Jan 13, 2017 - Refineries/marketing ..... CRISIL Limited: CRISIL House, Central Avenue, Hiranandani Business Park, Powai
CRISIL FUND INSIGHTS Monthly funds newsletter from CRISIL Research Volume – 69 January 2017
Investment thoughts
ELSS: Harness equity investments and save tax Equity linked savings schemes (ELSS) have caught investors’ fancy over the past decade. Their popularity is rooted in tax benefits (if held for three years) and the opportunity to harness potential growth in equity. The category’s assets under management increased from around Rs 8,500 crore 10 years ago to over Rs 50,000 crore in December 2016.
Performance ELSS funds (represented by the CRISIL – AMFI ELSS Fund Performance index) returned 25% p.a., on average, in the three-year rolling period since June 2001 against 17% by equity bellwethers Nifty 50 and S&P BSE Sensex over the same period. However, investors need to increase their investment horizon to derive optimum benefit. Since ELSS invests in equity, it is exposed to risks associated with the asset class especially in a shorter time horizon of three years. This is validated by the minimum return of -11% given by the category over this period, which spelt capital losses.
How do they stack up with other products? For this analysis, we have taken popular tax saving options but excluded those that are mandatory in nature (employee provident fund) or linked to a specific goal such as retirement (NPS). Except for unit linked insurance plans (ULIPs), all other popular options are fixed income-oriented, thus reducing the ability to generate high inflationadjusted returns. Characteristics Returns
Lock in period
Tax treatment
ELSS Linked to equity market returns Full amount can be withdrawn after three years from date of allotment Dividend and maturity amount are tax-free
PPF
Increase in investment horizon positive for ELSS funds 25%
Returns
Investors can nullify this risk by increasing the investment period. The chart displayed alongside shows that ELSS have given on an average 20% CAGR returns over all periods analysed. The benefit of long term investment in addition to strong returns is reduction in volatility and increased minimum returns of the category. Over a 10-year investment horizon, ELSS funds have returned minimum 10%, which is more than both the inflation rate and returns of traditional instruments (~8%).
10% -5%
-20% 3 years 5 years Average return Volatility
7 years 10 years Minimum return Average inflation
Note – ELSS funds data represented by daily rolling returns of CRISIL-AMFI ELSS Fund performance index as of December 2016, Inflation data represented by average CPI inflation during the period
NSC
Tax Saving FDs
Insurance / ULIP Market linked based on investment chosen (equity / debt)
8.0%*, compounded annually
8.0%*, compounded half yearly 6.50%^
Lock-in period is 15 years; partial withdrawal permitted after completion of six years
No withdrawal prior to maturity; but investments can be used as collateral to avail loans from banks
No premature exits permitted
No surrender charges after five years
Tax exempt at contribution, accumulation, and withdrawal
Interest income taxed at income tax slabs
Interest income taxed at income tax slabs
All gains are tax-free
*Rate notified for Q4 FY16-17; ^SBI domestic term deposit rate for sums below Rs 1 crore and maturity from five to 10 years for public
Other benefits of ELSS Professional management: Fund managers are highly experienced and trained to pick the right stocks. Diversified portfolio of stocks: Equity diversification across market capitalisation puts investors in a more advantageous position to benefit from changes in equity market sentiment. Large cap exposure helps limit loss in a market downtrend, while small and mid-cap exposure boosts performance in an uptrend. Flexibility to take SIP route: Systematic investment plans (SIPs) help capture superior returns generated by equities and minimise the risk of investing in a volatile asset class. SIP is a hassle-free and affordable way of investing in mutual funds, as it ensures regular investments at both high and low points of the market. It captures the opportunity, which is otherwise difficult to forecast, and averages the cost through rupee cost averaging and instills discipline. However, investors must note that they can claim tax benefits only if they hold ELSS investments for at least three years. For the record, every SIP installment gets locked for three years. Thus, the last SIP of a one-year ELSS will finish its lock-in period only after another one year, i.e., four years from the start of the first SIP. Summing up With the tax season right around the corner, most individuals will begin their tax planning activities in earnest. Investors with an aggressive risk profile can look at investing in ELSS to save tax. Though these funds have the least investment horizon of three years to save tax up to Rs 46,350 (at the highest tax bracket), investors should hold on to these funds longer to derive optimum benefit.
