Jan 13, 2016 - Refineries/Marketing. 6. Reliance Industries Ltd ..... name, address, and email id, to fulfil your reques
CRISIL FUND INSIGHTS Monthly funds newsletter from CRISIL Research Volume – 57 January 2016
Investment thoughts
This tax season, grow your wealth with ELSS
With the financial year nearing closure, investing in tax saving instruments is high on everyone’s priority list – the vanilla options being five-year fixed deposits, the public provident fund (PPF), national savings certificates (NSC) etc. Agreed, these instruments promise safety and stability. However, the large youth population in India needs avenues that would complement their long investment horizon more commensurately. Equity is one such asset class that can deliver higher returns. Equity-linked savings schemes (ELSS) offered by domestic mutual funds allows retail investors to seek exposure to equity and save on their tax outgo, under Section 80C of the Income Tax Act.
ELSS – at a glance ■
Tax-saving mutual fund scheme that predominantly invests in a diversified portfolio of stocks
■
Units to be held by investors for at least three years to claim tax rebate
■
Falls under the exempt exempt-exempt (EEE) category (no capital gain tax and tax-free dividend)
■
Investments up to Rs 1.5 lakh allowed as deduction under section 80C
■
Investors can save up to Rs 15,450, Rs 30,900 and Rs 46,350 for tax brackets of 10.3%, 20.6% and 30.9% respectively, for investments of Rs 1.5 lakh.
■
Possible to invest regularly via systematic investment plans (SIPs) with as low as Rs 500 per month.
■
A longer investment horizon will ensure higher risk-adjusted return
■
Investments are subject to market risk and hence, investors must consider investment goals, time horizon, age and risk appetite
ELSS v/s traditional instruments - Lowest holding period, superior average returns Among tax saving instruments available under Section 80C, ELSS funds have the lowest holding period i.e. three years, while CRISIL’s analysis - represented by CRISIL – AMFI ELSS Fund Performance index - shows these funds have given an average 28% CAGR return over a 3-year rolling period since June 2001. This is more than twice the rate of return offered by traditional debt instruments (8-10%).
Widen investment horizon to reduce risks While ELSS funds have given an average three-year holding return of 28% (compounded), there is a flipside. The minimum return over this period was -10%, which spelt capital losses. Hence, investors should bear in mind, risks that come to the fore if they have a short-term horizon. Yes, this can this be offset – by stretching the investment horizon (see Chart 1). Even with average returns remaining over 20%, over a wider horizon, volatility diminishes gradually and the minimum return increases. Over a 10-year investment horizon, ELSS funds have offered a minimum return of 13%, still a failsafe higher return compared with traditional instruments. Systematic approach to investment Systematic investment plans (SIPs) allow individuals to park funds in ELSS, starting as low as Rs 500 per month, at regular intervals. SIPs will help investors benefit from rupee cost averaging, and thus offset volatility in the equity market. Also, instead of making a huge rush to invest in tax-saving instruments towards the last quarter, SIPs allow investors to spread their investment across the fiscal, starting from April itself. However, investors must note that they can claim tax benefits only if they hold the investments in ELSS for at least three years. For the record, every SIP installment gets locked for three years. Thus, the last SIP of a 1-year ELSS will finish its lock-in period only after another three years i.e., four years from the start of the first SIP.
Summing up
Chart 1: Risk versus return for ELSS 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% 3 year Average returns
5 year
7 year Minimum returns
10 year Volatility
Investors with a higher risk appetite and longer investment horizon can choose ELSS funds to seek exposure to equities and simultaneously, claim tax benefits. They can mitigate risks by having a longer term investment horizon. To be sure, they must carry out due diligence on schemes before investing. Investors can also refer to top funds within the ELSS category in the quarterly CRISIL Mutual Fund Ranking, available at www.crisil.com.
CRISIL FUND INSIGHTS Market - Overview Indices Nifty 50 S&P BSE Sensex
% Change in Dec 2015 0.14 -0.11
% Change in Nov 2015 -1.62 -1.92
Indicators 10 year Gsec Monthly CPI Inflation
Dec 31, 2015 7.76% 5.61%
Nov 30, 2015 7.79% 5.41%
■
Domestic indices were volatile, but ended almost flat in the last month of 2015. Among benchmarks, the Nifty 50 gained 0.14%, while the S&P BSE Sensex fell 0.11%.
