0.42 12215.37 6.71 0.53 NILUTI-Treasury Advantage Fund (G) 4032.55 15.67 5.73 3.63 7.42 8.24 0.40 12476.38 7.30 0.70 NILReliance Medium Term Fund - (G) 33.53 26.14 5.64 0.44 7.55 9.17 0.86 11451.65 7.08 1.27 0.50% on or before 7D,NIL after 7DReliance Money Manager Fund - Retail (G) 2135.35 19.14 5.55 2.72 6.80 7.74 18827.41 6.87 0.84 NIL

Benchmark Crisil Liquid Fund Index 6.83 6.37 5.85 6.53 6.91 Crisil Short-Term Bond Fund Index 56.02 5.17 -0.91 8.62 10.17

Floating Rate - Short Term Funds NAV 1 W 1 M 3 M 6 M 1 Y "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

Birla Sun Life Floating Rate - LTP - (G) 195.48 6.10 0.41 8.14 9.86 9.56 0.43 5459.24 7.00 1.28 NILReliance Floating Rate Fund - STP (G) 25.42 4.56 0.16 7.69 9.28 9.07 0.58 4670.44 7.02 1.36 0.50% on or before 1M,NIL after 1MHDFC Floating Rate Income - ST - WP (G) 27.78 7.10 1.31 7.77 8.99 9.00 0.29 15226.48 6.99 1.20 NILUTI-Floating Rate Fund - STP (G) 2605.87 5.60 3.46 7.61 8.62 8.88 1.00 6771.25 7.35 0.78 NILKotak Floater Short Term (G) 2621.16 6.60 6.41 6.72 6.99 7.68 0.22 10620.17 6.62 0.12 NILBirla Sun Life Floating Rate - STP - (G) 212.78 6.40 6.31 6.72 6.98 7.71 0.53 4949.85 6.72 0.12 NILBenchmark Crisil Liquid Fund Index 6.37 5.85 6.53 6.91 7.50

Income Funds - Short & Medium Term NAV 6 M 1 Y 2 Y 3 Y 5 Y "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

Birla Sun Life Dynamic Bond Fund - Reg (G) 29.15 14.36 14.00 10.74 12.08 10.67 1.51 15567.50 7.27 8.32 NIL,0.50% on or before 90D, NIL after 90DHDFC Medium Term Opportunities Fund (G) 17.82 11.35 10.66 9.63 10.07 9.63 0.29 8967.89 6.92 2.69 NILICICI Pru Regular Savings Fund (G) 17.06 11.25 9.58 9.29 9.85 9.27 1.73 6245.52 8.85 1.90 NIL on or before 1Y, 1.00% on or before 1Y,NIL after 1YFranklin India Corporate Bond Opportunities (G) 16.33 11.00 8.75 9.02 9.98 9.89 1.83 6731.62 9.99 1.51 3.00% on or before 12M,2.00% after 12M But on or before 24M, 1.00% after 24M But on or before 36M, NIL after 36MBirla Sun Life Medium Term Plan (G) 20.16 10.88 10.87 10.21 10.80 10.72 1.58 9007.05 8.76 3.30 NIL,1.00% on or before 365D, NIL after 365DBirla Sun Life Short Term Fund (G) 61.30 10.77 10.24 9.58 10.02 9.79 0.30 16658.52 6.91 2.45 NILBenchmark Crisil Composite Bond Fund Index 14.85 12.75 10.79 11.98 9.69 Crisil Short-Term Bond Fund Index 10.17 9.81 9.24 9.64 9.25

Income Funds - Long Term NAV 6 M 1 Y 2 Y 3 Y 5 Y "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

Birla Sun Life Income Plus (G) 73.52 17.22 14.33 9.41 11.62 9.53 1.69 4126.56 6.71 8.30 NILReliance Dynamic Bond Fund (G) 22.30 16.74 13.87 9.79 11.62 10.30 1.68 4596.00 6.88 7.88 1.00% on or before 12M,NIL after 12MKotak Bond - Regular (G) 46.63 15.91 14.28 9.41 11.31 9.67 1.77 4468.32 7.01 7.82 NILIDFC Dynamic Bond Fund (G) 32.91 16.76 12.67 9.27 11.27 9.73 1.99 5317.23 6.48 8.38 NILReliance Regular Savings Fund - Debt (G) 22.22 10.41 10.04 9.41 9.94 9.46 1.70 8127.60 8.92 1.97 1.00% on or before 1Y,NIL after 1YIDFC Corporate Bond Fund - Regular (G) 11.00 11.49 0.56 5283.27 7.00 2.85 NILBenchmark Crisil Composite Bond Fund Index 14.85 12.75 10.79 11.98 9.69 Crisil Short-Term Bond Fund Index 10.17 9.81 9.24 9.64 9.25