● Domestic equity benchmarks Nifty 50 and S&P BSE Sensex ended down 0.47% and 0.10%,
Market - Overview
respectively, in December, but gained 3.01% and 1.95%, respectively, in 2016.
Indices Nifty 50 S&P BSE Sensex
% Change in Dec 2016 -0.47 -0.10
% Change in Nov 2016 -4.65 -4.57
Indicators 10 year Gsec Monthly CPI Inflation
Dec 30, 2016 6.51% 3.41%
Nov 30, 2016 6.42% 3.63%
● The biggest dampener in the month was worries about the impact of demonetisation on corporate earnings. The market fell after the Reserve Bank of India's (RBI's) unexpected move to maintain the repo rate in its monetary policy review on December 7, 2016.
● Discouraging domestic industrial production data, increasing possibility of a delay in the implementation of Goods & Services Tax (GST) and persistent selling by the foreign institutional investors (FIIs) were a few other discouraging cues.
● Globally, concerns over prospects of a steeper-than-expected US Federal Reserve (Fed) rate hike in 2017, uncertainty about US President-elect Donald Trump's policies, and anxiety about the state of the European banking system also weighed on the market.
●
However, further losses in Indian equities were capped owing to buying from domestic institutional investors (DIIs) and strength in the rupee against the dollar. The market was also boosted by the European Central Bank's (ECB's) decision to extend its quantitative easing (QE) programme until December 2017. Most Nifty indices ended down in December 2016. Nifty Pharma index was the top laggard – down 7.34% on weak earnings outlook. Metal stocks witnessed heavy selling pressure owing to demand worries amidst slowdown in China.
●
Mutual Fund – Overview 175,000
16.0
125,000
15.0
75,000
14.0
25,000
(Net Flows ₹ cr)
(AUM ₹ lakh cr)
17.0
13.0
-25,000
12.0
-75,000
11.0
Net flows (RHS)
Dec-16
Nov-16
Oct-16
Aug-16
Sep-16
Jul-16
Jun-16
Apr-16
May-16
Mar-16
Jan-16
Feb-16
Dec-15
-125,000
Industry Month-end AUM
Category returns 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 Debt Fund Performance Index CRISIL – AMFI Short Term Debt Fund Performance Index CRISIL – AMFI Ultra Short Fund Performance Index CRISIL – AMFI Liquid Fund Performance Index Gold Funds (ETFs and FoFs)
Absolute Monthly Returns% Dec-16 Nov-16 -1.64 -5.09 -2.06 -5.01 -2.59 -6.97 -2.11 -5.75 -2.17 -2.88 -2.09 1.16 -2.70 5.20 -0.88 2.41 -0.39 1.84 0.20 1.07 0.51 0.62 -3.18 -4.82
● The Indian mutual fund industry’s quarterly average assets under management (AUM) recorded their highest percentage and absolute annual growth since the Association of Mutual Funds in India (AMFI) started declaring quarterly AUM in September 2010.
● The industry grew 26.29%, or by Rs 3.53 lakh crore, to a new high of Rs 16.93 lakh crore (excluding fund of funds) in the year ended December 2016. Equity and short-term debt funds were the top contributors. Average AUM grew 5.13%, or by Rs 82,610 crore, on-quarter.
● Investor confidence in equity funds has been on the rise despite subdued performance by the asset class for the second consecutive year. The category attracted inflows of Rs 96,784 crore in 2016 and Rs 1.18 lakh crore in 2015 even though equity benchmark Nifty 50 returned 3% and 4%, respectively, in the mentioned periods. The category’s assets gained 23.88% during the year to close at a record high of Rs 5.63 lakh crore in December 2016. Assets gained 4.74% or Rs 25,449 crore in the quarter ended December led by inflows, despite the Nifty 50 losing 4.94% in the same period.
Top Stock Exposures – Dec 2016
Top Sector Exposures – Dec 2016
1.
HDFC Bank Ltd.
1.
Banks
2.
ICICI Bank Ltd.
2.
Pharmaceuticals
3.
Infosys Ltd.
3.
Computers - software
4.
State Bank of India
4.
Engineering, designing, construction
5.
Larsen & Toubro Ltd.
5.
Passenger/utility vehicles
6.
Maruti Suzuki India Ltd.
6.
Refineries/marketing
7.
Reliance Industries Ltd.
7.
Cement
8.
ITC Ltd.
8.
NBFC
9.