■
For the calendar year, Nifty 50 and S&P BSE Sensex fell 4% and 5%, respectively for the first time since 2011 (when markets plummeted almost 25%).
■ ■
Several domestic and international events impacted market direction during the month.
■
On the flipside, sentiment was hit by the lack of progress in passage of key legislations, including the Goods & Service Tax (GST) bill and the Insolvency and Bankruptcy Code Bill in the winter session of Parliament.
Investors cheered the release of encouraging domestic macroeconomic numbers, including upbeat industrial output, narrowing of the current account deficit and an affirmation on India's long-term foreign currency and local currency issuer default ratings at 'BBB-' by Fitch.
■
Sentiment was dented further after the government lowered its GDP growth forecast for the current fiscal to 7-7.5%, from an earlier estimate of 8.1-8.5%, sporadic weakness in the rupee and persistent foreign outflows. A fall in global equities, amid a commodities rout and concerns over a possible rate hike by the Fed in the near term, affected the market. The US Fed hiked the interest rate by 25 bps in nearly a decade.
■
Nifty sectoral indices ended mixed in December. Among the indices analysed, Nifty Media surged 8%, buoyed by a rally in the index major. Nifty Metal index rose 5% after the government imposed a 5-57% anti-dumping duty on cold-rolled steel products from various countries.
■
Nifty Pharma index rose 4% as investors opted for defensive bets, amid volatile markets. Nifty PSU Bank index was the top laggard, falling 11.47% weighed down by asset quality concerns.
14.0
140,000
12.8
84,000
11.6
28,000
10.4
-28,000
9.2
-84,000
Top Stock Exposures – Dec 2015 (Net Flows Rs cr)
(AUM Rs lakh cr)
Mutual Fund – Overview Top Sector Exposures – Dec 2015
1. HDFC Bank Ltd.
1. Banks
2. Infosys Ltd.
2. Computers – Software
3. ICICI Bank Ltd.
3. Pharmaceuticals
4. Axis Bank Ltd.
4. Engineering, Designing, Construction
5. Larsen & Toubro Ltd.
5. Refineries/Marketing
6. Reliance Industries Ltd.
6. Passenger/Utility Vehicles
7. State Bank of India
7. Cement
8. Maruti Suzuki India Ltd.
8. NBFC
9. Sun Pharmaceutical Industries Ltd.
Dec-15
Nov-15
Oct-15
Sep-15
Jul-15
Net flows (RHS)
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
-140,000 Dec-14
8.0
Industry Month-end AUM
Category returns CRISIL – AMFI Large Cap Fund Performance Index
Absolute Monthly Returns% Dec-15 Nov-15 -0.69 -0.53
Entries
Exits
Adani Transmission Ltd.
Ambika Cotton Mills Ltd.
Alkem Laboratories Ltd.
Mandhana Industries Ltd.
Dr. Lal Pathlabs Ltd.
Royal Orchid Hotels Ltd. Tara Jewels Ltd.
-0.70
0.36
Gayatri Projects Ltd.
CRISIL – AMFI Small & Midcap Fund Performance Index
0.82
1.04
Narayana Hrudayalaya Ltd.
CRISIL – AMFI ELSS Fund Performance Index
-0.01
0.12
NCL Industries Ltd.
CRISIL – AMFI Balance Fund Performance Index
-0.04
0.13
SpiceJet Ltd.
CRISIL – AMFI MIP Fund Performance Index
0.04
-0.07
Zicom Electronic Security Systems Ltd.
CRISIL – AMFI Gilt Fund Performance Index
0.02
-0.69
CRISIL – AMFI Debt Fund Performance Index
0.41
0.06
CRISIL – AMFI Short Term Debt Fund Performance Index
0.51
0.33
CRISIL – AMFI Ultra Short Fund Performance Index
0.57
0.60
CRISIL – AMFI Liquid Fund Performance Index
0.63
0.63
Gold Funds (ETFs and FoFs)
0.04
-6.14
The domestic mutual fund industry saw its assets swell in the three months ended December, marking the ninth quarter of gains on the trot. Quarterly average AUM rose 1.9%, or Rs 24,967 crore, to Rs 13.41 lakh crore - a record tally since the AMFI started declaring the data in September 2010.
