ICICIdirect MonthlyMFReport

Mutual Fund Review
November 19, 2009 | Mutual Fund
Mutual Fund Review
Mutual Fund Review

September 20, 2012
Equity Markets ........................................................................................................2 Debt Markets ..........................................................................................................3 Institutional fund flow..............................................................................................4 Industry Synopsis....................................................................................................5 Category Analysis ...................................................................................................6 Equity funds ........................................................................................................6 Equity diversified funds...................................................................................7 Equity infrastructure fund................................................................................8 Equity Banking Funds......................................................................................9 Equity Pharma Funds ....................................................................................10 Equity FMCG .................................................................................................10 Equity Technology Funds ..............................................................................11 Arbitrage Funds.................................................................................................12 Exchange Traded Funds (ETF) ...........................................................................13 Balanced Funds.................................................................................................14 Monthly Income Plans (MIP).............................................................................15 Debt funds.........................................................................................................16 Liquid Funds..................................................................................................17 Income Funds ...............................................................................................19 Gilt Funds......................................................................................................21 Gold ETFs: Currency movements deciding the price trend ................................22 Model Portfolios ....................................................................................................23 Equity funds model portfolio..............................................................................23 Debt funds model portfolio ................................................................................23 I direct Top Picks...................................................................................................25
Note: Whenever, returns for the scheme are shown in the report, they are for the growth option of the scheme.
ICICI Securities Ltd. | Retail MF Research
S&P CNX Nifty : July 2012 , Not much return but high interim volatility (300 points move between high & low) Update
6000 5850 5700 5550 5400 5250 5100 4950 4800 4650 4500 Dec-11 12.61% 0.14% 6%
Equity Markets
The government tried to shrug off the "policy paralysis" concerns by announcing a few big reform decisions: Subsidy reduction: By raising diesel price by | 5/litre and capping subsidised LPG to six cylinders per annum, subsidies are likely to come down by | 20000 crore Disinvestments: The government expects to raise | 15000 crore by lowering its stake in four PSUs FDI: The government has allowed 51% FDI in multi-brand retail - where states are free to decide, 49% FDI in aviation, 49% FDI in power exchanges and increase of FDI in broadcasting services to 74% from 49% Indian markets also reacted positively to the policy announcement and staged a sharp rally in the first half of September Global equity markets also remain supportive on speculation that policy makers in the US, Europe and China will ease monetary policy to boost growth, which they actually did and the same helped to calm market nervousness
Index Value
Mar-12
Source: Bloomberg, ICICIdirect.com Research
Spree of reforms triggers rally across board

10 6.4 6.1 Return (%) 5.8 5.2 4.7
Jun-12
0 BSE Sensex BSE 100 BSE 500 BSE BSE Small Cap Midcap
Source: Bloomberg, ICICIdirect.com Research Returns : July 2012
Foreign institutional investors (FIIs) participation in the Indian equity market was quite heartening. Despite the aforementioned economic factors, both global as well as domestic, FIIs exuded confidence in the Indian equity market as they net bought to the tune of | 7000 crore in September till September 17 after buying shares worth | 9730 crore in August, taking their YTD net purchases to | 70,000 crore However, domestic mutual funds, on the other hand, remained net seller at every higher level. They have sold shares worth | 700 crore in September till 17 after being net sellers of | 1600 crore in August, taking their total net sales YTD to | 10200 crore We think that amid the current euphoria, words of caution are warranted, particularly with regard to the evolving national political landscape. The government move seems to be more an act of desperation than a well-charted plan. In particular, by hurriedly pushing through the politically sensitive FDI in multi-brand retail, the government has pushed UPA allies (particularly TMC and even SP) into a corner, forcing them to take a public stance by either supporting the government or pulling out of the coalition
Outlook
10.3 20 Return (%) 10 0 Helathcare -1.5 -10 Reality Auto Metal Sensex Banking Cap.Goods Oil &Gas Con.Durables PSU IT FMCG -2.7 14.8 9.6 9.3 8.6 8.2 6.6 6.4
4.4
Source: Bloomberg, ICICIdirect.com Research Returns : July 2012
3.8
Analysts name
Sachin Jain sachin.ja@icicisecurities.com Sheetal Ashar sheetal.ashar@icicisecurites.com
In recent days, the government has acted boldly, undertaking several difficult reforms such as fuel price hike and FDI liberalisation in several sectors among others. These steps send out a strong signal to investors, ratings agencies and even to the RBI that the government is serious about Indias macro environment. Some more action is expected in the near-term and the same may provide a further boost to investors confidence However, as more reforms follow and market moves to discounting FY14 earnings, we see meaningful upsides from the current levels in the next one or two years. However, since the market has rallied sharply in the near term, buy on any correction should be the investment strategy Our target investment plan (TIP) investment strategy is ideally suited in the current investment market environment
Page 2
G-Sec yield: Uptick at the fag end of month as July rai deficit creates inflation worries
9.0 8.8 Yield (%) 8.6 8.4 8.2 8.0 7.8 Aug-12 Jan-12 Jul-12 Mar-12 May-12 Sep-12 Jun-12 Feb-12 Apr-12
Debt Markets
Update
The RBI cut CRR by 25 bps to 4.5% while keeping all other rates unchanged in its mid quarter policy meeting on September 17. The CRR cut, which will infuse | 17,000 crore into the system, is aimed at mitigating liquidity deterioration on account of advance tax outflows and possibility of wedge between credit and deposit growth re-appearing over busy season on credit The RBI welcomes recent steps by the Government of India (GoI) on fuel price hike (fiscal step) and FDI decisions (steps on supply side) and promises to reinforce their positive impact; while keeping its focus on inflation management Near term concerns on inflation are quite evident with supply constraints and rupee depreciation imparting stickiness to inflation even as demand moderates. The RBI is also wary about effects on commodity prices of recent easing measures undertaken by the Fed and the ECB. Also, it notes that the 50 bps repo rate cut undertaken in April was on the back of assumption of some GoI action In the policy statement, while the RBI has focused on the inflationary persistence in the economy, it has taken cognizance of the fact that growth concerns have increased Headline inflation came in at 7.55% YoY in August (as compared to our expectation of 7.1% YoY), sharply higher than the previous month's print of 6.87% YoY. The June number was revised upward to 7.58% YoY. Fuel inflation rose sharply to 8.32% YoY from 5.98% YoY. Substantial upward risks to this index exists now that the government has hiked diesel prices and international crude prices are on an uptrend on account of geopolitical tensions and the announcement of QE3 by the Fed Liquidity has improved substantially at the start of September as can be seen in the magnitude of the fall in LAF infusions, which averaged around | 12500 crore from around | 45000 crore in August. However, it is expected to pick up, going forward, on expectation of a pick-up in credit offtake with the beginning of the festive season and advance tax outflows. The same may result in firming up of yields on money markets papers to a slight extent
Debt Outlook
10-Year Benchmark G-Sec Yield
Steeping of the yield curve

8.3 8.2 Yield (%) 8.1 8.0 7.9 7.8 1yr 31-Aug 3yr 5yr 14-Sep 10 yr
back of improved liquidity

1000 500 0 | Cr. -500 -1000 -1500 -2000 Jan-12 Aug-12 Feb-12 Jul-12 Mar-12 May-12 Sep-12 Jun-12 Apr-12
Easing system liquidity, falling growth and the appetite of banks for government bonds due to low credit offtake are positive for the markets while controlling inflation on rising administered prices are a major concern for the RBI Corporate bonds will benefit from easing liquidity conditions. However, the same will be restricted to only the top rated (AAA) borrowers. Most of the short-term debt funds and dynamic bond funds are increasing duration and exposure to corporate bonds to take advantage of the spread and the current steepening of the yield curve. Therefore, they remain a better investment option The outlook for G-Secs has incrementally improved. However, since sustained supply concerns remain, there may not be a secular rally in the segment. It is better played through dynamic funds with opportunistic exposure to government securities
Page 3
Institutional fund flow