Sun Pharmaceutical Industries Ltd.
9.
Housing finance
10.
Indusind Bank Ltd.
10.
Auto ancillaries
New Stocks Entries and Exits in Mutual Fund Portfolios – Dec 2016 Entries
Exits
Laurus Labs Ltd.
Dredging Corporation of India Ltd.
Sah Petroleums Ltd.
Kesoram Industries Ltd.
NOCIL Ltd.
Selan Exploration Technology Ltd.
Balaji Amines Ltd.
Shivam Autotech Ltd.
Sudarshan Chemical Industries Ltd.
less sensitive to interest rate changes. Within the universe, short-term debt and ultra short-term funds assets’ increased by Rs 1 lakh crore and Rs 56,536 crore in the year to scale a new high of Rs 2.49 lakh crore and Rs 1.97 lakh crore in December 2016, respectively.
● Long-maturity debt funds’ assets posted lacklustre growth in 2016. Income funds’ assets rose 4.21% to Rs 1.08 lakh crore while gilt funds grew 2.17% to Rs 17,630 crore in the year ended December 2016. However, in the latest quarter, income and gilt funds witnessed absolute growth of Rs 10,845 crore and Rs 1,611 crore, respectively, on the back of hopes that the RBI may announce more policy easing measures. The yield on the 10-year benchmark bond eased to 6.51% by December-end 2016 from 6.96% a quarter ago and 7.76% a year ago.
● Investors continued to withdraw money from the gold ETFs category with consolidated outflows of the past four years totalling Rs 5,300 crore. The category’s average AUM fell 14.25% on-year and 20.12% on-quarter to Rs 5,181 crore in December 2016.
● AMFI bats for US’ 401 (k)-like product in budget proposals.
● Short-maturity debt funds are increasingly becoming popular as they are
Fund News
●
BSE launched the ‘BSE StAR MF’ mobile application and extended the cut off time for acceptance of subscription transaction of liquid funds as well as debt and equity schemes valuing at least Rs 2 lakh by half an hour on its mutual fund platform.
CRISIL Fund Rank 1 Schemes - Debt
Fund Focus
Mutual Funds' Performance Report Point to Point Returns %
Inception Date
Average AUM (Rs.Crore)
20-Jan-10
1716.18
3.54
1.68
1 3 6 1 3 Since Month Month Month Year Years Inception
Style Box
Std. Sharpe Deviation Ratio (%)
Debt Long ICICI Prudential Long Term Plan
-1.64 3.44
9.52 16.80 13.84
10.68
HDFC High Interest Fund - Dynamic Plan
-2.50 1.88
8.22 14.76 12.11
9.22
28-Apr-97
2161.44
3.29
1.29
Birla Sun Life Dynamic Bond Fund
-3.68 1.21
7.20 14.04 12.08
9.11
27-Sep-04 14603.48
3.16
1.36
-0.89 2.59
7.05 12.67 10.59
9.22
1-Jan-10
8152.56
2.32
2.43
UTI-Banking & PSU Debt Fund
0.02
6.50 11.70 NA
9.90
3-Feb-14
1267.40
1.38
3.44
IDFC Super Saver Income Fund - Medium Term
-0.43 2.22
5.52
9.93 9.53
7.72
8-Jul-03
4498.71
1.48
2.08
HDFC Gilt Fund - Long Term Plan
-3.45 1.79
8.92 16.54 13.77
8.23
25-Jul-01
3457.62
4.00
1.46
Reliance Gilt Securities Fund
-2.45 3.49
10.41 16.96 13.89
9.75
22-Aug-08
1246.40
3.93
1.51
Reliance Corporate Bond Fund
-0.70 2.00
6.35 11.15 NA
10.62
26-Jun-14
3180.65
1.72
2.46
Kotak Medium Term Fund
-0.64 1.99
6.29 11.00 NA
10.81
21-Mar-14
2918.69
1.53
2.65
JM High Liquidity Fund
0.54
1.70
3.53
7.74 8.43
8.06
31-Dec-97
5365.56
0.32
3.09
Indiabulls Liquid Fund - Existing Plan
0.55
1.73
3.61