Gilt Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

SBI Magnum Gilt Fund - Long term (G) 36.57 22.17 16.18 11.77 14.46 12.05 0.96 2204.91 6.53 7.05 NILICICI Pru Long Term Gilt Fund (G) 57.27 20.85 18.08 11.72 13.82 10.37 1.25 2707.47 6.64 9.03 NILHDFC Gilt Fund Long Term Plan (G) 34.05 17.79 16.49 11.13 13.77 10.58 0.77 3717.81 6.64 8.74 NILBirla Sun Life Govt Sec - Long Term (G) 49.19 17.35 15.30 10.35 12.77 10.38 1.38 766.14 6.62 6.88 NILDSP BR G-Sec Fund (G) 53.34 19.79 15.30 10.65 12.08 9.21 1.39 790.95 6.47 8.74 NILEdelweiss Govt Securities Fund (G) 13.59 12.44 12.44 9.12 1.25 838.63 6.65 2.75 1.00% on or before 12M,NIL after 12M

Monthly Income Plan NAV 6 M 1 Y 2 Y 3 Y 5 Y "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

Birla Sun Life MIP II - Wealth 25 (G) 33.82 11.85 13.35 9.37 15.11 13.63 2.11 1414.04 6.80 6.63 NIL,1.00% on or before 365D, NIL after 365DHDFC Monthly Income Plan - LTP (G) 39.98 14.62 13.00 8.43 13.64 11.87 1.90 3782.60 7.36 6.75 1.00% on or before 1Y,NIL after 1YICICI Pru MIP 25 (G) 34.91 11.14 11.03 8.80 13.17 12.40 2.05 1229.06 7.85 4.75 1.00% on or before 1Y, NIL after 1Y,NIL on or before 1YReliance Monthly Income Plan (G) 37.48 11.14 9.41 7.84 12.73 11.57 1.82 2557.99 7.60 5.57 1.00% on or before 12M,NIL after 12MUTI-MIS Advantage Plan (G) 34.75 7.64 8.95 8.08 12.26 11.61 1.80 879.04 0.00 NILICICI Pru Regular Income Fund (G) 16.08 10.13 9.84 9.48 11.30 9.17 1.68 2311.11 8.62 1.13 0.50% on or before 6M,NIL after 6M

Benchmark

Crisil MIP Blended Index 12.28 11.26 9.12 11.63 10.16

Funds of Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y "ExpRatio" "AUM(in Crs.)" YTM MD Exit Load

Franklin India Dynamic PE Ratio Fund of Funds (G) 67.27 5.17 7.79 6.53 12.30 11.99 1.74 751.28 1.00% on or before 1YDSP BR Dynamic Asset Allocation Fund (G) 12.73 6.80 7.65 6.05 1.81 1027.88 1.00% on or before 12M,NIL after 12M, NIL on or before 12M

Benchmark CRISIL Balanced Fund - Aggressive Index 3.65 6.04 3.34 10.07 11.31 S&P BSE Sensex -2.76 2.56 -1.43 7.98 11.48

Addi�onal Informa�onAnnualized

JRL 40

Performance as on January 02, 2017

Best Funds

When you want to invest in debt funds then you are confronted with scores of funds to choose from an exercise which no doubt leaves you baffled. So, we have handpicked 40 schemes across various categories based on different parameters like superior return score, mean return and volatility, portfolio concentration analysis, liquidity analysis, asset quality, average maturity, assets size, downside risk probability and historic consistent performance. We have also used the ratings from various rating agencies. We will review these schemes once every quarter depending upon the liquidity and interest rate conditions and RBI's stance and our aim is to enable you to pick those schemes that meet your investment horizon and risk appetite to give you returns better than over traditional fixed income instruments.