■
For the year ended December, quarterly average AUM was up 21% over the previous year, cresting a spirited surge in equity and debt funds. This, however, was a tad under the 26% on-year rise logged in 2014.
■
9. Power equipment 10. Housing Finance
New Stocks Entries and Exits in Mutual Fund Portfolios – Dec 2015
CRISIL – AMFI Diversified Equity Fund Performance Index
■
■
10. ITC Ltd.
■
Short maturity debt funds - comprising short-term debt funds, ultra-short and liquid funds - logged steady growth. At the close of December, average AUM of short-term debt funds was up 54.5% (Rs 52,300 crore) and 4% (Rs 5,704 crore) on a yearly and quarterly basis, respectively, at Rs 1.48 lakh crore. For ultra-short and liquid funds, average AUM was up 22.9% (Rs 26,171 crore) and 8.4% (Rs 22,837 crore), respectively, on a yearly basis, though on a quarterly basis assets declined.
Equity mutual funds continued to attract investors, despite negative undertone in the equity market. Robust inflows (net purchases) boosted average AUM by 35%, or Rs 1.18 lakh crore, to a record Rs 4.54 lakh crore. The category grew 4.1% or Rs 17,845 crore - a ninth successive quarterly rise - though mark-to-market losses capped gains.
■
On the regulatory front, SEBI asked AMCs if they have capped upfront commission, in line with AMFI's recommendation.
■
SEBI tightens its norms for mutual funds' exposure to riskier corporate bonds, which also included a 10% cap on investment limit in bonds of a single company.
The average AUM of long maturity debt funds, including debt and gilt funds, rose 56%, or by Rs 43,415 crore in 2015 as a series of repo rate cuts by the RBI boosted sentiment. The central bank lowered the key rate by 125 bps over the year to 6.75%, citing lower inflationary pressure and need to boost the economy.
■
SEBI said it will not immediately force the mutual fund industry to reduce distributors' commission further.
■
SEBI allows gold exchange traded funds (ETFs) to invest in the recentlylaunched gold monetisation scheme.
Fund News
BSE asks mutual fund houses to mandatorily provide compliance details for the new global tax avoidance law - FATCA with regard to each client on the stock exchange’s mutual fund trading platform. GIC Housing Finance to acquire up to 16% stake in LIC Nomura Mutual Fund AMC for Rs 23 cr.
CRISIL Fund Rank 1 Schemes – Debt
Fund Focus
Mutual Funds' Performance Report Point to Point Returns % Scheme Name
1 3 6 1 3 Since Month Month Month Year Years Inception
Inception Date
Average AUM (Rs.Crore)
Std. Sharpe Deviation Ratio (%)
Style Box
Debt Long
L&T Short Term Opportunities Fund (CRISIL FUND RANK 1)
Tata Dynamic Bond Fund
0.48
0.25
4.36
7.10 10.34
6.82
9-Sep-03
1004.41
4.85
1.40
HDFC High Interest Fund - Dynamic Plan
-0.08 -0.52
3.77
5.51 8.88
8.93
28-Apr-97
2245.46
5.28
0.90
IDFC Dynamic Bond Fund
0.36
-0.50
4.26
6.11 8.77
8.20
3-Dec-08
6121.23
5.93
0.78
DWS Banking & PSU Debt Fund
0.53
1.53
4.22
8.77
NA
9.03
8-Mar-13
1555.58
1.03
4.91
L&T Short Term Opportunities Fund
0.45
1.56
4.29
8.17 8.88
9.12
27-Dec-11
1576.94
0.95
4.45
Birla Sun Life Short Term Fund
0.66
1.70
4.51
8.89 9.40
9.53
3-Mar-97
9055.54
0.93
5.61
SBI Magnum Gilt Fund - Long Term
0.29
-0.45
4.58
7.35 11.06
7.92
23-Dec-00
2399.74
7.29
1.09
Investment Approach
L&T Gilt
0.07
-0.54
4.48
7.48 10.94
8.49
29-Mar-00
92.77
5.93
1.29
Birla Sun Life Short Term Opportunities Fund
0.59
1.52
4.29
8.42 9.95
7.23
9-May-03
3929.81
1.29
3.55
The objective of the scheme is to generate returns for investors with a short-term investment horizon by investing in fixed income securities of shorter maturity.