After having bought equities worth | 44,036 crore in Q1CY12, FIIs turned sellers to the tune of | 1957 crore in Q2CY12. In the current quarter FIIs have been buyers in the equity markets to the tune of | 25890 crore till September 14, 2012 Given the policy reforms that are being announced and assurance from the finance minister to announce further reforms and no rollback of existing announcements, we expect strong FII flows in the coming months Also, monetary measures taken by the European Central Bank and the US Federal Reserve should also increase global liquidity, which should support funds coming into Indian equities
Exhibit 1: Trend in FII & MF investment in Indian equities
25217 30000 25000 20000 15000 10000 5000 0 -5000 -10000 -15000 5610 9729.6 10272 6000 5800 5600 5400 5200 5000 4800 4600 4400 4200 4000
11089
7019
7411
7730
| Crore
1201 3311
2497
2469
-361
-129
-397.8 -1522.3
-464
-527.6 -568.4
295.5 133.4
652
810
201
581
-777 -1457
-1416
-1847
-5158
Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Series1 Series2 Series3
-9537
Mutual funds have always been sellers whenever the market has risen. Mutual funds sold | 10126 crore worth of equities in CY12 till September 14, 2012 Since December 2021, markets have risen from 4600 to 5600 level delivering 21% return CY13 till date. Fund managers as well as mutual fund investor have captured every rise to book profits Fund managers have been sellers every single month. Hence, there have also been outflows from equity funds for each month in the current calendar year
Exhibit 2: Fund manager as well as MF investors cash out
Jan-12 1000 500 0 | crore -500 -1000 -1500 -2000 -2500 -3000 -1847 -2171 -2809 Outflow from Equity market Ouflow from Equity schemes -380 -1416 -1854 -527.6 -615 -397.8 -286 -949 -1600 -2286 71 Feb-12 Mar-12 Apr-12 May-12 420 Jun-12 295.5 Jul-12 Aug-12
Source: Bloomberg, AMFI, ICICIdirect.com Research
-4539
-2171
-1854
-1600
-608
Page 4
5888
Industry Synopsis
With the objective of increasing penetration several measures were announced by Sebi to be implemented for October 1, 2012 Expense ratio that is charged to the scheme (currently highest that can be charged is 2.5%) can be increased by additional 30 basis points if new inflows from beyond top 15 cities are at least (a) 30% of gross new inflows in the scheme or (b) 15% of the average assets under management (year to date) of the scheme, whichever is higher Such new inflows need to stay in the scheme for a year else, it has to be clawed back to the scheme Service tax shall be charged to the scheme over and above the expense ratio Portfolio disclosure as on last day of the month to be made on or before 10th of the next month Fund houses are required to set apart at least two basis points within the limit of TER for investor education awareness programmes Mutual funds/AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes. Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc, and no commission shall be paid from such plans. The plan shall also have a separate NAV
Assets under management (AUM) grew to | 7.5 trillion as on August 31, 2012 from | 5.8 trillion as on March 31, 2012 registering growth of 28%. AUM under income & money market funds mainly accounted for the gains. Cumulative net inflows in FY13 till date for all schemes taken together were | 153782 crore. Except for debt (| 50329 crore) and money market funds (| 101859 crore) all other categories witnessed outflows.
Exhibit 3: Trend in average assets under management (AAUM)
730361 Jul-12
Jun-12 UTI
800000 696738 695437 699284 641937 659153 675338 680154 750000 | Crore 700000 650000 600000 550000 500000 Nov-11 Oct-11 Aug-11 May-12 681655 688835
611402
587197
Reforms will likely extend the reach but will be at 20-30bps
Source: AMFI,ICICIdirect.com Research
Exhibit 4: AUM decline in most categories

318029 400000 350000 | Crore 300000 193466 176080 168625 250000 200000 150000 100000 Income Equity Aug-11 Money Market Aug-12 178062 349311
Exhibit 5: gold ETFs AUM cross | 10,000 crore

19000 13000 10000 4800 4000 1000 FOF(Overseas)
92872 82888 73152 67270 60923 Dec-11 Jun-11 Sep-11 Mar-12
| Crore
10701
16000
Balanced
3140 3282
7000
Gilt
2063.02 1548
Aug-11
Aug-12
Source: AMFI, ICICIdirect.com Research
Source: AMFI , ICICIdirect.com Research
Exhibit 6: Trend in AAUM (top 5 AMC)

HDFC MF replaced Reliance MF as the top fund house in the industry with market share of 13.4% In Q1FY13, of the Top 10 AMCs, except for Kotak, all other fund house saw an increase in AAUM. Highest AAUM increase of 12% was of SBI Asset Management Company followed by 9.96% increase in the AAUM of Birla Sun Life Asset Management Company In FY12, L&T Mutual Fund acquired the assets of Fidelity Mutual Fund leading to an increase in its market share. However, L&Ts management has been unable to retain the confidence of the Fidelity fund investors as seen from a QoQ decline in AAUM under Fidelity funds
110000 100000 90000 | Crore 80000 70000 60000 50000
HDFC
Reliance
ICICI Prudential
Birla Sunlife
Other ETFs
Gold ETFs
2832.00 2399
Page 5
16409 15761
Aug-12
Jan-12
Dec-11
Apr-12
Sep-11
Mar-12
Jun-12
Feb-12
752548
Category Analysis Equity funds

In equity funds, with the markets moving up in the last week all categories delivered flat to positive average returns IT/pharma funds outperformed other fund categories indicating export oriented sector benefiting form the appreciated rupee Category average returns were lower than the benchmarks returns as not all fund managers could catch up with the sharp rally
Exhibit 7: Index heavy weight outperformed
8.00 7.0 6.68 4.8 Return % 4.00 2.66 0.7 0.00 Large Cap IT Mid cap Pharma FMCG Diversified Banking Infra 179618 178202 Jul-12
Cpaital Goods 5296 6369 -1073
4.5 3.32
4.5 2.57 0.82 0.1
5.2 4.62
3.68
2.442.4
Source: Crisil Fund Analyser, ICICIdirect.com Research Note : Returns : 1M (14 Aug 2012- 17th Sep 2012)
Exhibit 8: Highest outflow in current financial year

4000 Net Inflow ( | Cr ) 1986 1440 210 -60 -2000 -4000 Aug-11 Nov-11 Oct-11 Dec-11 Sep-11 Jul-11 Jun-11 -869 -52
Exhibit 9: AUM down 3 % YTD FY13

191607
179640
178062
177391
| Crore
-615
-2809 Jan-12 Feb-12 Mar-12 May-12 Jun-12 Apr-12
-2286 Aug-12 Jul-12
170000 160000 Jul-11 Sep-11
Nov-11
161242
-380
-286 -949
180000
170037
Jan-12
Mar-12
Net inflow (Equity + ELSS)
AUM (Equity+ ELSS)
Exhibit 10: Deployment of equity funds (| crore)

No major change since the start of the financial year except that allocation to interest sensitive has decreased
Banks Software Aug-12 Mar-12 OoQ change 32970 34000 -1030 18123 18177 -54
Pharma
Consumer Non Petroleum Finance Durables 16495 15038 10436 9734 14610 15332 11255 9195 1885 -293 -819 539
Auto 7917 9431 -1514
Power 6600 7185 -585
May-12
170400
190000
176080
Oil 5652 5839 -186
71
Source: SEBI, ICICIdirect.com Research , Sector Classification (as per AMFI)
179620
472
420
182076
200000
184993
185722
2000
Page 6
Equity diversified funds

