Sep 18, 2017 - just a couple of clicks of the mouse or the smart phone. ... I-SIP registration â If an investor wants
CRISIL FUND INSIGHTS Monthly funds newsletter from CRISIL Research
Volume – 77 September 2017
Investment thoughts
Go tech-savvy for seamless investing Technology has become an all-embracing part of everyday life. It allows us wireless access to almost everything with just a couple of clicks of the mouse or the smart phone. Its pervasive nature has made inroads into the financial investment universe as well, and made tasks easier and convenient. Mutual funds and their allied partners, too, are leveraging technology to hasten and smoothen the customer on-boarding process.
The case for leveraging technology in mutual fund investing Technology gels well with India’s demographic structure, where the median age is less than 30 years. Also termed millennials, this cohort presents immense opportunities for the mutual fund industry as they are at ease with using technology to conduct the entire gamut of financial transactions. The biggest benefit for investors is convenience, which includes paperless experience and ease of transaction. Investors are spared mountain of paperwork. Advent of E-KYC (know your customer) is a perfect example of this, wherein investors can upload their verification details just by linking it with their Aadhaar card as against the previous practice of in-person verification which was time consuming as well as cumbersome. Also, investors can now transact and review their investments with just one click of a button. Online platforms for seamless experience The platforms available for online investment in mutual funds, both web and mobile-enabled (app), are as follows:
Cautionary points for first-time online investors ●
E-KYC compliant – Investors need to be compliant with KYC for investing in mutual funds. It is a one-time process. First-time investors need to update their personal details, PAN and Aadhaar number digitally, and they receive a one-time password or OTP. After entering the OTP, the web form gets auto populated. However, there is an investment cap of Rs 50,000 per fund house per year.
●
Updating bank details – In any online mode, investors need to update their bank details, which include IFSC and MICR code along with the account number. They also need to upload the softcopy of a cancelled cheque.
●
Nomination details – It is very important to mention details of a nominee to spare legal heirs the hassle in the event of an investor’s death. Absence of this information can lengthen the procedure by necessitating documents such as the deceased’s will, court order in the absence of a will, indemnity and legal heir certificate.
●
I-SIP registration – If an investor wants to make systematic investment plan or SIP investments, he/ she will be provided a unique registration number, which needs to be updated with the bank’s bill payment so that the SIP installment is auto debited.
Investors can reduce the cost of investing by purchasing direct plans online, as they do not include distribution fees. However, not all online platforms provide the options to buy direct plans and some do charge a small fee. Nevertheless, the use of technology in investing is indeed a boon as it offers convenience in terms of tracking and transacting and expunges mis-selling.
Market - Overview
● Geo-political tensions and discouraging domestic developments dragged down domestic equity indices in August 2017. Benchmarks Nifty 50 and S&P BSE Sensex lost 2.41% and
% Change in Aug
% Change in July
2017
2017
Nifty 50
-1.58
5.84
S&P BSE Sensex
-2.41
5.15
Aug 31, 2017
July 31, 2017
Indices
Indicators
1.58%, respectively.
● The market fell sharply after capital market regulator Sebi directed stock exchanges to initiate action against suspected 331 shell companies.
● Release of downbeat domestic manufacturing and services activity data and the Reserve
10 year Gsec
6.53%
6.47%
Monthly CPI Inflation
3.36%
2.36%
Bank of India’s (RBI’s) neutral monetary policy stance, despite reducing the repo rate in its policy meet on August 2, 2017, also impacted local indices.
● Rising tensions between India and China, and heavy selling of domestic equities by foreign institutional investors (FIIs) acted as a dampener.
● ●
More losses were, however, capped after the Securities Appellate Tribunal (SAT) lifted Sebi’s trading curbs on the shares of six suspected shell companies. India’s and China's agreement to end the Doklam stand-off, robust GST revenue collection getting a good start in the first month (July 2017) and buying by domestic institutional investors (DIIs) further boosted sentiment for domestic equities.
●
Most Nifty indices ended lower in August. Nifty PSU Bank index was the top laggard – down around 12% after the country’s largest public sector bank reported a big jump in bad assets in the June quarter.
●
Meanwhile, Nifty Metal index rose around 7% on the back of recovery in global commodity prices.
Mutual Fund – Overview 20
100,000 25,000
18
-50,000
16
-125,000
Net flows (RHS)
Aug-17
Jul-17
Jun-17
Apr-17
May-17
Feb-17
Mar-17
Jan-17
Dec-16
Oct-16
Nov-16
Aug-16
Sep-16
14
Top Stock Exposures – Aug 2017
Top Sector Exposures – Aug 2017
1.