ICICI Prudential Corporate Bond Fund
0.31
1.41
4.35
8.42 8.90
7.49
15-Sep-04
3889.73
1.42
3.21
Sundaram Money Fund
0.64
1.89
3.90
8.32 8.89
7.94
8-Dec-05
4641.11
0.41
10.91
HDFC Liquid Fund
0.63
1.90
3.92
8.35 8.91
7.31
17-Oct-00 27523.81
0.42
10.77
Axis Liquid Fund
0.64
1.90
3.92
8.35 8.88
8.30
9-Oct-09
9138.54
0.41
11.00
Tata Money Market Fund
0.63
1.89
3.91
8.35 8.93
7.76
1-Sep-04
5645.49
0.41
10.94
Axis Banking Debt Fund
0.55
1.70
3.98
8.50 8.82
8.91
8-Jun-12
502.49
0.57
8.15
10
IDFC Banking Debt Fund
0.61
1.74
3.95
8.54
NA
8.88
7-Mar-13
1256.12
0.54
8.75
8
DWS Treasury Fund - Investment Plan
0.56
1.73
4.02
8.24 8.68
8.18
9-Oct-09
818.22
0.57
7.52
Religare Invesco Credit Opportunities Fund
0.65
2.03
4.15
8.80 9.28
8.68
28-Aug-09
2714.46
0.43
11.95
Debt Long
Gilt
Credit Opportunities Fund
Liquid
Launched in December 2011, L&T Short-term Opportunities Fund is an open-ended short-term income fund. It has been assigned CRISIL Fund Rank 1 in the short-term income fund category (as per CRISIL Mutual Fund Ranking for the quarter ended September 2015). The fund was ranked within the top 30 percentile (Fund Rank 1 or Fund Rank 2), since March 2013. The fund's quarterly average assets under management (AUM) for the quarter ended December 2015 stood at Rs 1,577 crore.
Performance The fund has outperformed its category (CRISIL ranked short-term debt funds) across various time frames – three months, six months, one and three years, as on January 13, 2016 (See Chart 1). However, compared with its benchmark (CRISIL Short-term Bond Fund Index), it has given marginally lower returns over the periods analysed.
Chart 1: Performance as on January 13, 2016
9.08
8.78
8.69
9.50
9.30
9.25
8.54
8.07
7.96
4.20
4.19
2
4.14
4
1.54
6 1.45 1.66
Returns (%)
Ultra Short Term
CRISIL Mutual Fund Ranks as of September 2015
0
Point to Point Returns are as on December 31, 2015
3 Months
Returns are annualised for periods above 1-year, other wise actualised High
Risk ratios for Debt Short, Credit Opportunities, Liquid and Ultra Short Term categories are for a period of 1 year; risk free rate: 7.68% (average T-bill auction cut off rate during the period)
Medium
Low
Risk ratios for Debt Long and Gilt categories are for a period of 3 years; risk free rate: 8.33% (average T-bill auction cut off rate during the period)
High
INTEREST
Medium
RATE
Low
SENSITIVITY
Average AUM is 3-months average number as disclosed by AMFI for the period October-December 2015
Average Assets under Management - A Bird's Eye View Mutual Fund Name
Oct-Dec Jul-Sep 2015 2015 Change % (Rs.Crore) (Rs.Crore) (Rs.Crore) Change
Mutual Fund Name
Oct-Dec Jul-Sep 2015 2015 Change % (Rs.Crore) (Rs.Crore) (Rs.Crore) Change
HDFC Mutual Fund
178373
170838
7535
4.41
Canara Robeco Mutual Fund
7439
7213
226
3.13
ICICI Prudential Mutual Fund
172154
164629
7526
4.57
Goldman Sachs Mutual Fund
6852
7132
-280
-3.93
Reliance Mutual Fund
156948
152919
4028
2.63
PRINCIPAL Mutual Fund
5816
6624
-808
-12.19
Birla Sun Life Mutual Fund
136561
133404
3157
2.37
BNP Paribas Mutual Fund
5008
4638
370
7.99
UTI Mutual Fund
106129
104077
2052
1.97
Indiabulls Mutual Fund
4917
5196
-279
-5.37
SBI Mutual Fund
100055
88628
11427
12.89
Motilal Oswal Mutual Fund
4552
3928
624
15.88
Franklin Templeton Mutual Fund 70780
77328
-6548
-8.47
Taurus Mutual Fund
3503
4656
-1153
-24.76