View Short term: Neutral Long-term: Positive The BSE Sensex has surged 443 points to close at 18,464. It rallied by 1,151 points between September 6 and September 14, reporting its highest rise since June 2011 A spate of announcements by both global as well as domestic central authorities fuelled an equity market rally Globally, the European Central Bank and the US Federal Reserve announced monetary easing measures, which cheered markets Back here diesel prices were finally hiked by | 5 p/litre and some rationalisation in usage of subsidised LPG cylinder was announced. Divestment in four companies was finalised. FDI was allowed in certain sectors All these measures will not only help on the economic front but also bring a sea change in the equity market sentiment At 18500, the BSE Sensex is trading at price to equity (PE) of 12.5x FY14 EPS of | 1469. However, as more reforms follow and market moves to discounting FY14 earnings, we see meaningful upside from current levels in the next one or two years Unless political abuse leads to rollback of measures announced, markets may see good FII inflows coming in months ahead An across the board rally may happen and diversified funds make investment sense. Since the market has rallied sharply in the near term, buy on any correction should be the investment strategy
Exhibit 11: Positive bias funds
Large cap Funds Scheme Name Franklin India Bluechip Fund HDFC Top 200 Fund ICICI Prudential Focused Bluechip Equity Fund UTI Opportunities Fund Benchmark - BSE Sensex Category Average Diversified Funds Scheme Name Franklin India Prima Plus HDFC Equity Fund ICICI Prudential Dynamic Plan Benchmark - CNX Nifty Category Average Midcap Funds Scheme Name HDFC Mid-Cap Opportunities Fund ICICI Prudential Discovery Fund IDFC Premier Equity Fund plan A SBI Emerging Bluechip Benchmark - CNX Midcap Category Average
6M 3.13 2.65 5.67 5.42 6.13 5.39 6M 5.07 1.65 4.61 5.46 4.44 6M 5.12 7.81 6.28 18.44 -2.26 6.13
1 Yr 8.34 7.66 11.74 12.58 9.44 8.65 1 Yr 8.96 5.77 12.19 10.28 7.56 1 Yr 9.67 17.08 6.52 16.54 1.61 7.67
3 Yr 9.00 7.54 10.87 10.20 3.52 5.51 3 Yr 8.77 9.25 10.71 4.15 5.98 3 Yr 16.41 12.80 15.09 22.02 4.56 9.70
5Yr 7.84 10.02 N.A 11.96 3.64 5.30 5Yr 7.08 9.31 8.89 4.53 4.74 5 Yr 10.41 12.92 13.73 7.94 3.41 4.49
Source: Crisil Fund Analyser, ICICIdirect.com Research Note : % Returns are as on September 17, 2012, Returns above 1 yr are CAGR returns
Page 7
View Short-term: Neutral Long-term: Positive
Equity infrastructure fund

We remain neutral on the sector. Very selective individual stocks with strong execution capabilities and focus on de-leveraging the balance sheet would outperform, going ahead While the fundamentals of companies are yet to see an improvement, the recent government action on reform such as hike in diesel price and FDI in retail and aviation sectors have raised some hopes on the better environment for the infrastructure sector, going ahead Additionally, a slowdown in the economy also raises hopes for an interest rate cut (though sticky inflation may delay the interest rate cut) Overall, the sector may take longer to recover better to stay invested in a diversified fund
Exhibit 12: CNX Infrastructure Index
3200 3000 2800 2600 2400 2200 2000 Nov-11 Oct-11 Dec-11 Jan-12 Aug-12 Aug-11 Sep-11 Mar-12 May-12 Sep-12 Feb-12 Jun-12 Apr-12 Jul-12
CNX Infrastructure Index
Exhibit 13: Category average vs. Benchmark Indices

8.4 7.6 8.2 4.4 10 4.1 2.9 5 Return (%) 0 -1.5 -4.4 5YR -5 -10 1M 3M 6M Category Average 1 YR BSE 100 -2.4
Source: CRISIL Fund Analyser, ICICIdirect.com Research Note : % Returns are as on Sep 17, 2012, Returns above 1 yr are CAGR returns
Exhibit 14: Positive bias funds Top Recomeded Equity Infrastructure Funds Scheme Name Canara Robeco Infrastructure Franklin Build India Fund HDFC Infratructure Fund ICICI Prudential Infrastructure Fund Benchmark - BSE 100 Category Average
6M -0.23 5.71 -4.27 0.43 4.39 -1.45
1 Yr 1.72 10.49 -2.11 -1.45 8.16 -2.35
-6.8
3YR
3.3
3 Yrs 3.4 5.19 -0.18 -2.02 3.25 -6.75
3.6
5 Yrs 3.68 N.A N.A 1.68 3.62 -4.38
Source: CRISIL Fund Analyser, ICICIdirect.com Research Note : % Returns are as on September 17, 2012, Returns above 1 yr are CAGR returns
Page 8
View Short-term: Positive Long-term: Positive
Equity Banking Funds

Banking funds continue to be volatile reacting to various macroeconomic variables and ensuing changes on expectations on the RBIs stance towards a rate cut In its Mid Quarter Review held on September 14, 2012, the RBI had cut the CRR by 25 bps bringing it down to 4.50%. The banking sector will benefit on the margins front as CRR funds kept with RBI, that are not earning anything, will start earning some return We believe if the reforms process that has been initiated by the government in past few days gains momentum that may help banks in the form of higher credit growth and improved recovery of bad loans Factors that need to be watched are credit pick up that should happen as we enter the busy season and rate cuts as and when it happens
Bankex
16000 15000 14000 13000 12000 11000 10000 9000 8000 Oct-11 Aug-11 Aug-12 Feb-12 Apr-11 Apr-12 Jun-11 Dec-11 Jun-12
Higher provisioning cost may still keep earnings lower. Reduction in FD rate may reduce cost of funds and add to net interest margin (NIM) Banking being a relatively high beta sector has delivered higher returns vis--vis the broader market in upturns. Entry into these funds during bad times can add additional 10-15% once the cycle gets reversed. We, therefore, advise aggressive investors to start accumulating banking funds in their portfolio
Exhibit 15: Category average vs. Benchmark Indices
13.3 10.1 15
-11% 19% -25% 154% -61% 134% -29% 160% -20% 104%
BANKEX Index
Performance during up and down turns

Index Bankex Feb 12 - Jun 12 Dec 11 - Feb 12 Oct 10 - Dec 11 Mar 09 - Oct 10 Jan 08 - Mar 09 Jun 06- Jan 08 May 06 - Jun 06 Jul 04 - May 06 Feb 04 - Jul 04 Apr 03 - Feb 04 11219 12839 9153 14479 3633 12087 4017 5809 2381 3063 Sensex 16454 18429 15455 20688 8160 20873 8929 12612 4843 6036 Returns % Bankex -13% 40% -37% 299% -70% 201% -31% 144% -22% 120% Sensex
13.0
8.4
10 5.2 4.6 Return (%) 5 0 -5 -10 1M 4.81
9.4
6.1
5.1
6.13 3.52
-2.72
3M
6M Category Average
1 YR Bankex
3YR BSE Sensex
5YR
Source: CRISIL Fund Analyser, ICICIdirect.com Research Note : % Returns are as on Sep 17, 2012, Returns above 1 yr are CAGR returns
Exhibit 16: Positive bias funds Scheme Name Reliance Banking Fund UTI Thematic - Banking Sector Fund ICICI Prudential Banking and Financial Services Fund Benchmark - BSE Bankex Category Average
1M 9 9.81 9.96 9.91 9.48
6M -5.54 -5.22 -5.15 -4.74 -5.88
1 Yr 37.52 28.95 26.52 26.75 28.95
Page 9
9.2
9.20
9.44
11.5
13.0
3 Yrs 27.49 22.7 N.A 18.70 25.10
Equity Pharma Funds