7.87 8.48
8.90
25-Oct-11
6415.43
0.32
3.44
Tata Liquid Fund
0.52
1.65
3.45
7.57 8.29
7.41
23-May-03 3077.86
0.32
2.60
Birla Sun Life Floating Rate Fund - Long Term
0.03
2.03
4.94
9.59 9.34
9.01
30-Mar-09
5580.56
0.89
3.08
Axis Treasury Advantage Fund
0.29
1.67
3.85
8.20 8.47
8.33
9-Oct-09
2602.58
0.49
2.90
DSP BlackRock Ultra Short Term Fund
0.26
1.83
4.17
8.52
8.66
10-Mar-15
3317.27
0.61
2.87
DHFL Pramerica Short Term Floating Rate Fund
0.32
1.81
3.98
8.35 8.59
8.20
9-Oct-09
1041.92
0.58
2.71
Debt Short
3.05
Gilt
Credit Opportunities Fund
Liquid
Ultra Short Term
NA
CRISIL Mutual Fund Ranks as of September 2016
16
0
3 Months
Oct-Dec
227989
215986
HDFC Mutual Fund
221825
Reliance Mutual Fund
195845
Birla Sun Life Mutual Fund SBI Mutual Fund UTI Mutual Fund
Mutual Fund Name
11.2
11.1
10.3
14.4
6 Months
1 Years 3 Years 5 Years Period Reliance Gilt Securities Fund Category I-SEC Li-Bex
Average Assets under Management - A Bird's Eye View Jul-Sep
3.0
4
Average AUM is 3-months average number as disclosed by AMFI for the period OctoberDecember 2016
2016 2016 Change % (Rs.Crore) (Rs.Crore) (Rs.Crore) Change
8
13.7
SENSITIVITY
13.0
Low
Risk ratios for Debt Long and Gilt categories are for a period of 3 years; risk free rate: 7.68% (average T-bill auction cut off rate during the period)
12
16.6
INTEREST
Medium RATE
17.4
High
9.5
Low
18.0
Medium
3.8
High
9.9
CREDIT QUALITY
Risk ratios for Debt Short, Credit Opportunities, Liquid and Ultra Short Term categories are for a period of 1 year; risk free rate: 6.72% (average T-bill auction cut off rate during the period)
9.0
Risk Ratios are annualised
ICICI Prudential Mutual Fund
Gilt funds tend to benefit when interest rates ease, as seen in the latest one year. The 10-year G-sec yield declined to 6.44%, down 1.32% from a year ago, led by interest rate cut by the RBI (by 50 bps during the year) and downward pressure exerted by demonetisation. The fund has actively managed the interest rate risk during the period. For instance, in February 2016, when 10-year G-sec yields were in an upward trajectory at 7.78%, the fund had average maturity of 11.73 years. Conversely, in November 2016, when 10-year G-sec yields softened to 6.54%, the fund increased its average maturity to 14.24 years. Funds with a longer maturity benefit more than those with a shorter maturity in a falling interest rate scenario and vice versa. 20
Returns are annualised for periods above 1-year, other wise actualised
Oct-Dec
Performance
Chart: Performance as on January 13, 2017
Point to Point Returns are as on December 31, 2016
Mutual Fund Name
Launched in August 2008, Reliance Gilt Securities Plan is an open-end government security (G-sec) scheme that seeks to generate optimal credit risk-free returns by investing in a portfolio of securities issued and guaranteed by the central and state governments. It has been ranked CRISIL Fund Rank 1 and 2 (top 30 percentile of its peer group) for the past nine quarters ended September 2016 as per CRISIL Mutual Fund Rankings. Its average assets under management (AUM) totalled Rs 1,246 crore in the quarter ended December 2016.