HDFC Bank Ltd.
1.
Banks
2.
ICICI Bank Ltd.
2.
Pharmaceuticals
3.
State Bank of India
3.
Computers - Software
4.
Infosys Ltd.
4.
Engineering, designing, construction
5.
Larsen & Toubro Ltd.
5.
Refineries/marketing
6.
Housing Development Finance Corporation Ltd.
6.
Passenger/Utility Vehicles
7.
ITC Ltd.
7.
NBFC
8.
Maruti Suzuki India Ltd.
8.
Housing Finance
9.
Reliance Industries Ltd.
9.
Cement
10.
Kotak Mahindra Bank Ltd.
10.
Cigarettes
New Stocks Entries and Exits in Mutual Fund Portfolios – Aug 2017
Industry Month-end AUM Absolute Monthly Returns% Aug-17 Jul-17
Category returns
●
(Net Flows ₹ cr)
175,000
(AUM ₹ lakh cr)
22
CRISIL – AMFI Large Cap Fund Performance Index CRISIL – AMFI Diversified Equity Fund Performance Index CRISIL – AMFI Small & Midcap Fund Performance Index CRISIL – AMFI ELSS Fund Performance Index CRISIL – AMFI Balance Fund Performance Index CRISIL – AMFI MIP Fund Performance Index CRISIL – AMFI Gilt Fund Performance Index CRISIL – AMFI Income Fund Performance Index CRISIL – AMFI Short Term Debt Fund Performance Index CRISIL – AMFI Ultra Short Fund Performance Index CRISIL – AMFI Liquid Fund Performance Index
-1.38 -0.72 -0.81 -1.17 -1.17 -0.07 0.23 0.38 0.63 0.57 0.54
5.55 5.02 3.60 5.03 4.19 1.90 0.59 0.72 0.89 0.74 0.55
Gold Funds (ETFs and FoFs)
3.07
-0.46
Reaching a crucial milestone, the Indian mutual fund industry's assets
Entries
Exits
Cochin Shipyard Ltd.
Cosmo Films Ltd.
HEG Ltd.
Deep Industries Ltd.
Centrum Capital Ltd.
EMCO Ltd.
Shipping Corporation Of India Ltd.
Gayatri Bioorganics Ltd.
BLS International Services Ltd.
Ortel Communications Ltd.
Gravita India Ltd. Avadh Sugar & Energy Ltd.
●
under management (AUM) surpassed the Rs 20 lakh crore mark in August.
crore in August thanks to inflows of Rs 21,352 crore, reversing the outflows in the preceding three months.
AUM rose 3.1%, or by Rs 62,384 crore, to Rs 20.59 lakh crore, according to the Association of Mutual Funds in India (AMFI) data.
●
Gilts funds attracted inflows of Rs 1,420 crore, highest in 29 months, compared with inflows of Rs 651 in July. Robust inflows helped gilt funds'
consecutive month. The category attracted record inflows of Rs 20,362
AUM grow 9.4%, or by Rs 1,463 crore, to Rs 17,069 crore.
crore. However, mark-to-market losses restricted further rise in AUM. Balanced funds witnessed record inflows of Rs 8,783 crore - 39th straight month of inflows - which increased its assets 5.8%, or by Rs 7,077 crore, to a record high of Rs 1.28 lakh crore.
●
●
Investors continued to pour money into equity funds for the 17th crore, helping its AUM grow 2.3%, or by Rs 14,470 crore, to Rs 6.44 lakh
●
AUM of liquid funds rose around 8%, or by Rs 25,688 crore, to Rs 3.49 lakh
Debt funds' assets grew 1.5%, or by Rs 12,704 crore, to Rs 8.58 lakh crore on the back of inflows and MTM gains. However, inflows in the category dwindled to Rs 8,390 crore in August from Rs 60,084 crore in the preceding month.
Fund News
●
Among regulatory developments, Sebi may tweak its investment advisory guidelines for mutual fund distributors.
●
Sebi wants the mutual fund industry to benchmark the returns of its equity schemes against a total return index.
●
Sebi is planning new rules to push mutual funds to merge common plans and cut expenses charged to investors.
●
Sebi's mutual fund advisory panel has recommended strict definitions on how mutual funds are categorised.
● IIFL Asset Management bought a 2.59% stake in Reliance Nippon Life Asset Management (RNAM) for about Rs 390 crore. ● Edelweiss Mutual Fund to disclose the performance of its equity schemes against the total return index of their respective benchmarks.