View Short-term: Neutral Long-term: Neutral With ~25% YTD returns, the BSE Healthcare index maintained outright outperformance vis--vis the Sensex and broader BSE 500 The sector will continue to be sought after as it remains relatively insulated from global slowdown and domestic economic vagaries. However, the premium gap (~36% vis--vis) is expected to come down on account of premium valuations at which most of the pharma stocks are now trading
Exhibit 17: Fund returns vs. Benchmark
30 25 Returns (%) 20 15 10 5 0 1M 3M 6M Reliance Pharma Fund 1 Yr BSE Healthcare 3 Yr 5 Yr 2.7 0.7 14.7 12.0 19.0 16.2 16.8 23.2 24.8 22.8
20.5 15.0
Equity FMCG
View Short-term: Book Profit Long-term: Neutral With the monsoon witnessing a revival in August end, we expect the growth for FMCG companies in H2CY12 to be healthy with an equal mix of prices and volumes. Sales growth would also be driven by festive season demand. Advertisement expenses would, however, witness an uptrend driven by increasing fight for market share and new launches for the festive season Valuations for the FMCG sector remain stretched and the riskreward is unfavourable. A recent reversal in market sentiments has led to some profit booking in the defensive sector and investors are moving towards cyclical plays With a reversal in market sentiment it is better to move from defensive to aggressive sector funds to generate alpha
Exhibit 18: Category average vs. fund return
23.8 31.7 32.2 40
In FY12, the defensive sector was the only category to sizeably increase investors wealth ~31% Recent reversal in market sentiments has seen some profit booking in FMCG stocks
27.7 33.9 27.1 3YR
Returns %
30 20 0.8 0.8 0.1 10 0 7.0 7.4 7.5
1M
3M
6M
1 YR
ICICI Prudential FMCG Fund - Growth
SBI Magnum Sector Umbrella - FMCG Fund
Page 10
16.4 23.9 20.0 5YR Index
19.5 23.7 21.4
Equity Technology Funds

View Short-term: Neutral Long-term: Neutral Though IT stocks have run up in the past few days with the background of quantitative easing, the underlying concern of CY12E IT budgets still remains. The demand environment in the US and BFS vertical continues to be challenging with IT budgets being trimmed across the board Rising price-volume trade offs and increasing deal pipeline in emerging markets alone could bring downward pressure on margins The scenario is not that favourable for a broad based rally in IT stocks. Hence, these funds can be avoided specially after having rallied so much
Exhibit 19: Fund return vs. Benchmark
25 21.0 20 Returns (%) 15 10 5 0 1M 3M 6M Category Average 1 Yr BSE IT 3 Yr 5Yr 8.6 5.8 4.6 2.6 2.8 18.0
11.1 6.7 6.4
1.2
1.1
Exhibit 20: Rupee appreciation a negative ...

59 57 55 53 51 49 47 45 Aug-12 Jan-12 Jul-12 Mar-12 May-12 Sep-12 Feb-12 Jun-12 Apr-12
Exhibit 21: Stimulus from FED & ECB to revive their respective economies beneficial to Indian IT companies
7000 6500 6000 5500 5000 4500 Aug-11 Nov-11 Oct-11 Aug-12 Dec-11 Sep-11 Jan-12 Jul-12 Mar-12 May-12 Sep-12 Feb-12 Jun-12 Apr-12
|/$
Source: Bloomberg, ICICIdirect.com Research Source: Bloomberg, ICICIdirect.com Research
BSE IT
Page 11
Arbitrage Funds
View Short-term: Neutral Long-term: Neutral Arbitrage funds seek to exploit market inefficiencies that will manifest as mispricing in cash (stock) and derivative markets Since the inception of the July series, the markets have been range bound and, thus, arbitrage opportunities are scarce, when compared with May and June. Even in the recent sharp upward movement not too many arbitrage opportunities were seen Arbitrage funds are classified as equity funds as they invest into equity share and equity derivative instruments. Since these are classified as equity funds for taxation, dividends declared by the funds are tax free. No capital gains will be applicable if they are sold after one year These funds can be looked upon as an alternative to liquid funds. However, for these funds, returns totally depend on arbitrage opportunities available at a particular point of time and investors should consider reviewing the same before investing. Return of arbitrage funds are not linear and, therefore, not suitable for investors who want consistent return across time period Arbitrage funds should be used as a liquid investment and should not be a major part of the investors portfolio
Exhibit 22: Category average. vs. Benchmark
10 9 8 7 6 5 4 3 2 1 0 9.35 8.69
Availability of arbitrage positions depends very much on the market scenario. Directional movement in the broader index attracts speculators in the market and cost of funding makes the futures positions biased In case of positive movement, long build-up in futures puts the pricing in the upward bias and creates a window for direct arbitrage positions On the other hand, negative bias attracts fresh sellers in the market and speculators try to sell the stock at much cheaper than the theoretical prices. In such situations, reverse arbitrage opportunities arise On the other hand, a range bound market does not give ample room to create arbitrage positions
7.19
7.19 5YR
Return %
5.22
Volatile markets in past one year had created various arbitrage opportunities. This has helped arbitrage funds deliver close to 9% tax free return
2.38
0.81
1M
0.64
3M
1.98
6M Category Average
4.25
1 YR
3YR
Crisil Liquid Fund Index
Source: Crisil Fund Analyser, , ICICIdirect.com Research Note : % Returns are as on Sept 17, 2012 Returns above 1 yr are CAGR returns
Exhibit 23: Positive bias funds Scheme Name ICICI Prudential Equity and Derivatives Fund - Income Optimiser Plan IDFC Arbitrage Fund - Plan A - (Regular) - Growth Kotak Equity Arbitrage Fund SBI Arbitrage Opportunities Fund - Growth CRISIL Liquid Fund Index Category Average
6M 5.64 5.22 5.09 5.40 4.25 5.22
1 Yr 9.17 9.52 9.30 9.41 8.69 9.35
6.75
3 Yrs 7.09 7.17 7.40 7.43 6.75 7.19
Source: CRISIL Fund Analyser, ICICIdirect.com Research Note : % Returns are as September 17, 2012, Returns above 1 yr are CAGR returns
Page 12
6.95
5 Yrs 7.10 6.67 7.29 7.13 6.95 7.19
Exchange Traded Funds (ETF)

In India, there are three kinds of ETFs available: Equity Index ETFs, liquid ETFs and gold ETFs An equity index ETF tracks a particular equity index such as the BSE Sensex, NSE Nifty, Nifty Junior, etc
Traded volumes should be the major criterion that is used while deciding on investment in ETFs. Higher volumes ensure lower spread and better pricing to investors...
An equity index ETF scores higher than index funds on several grounds. The expense of investing in ETFs is relatively less by 0.501.00% in comparison to an index fund. The expense ratio for ETFs is in the range of 0.50-0.75% excluding brokerage while for index funds the expense ratio varies in the range of 1.0-1.5%. However, brokerage (which varies) is applicable on ETFs while there are no entry loads now on index funds The tracking error, which explains the extent of deviation of returns from the underlying index, is usually low in ETFs as it tracks the equity index on a real time basis whereas it is done only once in a day for index funds ETFs also provide liquidity as they are traded on stock exchanges and investors may subscribe or redeem them even on an intra-day basis. This is not available in index funds, which are subscribed/redeemed only on a closing NAV basis There are over 400 ETFs traded globally. ETFs are transparent and cost efficient. The decision on which ETF to buy should be largely governed by the decision on getting exposure in that asset class
Tracking error, though it should be considered, is not the deciding factor as variation among funds is not huge...
Volumes are higher only in the Goldman Sachs Benchmark ETFs and tracking error is also lowest at 0.01%. Therefore, it is our top pick for investors wanting Nifty-linked returns
Exhibit 24: List of Equity Index ETF