Kotak Mahindra Mutual Fund
54902
56511
-1608
-2.85
Mirae Asset Mutual Fund
2802
2427
375
15.46
IDFC Mutual Fund
54715
56774
-2059
-3.63
Union KBC Mutual Fund
2732
2672
60
2.24
DSP BlackRock Mutual Fund
38099
37339
760
2.04
BOI AXA Mutual Fund
2428
2881
-453
-15.73
Axis Mutual Fund
34489
31789
2700
8.49
DHFL Pramerica Mutual Fund
2163
2366
-202
-8.54
Tata Mutual Fund
31556
28857
2699
9.35
Edelweiss Mutual Fund
1632
1573
60
3.81
L&T Mutual Fund
25059
24280
778
3.21
Peerless Mutual Fund
1024
860
164
19.08
Deutsche Mutual Fund
24786
25329
-543
-2.14
IL&FS Mutual Fund (IDF)
900
878
22
2.53
Sundaram Mutual Fund
21877
22124
-247
-1.12
Quantum Mutual Fund
632
612
19
3.13
Religare Invesco Mutual Fund
19869
21594
-1724
-7.98
PPFAS Mutual Fund
629
604
25
4.16
JM Financial Mutual Fund
15868
15858
10
0.06
IIFL Mutual Fund
422
412
10
2.45
LIC NOMURA Mutual Fund
12384
11157
1227
11.00
IIFCL Mutual Fund (IDF)
343
350
-7
-2.03
Baroda Pioneer Mutual Fund
9255
9532
-276
-2.90
Escorts Mutual Fund
292
300
-8
-2.64
HSBC Mutual Fund
7696
7843
-147
-1.87
Sahara Mutual Fund
110
124
-14
-11.27
IDBI Mutual Fund
7507
7016
491
7.00
Shriram Mutual Fund
37
35
2
6.66
JPMorgan Mutual Fund
7501
12455
-4954
-39.78
Grand Total
25038
1.90
1340798
1315760
AAUM is the quarterly average number and excludes Fund of Funds Data sorted on latest average AUM numbers
6 Months
1 Year
2 Years
3 Years
(Period) L&T Short Term Opportunities Fund Short Term Debt Funds Crisil Short Term Bond Fund Index
CREDIT QUALITY
Risk Ratios are annualised
Note: Returns above one year are annualised
The fund’s volatility (1.65%), as measured by standard deviation, is lower than the category average (1.89%) for the three-year period ended January 13, 2016. For the same period, the risk-adjusted performance - measured by Sharpe ratio - is 2.71, higher than the category average of 2.63.
Portfolio Analysis Over the last three years, on an average, the fund has invested 90% of its portfolio in sovereign and highestrated (‘AAA/A1+’) securities. The fund has invested in 32 debt securities. As of December 2015, top 10 securities accounted for 81% exposure of the fund’s portfolio vis-à-vis an average 77% exposure for its category. Thus, the fund is slightly more concentrated, compared with its category.
Fund Manager Mr. Vikram Chopra, a B.Com and MBA, has over 13 years of experience in fixed income and dealing. He is responsible for investing in debt and money market instruments. 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) Tax saving instrument that can be purchased from post offices (1,1,1)
1
2) Volatile asset class that generates superior long-term gains (6)
2
4) Mutual fund industry body in India (1,1,1,1)
3
4
7) Investment offering tax benefits under Section 80C, backed by the government with a 15-year lock-in period (1,1,1)
Horizontal
5 6
7
2) Diversified equity mutual funds scheme, with a 3-year lock-in period that provides tax benefits under section 80C. (1,1,1,1) 3) Average annual growth rate of an investment, over a holding period exceeding one year (1,1,1,1) 5) Chance that the actual return may be lower than expected in investment parlance (4) 6) A mutual fund investment feature that allows fixed investments at regular intervals. (1,1,1)
Answers Horizontal: Vertical:
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