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Equity Schemes Addi�onal Informa�on

BenchmarkNifty 500 0.03 4.44 1.83 12.52 14.17 7.79 S&P BSE 200 -0.08 4.51 1.45 11.63 13.65 7.80 S&P BSE 100 -0.51 4.16 0.31 9.93 12.76 7.54 Nifty 50 -1.23 3.66 -0.38 9.16 12.09 7.51

AnnualizedLarge Cap Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

Franklin India Prima Plus - (G) 457.60 -1.79 5.04 5.04 19.87 18.88 12.76 9372.85 2.27 0.86 0.01 1.00% on or before 1YSBI BlueChip Fund (G) 29.82 -1.12 5.42 6.70 18.79 19.98 9.79 9734.53 1.98 0.90 0.01 1.00% on or before 1Y,NIL after 1YBirla Sun Life Frontline Equity Fund (G) 170.56 0.72 7.95 4.49 16.34 18.48 13.01 13847.81 2.10 0.93 0.02 1.00% on or before 365D, NIL after 365DHDFC Equity Fund - (G) 476.91 3.65 7.53 1.13 16.21 16.85 12.60 15644.98 2.10 1.21 0.02 1.00% on or before 1Y,NIL after 1YICICI Pru Focused Bluechip Equity Fund (G) 30.78 2.02 8.20 3.86 14.89 16.20 11635.12 2.17 0.93 0.03 1.00% on or before 1Y,NIL after 1YHDFC Top 200 Fund (G) 432.45 3.70 8.88 1.20 14.41 15.51 12.31 12640.75 2.12 1.15 0.03 1.00% on or before 1Y,NIL after 1Y

BenchmarkS&P BSE Mid-Cap 2.68 8.33 8.28 21.78 18.54 7.55 Nifty Free Float Midcap 100 3.87 7.36 7.26 21.43 18.59 10.67 Nifty 500 0.03 4.44 1.83 12.52 14.17 7.79 S&P BSE 500 0.06 4.34 1.74 12.22 13.80 7.66 S&P BSE 100 -0.51 4.16 0.31 9.93 12.76 7.54

Mid Cap Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

Franklin India Smaller Companies Fund (G) 44.30 1.62 10.79 10.60 31.88 31.50 15.06 4055.92 2.46 0.92 0.03 1.00% on or before 1Y,NIL after 1YSundaram Select Midcap - (G) 389.24 5.54 11.52 11.73 29.60 25.59 15.43 4178.16 2.29 1.06 0.03 1.00% on or before 12MHDFC Mid-Cap Opportunities Fund (G) 42.52 5.72 11.57 9.01 27.85 26.05 12986.51 2.24 0.95 0.04 1.00% on or before 1Y,NIL after 1YFranklin India Prima Fund - (G) 732.59 0.17 8.80 8.17 27.48 26.17 13.06 4566.29 2.35 0.90 0.03 1.00% on or before 1YReliance Growth Fund - (G) 833.11 1.47 4.01 5.48 19.58 18.02 12.05 5501.25 2.00 1.08 0.01 1.00% on or before 1Y,NIL after 1YIDFC Premier Equity Fund (G) 71.07 -4.27 -1.82 2.97 19.12 20.00 18.30 5710.36 2.00 0.91 -0.02 1.00% on or before 365D,` NIL after 365D

BenchmarkNifty 500 0.03 4.44 1.83 12.52 14.17 7.79 S&P BSE 500 0.06 4.34 1.74 12.22 13.80 7.66 S&P BSE 100 -0.51 4.16 0.31 9.93 12.76 7.54 Nifty 50 -1.23 3.66 -0.38 9.16 12.09 7.51

Multi Cap Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

ICICI Pru Value Discovery Fund (G) 119.11 -0.63 5.02 5.62 24.34 24.80 15.92 14874.10 2.26 0.91 0.01 1.00% on or before 12M, NIL after 12MFranklin India High Growth Companies Fund (G) 30.34 1.22 5.04 3.49 24.18 24.36 5129.53 2.32 1.05 0.01 1.00% on or before 2Y,NIL after 2YKotak Select Focus Fund (G) 25.00 2.56 9.77 6.45 21.22 20.27 6936.65 2.00 0.93 0.03 1.00% on or before 1Y,NIL after 1YICICI Pru Dynamic Plan (G) 205.33 7.47 12.76 5.52 15.09 18.20 12.04 5761.42 2.12 0.80 0.05 1.00% on or before 1Y,NIL after 1Y, NIL on or before 1YReliance Equity Opportunities Fund (G) 69.45 -2.80 -6.40 -2.87 14.62 18.18 12.33 9688.61 1.98 1.01 -0.03 1.00% on or before 1Y,NIL after 1YUTI-Equity Fund (G) 101.04 -3.08 1.45 1.24 14.50 16.30 11.98 4959.32 2.15 0.92 0.00 1.00% on or before 1Y,NIL after 1Y