Fund Name HDFC Index Fund - Sensex Plan HDFC Index Fund - Sensex Plus Plan LIC NOMURA MF Index Fund - Sensex LIC NOMURA MF Index Fund - Sensex Advantage SENSEX Prudential ICICI ETFund (SPIcE) Reliance Index Fund - Sensex Plan Tata Index Fund - SENSEX - Option A Franklin India Index Fund - BSE Sensex pl IDFC Nifty Fund Nifty BeES Birla Sun Life Index Fund Canara Robeco Nifty Index HDFC Index Fund - Nifty Plan IDBI Nifty Index Fund Principal Index Fund LIC NOMURA MF Index Fund - Nifty Plan ICICI Prudential Index Fund - Nifty Plan Quantum Index Fund Reliance Index Fund - Nifty Plan SBI Magnum Index Fund Tata Index Fund - NIFTY - Option A Taurus Nifty Index Fund Franklin India Index Fund - NSE Nifty Plan UTI Nifty Index Fund Religare Nifty Exchange Traded Fund BSE Sensex S&P CNX NIFTY AAUM 43.92 83.78 23.73 4.2 0.91 2.73 6.04 56.33 9.65 552.27 22.88 4.2 101.69 138.56 12.9 28.83 90.27 1.62 65.73 34.69 8.25 1.34 230.94 164.36 N.A NAV 155.19 236.88 35 32.65 201.45 9.09 45.26 52.51 10.98 568.67 55.13 29.8 48.52 10.61 38.27 31.33 52.55 577 9.29 48.02 33.67 10.55 44.24 35.04 566.27 18542.3 5610 6M 6.91 7.73 7.11 5.82 8.99 7.25 6.84 6.76 7.04 6.66 5.63 5.89 6.18 5.91 5.09 6.04 5.76 6.5 6.46 5.93 6.45 6.37 5.94 3.45 6.19 6.13 5.46 1YR 10.05 11.78 10.17 9.39 12.5 10.39 9.7 9.47 12.19 9.63 9.68 10.37 9.88 10.15 9.67 10.57 10.14 11.45 11.47 10.51 11.03 8.98 10.07 10.55 10.94 9.44 10.28 3YR 3.52 7.28 3.94 3.17 5.17 N.A 3.42 3.71 N.A 4.53 3.51 4.22 3.63 N.A 3.97 4.59 4.53 4.93 N.A 4.21 4.31 N.A 4.21 4.04 N.A 3.52 4.15 5YR 1.88 7.17 1.93 1.35 4.78 N.A 2.9 4.01 N.A 5.03 3.63 4.24 2.25 N.A 3.65 2.61 5.36 N.A N.A 3.46 3.93 N.A 4.28 3.97 N.A 3.64 4.53
Source: Crisil Fund Analyser, , ICICIdirect.com Research Note : Returns above one year are Compounded Annualised return as on September 17, 2012, AUM as on 30th June 2012
Page 13
Balanced Funds
View Short-term: Neutral Long-term: Neutral Balanced funds are hybrid funds. More than 65% of the overall portfolio is invested into equities. Hence, as per provisions of the Income Tax Act, 1961, any capital gain over one year becomes tax free. Also, dividends declared by the funds are tax free In case you separately invest 35% of your investible corpus in a debt fund, the same will be subject to higher taxation. However, if the whole of the corpus is invested in balanced funds 100% shall have the lower taxation applicable as mentioned above
Investors with a limited investible surplus and a lower risk appetite but with a willingness to invest into equities can look to invest in these funds
The debt component provides protection in volatile markets like last year. However, in a bull rally, the funds will underperform their equity counterparts as they have done so far in CY12. The return gets reduced over diversified peers owing to the debt component
Exhibit 26: Debt allocation helps maintain steady AUM
16799 16752 18000 | Crore
Exhibit 25: With equity markets going down inflows have dried up
400 Net Inflow ( | Cr ) 200 0 -200 -400 Aug-11 Oct-11 Aug-12 Dec-11 Feb-12 Jun-12 Apr-12 210 99 12 -9 -88 -101 -243 105 -23 61 19 -64 -158
16409
16327
16261
16207
16224
16231 Jun-12
15000 14000 Oct-11 Aug-11
Dec-11
14556
16000
15468
15478
Balanced Funds AUM
Exhibit 27: Category average vs. Benchmark

10.3 15 Returns (%) 6.7 6.6 10 5 0 3M Category Average 6M 1 YR Crisil Balance fund Index 3YR 5YR Diversified Funds 8.3 8.6 5.3
7.6
7.5
4.9
5.5
6.0
6.2
6.5
Source: Crisil Find Analyser, ICICIdirect.com Research, Returns as on Sep 14, 2012
HDFC Prudence has been a consistent top performing fund in the category. Higher exposure to equity helps the fund to generate above average returns over long term. However, the strategy proves to be too aggressive in case of a clear downtrend
Exhibit 28: Positive bias funds Scheme Name Birla Sun Life 95 Fund ICICI Prudential Balanced Fund HDFC Prudence Fund Tata Balanced Fund Crisil Balanced Fund Index Category Average
4.4
6M 5.36 5.77 2.76 8.95 5.32 4.94
1 Yr 7.09 10.63 6.69 13.95 10.29 8.58
3 Yrs 8.20 11.04 12.05 11.24 5.45 7.53
4.7
Aug-12
Feb-12
Apr-12
15761
17000
16118
5 Yrs 8.21 6.52 11.12 9.50 6.45 6.20
Page 14
Monthly Income Plans (MIP)

View Short-term: Positive Long-term: Positive An MIP offers investors an option to invest in debt with some participation in equity, approximately 10-25% of the portfolio MIPs are suitable for investors who seek higher return from a debt portfolio and are comfortable in taking nominal risk The debt corpus of the portfolio provides regular income while the equity portion of the fund provides extra return. However, returns can also get eroded by a fall in equities MIPs are currently can be classified in two types Aggressive MIP and Conservative MIP based on its equity allocation Risk averse investors should invest in MIPs with lower equity allocation to avoid capital erosion and earn more stable returns In the recommended MIPs, HDFC MIP LTP and Reliance MIP are aggressive MIPs (higher equity allocation) while Birla Sunlife MIP II Savings 5 Plan is a conservative MIP HDFC MIP LTP and Reliance MIP have the highest average AUM. The large size helps to find better investment opportunities and lowers the expense ratio Also, with a large size, the funds can hold papers up to its maturity period, without having to face unwarranted redemption pressure, thereby adding to the scheme returns
Exhibit 29: Category average vs. benchmark
10 9 8 Absolute Retur(%) 7 6 5 4 3 2 1 0 1M 3M 6M Category Average 1 YR Crisil MIPEX 3YR 5YR 0.9 0.9 2.8 2.8 3.8 3.9 8.3 6.3 6.7 6.9 6.9 9.3
In the recommended MIP, HDFC MIPs exposure to corporate debt has been increased while allocation to equities has been reduced. Reliance MIPs exposure to GSecs has been increased. Reliance MIP is more aggressive compared to HDFC MIP Conservative Birla Sunlife MIP II savings 5 is very safe fund with lower equity and a good credit profile
Exhibit 30: Positive bias funds Scheme Name Birla Sun Life MIP II - Savings 5 Plan HDFC Monthly Income Plan - LTP Reliance Monthly Income Plan Crisil MIP Index Category Average
6M 4.77 2.82 4.39 3.91 3.79
1 Yr 10.14 7.97 10.51 9.27 8.34
3 Yrs 7.61 8.22 8.71 6.65 6.34
5 Yrs 10.42 9.48 11.39 6.93 6.92
Page 15
Debt funds
Exhibit 31: Higher returns across all categories as yield curve shifts down
12.0 10.0 Returns(%) 8.0 6.0 4.0 2.0 0.0 Income UST Liquid Crisil LiquiFex Income ST Crisil STBx Income Crisil ComBex Gilt MT&LT I-SEC Com.Gilt 9.82 8.52 8.10 8.43 9.49 10.99 9.20 9.12 10.45
Source: Crisil Fund Analyser ICICIdirect.com Research Note : 1Month annualized return as on September 17, 2012
Exhibit 32: Deployment of funds (as on June, 2012)

Government Securities 1 year and above
Exposure to one year and above papers has increased via increase in G sec and corporate papers
Commercial Paper Bank Certificates of Deposit
182 days to 1 year 90 days to 182 days Less than 90 days 0 50000 100000 150000 200000 250000 300000
Treasury Bills CBLO Other Money Market Investments Corporate Debt PSU Bonds / Debt Securitised Debt Bank FD
Source: SEBI, ICICIdirect.com Research Note : Holding as % of total AUM
Exhibit 33: G-Sec yield curve