CRISIL Fund Rank 1 Schemes - Equity
Fund Focus
Mutual Funds' Performance Report Point to Point Returns % Scheme Name
Inception Date
1 3 6 1 3 Since Month Month Month Year Years Inception
Average AUM (Rs.Crore)
Style Box
Std. Sharpe Deviation Ratio (%)
Balanced HDFC Balanced Fund
-1.19 3.72
12.10 16.75 14.68
16.93
11-Sep-00 11349.36
10.54
0.71
Aditya Birla Sun Life MIP II - Wealth 25 Plan
0.69
4.68
9.77 13.10 14.90
10.72
22-May-04 1836.44
6.00
1.22
ICICI Prudential MIP 25
0.14
3.24
8.04 11.74 12.23
10.59
30-Mar-04 1324.39
4.62
1.07
MIP Aggressive
Style Box Legend
CRISIL Mutual Fund Ranks as of June 2017
Value
Point to Point Returns are as on August 31, 2017
Blend
Growth
Large Cap
Returns are annualised for periods above 1-year, other wise actualised
Small & Midcap
Risk Ratios are annualised
Diversified
Period for Risk Ratios is three years For Sharpe Ratio the risk free rate is 7.10% - the average 91-day T-Bill auction cut-off rate for three years Average AUM is 3-months average number as disclosed by AMFI for the
Medium
Low
period April-June 2017
Launched in March 2004, Aditya Birla Sun Life MIP II Wealth 25 Plan is a debt-oriented hybrid fund and has been ranked in the top 10 percentile (CRISIL Mutual Fund Rank 1) since June 2016. The fund’s primary objective is to generate regular income to make monthly payments or distribution to unit holders and secondary aim is growth of capital. The fund’s average assets under management (AUM) tallied at Rs 1,836 crore in June 2017.
Performance
CREDIT QUALITY High
Aditya Birla Sun Life MIP II - Wealth 25 Plan (CRISIL FUND RANK 1)
High
INTEREST
Medium
RATE
Low
SENSITIVITY
The fund has given 10.8% compounded annual growth rate (CAGR) since its inception versus 9.7% by the category (MIP Aggressive Funds as per CRISIL ranking – June 2017) and 8.4% by the benchmark (CRISIL MIP Blended Fund Index). The fund has also outdone the category and its benchmark in all the periods analysed.
Chart 1 – Performance as on September 18, 2017 15
Mutual Fund Name
Jan-Mar
Apr-Jun
2017 2017 Change % (Rs.Crore) (Rs.Crore) (Rs.Crore) Change
Mutual Fund Name
Jan-Mar
2017 2017 Change % (Rs.Crore) (Rs.Crore) (Rs.Crore) Change
10.4
9.2
10.1
14.7
10.9
10.4
14.2
10.1
9.8
6
8.5
Apr-Jun
14.2
Average Assets under Management - A Bird's Eye View
9
9.7
Returns (%)
12
3 0
7.11
Indiabulls Mutual Fund
10071
15867
6.69
HSBC Mutual Fund
9316
8812
504
5.72
12073
5.72
Mirae Asset Mutual Fund
9201
7457
1744
23.39
5 Years Period Aditya Birla SL MIP II - Wealth 25 Category CRISIL MIP Blended Fund Index
10666
5.47
IDBI Mutual Fund
7296
7719
-423
-5.48
Note: Returns above one year are annualised
11791
7.51
Edelweiss Mutual Fund
7272
6918
354
5.12
6.23
BNP Paribas Mutual Fund
6477
5891
587
9.96
8981
9.74
PRINCIPAL Mutual Fund
5422
5347
75
1.41
9004
11.03
BOI AXA Mutual Fund
4014
3552
461
12.99
6814
10.62
Union Mutual Fund
3767
3416
351
10.27
The fund has performed well in terms of risk-adjusted basis (as measured by Sharpe ratio) in the past three years. It has given a score of 0.1 compared with the category’s 0.08.
