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Sep 18, 2017 - just a couple of clicks of the mouse or the smart phone. ... I-SIP registration – 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; [email protected] About CRISIL Limited

CRISIL is an agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers. We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

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