8.5
With liquidity scenario, improving, short term yields came
Exhibit 34: Corporate bond curve moves down

9.8 9.7 9.6 9.5 9.4 9.3 9.2 9.1 9.0 1yr 31-Jul 3yr 5yr 10 yr 17-Sep
8.3 Yield (%) Yield (%) 1yr 4-Sep 3yr 5yr 10 yr 18-Sep 8.1 7.9 7.7 7.5
down while government borrowing pressure continued at the longer end. Also, with liquidity improving there was lack of OMO by RBI, which further pressurised yields leading to steepening of the yield curve
Page 16
View Positive
Liquid Funds
Recommended liquid funds continued to deliver around 9% annualised return for one-year time period as short-terms rates came off their peaks Liquidity conditions have improved with the RBI infusing ~| 37000 crore on a daily basis through the liquidity adjustment facility (LAF) in September against earlier | 1,00,000 crore RBI in its mid quarter monetary policy review reduced CRR by 25 bps. This will induce | 17000crore into the system One round of easing in shorter term rates has already happened. We may now see pressure coming off in the two to four year segment flattening the yield curve along with shifting downwards Liquid funds should now be used only for parking the liquid surplus
Exhibit 35: Call rates move lower
9.00 8.50 Rate(%) 8.00 7.50 7.00 31-Mar-12 15-Apr-12 30-Apr-12 15-May-12 30-May-12 14-Jun-12 29-Jun-12 14-Jul-12 29-Jul-12 13-Aug-12 28-Aug-12 12-Sep-12
(%)
Exhibit 36: Three months CP/CD came off their peak

12.50 11.00 9.50 8.00 6.50 5.00 3.50 2.00 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 3M CD 3M CP
Source: Bloomberg, ICICIdirect.com Research Source: Bloomberg, ICICIdirect.com Research
Exhibit 37: System liquidity improving close to RBIs comfort level as seen from LAF borrowing...
1000 500
Liquidity situation improved cooling off short term rates.
0
| Cr.
CRR cut will add another | 17000 crore
-500 -1000 -1500 -2000
1-Nov-11
16-Nov-11
12-Aug-12
14-May-12
29-May-12
Page 17
27-Aug-12
15-Mar-12
30-Mar-12
16-Dec-11
31-Dec-11
11-Sep-12
13-Jun-12
28-Jun-12
13-Jul-12
15-Jan-12
30-Jan-12
14-Feb-12
29-Feb-12
14-Apr-12
29-Apr-12
28-Jul-12
1-Dec-11
Exhibit 38: Inflows in liquid funds continue albeit low

120000 80000 Net Inflow ( | Cr ) 40000 0 -40000 -80000 -120000 Nov-11 Oct-11 Aug-11 May-12 Aug-12 Dec-11 Jan-12 Mar-12 Sep-11 Jun-12 Feb-12 Apr-12 Jul-12 -10066 32745 5861 26429 6860 75752 25052 17708 14775
Exhibit 39: YTD Good AUM growth

182617 168625
200000 180000 160000 140000 120000 100000 80000
162553
166521
157455
128537
| Crore
120713
147812
-41078
-48839 -76537
-25128
Nov-11
Oct-11
Jan-12
80354
156844
158853 Jun-12
178136 Jul-12
5Yr
Aug-11
Liquid Funds
Exhibit 40: High short-term rates help funds post higher return
11.0
Liquid funds will deliver better risk adjusted return
9.0 Annualised Returns % 7.0 5.0 3.0 1.0 -1.0
8.10 7.52
8.48 7.84
9.11 8.43
9.14 8.69 6.966.75 6.966.95
1M
3M
6M
1 Yr Crisil liquid Fund Index
3Yr
Category Average
Source: Crisil Fund Analyser, , ICICIdirect.com Research Note : Returns are annualised returns as on September 17, 2012
Exhibit 41: Top recommended Liquid funds

Particulars/Period 1M 3M 6M 1 Yr 3Yr 5Yr
HDFC Cash Management Fund - Savings Plan HDFC Liquid Fund Reliance Liquid Fund - Treasury Plan Crisil liquid Fund Index Category Average
8.82 8.70 8.16 7.52 8.10
9.17 8.94 8.54 7.84 8.48
9.92 9.62 9.11 8.43 9.11
May-12
9.80 9.65 9.21 8.69 9.14
7.56 7.37 7.15 6.75 6.96
Aug-12
Sep-11
Dec-11
Feb-12
Mar-12
Apr-12
193466
7.65 7.48 7.32 6.95 6.96
Page 18
View Ultra-short term: Positive Short-term: Positive Long-term: Neutral
Income Funds
The RBI in its Mid quarter monetary policy review as expected did not cut the repo rate but reduced CRR by 25 bps The RBI welcomed recent steps by GoI on fuel price hike (fiscal step) and FDI decisions (steps on supply side) and promised to reinforce their positive impact; while keeping its focus on inflation management While near term focus on inflation was expected, there is also a clear commitment to support supply side and fiscal measures of the GoI. Very importantly, the RBI is clearly not shirking its responsibility on growth; just waiting for a more opportune time to act If the government were to follow through recent steps with more on the fiscal side, we believe conditions will start to fall in place for the RBI to support growth via rate cuts Any mid term rise in yield should, therefore, be seen as an opportunity to enter into higher duration funds. Dynamic bond funds in the income fund space are best suitable in current situation. As rates come down G sec curve will be the first to move and dynamic funds can capture the same via increasing exposure to government securities in the portfolio
Exhibit 42: Ultra short term, short term income funds attracting inflows
25000 20000 15000 10000 5000 0 -5000 -10000 -15000 -20000 Aug-11 21670 17874 8288 -1735 -6925 -15263 Nov-11 Oct-11 Dec-11 Sep-11 -2527 -2926 -7654 15801567
Exhibit 43: AUM increase on capital appreciation and inflows
318029
314680
313042
304075
298569
297957
297540
Net Inflows (| .Cr)
400000
| Crore
7548
300000 200000 100000 0
Aug-11
Nov-11
Oct-11
290844
309738
313422
316735 Jun-12
340181
7.5
-15401 May-12 Aug-12 Jun-12 Jan-12 Feb-12 Mar-12 Apr-12 Jul-12
Income Funds AUM
Exhibit 44: Periodic returns (category average)

12.0 Annualised Return % 10.0 8.0 6.0 4.0 2.0 0.0 1M 3M Ultra Short Term 6M Short Term 1 Yr 3Yr 5Yr 8.5 11.0 9.8 8.9 9.6 9.4 9.6 10.310.0
9.3 9.6 9.6 7.3 7.6 7.0
May-12
8.2
Ultra short-term and short-tern funds should be preferred
Long term income
Source: CRISIL Fund Analyser, ICICIdirect.com Research, Returns are annualised returns as on September 17 ,2012
Page 19
Aug-12
7.3
Dec-11
Sep-11
Jan-12
Feb-12
Mar-12
Apr-12
Jul-12
349311
Exhibit 45: Top recommended ultra short-term funds

Particulars/Period
Ultra-short-term...most of the gains has been achieved
1M
3M
6M
1 Yr
3Yr
5Yr
IDFC Money Manager Reliance Meduim Term Tempelton India Low Duration Crisil liquid Fund Index Average
9.41 9.60 9.52 7.52 8.52
9.73 9.97 9.82 7.84 8.91
11.40 10.96 10.68 8.43 9.62
9.66 9.81 10.26 8.69 9.32
7.48 7.74 N.A 6.75 7.27
7.35 7.59 N.A 6.95 7.47
Source: CRISIL Fund Analyser, ICICIdirect.com Research Note : Returns are annualised returns as on September 17, 2012
Exhibit 46: Top recommended short-term funds

Short-term funds will benefit as short-tern yields are likely to decline first compared to long-term yields
Particulars/Period
1M
3M
6M
1 Yr
3Yr
5Yr
Birla Sun Life Dynamic Bond Fund HDFC High Interest Fund - Short Term Plan ICICI Prudential Short Term Plan Templeton India Short Term Income Plan Crisil Short Term Bond Fund Index Average
10.72 10.29 10.20 10.94 9.08 9.82
10.34 10.32 10.19 10.36 9.49 9.62
10.93 10.46 10.08 11.09 8.90 10.29
10.44 9.59 9.40 9.78 7.89 9.55
8.10 7.69 7.25 8.22 7.52 7.57
9.60 9.05 8.87 9.21 6.53 8.24
Exhibit 47: Top recommended income long-term funds