5899
10.22
Mahindra Mutual Fund
2105
1995
110
5.50
60636
725
1.20
IIFCL Mutual Fund (IDF)
1858
412
1446
350.67
44484
39300
5184
13.19
Quantum Mutual Fund
1066
962
104
10.85
Tata Mutual Fund
42148
42619
-471
-1.11
IL&FS Mutual Fund (IDF)
1046
1020
27
2.61
Sundaram Mutual Fund
32178
29370
2809
9.56
Peerless Mutual Fund
955
1062
-106
-10.02
DHFL Pramerica Mutual Fund
25720
26117
-397
-1.52
IIFL Mutual Fund
820
565
256
45.27
Invesco Mutual Fund
24258
23528
730
3.10
PPFAS Mutual Fund
760
696
64
9.22
LIC Mutual Fund
22514
21475
1039
4.84
Taurus Mutual Fund
583
1876
-1293
-68.94
JM Financial Mutual Fund
12313
13668
-1355
-9.91
Escorts Mutual Fund
258
243
16
6.52
Baroda Pioneer Mutual Fund
10764
10324
440
4.26
Sahara Mutual Fund
67
67
0
0.14
Canara Robeco Mutual Fund
10752
9940
813
8.18
Shriram Mutual Fund
42
41
1
3.11
Motilal Oswal Mutual Fund
10373
8115
2257
27.82
Grand Total
1951775
1829583
122191
6.68
ICICI Prudential Mutual Fund
260225
242961
17264
HDFC Mutual Fund
253044
237178
Reliance Mutual Fund
222964
210891
Birla Sun Life Mutual Fund
205715
195049
SBI Mutual Fund
168816
157025
UTI Mutual Fund
145340
136810
8530
Kotak Mahindra Mutual Fund
101197
92216
Franklin Templeton Mutual Fund
90619
81615
DSP BlackRock Mutual Fund
70991
64177
Axis Mutual Fund
63599
57700
IDFC Mutual Fund
61361
L&T Mutual Fund
10820
-748
AAUM is the quarterly average number and excludes Fund of Funds
-6.92
1 Year
3 Years
10 Years
Portfolio analysis The fund’s debt portfolio was primarily invested in safe bets, with 90.4% of the total debt holdings in top rated papers (AAA and A1+) and government securities for the past three years ended August 2017. The interest rate risk was managed well by altering its modified duration. For instance, when the benchmark yield for five-six years’ maturity bucket fell from 7.18% in March 2017 to 6.91% in August 2017, the fund increased its modified duration from 5.73 years to 5.85 years. Further, the fund maintained average equity exposure of 29%, with finance, auto, banks, pharmaceuticals and industrial capital goods forming the top five sectors in three years ended August 2017.
Fund manager Mr Satyabrata Mohanty, CA & CFA, is Head - Mixed Assets and has over 18 years of experience in finance and research. Mr Vineet Maloo, B.Com & CA, is the equity fund manager and has 13 years of experience. Mr Pranay Sinha is fund manager – fixed income with around 11 years of experience in the financial markets. Every month, Fund Focus will feature one of the CRISIL Mutual Fund Rank 1 or 2 Schemes
Crossword Corner – boost your financial knowledge Vertical: 1
2
6
3
7
8
9
1)
Mutual funds send investors one single consolidated account statement every month, detailing all transactions (1,1,1)
2)
A transaction aggregating portal that offers various facilities to simplify the process of investing and tracking mutual fund investments (9)
3)
A type of fund that is based on credit management strategies (1,1,1,1)
4)
The total market value of assets that an investment company manages on behalf of investors (1,1,1)
5)
Institutions that register and maintain detailed records of investors' transactions for the convenience of mutual fund houses (1,1,1)
Horizontal:
4
10
5
6)
The process of identifying and verifying the identity of its clients (1,1,1)
7)
An industry standards organisation in India in the mutual funds sector (1,1,1,1)
8)
Feature whereby an investor is able to invest lump sum in a scheme and regularly transfer a fixed or variable amount into another scheme (1,1,1)
9)
Equity scheme that offers tax benefits under Section 80C (1,1,1,1)
10) A metric used to measure profitability of investments (1,1,1)
Answers 1) CAS (consolidated account statement), 2) MF utility, 3) CROP (credit opportunity funds), 4) AUM (assets under management), 5) RTA (registrar and transfer agent)
Vertical:
6) KYC (know your customer), 7) AMFI (Association of Mutual Funds in India), 8) STP (systematic transfer plan), 9) ELSS (equity-linked savings scheme), 10) IRR (internal rate of return)
Horizontal:
Contact Details
Deepak Mittal : +91 22 3342 8031;
[email protected] Vijay Krishnamurthy: +91 22 3342 8056;
[email protected] Dinesh Agarwal: +91 22 3342 3440;
[email protected] Amrita Sarkar : +91 22 3342 8405;
[email protected] Sandeep Tripathi : +91 22 3342 8047;
[email protected] Rajnikant Tiwari: +91 22 3342 2954;
[email protected] Ankur Nehra: +91 124 6722 418;
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