BenchmarkCRISIL Balanced Fund - Aggressive Index 1.83 6.04 3.34 10.07 11.31 8.31

Balanced Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

HDFC Balanced Fund (G) 119.02 4.80 9.80 6.64 19.74 18.68 14.02 8135.89 1.97 0.70 0.04 1.00% on or before 1Y, NIL after 1Y,NILBirla Sun Life Balanced '95 Fund (G) 640.11 2.47 9.31 6.36 18.75 17.16 13.42 5008.95 2.27 0.73 0.03 NIL,1.00% on or before 365D, NIL after 365DTata Balanced Fund - Regular (G) 240.05 1.03 4.46 5.85 18.66 18.49 13.56 6521.62 2.30 0.68 0.01 1.00% on or before 365D,NIL after 365DHDFC Prudence Fund - (G) 409.70 6.15 9.53 4.97 18.62 17.18 13.65 14635.73 2.27 0.94 0.03 1.00% on or before 1Y,NIL after 1Y,NILSBI Magnum Balanced Fund (G) 100.58 0.56 4.10 5.70 16.87 19.20 11.00 7406.56 1.99 0.62 0.01 NIL on or before 12M,1.00% on or before 12M,NIL after 12MICICI Pru Balanced Advantage Fund (G) 28.20 2.73 7.65 7.19 13.92 16.91 16486.51 2.26 0.63 0.03 NIL on or before 18M

BenchmarkCrisil Liquid Fund Index 3.46 7.50 7.86 8.29 8.49 7.65

Arbitrage Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

JM Arbitrage Advantage Fund (G) 21.64 3.69 6.86 7.06 7.47 8.20 7.67 3839.43 1.05 0.06 0.17 0.50% on or before 30DICICI Pru Equity - Arbitrage Fund (G) 21.47 3.54 6.90 7.20 7.61 8.55 6106.94 0.94 0.06 0.17 0.25% on or before 1M,NIL after 1MReliance Arbitrage Advantage Fund (G) 16.57 3.46 6.63 7.36 7.49 8.42 3816.19 1.00 0.06 0.15 0.25% on or before 1M,NIL after 1MHDFC Arbitrage Fund - WP (G) 19.44 3.46 6.71 7.15 7.37 7.89 3436.19 0.78 0.06 0.16 0.25% on or before 1M,NIL after 1MKotak Equity Arbitrage Fund (G) 23.12 3.40 6.68 7.11 7.69 8.37 7.81 5573.84 1.11 0.06 0.17 0.25% on or before 30D,NIL after 30DIDFC Arbitrage - Regular (G) 20.45 3.26 6.34 6.87 7.39 8.14 2652.55 0.94 0.06 0.15 0.25% on or before 1M,NIL after 1M

BenchmarkS&P BSE Healthcare -4.94 -12.98 0.48 13.97 20.17 14.51 S&P BSE 100 -0.51 4.16 0.31 9.93 12.76 7.54 S&P BSE Power -1.38 2.56 -1.43 7.98 11.48 6.80

Sector Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

Reliance Banking Fund - (G) 186.02 3.96 11.60 2.60 20.19 19.95 17.37 2216.29 2.08 1.24 0.03 1.00% on or before 1Y,NIL after 1YDSP BR India T.I.G.E.R. Fund (G) 70.91 2.28 4.09 2.37 19.10 15.95 8.01 1342.25 2.42 1.12 0.01 1.00% on or before 12M, NIL after 12MReliance Pharma Fund (G) 134.09 -0.01 -10.95 3.70 17.01 21.03 20.73 1593.47 2.14 0.92 -0.06 1.00% on or before 1Y,NIL after 1YUTI-Infrastructure Fund (G) 45.93 1.63 4.04 -0.51 16.43 12.95 3.92 1408.96 2.21 1.14 0.01 1.00% on or before 1Y,NIL after 1YICICI Pru Infrastructure Fund - (G) 40.44 1.02 2.06 -0.20 15.55 12.89 8.13 1253.46 2.25 1.03 0.00 1.00% on or before 1Y,NIL after 1YReliance Diversified Power Sector (G) 76.39 1.65 0.65 0.80 15.14 10.76 7.67 1515.53 2.15 1.17 -0.01 1.00% on or before 1Y,NIL after 1Y

ELSS Funds NAV 6 M 1 Y 2 Y 3 Y 5 Y 10 Y "AUM(in Crs.)" "ExpRatio" SD Sharpe Exit Load