Dynamic bond fund can capture the first downward movement in the G sec curve
Particulars/Period
1M
3M
6M
1 Yr
3Yr
5Yr
IDFC Dynamic Bond Fund Reliance Dynamic Bond Fund SBI Dynamic Bond Fund Crisil Composite Bond Fund Index Category Average
10.27 12.01 12.89 9.74 10.99
9.45 9.45 9.52 8.90 9.43
11.38 11.38 10.87 9.20 9.98
11.38 11.36 12.17 9.01 9.58
7.18 7.69 9.24 6.76 7.04
9.25 5.19 5.14 6.81 7.28
Page 20
View Short-term: Neutral Long-term: Neutral
Gilt Funds
Gilt funds may remain volatile as supply concerns and rate cut expectation may keep playing in the gilt market Though from the recent policy RBIs stance towards growth the debate now is not about whether interest rate would decline or not but when that would the same happen Second half borrowing calendar is due to be announced by the month end and will be one factor to be watched The outlook for G-Secs has incrementally improved. However, since sustained supply concerns remain, there may not be a secular rally in the segment. It is better played through dynamic funds with opportunistic exposure to government securities
Exhibit 48: Some profit booking

1000 Net Inflow ( | Cr ) 500 0 -500 -1000 -1500 Nov-11 Oct-11 May-12 Aug-12 Dec-11 Sep-11 Jan-12 Jun-12 Feb-12 Mar-12 Apr-12 Jul-12 -117 -252 -107 420 521 -88 53 -230 -371 -31
Exhibit 49: AUM stable

3731 3675 3659 4000 3500 3000 2500 2000 1500 1000 3442 3298 Jul-12
10.0 7.6 7.1 1 Yr
3Yr
3192
3140
3021
2743
| Crore
115 21
Nov-11
Jul-11
2663
3121
Sep-11
Jan-12
Mar-12
Glt Funds AUM
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
Exhibit 50: G-Sec funds return analysis

12.0 10.0 8.0 6.0 4.0 2.0 0.0 1M Gilt Short term 3M Gilt Medium to long term 6M 7.4 9.0 6.4 10.8 8.4 7.9 7.5 10.5 6.9
I-SEC Composite Gilt Index
Source: Crisil Fund Analyser, ICICIdirect.com Research Note : Returns are annualised returns as September 17, 2012
Exhibit 51: Top recommended gilt funds

Particulars/Period 1M 3M 6M 1 Yr 5Yr
ICICI Prudential Gilt - Investment - PF Option Birla Sun Life Gilt Plus - Regular Plan I-SEC Composite Gilt Index
8.97 10.53 10.78
4.97 2.92 7.88
8.15 6.35 10.45
May-12
3131
7.80 7.41 9.99
3266
5.32 4.98 7.33
3282
11.41 7.32 8.05
Page 21
Gold($/Ounce)
1800
Gold ETFs: Currency movements deciding price trend

Gold prices touched a new all-time high of | 32,500 per 10 gram on seasonal demand amid strong global trend on speculations that after ECB, central banks from the US and China would bring in more stimulus measures to revive economic growth, raising the demand outlook for the precious metal Global prices rose more than 7% in the last month to currently around US$1730 per tonne
1700 $/Oz 1600
1500 Aug-12 Jan-12 Apr-12 Mar-12 Jun-12 Jul-12 May-12 Sep-12 Feb-12
Higher prices, however, have particularly in China and India, than two years in the second Council. However, the demand robust
reduced the demand for the metal which fell to its lowest level in more quarter according to the World Gold from sovereign governments remains
Source: Bloomberg, , ICICIdirect.com Research
Gold (Mumbai Spot)

33000 32000 31000 30000 29000 28000 27000 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep12 12 12 12 12 12 12 12 12 Mumbai Gold Spot Prices |
Overall, jewellery and investment demand both fell substantially. Jewellery consumption was down 72.3 tonnes at 418.3 tonnes while investment fell 88.3 tonne to 302 tonne. Investment and jewellery demand from consumers in India, the world's No. 1 gold market, plummeted 38% to 181.3 tonnes in the second quarter Indian policy makers are making every effort to reduce gold imports so as to manage the current account deficit. This along with high gold prices in rupee terms is likely to keep Indian demand subdued for some more time International as well as domestic gold prices are likely to trade in a range as higher prices are keeping investors cautious while global macros are providing support Allocation to gold from an absolute return perspective should be avoided. It should form only a small part of the overall portfolio for diversification purposes
Exhibit 52: Assets under gold ETF have tripled in FY12 due to increase in gold prices
29450 29380 29950 30250 31050 Aug-12 10701
Source: Bloomberg, , ICICIdirect.com Research

27620 26600 27300
Exhibit 1: Highest ever outflow on profit booking

1200 1000 800 600 400 200 0 -200 -400 988 31050 32000 30000 569 494 455 28000 157 82 85 231 50 26000 95 88 24000 22000 20000 Aug-12 |
| Crore
22550
23400
27550
28050
11000 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000
33000 31000 29000 27000 25000 23000 21000 19000 17000 15000
29200
28430
28950
10218
10312
10086 Jun-12
121
Aug-11
Nov-11
Jun-11
Oct-11
Dec-11
Jul-11
Apr-12
Sep-11
Jan-12
Mar-12
Feb-12
Aug-11
Dec-11
Jun-12-227
Apr-11
Oct-11
Jun-11
Feb-12
Apr-12
AUM
Spot price
Net inflows (LHS)
Spot price
May-12
Jul-12
-22
-41
10398
252 234
5568
6119
7578
8173
9090
9568
9153
9614
9895
9866
Page 22
Model Portfolios Equity funds model portfolio

Investors who are wary of investing directly into equities can still get returns almost as good as equity markets through the mutual fund route. We have designed three mutual fund model portfolios, namely, conservative, moderate and aggressive mutual fund portfolios. These portfolios have been designed keeping in mind various key parameters like investment horizon, investment objective, scheme ratings, and fund management.
Exhibit 53: Equity model portfolio
Particulars
No changes have been made in the current month.
Aggressive
Moderate
Conservative
Review Interval Risk Return Funds Allocation Franklin India Prima Plus HDFC Top 200 ICICI Prudential Dynamic Plan ICICI Prudential Focussed Bluechip Eq. UTI Opportunites Grand Total(a+b)
Monthly Monthly Quarterly High Risk- High Return Medium Risk - Medium Low Risk - Low Return Return % Allocation 25 25 25 25 100 25 25 25 25 100 25 25 25 25 100
Source: , ICICIdirect.com Research
Since inception, all three portfolios have outperformed the benchmark BSE 100. FY13 YTD, Conservative portfolio outperformed due to 20% allocation to Birla Sunlife Dynamic Bond Fund in the first two months We have kept all portfolios fully invested since the last month.
Exhibit 54: Value of | 1 lakh investment in portfolio since inception

70.0 60.0 50.0 40.0 % 20.0 10.0 0.0 Aggressive Moderate Conservative BSE 100 30.0 64.57 58.46 57.92 49.86
Exhibit 55: Sharp rally led in the markets led to near term underperformance
Aggressive 6.00 5.00 4.00 3.00 2.00 1.00 0.00 % 4.56 4.20 Moderate Conservative 5.28 BSE 100 4.98
Source: : Crisil Fund Analyser, ICICIdirect.com Research Portfolio inception date : Sep 15, 2009; Returns as on September 17 ,2012,
Source: Crisil Fund Analyser , ICICIdirect.com Research Returns for FY13 YTD (September 17,2012)
Page 23
Debt funds model portfolio