3.3
ICICI Prudential Banking & PSU Debt Fund
Reliance Gilt Securities (CRISIL Fund Rank 1)
Returns (%)
Scheme Name
Note: Returns above one year are annualised
Jul-Sep
2016 2016 Change % (Rs.Crore) (Rs.Crore) (Rs.Crore) Change
12003
5.56
HSBC Mutual Fund
8670
8503
167
1.97
213086
8738
4.10
IDBI Mutual Fund
7761
8128
-367
-4.52
183129
12717
6.94
Motilal Oswal Mutual Fund
7131
6393
738
11.55
180808
168881
11928
7.06
Edelweiss Mutual Fund
6826
2256
4571
202.63
140997
131554
9443
7.18
Mirae Asset Mutual Fund
6343
5235
1108
21.16
129389
127333
2056
1.61
BNP Paribas Mutual Fund
6032
6069
-36
-0.60
Kotak Mahindra Mutual Fund
82135
70387
11748
16.69
PRINCIPAL Mutual Fund
4868
5136
-269
-5.23
Franklin Templeton Mutual Fund
75783
73666
2117
2.87
Union Mutual Fund
3056
3387
-331
-9.77
DSP BlackRock Mutual Fund
58357
49852
8506
17.06
BOI AXA Mutual Fund
2896
3636
-740
-20.35
IDFC Mutual Fund
57998
56656
1341
2.37
Taurus Mutual Fund
2339
2663
-324
-12.16
Axis Mutual Fund
49281
47179
2101
4.45
Mahindra Mutual Fund
1457
950
507
53.35
Tata Mutual Fund
38271
39691
-1420
-3.58
IL&FS Mutual Fund (IDF)
995
970
24
2.52
L&T Mutual Fund
35191
32667
2524
7.73
Peerless Mutual Fund
946
971
-25
-2.59
Sundaram Mutual Fund
27013
26700
313
1.17
Quantum Mutual Fund
858
806
52
6.48
DHFL Pramerica Mutual Fund
24807
24473
334
1.37
PPFAS Mutual Fund
676
668
8
1.19
Invesco Mutual Fund
23617
22560
1056
4.68
IIFL Mutual Fund
424
370
53
14.36
LIC Mutual Fund
18022
16453
1569
9.54
IIFCL Mutual Fund (IDF)
399
388
11
2.72
JM Financial Mutual Fund
13522
13612
-90
-0.66
Escorts Mutual Fund
286
295
-8
-2.85
Baroda Pioneer Mutual Fund
10785
11703
-917
-7.84
Sahara Mutual Fund
67
80
-13
-15.80
Indiabulls Mutual Fund
10227
6731
3495
51.93
Shriram Mutual Fund
Canara Robeco Mutual Fund
9411
9320
91
0.98
Grand Total
38
43
-5
-12.72
1693339
1610729
82610
5.13
AAUM is the quarterly average number and excludes Fund of Funds
Active management was seen in the performance of the fund, as it returned 18% in the past one year for the period ended January 13, 2017 versus 16.6% for the category (CRISIL ranked gilt funds) and 17.4% for the benchmark (I-Sec Li-Bex). It beat the benchmark and the category in the less than one-year period, but closed lower than the benchmark in the longer horizon. Since inception, the fund has returned 9.8%.
Asset allocation In the past three years ended December 2016, the fund had 96% in G-secs, and remaining in cash and cash equivalents.
Fund Managers’ Profile Mr Prashant Pimple, a B.Com and MMS, is Senior Fund Manager – Fixed Income at the fund house and has a total experience of over 17 years in capital markets. Every month, Fund Focus will feature one of the CRISIL Mutual Fund Rank 1 or 2 Schemes
Crossword Corner – boost your financial knowledge Horizontal:
1
2
4
3
5
4)
A tax saving mutual fund category with a lock-in period of 3 years (1,1,1,1)
6)
An investment in gold in electronic form (5,4)
9)
A sector impacted by the Centre's currency ban (4,6)
12) Funds released by a mutual fund house periodically, which can be paid out or reinvested (8)
Vertical: 6
9
7
10
8
11
12
1)
An investment-cum-insurance scheme with a lock-in period of 5 years (1,1,1,1)
2)
Equity markets pass through this phase when sentiment for stocks is weak (4)
3)
A rise in prices in the economy at an aggregate level (9)
5)
Periodic investment in a mutual fund at predefined intervals to tide over equity volatility (1,1,1)
7)
The tax status enjoyed by the PPF scheme (1,1,1)
8)
A proposed indirect tax regime in India (1,1,1)
10) A retirement scheme in which both employee and employer contribute a percentage of their monthly salaries (1,1,1) 11) India's securities market regulator (1,1,1,1)
Answers
Horizontal:
4) ELSS (Equity Linked Savings Scheme) 6) Paper Gold 9) Real Estate 12) Dividend
Vertical:
1) ULIP (Unit Linked Insurance Plan) 2) Bear 3) Inflation 5) SIP (Systematic Investment Plan) 7) EEE (Exempt Exempt Exempt) 8) GST (Goods and Services Tax) 10) EPF (Employee Provident Fund) 11) SEBI (Securities and Exchange Board of India)
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]
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