Reliance Tax Saver (ELSS) Fund - (G) 47.28 2.21 4.74 0.88 22.93 22.83 12.35 5882.19 2.00 1.15 0.01 NILAXIS Long Term Equity Fund (G) 30.40 -3.46 -0.12 3.33 20.82 22.33 10486.56 1.98 0.87 -0.01 NILFranklin India Taxshield - (G) 437.97 -1.50 4.83 4.77 19.67 18.59 13.28 2368.54 2.44 0.87 0.01 NILICICI Pru Long Term Equity Fund - (G) 284.71 0.18 4.69 4.46 17.86 19.89 11.87 3549.73 2.30 0.85 0.01 NILHDFC Tax Saver Fund (G) 1319.31 4.95 7.77 0.85 16.52 15.95 10.67 5268.34 2.17 1.10 0.02 NILSBI Magnum Tax Gain Scheme (G) 112.78 -0.04 2.49 2.88 16.36 17.68 4748.25 2.01 0.93 0.00 NIL

BenchmarkNifty 500 0.03 4.44 1.83 12.52 14.17 7.79 S&P BSE 200 -0.08 4.51 1.45 11.63 13.65 7.80 S&P BSE 100 -0.51 4.16 0.31 9.93 12.76 7.54

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G-Sec and Corp Bonds prices move inversely to interest rates and hence opposite effect will be portrayed in percentage columns.

Indian Sta�s�cs Global Sta�s�cs31-Dec-16 31-Dec-1630-Nov-16 30-Nov-16% Change % Change

Data Cruncher

America

Dow Jones (USA) 19,762.00 19,171.14 3.08

Nasdaq (USA) 5,383.12 5,325.02 1.09

Bovespa (Brazil) 59,859.30 61,999.30 (3.45)

IPC (Mexico) 45,642.90 45,315.96 0.72

Europe

FTSE (UK) 7,116.30 6,777.87 4.99

CAC 40 (France) 4,851.41 4,580.84 5.91

DAX (Germany) 1,146.90 10,640.00 (89.22)

Asia Pack

Shanghai Composite (China) 3,103.10 3,249.00 (4.49)

Nikkei 225 (Japan) 19,114.37 18,304.00 4.43

Hang Seng (Hong Kong) 22,002.40 22,782.00 (3.42)

Straits Times (Singapore) 2,880.76 2,905.17 -0.84

Taiwan Weighted (Taiwan) 9,253.30 9,240.00 0.14

Kospi (South Korea) 2,075.20 1,985.00 4.54

Jakarta Composite (Indonesia ) 5,296.70 5,148.91 2.87

KLCI Composite (Malaysia ) 1,641.70 1,619.00 1.40

Other Statistics

Crude Oil (Brent) 56.50 51.55 9.60

Dollar Index 102.78 99.97 2.81

US Fed Rate 0.50% 0.50% 0.00

10 Year Government Yield (US) 2.42% 2.39% (1.30)

3 month USD LIBOR 1.01% 0.93% 8.60

6 month USD LIBOR 1.33% 1.29% 3.10

European Central Bank (interest rate ) 0.00% 0.00% 0.00

Bank of England (interest rate ) 0.25% 0.25% 0.00

10 Year Government Yield (UK) 1.35% 1.42% 4.80

Bank of Japan (Interest Rate) -0.10% -0.10% 0.00

10 Year Governement Yield (Japan) 0.05% 0.03% (61.29)

Stock Indices

CNX Nifty 8,173.95 8,214.60 (0.49)

BSE Sensex 26,624.32 26,625.99 (0.01)

BSE 200 3,507.65 3,555.56 (1.35)

BSE Midcap 12,016.11 12,495.36 (3.84)

BSE SmallCap 12,032.36 12,325.77 (2.38)

BSE Realty 1,260.80 1,283.29 (1.75)

BSE Healthcare 14,700.90 15,724.51 (6.51)

BSE Bankex 20,700.00 21,298.27 (2.81)

BSE I.T. 10,173.01 9,843.86 3.34

BSE PSU 7,684.78 7,867.30 (2.32)

Money Market

3 months CD 6.25% 6.40% (2.34)

1 Year CD 6.40% 6.70% (4.48)

3 months CP 6.45% 6.55% (1.53)

1 Year CP 6.80% 6.90% (1.45)

Call Rate 6.17% 6.18% (0.16)

Gilts

91 Day T-Bill 6.19% 6.20% 0.16

364 Day T-Bill 6.36% 6.30% (0.95)

10 Yr Benchmark 6.62% 6.36% (4.09)

Corporate Bonds

5 Yr AAA Benchmark 7.15% 7.10% (0.70)

10 Yr AAA Benchmark 7.35% 7.25% (1.38)

Other Statistics

Inflation (CPI-monthly) 3.15% 3.39% (7.08)

Forex Reserves (Billion USD) 360 365 (1.56)

INR vs.USD 67.95 68.60 (0.94)

Gold (Rs.10/gm) 29,796 28,488 4.59

Silver (Rs./ Kg) 42,972 44,918 (4.33)

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