We have designed three different mutual fund model portfolios for different investment duration namely less than six months, six months to one year and above one year. These portfolios have been designed keeping in mind various key parameters like investment horizon, interest rate scenarios, credit quality of the portfolio and fund management, etc. Keeping in mind current market scenario, allocation in the 0-6 months portfolio has been increased to 60% to ultra short term funds from 40% earlier. While keeping in mind the tactical G-sec opportunity, the allocation to dynamic bond funds has been increased in the six months to one year and one year and above portfolio. Based on the portfolios of individual funds, we have introduced new funds in the portfolio and replaced pure income funds with dynamic bonds funds
Time Horizon 0 6 months 6months - 1 Year q y Liquidity moderate return y Nominal Return Monthly Monthly Medium Return % Allocation 20 20 20 20 20 20 20 20 20 20 20 20 100 Above 1 Year Above FD Quarterly g Return
Exhibit 56: Debt funds model portfolio
Particulars Objective Review Interval Risk Return Funds Allocation Ultra Short term Funds IDFC Money Manager Fund - Investment Plan Templeton India Low Duration Fund Reliance Medium term fund Short Term Debt Funds Taurus Short Term Income Fund Birla Sunlife Dynamic Bond ICICI Prudential Short Term HDFC High Interest STP ICICI Prudential Regular Saving Long Term/Dynamic Debt Funds IDFC Dynamic Bond fund Reliance Dynamic Bond Fund SBI Dynamic Bond Fund Total
Source: ICICIdirect.com Research
20
100
20 20 100
Exhibit 57: Model portfolio performance : FY13 YTD (17th September 2012)
6.00 5.00 4.00 3.00 2.00 1.00 0.00 0-6 Months 6Months - 1Year Portfolio Index Above 1yr % 4.77 3.83 4.91 4.39 5.02
4.65
Source: Crisil Fund Analyser, , ICICIdirect.com Research
*Index: 0-6 months portfolio Crisil Liquid Fund Index, ; 6 months-1 year Crisil Short term Index
Above 1 year: Crisil Composite Bond Index
Page 24
I direct Top Picks

Exhibit 58: I-direct Top picks
Equity
Category Short Term Largecaps Positive View Long Term Positive Franklin India Bluechip HDFC Top 200 Fund ICICI Prudential Focussed Equity Fund UTI opportunites Fund Midcaps Positive Positive HDFC Midcap Opportunities ICICI Prudential Discovery Fund IDFC Premier Equity SBI Emerging Bluechip ELSS Positive Positve HDFC Tax Saver ICICI Prudential Tax Plan Franklin India Tax shield Top Picks
Debt
Category Liquid Funds Positive View Top Picks HDFC Cash Mgmnt Saving Plan Reliance Liquid Treasury Plan Ultra Short Term Positve IDFC Money Manager Fund - Investment Plan Plan A Reliance Meduim Term Templeton India Low Duration Fund Short Term Positive Birla Sun Life Dynamic Bond Fund HDFC High Interest STP Templeton India Short term ICICI Prudential Short Term Income Funds Neutral Reliance Dynamic Bond Fund IDFC Dynamic Bond Fund SBI Dynamic Bond Fund Gilts Funds Neutral ICICI Pru Gilt Inv. PF Plan Birla Sunlife Gilt Plus MIP Conservative Aggressive Positive Birla Sun Life MIP II Savings- 5 HDFC MIP- LTP Reliance Monthly Income Plan
Source: ICICIdirect.com Research
Page 25
Pankaj Pandey
Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com
pankaj.pandey@icicisecurities.com
Disclaimer
ICICI Securities Ltd. - AMFI Regn. No.: ARN-0845. Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India. The selection of the Mutual Funds for the purpose of including in the indicative portfolio does not in any way constitute any recommendation by ICICI Securities Limited (hereinafter referred to as ICICI Securities) with respect to the prospects or performance of these Mutual Funds. The same should also not be considered as solicitation of offer to buy or sell these securities/units. The investor has the discretion to buy all or any of the Mutual Fund units forming part of any of the indicative portfolios on icicidirect.com. Before placing an order to buy the securities/units forming part of the indicative portfolio, the investor has the discretion to deselect any of the securities/units, which he does not wish to buy. Nothing in the indicative portfolio constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the investor's specific circumstances. The details included in the indicative portfolio are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The securities included in the indicative portfolio may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs. This may not be taken in substitution for the exercise of independent judgement by any investor. The investor should independently evaluate the investment risks. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this indicative portfolio. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. ICICI Securities may be holding all or any of the securities/units included in the indicative portfolio from time to time. Please note that Mutual Fund Investments are subject to market risks, read the offer document carefully before investing for full understanding and detail. ICICI Securities Limited is not providing the service of Portfolio Management Services (Discretionary or Non Discretionary) to its clients. The information contained herein is strictly confidential and meant solely 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 any form, without prior written consent of ICICI Securities Limited. The contents of this mail are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. While due care has been taken in preparing this mail, I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any inaccurate, delayed or incomplete information nor for any actions taken in reliance thereon. This mail 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 I-Sec and affiliates to any registration or licensing requirement within such jurisdiction.

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Mutual Fund Review

November 19, 2009 | Mutual Fund

Mutual Fund Review

Mutual Fund Review

ICICI Securities Ltd. | Retail MF Research

Source: Bloomberg, ICICIdirect.com Research

Spree of reforms triggers rally across board

Source: Bloomberg, ICICIdirect.com Research Returns : July 2012

Source: Bloomberg, ICICIdirect.com Research Returns : July 2012

ICICI Securities Ltd. | Retail MF Research

10-Year Benchmark G-Sec Yield

Source: Bloomberg, ICICIdirect.com Research

Steeping of the yield curve

Source: Bloomberg, ICICIdirect.com Research

back of improved liquidity

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd. | Retail MF Research

Institutional fund flow

Source: Bloomberg, ICICIdirect.com Research

Source: Bloomberg, AMFI, ICICIdirect.com Research

ICICI Securities Ltd. | Retail MF Research

Reforms will likely extend the reach but will be at 20-30bps

Source: AMFI,ICICIdirect.com Research

Exhibit 4: AUM decline in most categories

Exhibit 5: gold ETFs AUM cross | 10,000 crore

Source: AMFI, ICICIdirect.com Research

Source: AMFI , ICICIdirect.com Research

Exhibit 6: Trend in AAUM (top 5 AMC)

110000 100000 90000 | Crore 80000 70000 60000 50000

Source: AMFI, ICICIdirect.com Research

ICICI Securities Ltd. | Retail MF Research

Category Analysis Equity funds

4.5 2.57 0.82 0.1

Exhibit 8: Highest outflow in current financial year

Exhibit 9: AUM down 3 % YTD FY13

-2809 Jan-12 Feb-12 Mar-12 May-12 Jun-12 Apr-12

-2286 Aug-12 Jul-12

170000 160000 Jul-11 Sep-11

Net inflow (Equity + ELSS)

AUM (Equity+ ELSS)

Source: AMFI, ICICIdirect.com Research

Source: AMFI, ICICIdirect.com Research

Exhibit 10: Deployment of equity funds (| crore)

Auto 7917 9431 -1514

Power 6600 7185 -585

Source: SEBI, ICICIdirect.com Research , Sector Classification (as per AMFI)

ICICI Securities Ltd. | Retail MF Research

Equity diversified funds

ICICI Securities Ltd. | Retail MF Research

View Short-term: Neutral Long-term: Positive

Equity infrastructure fund

CNX Infrastructure Index

Source: Bloomberg, ICICIdirect.com Research

Exhibit 13: Category average vs. Benchmark Indices

6M -0.23 5.71 -4.27 0.43 4.39 -1.45

1 Yr 1.72 10.49 -2.11 -1.45 8.16 -2.35

3 Yrs 3.4 5.19 -0.18 -2.02 3.25 -6.75

5 Yrs 3.68 N.A N.A 1.68 3.62 -4.38

ICICI Securities Ltd. | Retail MF Research

View Short-term: Positive Long-term: Positive

Equity Banking Funds

Performance during up and down turns